INDEX OPTIONS TRADING- consistent monthly income

Survived stock market 2008

2008-12-31T00:05:36-06:00

I am happy to see 2008 coming to a close.

The year is over almost, not yet though at the time of this post. Oh what a year this has been. I cannot recall another horrific year since 1992 when George Bush Sr was President and the economy collapsed and a young new face named Bill Clinton came out from nowhere from Arkansas, and beat the pants off him. It was a hard year. As I remember I made only $5000 in the whole 1992 struggling and worrying and not knowing how I will get hold of my next dollar and if the key in my lock would turn.

Well that was 16 years ago and people forget everything or is it history that just keeps repeating itself ? They say it does and I couldn’t agree anymore. The year 2008 dawned with a harsh cold winter like chill in January and a jittery and gloomy stock market in pure angst ! Than the whole economic debacle started unfolding right before our eyes. The beads scattered across the marble floor and each one of them dispersing into an ugly pattern.

As goes January so goes the year, you have heard that saying on Wall Street? Well that is true. The year did exactly how January was. The ugly turns in mortgage mess and sub prime fiasco became horrific tales that only you could tell to your grand children someday. The basket of mortgage tranches became unsaleable fruits that no one would pick in the market place. That shoved the big players Bear and Sterns, Lehman brothers, Citigroup, Merrill Lynch and even Goldman Sachs into a tight corner. Saddled with debt, unable to push it away, some of these giants sank with it. Panic ensued, and the whole stock market went into a tail spin hitting new lows and wiping out our national wealth by trillions each day!

Than came the Feds, ready to give it a jump and they cut interest rates in March 2008 with generosity. But the medicine was too late and quite ineffective. The damage was already done. Public confidence shattered and vanquished by events never recovered. However, that produced a spark and the markets started rallying from March 19, 2008 till May 14 2008 as I recall. I was trading BIDU puts deep in the money, that acted like long calls. I was able to garnish substantial profits in that rally alone. BIDU and AAPL just two stocks, some POT and MOS and others as they came. That bliss lasted only six weeks.

Than all of a sudden, the rally fizzled and the markets never went back up and kept sliding down from thereon for the balance of the year. After taking some losses I quit trading BIDU and still kept trading small shall we say against the winds ? It was a no win situation. The whole trading environment turned so bearish and untrustworthy it was impossible to place any long positions for a few days. Even Iron condors trading became a challenge. You couldn’t have survived in that tough tough market. With Oil futures galloping high and falling incomes and and a gala of bad news everywhere it was a horrific time. Nothing seemed to work right, nothing at all.

June and July were intolerable months. One day BIDU dropped 40 points and I incurred serious losses in my personal account. I stopped trading BIDU. You see BIDU is a dangerous stock. It runs fast and climbs 20 points in any given rally, at least it used to, when it was a a $ 340 dollar stock but when it drops, it can crater your whole trading account in a heartbeat. In my opinion having traded BIDU first half of the year, I pulled the plug on it and decided I will never trade it again. That decision in hindsight has proven quite profitable for me, and has preserved my trading capital to this day.

August and September the economy was in utter shambles but we kept trading Iron Condors with caution. and Market Crisis 2008 in full swing. Luckily Bear and Sterns was bought out by JP Morgan & Chase earlier in March, but Lehman Brothers, was left to hung dry by the Feds. Bank failures became an ordinary scares everyday. First it was INDYMAC that went down, and than right after that nation 5 th largest financial institution Washington Mutual went under ! Nothing was safe. The panic had set in quite hard and gripped every American from coast to coast. People were lining up outside banks taking out cash. Meanwhile the stock market went into a giant tizzy cascading into a waterfall sell off. There were days of 500, 600 points drops and one day it was a 780 points drop within few hours! Those charts are still there after September 20, 2008, just take a look at it, and see what a horrific time that was in 2008.

We were doing IRON CONDORS on NDX and when NDX crashed through the 1600 barrier, I ordered everything to be sold no matter what the losses were, it was obvious the dam has broken and Dubya has crashed the economy into the Wall just like his father did 16 years ago. But what was more notable this was far more spectacular and horrific, than 1992 ! Much more damaging, disgraceful and painful !

