How to profit from a stock market?
3.09% max return in 37 days.. What is maximum risk ?
I feel risk is more than return expected.. if it is so, it is not worth...
A Conflicted Market
I’m just not finding a lot to work with right now. Many stocks appear overbought, but are not offering the right setups for bearish trades. Straddles would be an ideal trade strategy, as they can benefit if the underlying continues rising, and especially if the underlying falls sharply.
The problem with straddles right now is the options have significant premiums in their prices due to high Implied Volatilities. The underlying stocks would have to move significantly for many straddle trades just to break even.
Elevated IV’s also makes many other option strategies low probability, high risk. Conservative trades like covered calls on the best stocks are good trades until the market figures out which way it wants to go.
Over the past two weeks, the S&P 500 for instance has traded within a 2% range
3.09% max return in 37 days.. What is maximum risk ? I feel risk is more than return expected.. if it is so, it is not worth...
Plus if there is any retunr, it would be nominal. Would be better to shoot for a long term investment.
Volatility Up, Volume Spotty
Volatility has been picking up, so buying puts as protection has become more expensive. But a cautious trader may want to cut back on open positions, initiate smaller trades, stick to more conservative trades, and consider small positions in bearish ETFs.
Very simply, let the market prove itself. Don’t look at just the daily charts. Most stocks have produced, or are about to produce, Stochastic sell signals on their weekly charts. The risk on any bullish trades will be higher. And on any rallies, look for volume. If the big players aren’t participating, why should you?
The market volatility, and yesterday’s reversals, have set up some interesting covered call trade possibilities. Normally covered calls are more conservative, lower-yielding trades. In today’s newsletter, I offer six higher-probability covered call setups on high quality stocks offering potential returns of 5 to almost 8% over the next 4 weeks.
Of course, there’s much more you need to know and many more stocks you can capitalize upon each and every day.
Time for War?
Forget the NSA scandal. Forget Edward Snowden. The focus has shifted now to war as the White House will seek to arm Syrian rebels following the claim that chemical weapons have been used against Syrian rebels.
Make no mistake about it, the agenda is to remove Assad (below); a major pipeline is at stake, and in this Real Life Game of Thrones, the next move will be from the Russians
What should we expect in the markets following this escalation? Look to the broad markets to show strength and further escalation to be positive for defense companies: Lockheed Martin, Northrop Grumman and Boeing.
Faster Than A Speeding Bullet
Faster than a speeding bullet. More powerful than a locomotive. And able to leap tall buildings in a single bound. It is wild and crazy market.
Above you see the treacherous fall into the close on Wednesday, followed by an equally, if not more impressive rise to the close on Thursday. This market really does move faster than a bullet. In an instant, it’s powering higher or lower and faking out technicians left, right and center.
What seems like cause for concern in the early morning has become cause for celebration by day’s end. But what is the cause? Maybe it is the bullish headline news that the “Fed Likely to Push Back on Market Expectations of Rate Increase.”
If you’re confused and unsure of the reason, you’re not alone. The precious metal of the last few millenia, gold, has been decidedly schizophrenic the past couple of days.
Does Buffett’s Balance Sheet Suggest a Market Top?
Just as children’s literature has provided us with “giants” (Paul Bunyan; the giant from “Jack and the Beanstalk”; etc.) so the investment world provides us with “giants” as well – persons whose names are intoned with a reverence reserved for precious few Wall Street figures.
The identity of the currently “biggest” investment giant is debatable. However, there is no question that Warren Buffett looms large within the pantheon of such giants. He is (practically) universally revered, widely idolized, and perhaps overly analyzed. I offer that last thought as a way of confessing that I probably shouldn’t be adding this article into the oversized bin of “Buffett Analysis”; however, I have been shamelessly bribed to do so (a colleague challenged me to do it — promising a dinner in Dublin with all the Guinness I can drink!).
A recent investment headline questioned: “Warren Buffett Ready for a Stock Market Crash With a Record $49 Billion in Cash?” That headline is a good example of how Buffett is referred to in the press as a barometer of market direction. That is quite understandable, given his long-term performance record. However, simplistic headlines often obfuscate the intricacies of how Buffett manages money.
How to play high volatility when the stock price is up or down
FXY appears to have turned around nicely and seems to have found nice support on its 5-day moving average so that would be a good place to consider selling premium via a bull put spread.
BEN - typically following the trend is the smart play, so that would mean going bearish.
In general, the first step in the analysis of any company is typically to evaluate the fundamentals to validate that the long-term potential is good. Once you've done that you can feel more confident that pullbacks are opportunities.
For example, with BEN if you're plan was to look to a long-term position then the attractive premium offers a nice bull put spread below the $145 support level that has held for many months with the exception of a recent one-day decline below that level. With just 7 days to go to expiration in June a $0.95 credit on a 145/140 bull put is attractive. If it were to expire, a nice credit is generated but if the stock were to decline, your Contingency Exit Plan could align with your longer term expectations to use the further pullback as an opportunity to own the stock at lower levels, which would take place when the short put was assigned, and in tandem purchase a long.
To explore more visit us at "markettamer"
Dear Members Once you've done that you can feel more confident that pullbacks are opportunities.
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In general, the first step in the analysis of any company is typically to evaluate the fundamentals to validate that the long-term potential is good. Once you've done that you can feel more confident that pullbacks are opportunities. Here is one trading example that could be considered:
Ticker: SH (ProShares Short S&P 500).
While buying the shares outright (alone), the trade could profit from a falling stock market only.
But what if the stock began to trade sideways as a result of the S&P 500 trading sideways or in a range?
Enter a covered call.
Here is an example:
Buy 100 shares of SH at $29.50 (today's intraday price).
Sell to open [1] July $30 short call for a credit of $0.40 per share.
Net Debit: $29.50 - $0.40 = $29.10 (max risk)
Max Reward: $30.00 - $29.10 = $0.90
Trade potential: 3.09% return on risk in 37 days.
By structuring a covered call, even if the stock finishes right at where it was purchased, the short call credit of $0.40 would still be a profit. And, if the stock rises, a slightly larger profit could be had as well.
Now, if the expectation was for the S&P 500 to trend down dramatically, just holding SH shares would have a larger pay off as well. To explore more visit us at "markettamer"