First Quarter Comes To A Close

The markets are not heading anywhere definitive today. Everything is pretty much flat as the first quarter of 2008 is drawing to a close.

As we look ahead to Q2, there are still a lot of clouds on the horizon. I'll continue to keep an eye on the charts and on my market exposure.

Christopher Smith
TheOptionClub.com

Technical Analysis Lesson on Continuation Chart Patterns

It's about noon on Sunday here, and after enjoying a nice lunch I remembered that I need to post the next Traders' Whiteboard video for everyone.

This seventh video covers continuation patterns. A continuation patten is one that signals a continuation of, or a return to, the prevailing trend.

Like the other Trader's Whiteboard videos, this one is about six minutes long. If you missed any of the prior six videos, just look back through this month's blog posts and you'll find them.

Tomorrow's another trading day, so take a little time tonight to review your positions and assess your risk.

Trade well!

Christopher Smith
TheOptionClub.com

Market Trend Analayis and the Traders Whiteboard Cont....

Good morning! It's Saturday and I have a 9:00 a.m. appointment with a trainer. Ever since I turned 40 it's like the warranty expired. I used to cruise into the gym, lift a little weight, jump on a stair climber, and I was good to go. Now I pay some young in-shape guy to inflict pain on me, and still slowly lose the battle.

I feel a little like Friday's market...

Friday morning, we opened up. In fact, the NASDAQ gapped up and advanced 1% during the first hour. It just wasn't meant to be, though.

All of the major indexes closed lower for the day.


We're still in a rally, but this market needs to get some momentum going if its going to break out of its current bearish trend. I haven't seen that momentum yet, and today I'm feeling pretty good about that call premium I sold.

But, hey! The guys on CNBC were saying yesterday that the bottom is here... Did you notice that red trade triangle come in there Thursday on the S&P 500? Could this downward trend continue?

Look back on the posts a few days. I posted a chart with Fibonacci levels, and surmised that 1,170 was not out of the question. Yeah, we've got to be questioning whether the bottom is really here.

Don't get me wrong... I don't mean to be negative, but my money is on the line here so I do want to be realistic and pay attention to the probabilities. Just spend some time thinking about what it would mean for you if we go to 1,170 and have a plan in place if that happens...

I spend a lot of time emphasizing why we all need to have some form of trading and investing plan. If you listen to CNBC for your guidance, you'll be buying the wrong stuff and the wrong time. You need some thing more objective.

That's one very big reason why I'm a fan of Bill Poulos' new course. It's objective. It's rule based. It filters out all of the noise and just focuses on what's actually happening in the market, identifying a trend, finding a safe point of entry, and then applying an effective money management discipline. Check out the review of ETF Profit Driver if you need more info on that.

So, with the idea of making ourselves more disciplined, more sophisticated traders, it is time for our 6th Traders Whiteboard lesson.

Now, if you've missed any of these just scroll back through the blog posts and you'll find the prior five. Those videos are still up, and each of them is just a few minutes long.

In this 6th lesson, we get into the interplay between fundamental and technical analysis. The whole video is a little under 7 minutes in duration, but it touches upon a couple key concepts so it's time well spent.

Come back tomorrow and I'll have a seventh trading lesson for you...

Have a good weekend!

Christopher Smith
TheOptionClub.com

ETF Profit Driver Trading Methods Revealed

Bill Poulos' new course is getting lot's of attention. I know what you're thinking about that, too.

Is this a big deal? Right?

So, I've been using every spare moment I have had over the last few days to work through the advanced copy of the course that I talked Bill into sending over to me. I've been up to 1:00 a.m. one night, 1:30 a.m. the next...

The reason I've been doing this is to get a full review out, before the course goes on sale, so you know exactly what this thing is all about.

I have to be honest about the course, and I'll tell you that my guess is that far too few people will pick up a copy. I'm serious about that, too.

There are two mistakes that I see made over and over and over. They're made by novice investors as well as some seasoned traders who should know better.

Those mistakes are 1.) trading without a plan, and 2.) taking on too much risk.

If those same people who have been guilty of making those mistakes picked up a copy of Bill Poulos' ETF course and really gave it their attention, I don't think they'd ever make those mistakes again.

The course is solid. It provides a good background on ETF's and trading fundamentals. Bill then walks you through four trading methods in step-by-step fashion.

Why four?

Keep in mind you're only trading the ETF's to the upside. You can get bearish, but trust me even then you're just trading upward trending funds.