WE STOPPED TRADING. The were no trades ordered for the next 3 months. When the Stockmarket Crashed 2008 in October, we took to the side lines and the VIX shot up over 45 and went to 87 and 90 something it has never seen before in its entire history ! There was not a single trade done in that time, and capital preservation became the only game in town. This was history in the making. We survived and survived well. Many advisory services who kept rolling trades month after month, they incurred huge losses, that they cannot recoup in 2 years to come. But we did not lose a SINGLE PENNY in that time!

What was more amazing, that the stock market kept rallying hard. Seen 900 point rallies and 700 point sheer drops. The volatility was insane ! Like a menacing Bear, it produced some spectacular sharp rallies to the upside only to crash harder than before! Take a look at older posts on index options trading during that time. This was an awesome sight to behold. Charts were damaged so badly and mauled that it may take years to get them back to original lustre. The SPX and NDX went down to pre 2003 levels wiping out pension plans, savings, IRAs and the asset base and backbone of America ! The market crashed and crashed hard as it could.

Congress came back with a 750 billion Stock market bailout for these for Wall Street folks and for the people who screwed up the whole till in the first place, and padded them on the back. But It did nothing for the markets though. Still its doubtful it ever will. The real estate market is still in the dumps and has not bottomed out yet and unless it recovers with some buying ,donot hope much too soon.

But that was what we have seen in 2008 and history does repeats itself often and repeats hard. We are still not out of it yet, lot more hardships on the go. It may get worse before it gets better. Lets be cautiously optimistic for 2009. See how January goes and you know the saying right?

We have started trading lightly and with caution. If the markets become volatile again we are out of it soon. Meanwhile Iron Condors and spreads and January trades are doing well. I want to wish you a very happy New Year and lets keep our chin up and not fall to this doom and gloom falling everywhere.

I am optimistic, how about you?

Merry Christmas 2008

2008-12-25T11:08:58-06:00

Wish you a Merry Christmas and Happy New year

From

Index options trading

Iron condor credit spread Trading

Index options trading strategies

Iron Butterfly - Free trade

2008-12-20T15:19:11-06:00

Click Here!

COMPANY

WMT , known as Wal-Mart Stores, Inc. operates retail stores in various formats worldwide. The company, Wal-Mart Stores segment offers general merchandise, including apparel, domestics, fabrics and notions, stationery and books, shoes, housewares, hardware, electronics, home furnishings, small appliances.

TRADE OBJECTIVES

Income generation over the slow Holiday season when the market volumes dries up, and Fund Managers are hitting ski slopes or warm waters of Caribbean.

TRADING PLAN

Walmart is a stable company overall and the stock is in trading range for last 60 days or so. There is certain amount of consolidation going on, do not know how long this will last. Therefore we are taking advantage of this narrow trading range and placing a Naked straddle or an Iron Butterfly on January options, like we did for the month of December and closed with profits.

NAKED STRADDLE

SELL 5 DECEMBER 55 PUTS = $ 1.88 ( Fridays closing prices shown here )

SELL 5 DECEMBER 55 CALL =$ 2.80 ( Fridays closing prices shown here )

Net credit =$4.68 x 5 = $2340.00

Break Even points 59.68 and 50.32 Margin requirements will vary with brokerage accounts.

The trade can be closed once a trader gains 20% profits.

Since this is a Naked straddle the trade needs to be monitored and could possibly results in unlimited losses if not managed properly. Some brokerages houses may not allow you to write naked options without protection.

IRON BUTTERFLY

Well in that case, another avenue is to buy protection and trade an Iron Butterfly. One can buy December 60 calls or December 65 calls and December 50 puts or December 45 puts -to limit risk and than you may not have the above restrictions and it will cap your losses to either side. Remember you can only lose on one side of the trade on expiration.

An IRON Butterfly has a lower profit potential than naked straddle which is more risky and only experienced option traders should trade and manage such a trade. But since you are paying for protection on either side of the trade, and insuring your maximum losses to a predetermined amount, the butterfly trades works best for risk averse traders.

