Monday, August 31, 2015

Tuesday's Prospects

On Monday, Aug. 31:

Of 509 large-cap stocks and exchange-traded funds in my analytical universe, one broke beyond its 20-day price channel, to the upside.

The symbol, USO, has sufficiently high implied volatility, options liquidity and spread narrowness to warrant a trade. Its historical odds of success are even, which is disqualifying.

However, given the importance of crude oil and USO as its avatar, I shall do further analysis of the symbol as a pure volatility play on Tuesday, Sept. 1.

There are no prospects for trades coinciding with earnings announcements under my Volatility Rules.

The next earnings season begins Oct. 8, with peak announcements lasting for three weeks. Under the exclusion rule that forbids me from opening new positions in stocks within 30 days of an earnings announcement, in month before the season begins increasing numbers of symbols will be removed from my prospective trades list during initial screening. The rule doesn't apply to trades under my Volatility Rules.

Methodology

The stocks in my analytical universe all have analyst coverage through the stock-ranking company Zacks Investment Research. Not all of the exchange-traded funds are so covered.

I screen the symbols for historical odds of a profitable signal in the direction of the breakout for the past 12 months.

For symbols whose odds of success are in the top or bottom thirds, I next screen for 1) suitability of the options grid, including implied volatility of three figures or greater on the strike prices I would need to use to build a position, 2) implied volatility in the 70th percentile or greater of its most recent rise, and 3) the absence of an earnings announcement within the next 30 days.

-- Tim Bovee, Portland, Oregon, Aug. 31, 2015

References

My trading rules can be read here.

Alerts

Two social media feeds provide notification whenever something new is posted.
Disclaimer
Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.
No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.
License

Creative Commons License

All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.Tss s ss'ss

Monday's Outcomes

I opened a short iron condor position on VXX.

I exited my short strangle on VNQ for a profit.

-- Tim Bovee, Portland, Oregon, Aug. 31, 2015

References

My volatility trading rules can be read here.

Alerts

Two social media feeds provide notification whenever something new is posted.
Disclaimer
Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.
No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.
License

Creative Commons License

All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.

VXX Analysis

Update 9/15/2015: The premium cost of exiting VXX fell below 10 cents. I have closed the position to avoid additional time risk.

Shares declined by 4.6% over 15 days, or a -112% annual rate. The options produced a 466.7% yield on debit, for a +11,356% annual rate.

The VXX exchange-traded notes track futures that inter turn track the VIX -- the implied volatility of the S&P 500.

Volatility took a huge leap upward when global markets panicked over the course of the Chinese economy and markets. High volatility suggests that I place trades that will profit as that volatility declines in a reversion to the mean.

My trade was based on a strangle position opened by a regular on the Dough education and trading site, Rachel Fox, who has created a nicely done beginners tutorial on options trading that can be seen here.. I converted her strangle to an iron condor in order to lessen the buying power impact on my account.

[VIX in Wikipedia]

VXX

I shall use the SEP series of options, which trades for the last time 18 days hence, on Sept. 18.

Ranges

Click on chart to enlarge.
VXX at 11:20 a.m. New York time, 30 days hourly bars
Implied volatility stands at 115%, which is four times the VIX, a measure of volatility of the S&P 500 index. VXX’s volatility stands in the 00 percentile of its most recent rise.

Ranges implied by options and the chart
WeekSD1 68.2%SD2 95%ChartEarns
Upper34.5142.4828.22N/A
Lower19.5710.6021.72N/A
Gain/loss30.0%60.1%
Implied volatility 1 and 2 standard deviations; chart support and resistance, maximum earns move

The Trade

Iron condor, short the $32.50 calls and long the $34 calls,
short the $21 puts and long the $19.50 puts,
sold for a credit and expiring Sept. 19.
Probability of expiring out-of-the-money

SEPStrikeOTM
Upper32.579.7%
Lower2178.3%

The premium is $0.51, which is one third of the width of the position’s wings.The stock at the time of purchase was priced at $26.41.

