10:20 p.m. New York time

SPY opened at a lower low but then rose up into yesterday’s range. My volatility plays in AAPL and AMD remain out of the money, which is another term for the profit zone.

And my often ignored shares position on SPXU, an S&P 500 inverse and leveraged fund, remains unprofitable. If  the bearish conclusion of my Elliott wave analysis turns out to be correct, then it will return to profitability in the near term.

Rather than adding to my positions today, I’m waiting until next week in the interest of providing some time diversity to my holdings.

On Saturday I shall post the Week Ahead of what to look for next week.

By Tim Bovee, Portland, Oregon, Sept. 7, 2018

Read More »

Advanced Micro Devices Inc. (AMD)

Update Oct. 2, 2018: I exited AMD for a $1.74 profit on the options, with shares trading at $30.21 at exit, The exit price was within the profit zone, 21 cents away from the short calls strike price.

Implied volatility at exit was 74%, two points above its level at entry.

I exited at 77.6% of maximum potential profit, well above my target of 50% of max.

Shares rose by 6.1% over 26 days, or an 86% annual rate. The options position produced a 345.5% return for a +4,85-% annual rate.

---

I have entered a short iron condor on AMD, using options that trade for the last time 29 days hence, on Oct. 5. The premium is a $0.98 credit and the stock at the time of entry was priced at $28.48.

I made the decision to enter the trade in my account based on a high implied volatility rank and a trending counter to the broad markets.

The profit zone for this position is between $32.98 on the upside and $25.48 on the downside.

Read More »

12:10 p.m. New York time

I’ve entered a short iron condor position on AMD.

11:10 a.m. New York time

Of my volatility prospects, I’m tossing KR and LEN because they have earnings coming up soon. I’m passing on EBAY bceause the chart has developed a significant downward movement.

For this strategy, I’m looking for stocks that aren’t moving directionally. My method at this point is to look either for sideways moving charts or stocks that are moving contrary to the market’s main trend, which I consider to be downward.

The remaining symbols are CRM, with an implied volatility rank (IVR) of 40%, and AMD, with an IVR  of 54%. The AMD rank is calculated from a spike last March. If I follow my practice of eliminating major outliers, AMD’s IV is at its high point of the year, giving an IVR of 100%.

I shall analyze AMD as a potential volatility play.

10:45 a.m. New York time

In my Elliott wave analysis prospects, SPY is trading within yesterday’s range, albeit with a lower high, suggesting that the next wave down is continuing at a tentative pace.

In trades using volatility strategy, AAPL has dipped below yesterday’s range. The position has an 85.9% chance of expiring profitably to the downside and a 68.6% chance to the upside.

I shall review five potential volatility plays today: KR, CRM, LEN, EBAY and AMD.

By Tim Bovee, Portland, Oregon, Sept. 6, 2018

Read More »

Apple Inc. (AAPL)

Update 9/21/2018: I have exited AAPL at $3.92 per contract/share, a small loss. I exited a week before expiration as the share price continually toyed with the lower breakeven level.. The share price was $228.71 at the time I exited.

Shares declined by 4.2% over 16 days, or a -95% annual rate. The options position produced a 0.8% loss for a -17% annual rate.

---

I have entered a short iron condor on AAPL, using options that trade for the last time 23 days hence, on Sept. 28. The premium is a $3.89 credit and the stock at the time of entry was priced at $228.71.

I made the decision to enter the trade in my account based on high implied volatility relative to the past 52 weeks.

The profit zone for this position is between $238.89 on the upside and $216.39 on the downside.

Read More »

1:30 p.m. New York time

I’ve entered a position on AAPL.

1 p.m. New York time

To the final four I added NFLX, and I then recalculated the IV rank to get a more current figure than that provided in the TastyTrade report from which I chose prospects.

That recalculation made LULU less attractive by lowering the IV rank to 29. Also, earnings produced an upside gap, and I’m not yet certain whether the price has stabilized. So I’ve passed on LULU.

I also declined further consideration of AMZN because of the high price of shares. A $2,000+ price tag would require me to commit an overly large proportion of my trading funds to a single symbol. My rule is, echoing Tom Sosnoff, is: Trade small, trade often.

NFLX is fine with a price that meets my standards and a decent IV rank of 58. But the price is undergoing a marked directional move downward, so I’m passing for now.

That leaves AAPL, with an IV rank of 57 and CRM, with an IV rank of 37. AAPL first, and if passes muster for a trade, then in the interest of time diversification,  I’ll defer further consideration of CRM until a later day.

11:05 a.m. New York time

For the Final Four — LULU, CRM, AMZN and AAPL — here’s how I’ll be thinking through the trading decision.

Each trade will be structured as an iron condor, meaning that there will be a zone of profit surrounding the current price, and a move too far up or down will move the position into the loss column.

I favor higher implied volatility relative to its history because that allows me to use a wider zone of profit. It’s possible to skew an iron condor to favor one direction or the other. For this first batch, I intend to build the trade without skewing.

The other factor is the expiration date. Generally, the further out the expiration, the higher the premium and therefore the wider the zone of profit. But time itself is a risk factor. The quicker I can exit a trade profitably, the less my potential risk, and the longer I linger in a position, the greater my risk. Given the uncertainties uncovered by my Elliott wave analysis of SPY, I shall aim for shorter-term trades as close to 30 days out as I can get. In order to attain that goal I will consider weekly option issues. They tend to have wider bid/ask spreads than do the monthlies, reducing profit, but I consider time to be a greater risk.

That’s it. Time to get to work.

10:35 a.m. New York time

I’ve eliminated one of the prospective odds trades because of an approaching earnings announcement: ORCL on Sept. 13.

