Live: Wednesday, Aug. 14, 2019

2:40 p.m. New York time

My options positions — on GDX, IWM, QQQ and SPY — remain within their profit zones. IWM is 14 cents away from my point for managing the trade, at 50% of maximum potential profit.

2:10 p.m. New York time

I went through my 90-some-odd funds using the DMI Trend metric. Only three would be candidates for a trade: GLD, SMH and XLP. For collateral confirmation, I looked at the DMI Stochastic Extreme, which shows all three as being at the peak of the trend, suggesting that there is less likelihood of continued rise. So I’m passing on all three, especially given today’s rapid decline in the markets.

The DMI Stochastic Extreme is a metric that was developed by Barbara Starr and published in the January 2013 edition of Technical Analysis of Stocks and Commodities. (The article is behind a paywall.)  TDAmeritrade’s ThinkOrSwim education site has a brief description of the metric.

1:55 p.m. New York time

Here are the percentages for my latest two exits.

IYR produced a 1.6% loss over five days for a -199% annual rate. The loss was $1.49 per share.

USO produced a 1.4% loss over two days for a -256% annual rate. The loss was 16 cents per share.

I’d say today has been a roller coaster ride, but only we start at the top of the roller coaster and then jump out of the car on the way down. Here’s the current, sadly lonely line-up for my managed shares portfolio:

sym slot # entry $ sector
(empty) 1
SLV 2 15.88 metals
(empty) 3
(empty) 4
(empty) 5

SLV remains uptrending by the DMI indicator, and the DMI Stochastic Extreme shows that it has not yet reached the extreme. True, the DMI+ has moved below the average — the DMA — and so I would be reluctant to make a new entry. But I’ll continue to hold until the DMI Trend shows a sell signal.

1:05 p.m. New York time

In my managed shares portfolio, I’ve exited USO for $11.42. IYR also switched on the DMI to a sell signal, and I exited at $90.02.

12:35 p.m. New York time

After thinking through the problems with my managed shares trading, discussed below, I’ve decided the best solution is to switch from the Fisher Transform to the DMI, developed in 1978 by J. Welles Wilder. It compares well with the Fisher Transform in terms of the timeliness of the signal. Both methods have occasional false signals — whipsaws — which are quickly corrected by the indicator itself.

An Investopedia article gives a good explanation of the DMI.

Of my three remaining holdings, IYR and SLV are uptrending according to the DMI and should be held. One holding, USO, has moved to downtrending on the DMI, and I shall exit.

Of the symbols I passed today, SMH has a DMI buy signal, given yesterday, and I shall considering entering a position.

The revised rules can be found here.

I think this will result in slower turnover, greater likelihood of profit, and also, greater difficulty in filling the five slots in my portfolio.

10:40 a.m. New York time

Happy Inversion Day! Yields on the 2-year and 10-year Treasury notes inverted from the usual pattern, with the 10-year notes having a lower yield than the 2-year. Normally, the 10-year notes yield ore to cover the additional time risk.

An inversion is usually followed by a recession, but not for months. So although the headlines are playing the click-baity panic mode for all it’s worth, I’m sitting back with a calm smile — What? Me worry? — and allowing my rules to keep me out of the trouble. The rules don’t guarantee profits. They do mitigate loss.

As they did this morning in my experimental managed shares portfolio, when the Fisher Transform metric gave a sell signal on ARKW. I sold, for $48.47, which is $1.64 below the entry price. ARKW produced a -3.3% loss over six days for a -199% annual rate.

I then reviewed 14 buy signals given yesterday in search of a replacement for ARKW, and also GDXJ, which I sold the day before. No luck. All had either switched to sell signals this morning, or showed non-trending charts that warned me away from entering positions.

The managed shares line up:

sym slot # entry $ sector
(empty) 1
SLV 2 15.88 metals
(empty) 3
IYR 4 91.51 real estate
USO 5 11.42 energy

So far, the managed shares experiment has produced not a single profit. That tells me that:

  • We are in a non-trending market
  • My management rules need to have an additional metric that tells the degree to which the market as a whole, and a specific symbol, are trending.
  • To enhance the odds of profit, I should trade only uptrending symbols and for the best odds, the surrounding markets should also be uptrending.

Something to ponder.

By Tim Bovee, Portland, Oregon, August 14, 2019

Read More »

Live: Tuesday, Aug. 13, 2019

11:10 a.m. New York time

In my managed shares portfolio, GDXJ gave a sell signal, and I exited for a $40.28 credit, producing a 68 cent loss, or 1.7% over seven days for a -87% annual rate.

