My YTD performance and reviewing Options Action and Fast Money from 2/9/2018


In an earlier post, I shared my one-year performance in my two active trading accounts, one is a retirement account and the other is taxable. 

I call my retirement account my speculative account and I call my taxable account my less risky account. 

In the speculative account I trade large volumes of options. Fidelity loves me, even at $4.95/trade. I have about 25 names going. Last year I made about 75% in this account. 

In the less risky account I trade SPY and call and put options on SPY. Last year I made about 35% in this account. 

Here’s my YTD performance for these two accounts after this draw down: 

Speculative – down 7.37 % 

Less Risky – down 19.17% 

Ouch! Funny the difference, right? Is Less Ricky really less risky based on these numbers? 

BUT, remember volatility is WAY, WAY up which means the bid/ask spreads are much higher in options, particularly put options which greatly exaggerates these numbers.  

Also, I have/had a great deal of working calendar spreads in the speculative account which is the PERFECT thing to have on going into a volatility spike. On Friday a bunch of the short legs of the spreads went to 0, most of the credit spreads went to 0 too. I either rolled them up and out, or just held on to the longs over the weekend. 

Which brings me to yesterday’s Fast Money and Options Action. I’m feeling a bit nervous as I agree completely with the ChartMaster’s analysis. I think we have hit the 200-day moving average in the SPY and reversed. I don’t think we get back to all-time highs within two weeks, but maybe in the course of a month? 

As to the other trades mentioned: 

XOM – I have not stock or options in this name, but I agree it may be time to change that. Mike’s trade of the March16 77.5/82.5 call spread for $120 looks good to me. Monday I am going to look into following him into that trade or maybe set up a April/March calendar spread. Will post it here if I do. 

F – no recommendation from Mike, but ChartMaster thinks the chart is similar to XOM above. 

WMT – Dan takes this name on and recommends selling a put spread, the March 97.5/92.5 collecting about $150 each (risking $500). I actually like this too, the exaggerated volatility means you can get more for these credit spreads than before. Calendar put spreads would work here too. I may look into buying one April 97.5 put, buying one March 92.5 put and selling two March 97.5 puts. I think this is called a long calendar put butterfly. 

VXX – Mike talked about this on OA and the other guys on FM too. Suffice it to say most agree it will be difficult for this to hold this level and I couldn’t agree more. I’m not going to bore you with recapping my VXX trades (and UVXY and SVXY) but one week ago these names (all long now) used to be about 7.5% of my speculative account is now about 12% of the account. Probably why the account got hit the least.

Thank goodness for my moron trade! 



Political Investing & Another Day of trading $UVXY $VXX $XIV

Did you trade today based on anything that President Trump said last night? Did you trade today based on anything that he didn’t say? Are you worried that the market might tank if Robert Mueller indicts someone new? Are you trading on politics?

As much as I would like to say that I am free of bias, that is, my market view is agnostic as to politics, I’m afraid I can’t be sure. But what I am sure of is that I strive to be. I have political views, just like everyone. And I have a very strong opinion about what I think should happen. But I learned an important lesson in the 2016 election. 

I went into the 2016 Presidential election thinking the odds that Clinton would win at 2:1. Based on that I thought the market would continue its steady climb of the last seven years. Consensus was that If Trump won, the market would correct about 20%. I was hedged a bit, but decidedly long. 

We all know what happened. I was shocked when I got up the next morning. Overnight the S&P futures were limit down but had rebounded slightly by the morning. I did buy some put spreads when the market opened, but I did not sell the longs. 

Suffice it to say that I had done the right thing, but for an entirely wrong reason. I had thought the wheels would come off the economic wagon if Trump was elected. That, simply, was just plain wrong. 

As traders we are all trying to predict the future. We look at fundamentals. We listen to ‘The ChartMaster’. We have hunches. We believe, we have faith. We love Apple (and Tesla etc) and now we love Boeing. We create a story about why this happened and why that will happen next week, next month, next year.  

