Michael Destroys The Florida Panhandle
After the circus temporarily left Washington it felt like there would be a period of calm as we approached the midterm elections. But it now appears that the really big stuff was waiting to hit and as usual at this time of year it was a Hurricane. The storm was named Michael and it is one for the record books. It was the first Hurricane to hit Panama City in over 150 years and one that will take the residents of the Florida panhandle years to recover from. If you have never been to the “Redneck Rivera” it has some of the most spectacular beaches in the world. Sixty miles of pure white sand that is so fine that when you walk on it, your feet squeak.
It wasn’t as if no one knew that Hurricane Michael was coming and it was going to hit close to the capital of the Florida panhandle, Panama City. But what they didn’t know was that it would grow from a small hurricane that would cause some damage to a monster – bigger than Katrina or Andrew. According to many meteorologists, it ranked as the top storm to ever hit the U.S. The closer the storm got to land, the more it picked up in intensity. This is the opposite of most hurricanes that lose their punch when they are approaching land. Whatever the case, when it did hit it unleashed a power rarely seen.
The biggest killer in hurricanes is not the wind, it is the rain and tidal surge. The tidal surge that hit Panama City Beach reached over 14 feet. In other words, where their used to be dry land and houses on the beautiful beach, that was now 14 feet under water. The wind and rain did the rest. Insurance companies estimate the damage to be around $8 billion. If this hurricane had hit Miami it would have been $100’s of billions.
I used to own a condo on the beach in Destin which is about fifteen miles west of Panama City Beach, and to see what happened was hard to take. The only good news is that the people that live in the area are down to earth, tough, hardworking dudes and they will survive. They will never forget what happened, but they will rebuild, and the Rivera will once again become the beautiful place that it once was.
Ask Mr. Seifert
I am constantly asked questions about trading and how important execution is to insure success. Each week, we will answer those questions with a short paragraph on a variety of trading subjects.
Question: What is the best way to initiate a credit spread?
Answer: Getting the spread on correctly is important. Novice traders blow themselves up trying to get the “edge” on the market makers. Forget about that strategy it won’t work. You are not going to be able to out execute the market makers. There are a couple of choices that will work when getting the spread in place. First you can “leg” the spread on by buying the long side of the trade first and selling the short leg second. I use this strategy when I have a preference in market direction. I get my limited risk leg on first and then try to sell the credit side with more premium. Second you can set your browser on the site you are using to find out where the spread is trading in the market. You should be able to get filled within a few cents either way once you know where the spread is trading in the live market. The third way is always wrong. It is to leg the spread on by selling the short option leg first. This is selling a naked option and will eventually cause a big loser. You are not going to beat the wise guys at their game. Eventually the impossible will happen and as soon as you sell the naked option Houston will get 50 inches of rain, and you will take a possible risk of $280 and turn it into $3000. You will then email me and tell me that I don’t know what I am doing and the risk is much greater than I claim it is. Remember bulls and bears make money, pigs get slaughtered! Don’t be a pig. There is plenty of money to be made doing it the right way.
The Wise Guy Report: The View from The Electronic Floor
Each week I talk about how the Wise Guys (floor traders) find the soft spots in the market and take advantage of price dislocation in three major commodity markets: Gold (GC), Crude Oil (CL) and Long-Term Interest Rates (ZB). On the equity side, I cover MSS which is the Mister Seifert Sez Composite Index. This is a proprietary index that I created which measures the dollar flow of the four major indexes (S&P 500, Nasdaq 100, Russell 2000 and the Dow Jones Industrials) on an unweighted basis. Let’s take a look at how the U.S. Equity markets are faring.
US Equities Market (Possible Top)
Last week I noted that the U.S. equity market which had been leading the world’s other markets by a large margin, appeared to be topping out. I expressed concern that Market Edge’s computer model was showing that although the market was continuing to rally, distribution was taking place. What that means is that the sellers were gaining momentum in the market even though price had not topped out. When the market is selling off and Market Edge’s computer model shows accumulation is taking place it means that most likely (70% of the time) the market is bottoming out. The sudden turn in the equities market is no surprise. The market never announces itself, it just happens. Unfortunately, most traders are not prepared for the turn. The question now is whether this is a short-term bottom to the nine-year bull or is the top in and we are headed for more selling pressure? The next few weeks will determine where we are going. In February we had a similar quick sell off with the VIX going up over 400% in four days, but that turned out to be a retracement and a buying opportunity, as the market went on to make new highs this summer. I would look for days when the market is in a complete tailspin and the media is telling you that this is the end of the world to look for buying opportunities. This is not the time to sell. You want the a capulation rally first, and then you can take a shot from the short side, I would suggest you observe the price action and pay attention to Market Edge’s ‘Market Forecast’ before getting long in the market.
Get Your FREE Two-Week Trial Subscription
The option trades and strategies offered by The Optionomics Group are very unique in that they all have limited risk while creating great leverage. Our basic BL – BR Credit Spread Strategy (and all of the others) let you control 100 shares of a $200 stock ($200*100 = $20,000) for only $500 (the spread differential) or 40:1 leverage with your risk limited to only $500. Plus our strategies produce winning transactions in four out of five possible outcomes.
The Optionomics strategies let you become the casino whereby you have a mathematical edge that lets you grind out consistent returns in any kind of market environment. These strategies are designed to produce good returns over a short to intermediate term time frame. It is an approach to the stock market which will be hot, cold or average over time, but the end result should be very good in any type of market environment.
I offer a FREE Two-Week trial to the various subscription services with no cost or strings attached. Each strategy is explained in a 5-7 page booklet which includes sample recommendations and model portfolios. I doubt that you have ever seen anything like this. During your FREE trial, you can paper trade the various strategies and get a feel for the deal without risking a penny. Simply click on the appropriate tab on the Optionomics’ Home page to access the informative booklets and then sign up for one or all of the weekly subscriptions.
- The Bullish – Bearish Credit Spread Strategy: The basic strategy of trading weekly credit spreads.
- The 21st Century Covered Calls Strategy: A modern day alternative to the old fashioned covered call strategy.
- The Low Cost Put – Call Hedge Strategy: Sleep at night knowing your portfolio is protected for little or no cost.
- The Earnings Trade: Get in on potential big movers with little or no downside risk.
- The One Day Wonder Trade: Get ready for some real action. A one day trade with great potential.
- The Blow Off Top – Bottom Trade: A lot of action and big moves too.
Each Monday morning by 11:00 EST, the plays for the upcoming week plus updated model portfolios for each strategy are posted on the site. The prices in the reports are Monday morning’s opening prices. In addition, I have a webinar on Thursday afternoon where I discuss various option strategies, what is happening on the floor and answer any questions that you may have. Don’t worry if you miss the show. They are archived on the site. Sound Good? Good! You can subscribe to one or more of the subscriptions for only $19.95 each per month on a month to month basis with no contract or strings attached. If you subscribe to three, it is only $49.95 per month while you can subscribe to all six for only $79.95 per month, a 33% discount. I think you will agree that this is a super offer so give it a try. Click on www.optionomicsgroup.com to access the Optionomics Group web site and get started today doing what the pros do –
“Don’t Buy Them – Sell Them”.
Mr. Seifert