Options Trading Strategies
Weekly Market Strategies
May 21, 2012 Where To Invest Your Money Now
Market Strategies Newsletter
Covering High Return Balanced Investing Success Strategies For
Stocks ■ Bonds ■ Interest Rates ■ Natural Resources
■ Currencies ■ Venture Capital ■ Gold
A Publication of Princeton Research, Inc. (www.PrincetonResearch.com)
Contributing Staff: Michael King, Bill Chippas, Charles Moskowitz
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New Trades for this week:
BUY 1 AMZN JUNE 220 CALL @ $5.10
BUY 2 NFLX JUNE 70 CALLS @ $4.40
The $10,000 Options Only account had a Gain last week of $328 increasing our gains for the year from $2,091 to $2,419.
Three positions remain:
The LNG June 15 Calls,
PRGO June 105 Calls and the
TLT June 120/122 Call Spread.
The Open positions are highlighted in the options table below.
Approximately $ 1755 funds are in use.
This week was a steady and constant grind to the downside. I was expecting to see the move halted near the measured move of my “BEAR FLAG” (SPY 130.14) and sold some puts a bit too early. My work shows the 200 Day Moving Average supports the SPY around 127.75-128 and is deeply oversold.
The balance in this account has been excellent. While we took some small profits (and loses) we finished UP about 3% with the SPY DOWN 4%. We are maintaining the balance by being long with PRGO and LNG and long a TLT spread…While these may appear all LONGS, the TLT generally acts opposite the market since the Treasuries which it represents are a safety play. The spread has a maximum value of $2.00, and we paid only $ .68 to initiate, and its closing value on Friday was $1.35… a double for us.
While all the news this week was generally bad, I expect to see a bounce in the SPY from either at or near the 200 day MA back to the 134 area. We COULD see it carry to 135.50, but it will depend on both the news and the level of confidence in the Financials both here and in the EUROZONE…CAM
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Previous closed out trades not listed here may be seen in the March, February and January weekly newsletters. See past issues at http://www.princetonresearch.com/market-strategies-newsletter/
DATE |
TRADE |
PRICE |
COST |
PROCEEDS |
RESULTS |
5/18 |
Bought 8 LNG June 15 Calls |
.75 |
600 |
|
|
5/18 |
Sold 2 ROK June 67 Puts |
1.90 |
|
380 |
240 Gain |
5/17 |
Sold 3 ROK June 67 Puts |
2.00 |
|
600 |
390 Gain |
5/17 |
Sold 5 SPY May 133 Puts |
.87 |
|
435 |
55 Loss |
5/17 |
Sold 5 SPY May 133 Puts |
1.31 |
|
655 |
165 Gain |
5/17 |
Sold 4 DD June 50 Calls |
1.03 |
|
412 |
412 Loss |
5/15 |
Bought 10 SPY May 133 Puts |
.98 |
980 |
|
|
5/14 |
Bought 4 DD June 50 Calls |
2.06 |
824 |
|
|
5/11 |
Sold 10 TLT June 122 Calls (call spread ) |
1.00 |
(1000) |
|
|
5/11 |
Bought 10 TLT June 120Call ( call Spreads) |
1.68 |
1680 |
|
|
5/8 |
Bought 5 PRGO June 105 Calls |
.95 |
475 |
|
|
5/7 |
Bought 5 ROK June 67 Puts |
.70 |
350 |
|
|
New trades $ 10,000 account…In Texting we have a limited amount of words. In the interest of brevity: OPTIONS ONLY: 6 June, 7 July . The Quantity and Strike Price for each trade is specific.
For any questions please call 702 650 3000
Market Laboratory – Weekly Changes
Prices are copied from Barron’s Weekly and Yahoo Finance and may be incorrect
Dow 12369.38 -451.22 -3.52% |
Nasdaq 2778.79 -155.03 -5.28% |
S&P 500 1295.22 -58.16 -4.30% |
Transportation 4873.76 -266.94 -5.19% |
Russell 2000 747.21 -42.85 -5.42% |
Nasdaq 100 2478.53 -137.45 -5.25% |
Gold 1591.90 +7.90 +0.5% |
Silver 2871.5 -17.5 -0.61% |
Crude 91.48 -4.65 -4.84% |
Heating Oil 283.00 -13.36 -4.51% |
Unleaded Gas 2.8895 -.1113 -3.71% |
Natural Gas 2.742 |
VIX 25.10 +5.21 +26.2% |
Put/Call Ratios S&P 100 161/100’s -5/100’s |
Put/Call Ratios CBOE Equity 89/100’s +1/100’s
|
Bonds 148-10 +3-06 2.79% -0.22% |
10 Yr Note 133-26+0-236 1.70% -0.14% |
Copper 346.85 -17.95 -4.92% |
CRB Inflation Index 290.43 -1.37 -0.47% |
Barron’s Confidence 68.4.% -0.4% |
S&P100 591.61 -23.73 -3.86% |
5 Yr Note 124-027 -0-015 0.73% -0.02%
|
Dollar 81.42 +1.02 +1.27% |
DJ Utilities 464.16 -7.85 -1.66% |
AAII Confidence Index |
Bullish 23.6 -1.8% |
Bearish 46.0% +3.9% |
Neutral 30.5% -2.5 %
|
M1 Money Supply +15.84% May7th
|
M-2 Money Supply +9.85%May7th
|
M1…all money in hands of the public, Time Deposits Traveler’s Checks, Demand Deposits
M2 adds Savings and Money market Accounts both compared with the previous year.