But what I want to emphasize tonight is we should not let our political biases influence that equation. In particular, you should not let your love of Trump (or the Republicans, the Democrats etc) or your disgust of Trump (or the Republicans, the Democrats etc) influence how you invest your money. You have only one goal in mind here, to make that money grow as quickly as possible. So save that political argument for some other forum besides StockTwits. I have a hard enough time keeping my emotions in check about AAPL or FB or AMZN or TSLA or . . . . .  

I got two examples from CNBC: 

Joe Kiernan has become much more of a conservative mouthpiece over the years. He wasn’t always this way, but it happens. When Obama was President he was always espousing how 44 was getting ready to regulate us into a recession. Obama was President for 8 years and he presided over an economic expansion. I was trading in 2008 and 2009. I was truly concerned we could enter a depression. Congress wouldn’t pass stimulus bills saying the deficit would explode. The Affordable Care Act was supposed to kill jobs, but that didn’t happen. If I believed Joe, I would have bought nothing but S&P puts. And I would have watched my portfolio slowly crumble while the rest of the world made money. 

Today, Dan Nathan on Fast Money and Options Action is our resident bear. He strongly disapproves of the Trump Administration and has stated several times that this rally we have had since the 2016 election just hast to come to an end. He thinks there is a good chance of Trump getting in trouble. I remember when there was time on Options Action where his trade was always a put spread in SPY or IWM or QQQ. 

Both Joe and Dan have been wrong. I’ll still listen to them, but if I detect their recommendation is based on love of Trump (Joe) or disgust of Trump (Dan) well, I will give their opinion much less weight. 

Volatility is back, deal with it! 

That was the chyron on Fast Money this afternoon. 

Yesterday I traded options in UVXY and VXX and bought a small bit of XIV. In the morning, when volatility spiked I sold covered calls in UVXY and VXX. 

Later that day I bought calendar put spreads in both names with the strike price of 27 for VXX and 12 for UVXY. 

Today as volatility pulled back, I rolled a few of those covered calls up and out and put on some call calendars at 30 for the VXX and 12, again for the UVXY. 

All of this has sent my speculative account up about 1% yesterday and 1% today. 

Chris Harvey of Wells Fargo thinks its back . . . . but we will see. I think it may whimper back down and we consolidate in the S&P. 

Should You Trust @CNBCFastMoney’s Chartmaster? Trading $IBB and $GOOGL

So, if you watch Fast Money and Options Action on CNBC. You are undoubtedly aware of Carter Worth. CBW , as they sometimes call him, appears calm and level headed on the show and when he is ‘at the plasma’ presents some very compelling charts. This week he made the case for trading Alphabet , specifically those shares that have some voting rights, GOOGL. 

This week he is bullish on GOOGL. He makes his case based on relative performance to other large cap tech names such as AAPL, MSFT, AMZN, FB and NFLX. NFLX is a bit of an outlier here as the five other names including GOOGL are the top 5 S&P stocks by market capitalization. These 6 names have a market cap of $3.7 TRILLION and are 14% of the S&P.  

CBW states that GOOGL has underperformed these other 5 stocks for the last two years and is just beginning to break out. He sees it breaking to the top of its rising channel another 10-12% which would place it at 1305 to 1330. 

I agree, and I am long GOOGL using 5 debit call spreads, 4 of which are either calendar call spreads or diagonal calendars. I am also slightly hedged with one put spread. 

But here’s the deal, I’m not long based on what CBW thinks about relative underperformance being a reason to be long. I have heard him countless times use relative underperformance to be BEARISH on a stock or even and index/sector. 

You see, sometimes these analysts will use technical analysis like this to bolster a claim and you can use it EITHER WAY. Sometimes analysts will use fundamental analysis and eschew the technicals saying they are of no use ‘in this circumstance’. 

Bottom line: if technical analysis was truly predictive virtually all the technicians would be in agreement about the interpretation of price action. And we would all make money just by subscribing to their newsletter. But more often than not, the analyst has made up his or her mind and using confirmation bias then goes to the chart to argue their point. 