An IRON butterfly trade gives a trader an income generation tool and it works best with stocks in a slightly bullish to neutral bias. Its paramount that your underlying asset remains in that range, otherwise the trade may not work.

There are adjustments and other fine tune ups and that can be done, if the stock reaches your break even points. That however requires more Margins and further trading so one should be prepared to deal with it and keep sufficient Margins in the trading accounts. If not the trade should be closed and losses taken.

GOOGLE December free trade closed

2008-12-09T10:52:19-06:00

We shorted GOOGLE 250 puts back on November 14, 2008 .

http://indexoptionstrading.alliancemtg.com/how-to-buy-google-cheap-trade/

Today taking advantage of time decay and stock movement- closed the trade. Google is up today at 314 and we can let these puts expire worthless, but we are not taking any chances, should the market reverse.

BUY BACK DEC GOOG 250 PUTS @ 1.65 = $ 825 .00

NET PROFIT $3350-$850 = $ 2525.00

ORIGINAL TRADE SELL 5 DEC GOOG 250 PUTS @ 6.70 = $3,350 Net credit to the accounts

Delta -6.7 Theta = $ 60.53 /day

Probability = 84%

Index options trading- how to survive the worst

2008-12-07T00:03:37-06:00

Index options trading. Well this week’s employment report was no comfort for that. US Non Farm payrolls lost 533,000 jobs in a single month. If you divide that by 30 days we are losing jobs at the rate of 17, 500 jobs per day, and its getting worse.This is the worst job loss reported in 34 years, according to Labor Department statistics. As per Market watch ” It was only the fourth time in the past 58 years that payrolls had fallen by more than 500,000 in a month. Since the recession began 11 months ago, a total of 1.9 million jobs have been lost. Job losses in September and October were revised much lower.”

“This is almost indescribably terrible,” wrote Ian Shepherdson, chief U.S. economist for High Frequency Economics. “The pace of job losses is accelerating alarmingly.” Over the past three months, 1.26 million jobs have been lost, a pace of job destruction exceeded only once since 1945.

This shoved the unemployment rate from 6.5% to 6.7% in a ugly pattern that is not ending anytime soon. This seems to be getting worse than better, and there is no adult out there who is managing this economic crisis with some dedicated enthusiasm. There is almost a power vacuum in the White House, with a lame duck President sitting out his last days in a horrific glory, while a newly elected President is completely powerless and sidelined. The country seems to be rocking back and forth, sliding deeper and deeper into a recession.

Meanwhile the auto makers are back in Washington with a hat in hand, begging for a tax payer’s bailout in the tune of $34 billion. At least some people don’t know, that Chrysler Corp and GMAC are owned by the Wall Street Hedge fund Cerebus. Its almost like bailing out a Hedge fund, rather than an auto maker, and taking money from the poor, distributing to the rich, a formula that we have seen played out over and over again.

Despite all the bad news on Friday- Stock market rose in the last hour of trading to 249 points as if to defy all odds. There was no good reason for this rally, its merely a bear trap set up to pummel longs in the coming next week. You alway think, this will continue on, but sadly enough, we have been climbing these trees of promises for a whole year. Sharp mind bending rallies, and almost immediate nasty sell offs, that takes us lower than the previous lows, and the charts keep getting destroyed with every new low.

We have posted some Intraday trades for subscribers in the membership area. These trades require quick stealthy ability to enter and take $1 or $2 profits and come out. I have been trading $SKF $SRS $ SDS and $SMN and some ultra short ETFS.

When the market broke down after Friday’s unemployment report, we posted short trades on $INFY $CHK $ and $ENER in the member’s subscriber area. These trades are for the active traders and with margin accounts above $25,000.

There is a lull in the income type trades that we always like, due to the volatility and higher VIX which makes Iron condor trading, Index spread options trading, and Index options trading, much more riskier. By avoiding these Index option trades, we have managed to preserve our trading capitals intact, and will live to trade another day. Many Option advisory services are still cranking out trades and losing big time each month. There is no excuse for such stupidity, not knowing your markets, and putting your followers through needless risks.