New Stock Recommendations
BUY 5 AAPL at $517.00
Last week we bought MTOR and SSNS and we were stopped on SNTS and FCH.
Each stock is allocated a theoretical $ 5,000 share of the portfolio unless otherwise indicated.
Stock |
Purchase Price |
Purchase Date |
Stop/Loss |
|
Price/Date Sold |
|
Profit/(Loss) |
MTOR 800 |
5.64 |
5/14/12 |
|
|
|
||
SSNS 2000 |
2.65 |
5/14/12 |
|
|
|
||
FCH 1000 |
4.68 |
5/11/12 |
4.17 sco |
3.98 5/18 |
( 700 ) |
||
GMCR 200 |
25.93 |
5/9/12 |
21.93 sco |
|
|
||
LULU 80 |
70.52 |
5/8/12 |
|
|
|
||
AAPL 5 |
578 |
4/20/12 |
|
|
|
||
FAZ 250 |
22.07 |
4/19/12 |
|
|
|
||
SIRI 2000 |
2.265 |
4/18/12 |
|
|
|
||
RWM 200 |
26.95 |
4/16/12 |
|
|
|
||
AAPL 10 |
612.01 |
4/13/12 |
|
|
|
||
CWTR 2500 |
1.16 |
4/2/12 |
.81 sco |
|
|
||
IYT 60 |
92.48 |
3/29/12 |
|
|
|
||
AIVN* 10000 * 5000 |
.25 |
3/12/12 |
.10 sco |
|
|
||
SNTS 1000 |
4.80 |
3/12/12 |
6.17 sco |
5.80 5/17/12 |
1000 |
||
XBOR* 2000 |
2.25 |
2/24/12 |
|
|
|
||
CISG 600 |
8.50 |
2/10/12 |
|
|
|
||
XBOR*3570 |
1.40 |
8/12/11 |
0.70 sco |
|
|
||
LEI* 2425 |
2.06 |
8/10/11 |
1.03x |
|
|
||
LEOM*16650 |
0.30 |
12/17/10 |
0.03 sco |
|
|
Note: Previous closed out stock and option positions can be found in the May 14 and newsletters dating back to July 20, 2009. Stay alert on the free texting service for new trades and exits.
Model Portfolio Comments/Changes:
The week was governed by the HYPE from both sides in the Facebook offering. Frankly, I can’t figure out what the big deal was as it related to the trading on Friday…All it said to me was that the bankers did a great job of pricing the deal. The fact that NASDAQ was not prepared or technically able to keep up with the quotes and executions from the start to finish is its own problem notable on the two year anniversary of the “Flash Crash”. For that lapse, NDAQ shares were pared by over 4%….and rightly so. You can’t expect people to trade at 11:30 AM and not get fills until 3:45PM.
The tech stocks rose and fell with FB and notably weak were AAPL, GOOG, and IBM. As mentioned in the Options Only section, I will be looking for some buys near support. The balance in this account is actually paying off to a greater extent than in Options Account. We have FAZ (3X reverse financials) with a gain of 30% and RWM (rev Russell 2000) with a gain of 10%.
Our TLT position in this account is also up 100%. Almost all of the economic news was a negative surprise and a look at our Market Lab spells that out. We finished the week up a minor .5% and got stopped out of a couple of our smallcap positions. These were stops that we’ve raised as the stocks rose or issues that broke support. Political deadlock, yearend tax issues and the Eurozone will continue to be the wildcard for the markets. Because the market is approaching an important area of support, we are going to concentrate on several small positions in stocks that have the potential to make meaningful moves up. In this way we can control risk in real terms but realize good gains if we are correct.
