Tuesday, Aug. 6, 2019

11:55 a.m. New York time

My IWM order has been filled. I’ve posted the analysis.

11:35 a.m. New York time

And — happy days! — it’s time to begin repopulating my short iron condor options positions. And what a good time it is! Implied volatility rankings on market-wide exchange traded funds has leapt to high levels from the IVR swamp of despond where they have languished for much of the year.

This round, the options expiring September 20, 2019, I shall focus on those market-wide ETFs. I’ve entered an order for the first, IWM, which tracks, the Russell 2000, but have not yet gotten a fill.

Today is 45 days prior to expiration, and I’ll be pacing my position entries over several days in order gain some time diversification.

I’m choosing that strategy because of a study discussed last month on the financial network TastyTrade, an outfit that does the most useful options trading studies that I’ve seen, ever. This study looks at outcomes by the category of underlying, and find that the broad market positions tend to do best. The discussion, broadcast July 16, can be watched here.

10:40 a.m. New York time

In yesterday’s post, I mused about whether there’s an improvement to my signaling method that would reduce the likelihood of whipsaws. Having slept on it, I’ve concluded that there’s really no metric that would help. All it would do is take one of the most sensitive yet whipsaw-avoidant signaling algorithms around, the Fisher Transform, and turn it into something less sensitive.

The reality is that whipsaws tend to happen when markets are changing trend, topping or bottoming. And that’s something where we all have a built-in algorithm. Our vision and brains together constitute one of the best visual pattern recognition systems around. We know a trending stock chart when we see it. We know topping and bottoming behavior when we see them.

So going forward I shall confirm the Fisher Transform buy signal by looking a the stock chart and judging whether the greater trend is in to the upside. If it is, then it’s a buy. EWM, for example, was giving a Fisher Transform buy signal this morning. But the chart shows a decline from July 10. True, the price moved higher today compared to yesterday, but as a wise mentor told me years ago, “One day does not a trend make.” Another mentor added, ” Right. It’s three days. It takes three takes to make a trend.” Well, whatever. Like you, I know a trend when I see it.

So I rejected EWM, despite the signal. Another signal was GDXJ, and it is clearly in an upward trend. I entered GDXJ for a debit of $40.96 per share. It is, presently, the only managed shares position I have, the rest having been shot down by sell signals over the last two days.

By Tim Bovee, Portland, Oregon, August 6, 2019


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.

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