Stock Market 2008-diving off a cliff

2008-11-22T15:34:49-06:00

With My system you can make money from the stock market during recession-no matter how bad the Economy gets-Click her and read more

The market has seen nothing but down days since Obama was elected President on November 5, 2008, until Friday when it made a near 500 point rally to the upside. The market internals have been nothing but ugly. Twice the DOW came and touched 8000 and finally it broke through and plunged to the levels not seen since 2002. That means all those investor’s, pension funds, savings and monies are wiped clean and done with or have taken huge hits.This is an unprecedented market action not seen in number of years.

Announcement of Tim Geithner as the Treasury Secretary, however sent the market 500 up in a knee jerk rally. Quite frankly it could have been Mickey Mouse named as Secretary of Treasury and the market would have done the same to rally from deeply over sold conditions. Days and days of selling created those conditions and it may bounce higher for few days.

What we have seen in the past 2 months will again be true. Bears feed off these rallies, buyers go in there and get trapped and killed. What I have seen, the market can’t even piece a few days of back to back upside action, let alone rally higher to new grounds. There is no catalyst out there if you looked for one. The economy is under the weight of myriads of problems, like Auto Makers bailout and others. Banks and financial stocks being hit with problems. Citibank announcing lay offs, and JP Morgan Chase following the same.

We may see few days of bounces and sharp rallies and if history is any guide, the market will eventually sell off again. The broad consensus is that we may see 6000 levels before we see 8000. But who knows where that bottom is? Every prediction has its own flaws and cannot be taken as an absolute truth.

Therefore what can you do to make money? One of the best positions is to stay in cash. Yes that is a position. You don’t have to trade everyday if you can help it. As a result, all our newsletter subscribers have not lost a SINGLE PENNY since September 2008. Compare this to other newsletter services who kept rolling off trades month after month, and and ended up taking huge losses that cannot be recouped for 2 years.

The other things I have done is micro trading ultra short ETFS like $SKF, $SRS, $SDS, $SMN, $TWM, $ EEV $ FAZ and numbers of others. But these are “Speculative Trades” meaning they carry a higher amount of risk and bigger rewards and cannot be done unless you have nerves of steel. I myself have not taken many chances since the movements in $SKF, SRS are 30 to 40 points each way and the volatility ranges 100 to 150%. When the market drops you go long place a stop loss order and hope for the best. When the market rallies, you sell short and place your stops and quickly scalp profits. You have to be quick on the draw to make it. Cannot hold overnight as the markets often gap up or down. This is what most experienced traders and hedge funds and others I have seen are doing these days. That seems to be the only viable game on Wall Street.

(Photo courtsey Getty)

Dan Sheridan-Options-trading-strategy

2008-11-15T16:47:25-06:00

Here is an Options trading Strategy from my fave Dan Sheridan of C B O E, giving us a free trade on Target. Its an Iron condor however he calls its a split butterfly, well that’s just a matter of opinion. Whats good about it, that target is a non volatile stock and the earnings are due on November 17 Th and it should be a good play to make some money. I myself would initiate this trade on behalf of Dan Sheridan’s timely input, and I wanted it to bring it to your attention, the least I could do, so you can make some money. Its a Free trade so enjoy it.

GOOGLE December Trade

2008-11-14T23:49:35-06:00

The markets sold off heavily towards the close down 332 points, profit takers and hungry traders going home with pocket full of change to pay for milk and coffee. BEFORE that happened GOOGLE shot up to 324 and as a lurking opportunist I took profits, and I was right. Right after that Google fell apart in the last hour sell off and went down to 310 and I immediately sold another batch of puts in the selling vortex 3 minutes before the bell. Given below is a free trade. The last trade is good for next 1-2 trading days.

