I’ll be attending a lecture this Friday at CU concerning the use of VIX as a portfolio asset. To access a paper on this topic authored by three finance professors, click here.
From the monthly archives:
March 2010
The Russell 2000 is near a midpoint pivot which can be shorted with a tight stop, using the exchange-traded fund IWM. On March 23 we identified a weekly pattern with a “D” target at 70.67. Since then a daily pattern has been confirmed whose midpoint is at 70.23, a pivot which is more likely to give us tradeable precision. Traders can go short at 70.17 with a stop at 70.31, risking $70 on a 500-share position. Futures traders can sell the June Russell 2000 contract at 697.70 with a stop at 699.10, risking $140. For the futures, the pivot is at 698.35. (Posted by Doug McLagan) _______ UPDATE: The index has gone sideways with a vengeance and is about to extending the tedium into a second month. Although you should keep the tradable numbers given above in mind if this vehicle interests you, we are taking it off the “Actionables” list.
The weekly chart yields a potential rally-stopping target at 252.17 (A=195.71 on February 26) that became an odds-on bet with yesterday’s push above the midpoint pivot, 236.16. If boarding for the ride up, I’d suggest using the 5-minute chart and the peak shown as a breakout number for camouflage. I’ve sketched out a hypothetical trade, which would work best (i.e., with relatively little risk) if there’s a slight breach of the 236.54 peak followed by a relatively quick tracing out of b-c-x. _______ UPDATE (10:34): The mindless herd is out in force this morning, wholly unaware that their panic-stricken actions and reactions are being governed by a Hidden Pivot. Because 236.16 is obviously the key to today’s swings, we can be confident that a decisive move above it will terminate precisely at 252.17. _______ FURTHER UPDATE (April 5): Set an alert at 252.17 for your own purposes, but please note that the stock has been removed from the list of “Actionables.”
We can use a midpoint resistance at 81.85 as a minimum upside target for now. DXY got within 0.15 points of it yesterday, but if it should close above the resistance, that would signal more upside over the near term to at least 82.69. The pattern is shown in the chart (inset) and looks clean enough to make the midpoint a reliable benchmark.
We hold 800 shares with a costs basis that has been reduced to 11.75 by several covered writes done in succession. The stock is working on a minor bullish impulse that could hit 16.01 if a midpoint impediment at 15.63 gives way. Let’s be prepared by offering eight April 17 calls short for 0.26, good till Friday. That price is a bit rich, so be prepared to adjust on-the-fly if I give the signal intraday. ______ UPDATE (11:11 a.m. EST): Cancel the offer, since time decay ahead of a three-day holiday weekend is causing the April calls to shed premium too fast to make them worth selling. Instead, offer eight May 18 calls for 0.66, good till canceled. The sale is predicated on a 17.25 target. _______ UPDATE (April 7, 10:13 a.m. EST): Short the calls on the current bid of 0.65, taking a penny’s discretion. (Note: With SLW on the move at the time of the update, the worst you could have done was 0.64, so we’ll use that price officially.)
The trendline that we used as a rally objective yesterday comes in around 1122.20 today, and it still looks like the number to beat. A push above it — or even better, a close above it — would light a fire under buyers. However, if the futures simply roll over, look for a tradable bottom at exactly 1090.10, a midpoint pivot that we can use for now as a minimum downside objective. Please note that its breach would portend more downside to as low as 1065.50.
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The futures got as high as 17.440 yesterday, but they’ll need to close above a midpoint resistance at 17.565 (see chart) to develop enough thrust to leave this month’s highs behind. Thereafter, they’d become an odds-on bet to hit 18.575 within a day or two — not quite enough to refresh the bullish trend on the daily chart. That would take a print exceeding 18.900.
Our modest short position has ceased to be worth caring about. Rather than allowing the puts to waste away as we become increasingly forgetful about checking on them each day, I’ll suggest closing out the position — long two April 48 puts – shortly after the opening bell if the options have traded for 0.60 or less. I have couched the recommendation in those terms because I do not want you dumping the puts if the QQQQs begin the day looking like hell (unlikely as that may sound). ______ UPDATE: We exited the puts for 0.50 (or so), sustaining a whopping loss of about $15 in the process. The lesson here is that even if your entry is perfectly timed, and even if you do some judicious, perfectly timed partial-profit taking along the way, it is still not possible to make money with put options (unless, of course, you are a naked seller of them). This has been true perhaps 99.97% of the time since listed options were first offered by the CBOE in 1973 and it remains true now, even if the shorting has faded a rally that we all know is doomed.
How Americans Have Coped With Decline
by Rick Ackerman on March 31, 2010 12:37 am GMT · 9 comments
(Editor’s note: Is economic recovery slowly emerging? And is there perhaps a benign side to the alarming expansion of the nanny state under President Obama? Readers aggressively rejected both of these ideas in responding to yesterday’s essay by “Donniemac.” Following are the comments of Chris T., whose thoughts mirror our own, especially where they pertain to the steepening decline in America’s standard of living.)
I could not be as sanguine as [Donniemac]. We always read about all this being caused by the general profligacy of an entire generation. To some extent of course that is true. However, what is the backdrop to all of that? A few generations of Americans grew up in a generally sound economic environment, where the norm was that the next generation would do as well or better than their forebears. It is this situation that finally went under » Read the full article