And I’ve struck five because they are moving down, and I’m looking for rising or sideways stocks. The downtrenders are TSLA, FB, GOOG, INTC and TWTR.

That leaves LULU, CRM, AMZN (which will probably be too expensive for my standards) and AAPL remaining from my first batch of prospects. Of those, LULU and CRM have high IV ranks, 64 and 51, resepctively. AMZN and AAPL have IV ranks in the 20s.

9:55 a.m. New York time

SPY has begun the day trading within yesterday’s range. I anticipate no re-entry of my trading based on Elliott wave analysis.

As I noted yesterday, I shall be considering the wisdom of re-engaging with the odds-based strategy I used extensively before the bear market began on Jan. 26. The first batch of prospects I’ll be exploring are LULU, TSLA, ORCL, CRM, FB, GOOG, INTC, AMZN, AAPL, TWTR, NFLX.

By Tim Bovee, Portland, Oregon, Sept. 5, 2018

Read More »

3:20 p.m. New York time

I had no need to trade today. As we near the closing bell, SPY is trading within Friday’s range.

Over the summer my trading dropped off, primarily because of uncertainty over where we stood within the new bear market. I’m feeling comfortable enough with our new era to attempt a greater volume of trading.

My plan is this: I’m looking for stock options, as opposed to ETF options, because stock options tend to have higher implied volatility, which increases my profits.

Because of the directional uncertainties at this point in the Elliott wave progression, I shall focus on short iron condors, which limit losses both when the underlying rises past a point and when it falls past a point.

I’ll be looking for stocks that have high relative implied volatility and that are rising. To measure relative IV, I shall use the IV Rank metric developed by Tom Sosnoff‘s team at TastyTrade.

Tom had the vision of democratizing access to professional-grade options trading tools and oversaw the development of ThinkOrSwim, the best options platform there is and the platform that I use for my trading. He eventually sold ThinkOrSwim to TDAmeritrade, which manages it to this day.

I urge anyone who hasn’t checked out his current venture, the options education platform TastyTrade, to do so, and to get on the email lists immediately. His team, personified by “Dr. Data’, provides reams of useful information about individual stocks and funds. The IV Rank metric I’ll be using in my trading is part of that data.

All absolutely free. Great tools for options traders. (This is not an advertisement, by the way, but a heartfelt homage to a vision and tools that have had a huge impact on my trading.)

He also runs the brokerage TastyWorks, which I haven’t check out yet, but I plan to, quite soon.

7:20 a.m. New York time

With Labor Day behind us, the markets set summer’s quirkiness aside and begins the serious business of August.

September, it is said, typically is a down month. That would certain match where the S&P 500 — in the form of its exchange-traded fund SPY — has positioned itself. I posted a longer-term chart on Aug. 27, suggesting in my discussion that it showed a peak was near, to be followed by a substantial decline.

Today’s shorter-term chart, covering 15 days with 20-minute bars, confirms that that finding.

My Elliott wave analysis suggests that it is an X wave of the Minor degree {+2}, combing two corrective patterns. X waves tend to be zig-zags, and I would anticipate that it would reach completion above the start of prior corrective pattern in the series, in this case a zig-zag that began Feb. 9 at $252.92, which is 15% below the Aug. 29 end of that pattern at $291.74.

By Tim Bovee, Portland, Oregon, Sept. 4, 2018

Read More »

With Monday’s Labor Day holiday behind us in the United States, the markets move from summer holidays to the serious business of autumn: Divining the minds on the Federal Open Market Committee by analyzing the strength of the economy.

As is often the case in finance, the question comes down to one of simple math: How quickly with the Fed raise interest rates? And will it be faster than before or slower?

A key measure of the economy’s strength, the employment situation report, will be published on Friday at 8:30 a.m. New York time. The trailing indicator will get a sneak preview on Thursday in the form of the ADP employment report, issued at 8:15 a.m. by a private payroll management company.

Other heavily watched reports out during the week: The Institute of Supply Management manufacturing index on Tuesday at 10 a.m. and international trade on Thursday at 8:30 a.m.

Read More »

10:35 a.m. New York time

SPY continues to trade within a narrow range since coming off the high of Aug. 29. It’s a holding pattern, perhaps in anticipation of the coming three-day weekend. U.S. markets will be closed Monday for Labor Day, marking the emotional end of summer, if not the astronomical end.

I shall post The Week Ahead on Saturday as usual.

By Tim Bovee, Portland, Oregon, Aug. 31, 2018

Read More »

10:05 a.m. New York time

SPY has opened within yesterday’s range, below the peak, a movement so small as to lead to no conclusions whatsoever. I anticipate no trades today.

By Tim Bovee, Portland, Oregon, Aug. 30, 2018

Read More »

9:50 a.m. New York time

I’ve brought my  Elliott wave analysis down to a shorter-term level in an attempt to judge how far the present rise has progressed. There are often ambiguities in a wave count, so this is one of several ways of assessing the rise. It shows that wave C in the Minor degree {+2} was completed on Aug. 27 by wave 5 of the Minute degree {+1}, or nearly so.

It’s also possible to count the peak I have labelled 3 {-1} as 1 {-1}, in the Subminuette degree. If that turns out to be the case, then what I have labelled as wave 5 of the Minuette degree is in fact wave 3 of that degree, and the C wave of the Minor degree {+2} still has a ways to go.

In either case, I see no opportunity to trade back in to SPY today, and so I shall wait for the ambiguities to resolve themselves. That will take a decline off of the Aug. 27 peak, perhaps a sharp one with a gap to signal that the trend has changed.

By Tim Bovee, Portland, Oregon, Aug. 29, 2018

Read More »