Summary

By: Angelo Campione | Fri, Sep 19, 2008
Print Email

9/19/2008 7:03:51 PM

Summary of Position For September

We entered a half Sep SPX 1395/1405 Call Option Spread on August 15 and received a premium of $60 per spread. Then on August 18 we entered a full position in a Sep 1195/1185 Put Option Spread and received a premium of $90 per spread. Finally, after a tumultuous week during options expiry we defended the Put Option spread by closing it on September 18 for a net cost of $400 per spread.

The combined total of this equates to a net loss of $285.70 per $1,000 of margin used or 28.57% after commissions for 5 weeks in the position (using Interactive Brokers commission rates). The loss before commissions was 28%. The official CBOE settlement price for the September SPX options was 1279.31 (note, this is not a typing error, the market added around 10% in 2 days! Also, the actual trading high today was 1265. This is settlement risk).

Current Position:
Nil

The system has now moved into Buy mode.

SPX Chart - Bigger Picture

From the chart above we can see that during the week all supports were broken as the markets went into panic, however in the end the market closed back in the trading range area. The probabilities now favor a trading range of 1170 - 1300 for the month ahead as the market digests all history making events that have occurred this week.

SPX Chart - Shorter Picture

Well, we'd thought that last week was a wild one, but this one simply a mind blowing one. Monday started with a 60 point drop to 1192, Tuesday continued lower to 1169 to start with but finished strongly at 1213, then Wednesday another 57 points down to 1156 and clearly the market was spooked, Thursday saw one of the biggest turnarounds on record with the market moving 70 points higher in the afternoon to close at 1206 and finally Friday, the horse bolted out of the gates gapping up and closing almost another 50 points higher to 1255.

We now have a downward trend channel with approximately a 150-point range from 1275 - 1125. Given the exuberance today, if we can get above 1275 next week, that'll be a sign of changing sentiment in the short term. Although the most likely outcome for next week is that we consolidate towards the 1200 level before advancing again.

For next week, support is 1170 - 1130 and resistance is 1260 - 1280.

One thing's clear, the type of market action we've seen this week cannot be reasonably foreseen. I mentioned during the week that statistically these are very rare occurrences, in fact the likelihood of what we saw this week was less that 5%. When we enter a position, we work on a risk factor of about 10% (i.e. that there is a 10% chance of the strike we enter to be hit during the month).

It's never easy taking a loss but we do what needs to be done and move on.

Finally, I'll reassess if we are to enter a position for Monday and issue an email on Sunday evening.

The quote this week is from Arnold Schwarzenegger, "Strength does not come from winning. Your struggles develop your strengths. When you go through hardships and decide not to surrender, that is strength."

Annual Subscription Offer

If you haven't taken up our annual subscription offer yet, you can help your monthly returns by saving 20% on your subscription fees. By taking up our annual subscription offer, you get a year's service for the equivalent of $39.92 per month (or 20% less than the current monthly fee).

Please click on this link for your annual subscription: Annual Subscription

Please contact customer support if you have any issues at: customersupport@stockbarometer.com

Have a great weekend and feel free to email me at angelo@stockbarometer.com with any questions or comments.

 


 

Angelo Campione

Author: Angelo Campione

Angelo Campione
"Improved Speculation Through Timing"

About The Advantage Report Trader Alert:

The Advantage Report is a timing service that allows you to maximize profit in both bullish and bearish market, we have a proprietary system that issues buy or sell signals based on several algorithms.


The signals we have are:

BUY - This means go long in your desired investment vehicle.
SELL - This means go short in your desired investment vehicle.
PRELIMINARY BUY or SELL - This means be alert to a potential change of signal and be ready to take action shortly but DO NOT take action yet.
STOP - This means close your positions and go to cash

To Learn more about us: Click Here

Not a subscriber yet? Want to be? Click here and sign up for a no cost trial. Sign up for our TRADE TUTOR weekly newsletter at no cost to get a trading education from Pro Traders.

Important Disclosure:

Futures, Options, Mutual Fund, and Equity trading have large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in these markets. Don't trade with money you can't afford to lose. This is neither a solicitation nor an offer to buy/sell Futures, Options, Mutual Funds or Equities. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on this Web site. The past performance of any trading system or methodology is not necessarily indicative of future results.

Performance results are hypothetical. Hypothetical or simulated performance results have certain inherent limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not actually been executed, the results may have under- or over-compensated for the impact, if any, of certain market factors, such as a lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown.

Investment Research Group and all individuals affiliated with Investment Research Group assume no responsibilities for your trading and investment results.

Investment Research Group (IRG), as a publisher of a financial newsletter of general and regular circulation, cannot tender individual investment advice. Only a registered broker or investment adviser may advise you individually on the suitability and performance of your portfolio or specific investments.

In making any investment decision, you will rely solely on your own review and examination of the fact and records relating to such investments. Past performance of our recommendations is not an indication of future performance. The publisher shall have no liability of whatever nature in respect of any claims, damages, loss, or expense arising out of or in connection with the reliance by you on the contents of our Web site, any promotion, published material, alert, or update.

There is a very high degree of risk involved in trading. Past results are not indictive of future returns. Stock Barometer and all individuals affiliated with Stock Barometer assume no responsibility for your trading or investment results.

Copyright © 2007-2010 Angelo Campione

All Images, XHTML Renderings, and Source Code Copyright © Safehaven.com