Adding to my Inventory

Today I am adding some hedges to my short positions:

1) Short 5 Dec HO 2.33 puts @ 920 pts
2) Short 5 Dec RB 2.20 Calls @ 300 pts

* 1 and 2 were done as a package. In a perfect world I would get assigned on both legs locking in a 730 diff, with the current diff at 1850. But I do not think this is the most likely case. It is most likely that one or the other will get assigned or they both expire worthless (which would be awesome as well, but diff would have to come in about 500 pts).

It really has to do with the current diff and where they usually finish historically. For example with the current 1850 diff this is right in line with historicals, so if I were to get assigned on the 2.20 RB calls that would give HO a minimum price of 2.3850, thus no assignment on the HO short puts. So on something like this if I get assigned on the 2.20 RB calls then my breakeven is at around 2.32 or if I get assigned on the 2.33 HO puts then my breakeven is around 2.20.

In addition to the above position I did add 1 short CL Dec put at the 80 strike for $1. If we get a sizable dip tomorrow before the fed announcment I will look to add maybe 2 more short puts in crude and maybe even sell a few RBOB puts somewhere in the middle of my 2.04/1.90 put spread that I own. Just looking to hedge my bets a little.

Cool Tools from Trademonster.com

As you all I know, I occasionally check out other platforms as they make improvements and added features. A few months back I checked out a platform Livevol, which was a really cool and useful tool as you get further into your options trading career. It retails for about $100 a month. Well now trademonster is adding those same scans for free to its platform. They do not have them all but they continue to make the library larger. So if you get a chance check out the trademonster platform.

How are you playing QE2?

Let me tell you I am so tired of talking about QE2 and am glad that it will finally be out and in the open once the fed conludes their two day meeting next week. We have seen estimates of 500 billion to 2 Trillion. Then you have GS saying that anything under $4 Trillion will be ineffective.

But since then the number has been tempered a bit to a few hundred billion dollars over several months. I think that the markets have been pricing in a much bigger package and we might get a sizable corrective move after the details are released. But you also have to look at the flip side, the market may take it as the economy is not doing as bad as everyone thought, therefore the fed does not need to print that much more money.

But I will tell you, aside from teh trades that I have on that are non directional plays, I am playing this with a bias to the short side. I have the following positions to the shortside going into next week.

1) Long 5 RBOB Dec '10 2.04/1.90 Put spreads @ $0.0525

2) Short 5 CL Dec '10 80/82.50 call spreads @ $0.85

3) Long 5 CL Jan '11 83/78 put spreads @ $1.84

This is where I stand going into next week.

How are you playing next week?

New Crude calender spread

Today I put on a front to back calander spread using the Dec and Jan Crude Futures. I am short the Dec contracts and long the Jan contracts. I put this trade on locking in a diff of 76cts over the Dec contract. So you would say I am long the Jan/Dec at +76.

I like this trade for a few reasons. One is the liquity of these contracts is great, 2nd its easier than playing flat our direction, and lastly because of an abundance of inventory. We have more crude then know what to do with and I do not see that happening anytime soon. The spread has gotten as wide as +140 or $1.40, seen in the begining of September. There is price support around +65 ish. I am looking to add around this area if it comes in some more and look for it to expand back up towards +140. I would stop the position out below +60 and would probably sell half if not all around +100 to +110. So risk is about 10cts (assuming I get the second set of 5 lots, Avg price would be +70 with stop at +60) for a reward of 30-40cts.

I have 5 lots of Long Jan '11 CL and 5 lots of short Dec '10 CL at +76.

Goals going foward...

I have not had a lot of time to post over the last few months due to the new trading position. But my goal has always been to make it back to the blog on a regular basis. But starting in November my goal is going to be to post and update about every position.

Keep me Honest!!!

What my positions look like going into products OPEX

When I talk about OPEX, I am talking about option expiration for the RBOB and HO products option expiration cycle. It is a bit different then equities which happens the 3rd Saturday of every month (last day to trade is the Friday before). For RBOB and HO opex falls two days prior to the expiration of the futures contract, as is the case for Crude Oil. But note however that Crude has diferrent expirations than that of RBOB and HO.

So with that said lets take a look at what I am holding onto going into OPEX tomorrow. Below you will see all my current holdings that are exposed to the NOV opex cylce. I have ran through 2 of the most likely scenario's for tomorrow and what that means in terms of P&L for me.

So for NOV my P&L will fall somewhere between + $6,510 to - $14,490, or about a $20k range. My money spot is right at 2.22.

Be very very Careful.

Keep a watch out on the $SPX and get prepared now for the storm before it arrives!

Once again I will say if you do not have protection against a market sell off, get it now. Take a look at this chart.




Now take a look at this chart. Look at the month of April up above and then down below.





If this doesn't scare you I'm not sure that Halloween's gobblins are going to phase you. These charts come from Jeff Clark at the growthstockwire.com. Before you write this off as just another crazy guy with his charts know that this bearish wedge formation breaks to the downside at around 80% of the time. Jeff Clark is the best in the business at short term trading so you'd better heed his warnings. I suggest December puts against the SPY or for the more courageous calls on the SPXU(3x the DAILY move in the S&P 500, more of a short term trading vehicle, not an investment)


Do Your Own Diligence....it's your money...Act like it!