Buy FSLR (sell puts)

Buy FSLR via selling Aug 230 puts

FSLR higher on earnings, chart is also supportive. Recent lows are 240.

Positions: long BUD, IBM, FSLR

Buy IBM (sell puts)

Buy IBM via selling the Aug 115 puts

IBM had good earnings two weeks ago, and has been consolidating. The puts are 12 points out of the money, with a modest premium that reflects the low chance of IBM going below the strike before expiration.

I am not loading the boat by any means, with this low premium, high probability trade.

Positions: long BUD, IBM

Pring: Four reasons to be optimistic

Over at Peter Brimelow's Marketwatch column, Martin Pring is quoted with (link)
"Four Key Reasons to be Optimistic Today"

1. Low Consumer Confidence = Profits Ahead

2. Bull Markets Always Follow Bear Markets

3. Lower Oil Prices Ahead

4. Record Cash Levels on Sidelines

>>

For the intermediate term trader/investor, I agree that there are many reasons to be bullish. For the short term, the knives keeps falling and would be heroes continue to be sliced up. I am not so brave at the moment. A retest of the recent lows may be an interesting time. There is a chance it could be an acceleration to the downside if a lot traders have a stop loss at the low.

Position: long BUD

The other shoe

Today is what some might call the other shoe dropping. There isn't that much news, but the bottom drops out of the stock market. At the moment, I am unsure of what is coming next, and for now will stand aside. I'll keep looking for trades, but I have to say, it is a confusing market.

Positions: long BUD

Sell AAPL calls

Sell AAPL Jul 185 calls for virtually a total loss (-95%)

Earnings are good, but guidance is disappointing, and the company says that Steve Jobs' health is a private matter. AAPL opens about 10% lower. I dump my calls for almost a total loss. This is the biggest dollar loser of they year for me. There are no guarantees buying ahead of earnings. I took my shot, going for the home run and struck out. Still, I am "glad" I bought calls rather than my usual of selling puts. When a stock gaps down, being short puts is scary and can wipe out a good portion of one's account.

Positions: long BUD

Buy AAPL calls

Buy AAPL Jul 185 calls

That's not a typo folks, I bought calls. Readers know this is unusual for me, that 80% to 90% of my trades have been selling options, usually after earnings, not in front of them. Using a baseball analogy, this a home-run swing for a person who is more typically a singles hitter. Positive factors include big misses by some other tech stocks, and AAPL has been beat down to a chart support level. Rumors about the health of Steve Jobs helped sink the stock this morning. I am buying in the middle range here, not at the lows.

Apple options are pricing in about a 10% move on earnings tonight. This means straddle sellers break even on 10% up or down, straddle buyers need more than a 10% move to make money. (A straddle is buying both a put and and a call.)

Positions: long BUD, AAPL

3-1-2 for July expiration

As a trader who mostly sells options, it makes sense to track progress from expiration to expiration (always the 3rd Friday of each month). For the trading month up to July expiration, I have five winners, one loser. The headline is 3-1-2 because two of the winners are what I term "break even winners" where the broker makes more than I do. Losers of the same ilk are "break even losers."

The one loser was X (U. S. Steel) and it would have been a winner had I held until expiration, instead of cutting my loss. The five winners are short RIMM, long SPY, EEM, IWM, SPY again. The trades this week with the tailwind of the big rally helped move me above break even for the period.

Overall, this month can be described as treading water with a tiny gain. Still, considering that most of my trades were longs (short puts), and the market had another down month, it is something. Better to be cautious and eek out a tiny gain, than that guy that I wrote about in "Another Sad Story." He "graduated" from an option seminar that taught the strategy of buying straddles (both puts and calls hoping for a big, big move either way) ahead of earning reports. That guy lost 100% of his account in a few months worth of trading. Options are not for everyone and like I said, my trading style would not work for some others.

long BUD is my only remaining position

Cheers.