The risk/reward ratio is 1.8:1.

The zone of profit in the proposed trade covers a $5.75 move either way. the equivalent of three days' movement as measured by the average true range.

Decision for My Account

I've opened a position on VXX as described above.

-- Tim Bovee, Portland, Oregon, Aug. 31, 2015

References

My volatility trading rules can be read here.


Alerts


Two social media feeds provide notification whenever something new is posted.

Disclaimer
Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.
No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decisions for his or her own account, and take responsibility for the consequences.
License

Creative Commons License

All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.

Monday's Agenda

Often, this period between earnings seasons is the doldrums, with many days passing without a trade. The high volatility generated by the China Panic has created  opportunities of a sort not seen in recent years.

I intend to place a pure volatility play on VXX and shall be looking for other potential trades.

-- Tim Bovee, Portland, Oregon, Aug. 31, 2015

References

My volatility trading rules can be read here.

Alerts

Two social media feeds provide notification whenever something new is posted.
Disclaimer
Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.
No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.
License

Creative Commons License

All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.Tss s ss'ss

Saturday, August 29, 2015

The Week Ahead: Jobs, factories and trade

The employment situation report dominates will place another marker on the scale as the Federal Open Market Committee weighs its next move on interest rates. The report, including the headline-generating unemployment rate, will be published Friday at 8:30 a.m. New York time.

The jobs stats will get preview on Wednesday as the ADP employment report, prepared by the leading U.S. payroll company, is released at 8:15 a.m.

Two other potential market movers are on the economic reporting calendar: The Institute of Supply Management manufacturing survey on Tuesday at 10 a.m. and international trade on Thursday at 8:30 a.m.

Leading indicators (in descending order of importance):

The interest rate spread between 10-year Treasuries and the federal funds rate, reported continually during market hours.

The M2 money supply, at 4:30 p.m. Thursday.

Average hourly workweek in manufacturing from the employment report, at 8:30 a.m. Friday.

Manufacturers' new orders for consumer goods and materials from the factory orders report, at 10 a.m. Wednesday.

Vendor performance, or the deliveries times index, from the ISM manufacturing survey, at 10 a.m. Tuesday.

The S&P 500 index, reported continually during market hours.

Average weekly initial jobless claims, at 8:30 a.m. Thursday. 

Manufacturers' new orders for non-defense capital goods from the factory orders report, at 10 a.m. Wednesday.

Events arranged by day:

Monday: The Chicago Purchasing Managers index at 9:45 a.m. and the Dallas Federal Reserve manufacturing survey at 10:30 a.m.

Tuesday: Motor vehicle sales throughout the day, the Purchasing Managers manufacturing index at 9:45 a.m., the ISM manufacturing index at 10 a.m. and construction spending at 10 a.m.

Wednesday: The ADP employment report at 8:15 a.m., productivity and costs at 8:30 a.m., factory orders at 10 a.m., petroleum inventories at 10:30 a.m. and the Federal Reserve Beige Book at 2 p.m.

Thursday: International trade and jobless claims, both at 8:30 a.m., the Institute of Supply Management non-manufacturing survey at 10 a.m. and the M2 money supply at 4:30 p.m.

Friday: Employment at 8:30 a.m.

I also keep an eye on the Baltic Dry Index, updated daily, and the 5-year implied inflation rate based on U.S. Treasury yields, which presently stands at 1.31%.