I have no immediate replacement waiting, so that slot will remain empty today. The line-up

sym slot # entry $ sector
(empty) 1
SLV 2 15.88 metals
ARKW 3 50.11 technology-internet
IYR 4 91.51 real estate
USO 5 11.42 energy

By Tim Bovee, Portland, Oregon, August 13, 2019

Read More »

Live: Monday, Aug. 12, 2019

9:55 a.m. New York time

I’ve filled the empty slot in my managed shares portfolio, adding USO after a Fisher Transform buy signal, confirmed on the chart by a 5-day exponential moving average cross. Here’s the line-up:

sym slot # entry $ sector
GDXJ 1 40.79 metals
SLV 2 15.88 metals
ARKW 3 50.11 technology-internet
IYR 4 91.51 real estate
USO 5 11.42 energy

By Tim Bovee, Portland, Oregon, August 12, 2019

Read More »

GDX Analysis

VanEck Vectors Gold Miners ETF  (GDX)

Update 8/26/2019I’ve exited my short iron condor on GDX at 51.1% of maximum potential profit, slightly above my normal management point. The exit cost was a $0.22 debit, giving a $0.23 profit, with shares trading at $29.95, or $0.28 above the level at entry.

GDX traced a sideways path during the entirety of my holding period. Implied volatility fell by 15.1 points, to 84.7%, from its entry level.

Shares rose by 0.9% over 17 days, or a +20% annual rate. The options position produced a 104.6% return for a +2,245% annual rate.


I have entered a short iron condor spread on GDX, using options that trade for the last time 42 days hence, on September 20. The premium is a $0.45 credit and the stock at the time of entry was priced at $29.63

The profit zone for this position is between $34.45 on the upside and $25.45 on the downside.

The implied volatility rank (IVR) stands at 99.8%.

Premium: $0.45 Expire OTM
GDX-iron condor Strike Odds Delta
Long 36.00 93.2% 9
Break-even 34.45 89.9% 12.5
Short 34.00 86.6% 16
Puts
Short 27.00 77.2% 19
Break-even 25.45 84.5% 13
Long 25.00 91.8% 7

The premium is 22.5% of the width of the position’s wings.

The profit zone covers a 16.3% move to the upside and a 16.4% move to the downside of the entry price, for total coverage of 32.7%

The risk/reward ratio is 3.4:1, with maximum risk of $155 and maximum reward of $45 per contract.

By Tim Bovee, Portland, Oregon, August 9, 2019

Read More »

QQQ Analysis

Invesco Powershares QQQ (QQQ)

Update 8/23/2019: My short iron condor position on QQQ reached half of maximum potential profit, and I exit for a $0.93 debit, with shares trading at $187.36, up $1.56 from their price at entry. The profit per contract was $93.00.

The stock traced a sideways trend during my holding period. It fell sharply on the day I exited, following a tweet by Trump, but only after I had exited. The market response to the president’s tweet reduced the position’s profit to well below 50% of its maximum potential. It was one of those fortuitous events of timing that never fails to put a smile on a trader’s face. The implied volatility rank at exit was 27.6%, down 3.6 percentage points from the entry level.

Shares rose by 0.8% over 14 days, or a +22% annual rate. The options position produced a 100.0% return for a +2,607% annual rate.


I have entered a short iron condor spread on QQQ, using options that trade for the last time 42 days hence, on September 20. The premium is a $1.86 credit and the stock at the time of entry was priced at $185.78.

The profit zone for this position is between $198.86 on the upside and $158.86 on the downside.

The implied volatility rank (IVR) stands at 31.2.

Premium: $1.86 Expire OTM
QQQ-iron condor Strike Odds Delta
Long 203.00 96.0% 5
Break-even 198.86 90.0% 10.5
Short 197.00 84.0% 16
Puts
Short 171.00 81.0% 17
Break-even 158.86 87.0% 11.5
Long 157.00 93.0% 6

The premium is 18.6% of the width of the position’s wings.

The profit zone covers a 7.0% move to the upside and a 16.9% move to the downside of the entry price, for total coverage of 24.0%

The risk/reward ratio is 4.4:1, or $814 in maximum risk to $186 in maximum reward.

By Tim Bovee, Portland, Oregon, August 9, 2019

Read More »

Live: Friday, Aug. 9, 2019

1 p.m. New York time

I’ve entered a long iron condor position on GDX and have posted the analysis.

10:45 a.m. New York time

My short iron condor order on QQQ has been filled, and I have posted the analysis.

10:25 a.m. New York time

I’ve placed a short iron condor order on QQQ. My asking price is $1.85.

9:50 a.m. New York time

I’ve added IYR to my managed shares after a buy signal from the Fisher Transform. The confirmation was a visual inspection of the chart trend. One slot remains empty. Here’s the portfolio:

sym slot # price $ sector
GDXJ 1 40.79 metals
SLV 2 15.88 metals
ARKW 3 50.11 technology-internet
IYR 4 91.51 real estate

By Tim Bovee, Portland, Oregon, August 9, 2019

Read More »

Live: Thursday, Aug. 8, 2019

4:40 p.m. New York time

My order on EEM expired unfilled.

10:05 a.m. New York time

I’ve placed an order for a short iron condor on EEM. My asking price is $0.55. No fill yet.