• One method is designed to identify and jump on board break outs. This is the start of a new trend.
• A second method puts you into a trend that is already in place and moving forward. You're just jumping in at a point of relative safety.
• The third method comes into play after that new trend has experienced its first real consolidation, pulling back to support. That's were you'll get in for further upside.
• Once the trend breaks down, the fourth and final method positions you to get in as the upward trend re-emerges from the consolidation. If you're familiar with Elliot's Wave Theory, think a Type 2 trade as the market transitions from a Wave 4 to a the impulse Wave 5.

This is well suited for retirement accounts, educational accounts, etc.

Review of ETF Profit Driver

I know that I promised a complete review, and I finished it last night. Take a few minutes and give it a read because I go into the course in quite a bit of detail. Feel free to send me any questions that you may have, or just post a comment here on the blog.

Christopher Smith
TheOptionClub.com

U.S. Consumers Spending Stagnant On Higher Income

This morning, data for U.S. consumer income was reported as a 0.5% rise. The market was expecting just 0.3% and a half point gain is the biggest gain seen for more than half a year.

On the other hand, personal consumption rose just 0.1% and once you factor in higher prices real spending was unchanged. This marks a clear cutback in spending in favor of savings, or more likely in favor of paying down debt. Question also whether this is an indication whether those stimulus checks in May will get spent with local retailers versus allocated to pay down additional debt or further fund the savings account.

At 10:00 a.m. EST today, we will get the University of Michigan Sentiment Index numbers. The market expects an end-of-month value of 69.5, as compared to a prior reading of 70.8.

The pre-market activity suggested a mildly higher open.

With the weekend now here, we'll pick up with our educational video series on technical analysis basics.

In this edition of the Traders Whiteboard we will be introduced to the concept of establishing a trading game plan.

Far too often I hear from traders who tell me that they are in a trade, but are not sure what to do next. In a perfect trading world. this question would never be asked because everyone of us would have a pre-established trade plan in place before we open the trade.

The whole video is just 5 minutes long. So, grab a cup of coffee and click on the the video image above to start it playing.

I'll be posting additional lessons over the weekend...

Trade well.

Christopher Smith
TheOptionClub.com

Market Update, a FREE Copy of ETF Profit Driver, and Tonight's Webinar...

I've go a few things to cover today, so if you don't want to miss any of them be sure to check out the whole post.

Current Market Analysis

Interesting. Before the market opened this morning, the futures were trading higher and it looked like we were going to see some upside.

It's about an hour into the trading day as I type this and I've been watching the big cap indexes fluctuate between positive and negative. The RUT and NDX have pretty much remained in the red, and in the last several minutes I've watched all the broad based indexes get negative.

My analysis is unchanged from what I posted on the blog yesterday, so just check that out if you're curious.

A Free Copy of ETF Profit Driver?

I've seen Bill do this before. He's going to give away a free copy of his ETF Profit Driver course before they release it for sale. He even pays shipping and handling...

If you're interested, you just need to tell him why you should be the one he gives it to. You can do that here:

ETF Trading Course Contest Entry

I'd really like to see someone from TheOptionClub.com win the free copy, so take a couple minutes and throw your name in the hat!

Options Trading Service Webinar TONIGHT!

This is last minute and I do apologize, but I just learned about this last night...

A short while ago, Options University hosted a live webinar to profile some significant updates to their trading service. The presentation was plagued with some technical problems, so they're hosting a repeat of the presentation.

The presentation features Ron Ianieri, who will give you a "behind the scenes" look at what they do.

You may register here:

Webinar Registration

It is tonight at 9:00 p.m. EST, so you need to get signed up and

What's Coming Tomorrow...

With tomorrow being the end of the week, I'll be posting the next lesson in the Traders' White Board series.

This series is a free education course on the basics of technical analysis. I posted the first three lessons last Friday, Saturday and Sunday. I'll be doing the same this weekend.

Each lesson is a short video, focusing on one discreet topic. So, set aside ten minutes tomorrow, and over the weekend, to visit the blog and brush up on your T&A skills...

Oh! Don't forget. I'll be getting that ETF Profit Driver review up as well...

Trade well!

Christopher Smith
TheOptionClub.com

Why The S&P 500 May Be Heading For 1,170...

