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Greg Loehr
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Greg Loehr has been active in the options trading industry since 1990 when he first began working for the preeminent proprietary options trading firm Susquehanna Investment Group. Loehr began his career on the floor of the Chicago Mercantile Exchange in Susquehanna’s FX futures and options... More
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Options Buzz
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  • Where Is This Stock Going?

    One of the truest things I've heard recently was "It's SOOOO nice not having to pick which way the stock is going!" That came from a one-on-one coaching student of mine that had fallen into the trap of over-analyzing charts and looking for "that one right" indicator. Not having to pick a direction had taken a huge burden off her shoulders.

    I don't know how many times I've told people that trading is not about being right - think "credit spreads and calendars" - but rather, it's about managing the trade. And with the non-dirctional strategies, like this trading student is learning, direction is even less of a factor.

    Here's a chart of AAPL. Which way is it going? You can click to open a larger chart.

    (click to enlarge)

    Most people, I think, would say that the stock is going up. In reality, you don't really know. We can say that the stock has been going up, and this is where the technical analysis discussion begins and drags on into the night. There are those on one side that absolutely believe they can reliably pick stock direction (I can't even do it unreliably), and then there's Dr. Burton Malkiel on the other. So in addition to the argument of where AAPL is going, there's the argument of whether technical analysis even "works".

    Let's not get into either so no one's feelings get hurt.

    Instead of picking a direction and risk pulling a "Wrong Way Corrigan", let's go with a non-directional approach. See the green graph in the middle of that picture? That's a summation of the average volatility of the options. It's pretty low compared to range it's been in over the past year. There's nothing that says the volatility can't go lower, but there are a couple things that make me think a non-directional trade is worth looking in to.

    Remember, with a non-directional trade like a strangle we don't care which way the stock goes. Hence the name. We want either enough stock movement to overcome the theta. Or a big enough rise in the volatility to overcome the theta, or both.

    With AAPL, the stock has been recently moving enough to cover the theta. That's good, especially if it continues. And the volatility has been showing some signs of picking up. Again, that's good, but we'd obviously like to see either, or both, continue.

    Probably the best part of this trading idea is that if we're wrong and the stock doesn't move, it's a pretty low-risk approach to trading with the volatility in the basement like it is. It can go lower, but I'd take that risk over picking the direction.

    Trade safe!

    Greg Loehr

    Disclaimer: Loehr Consulting, LLC ("Company"), doing business as Options Buzz, is not an investment advisory service, nor a registered investment advisor or broker-dealer and does not purport to tell or suggest which securities customers should buy or sell for themselves. Before placing any trade you should consult with a licensed broker or registered investment advisor as well as read The Characteristics and Risks of Standardized Options. Please visit www.OptionsBuzz.com for the complete disclaimer and terms of use.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Jul 31 9:36 AM | Link | Comment!
  • Three Reasons To Love GLD Volatility

    In today's Daily Buzz free chat we spent some time discussing GLD and the potential for a move that could be profitable for a strangle. For those that missed today's chat, or for those just looking to learn more behind this potential trading idea, I thought I'd fill in a few details.

    There are three main reasons why I like this trade, and you can see two of them on the chart below:

    (click to enlarge)

    GLD daily chart with implied volatility

    The first is that the stock has been consolidating. We've seen this setup many times before with this stock (I know, I know...it's really an ETF, but who cares?), and just last week we found a strangle that profited 50% in less than four days. That's that gap you see about six bars from the last.

    But it's not just stock consolidation, and the idea that the stock might be getting ready to move, it's also about the implied volatility of the options. This is the second thing that I like about this trade. You just shouldn't trade a strangle, or any option for that matter, without first considering and understanding the implied volatility.

    If you compare today's levels with those back in early April, then today's levels seem high. But I think we're in a 'new normal', at least for a little while longer; and today's volatility looks cheap compared to late April and late June. I discussed this in greater detail during our Live Trading Session today.

    Finally, the third reason you might want to own some GLD volatility is the data and announcements coming out this week. There's ADP employment, the Fed meeting, and non-farm payrolls on Friday. That's a lot of stuff. Putting it all together, and I think GLD volatility is a 'buy.'

    Trade safe!

    Greg Loehr

    Broken Wing Butterfly Training

    Disclaimer: Loehr Consulting, LLC ("Company"), doing business as Options Buzz, is not an investment advisory service, nor a registered investment advisor or broker-dealer and does not purport to tell or suggest which securities customers should buy or sell for themselves. Before placing any trade you should consult with a licensed broker or registered investment advisor as well as read The Characteristics and Risks of Standardized Options. Please visit www.OptionsBuzz.com for the complete disclaimer and terms of use.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Tags: GLD, volatility
    Jul 30 7:09 AM | Link | Comment!
  • The Daily Buzz Starts With Big Winners

    In addition to the Options Buzz website makeover, we also recently opened our new, free, live daily chat room call The Daily Buzz. In less than two weeks we've found winning trades on IBM, GLD, AAPL, ALK and NFLX, and one losing trade on GMCR, with a net profit of nearly $8,000.

    Here are the trades so far.

    (click to enlarge)

    The "Portfolio at Risk" and "Profit/Loss $" are based on a $100k account, and therefore are trades that risk between $2,500-$5,000. Everyone is invited to this free chat room to discuss trading ideas, and I'll see what opportunities might be out there right now.

    Click here if you'd like to join in The Daily Buzz.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Tags: AAPL, earnings
    Jul 26 9:38 AM | Link | Comment!
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