9:35 a.m. New York time

I’ve added ARKW to my managed shares portfolio, for an entry price of $50.11. The Fisher Transform gave a buy signal yesterday, and the trend is confirmed by a Bullish Engulfing candlestick pattern.

ARKW20190808
ARKW bullish engulfing pattern, daily bars at the Aug. 7, 2019 close

 

 

This brings my holdings back to three as the markets settle after the large drop earlier in the week.

sym slot # price $ sector
GDXJ 1 40.79 metals
SLV 2 15.88 metals
ARKW 3 50.11 technology-internet
(empty) 4
(empty) 5

I declined 11 Fisher Transform buy signals from Wednesday because they lacked trend confirmation. They are ACWX, BBJP, EIDO, EWC, EWJ, EWP, EWQ, EWT, XHB, XLU and XLY.

By Tim Bovee, Portland, Oregon, August 8, 2019

Read More »

SPY Analysis

SPDR S&P 500 ETF (SPY)

Update 8/26/2019: I’ve exited my short iron condor position on SPY for 50% of maximum potential profit. The exit cost as a $0.76 debit, for a profit of $0.76, with shares trading at $287.82, up $2.94 from the price at entry.

SPY fluctuated during my holding period within a $10 range. The implied volatility rank declined by 20.5 points to 45.1% at exit.

Shares rose by 1.0% over 19 days for a +20% annual rate. The options positions produced a 100.0% return for a 1,921% annual rate.


I have entered a short iron condor spread on SPY, using options that trade for the last time 44 days hence, on September 20. The premium is a $1.52 credit and the stock at the time of entry was priced at $284.78.

The profit zone for this position is between $301.52 on the upside and $251.52 on the downside.

The implied volatility rank (IVR) stands at 65.6%.

Premium: $1.52 Expire OTM
SPY-iron condor Strike Odds Delta
Long 303.00 92.0% 9
Break-even 301.52 89.0% 11.5
Short 300.00 86.0% 14
Puts
Short 261.00 83.0% 14
Break-even 251.52 86.5% 11.5
Long 250.00 90.0% 9

The premium is 21.7% of the width of the position’s wings.

The risk/reward ratio is 3.6:1. Each contract carries $548 in maximum potential loss compared to $152 in maximum potential profit.

By Tim Bovee, Portland, Oregon, August 7, 2019

Read More »

Live: Wednesday, Aug. 7, 2019

12 p.m. New York time

I’ve posted the analysis of SPY.

11:55 p.m. New York time

I’ve entered a short iron condor position on SPY. Details to follow.

10:10 a.m. New York time

Metals are all that’s worth buying out of my managed shares pool. I added SLV to GDXJ, and I still have three empty slots.

sym slot # price $ sector
GDXJ 1 40.79 metals
SLV 2 15.88 metals
(empty) 3
(empty) 4
(empty) 5

One reason for the paucity of trades is my new rule requiring that the symbol be in an uptrend. At this point I’m using the gut-feel method — I know an uptrend when I see it — and will, if the opportunity presents itself, use such things as Japanese candlestick patterns to resolve ambiguities.

Only SLV qualified for a trade when trend was added to the mix. The buy signals rejected because of their trends were BRZU, DBA, EEM, EPI, EWH, EWM, EWW, EWZ and RSX. So clearly, at this moment, the trend requirement is quite limiting. In a future up market, the trend requirement won’t be limiting at all, since almost every sector will be trending upward. That makes the trend an invaluable tool because it ties my trade selections to the Zeitgeist of the markets. Or, as wise old traders with a liking for shibboleths habitually put it, “The trend is your friend.”

By Tim Bovee, Portland, Oregon, August 7, 2019

Read More »

IWM Analysis

iShares Russell 2000 ETF (IWM)

Update 8/20/2019My short iron condor position on IWM reached 50% of maximum potential profit, and I exited for a $0.90 debit — half the credit received at entry. Shares at exit were trading at $149.25, which is $1.12 above their level at entry.

IWM meandered in a sideways movement during the holding period, and that was reflected in the implied volatility rate, which fell by 19.8 points from the entry level to 29.0% at exit.

Shares rose by 0.8% over 14 days, or a +20% annual rate. The options position produced a 100.0% return for a +2,607% annual rate.


I have entered a short iron condor spread on IWM, using options that trade for the last time 45 days hence, on September 20. The premium is a $1.80 credit and the stock at the time of entry was priced at $148.13.

The profit zone for this position is between $156.80 on the upside and $126.80 on the downside.

The implied volatility rank (IVR) stands at 48.8.

In building the trade, I skewed it to provide a deeper profit zone to the downside.

Premium: $1.80 Expire OTM
IWM-iron condor Strike Odds Delta
Long 162.00 93.0% 7
Break-even 156.80 84.0% 16.5
Short 155.00 75.0% 26
Puts
Short 132.00 87.0% 12
Break-even 126.80 90.0% 9
Long 125.00 93.0% 6

The premium is 25.7% of the width of the position’s wings.

The risk/reward ratio is $520 to $180 per contract, or 2.9:1.

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

Read More »