Live: Wednesday, Oct. 24, 2018

11:50 a.m. New York time

I have entered a short iron fly position on MSFT.

11:20 a.m. New York time

The earnings announcement for MSFT has changed from the list I am working from, and I shall analyze it as an earnings play today.

10:25 a.m. New York time

I have no earnings play that I care to take today. There are four prospects, AKS, GOOG, V and WPG.

AKS and V have implied volatility rates in the 3rd quintile (41-60), which is lower than I want to go. WPG is in the 2nd quintile, but has a lower market capitalization than I like. Market cap translates fairly closely into liquidity. AKS also has a smaller market cap than I like.

That leaves GOOG, which, at $1,096 per share, lacks the granularity needed to properly size a trade for someone with my resources. That’s personal for my account; others might find it to be an attractive.

  • Today’s Book

The Socionomic Theory of Finance

by Robert Prechter

After sharp drops like those the markets have experienced this week, everyone looks up, puzzled, and asks “Why?” The professional market watchers — from Bloomberg and The Wall Street Journal on down the size scale — all to a version of this: “The markets slid sharply today as investors grew nervous over ——“. Fill in the blanks.

I remember a time when every day, the U.S. markets were said to swing wildly because of Greece. I mean, Greece? Really? Yesterday’s swings were the result of uncertainty over the death of a Saudi journalist who wrote for an American newspaper, as well as concern over Brexit? Really? Since neither is new news?

In the 2nd quarter of this year, on average 132,628,945 shares of stock were traded each day. That’s not even looking at the options trades. Does it seems reasonable that all of those transactions made by all of those traders really had a single, simple, overwhelming reason for taking action? Especially when the causes cited are, shall we say, less than macroeconomic in their implications.

It hasn’t made sense for a long time to Robert Prechter, the leading practitioner of Elliott wave analysis, and he developed a counter-theory, which he calls socionomics. This book is the fullest account of what moves markets under his theory.

I’ve read it, and found it to be a useful corrective to the simplistic ways people think about the markets. Well worth the time investment.

More about the book

I’ve also taken a look at SPY with an eye toward re-entering using the options that expire Dec. 21.

A chart of the movement since the Sept. 20 peak shows that, using Elliott wave analysis, SPY yesterday indeed completed the 1st wave of the Minute degree {+1}. The chart covers 30 days with 30-minute bars.


The 2nd chart, below, covers two days with five-minute bars. That closer view suggests that SPY has completed the A wave within the uptrending 2nd wave of the Minute degree. The pattern would be a B wave retracing part of the A-wave rise, and then a C-wave to the upside complete the Minute 2nd.


The re-entry point for my bear positions on SPY would be at the end of the C wave, which would mark the beginning of the 3rds Minute wave down, which should bring significant near-term decline.

Here is the status of my options positions, including SPY at the time I exited.

sym option debit share price curr % max profit net prft/shr $ option days left
C 3.74 65.05 (8.4) (0.29) 23
EWZ 0.98 38.06 (14.0) (0.12) 23
HON 6.02 149.90 5.0 0.32 23
IBM 8.95 129.55 (31.8) (2.16) 23
JNJ 5.88 139.45 (5.0) (0.28) 23
MCD 7.79 174.77 (25.6) (1.59) 23
PM 3.72 88.35 (8.5) (0.29) 23
STZ 6.40 213.51 23.8 2.00 23
UPS 7.68 110.56 6.3 0.52 58
WBA 3.96 77.02 (11.2) (0.40) 23

And here is the status of my shares positions:

sym share price net result % net profit $ days held
AAPL 221.31 -1.2% (2.65) 40
CHK 4.32 8.0% 0.32 40
FXI 39.54 -4.1% (1.67) 40
SPXU 38.75 -4.5% (1.81) 162
TSLA 288.75 -5.3% (16.24) 23
VNQI 53.03 -6.7% (3.78) 41

By Tim Bovee, Portland, Oregon, Oct. 24, 2018

Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decisions for his or her own account, and take responsibility for the consequences.


All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

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