Broader Market Weekly Performance:
Dow -2.85%
S&P -2.84%
Nasdaq -3.47%
Russell -3.13%
Check out my latest interview on Benzinga and TraderInterviews.com
MARKET UPDATE:
Markets gave back most of the previous 2 week rally this week finding support in the S&P 1210-1220 area. Jobless claims posted their lowest level in 3.5 years and other world economic data was "okay". These items supported markets on Thursday and Friday.
Moody's cut Belgium's credit rating by 2 notches while S&P and Fitch signaled potential broad downgrades across Euro-land. I sure am glad the ratings agencies are warning investors about Euro debt issues, we never would have known there was a problem without the ratings agencies saving the day! Being late to the party is fashionable in some instances but not when it comes to regulation and disclosure. Ratings agencies are an enormous farce and corrupt waste of space (and money). These are the same idiots that warned about the mortgage crisis AFTER it was over. Gimme a break! I feel much better now, thanks for listening to my rant :)
Economic releases will be light this coming week and should allow for markets to digest the recent volatility and drift sideways with an upward bias. This has been one of the toughest trading years in recent history and much attention was placed on quadruple witching Dec OpEx which concluded Friday. The VIX has retreated sharply and sits comfortably below it's 200 DMA. Now that Dec OpEx is over, as evidenced by the VIX, fear has started, and will continue, to be sucked out of the market precipitating a collapse of option volatility's (aka: option premiums); this will benefit the existing ITM debit call spread in the BookingAlpha Monthly Trading Service. The path of least resistance for markets is sideways to up.
That being said, I would not be short puts here. The market sets up nicely for a rally into year end as illustrated above and from a price action perspective. However, this market is quite similar to 2007...and we all know what happened in 2008. Now, I am not calling for a 30%-40%-50% decline in markets now or in the next 2-4 months. However, there are some hefty headwinds out there, including: The European debt crisis, our own debt/spending debacle, slowing growth in Asia, etc. Everyone has kicked the can down the road until next year but that isn't that far away. It might be another "fun" trading year next year.......oh well, I guess i will completely grey then by this time 12 months from now!
Be opportunistic and judicious with new trades as year-end approaches. It still remains to be seen if Santa will be making an appearance, although I do expect some Holiday cheer to enjoyed in the short term.
BOOKINGALPHA UPDATE:
Monthly Trading Service Commentary:
This week brought the expiration of December monthly options which, for BookingAlpha, meant the profitable expiration of our two Iron Condors on SPY and RUT. The recent increase in volatility, while chewing many traders up, has provided us nice entry points with good premiums which we were able to exploit for some very profitable trades to round out the year.
As a result of Dec monthly opex, the Monthly Trading Service portfolio is back to almost all cash. One position remains open: An ITM (in the money) debit call spread on SPY using Dec31 quarterly options. This spread is still nicely ITM despite markets pulling back almost 3% this week alone. The existing debit spread is designed to reach its full profit potential as long as SPY stays above the short spread strike. The trade has a nice margin of safety as SPY found some footing on Wednesday after declining earlier in the week.
Looking forward, I will wait to initiate new trades until markets move back toward the top or bottom of the recent trading range. In the next two weeks trading volumes are likely to be thin making for choppy markets. If Santa will be making an appearance he will begin his rally soon. However, I will not chase new positions under these market circumstances. Instead, I will be patient and wait for the next opportunistic entry point.
The Monthly Advisory continues to outperform and deliver consistent drama-free Alpha:
+60.01% BookingAlpha Monthly Advisory
vs.
-3.10% YTD S&P 500
Weekly Trading Service Commentary:
This week brought the successful expiration of an SPY Iron Condor and an NDX Credit Call Spread. As a result, the Weekly Trading Service booked handsome profits and is back to 100% cash.
The SPY trade (originally a credit call spread that was adjusted up one strike and out a couple weeks and then later turned into an Iron Condor) was a little painful at first as a result of the SPY's strong rally on European debt crisis headlines. However, I stuck to my analysis of the European situation, price action, market internals, and my trading plan executing the adjustment prudently and further enhancing the position by adding the puts, to create the Iron Condor, effectively.
While price is all that matters, you can't let price alone freak you out causing you to prematurely bail on a trade. That is the beauty of options: their flexibility; as demonstrated with the SPY trade. Obviously, sometimes you have to "cut bait" and close a trade with a loss and move on. However, the majority of the time you can dance your way out with much less of a loss, or like in the SPY trade's case, for a very nice profit.
The NDX trade was an opportunistic trade taking advantage of the market rising a little too far too fast on European headlines (not resolutions to their problems) and then uncovering a mis-pricing in the NDX options allowing us to strike and collect a nice premium with extremely little risk.
Looking forward, I will wait to initiate new trades until markets move back toward the top or bottom of the recent trading range. In the next two weeks trading volumes are likely to be thin making for choppy markets. If Santa will be making an appearance he will begin his rally soon. However, I will not chase new positions under these market circumstances. Instead, I will be patient and wait for the next opportunistic entry point.
The Weekly Advisory continues to outperform and deliver Alpha:
+40.06% YTD BookingAlpha Weekly Advisory
vs.
-3.10% YTD S&P 500
Navigate wisely and stay profitable, my friends. Happy trading!
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Comments
Loading...
Posted In: Global
Benzinga simplifies the market for smarter investing
Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.
Join Now: Free!
Already a member?Sign in
