S&P 500 New High Chart of The Day

Starting today I will be posting a daily chart with the new high of the day. And in the event that I post the chart to early and we make another high from the time I posted the previous chart I will post a new chart the following day. This should be fun documenting this epic move to the upside.

Good Luck Trading!

In The Money Trades

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Hedging Short /ES Position

As many of you know who have been following the blog the past month or so, I have flipped from bullish to bearish. Admittedly I have been wrong as the S&P 500 has rallied over 100 points since I initiated my short. As you may recall I sold a call on the /ES at the 1,555 strike for 32 points that effectively got me short at 1,587 which was only about 5 points off of the S&P 500 all time highs. We have since then traded to NEW all time highs several times over. With the most recent high putting us 1,000 points off the March 2009 low of 665.75...putting the new all time high at 1,665.75. The thing to keep into perspective is that it took only 17 months to trade off the previous all time high in 2007 to the March low. It has taken over 4 years to recover from that fall and finally build enough momentum to make a new all time high.

So what have I done while the market has moved 110 points against my short position? I have bought OTM upside calls at 1615, 1650, and 1700. I have sold various OTM puts and put spreads. The position started off as a naked call position that had unlimited risk to the upside, but once my breakeven was challenged I had to do the prudent thing and begin to hedge to the upside while defining my maximum risk. At the same time I have had to sell put premium in the direction I want the market to go at extremely low volatility levels. The short position at this point is really just a stake in the ground to trade against. So far I have moved my breakeven up 30 points to 1,618.

Over the coming weeks I will continue to trade premium around my position. We still have 33 days left until expiration...and really about 30 days before I need to start thinking about rolling the short call out to pick up some duration and hopefully some additional premium.

I will continue to be conservatively aggressive if that makes any sense. Although I have sold OTM premium in the direction I need the market to go, I have been conservative in the sense that I have left my ability to profit from a downside move open. My preference would be to get a nice pop in volatility and thus option premium that would allow me to be a little more aggressive in trading around the position. Otherwise I am forced to continue to sell low vol premium.

Good Luck Trading!

In The Money Trades




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Remember When Apple Was Going to Be 1st Trillion Dollar Company?

In the not so distant future everyone in their brother were buying Apple and touting that it was going to be the  first $1 trillion dollar company. At its all time weekly closing high of $705 Apple was valued at $663 Billion. Don't get me wrong, I love apple but really a trillion dollars. The at some point the market ran out of buyers and over the preceding 8 months the stock lost $300 billion in value.

Why am I telling you this? Its to make a point that things do not go up forever. Eventually we run our of motivated buyers and eventually we get to a place where people need to take profits. The crazy thing is that it usually takes an overdone and overhyped move to act as the catalyst lower.

As I write this the markets are making yet another all time high at 1,637:

I admit that I have no clue when this market will finally correct, but I also still favor playing the downside when thinking about risk/reward. Although my portfolio is short delta, this does not mean however that I have not been taking on any long trades. I have and will continue to play the upside as I trade around my short position until the market finally starts moving in my direction. The ultimate goal at the moment is to keep losses as small as possible while I wait out the market.

Why am I short? Because I don't like the prospect of entering into a position at all time highs. Obviously I don't know which "All Time High" will be THE ONE, but eventually we trade lower off of an all time high and I have obviously been early the past 5 weeks.

Good Luck Trading!

In The Money Trades


And 1 favor that we ask: 

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Did we forget that markets trade lower???

I am short all of the above with various strategies. These charts are starting to look pretty ridiculous. My assumption is that eventually we will have a two sided market where sellers will take control for a bit while the bulls catch their breath. I continue to just wait as we continue to grind higher.

Not much else to talk about with markets still at all time highs and the vix super low, doesn't bode well for selling much premium. Only have about 25% of my capital committed.

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!

JNJ: Oops I did it again...18th Consecutive Week Up

I am short and it is not working. But while I am a little frustrated, I am at the same time amazed with this run to the upside. The new high for the week was put in just shy of $86 at $85.99. May 1st was a day of hope for the bears where JNJ traded a buck lower, we all thought it was day 1 of decent trade lower (but it was just a head fake). I continue to be long the May '13 $85 puts and it now seems like we are going for a hail mary on this one given its resilience to the upside (probabilities say it only has a 17% chance of hitting $82.50). But then again, what do the probabilities say about this thing finishing higher for a 19th consecutive week in a row?

But after getting short this name starting on 4/8 at the time when it was only up 14 consecutive weeks in a row, I am committed to the trade. Eventually this thing will crack. I would love to see some profit taking in this name for a move $5 lower, that would be ideal :)

Other than hoping for that down move between now and May expiration I continue to sell some premium against my long puts with the weekly's to try to mitigate the time decay as much as possible.

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!