Treasury Debt

Bills
  • 4-week: Announcement Monday 11 a.m., auction Tuesday 11:30 a.m., settlement Thursday.
  • 3-month: Auction Monday 11:30 a.m., announcement Thursday 11 a.m.
  • 6-month: Auction Monday 11:30 a.m., announcement Thursday 11 a.m.
Notes
  • 2-year: Settlement Monday.
  • 3-year: Announcement Thursday 11 a.m.
  • 5-year: Settlement Monday.
  • 7-year: Settlement Monday.
  • 10-year: Announcement Thursday 11 a.m.
Bonds
  • 30-year: Announcement Thursday 11 a.m.
TIPS
  • 5-year: Settlement Monday.
Fedsters

With the Jackson Hole Conference over and the Beige Book hitting the screens on Wednesday, a few of the Federal Reserve glitterati are suddenly in a talkative mood.

Richmond Fed Pres. Jeffrey Lacker, a member of the Federal Open Market Committee, speaks on Friday.

Boston Fed Pres. Eric Rosengren, an FOMC alternate, takes to the podium on Tuesday

And Minneapolis Fed Pres. Narayana Kocherlakota, who holds no FOMC position this year, has an appearance on Thursday

Analytical universe

This week I shall be analyzing new bull and bear signals among 509 large-cap stocks and exchange-traded funds.

Good trading.



-- Tim Bovee, Portland, Oregon, Aug. 29, 2015

References

My trading rules can be read here.


Alerts


Two social media feeds provide notification whenever something new is posted.

License

Creative Commons License

All content on Tim Bovee, Private Trader by Tim Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com

Friday, August 28, 2015

Monday's Prospects

On Friday, Aug. 28:

Of 493 large-cap stocks and exchange-traded funds in my analytical universe, one broke beyond its 20-day price channels, to the upside.

The symbol, INCY, didn't survive initial screening because of ambiguous odds of successful bull signals.

There are no prospects for trades coinciding with earnings announcements under my Volatility Rules.

With no symbols having survived initial screening, I shall do no further analysis on Monday, Aug. 31.

The next earnings season begins Oct. 8, with peak announcements lasting for three weeks. Under the exclusion rule that forbids me from opening new positions in stocks within 30 days of an earnings announcement, in month before the season begins increasing numbers of symbols will be removed from my prospective trades list during initial screening. The rule doesn't apply to trades under my Volatility Rules.

Methodology

The stocks in my analytical universe all have analyst coverage through the stock-ranking company Zacks Investment Research. Not all of the exchange-traded funds are so covered.

I screen the symbols for historical odds of a profitable signal in the direction of the breakout for the past 12 months.

For symbols whose odds of success are in the top or bottom thirds, I next screen for 1) suitability of the options grid, including implied volatility of three figures or greater on the strike prices I would need to use to build a position, 2) implied volatility in the 70th percentile or greater of its most recent rise, and 3) the absence of an earnings announcement within the next 30 days.

-- Tim Bovee, Portland, Oregon, Aug. 28, 2015

References

My trading rules can be read here.

Alerts

Two social media feeds provide notification whenever something new is posted.
Disclaimer
Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.
No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.
License

Creative Commons License

All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.Tss s ss'ss

Thursday, August 27, 2015

Friday's Prospects

On Thursday, Aug. 27:

Of 493 large-cap stocks and exchange-traded funds in my analytical universe, none broke beyond its 20-day price channel.

There are no prospects for trades coinciding with earnings announcements under my Volatility Rules.

With no symbols having passed screening, I shall do no further analysis on Friday, Aug. 28.

The next earnings season begins Oct. 8, with peak announcements lasting for three weeks. Under the exclusion rule that forbids me from opening new positions in stocks within 30 days of an earnings announcement, in month before the season begins increasing numbers of symbols will be removed from my prospective trades list during initial screening. The rule doesn't apply to trades under my Volatility Rules.

Methodology

The stocks in my analytical universe all have analyst coverage through the stock-ranking company Zacks Investment Research. Not all of the exchange-traded funds are so covered.

I screen the symbols for historical odds of a profitable signal in the direction of the breakout for the past 12 months.

For symbols whose odds of success are in the top or bottom thirds, I next screen for 1) suitability of the options grid, including implied volatility of three figures or greater on the strike prices I would need to use to build a position, 2) implied volatility in the 70th percentile or greater of its most recent rise, and 3) the absence of an earnings announcement within the next 30 days.