Sell IWM, Sell EEM (buy back puts)

Sell IWM via covering my short Aug 63 puts

Stocks have had a nice 2+ day run, and a pullback, perhaps even a pullback all the way back to the lows wouldn't shock me. V-shaped bottoms are not common, and even when they occur they can be very tough to trade. There aren't many "safe" entry or exit points on most V-bottoms. "When in doubt, get out."

Sell EEM via covering my short Jul 125 puts
As I type up the IWM entry, EEM continues to slide. Even though the odds of it coming into the money are about those of a lightning strike, I am closing out my position for a break even profit. Even since I entered the trade, it has been nagging me. The remaining premium seems worth a bit of peace of mind for the rest of the day, because I am not in front of the computer all day.

RIMM, SPY expiring today
that may leave me with long BUD as my only position

The "beat" goes on, well, until GOOG

VixandMore (link) has this

>>
with 11% of the S&P 500 companies reporting, Bespoke has calculated the current quarter's EPS beat rate to be 72%. There are a lot of earnings reports still to come, but if it holds, the 72% beat rate will be the second highest in the past decade.
>>

Then GOOG drops a bombshell and is down 11% after hours. The other caveat is that a good many companies are beating estimates for this quarter and then guiding lower for the rest of the year. One explanation might be that the stimulus checks are about done, and a lot of them got spent for the quarter just ended.

I believe that earnings are the primary mover of stocks over the long term. It will interesting to see how the overall stock market responds to the GOOG news. A modest dip would be the normal reaction. Calendar trends point to 7/24 as a decent buy in for stocks, and about a one week holding period. Again, seasonal factors are one of the least reliable indicators. Still, I like to bet with as many indicators in my favor as possible.

Buy EEM (sell puts)

Buy EEM via selling Jul 125 puts

Just a sliver of premium to be had, but it is one way to slightly increase my bullish exposure for tomorrow.

Positions: long BUD, EEM, IWM, SPY
Short: RIMM
July expiration EEM, RIMM, SPY
August BUD, IWM

Buy IWM (sell puts)

Buy IWM via selling Aug 63 puts

I double up on bullish index bets. These puts are closer to the money than I usually buy. I am betting this rally has some oomph. As always, time will tell, and if it goes against me, I will cut my losses.

Positions: long IWM, SPY, BUD
Short: RIMM

Buy SPY (sell puts)

Buy SPY via selling Jul 118 puts

Like I wrote yesterday, I think this rally attempt may hold, and making a small bet on the long side. Expiration is Friday, so even two more of these 1% down days won't take it to my strike price. [Yoda voice] Cautious I am.

Positions: long BUD, SPY, short RIMM

Another banana

Another failed rally, though the market closed well off it lows. Yet another day when a relatively big decline (-1.4% on SPY) seems like a good day because it closes well above the lows.

As I wrote a couple of days ago, sometimes it takes two failed rallies for bulls to throw in the towel and the third rally is the one that finds some footing. I don't like to trade fast markets, and today was another fast moving market. We'll see how the next rally attempt unfolds and I may try to play it, though as always it will likely be a small hedged bet.

Gold has seen a good run, though I remain reluctant to try and trade it.

Positions: long BUD (short August puts)
short RIMM (short July calls)

Buy BUD (sell puts)

Buy BUD via selling the Aug 65 puts
Bud agrees to a takeover bid from InBev. There is always a chance that the takeover falls through, and some traders may be locking in some gains by buying some puts against long stock. The odds favor a stable share price, moving steadily up to 70. Deal expected to close by the end of 2008.

Positions: short RIMM, long BUD

Sell SPY (buy back short puts)

Buy back short SPY Jul 116 puts

I don't like the way the market is trading, or the way I am trading. So I am taking my breakeven profit (when profit is less than the commissions) and taking this trade off the table. Many traders trade smaller and smaller when they are in a bad streak.

Position: short RIMM hedged

Cover short X (buy back calls) ouch!

Cover short X position by buying back my short Jul 200 calls

X sky rockets 20 points off its recent low this morning. I am caught with my proverbial pants down. I vascillate on taking the loss and it only gets worse as the day does on.

