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

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2:20 p.m. New York time

By the rule book on Tuesday I’ll start entering my options positions that expire September 20. Tuesday is 45 days prior to expiration.

My managed shares positions had been reduced to one by Friday’s sell signals, executed this morning, and a sell signal this morning removed the last position from the board.

Sold are EWM, XBI, XHB and XOP, with these results:

• EWM, bought $28.55 on Aug. 1, sold $27.95 on Aug.  5, $-0.60 loss. Shares declined by 2.1% over three days for a -256% annual rate.
• XBI, bought $86.76 on July 31, sold $82.08 on Aug. 5, $-4.68. Shares declined by 5.4% over five days for a -394% annual rate.
• XHB, bought $42.07 on Aug. 1, sold $40.31 on Aug. 5, $-1.76 loss. Shares declined by -4.2% over four days for a -382% annual rate.
• XOP, bought $25.16 on July 31, sold $22.43 on Aug. 5, $-2.73 loss. Shares declined by 10.9% over five days for a -792% annual rate.

The positions prepped for entry were CORN, GLD and XLU, and I added FXE for the position vacated this morning.

But I’m passing on those trades for now, given the Sturm und Drang in the markets after China allowed its currency to weaken.

As the economist Paul Krugman tweeted this morning, “Trump’s latest tariffs may look like the world trade equivalent of the assassination of Franz Ferdinand — the event that tripped an uneasy situation into all-out trade war.” I mean, who wants to hold shares as the guns of August are rolling into place?

Speaking of Sturm und Drang, my early results with this experimental method have produced way more churn than I anticipated. Could be intrinsic to all markets. Could be an artifact of this time and these markets. I’ll use the time-out enforced by the heightening tariff war to think about ways to smooth the signaling.

By Tim Bovee, Portland, Oregon, August 5, 2019

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1:35 p.m. New York time

I’ve updated my thought experiment on hedged earnings plays with a day-after observation. See Thought Experiment: An IBM earnings play.

10:05 a.m. New York time

I exited my managed shares positions XLE and XLV after each received a sell signal. I had only one buy signal that I could reasonably use to fill a slot: EWM, which I entered for $28.55 a share.

XLE produced a 0.6% loss over two days, or a -115% annual rate. The price change was down 39 cents.

XLV produced a 1.1% loss over four days for a -103% annual rate, a decline of $1.04.

Here’s the lineup:

sym	slot #	price $	sector
(empty)	1	#N/A
EWM	2	28.55	intl-malaysia
XBI	3	86.76	biotech
XHB	4	42.07	real estate
XOP	5	25.16	energy

By Tim Bovee, Portland, Oregon, August 2, 2019

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1:40 p.m. New York time

I’ve updated Thought Experiment: An IBM Earnings Play with results and conclusions.

1 p.m. New York time

My paper-trade on IBM, part of a thought experiment on hedging earnings plays, triggered an exit, for a $2.38 debit with shares at $151.88. I’ll update the analysis shortly with full results.

I’ve made three swap outs on the managed stocks account. I exited FXE and GLD on sell signals. I entered XLE and XHB, in the energy and real-estate sector, respectively. Here’s the new line-up:

sym	slot #	price $	sector
XLE	1	62.11	energy
XLV	2	92.21	health care
XBI	3	86.76	biotech
XHB	4	42.07	real estate
XOP	5	25.16	energy

The FXE exit credit was $105.19, producing a 0.8% (80 cents) loss over one day, or a -276% annual rate.

The GLD exit credit was $133.41 , producing a -1.1% ($1.45) loss over one day for a -392% annual rate.

The new line-up leaves me overweight in energy, with two positions.

By Tim Bovee, Portland, Oregon, August 1, 2019

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