-- Tim Bovee, Portland, Oregon, Aug. 27, 2015

References

My trading rules can be read here.

Alerts

Two social media feeds provide notification whenever something new is posted.
Disclaimer
Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.
No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.
License

Creative Commons License

All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.Tss s ss'ss

Wednesday, August 26, 2015

Thursday's Prospects

On Wednesday, Aug. 26:

Of 493 large-cap stocks and exchange-traded funds in my analytical universe, two broke beyond their 20-day price channels, both to the downside.

No symbols that gave trading signals survived initial screening,

There are no prospects for trades coinciding with earnings announcements under my Volatility Rules.

With no symbols having survived early screening, I shall do no further analysis on Thursday, Aug. 27.

The next earnings season begins Oct. 8, with peak announcements lasting for three weeks. Under the exclusion rule that forbids me from opening new positions in stocks within 30 days of an earnings announcement, in month before the season begins increasing numbers of symbols will be removed from my prospective trades list during initial screening. The rule doesn't apply to trades under my Volatility Rules.

Methodology

The stocks in my analytical universe all have analyst coverage through the stock-ranking company Zacks Investment Research. Not all of the exchange-traded funds are so covered.

I screen the symbols for historical odds of a profitable signal in the direction of the breakout for the past 12 months.

For symbols whose odds of success are in the top or bottom thirds, I next screen for 1) suitability of the options grid, including implied volatility of three figures or greater on the strike prices I would need to use to build a position, 2) implied volatility in the 70th percentile or greater of its most recent rise, and 3) the absence of an earnings announcement within the next 30 days.

-- Tim Bovee, Portland, Oregon, Aug. 26, 2015

References

My trading rules can be read here.

Alerts

Two social media feeds provide notification whenever something new is posted.
Disclaimer
Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.
No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.
License

Creative Commons License

All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.Tss s ss'ss

Wednesday's Outcomes

I opened a direction-neutral position on AVGO coinciding with the company's earnings announcement.

-- Tim Bovee, Portland, Oregon, Aug. 26, 2015

References

My volatility trading rules can be read here.

Alerts

Two social media feeds provide notification whenever something new is posted.
Disclaimer
Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.
No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.
License

Creative Commons License

All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.

AVGO Analysis

9/19/2015: The AVGO puts expired without value for maximum profit, although the calls produced a loss. Shares rose by 14.5% over 19 days, or a +278% annual rate. The iron condor options produced a 50.2% loss on debit, for a -966% annual rate.

Update 9/9/2015: I've exited the calls on my position after AVGO tipped above the profit zone. The position is now a bull put options spread expiring in September. 

In rising AVGO triggered a bull signal, and I have separately opened a bull put spread expiring in October. (See the Sept. 9 analysis here.)

I shall calculate profit and loss on the positions separately as they expire.
---
The analog semiconductor company Avago Technologies Ltd. (AVGO), headquartered in San Jose, California and Singapore, publishes earnings on Wednesday after the closing bell.


[AVGO in Wikipedia]

AVGO

I shall use the SEP series of options, which trades for the last time 23 days hence, on Sept. 18.

Ranges

Click on chart to enlarge.
AVGO 10:06 a.m. New York time, 90 days 2-hour bars
Implied volatility stands at 63.3%, which is 1.9 times the VIX, a measure of volatility of the S&P 500 index. AVGO’s volatility stands in the 88th percentile of its most recent rise.

Ranges implied by options and the chart
WeekSD1 68.2%SD2 95%ChartEarns
Upper131.27149.26125.77N/A
Lower95.2977.30100.00N/A
Gain/loss15.9%31.8%
Implied volatility 1 and 2 standard deviations; chart support and resistance, maximum earns move

The Trade

Iron condor, short the $130 calls and long the $135 calls,
short the $90 puts and long the $95 puts,
sold for a credit and expiring Sept. 19.
Probability of expiring out-of-the-money

SEPStrikeOTM
Upper13085.1%
Lower9585.8%

The premium is $1.02, which is 25% of the width of the position’s wings.The stock at the time of purchase was priced at $112.52.