The markets cooled a bit yesterday, and this morning's pre-market activity has been pointing toward a soft opening. The question is whether the market is consolidating the recent gains before heading higher, or was this buying just a short-term recovery from over sold conditions and we're about to resume our downward trend.

To gain some perspective, I have two charts from the MarketClub service for us to review. They are both of the S&P 500, but one is a weekly chart while the other displays monthly bars.

I won't post the daily, but you can very easily pull that up yourself. We have a recent green trade triangle from the MarketClub service on that chart, as well as on the weekly chart (above). You could get long here, but you would want to maintain a tight stop.

What I want to point out on the weekly chart above is the red, down sloping trend line. We are still in a downward trend and have rallied off of a recent low. I might get more confident about calling a bottom if we test that low and see it hold.


This second chart is the monthly. You'll notice that our last major bottom was back in March '03, and that we enjoyed a significant rally off that bottom that carried us through December '07. That's a long run.

I have inserted Fibonacci retracement levels. You'll see that the first level has held, but we could very well see the market retrace to the 50% level at about 1,170 on the index. Notice that the monthly chart has not produced a green trade triangle and we are still operating under the red triangle generated back in January.

What does all of this mean?

It means that we've rallied off of recent lows, but we don't know if this rally will turn into a new bull market trend. We may very well return to the current bear market trend, or see the market consolidate. The point is we are at a point where we need to see what develops while being cognizant of the "big picture."

Calling a bottom right now and jumping in with all your capital is ill advised. If you want to get long, be judicious. A couple in-the-money call options may be a safer means of taking a long position than buying the underlying equity. You can always exercise your rights under the options to buy the stock or sell the appreciated calls to help finance that equity purchase. If this rally fails, you have less at risk.

More technical analysis lessons from the Traders' White Board series are coming as we get closer to the weekend, plus I hope to have my review of Bill Poulos' ETF Profit Trader posted.

So far, I'm impressed and believe that he has done another expertly fine job. Let's see if my opinion holds up as I finish working my way through. Take a look at yesterday's post if you would like to get some additional information.

Trade well!

Christopher Smith
TheOptionClub.com

ETF Profit Driver Review

We had some significant gains yesterday. That's the second day in a row that we saw buying across the broad spectrum of the market.

Volume was off yesterday, as compared to Thursday, but keep in mind that Thursday was options expiration so some fall off in volume is only natural.

Nonetheless, the trend on the charts is still negative. I believe the major indexes have all re-taken their 50-day moving averages, but I'm still looking at a downward sloping trend line that must be broken if this now confirmed rally is to turn into something meaningful.

With the upward surge, I took the opportunity to sell some call premium. I may have to buy those shorts back if this rally pushes higher, but I'm playing the established trend. I do have hedges in place so if we do see the market run I should still be okay.

Preview Of ETF Profit Driver

I will be continuing our educational video series, but today I have other news. Next week, Bill Poulos is releasing his ETF Profit Driver course. Almost all of my trading and investing now centers on Exchange Traded Funds, so after reading his report I was very interested in this course.



ETF Profit Driver Preview Site

Bill and I go back a few years now. I got in touch with him, basically told him I wanted an advance copy of the course so I could dive into it and provide my members with a product review before it releases. We worked it out and I'm plowing through the material now...

A full review should be ready by the weekend. What can I tell you so far?

The course focuses exclusively on Exchange Traded Funds that are moving higher in value. There is no short selling, so you don't need a margin account. That means its good in an IRA and most 401k plans that give you a brokerage option.

ETF Profit Driver is designed to put you into trades at relatively safe points, when the underlying fund is trending higher. There are four distinct entry methods, so if you miss the trend when it first emerges you have three other methods of jumping on board at times when the odds are in your favor.

Where the course really distinguishes itself is in its well documented money management methods. Every time you open a position, you know exactly where to place your stop to limit whipsaws while effectively preserving your capital.

As the trend develops, you want to adjust that stop so that you effectively lock in profits while still giving the market room to move consistent with its established trend. ETF Profit driver provides explicit instruction on how and when to make those adjustments.

Finally, all good trades must come to an end and preferably conclude before a profit turns into a loss. The profit exits are designed to do just that and are also detailed within the course.

The end result is that after mastering the course materials, you will have what amounts to a fairly conservative "all weather" trading system.

You're trading ETF's, not individual stocks. You're not day trading or selling short. Capital is only exposed to the market when there is reason to believe that the probabilities are in your favor. Most importantly, you have a detailed plan for limiting losses.