So, you ask why am I BULLISH on GOOGL? Mostly because virtually everything is moving up these days (except AAPL which may help to explain why GOOGL is starting to catch up) and I don’t see GOOGL bucking the trend.  Tax cuts for corporations should be boosting earnings for at least a couple more quarters and has poured gasoline on bullish sentiment. I can see being long (and I am, 5:1), or being out. But what I can’t see anyone being short GOOGL here. 

Michael Khouw‘s trade is the Feb16 1185/1270 call spread for $26.5 ($2650 per contract spread).  This will break even at 1211.5. This can potentially make $8500.  

I like this idea but I want to pay less for this and give me more time to make money so I may buy a butterfly buying the Mar16 1200 call, selling 2 Mar16 1270 calls and buying the Mar16 1300 call for about $1,700 total. This breaks even at 1217 and gives another month to pay off. 

Trading $IBB 

Also in this episode of OA (the CNBC show, not the NFLX series, which is good BTW) Dan Nathan makes a case that biotech stocks are charging ahead. 

For the same reason I stated above with GOOGL, I agree that IBB moves higher. 

Dan’s trade is a straight up call spread, buying the Mar16 120/130 call spread paying about $225 for each contract spread. 

I like this trade and would put it on next week, and I may. I am already pretty long with 9 different call positions and 3 different put positions. 

What I might consider doing on top of Dan’s trade is to buy a calendar call spread in addition. You could buy the Mar16 131.67 call and sell the Feb16 132 call for about $25-30 which would make it easy to convert to a butterfly should it stay below 132 till Feb 16. 

The reason for these wack-a-doodle strike prices is based on the split the ETF went through a while back and 132 is the highest strike price available for the Feb16 expiration. 

Have a great weekend! 

Should you listen to the talking heads on CNBC? Part One

Should you listen to the talking heads on CNBC?  Part One 

The simple answer is yes. Why? Because it’s free and  if they were your advisor they would be charging you some obscene fee. 

But you gotta be smart and realize that the interests of these guys are not aligned necessarily with your interests. 

First, the purpose of CNBC (or Bloomberg or Fox or MSNBC et al) is not to make you money, but to make money for themselves. I know, seems obvious right? But most of the time it seems like they have our best interest at heart.  They want all of us to make money.

Well, yes and no, they don’t really care as long as you come back again tomorrow. And the day after, and the day after that. They just want your attention, just like Facebook and just like Twitter. All of these media outlets can charge more money to advertisers if they have more eyeballs and more engagement with those eyeballs. Your eyeballs specifically. 

One way CNBC does this is they scare you. How many teases do you here for upcoming Fast Money segments where they say that have one analyst who sees something in the charts that could bring this rally to a screeching halt, that could take Bitcoin to zero. I’ll tell you how often. Daily. 

So you stay. You watch. Turns out it’s not so scary after all. But don’t miss an episode because you might miss that bell at the top of the market, or the sign that makes this or that definitive

Second, many of the guests aren’t necessarily there to help you either. Most of them are there to sell something and I think even the most upstanding and reliable of them would probably admit it. The ones that wouldn’t admit that, probably should be the most ignored. 

Sometimes what they are selling is just a bit of legitimacy and sometimes they are more overt about selling. For instance, just this week Kevin O’Leary closed his final trade on Fast Money Halftime by recommending small cap international stocks. He touted them throughout the show. Guess what his recommendation for this was? A Vanguard low fee international ETF? Nah, it was for $ONTL which is a fund THAT HE OWNS. Feels like advice, but is really just a selling platform. 

But on the other end of the scale is my favorite analyst, Josh Brown, who now works for Ritholz Wealth Management. He is pretty up front that he is a wealth manager but doesn’t push his service.  He is also absurdly honest about the market imploring us to calm down and shooting down theories and aphorisms as well as the fear mongers. If he is on FM Halftime I always try to listen to the first 20-30 minutes of the show. I wish they sent out a podcast of Halftime so I wouldn’t have to watch it on the DVR or live . . . .maybe that’s on purpose 

And then there are a few regulars on the evening Fast Money show. Guy Adami is there almost every day and I can’t quite figure that out. Same with Karen Finerman and Tim Seymour. Do these guys get paid? Anybody know?