At least, it sure looks that way at the index level as the biggest of the big caps begin new legs higher.
Though, curiously, the two short positions I have on are also showing signs of working out for us.
With $VIX readings continuing to remain low, most bullish bets I’m looking at involve buying options premium since it is quite affordable in this environment.
In this week’s portfolio review, I fielded an important question: “What’s an appropriate account size for trading options?”
Of course, there is no one-size-fits-all for options accounts. But I get into a number of considerations to mull over to determine what is the right size for you.
It's "Fed Day." So I'm not interested in putting on any trades that might be material affected by any post-fed reaction. But I did find one that is trading in it's own universe, divorced from whatever may or may not come out of Washington.
This is a trade that will be hard for many people. Not hard to execute, just hard to comprehend the why?
Some people will look at the chart and be afraid of a pullback.
Some people will see that it's a $4 stock and say: "no thanks."
OK, the title of this note is a little tongue-in-cheek.
But let me explain.
I’m a rules based trader. I’m nothing without my rules. Without rules, I’m just a trader pissing in the wind, driven in multiple directions by my volatility and ever-changing emotional reactions to my intraday PnL.
That’s no way to live.
Once I committed to being intentional about every trade I put on, my trading jumped to a new level. This process includes a thoughtful rationale for my thesis, position sizing, stop loss, and profit-taking levels.
So these days, whenever positions are moving either for or against me, I take comfort in knowing that I don’t need to make any new decisions – even as my emotions tug at me to do something! I already know what to do because I laid it out in my original trading plan.
And for me, that works 95% of the time.
Why not 100%?
Because nothing is perfect. Not the setup. Not me. Not the rules. Nothing.
Occasionally, I need to use a little discretion. Thankfully, not often. But when I do, I do it from a position of strength.
In what has become pretty well documented over the past two years or so, our Uncle Warren Buffett has been accumulating a very large position in Occidental Petroleum $OXY. He's been making his buys in the neighborhood of $55-60 per share. Like clockwork, every time $OXY has traded below $60 per share, we see new Form-4 filings disclosing another large purchase by Berkshire Hathaway.
We at All Star Charts were a little ahead of the crowd on this trade, having sold puts numerous times in $OXY over the past two years at these levels to take advantage of elevated options premiums and the "Buffett Support Zone."
It's been a minute since I've bought anything on eBay. But, by the look of the chart, I must be the outlier as it appears there is still good business there and market participants appear to agree.
Here's what my Analysts had to say about $EBAY in a recent 2 to 100 Club report:
eBay is completing a rounding bottom reversal as it reclaims the 38.2% retracement level. This level has acted as resistance multiple times in the past, making it a great place to define our risk. If this breakout sticks, the primary trend is higher, and we want to be long against the 53 level.
On a relative basis, the stock is working its way higher out of a bearish-to-bullish reversal pattern versus its peers. If the reversal pattern is completed on absolute terms, we expect the stock to outperform its peers over longer timeframes.
We want to buy EBAY above 53, with a target of 64 over the coming 2-4 months.
I received a well-meaning question from one of our clients today regarding an open position.
This client missed getting into the trade a couple of months ago.
Paraphrasing her question, she asked, “Since the stock is still above your stop loss level, would it make sense to buy the dip here, and/or would you add to your position here?”
Again, it's a well-meaning question – one I’m sure we all often wrestle with.
The problem, however, is that the position isn’t acting well. It’s a longer-term trade for us and still has a ways to go until options expiration, but the stock is currently trading well below the level at which we first got in.
In the chart below, you can see where we entered at the purple circle:
[Note: We entered this trade on June 4th following the entry trigger. Details below]
On today's Flow Show, Steve Strazza brought the heat.
It appears Bitcoin is about to start another leg higher. It's showing all the signs: A tightening consolidation on the verge of an upside resolution. And with the 100,000 level on the watch list of every professional and amateur market speculator, it's hard to believe that the next bullish breakout does not include a run to and through this highly watched level.