Once I get the full review done, I'll announce it here on the blog so check back. I will also be continuing with those video trading lessons, another reason to stay tuned in.

How To Set Stop Losses Trading Video

Warren Buffet's number one rule of investing is "don't lose money." His number two rule? Don't forget rule number 1...

Today's video provides an extremely important lesson about not losing money.


Adam Hewison covers three methods of using stop losses in this video. If you're trading without stops, it's probably because you're unsure about how to use set your exit points.

Take about 7 minutes and watch this video, which will review three methods for selecting exit points. Incorporating this lesson into your trading could be one of the best things you could do for your financial success this year...

Trade well.

Christopher Smith
TheOptionClub.com

Trading Trends With Technical Analysis

It is Easter Sunday, and time for our third chart analysis video.



This installment focuses on simplifying your analysis. It touches upon basic trend analysis and then reviews some basic studies such as MACD, Stochastics, and other oscillators. The goal is not so much to pick tops and bottoms, but to identifying emerging trends and then jump on board for a significant portion of the move.

These "bite size" educational videos are a quick way to brush up on the fundamentals of technical analysis. So, grab your favorite beverage, take a few minutes, sit back and enjoy this short video.

Happy Easter!

Christopher Smith
TheOptionClub.com

Learning Technical Analysis Basics - Part 2

Yesterday, I posted the first in a series of videos that focus upon technical analysis fundamentals and techniques.

Today, I'm posting the second video in the series which will cover some chart patterns. These are high probability patterns, that you can start incorporating into your chart analysis today.



So, take a few minutes today and watch this short video. It is just a few minutes long, so at worse it's a review of the fundamentals we all need to know.

Trade well, and be sure to check back tomorrow as I'll have the third video in the series up for you.

Christopher Smith
TheOptionClub.com

Learning Technical Analysis - Traders' Whiteboard Series

The stock market is closed today in observance of Good Friday, but that doesn't mean that we can't work on improving our trading...

Starting today, I want to share a series of educational videos with you. Each video is part of the Traders' Whiteboard series, which covers some foundational aspects of technical analysis.


Even if you understand technical analysis fairly well, it never hurts to review the basics.

The markets are currently engaged in a consolidation, marked with a lot of volatility. No one can say, with any degree of certainty, where we are headed next.

These videos focus on identifying trends and patterns that can help you make sense out of what is going on and position yourself for future trends.

I'll follow up this weekend and post a couple more videos. There are several of them, so do check back.

Trade well!

Christopher Smith
TheOptionClub.com

Options On Visa To Make Their Debut

Visa (NYSE:V) debuted on Wednesday, March 19, 2008, with what can only be called a very successful IPO. In this time of concerns over credit, Visa has no such exposure because the company does not own any of the debt accumulated by consumers. The company simply processes the transactions and the consumer's debt is owned by other institutions.

At the close of its first trading day, Visa stock closed up 28% from it's $44 share price. Today, it closed up again at $64.35.

So, when will options be available? We have it on good authority that options on Visa will begin trading as early as next Friday.

Those interested in trading options on Visa, should check with their broker for the latest information.

Source: OptionClub

Economy Heading Into Recession Say Leading Indicators

Leading indicators are intended to forecast future economic activity. The more common leading indicators look six to nine months ahead.

The last time the leading index fell for five straight months was in early 2001, at the beginning of the last economic recession.

Of the 10 leading indicators most often watched, five fell in February. These included jobless claims, building permits, delivery times, consumer expectations, and stock prices.

Four indicators including the real money supply, interest rate spreads, orders for capital goods, and orders for consumer goods, rose. The factory workweek was unchanged.

It is likely that the Fed's efforts to stimulate the economy boosted the money supply. The question is whether such efforts will add sufficient fuel to the economy to keep us out of recession, or whether those efforts will further devalue the dollar and stifle growth through price inflation.

There are a lot of question marks out there, which is what is causing the turmoil and volatility within the markets. Should we get long in expectation of the next rally, but risk further capital erosion? Is the safety of cash a better play, even with the risk of seeing our capital eroded by the falling dollar and dismally low interest rate? Plus, we might be missing the next run...

That is the mental puzzle many investors are currently playing out in their own minds. The good news is that there are ways to grow your capital right now, and you can do it without undue capital risk or reliance upon individual stocks.

