And Away They Go
If you have ever seen a horse race you would probably recognize the call of the legendary race announcer Trevor Denman, and after a wild October we are now about to hit the main stride. What a month it has been. Remember Judge Kavanagh. His name is hardly mentioned any more. Then came the fate of Jamal Khashoggi, which ended pretty much as I predicted. The Saudis would admit that they were responsible, but not to the highest level of government. The Turks would be clear and the Trump administration would accept the story and the billions of dollars of commerce would not be threatened as life would go on. .
After that we had some crazy swings in the equity markets followed by the nut case living in a trailer that sent potentially dangerous devices to powerful democrats. Thank goodness he was caught. Finally, we had the tragedy in my home town of Pittsburgh. I don’t know how you stop these fringe maniacs. They have been around forever and hopefully someday the problem will be solved.
We have now reached the starting gate for the greatest biannual race on earth, the midterm elections. The good thing about the midterms is it gives voters a couple of years to decide if they made the right choice two years ago. The bad thing is the politicalizing. According to my latest survey, every single person running for congress is a crook. They all have taken bribes and catered to the wealthy. They have no spine and will never have one. What happened to a candidate running on his or her record? It is gone, it doesn’t exist anymore. The Quants look at the numbers and see their opponents most likely weakness. It doesn’t matter if it is true the only thing that matters is perception.
So, I will go out on a limb and make my predictions based on my pol. The Democrats will reverse the house and have the majority. This is a pretty easy call as in five of the last six midterms the house has reversed. The Republicans will hold a slight majority in the senate, but this could go either way. The governors are a toss up and I think it is too close to call. One thing is a lock, Judge Kavanaugh will still be on the Supreme Court.
Ask Mr. Seifert
I am constantly asked questions about trading and how to exploit certain market factors to insure success. Each week I will answer one of those questions with a short paragraph which will cover the trading subject.
Why do I lose money when I buy cheap puts and calls and I am right on my market direction call?
Answer: I am asked this question all the time. You are sure that Goldman Sachs is going to report earnings and revenues that will top estimates, and the stock is going to rally. You decide that the best leverage is to buy out of the money calls that are cheap, only $0.50 and you think you will at least double your money. Wrong! First, there are no cheap out of the money puts and calls. They are priced off the current At The Money Straddle and all market participants are aware of their value. Remember that for every option trade there must be a buyer and a seller and vice versa. So, when you buy that $0.20 delta cheap call you must be right in two ways. The price must go in your direction and it must be greater than the premium you paid for the option.
The number comes out and you were right GS rallies $15 but your $0.20 call actually goes down in value! You are shocked and blame everyone but yourself. Here is what you need to do. First learn how the option model works. Second use strategies that will protect you when your price direction is correct. I can assure you it is not buying cheap calls. Stop playing a game that you can’t win and learn how to use options to enhance your winners, not take them away. Nothing in trading or investing is more frustrating than being right in the market only to lose your money.
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 look at how the U.S. Equity markets are faring.
US Equities Market (Possible Bottom)
The U.S. equity market had a mixed week as the bulk of corporate earnings are now baked into the pie. After the selloff for the last several weeks, you had to feel that there would be a bounce last week and the market did react as such. Early in the week stocks came off last week’s decline with a nice bounce before giving back the gain later in the week. We have several factors at work here. One will be how the street will adjust now that earnings season is in the books. The second is the reality of the current political situation. I think that most observers believe that if the political climate shifts on November 6th, that the market will lose confidence in the current administration and that this could have a negative effect on prices. It is hard to say if the markets bottomed out last week or that it was simply a ‘dead cat’ bounce. One interesting note is that the Russel 2000, which has a tendency to lead the market in both directions, appears to have put in a bottom. This divergence between the small caps and large caps isn’t a guarantee that the market is changing direction but it is right more than it is wrong so it is something to keep in mind!
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