The Greek plan to exit the Euro by purchasing IPO shares of Facebook seems to be ill fated.

Losses from the JP Morgan credit default swap trade seems to grow by a billion dollars every day. When will those guys learn to use stop losses.

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S&P 500 Day Trading Strategy for May 18, 2012

Going into the month of May our trade was doing quite well as the VIX was bouncing upwards. When our short May 22 Call was nearing expiration we rolled to the short June 24 Call. As you can see in the first screen shot below, we had a $1,287 profit. It would have been perfectly reasonable to take the profit an run. However, our premise was that the VIX could go a lot higher due to the uncertainties in the market. Therefore, as you can see in the second screen shot, by rolling to the June 24 Call, we gave our trade an upside potential profit of $1,775 as long as the VIX closes above 24 at expiration. Not bad given the current trajectory of the VIX.

If we fell asleep, our worst case profit would be $775. Not bad at all. Simply by babysitting this trade for a couple months, we have a risk free trade.

However, if you are at all familiar with the VIX, you know that the VIX can be prone to quick wild swings in value. Therefore, it would be a shame to see our $1,287 profit fall all the way to $775 in a quick move down in the VIX. Therefore, one possible variation is to add a single put to our trade. Our original trade was based on trading 5 units. By adding a single June 22 Put, we could make sure to maintain a reasonable profit as the VIX declined.

In the third screen shot, you can see that we gave up some of our upside profit. It went from $1,775 to $1,630. Also, our worst case profit went from $775 to $640. However, the VIX would have to be exactly at 22 to realize the new worst case profit. Any VIX value greater than or less than 22 will produce a higher profit. In short, we give up some of our potential profit in return for preserving a decent return regardless of which way that VIX goes.

Now, with these new assurances, we can easily put this trade in the back of our mind and not worry about it.

As you can see from this example, options are very flexible trading vehicles. With a decent options trading strategy, you can start with a basic premise and continually morph your position as the market evolves. It’s not a 100% sure thing but it sure beats buying lottery tickets.

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The Anatomy of a VIX Options Trade III

Overall producer prices for April came in with a decline more than expected. While core producer prices increased in line with expectations. Clear as mud. Obama is a shoe in.

Gold is at recent lows. Buying opportunity or time to bail?

The U.S. dollar is now worth about the same as the Canadian dollar. I think I will keep my gold.

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Crude Oil Support and Resistance for May 11, 2012

Only 784 million shares traded on the NYSE.

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Crude Oil (CL) Technical Analysis for May 10, 2012

NYSE trading volume was above average for the last few months. The future is starting to get some attention.

The dollar increased setting gold back a bit. To traders, the dollar and treasuries appear to be safer than gold for the moment. That is how a mirage works.

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Russell 2000 Market Profile for May 8, 2012

If you were ready to follow the talking heads over the cliff at the open, you were disappointed as the day progressed. The dollar, oil and the stock market all ending with modest gains. It’s really hard to push down markets that are fueled with free money.

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Crude Oil Auction Market Theory for May 7, 2012

The pants completely cover your butt and the fabric is wonderful!

Do these pants make my butt look too big?

Both nonfarm jobs and nonfarm private payrolls increased less than expected. Everybody must be working on farms now?

The scared little traders went wee wee wee all the way to the dollar, treasuries and gold. Hmm… Strengthening dollar and rising gold… Where’s that VIX trade?

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Crude Oil Order Flow Trading for May 4, 2012

First quarter unit labor costs increased less than expected and productivity declined less than expected. If only… we could… somehow… change expectations to reducing labor costs and increasing productivity. Unleash the Kraken! Let the political advertisements begin!

ISM Non-Manufacturing Index declined more than expected. That old QE ain’t what it used to be.

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Russell 2000 Pivot Points for May 3, 2012

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