I announced this a few days ago, but considering the up and down sessions we have seen this week I thought I would again invite you to download this ETF report, if you have not already done so.

Download The ETF Blueprint Report Here...

It's about 57 pages long, but well worth the read. It should give you some pretty good ideas about how you might manage things going forward, no matter what the market does....

Trade well!

Christopher Smith
TheOptionClub.com

Market Rally Or Short Covering?

Yesterday was another big day in the markets!

Don't get too eager to jump in with long positions, though. Look back several posts. We saw similar price gains about a week ago and I'll wager that a lot of folks jump in just to see the market reverse.

The image above is a daily price chart for the S&P 500 from the MarketClub service. You'll notice on the right hand side of the chart that there are two green arrows. Those are potential "buy" signals generated by the Market Club service, which were triggered by the large price moves last week and, again, yesterday.

The problem we have is that yesterday's gains were on low volume and may very well have been a lot of short covering following the carnage that followed in the wake of the Bear Stearns fiasco. If there is no new institutional money to push a rally to new heights, that rally is doomed to fail.

We could still see a rally, however. I'm just not sold on the idea that now is the time to jump in, despite our green Trade Triangle from MarketClub.

So, what's the deal with these green triangles if I'm not taking the trades?

Fair question. The triangles do no work in isolation. You need to evaluate the buy signals, and the sell signals, in the context of the overall trend.


This second price chart is a weekly chart of the S&P 500, and it clearly demonstrates a downward trend. Plus, the last trade signal generated was a "sell."

If you want to take high probability trades using MarketClub, you'll look at multiple time frames and select only those trades that demonstrate favorable conditions in each. We have a "sell" on the weekly chart and a "buy" on the daily. Those signals conflict and that reduces our odds of success considerably.

The pre-market conditions suggest a lower open today. Let's see how things play out from here...

Trade well, and please do mind your risk!

Christopher Smith
TheOptionClub.com

Establishing An ETF Profit Blueprint

We're getting a nice bounce this morning, but we'll need to see if it holds up. Yesterday, with the VIX spiking over two points, I took the opportunity to sell some additional option premium.

Bear Stearns caught a lot of traders, and investors, by surprise. Last night, I shared a video demonstrating how that pain can be avoided by paying aware of the warning signs. Don't misunderstand what's being said there...

It's not about foretelling the future. It's about identifying signs of weakening market support, resisting the temptation to "get in cheap," and developing a plan that allows you to trade in a profitable manner.

Increasingly, over the last few years, I have traded fewer and fewer stocks. I tend to focus on Exchange Traded Funds, or ETF's, for both for my longer term investment accounts and much of my shorter term trading.

These funds tend to reduce the exposure you have to a single stock, while still providing you with the desired exposure to a broad market index or even a narrow market sector.

I, and I'll wager the majority of the investing public, tend to focus on the most popular products such as the DIA, IWM, QQQQ, SPY, etc. There are so many more, however...

A trading friend and mentor of mine has compiled a report on ETF products, and how to trade them, that he is making available in PDF format. I downloaded a copy last night and hit the print button before putting my daughter to bed.

I've just started skimming through it and decided I'd pass this along to you because there is a good amount of information.

The report focuses on a group of funds that have largely remained ignored by the mainstream, but for the last several years have been used by traders quite effectively. While these markets have been around for over a decade, they're just now beginning to gain momentum, but they're still far from 'popular'...

The report answers the top 20 questions about these markets. You'll also discover how you can use this information to breathe some much needed life into your portfolio, regardless of what you already trade.

HOW TO GET YOUR COPY OF THE ETF REPORT

The report is available on a complimentary basis. To get your copy, just visit this web page:

ETF Trading Report

I don't know how long it will be available, so I encourage you to download the report now.

Trade well.

Christopher Smith
TheOptionClub.com

Bear Stearns Losses Were Avoidable

All of this volatility made for a nice time to sell some option premium. That's what I found myself doing after the morning rally failed.

Bear Stearns has certainly been the talk of Wall Street but is just the most recently casualty of the credit market fall-out.

The reality is that the warning signs on Bear Stearns were present for months. If you were paying attention, you could have avoided the pain of owning Bear Stearns stock by selling your shares, or by purchasing put options.

It was also quite possible to make money on the short side. If you have a few minutes, take time to watch a video presentation that shows you exactly what I'm talking about.