I need to write on a white board "I will not chase high premiums... I will not chase premiums..." So many times I get burned badly when I do. Taking the loss, is a major ouch in percentage terms, but a tiny hit in dollar terms. Even with this morning's big move, there is still a high probability that X will not go over 200. However, continuing to hold the position means an outside chance for a game changing loss. As my profile states, living to trade another day is priority one for traders, no matter how convinced he/she might be about the trade eventually turning around. Stubborn traders are often short lived traders, or they are hindsight traders that trade on paper instead of with real money. It is an easy game to buy at the low and sell at the high trading on paper, and reporting trades in hindsight. Not so easy in real life, real time.

Someone remind me (maybe it will be me) of this lesson, the next time I am tempted by a high premium, or what seems like a "mispriced" option.

Positions: long SPY, short RIMM

Short X (sell calls)

Short X (US Steel) via selling the July 200 calls.

Calls are mispriced for a moment, perhaps a retail customer putting on a spread, wanting to buy the call. I pick off the modest premium before someone else does. First time I can remember reporting a trade like this on the blog, so it isn't my style to look for mispricing.

X is in a waterfall decline, which can be a high risk formation. However, my calls are 50 points out of the money and above the old high of 195, with nine days until expiration.

Positions: long SPY, short RIMM, X

Another picnic basket

The bear gets another picnic basket, with a 100 DJIA rally turning into a rout, then some modest buying into the close. It is almost a relief to be down 1% on the SPY.

Carl Futia has a bear sighting, this one at the Chicago Tribune newspaper (link to blog, July 7th entry if you are reading this later).

Da Bear

A growling bear is featured online at Barrons (pic link, main link).

We (the collective stock market we) have been waiting for you. As I wrote a couple of weeks ago, the appearance of the bear on the cover of Barrons can be taken as a buy signal. I remember Barrons featuring a high tech bull decked out in 3-D glasses near the top of the go-go boom in Internet stocks.

Like all sentiment indicators, this isn't one to bet the ranch on. The last time I wrote about sentiment, it was in terms of option premiums, and the market went straight down. It is a time to keep my eyes open. There are likely some good opportunities out there.

Positions: long SPY, short RIMM, both hedged

Buy SPY (sell puts)

Buy SPY via selling the Jul 116 puts (ten points out)

The opening rally fails, and I get in at about break even for the index. We are at chart support. I think there is a 50/50 chance that support holds. However, for these puts to come into the money, the first half of July will have to be another record setting down month like June 2008 was. Odds of that are not so high. A minor decline, with some rallies along the way is what I see as the most likely outcome. The short puts will do fine in that scenario.

Elsewhere, steel and coal stocks saw a sharp decline yesterday. The percentage play might be to short them on the first rally. A couple of stocks did see an opening pop, but I wasn't nimble enough to get in. Spreads on options can be wide on most of these stocks, so that discourages me.

Positions: long SPY, short RIMM

Oversold and oversold-er

The stock market is oversold. Yet, it keeps going down. I am reminded of the Stochastics trading systems. The percentage of winners can be decent, depending on the parameters and risk management. However, the losers can often be whoppers, and the buy signal keeps going stronger as the trend continues in one direction.

For novices, stochastics are a popular technical indicator used to identify over bought and over sold conditions. Traders using stochastics often use it to trade counter-trend and try to call the turns. When I was a stock market novice, stochastics seemed like a great way to trade, now I rarely look at it. Why? It doesn't fit my personality, or my trading style. As always, your mileage may vary (YMMV), and there are many traders that do very well that use stochastics as one of their top indicators.

At the moment, I don't see anything that looks like bottoming behavior in the stock market. Sometimes the best thing to do is nothing. It seems high risk to go short or long at the moment. When the market is oversold, a big rally happens sooner or later. However, timing that move is difficult. Anecdotally, often times two rally attempts will fail before a rally takes hold. My opinion is that we haven't had even one decent rally in this latest decline. Put premiums on SPY remain very high as compared to their equivalent calls, so it is difficult for me to want to buy put options.

Positions: short RIMM hedged