CAM
INDEX OPTION RECOMMENDATIONS
For those of you who do not buy puts to protect your portfolio, there are many ETF’s that are the inverse of the DOW. The symbols are DOG, SDS and RWM, whichgo up when the DOW, S&P 500 and Russell 2000 go down and down when they go up. The DZZ goes up double when gold goes down.
New Stock Option Recommendations
Buy 2 AMZN JUNE 220 CALLS @ $5.10
BUY 4 NFLX june 70 CALLS @ $4.40
Option and Overall Comments
We had a Gain last week of $ 520 in a down week. Our gain for the year was $9,389.05 and with last week’s Gain has increased to $9,909.05. We have Five long options positions remaining, the LNG June 15 Calls, FAZ June 22 Puts, LULU June 65 Put, TLT June 120/122 Call Spread and the CSCO Jan 20 Calls. The Stock table includes Sixteen long stock positions: MTOR, SSNS, LULU, GMCR, FAZ, RWM, SIRI, AAPL (a double), TXGE, CWTR, IYT, AIVN, CISG, LEI, LEOM and XBOR (a double). FAZ and RWM are inverse ETF’s.
The options call for a $ 2,500 investment unless otherwise started, while each stock position requires $ 5,000 unless specifically stated.
We are basing money management on a hypothetical $ 100,000.00 and are using $3,139 in the five options positions and $ 86,832 in the 16 long stock positions for a total of $ 89,971 with $ 10,029 in cash. These figures are approximate. We do not count commission costs and there may be errors.
Executions that have occurred at or near the open or close of trading sometimes vary from our actual numbers. For example, when something opens down and it is through our price, we take the next trade whether it is an uptick or continues lower. This sometimes results in a 50% trade that is slightly above or below the exact number…
Previous Week’s Recommendations and Rules for the $ 100,000 account
- All options count for about $ 2,500.00 for model portfolio calculations unless otherwise stated.
- When the option has doubled sell half the position.
- Stop Loss protection is either half or offered with each trade.
- The cost of the option is the asking price (or the price between the bid and ask, whichever is more realistic)
- The options will be followed until closed out.
- Option Symbols are stock symbol with expiration month and strike price
- Subscribers can follow us on Twitter or call 702 650 3000 for up to date information.
Option |
COST |
Date |
Sold |
|
Date |
Profit/(Loss) |
LNG June 15 15 Lots | Calls .75 |
5/18/12 |
|
|
|
|
SPY May 133 20 Lots |
Puts .98 |
5/14/12 |
10 at 1.31 |
5/17/12 5/17/12 |
$ 330 ( $ 110 ) |
|
TLT June 12020 Lots | Calls 1.68 |
5/11/12 |
|
|
|
|
TLT June 122 s 20 lots | Calls 1.00 |
5/11/12 |
|
|
|
|
FAZ June 22 2 Lots |
Puts 1.04 |
5/11/12 |
|
|
|
|
LULU June 65 1 lot |
Put 2.06 |
5/8/12 |
|
|
|
|
CSCO Jan 20 3 lots | Calls .80 |
2/14/11 |
|
Note: Previous closed out stock and option positions can be found in the May 14 and newsletters dating back to July 20, 2009.
This Weeks’ Economic Numbers and Media Data
Monday | Investors will assess weekend G-8 and NATO comments along with domestic and overseas events. |
Tuesday | 10:00 hrs Existing Home Sales Apr ( 4.65M vs 4.48M ) Spain Auctions Bonds |
Wednesday | 07:00 hrs MBA Mortgage Index 05/19 ( NA vs 9.2% ) 10;00 hrs New Home Sales Apr ( 340K vs 328K )10:00 hrs FHFA Housing Price Index Mar ( NA vs 0.3% ) 10:30 hrs Crude Inventories 05/19 ( NA vs 2.128M ) |
Thursday | 08:30 hrs Initial Claims 05/19 ( 365K vs 370K ) 08:30 hrs Continuing Claims 05/12 ( 3250K vs 3265K )08:30 hrs Durable Orders Apr ( 0.3% vs -3.9% ) 08:30 hrs Durable Orders-ex Transportation Apr ( 1.0% vs -1.3% ) |
Friday | 09:55 hrs Michigan Sentiment – Final May ( 77.5 vs 77.8 ) |
Fundamentals (previous letters may be seen at www.princetonresearch.com
The much anticipated Facebook release could not help a disastrous week in which all major indexes were down sharply. The Russell fell 5.42%; Nasdaq 5.28%; Transportation 5.19%; S&P 500 4.30% and the Dow 3.52%. All ten Dow Industrial Components were lower: Basic Materials led all losing groups with a 7.94% decline. Financials lost 6.76%; Technology 5.24%; Oil and Gas 4.93% Industrials fell 4.87%; Consumer services 4.42%; both Health Care and Consumer Goods 2.8%; Utilities 1.92%. Telecomm again was the leader falling 0.73%.