Analysis Of Bear Stearns Warning Signs

The analysis that forewarned of Bear Stearns tumble, is applicable to any other stock that you might trade. There are going to be more casualties before we see the next bull market, so take the time to watch.

Christopher Smith
TheOptionClub.com

Bear Sterns Sold At Fire Sale And Options Traders Poised To Profit!

The other shoe dropped this morning, with Bear Sterns being sold to J.P. Morgan Chase at a fire sale...just $2.00 per share!

Last week, Bear Sterns had announced that it had liquidity problems. That was code for "...we're broke and we need help."

In response, the Fed announced a bail out, with the Fed taking on a potentially huge liability.

This morning we learn that the entire firm is being sold-off, which translates into a stunning collapse for one of the world's largest and most venerable investment houses.

The central bank also made the extraordinarily rare move to cut its emergency lending rate to financial institutions to 3.25 percent from 3.50 percent, effective immediately. This is an attempt to calm the markets.

The Fed is trying to demonstrate a commitment to insuring that financial institutions will have access to funds. Obviously, the credit crisis is very much with us.

The market has been selling off this morning, but right now it is off its lows. It's looking pretty ugly out there for investors and anyone with a long position has got to be questioning their next move.

This sort of volatility and uncertainty can be like a lunch buffet for options traders. Someone is always making money, even when the market seemst to be falling apart.

Think about how you want to take advantage of the pain out there.

Christopher Smith
TheOptionClub.com

Martket Club Trade Triangle Analysis

We're seeing a lot of red again, this morning. The market actually opened to the upside, but it did not take long for the mood to turn bearish. The DJIA has been down more than 200 points during the first half hour of trading, but has eased off of the morning low...

The above chart is a daily chart of the S&P 500, displaying intra-day data from this morning. You can see that we still have a green trade triangle, which is the active signal. Another thing to make note of is the downward slope of the moving averages, which suggests that the market is in a downward trend.

Now, to fully appreciate the overall trend, you'll want to look at a weekly chart. Nonetheless, the point here is to take a look at the prevailing market trend.

The trend is your friend, except at the end...

Remember that old adage, because it is very easy to see an entry signal like that green triangle and jump into a directional trade. I have been cautioning about doing so, suggesting that you wait for a follow through day to confirm a change in trend.

A "buy" signal in a down trending market is really much more a signal to cover your short positions, take the profits off the table, and wait to see what opportunity presents next. You might be more aggressive with your entry when it favors the trend.

Trade well...

Christopher Smith
TheOptionClub.com

Market Head Fake?

Yesterday, I cautioned about the importance of waiting for a follow through day before jumping into an anticipated rally. While the market did head higher, things turned soft and we saw a reversal for a lower close. No big deal, however.

Today, we're seeing more selling and the S&P 500 is again below the 1,300 level. That big gain from a couple days ago doesn't seem so robust this morning.

There is a trading lesson to be learned here. One big day in the market does not make a rally. It could be the start of one, but it may also be a head fake. We need to remain disciplined.

Christopher Smith
TheOptionClub.com

Options University Strategist Webinar

There is some news from Options University that I wanted to share. You might recall that several months ago, they launched their "Options University Strategist" trade advisory service.

In an extended webinar session Ron Ianieri and his team introduced the service and, rather candidly, explained that the service was intended to be a "top shelf" offering and, because they wanted to deliver tremendous value, it would be something they would continue to change and improve.

In a nutshell, the OUS subscribers receive:

• Daily / Weekly option picks, alerts, and updates;
• POSITION MANAGEMENT (pretty important);
• The exact positions to enter with their broker;
• Special software for immediate alerts;
• Details on how to "morph" and roll-out a position; and
• How and when to close the position.

The idea was to remove the guesswork for their subscribers and deliver to them the same trades that they, as professional traders, would be making along with complete position management.

By all reports, the service has proven to be very popular. Nonetheless, even though it is successful, Ron and company have done as they said they would...

The OUS service has been completely overhauled!

These guys are pretty excited about the upgrades and they wanted all of us at TheOptionClub.com to see what they've done.

Ron is hosting a webinar tomorrow evening, Thursday, March 13th, to take us all "behind the scenes" and walk through the changes.

If I know Ron, he'll probably also throw in some good educational content to make the experience worth our time.

Additional information about attending the webinar is here:

Options University Strategist Webinar

I hope to see you online for the webinar.

Christopher Smith
TheOptionClub.com

Careful! Don't Jump The Gun...

