carleygarner
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February 19th, 2009
Pick up your copy of "Commodity Options" published by FT Press in any major bookstore or online retailer!
Stock index futures flat-line ahead of option expiration.
A strong open failed to lure additional buying as traders simply have no incentive to bid the markets higher. If technical aspects were enough to move the markets, we should have witnessed some follow through buying to this morning's move. However, market psychology is damaged and it has been more rewarding to be a bear.
The cash market Dow, as well as Dow futures, have spent the week hovering near the late November lows. However, the S&P and remained consistently above such levels and the NASDAQ even more so.
Many have questioned the inherent strength of the NASDAQ. Clearly, the index hasn't been in rally mode but it has lost considerably less than the other major indices. The most reasonable explanation that I can think of is simply the lack of banking stocks and the fact that tech companies are within arm's distance from the housing crisis. However, with that said it has been estimated that even if Citigroup and Bank of America share prices fall to zero it would only shave about 72 points from the value of the Dow Jones Index.
The SEC uncovered yet another ponzi scheme, this time it was a Hawaii -based firm known as Billions Coupons that preyed on deaf investors. According to the government agency, Billions Coupons and its CEO Marvin R. Cooper raised more than $4.4 billion from a little over 100 investors in the previous year and a half. The money was solicited through seminars at community centers for investors that were hearing impaired. Allegedly, Cooper used at least $1.4 million in the collected funds to purchase a new home and cover personal expenses.
It is stories like these that continue to drizzle pessimism onto Wall Street. However, it is stories such as these that makes me take a step back and look at the big picture. It is hard to imagine investor sentiment getting much worse. It is to the point at which many have simply given up on the prospects of a recovery in stocks. It is this attitude that typically precedes a major low. While I can't rule out at least one more leg lower in the indices, it is clear that the bear case is beginning to run its course.
Based on today's close, the markets are looking relatively weak. However, it seems as though selling put premium against a down move toward the 940 area is a good play in that if it happens, the implied volatility built into the option premium will allow for expensive put prices.
The markets are tricky that this level. There seems to be a small window of opportunity for the bears to take the S&P to 740 and the NASDAQ to 1137 but the risk of a sharp short covering rally is increasing exponentially. If you are short this market, tighten stops and proceed with caution.
* Due to time constraints and our fiduciary duty to put clients first, the charts provided in this newsletter may not reflect the current session data. However, market analysis and commentary does.
Please note: A mini S&P chart is used because it is better for charting purposes, but trade recommendations are based the full sized S&P unless otherwise noted.
S&P 500 Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading
Position Trade -
February 18 - Short March S&P 660 puts at $8, looking for a quick rally to cover.
Please note: A mini-sized Dow chart is used because it is better for charting purposes, but trade recommendations are based the full sized Dow unless otherwise noted.
Dow Jones Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading
Position Trade -
Flat
Please note: A mini-NASDAQ chart is used because it is better for charting purposes, trade recommendations will denote whether a mini or full sized contract should be used.
NASDAQ Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading
Position Trade -
Flat
*Due to the volatile nature of the futures markets some information and charts in this report may not be timely.
There is substantial risk of loss in trading futures and options.
Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.
Pick up your copy of "Commodity Options" published by FT Press in any major bookstore or online retailer!
Stock index futures flat-line ahead of option expiration.
A strong open failed to lure additional buying as traders simply have no incentive to bid the markets higher. If technical aspects were enough to move the markets, we should have witnessed some follow through buying to this morning's move. However, market psychology is damaged and it has been more rewarding to be a bear.
The cash market Dow, as well as Dow futures, have spent the week hovering near the late November lows. However, the S&P and remained consistently above such levels and the NASDAQ even more so.
Many have questioned the inherent strength of the NASDAQ. Clearly, the index hasn't been in rally mode but it has lost considerably less than the other major indices. The most reasonable explanation that I can think of is simply the lack of banking stocks and the fact that tech companies are within arm's distance from the housing crisis. However, with that said it has been estimated that even if Citigroup and Bank of America share prices fall to zero it would only shave about 72 points from the value of the Dow Jones Index.
The SEC uncovered yet another ponzi scheme, this time it was a Hawaii -based firm known as Billions Coupons that preyed on deaf investors. According to the government agency, Billions Coupons and its CEO Marvin R. Cooper raised more than $4.4 billion from a little over 100 investors in the previous year and a half. The money was solicited through seminars at community centers for investors that were hearing impaired. Allegedly, Cooper used at least $1.4 million in the collected funds to purchase a new home and cover personal expenses.
It is stories like these that continue to drizzle pessimism onto Wall Street. However, it is stories such as these that makes me take a step back and look at the big picture. It is hard to imagine investor sentiment getting much worse. It is to the point at which many have simply given up on the prospects of a recovery in stocks. It is this attitude that typically precedes a major low. While I can't rule out at least one more leg lower in the indices, it is clear that the bear case is beginning to run its course.
Based on today's close, the markets are looking relatively weak. However, it seems as though selling put premium against a down move toward the 940 area is a good play in that if it happens, the implied volatility built into the option premium will allow for expensive put prices.
The markets are tricky that this level. There seems to be a small window of opportunity for the bears to take the S&P to 740 and the NASDAQ to 1137 but the risk of a sharp short covering rally is increasing exponentially. If you are short this market, tighten stops and proceed with caution.
* Due to time constraints and our fiduciary duty to put clients first, the charts provided in this newsletter may not reflect the current session data. However, market analysis and commentary does.
Please note: A mini S&P chart is used because it is better for charting purposes, but trade recommendations are based the full sized S&P unless otherwise noted.
S&P 500 Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading
Position Trade -
February 18 - Short March S&P 660 puts at $8, looking for a quick rally to cover.
Please note: A mini-sized Dow chart is used because it is better for charting purposes, but trade recommendations are based the full sized Dow unless otherwise noted.
Dow Jones Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading
Position Trade -
Flat
Please note: A mini-NASDAQ chart is used because it is better for charting purposes, trade recommendations will denote whether a mini or full sized contract should be used.
NASDAQ Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading
Position Trade -
Flat
*Due to the volatile nature of the futures markets some information and charts in this report may not be timely.
There is substantial risk of loss in trading futures and options.
Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.