The worst kind of market is one that collapses without apparent reason. The markets do what they want and then ‘experts’ try to make explanations. We have had instability because of elections in Greece and France. I think after the G-8 Summit the markets will stabilize. The outlook is promising as they agreed on a mix of stimulation and debt reduction. In 2011 the entire European Union GDP totaled in excess of 17.5 trillion, tops in the world, while Greece did 303 billion, just 1.7%. Yet the small country of Greece with its unique socialist policies has been able to influence world politics.
2011 top 40 Nation’s GDP’s: EEU $ 17.5 Trillion; U.S. $ 15T; China 7.3T; Japan 5.9T; Germany 3.6T; France 2.8T; Brazil 2.5T; U.K. 2.4T; Italy 2.2T; Russia 1.9T; Canada 1.7T; India 1.7T; Spain 1.5T; Australia 1.5T; Mexico 1.2T; South Korea 1.1T;Indonesia 845B; Netherlands 840B; Turkey 788B; Switzerland 636B; Saudi Arabia 578B Sweden 538B; Poland 513B; Belgium 513B; Norway 484B; Iran 483B; Taiwan 466B; Argentina 419B South Africa 408B; UAE 360B; Thailand 346B; Denmark 333B; Colombia 328B Venezuela 316B; Greece 303B; Malaysia 278B; Finland 267B; Singapore 260B; Chile 248B ( numbers rounded )
Economic Data
Economic numbers were quite reasonable, some outstanding which did not reflect the extent of the market’s malaise. The Empire Manufacturing Report at 17.1 was more than double the 8.4 expected and 6.6 last month. Housing starts came in buoyant at 717K vs 680K and 654K last month, which incidentally was revised higher to 699K. Industrial Production rose to +1.1% well above the consensus of +0.5% and the 0.0% reading in March, which incidentally was even revised lower to -0.6%. Capacity Utilization was impressive gaining ground to 79.2% compared to the consensus of 79.0 and just 78.4% in March. Motor vehicle production gained 3.9% and utility usage 4.5%. Mining production increased 1.6% after declining 1.7% in March.
The Philadelphia Fed report was a problem, very negative off 5.8 vs a plus 8.8 last month and caused immediate market deterioration. April Retail sales were up only 0.1% while 0.2% had been expected. Leading Economic Indicators fell 0.1% the first negative reading since last September. The consensus called for a 0.2% increase. Eight of the ten components are well known that make up the consensus. Adjustments to building permits and jobless claims are the wild card. The contraction in LEI is not a sign of lasting weakness in the economic situation, but seasonal adjustment problems following the Easter Holiday involving Building permits which contributed a – 7.0% vs -2.3% and Initial Jobless claims -0.19 points, both small but which seasonal data will likely be reversed next month.
Technical Information
Support Levels: S&P 500 1274; 1268 Resistance S&P 500 1310; 1322
DOW 12,320; 12,175 Resistance DOW 12,530; 12,680
QQQ 5945; 5855 Resistance QQQ 6165; 6270
Nasdaq 2716; 2672 Resistance Nasdaq 2829; 2883
CYCLES
Cycles suggest a firmer tone early in the week and weakness towards end of week.
Rule 17B requires disclosure of payment for investor relations*
Princeton Research has received about $ 2,500 per month from Lucas ( LEI ) marked with an asterisk. Princeton has been paid for investor relations in the past and has negotiated a contract to be paid 100,000 restricted shares from Leo Motors ( LEOM ). In addition Princeton has bought shares. Cross Border paid us 25,000 restricted shares several months ago. We do not currently represent Cross Border but we like the company. We own about 3,000 shares. Princeton has 2,281,578 shares of AIVN.
Pursuant to the provisions of Rule 206 (4) of the Investment Advisers Act of 1940, readers should recognize that not all recommendations made in the future will be profitable or will equal the performance of any recommendations referred to in this Email issue. Princeton may buy or sell shares in companies it represents at any time.
CONTACT
Please Direct All Inquiries To:
Mike King
Princeton Research
3887 Pacific Street, Las Vegas, Nevada 89121
Phone: (702) 650-3000
Fax: (702) 697-8944
Visit: www.princetonresearch.com
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