The risk/reward ratio is 4:1.

The zone of profit in the proposed trade covers a $20 move either way. The biggest immediate move after each of the past four earnings announcements was $16.57, and the average was $7.78.

Decision for My Account

I've opened a position in AVGO as described above.

-- Tim Bovee, Portland, Oregon, Aug. 26, 2015

References

My volatility trading rules can be read here.


Alerts


Two social media feeds provide notification whenever something new is posted.

Disclaimer
Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.
No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decisions for his or her own account, and take responsibility for the consequences.
License

Creative Commons License

All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.

Tuesday, August 25, 2015

Wednesday's Prospects

On Tuesday, Aug. 25:

Of 493 large-cap stocks and exchange-traded funds in my analytical universe, 13 broke beyond their 20-day price channels, one to the upside and 12 to the downside.

No symbols that gave trading symbols survived initial screening.

There is one prospect for a trade coinciding with an earnings announcements under my Volatility Rules.

I shall do further analysis on Wednesday, Aug. 26.

The next earnings season begins Oct. 8, with peak announcements lasting for three weeks. Under the exclusion rule that forbids me from opening new positions in stocks within 30 days of an earnings announcement, in month before the season begins increasing numbers of symbols will be removed from my prospective trades list during initial screening. The rule doesn't apply to trades under my Volatility Rules.

Potential trades keyed to events

The dates are those of the events, all of them earns announcements. Events prior to the opening bell are marked "am", during the trading day "mid", and after the closing bell "pm".

Wednesday pm
AVGO
Thursday am
(none)

Methodology

The stocks in my analytical universe all have analyst coverage through the stock-ranking company Zacks Investment Research. Not all of the exchange-traded funds are so covered.

I screen the symbols for historical odds of a profitable signal in the direction of the breakout for the past 12 months.

For symbols whose odds of success are in the top or bottom thirds, I next screen for 1) suitability of the options grid, including implied volatility of three figures or greater on the strike prices I would need to use to build a position, 2) implied volatility in the 70th percentile or greater of its most recent rise, and 3) the absence of an earnings announcement within the next 30 days.

-- Tim Bovee, Portland, Oregon, Aug. 25, 2015

References

My trading rules can be read here.

Alerts

Two social media feeds provide notification whenever something new is posted.
Disclaimer
Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.
No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.
License

Creative Commons License

All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.Tss s ss'ss

Tuesday's Outcomes

I opened a volatility play on SPY.

-- Tim Bovee, Portland, Oregon, Aug. 25, 2015

References

My volatility trading rules can be read here.

Alerts

Two social media feeds provide notification whenever something new is posted.
Disclaimer
Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.
No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.
License

Creative Commons License

All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.

SPY Analysis

Update 9/10/2015: The cost of exiting SPY declined to a $0.10 premium debit and I closed the position for a profit to avoid additional time risk.

Shares rose by 0.7% over 16 days, or a +16% annual rate. The options produced a +450.0% yield on debit, for a +10,266% annual rate.

The S&P 500 exchange-traded fund SPY rebounded on Tuesday, the day after the China Crash. I'm considering a direction neutral position with a wide zone of profit in anticipation of a sharp decline in volatility.

No trading signal. No earnings, obviously. This is a pure volatility play.

[SPY in Wikipedia]

SPY

I shall use the SEP series of options, which trades for the last time 24 days hence, on Sept. 18.

Ranges

Click on chart to enlarge.
SPY at 10:10 a.m. New York time, 30 days hourly bars
Implied volatility stands at 32%, which is identical to the VIX, a measure of volatility of the S&P 500 index. SPY’s volatility stands in the 66th percentile of its most recent rise.

