A relentless uptrend was given another boost by Treasury Secretary Timothy Geithner's comments on the financial system recovery. Today's gains marked the fifth consecutive day of green prints and could signal follow through buying in early morning trade. Nonetheless, it seems as though some back and filling or maybe even something much larger could be on the horizon.
Gains have been made on light volume and suspect fundamental news. Realizing that the market and the economy are two separate things and it is certainly possible for stocks to rally well beyond the pace of the recovery, it seems as though investors may be running out of reasons to buy...at least for now. Crash? Maybe not, but I wouldn't expect gains to be overly swift from these levels without some type of digestion.
Our clients were recommended to sell calls into the rally, most sold the 1095 or 1090 strikes in the October S&P options for $6.50 to $6.00 respectively. However, those looking for a little more action might be able to buy the following spread for less than $400 and a profit potential of $3000. Go long the November S&P 1030 put, sell the 970 put and then sell the 1100 call. Above 1100 at expiration the risk is unlimited but with the market between 1030 and 1100 the risk is limited to $400. The trade starts making money intrinsically below 1030, breaks even at expiration at 1022 and maxes out at 970 (a profit of $2600 before commissions and fees). It gives traders nearly 70 points in room for error but still allows a respectable profit should the market move lower as anticipated.
If you prefer to trade futures, it seems like the December S&P begins to be an attractive short in the mid-to-high 1040's. We like the downside in the Russell from the mid 590's but just over 600 is possible. The NASDAQ seems a bit toppy near 1688 but I can't rule out a last ditch move to 1720ish.
Thursday was the official roll-over day. You should begin trading December futures!
* 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. Charts provided by Track 'n Trade, Gecko software.
**Seasonality is already be factored into current prices, any references to such does not indicate future market action.
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 -
Flat
Russell 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 -
Sell 1 December mini-NASDAQ near 1685
Gains have been made on light volume and suspect fundamental news. Realizing that the market and the economy are two separate things and it is certainly possible for stocks to rally well beyond the pace of the recovery, it seems as though investors may be running out of reasons to buy...at least for now. Crash? Maybe not, but I wouldn't expect gains to be overly swift from these levels without some type of digestion.
Our clients were recommended to sell calls into the rally, most sold the 1095 or 1090 strikes in the October S&P options for $6.50 to $6.00 respectively. However, those looking for a little more action might be able to buy the following spread for less than $400 and a profit potential of $3000. Go long the November S&P 1030 put, sell the 970 put and then sell the 1100 call. Above 1100 at expiration the risk is unlimited but with the market between 1030 and 1100 the risk is limited to $400. The trade starts making money intrinsically below 1030, breaks even at expiration at 1022 and maxes out at 970 (a profit of $2600 before commissions and fees). It gives traders nearly 70 points in room for error but still allows a respectable profit should the market move lower as anticipated.
If you prefer to trade futures, it seems like the December S&P begins to be an attractive short in the mid-to-high 1040's. We like the downside in the Russell from the mid 590's but just over 600 is possible. The NASDAQ seems a bit toppy near 1688 but I can't rule out a last ditch move to 1720ish.
Thursday was the official roll-over day. You should begin trading December futures!
* 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. Charts provided by Track 'n Trade, Gecko software.
**Seasonality is already be factored into current prices, any references to such does not indicate future market action.
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 -
Flat
Russell 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 -
Sell 1 December mini-NASDAQ near 1685
