Monday, September 21, 2009

Update for 9/21/2009

Today we saw the indices take a breather from the recent rally that put us at 11 month highs. The fifty percent rule seems to be in full force, as 1133.00 on the S&P seems almost inevitible.

In this post I would like to share a strategy with you known as the covered strangle.
With a covered strangle, you sell a covered call (or covered calls), and at the same time sell a put (or puts). Go at least 2 strike prices from the current money with these. I like to go at least 3 strikes from the money in most cases. If the calls expire in the money, your profit is equal to the price you paid for shares minus premiums from both sales (calls and puts), deducted from the price per share at the strike price of the calls. If the puts expire in the money, they will be "put" into your account. Your position value is equal to the price per share purchased with the covered call (price minus premium), plus the price per share "put into" the account (strike price minus premium), averaged. If the latter happens, you will turn around and sell as many calls as you can given the original shares, plus the shares put into your account. This strategy is another one of those dividend enhancing, long term winners for those who are patient and pick good quality companies to play with. Consider combining this technique with other techniques from earlier posts. As always, good luck and have fun with your trading and investing.

Tuesday, September 1, 2009

Update for 9/1/2009

Today we saw significant selling in the major indices. If you read my previous posts, you see that this comes as no surprise to me. This is why I urge people to 1) buy only the safest of blue chip stocks, and 2) protect their long positions by selling calls and buying puts (or bear market etf's). Part 2 of this defensive strategy (the option spread of selling calls and buying puts) is called a "synthetic short" position. It allows the investor to take a neutral position, long and short (synthetically) simultaneously, and collect dividends from the blue chips utilized in this strategy.

The S&P remains around the $1,000 price. Patient players may just get a shot at attractive entry points between now and Christmas. Personally, this is what I anticipate!

as always, good trading.

Thursday, August 27, 2009

Update for 8/27/2009

Today saw another small gainer for the indices, with no news or slightly negative news. I urge caution at these levels. The bias and technicals remain in favor of the longs, put option volumes confirm that traders are hedging and not overly confident that the stock markets can go straight up. The fact that we are making modest gains is encouraging, though. What you should look for on the index charts, is to see if we fail to make a new high with out breaking the first major support level already established below that high. In other words, if we make a lower high, then the previous support level is taken out, "look out below" could turn out to be appropriate advice.
I haven't added any new plays today. As always, read my previous posts for good advice/ideas.

Wednesday, August 26, 2009

Update for 8/26/2009

Another day closed practically unchanged for the major stock indices today. Technically the bias is still to the upside, and the news was good (Housing numbers, consumer confidence this week, etc.) The fact that good news is not sending the markets into rally mode speaks volumes to the fact that investors are looking for more solid signs of recovery before they will buy much larger chunks of shares. There has been, however, considerable day trading of FRE, FNM, and other "bankrupt" low expense companies of late. If this sounds fun to you, by all means take a whack at it (I have placed side bets on these more than once, and yes Im enjoying this little run up recently!). I do advise you don't bet the entire ranch on these, though.

A good play right now, for traders, would be IYR, and hedge with SDS.

For those of you looking for picks, I like MCD, MO, PM, JNJ, AAPL, and JPM. I also like POT, and CAT These are long term buy and holds. I do own a little GLD, and SLV, hedged with ZSL. GLD and SLV are precious metal etf's, and ZSL shorts the silver market.

For shorter or intermediate term trades on stocks that usually have the right quality for buy and hold if you are one that hates to give up on a bad position (a bad habit that sometimes can pay off if you are buying blue chips), I like to use special software. There is nothing mystical or magical about this software, it simply scans through mountains of data looking for criteria that I look for, technial and fundamental stuff. This saves me tons of time. I go through the picks resulting from running this software and further narrow down the selections to a handful, then look for entry/exit points. Would hardware like this help you in your trading? Probably, as long as you follow your plans and sift through the picks like I do. You can learn more about this valuable tool at the following link
As always, Im happy to answer questions or respond to comments at my email address, which is

Monday, August 24, 2009

Market update for 8/24/2009

Today the indexes finished close to unchanged, but the bias is clearly still to the upside.
The direction of the next big move is anyones guess, but the smart bet is probably that we go higher unless some major catastrophic event unfolds.
Here are some suggestions for picks.
CSIQ is a Canadian solar company that does business with China, and they are well positioned to take advantage of global stimulus and clean energy efforts. This is, in my own honest opionion, a name for the long hall. For a complete list of green energy picks, email me at veteran I am always happy to provide free insights, lists, answer questions, etc.
Another potential play is GMO. This company is sitting on a pile of molybdenum, and if nuclear energy becomes a factor, i.e. congress includes nuclear energy in the clean energy legislation, this one should take off nicely. MLP's and CRT's are a good idea as well. You can obtain lists by sending me an email and just ask, you will receive-spam free of course.
You may want to consider hedging any long position you take with QID, SDS, SRS, SH....these are all "bear market" etf's, they make money when the indexes are moving down in price.
Read previous posts for more investing and trading ideas. As always, trade at your own one can guarentee you a profit, but I will try to help you limit your losses and get you into some winning trades.

The secret to successfull trading is to cut your losses (by hedging or exiting losers before they lose too much money) and let your winners run. The objective of this blog is to help you do just that.
Until next time, good luck with your trading!

Thursday, August 20, 2009

Market update for 8/20/2009

Stocks opened lower again today, and rallied back into positive territory. Anyone looking to short this market, I would recommend go for it, but use a good exit strategy. The fundamentals are very weak right now. Unemployment situation showing no signs of improving, and record high numbers of foreclosures and defaults. Not good stuff.

Bernanke is facing the problem of timing inflation preventing policies. If he acts too soon, this market is going to sink like a ton of lead. If he waits too long, inflation is going to crush any recovery. I think the calls that the recovery is underway are a bit premature.

For now, play defensively. It is still wise to anticipate inflation. Look to crude oil to point the directions of stocks in the near term.

Wednesday, August 19, 2009

Dividend Stocks Recommended

I would like to make a special post about some dividend paying stocks to consider. These are defensive stocks, and now is a good time to consider them. The reason for this is the fact that the market could nose dive any day on these weak fundamentals, a panic is never out of the question. Just ask anyone who lost hundreds of thousands in their 401K portfolios last year. The stocks I recommend did not plunge like the rest of the markets did last fall, but instead experienced minor pull backs. For this reason, you should buy these defensive stocks now, and consider sectors that get beaten down hard in the event of a sell off, after the sell off.

The list I personally recommend is rather short, these are the best of the best, in my opionion.


Read my previous posts to learn how to properly insure these positions agains drops in price, and learn how to turn downward moves into positive events that can make you even more money in the long run.
As always, good luck trading and feel free to email me at lmr!