Ranges implied by options and the chart
WeekSD1 68.2%SD2 95%ChartEarns
Upper211.80229.74210.01N/A
Lower175.92157.88182.40N/A
Gain/loss9.3%18.5%
Implied volatility 1 and 2 standard deviations; chart support and resistance, maximum earns move

The Trade

Iron condor, short the $205 calls and long the $208 calls,
short the $170 puts and long the $167 puts,
sold for a credit and expiring Sept. 19.
Probability of expiring out-of-the-money

SEPStrikeOTM
Upper20587.7%
Lower17086.6%

The premium is $0.55, which is 18% of the width of the position’s wings. The stock at the time of purchase was priced at 193.98

The risk/reward ratio is 4.5:1.

The zone of profit in the proposed trade covers a $17.50 move either way. The average true range on the last up day intra-day before Monday's China Crash was $2.06, so the zone is equivalent to about 8-1/2 days of movement.

Decision for My Account

I've opened a position on SPY as described above.

-- Tim Bovee, Portland, Oregon, Aug. 25, 2015

References

My volatility trading rules can be read here.


Alerts


Two social media feeds provide notification whenever something new is posted.

Disclaimer
Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.
No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decisions for his or her own account, and take responsibility for the consequences.
License

Creative Commons License

All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.

Monday, August 24, 2015

Tuesday's Prospects

On Monday, Aug. 24:

Of 500 large-cap stocks and exchange-traded funds in my analytical universe, 77 broke beyond their 20-day price channels, all to the downside.

No symbols with high odds of success survived initial screening.

One symbol with low odds of success survived initial screening, having broken out to the downside. Low-odds symbols are candidates for non-directional trades.

However, given the panic in the markets on Monday that produced the breakout, I have no intention of doing further analysis on Tuesday, Aug. 25. I shall return to the table with my price-channel breakout strategy once the markets have stabilized.

There are no prospects for trades coinciding with an earnings announcements under my Volatility Rules.

The next earnings season begins Oct. 8, with peak announcements lasting for three weeks. Under the exclusion rule that forbids me from opening new positions in stocks within 30 days of an earnings announcement, in month before the season begins increasing numbers of symbols will be removed from my prospective trades list during initial screening. The rule doesn't apply to trades under my Volatility Rules.

First-round survivors

High-odds
Bull
(none)

High-odds
Bear
(none)

Low-odds
Bull
(none)

Low-odds
Bear
DAL

Methodology

The stocks in my analytical universe all have analyst coverage through the stock-ranking company Zacks Investment Research. Not all of the exchange-traded funds are so covered.

I screen the symbols for historical odds of a profitable signal in the direction of the breakout for the past 12 months.

For symbols whose odds of success are in the top or bottom thirds, I next screen for 1) suitability of the options grid, including implied volatility of three figures or greater on the strike prices I would need to use to build a position, 2) implied volatility in the 70th percentile or greater of its most recent rise, and 3) the absence of an earnings announcement within the next 30 days.

-- Tim Bovee, Portland, Oregon, Aug. 24, 2015

References

My trading rules can be read here.

Alerts

Two social media feeds provide notification whenever something new is posted.
Disclaimer
Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.
No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.
License

Creative Commons License

All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.Tss s ss'ss

Monday's Outcomes

I exited my bear call spread position on HAL for a profit.

-- Tim Bovee, Portland, Oregon, Aug. 24, 2015

References

My volatility trading rules can be read here.

Alerts

Two social media feeds provide notification whenever something new is posted.
Disclaimer
Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.
No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.
License

Creative Commons License

All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.

Monday's Agenda: The China Panic

I listed four potential trades in my "Monday's Prospects" post.

But with the China Panic continuing, all bets are off. What is happening today is outside of my normal trading rules, and I won't be opening new positions today.

