Phoenix Options

by | Jan 11, 2018 | Uncategorized

Phoenix Options- Tuesday October 29, 2013

Welcome to Volume Four No. 44 of Phoenix Options!

Here, we will analyze the market and individual stocks in the same way we do in the Phoenix Letter, but we will enter positions using option strategies versus buying and selling the stock.

The markets make new highs again; is a top in sight?

The rally last week could be attributed to the relief that the Ponzi scheme Washington passes off as “fiscal policy” was in place for at least another ninety days. This week it was bad news that triggered the rally. It appears that the financial markets have lost all touch with reality and only focus on one thing. Will the world’s biggest hedge fund continue to pour money into the banks? If the numbers suggest that the QE will continue then the right thing to do is to buy the equities market. How long can the Fed continue to print money? That is a good question and one that only they can answer.

Monday the markets opened unchanged and traded in a very tight range. The Bureau of labor statistics said that they would finally release the September job numbers on Tuesday October 22nd; it was obvious that no one wanted to trade until that news came out. Tuesday the employment numbers were released before the opening of the market and they weren’t as good as expected. That news brought buyers in with both hands and the DJIA opened on a gap of over seventy points, after a big rally midmorning someone decided it was time to put a little in the bank and they sold off to the opening gap before recovering to lock in solid gains. Wednesday brought in some naysayers who reconsidered how well equities were going to continue to fare with such negative fundamentals regarding the job market. Early selling pressure erased most of the gains from Tuesday and took the market to the lows of the week before some late buying pushed it back to midrange in tight congestion. Thursday all was forgiven as the markets opened on a gap higher and never looked back closing near the high of the week. Friday was more of the same as investor demand appeared not to be satisfied until the closing bell. The week showed a gain in all indexes and new yearly highs in all except the DJIA which pressed to lifetime highs but could not quite take them out. On average the Indexes gained a little over 1.2%

The week had two big economic stories, one was the declining jobs data and the other came from South America where a titan of commodities fell.

With the Debt ceiling crisis and the partial shutdown now in the rearview mirror traders needed some new data to concentrate on and when the Bureau of Labor Statistics released their jobs data on Tuesday they had it. The picture wasn’t very pretty and that was what traders were looking for. In the bizarre world of Wall Street sometimes very bad news is very good for the market. The picture that was painted was one of declining jobs creation with a slightly lower unemployment rate. The combination was a “perfect storm” for the street. They all agreed that the Fed wasn’t going to remove the heroin at the next meeting and it was time for Wilson to get in there and “buy Wilson buy”. So we are now turning our eyes to the next Fed meeting and to see when Big Ben leaves if the new Yellen Fed is going to continue with the Keysian model or if they have decided that it is time for the patient to go into rehab.

The second story came from Latin America and it was the stunning fall of Brazilian Commodity titan Eike Batista. In less than a year Mr. Batista managed to lose a $30 billion dollar fortune. On Friday his holding company declared bankruptcy and with it he surrendered almost all of his fortune. Mr. Batista had convinced investors that he would be able to parley his knowledge of commodities into “the largest fortune” the world had ever seen by getting into the energy markets. Unfortunately for him and his investors his foray into the Oil business turned out to be a bust. The billions that were spent to find new wells turned out to be nothing but dirt, and his creditors shut the door. With no more financing his empire crumbled in less than six months.

How could one of world’s richest men possible go broke in 90 days?

The answer is simple, greed!

Gordon Gekko the fictional tycoon from the movie Wall Street popularized the phrase that “Greed is good” but unfortunately like his fictional counterpart Eike learned the non fictional rule; Bulls and Bears make money, but Pigs get slaughtered.

Volatility continued to get hammered after the employment number was released. As long as the Fed is going to keep the free money flowing to the banks there will be no fear. However the lower vol goes the bigger the blast will be when the free money ends. However until then we must continue to grind out our small winners.

HOT LIST OCTOBER 29, 2013 

Symbol Company Name Sector Price Support Resistance Recommend
MOS Mosaic Basic Materials  41.65         45 50 Bullish
APA Apache Oil and Gas  85.68 88 91 Neutral
SPY S+P ETF ETF  163.65 174            N/H Neutral
IWM Russell 2000 ETF  100.38 108 111 Neutral
TLT Long Term Bonds ETF  105.99 106 109 Bearish
VXX Volatility ETF  17.04 12.5 17 Bullish
GS Goldman Sachs Financial  152.13 160 170 Neutral
AXP American Express Financial  71.47 78 N/H Neutral
LVS Las Vegas Sands Gaming  60.00 67 73 Neutral
WYNN Wynn Resorts Gaming  141.04 165 173 Neutral
CAT Caterpillar Industrials  82.54 82 89 Bearish
JOY Joy Global Industrials  49.12 55 60 Neutral
GLD Gold Gold ETF  134.62 125 132 Neutral
ANF Abercrombie/Fitch Retail  35.31 35 40 Bearish
AAPL Apple Technology 487.21         480 540 Earnings
NFLX Netflix Technology  283.91 300 340 Bearish

 

 

 

EBAY is still open from last week.  Our trade in TLT was stopped out.

ALL SUGGESTED TRADES WILL MOVE TO THE DECEMBER MONTHLY SERIAL.

