It was a great weekend, after a very good week. Breckenridge is now open. I will bring my camera on the hill on Tuesday and post a few photos.
The sell the news reaction from the election was spectacular. I wasn’t leaning short enough, however I managed to sell a number of longs on tuesday afternoon and buy a number of shorts to become net short for the first time in 7 days (-175 deltas).
On Wednesday and Thursday, I bought a number of calendar spreads around the the SPY 920-940 level. Midrange trading range (SPY 84-100). These all had very large Volatility Skews, and were mid range in their cycle Implied Volatility.
ANN, CMCSA, HRB, KLAC, SAI, SNDA, and VOD
I also took a position short the Euro with the DRR. I may be a little late to party. But I bought this on a trendbreak from the Euro’s flagging pattern (around 127.75). Also, with Trichet’s .50 bps cut, I think there is a long way to go. And the dollar… not many cuts to go. Will the Euro go all the way back to the 116 level? Eventually, I say yes… and well beyond. The Euro currency has crushed Mediterranean countries. I think there is going to be a major shake up there. But, getting back to the currency vs the US Dollar. I have taken a few rides on the Dollar train. This is my third shot, and I want to continue to with this trend. There is some sticking @ the 1.30 euro level. It may rally back to the 1.33 level, but I don’t think it will go much beyond that. I will be out @ 1.31, but I would then look for another entry.
On friday, I again played a “buy the rumor, sell the news” reaction on President elect Obama’s speech. I exited a number of longs including a large batch of my AIG 2.5p and call calendars for a nice 100%. I also sold to open a number of OTM call spreads on the SPY. Finally, on the sell the news down to SPX 910, I bought a number of long DIA Butterflies 94/98/102.
A song have been enjoying this weekend:
I was very active last week on the extreme moves. Up 5% on the week, and 13% for the past 35 days. I am getting my groove back. It has certainly been a strange 3 months. Government interventions, financial meltdowns, elections, hedgefund collapses, monster opening gaps, record volatility,etc. I am confident enough in my trading abilities to weave through combinations of these events, but all of them? It has certainly be tricky and frustrating at times. I feel like I am getting my head around this again. I have a number of scenarios which I have been putting trading plans in place.
About 10 days ago I was adding a number of sideways strategies which took advantage of high volatility from the top, bottom, and middle of the ranges. My thought in this market is this: “A market move or series of movements is going to screw the most people?” That understanding has not disappointed the trader. Failed breakouts and massive moves which don’t offer the larger trader/fund time to get involved. I will only trade this this market with options or stock and option combinations, and defined risk strategies.
SPY daily – I am watching the trendlines. Will this market make it above the Tertiary trendline @ SPY 98? If the most recent uptrend breaks, I don’t think many players are going to stick around to find out what happens next.
I could see a scenario where we see SPY 107 by the end of the week. There would be a mountain of resistance there, not in the least is the 50 day MA and 38% fib retracement.
DIA – daily – The chart looks darn near the same to me. DIA 93 as tertiary downtrend resistance. And oodles of reasons for the 99-100 reason to be a rally repeller.
If we were eventually able to get to DIA 11,000, I doubt I would first to be hitting the sell button.
The market fundies are unbelievably poor. Sentiment is the worst I have ever encountered. Earnings estimates are much too high, and companies are avoiding giving guidance whenever possible. The idea of going out to eat is a financial decision, much less buying anything of size. With all that said, a rally would run up in the face a many many people.
My thoughts – I will play the trend as much as I can. Right now the short term trend is sideways/consolidating, therefore I am a volatility seller. If we breakout and create the Head and Shoulder pattern, I will roll into a short term bullish stance. If we break the uptrend, I will be happy to be a seller. I found 48 super primo short plays. I am still trying to create strategies for all of them.
A few include:
ATK, BMC, CYMI, ECA, EQIX, FEIC, FFIV, MBT, NICE
A parting thought! -The blog Tim Knight posted today was interesting. The market will screw the most people possible. What would do it? Traders prematurely buying in to this Head and Shoulder pattern, and then having it fail. People would run for the doors, and the market would melt.
Stay on your toes, keep the size small, and don’t be afraid to have multiple scenarios to maneuver in this market. And now time for bed. I have to be up in a few hours to head to Denver and participate and in Red Option “Options for Traders” class. I look forward to learn a new thing or two. I am a student first.