What's happening is this. The S&P 500 fell sharply the first five minutes after the opening bell, and then bounced, reclaiming about half of its loss

SPX at 9:25 a.m. New York time, two days 1-minute bars

Volatility on the S&P 500 -- the VIX -- exceeded all of its levels since the Great Recession Peak. The volatility high so far today is 53.3%, and the recession peak in 2008 was 89.53. Friday's low was 20.80.

So market volatility on the S&P 500 jumped by 90% in the span of just a few minutes.

VIX at 11:45 a.m. New York time, 10 years weekly bars

For new trades, I treat events like this under my long standing rule about news events. I follow the dictum of the Napoleonic wars era banker Nathan Rothschild: "Buy to the roar of cannon and sell to the sound of trumpets."

Once the news is announced -- in this case, by the first five minutes of the trading day -- then there is no more profit to be had from it. Profit comes from anticipation.

So I'll deal with the China Panic in this way:

1) No new positions until things settle a bit. I'm a speculator and I bet based on the odds. I can't really calculate usable odds in a market like today's.

2) Delay adjusting existing positions until the direction of prices becomes clear. My positions all expire in September. All of the iron condors went in the money at the open today, but all but one (WMT) moved back in the money with the bounce.

3) Take profits under my normal rules. One position, HAL, has less than a dime of value on its contracts. That generally is the point where take the money and run.

Interesting day.

-- Tim Bovee, Portland, Oregon, Aug. 24, 2015

References

My volatility trading rules can be read here.

Alerts

Two social media feeds provide notification whenever something new is posted.
Disclaimer
Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.
No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.
License

Creative Commons License

All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.Tss s ss'ss

Sunday, August 23, 2015

The Week Ahead: GDP, new homes, durables, income, outlays, Jackson Hole

The second estimate of 2nd quarter gross domestic product will be published Thursday at 8:30 a.m. New York time. An unexpected revision from the first estimate could have an impact on stocks.

Other potential market-movers out during the week, new home sales on Tuesday at 10 a.m., durable goods orders on Wednesday at 8:30 a.m. and personal income and outlays on Friday at 8:30 a.m.

Federal Reserve Vice Chairman Stanley Fischer addresses the Fed's annual symposium at Jackson Hole, Wyoming on Saturday at 12:25 pm. New York time. The Jackson Hole get together, which begins on Thursday with the theme "Inflation Dynamics and Monetary Policy", will be closely watched as a source of the Fed's big-picture thinking. Fed Chair Janet Yellen won't attend the symposium this year, the second time in three years that the Fed's chief hasn't been part of the event.

Leading indicators (in descending order of importance):

The interest rate spread between 10-year Treasuries and the federal funds rate, reported continually during market hours.

The M2 money supply, at 4:30 p.m. Thursday.

The S&P 500 index, reported continually during market hours.

Average weekly initial jobless claims, at 8:30 a.m. Thursday. 

Index of consumer expectations from the Reuters/University of Michigan consumer sentiment report at 10 a.m. Friday.

Events arranged by day:

Monday: S&P Case-Shiller home price index in 20 metro areas at 9 a.m. and new home sales and consumer confidence, both at 10 a.m.

Wednesday: Durable goods orders at 8:30 a.m. and petroleum inventories at 10:30 a.m.

Thursday: GDP and jobless claims, both at 8:30 a.m.m and the M2 money supply at 4:30 p.m.

Friday: Personal income and outlays at 8:30 a.m. and consumer sentiment at 10 a.m.

I also keep an eye on the Baltic Dry Index, updated daily, and the 5-year implied inflation rate based on U.S. Treasury yields, which presently stands at 1.21%.

