OEX Option Trading

In my OEX trading over the past several weeks I’ve had personal extraordinary success, with daily returns in my personal journal of 11 wins at 33% average, and one loss at 50%.

Just prior to that I had several weeks where I simply did not trade, uncomfortable with the market moves and lack of VIX volatility, and then I “felt” it time to trade and had these wins.

I fall in love with an option. This is the most important option secret I teach, that few ever truly follow.

I watch it as I trade it, noting the bid/ask, but trading it around support and resistance lines, and recalculating my Pivot Point analysis.

I watch the volume, the times it moves, where it moves, and I begin to build inventory. Remember, that’s how I see it…fruit to be traded.

Using ATR, Pnf charting, and Dow Projections many of the stocks we own are tradable as options. We do not do complex covered calls, or butterflys.

If we are serious on a stock, we buy the option, and perhaps the stock.

But when we are short term trading, or day trading a stock or index, we are trading one option, and trading against other traders that are also buying and selling the same option. This is a game of bid/ask, nothing more than a card game, if trading an index.

The merit of how simple this correlation is (the odds are stacked against you) is how to make simple and fast trades on tight movements

Do not think long term. Have your investments, make sure they are sound, and do not watch them. Invest only what you can risk to trade, and that which you know is your “limit”. There are ratios one can analyze, but I find if our traders keep diversified portfolios, often with our Blue Chip holdings, and trade “investment and risk money” in their option trading, whether it be long term LEAP Options (the least risky) to any OEX or SPX option, or an option on any stock.

Check the website, subscribers. Many do not take advantage of how I teach, making note……..you are free to write to me and I will personally respond.

Euro Funds

For those of you that would like to trade on the Euro there are many funds, but we would pay special attention to EUO (ARCA). This is the Proshares Ultrashort Euro Fund. Germany was in the news they might buy some Greek bonds up, raising the Euro. Long term Euro disbelievers think it will be the “first currency to go”.

I believe there will be a one-world currency within my lifetime. I am 59.

Who knows if I’m right, or what it would be.

Right now, the Euro is worth watching.

Nature of Governments

Of course, I distrust the nature of all governments. But even I am amazed at how Greece was able to fake budgets, have inaccurate financial statements, and are affecting all other countries in the EU.

I find it hard to be positive on the Euro in general, and do not believe countries like Germany will put up with the disorder too long.

Now the EU will have to print more money (just as we did), and bearish bets on the Euro are at their highest since September. The ratio is 59,422 more trades to the downside of the Euro.

With whatever happens short term, it is likely this currency will crash.

This is why GLD and CEF remain up to 15% of our portfolios, as hedges against the Euro now, and the USD, which has created the circle of debt that, circles the world. Each of our shell games is dependent upon each other. The house of cards is much larger than people realize.

Don Peck is a deputy managing editor of The Atlantic. His article “How a Jobless Era will Transform America” is available on line at:

http://www.theatlantic.com/magazine/archive/2010/03/how-a-new-jobless-era-will-transform-america/7919

I consider this superb journalism, and a author that clear sees and filters through the masses in input we receive.

Much of what you will read in this article is my thinking exactly, and will be part of how I’ll consider a 17.5% real unemployment rate (my definition: people that want to work full time) what I believe will be standard for a number of years.

It is not Obama. It is even now not Congress. Goldman Sachs and the Greece game should show us what the “money” made goes to, and what is faked.

There will simply not be enough jobs. People will be spending less.

Please read this article and form with me our plan for how to stock and option trade to make money in an environment like this.

If I am predicting, from outside the economic circle, and as one of the most cynical of analysts, it will be interesting to hear what is discussed, vs. what is executed.

America is clearly seeing that things do not execute well in our government and that we are frozen.

We are in turn not executing well within many of our businesses, and this will compound the unemployment, as people are a variable cost that can be cut.

Dow Projections Outlined

Floyd is traveling in South America all of this week.

With my traveling it's a perfect time to outline where we see Dow projections, why we were profitable each day last week, and the week prior, in all but one signal we have provided, and what the market holds:

1. We will provide a range of option signals for your review this week.

2. In each case our rule of trading is:

a. Follow futures. If up or down 50+_ points look, if applicable, for "best buy" prices, typically 15 to 22% below prior day close.

b. Enter orders pre-market at best buy. Take no second buys unless highly risk oriented, and if buying at best buy look for 22 to 35% profits.

c. Hold each position no longer than 4 days.

3. Depending upon the whipsaw and charts Floyd sees we'll hold with one or two signals for the week, OR we will change strike signals.

We believe the market is acting in what Economist Krugman calls an L formation. We are all familiar with W, V, and the ABC head and shoulders topping. Krugman believes we may be entering the "lost decade" or an L formation in which we see the downside or upside, the I of the L and the _ becomes the flat lining he sees through 2010.

This holds with my thinking that we will see spikes of euphoria and hope, and reversals of real magnitude, as we've seen this past two weeks.

If Krugman or I are right we are seeing the typical behavior of an L formation within the last three weeks, with deep whipsaws, but always back to flat and steady line, with no real increase.

This has also occurred after the Fibonacci Retracement at 10,746. We think the market may next hit tops at 10,604, yet downside risk remains just as strong, no matter how it "looks".

The SPX can hit 1200, and the OEX 510-512, but it will be on how news in interpreted each day.

The Chilean Earthquake could easily effect the market.

For option traders some fast money is very possible to be made watching the SPX support and resistance lines and playing any strike point with a close ATM range on the SPX

Our Dow projections are critical in how we have been trading this past few weeks:

These are all support lines around a 10% Fibonacci retracement from 10,746

9667

9750

Both support lines above are deep bottoms that would show more root negative, and longer downturn.

9841

We held here at the last downturn, and quickly moved back above 10,000

9950

These are the resistance lines if the market holds at a 10% retracement

10,050-10,127

10,267

10,350-10,437

The market has been struggling in this range, with whipsaw to the 10,127 area occurring repeatedly.

10,604-next resistance top

10,746- Market Resistance Strong Top