 

 

(WAG) is going to be our first trade this week, which is a reprise of a trade that we scratched in the first quarter. WAG is the symbol for Walgreen Co. The company was founded in Chicago Illinois in 1901 by Charles R. Walgreen Sr. Walgreen’s grew rapidly in the 1920’s  and by 1930 it had more than 390 stores. Much of its expansion is attributed to the fact that it sold “under the counter” alcohol during prohibition. Unlike most businesses the company did not suffer during the Great Depression of the 1930’s in fact it prospered and by 1938 it had over 600 stores in 30 states. The company continued to grow as it was passed down to new generations and eventually became a public company. Today Walgreens is the largest retail drugstore company in the United States with over 8.300 stores in all 50 states. It employs over 176,000 people and had sales in 2012 of more than $71 billion.

PLACE A COPY OF THE CHART

The company’s stock hit an all-time high in September of 2006 reaching $51 a share. Unlike the Great Depression when the company was able to overcome adversity and grow they could not duplicate that prosperity during the great recession. The stock lost almost 60% of its value and bottomed with the rest of the stock market in the spring of 2009. Since then the stock has steadily gained and recovered to break out to new highs. Our traders feel that this move has crated momentum and the symbol will continue to prosper.

BUY WAG DECEMBER (52) CALL 1.90 OR BETTER

 

Our second trade this week will be (NEM) which is the symbol for Newmont Mining Corporation, which was founded, in New York City, in 1916, by Colonel William Boyce a “wildcatter”. The company continued to grow and by 1939 it had 12 mines in North America. In the early 1960’s it began the production of the first open pit Gold mine in Carlin Nevada. The Carlin Unconformity is the largest deposit ever found in the US. As of December 31, 2012, Newmont produced approximately 5.4 million equity ounces of gold annually and held proven and probable reserves of about 93.5 million ounces. Newmont employs more 34,000 people around the Globe, and is now headquartered in Greenwood Village Colorado USA. It is the only Gold mining company in the S&P 500 index.

SHOW COPY OF THE CHART

(NEM) is highly correlated to the price of Gold and after reaching a peak of more than $72 dollars an ounce at the zenith of Gold prices it has lost more than 67% of its value. Our traders feel that it has made a long term double bottom and is now poised for a significant rally.

 

BUY NEM DECEMBER (52) 27 CALL 2.40 OR BETTER

 

TWO METHODS TO GUARANTEE A FILL

We are going to leave this section up as some new subscribers are looking for answers to guarantee a fill when the price is close, we will use the ANF trade as an example.

There was a question on our ANF trade from a while ago and we would like to clarify how to get filled when we hit our price and bounce off. A couple of subscribers didn’t get filled and the reason was that the price of ANF never got below 2.60. Here are two ways to guarantee that you get filled when it hits the price. First if your broker will take an MIT (market if touched) order you can use the suggested price and the worst case is that you will get filled a penny or two above the suggested price. If your broker doesn’t use an MIT place a limit order 1 cent above the suggested price. In either case you will get filled. If it is a loser you will lose $1 more per contract, but if it is winner you will get the same percentage as our traders. In the three years of the letter this is the first time that we have had this transpire but it could crop up again in the future so this is the way to solve the problem before it happens.

ALL SUGGESTED TRADES WILL REMAIN IN THE MONTLY SEPTEMBER SERIAL.

 

In order to insure the highest possible quality of our suggested trades we now have mobile phone service for those subscribers that are out and about most of the time. If you would like to receive updates to your mobile phone click here.

TRADING RULES

Phoenix Option Trading Rules

  1. Suggested Trades
  2. Suggested trades can come anytime our traders see opportunity.
  3. Trades are emailed as well as texted
  4. Trades are posted to the Website
  5. Suggested Trades will appear in this format
  6. ABC Company – Buy to open the FEB 50 Call for 2.50 or better
  7. ABC Company – Buy to open the FEB 50 Put for 2.50 or better

Phoenix Options only buys options to open and sells options to close

The Company or Symbol – ABC Company

The expiration month – February (days)

The type of option – Call or Put

The price we want to pay – 2.50 per contract

Or Better – 2.50 or at a lower price

These orders will work until cancelled via our delivery system – text or email

Daily position and updates will be sent with instructions as to what to do next on the trade

  1. Entry Rules
  2. All trades work until we get our price or cancel
  3. You can work your order at the quoted price
  4. Exit Rules
  5. When a new trade is executed. Place a 30% stop
  6. When a 30% profit is reached change your 30% stop to a 10% trailing stop
  7. If you get stopped out for a 30% loss move on to the next trade
  8. Capital Management
  9. All trades based on a 500 investment

We are going to start to publish the trading rules each week in the letter in addition to the weekly report. We have had quite a few subscribers ask us to make sure that they can see the rules when they begin to trade.

TRADING OPENING AND CLOSING RANGES

We receive quite a few questions each week regarding using stops in opening and closing ranges. We have addressed this issue before, but we want to address it again. Opening and closing ranges in options use a rotation and they can be very difficult to trade using stops. Many times the market makers will be trading another strike and will “lean” on the strike that we are trading. They are trying to get the market to “print” (not necessarily a trade unless you have a stop working) a certain level so that they can complete their spread. We always advise our subscribers to remove stops during this time. The trades that we suggest always have limited risk and unlimited reward so if you miss your stop by a couple of ticks it is much better than allowing the market makers to stop you out in a 25 tick closing range.

NEW TRADING FORMAT TO CONTINUE

We continue to have positive feedback on our new way to do suggested trades, and we will continue to use it. Our traders feel that in order to provide the best possible service that they want to suggest trades that come to them as opposed to trying to pick the market. They feel that this format will increase the profit potential and give you many more trades each quarter. We are going to start to put more trades out on a projected basis. This will allow for a better “set up” price of the underlying stock.

You can review our trading rules and past trades

Til next time, have a great week!

Thanks for your support

 

The Phoenix Option Team