Treasury Debt

Bills
  • 4-week: Announcement Monday 11 a.m., auction Tuesday 11:30 a.m., settlement Thursday.
  • 3-month: Auction Monday 11:30 a.m., announcement Thursday 11 a.m.
  • 6-month: Auction Monday 11:30 a.m., announcement Thursday 11 a.m.
Notes
  • 2-year: Auction Tuesday 1 p.m.
  • 2-year floating rate: Auction Wednesday 11:30 a.m.
  • 5-year: Auction Wednesday 1 p.m.
  • 7-year: Auction Wednesday 1 p.m.
Bonds
  • None.
TIPS
  • None.
Fedsters

Outside of Jackson Hole, only one of the Federal Reserve glitterati has scheduled a speech during the week: Atlanta Fed Pres. Dennis Lockhart on Monday. Lockhart is a member of the Federal Open Market Committee.

Analytical universe

This week I shall be analyzing new bull and bear signals among 493 large-cap stocks and exchange-traded funds.

Good trading.



-- Tim Bovee, Portland, Oregon, Aug. 23, 2015

References

My trading rules can be read here.


Alerts


Two social media feeds provide notification whenever something new is posted.

License

Creative Commons License

All content on Tim Bovee, Private Trader by Tim Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com

Monday's Prospects

On Friday, Aug. 21:

Of 500 large-cap stocks and exchange-traded funds in my analytical universe, 73 broke beyond their 20-day price channels, all to the downside.

No symbols with high odds of success survived initial screening. High-odds symbols are candidates for directional trades.

Four symbols with low odds of success survived initial screening, all having broken out to the downside. Low-odds symbols are candidates for non-directional trades.

There are no prospects for trades coinciding with earnings announcements under my Volatility Rules.

I shall do further analysis on Monday, Aug. 24.

The next earnings season begins Oct. 8, with peak announcements lasting for three weeks. Under the exclusion rule that forbids me from opening new positions in stocks within 30 days of an earnings announcement, in month before the season begins increasing numbers of symbols will be removed from my prospective trades list during initial screening. The rule doesn't apply to trades under my Volatility Rules.

First-round survivors

High-odds
Bull
(none)

High-odds
Bear
(none)

Low-odds
Bull
(none)

Low-odds
Bear
V
VLO
MA
GOOGL

Methodology

The stocks in my analytical universe all have analyst coverage through the stock-ranking company Zacks Investment Research. Not all of the exchange-traded funds are so covered.

I screen the symbols for historical odds of a profitable signal in the direction of the breakout for the past 12 months.

For symbols whose odds of success are in the top or bottom thirds, I next screen for 1) suitability of the options grid, including implied volatility of three figures or greater on the strike prices I would need to use to build a position, 2) implied volatility in the 70th percentile or greater of its most recent rise, and 3) the absence of an earnings announcement within the next 30 days.

-- Tim Bovee, Portland, Oregon, Aug. 23, 2015

References

My trading rules can be read here.

Alerts

Two social media feeds provide notification whenever something new is posted.
Disclaimer
Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.
No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.
License

Creative Commons License

All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.Tss s ss'ss

Saturday's Outcomes

Ten iron condor positions, six of which had been partially closed earlier, expired on Saturday. I've updated the analyses with results.

The symbols are CAM, BABA, EBAY, EMC, GOOGL, HAL, HD, M, MOS and TGT.

-- Tim Bovee, Portland, Oregon, Aug. 23, 2015

References

My volatility trading rules can be read here.

Alerts

Two social media feeds provide notification whenever something new is posted.
Disclaimer
Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.
No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.
License

Creative Commons License

All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.

Friday, August 21, 2015

Friday's Outcomes

I opened a bear call spread on PRU and iron condors on QQQ and USB after the symbols gave bear signals.

I exited the INTC strangle and calculated results.

I exited the put portions of two iron condors that expire on Saturday: HAL and MOS.

-- Tim Bovee, Portland, Oregon, Aug. 21, 2015

References

My volatility trading rules can be read here.

Alerts

Two social media feeds provide notification whenever something new is posted.
Disclaimer
Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.
No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.
License

Creative Commons License

All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.