QQQQ

We should allow our eyes to get used to the kind of subtleties that will make for profitable shorts.  Ponder the one I've reproduced herein -- an unspectacular, downtrending A-B that exceeded the relevant 'external' low by just four cents. This pattern all but guaranteed a partial exit at p, and my guess is that it will reach 'D' before the dawn. Why not try to make a few bucks on the long side to cushion the stop the next time we get short?  Let's try it with a 61.57 bid (against a 61.55 D target) for 400 shares, stop 61.48.  

As promised, we'll keep trying to short this vehicle at each spot that yields attractive odds. Most immediately, that will mean buying four July 63 puts if the Cubes get within 15 cents of the 64.49 target shown.  I can't predict how much the options will sell for at that point, but if you want to get the best possible price, monitor the bid/asked spread for this series from the time QQQ hits 64.  If you fill the order, stop yourself out if the puts trade for 0.25 less than you paid for them.

The 63.18 high of yesterday's opening-bar bull trap exceeded a key external peak from May 29 by three cents, creating a bullish impulse leg that easily endured the selloff that followed. Whatever QQQ does in the days ahead, we'll be looking to short it however we can, every chance we get, since it's an ideal trading vehicle for relative novices.  First, though, here's one for more-experienced Pivoteers: If the pattern plays out more or less as sketched, go short at 'X' by buying a multiple of four  July 60 puts. I'll update with further guidance intraday if at least two traders report fills in the chat room. _______ UPDATE (11:12 a.m. EDT):  Cancel the order. The pattern has in fact developed to produce an 'X' short at 62.40, provided the point 'C' high at 62.40 endures. However, the QQQs are moderately buoyant today, and in the hourly-chart duel that has played out since Wednesday, bulls would appear to hold a slight edge.  If we were to get short right now we'd be in the position of hoping for "bad news" Sunday night. Hope being the final refuge of the desperate, we'll wait for a better opportunity.

We hold two June 65 calls for 0.84 against three June 62 puts  for 0.92. With the Cubes rallying into a shortened month (i.e., a June 25 expiration), this position is going to start shedding value quickly.  Let's try to close it out in the opening hour at near-break-even prices.  We have 4.44 in the position (1.68 + 2.76) and it closed yesterday at 4.46( 0.64 + 3.84), so scratching the trade is do-able.  I suggest exiting the puts first, since the calls are not going to move much on a rally. _______ UPDATE (May 23, 12:51 a.m EDT): If you exited on the opening yesterday you'd have gotten 1.27 for the puts, for a total of 3.81; and 0.38 for the calls, for a total of 0.76. The theoretical profit would have been $13, effectively a scratch.

We hold two June 65 calls for 0.84 against three June 62 puts purchased Friday for 0.92.   With a total of 4.44 at risk, this position will make money above 66.50 or below 59.75 at expiration. We have five weeks to play with it, perhaps by turning it into a less-risky butterfly, but for now do nothing further. It may also be possible to exit with a profit before expiration if the QQQs move precipitously. _______ UPDATE (May 15, 1:14 a.m. EDT): On a good-till-canceled basis, offer  three June 58 puts short for 1.20.  This is stretching, but you never know. _______ UPDATE (May 18, 1:55 a.m. EDT): Let's stretch a little farther, raising the offer on the short puts to 2.10, day order. You should sell them 1:1 against June 62 puts already held.

We hold two June 65 calls (or a multiple thereof) after initially acquiring four of them within pennies of yesterday's hysterical, V-shaped bottom. Profit-taking during the sharp rally that ensued has lowered our cost basis to 0.84.  This trade was designed so that even option novices could take a crack at it.  Now, with any luck, you'll have an opportunity to turn it into a riskless vertical bull spread -- riskless in this case meaning a position that will produce a profit of at least $200 per spread if QQQ is trading anywhere above 67 come June expiration, but no financial loss even if it should fall to zero. Accordingly, I'll recommend offering June 67 calls short for 0.88, day order. Offer one for each June 65 that you are long. _______ UPDATE (May 10, 12:25 a.m.): Continue to offer June 67 calls short at 0.88 as above, good-till-canceled.  _______ UPDATE (May 11, 2:47 a.m.): We almost never take straddle risks, since it amounts to doubling down on a bet against the house. But maybe just this once: Buy three June 62 puts (or three for every two calls you hold) for  0.94 or better.  I have purposely advised a bid above yesterday's settlement price because I want you to buy these puts -- although not at any price -- even if QQQ opens weak.

Occasionally we benefit when we cast our lot with the scumballs who fill market orders on the opening rotation.  Such was the case yesterday, when we exited a single August 68 put for 3.76 -- the high of the day -- off a 3.50 offer. The purpose of this gambit had been to make  enough to pay for a year's subscription to Rick's Picks, and to do so using a strategy simple enough for traders of all levels of experience to employ.  This we did, producing a theoretical gain sufficient to cover the price of a renewal -- with enough left over to buy yourself a decent cigar.  Let's plan on doing it again soon -- i.e., if and when this vehicle comes down to 63.63, 10 cents above the 'D' target of the pattern shown.  Bid there for four June 65 calls, but stop yourself out if they trade for 20 cents less than you paid. ______ UPDATE (2:14 p.m. EDT):  The 63.53 target shown in the chart was a bullseye.  As a result, we were able to buy four June 65 calls a few pennies off the low.  I'll use 1.03, the highest price reported in the chat room, as our cost basis. For now, offer two of the calls to close for 1.22, day order.

We hold a tracking position of two May 68 puts with a profit-adjusted cost basis of 1.34. For now, stop yourself out if the underlying vehicle trades above 68.29. You should also offer  single contract to close for 2.30. _______ UPDATE (12:25 p.m. EDT): With the market getting pounded for a second straight day, we sold the put option for 2.30. That effectively gives us one free put for each four-lot position acquired initially. It is my intention that this position be held until it pays for your subscription, but for now do nothing further. ______ UPDATE (May 1):  Like perhaps 99.999% of all unhedged puts purchased out-of-the-money by retail customers, these too will prove to have been a longshot bet. Even so, we will have held a risk-free play for more than six weeks on the unlikely demise of the Mother of All Bear Rallies.  Taking the blows easily in stride and surviving to fight again is what it's all about for us permabears, no? Continue to hold the position, since we are still likely to make a few bucks on it -- even with the broad averages surging to new recovery highs.  _______ UPDATE (May 4, 2:52 p.m. EDT): We hold a single May 68 put in the QQQs (or 25% of the original position, based on some multiple of four contracts purchased initially).   Since profits on this trade were earmarked to pay the cost of an annual subscription to Rick's Picks, I'll recommend closing out the single-contract position with a good-till-canceled offer of 3.50 for the put.  If you still hold more than a single put, hang on to at least half the position for a potential home run.

We hold a tracking position of two May 68 puts with a profit-adjusted cost basis of 1.34. Since no put option in history has ever been a keeper, we'll need to set a price for yet another interval of profit-taking. Accordingly, I'll recommend closing out half of the position with a good-till-canceled offer at 2.70. ______ UPDATE (April 2, 10:54 p.m. EDT):  In our dreams, perhaps, is where we'll sell one of our puts for 2.70. For now, better that we should place a 1.19 sell-stop on both of them, limiting our theoretical loss to a measly $30 plus commissions.