11/13/08 SELL 5 GOOG DEC 250 PUTS @6.60
11/14/08 BUYBACK 5 GOOG DEC 250 PUTS @5.40

Net profit = $ 1.20 x 5 = $600

11/14/08 SELL 5 GOOG DEC 250 PUTS @7.00 Net credit = $3500
Theta= $25.34/day
Delta= 7.41
Probability= 85%

GOOGLE held up really well in today’s onslaught and the chart patterns look very promising. We shall exit or adjust this trade should GOOG close below 300. Our short strike is almost 60 points away to do any damage. I expect coming week we should see GOOG in the 330-340 area.

IF you were a subscriber you would have access to all these trades in real time sent to you. You could be making money right here, as I have since yesterday. Go ahead and subscribe today!

You can make money during recession- no matter how bad the economy gets-Click here

How to buy GOOGLE cheap- Trade

2008-11-13T17:19:29-06:00

The market dropped beyond October lows in a horrendous plunge down to the depths never seen since 2001. The plunge was brutal and insane and reminded experienced traders how not take anything for granted. I was on the sidelines watching and seeing great stocks getting decimated. One of the great stock was Google which traded down to 280 and it was a moment that seemed ridiculous enough. A worldwide company with best looking fundamentals on the books and this indignity..

But soon the market rallied hard from the lows and ended up 550 points up at the close. Google vaulted 21 points to 310 well above the round number 300 which it broke a day earlier. Based on this market action, and the bullish move -here is the trade we made today on GOOGLE. This is how you can buy Google on the cheap or may not be able to.

SELL 5 DEC GOOG 250 PUTS @ 6.70 = $3,350 Net credit to the accounts
Delta -6.7 Theta = $ 60.53 /day
Probability = 84%

GOOG has to drop 62 points before December to create any damage.Well than again we’ll be buying GOOGLE at $ 250- $6.70= $ 243.30. That may be a great bargain if we get the stock assigned! So we sold naked puts and if you would say we have unlimited losses, that is not correct. I would love to own GOOGLE at 243.30 and while I wait for that to happen, I need to get paid for waiting, because I am very choosy, and I buy only the best companies, with top notch fundamentals.

Should things do not work out as we imagined or if I change my mind, or if GOOGLE drops below 300 in a nasty sell off, I can always buyback these puts not more than 50% of what I paid for and call it a day. You can exit the trade and still wait for another opportunity come your way, but I doubt GOOGLE will get that low again before December 2008. Just remember, you are collecting almost $60.53 daily if GOOGLE just stayed where it is now, twisting and turning with the market and that amount is collected by you when you buyback those puts and exit the trade.

Obama Wins- Markets lower

2008-11-07T13:45:59-06:00

Today the market is up 200 points before closing time on a bleak and grim unemployment report ? Maybe the picture of President Elect Obama and Joe Biden sitting together inspired traders? These two look lot better than the other two we had IMHO. What do you think? Leave your comments below…

Last 2 days Market continued to travel South without restrains. The DOW dropped 443 and SPX dropped -47 points in a major sell off that has become the norm. VIX shot up to 63.5 and all major stocks suffered losses.

On Friday’s bleak reports the market rallied 200 points and VIX dropped to 56. NASDAQ suffered a bruising 73 points and has since formed a large descending triangle. The triangle is outlined with yellow trend lines lines right hand side of the above chart.This type of chart pattern is bearish in nature and usually resolves to the downside. Lets see how this will come in play in next few days. Take a look at the Nasdaq daily charts. Similar patterns are forming on NDX. Click on chart below…

The DOW is setting up a bear flag on daily charts as well. Its an awful sign if it comes true. That means market is gearing for another downturn near future. We just have to see as it unfolds.

We are still holding on to our cash like squirrels in wintertime. No false sense of relief . None. capital protection is the most sane and prudent thing to do. Just imagine if you are out of ammo when the battle begins what will you do ?

What we are seeing is sharp rallies to the upside and than few days of consolidations and eventually sell off where hungry traders pounce on the meat on the bones in a feeding frenzy. Its the same type of defeatist behavior that repeats over and over again. Markets rally in the morning and in the last hour of the day is a major sell off where everyone cashes in and goes home flat.

There is so little money to go around in trading these days- and in order to fund a lifestyle , they have nothing left, but to cash in quickly and pay the rent.

Photo courtesy AP.