Another month of solid gains. I count of 57 winners, 3 losers, 1 unchanged, for the April option cycle, grade A-. Stock market consolidation can be good for option premium sellers. Some ways I have been evolving is doing a few more weekly options, and trading some big name stocks. I still do mostly traditional third week of expiration, but occasionally find something in the weeklies. In the past, I haven't had good experiences trading some of the big name option stocks such as Apple or Tesla.
for new readers, don't get too excited by the high win percentage. 80% to 90% is expected for my style of trading. The option buyer is hoping for a big 10x payoff, with only a 10%
chance of profit.
big question on many minds is whether sell in May and go away will
work or not this year. Back in May 2014, I wrote "Tea Leaves for
a Market Top." I keep going back to that. Some pieces of the
puzzle are now present. The transports (IYT) are diverging from the
overall market (SPY or VTI). The local stock market meetups are full
of people. The Santa Monica meetup has to turn people away. Newbies
are coming into the market. The main piece that is missing is the
inverted yield curve. Quantitative easing in Europe and expansionary
monetary policy in much of Asia remain big engines driving the global
U.S. Fed is getting ready to tighten. There have been many articles
about how the stock market keeps going up after the first Fed rate
hike. The cliche I learned is two steps and a stumble, meaning the
market goes down after the second rate hike. With so many people
playing this game, it might be a good idea to leave the party early.
No need to stay for the very last dance. However, the market's last
bull phase can be rewarding as speculative behavior can be excessive.
Some might say it is already that way, but only in hindsight will we
know for sure.
almost always cautious, but even more caution might be a good idea. For the
most part, stock market bears have been frustrated. There are a few
isolated stocks that have had decent down moves, but pickings have
been slim and difficult. In the last days of a bull, the action can
be choppy, so timing the tops is an extremely difficult game.
now the bull market is still in force. The last piece of the bear
market case, perhaps the most important piece, is an inverted yield
curve and that tends to happen with Fed rate hikes. Some may wait for
stock market technicals to confirm the down move by breaking below
some long term moving averages. If it is a shallow correction,
instead of a bear market, those moving averages can be good times to
buy. Again, we won't know if it is correction or bear market until
the dust settles.