Who buys at all time highs???

As I write this post this morning the markets are back within arms length to ALL TIME HIGHS! I really don't know how you can buy all time highs. If history tells us anything, buying all time highs whether in the stock market or in the housing market or any other market for that matter is a losing trade. But we have to remember that the markets can stay irrational for longer than expected. If you don't get too big for your pants, you can weather the storm.

In continue to be a difficult environment to sell option premium given the super low volatility environment. 

Positions: Short /ES, Short JNJ, Short GME, Long CLF, Long NLY,

Markets at all time highs are not great on my portfolio but I do have 2 pieces of saving grace:

1) I have positive theta

2) I am long CLF and that is offsetting negative P&L as we move higher.

Good Luck Trading!

In The Money Trades

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Long Vol in Low Vol Environment

On Monday I posted that I moved to 95% cash and that I thought short term that we could see some weakness in the markets. I also added a comment to that post that because of this thesis, I decided to get long volatility via the VXX. I sold 5 May '13 puts @ $1.24 with a $19 Strike price.

Above I have a 4 hour chart of the VIX. The thing I want to point out is that the VIX has been below 15 for all of 2013 except for 2 days. One of those days was the 35% spike on February 25th. I have 44 days til expiration to see a spike in volatility and plenty of time for theta to work for me. My goal is to capture about 50-70% of the premium I sold.

My break even is $17.76 and I would look to roll if we actually continued lower towards my break even before I close the trade. Remember when we had the spike in VIX in February I was short vol with a covered put position in the VIX. At these prices I don't like that trade as much, which is the justification of being long.

Remember I took off the VXX, I think last week for most of the max return with plenty of days til expiration.

Good Luck Trading!

In The Money Trades

And 1 favor that we ask: 

If you like the hard work we put into our blog posts and videos, PLEASE help us out by sharing them. Click the share links below and share them on FB, twitter, etc. It really helps us get more exposure and grow IN THE MONEY TRADES!

Is Volitility DEAD? Will the market ever trade lower?

Anyone that has been reading this blog over the last few months knows that I have been bullish for all of Q1 and have been projecting a bullish story for all of 2013. Overall I continue to be bullish for the year, but short term my opinion is being challenged. The S&P 500 finished Q1 up 10% on the year and volatility has basically traded near historical lows for a big part of the quarter besides the 35%+ spike in February.

This morning I happen to be watching the SPY trade up to test the $157 level. But it failed and reversed course. This is one of many instances of the last 1-2 weeks where we have had a pretty large reversal in the market. It feels like a tuggle war is taking place in the markets.

The VIX is popping 10% as I write this.

Volatility has been dead, but there is a certain level of complacency that is making me a bit nervous in the short term. I am starting to believe that we could see a correction lower. I am initially thinking that it could be in the tune of 30 points to start. I would re-evaluate if this occurs.

With that said I have actually lighted up on a few positions that were pretty deep in the money. With 9 months to go on a lot of my positions, today I had the opportunity to close those positions for close to 60% of the gain in some cases.

Before today I was close to 95% invested...after this morning I am more like 10% invested. Now don't get me wrong, I typically want to have passive positions on. But something told me this morning that it was a good opportunity to move to cash and wait for another opportunity to re-enter the market at lower prices. So until then I will likely sit in a large cash position.

Maybe we will get a pop in volatility that would allow me to put my covered put position back on in VXX. If we could see vol back in the 20's, it may also bring some opportunities to sell some premium.

Good Luck Trading!

In The Money Trades




And 1 favor that we ask: 

If you like the hard work we put into our blog posts and videos, PLEASE help us out by sharing them. Click the share links below and share them on FB, twitter, etc. It really helps us get more exposure and grow IN THE MONEY TRADES!

Long Volatility via VXX

As I have been talking about over and over for the past few weeks. Right now the market direction is up and  I am trying to sit on my hands and not add to any new long positions. The risk/reward to adding new positions with markets at the upper end of their range and at 5+ year highs is very hard to justify. The SPY is possibly starting to show signs of getting a bit tired. With that Volatility (VIX) is at the lower end of its range and is currently in the 13% percentile.

With that, this morning I sold the Mar '13 $22 put @ $1.28. In other words I collected a $1.28($128 bucks), betting that volatility is not going much lower and could go higher between now and March Expiration. By break even is at $20.82. I really like the fact that my Theta is about $2.33/day.

After adding this to my overall portfolio I am net long about 42 SPY deltas.

Additionally this week PBI will be paying its quarterly dividend. /The covered call I sold against my stock position is about $2 ITM. So I will update the original post on this position as to whether I get exercised to sell the stock or if I go under the radar and keep the dividend. Either way I make money :)

Good Luck Trading!

And 1 favor that we ask: 

If you like the hard work we put into our blog posts and videos, PLEASE help us out by sharing them. Click the share links below and share them on FB, twitter, etc. It really helps us get more exposure and grow IN THE MONEY TRADES!

VIX Options Trading Experience

A few weeks ago I traded my first VIX options. I just thought that with VIX at 17 and its relative lows at about 15 that I would sell some 17 strike puts. My feeling was I could just roll out to the next month and down to 16 if it went below 17. So that theory is flawed for a few reasons but the main thing I didn't consider was that below 17 there isn't really any premium to be had because it historically doesn't trade for much less, which makes sense as the reason I was interested in selling puts in the first place was that VIX doesn't normally trade this low and can't go to 0. The reason I exited the trade was with about six days left until they expired they were still trading .05 away from where I entered, but VIX was also trading about the same place and the next month options didn't look very enticing.

I took a look at the option chain and the price for the 17 put is about the same. So this made no sense to me for the weekly and monthly premiums to be near equal. The bid for the 16 put was .05 so that threw that theory out the window of rolling down to a lower strike. I also did not notice when I sold to open for .25 that these only trade in .05 increments. Last trade was showing .18 so I tried to pay that to close and TOS kicked the order out as invalid. So now I'm pissed that the chart is showing trades going through at prices other than .05 denominations so I decide this instrument sucks ass and there are better ways to play volatility. So I got out with a small $35 profit after fees but learned another lesson, which is great. I'm a big proponent of continually trying to trade with new instruments or ideas using small position size in order to gain the learning experience with real money instead of paper trading. I started small trading bond futures in November not having a clue how they worked and now I fully understand and I've booked $25,000 in profits. VIX options are not for me so I'll move on and dabble with something else.

VIX Option Chain: Last Trade shows .18 on the APR 17 Puts

Chart of APR 17 Put Trade Prices: Why are trades going through at other than .05 increments but TOS won't let me do it?

Long-Term VIX Chart with relative lows of near 15

Close Out Trade