Yes, yesterday was a big day in the market, but this morning things were languishing a bit. As I type this, the market has moved a little higher.

What we're looking for is a follow through day. As impressive as yesterday's action was, it doesn't mean a whole lot if the market does not follow through. Once it does, it may signal a change in trend.

If you're trying to get a grasp on what yesterday's rally was all about, you might check out my blog entry from yesterday.

I understand the desire to jump in, just don't get over eager!

Christopher Smith
TheOptionClub.com

Ben Bernanke And A Trade Triangle

Big day in the market today!

Just as I go on record anticipating some additional downside, Mr. Bernanke steps it to add liquidity to the financial markets. The Fed is now accepting the mortgage backed securities, that everyone has all but written-off as near worthless paper, as collateral. Yeah, the same paper that Citi and Merrill can't sell is now accepted by Ben Bernanke and company as collateral.

So, what's really going on here? Politically, a bail out of this mortgage mess is a tough sell. The public questions why individuals who over extended themselves and banks that made bad lending decisions should be bailed out on the taxpayer's dime. Seems like a reasonable question, and one that Congress is likely to have difficulty with if they try to legislate a solution.

Today's announcement is part of a scheme that shifts risk out of the private sector and onto the books of government entities. The Fed will likely wind up owning a lot of that worthless paper they take as collateral and there ain't no stopping it now. The upshot is that the market receive a shot of liquidity in the arm to help it through this credit crunch.


The chart above is of the S&P 500. As you can see from the oscillator, the broad market had been over sold and was due for a rally. I touched upon this in my last post, but my expectation was that we might get relief for a day or two before heading lower.

Today saw the DJIA power up over 400 points, which is something we have not seen since the market's bottom in March of 2003. The S&P made a similar move today.

You'll note that we have a green "trade triangle" following today's action. This is a bullish indicator from the MarketClub service, but because we've been trending down (pay attention to the slope of the moving averages) you may not want to bet heavily against the prevailing market trend. It is a good opportunity to close short positions, however.

We want to see a follow-through day as confirmation of a bottom having been reached. Until then, it is probably best to "keep your powder dry."

Trade well.

Christopher Smith
TheOptionClub.com

S&P 500 heading for 1,200...

There has been a lot of selling the last couple weeks and it continues today. It looks like we may be headed back down to 1,200 on the broad market S&P 500 this week or next, but may see an interim relief rally back above 1,300 before reaching the lower numbers. Having closed Friday at 1,293, that's not much of a rally and I don't see it getting above 1,320 any time this week.

Expiration occurs next week, so if you're trading March credit spreads or iron condors this may be a bit of a "nail biter" on the put side of things.

Once you're within about 10 days of expiration, it can be difficult to roll a credit spread out within the same month. Gamma risk is pronounced when expiration is so close, which makes it a dangerous time to have a short spread under threat.

Review your trade plans, keep an eye on the market, and trade smart...

Christopher Smith
TheOptionClub.com

The sky is falling....ain't it great!

The jobs reports is worse than expected. Foreclosures are spiking. The credit markets are in disarray. Yeah, the news is bad and the market's selling off...

...and volatility is picking up.

This is a great time to be an option seller! Selling premium during volatility spikes is pure Options 101.

Stock investors and traders tend to think in terms of price direction. Option traders can certainly trade directionally, but we also have other dimensions in which to play.

Implied volatility is measure of what the market thinks the market may actually do, and when uncertainty creeps into the picture imaginations run wild with dooms day scenarios. Put option premium tend to spike as more and more people seek some protection against market sell-off.

Like most things in the market implied volatility moves up and down, but over time tends to revert back from extremely high or low levels. As implied volatility spikes it can be an excellent time to take a look at selling option premium.

When it comes to at-the-money and out-of-the-money contracts, option premiums are comprised entirely of time value. That time value is effected, not only by the passage of time, but the rise and fall of implied volatility. When implied volatility rises, so does time value.

We pay more for time when implied volatility is high. What' the old adage?

Buy low and sell high, right?

That's what we want to do with implied volatility. When it spikes option traders can begin looking to sell premium to take advantage of the high prices.

Now, you have to be smart about what you sell and high IV levels are no excuse to throw risk management out the window. Be smart, stay in control of your trading, but keep in mind that selling premium during volatile times can be a very effective and rewarding strategy.

Trade well!

Christopher Smith
TheOptionClub.com