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Jumping Off a Bridge for Goldmen Sachs

Today I'm selling some puts on the financial giant Goldman Sachs. I am also selling some puts on MON.

Fund News

As of this month I have opened two new accounts. Sept was feared as the month we get our major pull back but my investors received 1.8% total return on their capital this month.

MasterCard....

The list of stocks and indices that I trade tend to have a slightly bullish stance over time. For example I have Amazon.com ticker AMZN on my list, and MasterCard ticker MA. Both of these stocks I feel slightly bullish on over the next 10 years. But as an option trader I don't really have 10 years more like 40 days. But I pick stocks that I would not mind owning over the next few years, and those are the stock that I trade. I bring this up due to the latest trade in my income portfolio. MasterCard has been one of my favorite trading vehicles and I know this beast fairly well. Today I purchased a call spread on MA.

Calendar vs. Short Puts

I trade a handful of underlyings and Goldman Sachs is one of them. Over the past two months this stock has not done anything. Credit spreads, calendars spreads and short puts worked out great, but the price action is getting closer to the uptrend line that started at the beginning of the year. Whats next for the financial giant? Implied volatility is at the lower 1/3 of the volatility range and the stock is channeling, both are ideal situations for a calendar spread. But I would rather find a spot that I would not mind owning this stock and sell a couple of puts. Below are the two ideas I have on GS.

Recap

People that trade for a living are under pressure all the time. A few bad trades might just keep you from paying your bills. But a few good trades might buy you that BMW you've been eyeing the last couple weeks. The main thing is being consistent, but being consistent is sometimes very inconsistent. Becoming consistent is a up hill battle that at first my be hard and sometimes frustrating, but it is something that all consistent successful traders have been through. Now a question that I have asked myself many times is "How can I become more consistent"? One thing that I did to become more consistent is lower my lot size. If you can not trade a 1 lot successfully what makes you think you will be able to trade a 10 lot. Start small and work your way up, another is trade the same underlying or index every month. By trading the same thing over and over again you will learn how it moves, how it acts and how it reacts. The reason I am talking about this is because I have a trade idea that involves one of the only underlyings that I trade the $RUT, and with a lot size that fits my management style. Over the next few years I will add to my lot size but for now this is good. With this strategy I am at a higher lot size then I was two months ago, this is good it is showing my consistency. But with other strategies like credit spreads or debit spread my lot size is much higher, like 130 times more.

Iron Butterfly on RUT

Commodity Shuffle

A nice three day weekend is practically here, volatility is dropping, equities are rising and bond yields are up. Labor day weekend is going to be a little less laborful, because today the market digested a 9.7% unemployment. Economist believe that the unemployment rate will continue to rise into next year topping out at about 10%. Now I am by no means an economist, but I would feel that this is a very bad thing. Now consumer spending counts for two thirds of our GDP, and with less working there will be more savings. Consumers will not spend there hard earned dollars like the burning holes we once were. GDP will in my opinion look so bad in the future that the dreams of hope and recovery will be crushed by false realities. I don't think that the market can just digest this situation and say "Well it will get better this is what was expected". And the only way it will get better is by more government stimulus. The economy is taking aspirin for a hole in the head. Now I believe in this country, I am not a doom and gloom believer, its just the reality of the situation is a lot worse then the market believes it is.

Swing Low....

In the start of May to the end of June everyone and my mother was calling for a head and shoulder pattern to take us to the double dip scenario. CNBC, Bloomberg and Fox business seemed to report on this technical pattern on a daily basis. Once the second shoulder formed bears started to short and the market did the opposite. The pattern was busted and we continued up. Over the years of trading and watching the markets I have learned that the market will not allow everyone to be right. That's why I like being a contrarian.

I keep hearing that this is the start of the next major pullback. But is there going to be a major pullback? I don't think so, I'm in the camp of a shallow side ways correction. Since all the major networks and blogs I read are all calling this the start of the major double dip correction it probably wont happen.

Worry on the Street

As an option trader there are a few things that I look at each and every day and one of them is Vega. In the option world I have been seeing a lot of volatility bulls (traders that want volatility levels to go higher) putting on double calendar spreads. These bulls are also bearish on the market, and are looking for the "double dip" in equities. A double dip would push the $VIX back to old high areas, and Vega long traders will be hitting grand slams. There are a few ways to participate in a rise in volatility. If you think we will have a double dip you can buy puts or you could buy a doublecalendar. Either way I think volatility levels are going to rise.

More Volatility....More Gold

Sorry I have not updated the blog in about a week, I will try to stay more on top if it.

Well the two worst months of the year are fast approaching, and volatility levels are low and building a base of support. There are a few things that I'm watching to be more prepared for any event that happens this fall. The first is gold, if big spikes in gold are being bought chances are investors are preparing themselves for some volatility. Gold is a great place to be if investors are worried about volatility levels rising. The next thing I stay on top of through out the day is the $VIX and $RVX.

To play a potently rise in gold prices, I have constructed a broken wing butterfly below.

Reversal?

Could we get money coming in to buy this market today? The ES chart above gives some probability to a mid to late day rally 10 points or so.

Its the week all option traders have been waiting for. Currently I'm working on some trade ideas that I will post later today or tomorrow.

SPX Double Calendar

Just going over some spread ideas and thought I would share this double calendar on the $SPX.

Holding Pattern.

Investors are in relax mode till the FOMC releases there statement at 2:15 est. This will produce a holding pattern on major market indices.

The Chart below is of GS, currently I have some buy writes on this stock in my income portfolio and in my managed account. The last four days were getting very hairy and my thoughts were for a test of 150. Now a test back to support would be healthy for the stock and not my positions. I decided to put on some more risk and I know this might sound crazy but I turned my positions into covered combinations. Meaning I own stock with a short call and a short put. Selling puts almost doubled my returns, as for a pull back I think we got it and we will start heading higher the rest of the week.

Beta Weighted

Currently I have on three calendar spreads. I wanted to highlight the beta weighted look at my positions.