Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.


Short-Term Trading in Options.

Monday 17January 2011

Our Options Scoreboard (below) includes the options totals (up 26.83% since 12/20/10) followed by a listing of today's trading signals.


CGTS OPTION  PORTFOLIO (Since 12/20/10) Active
% Gain 1/14/11 Profit Trades
26.83% Options Trades $547,281 204
Click to enlarge


OIL Feb 25 calls M5 3 ASP LT 2a 0.75 Long
EWG Feb 22 calls M5 3 ASP LT 2a 2.16 Long
TER Feb 13 calls M5 3 ASP LT 2a 1.65 Long
GNK Feb 15 puts M5 3 ASP LT 2a 1.05 Short
EPV Feb 15 puts M5 3 ASP LT 2a 1.3 Short
FRO Feb 30 puts M5 3 ASP LT 2a 4.1 Short
YOKU Feb 37 calls M2F 14% Trade 3.8 Long
YCS Feb 17 puts M2F 14% Trade 1 Short
REMX Feb 22.5 calls M4 ACCUM 00 14 1.8 Long
WBD Feb 30 calls M4 ACCUM 00 14 3.5 Long
FST Feb 37 calls M4 ACCUM 00 14 1.85 Long
VZ Feb 35 calls M4 ACCUM 00 14 1.11 Long
MITI Feb 35 calls M4 ACCUM 00 14 0.75 Long
O Feb 35 calls M5 3 Avg Diff ASP Sum 0.25 Long
FRO Fev 30 puts M5 3 Avg Diff ASP Sum 4.1 Short
AA Fev 15 calls M5 3 Test Combo 1.21 Long
HLF Feb 65 calls M5 3 Naked Wait 4.65 Long
ENZN Fev 12.5 calls M5 3 Naked Wait 0.4 Long
AIG Feb 57.5 calls M5 3 Naked Wait 2.1 Long
AFG Feb 40 calls M5 3 Naked Wait 0.4 Long
SBUX Feb 13 calls MJC Flash 00 ST 1.02 Long
UPS Feb 70 calls MJC Flash 00 ST 3.1 Long
Click to enlarge


We are at the stage now when we have to begin thinking about the coming correction.  Trading options can be very hazardous IF and WHEN the market turns against one.  We try to keep our finger on the pulse of the markets generally to avoid a devastating counter punch.

We look at the GSPC, the S&P 500 Index, to get a sense of what is happening in the indexes.  GSPC looks fine, looks very good in fact.

Click to enlarge

We could go through all of these indicators one-by-one, but we'll spare you at this point.  There is not one negative reading in this chart.  Let's compare it with XCI, the AMEX Computer Index, back in April 2010 to get a sense of what happens when selling hits.

Click to enlarge

Looking back at April 2010: XCI hit a bit of a bump in the road.  The first indicator to break down was, AS ALWAYS. M5 3, red, Top Pane.  This is a leading indicator -- it tops before the stock price tops; and it bottoms early as well.  In April 2010, it went into a free-fall.  The M4 Accum Indicator, black line, Top Pane, also broke down.  This indicator is bullish when it is advancing and when it flattens at + 10; when it turns down, we begin to pay attention.  The ChartMeter Indicator, black line, Second Pane Down, collapsed as well.  The ChartMeter ASP, which averages the ChartMeter, also broke down for the first time in this chart picture. 

This is NOT a current picture of XCI.  XCI is currently quite placid.  We are looking for signs in all the indexes we follow of such striking changes as those being shown by XCI in April of last year.

We also look for any signs of life in the VIX, and in the inverse ETFs we follow.  These should bolt up when stocks are ready to collapse.  We see none of that currently.


TER, TERADYNE, is our chart of the day -- and our option focus for today.  The Buy signal is being triggered by our M5 3 ASP LT 2a trading system, which is a short-to-intermediate-term trading system.  February calls are ok here, as would March calls also be fine.

CGTS OPTION  PORTFOLIO (Since 12/20/10) Active
% Gain 1/14/11 Profit Trades
32.94% M5 3 ASP LT 21 $79,044 24
Click to enlarge

Click to enlarge

A Disclaimer of sorts:

I will update these positions regularly, so we can all see how we are doing with our short-term speculating.

I am bullish on gold long-term (until Bernanke is fired, and more generally until about 2019, the end of the deflation cycle) -- and I'm relatively bullish on stocks until QE is abandoned.  QE does many things, one of which is to try to make sure that stocks and bonds don't decline.  The Fed, quite likely, has guaranteed to bankers the advance of stock prices.  As long as the Fed is willing and is allowed to backstop stock prices, short positions are very dangerous, except in isolated cases.  Bond vigilantes are showing Mr. Benanke that his designs may not be able to proceed without resistance however.  Rising rates are a slap in the face of American power; the slap is welcomed by those of us who think debt is the problem that needs to be addressed, destroyed, rather than expanded and extended.

Trading options is highly speculative and can be dangerous.  Pricing of options is never very clear; buying options is almost always less prefereable than selling options, in terms of likely profits.  But buying options gives an investor a HUGE BANG FOR THE BUCK.  Getting accurate price data on options (especially those thinly-traded) is also often a problem, with which we'll have to work.  Typically we work with the last close, if it falls between bid and offer.  If it does not, then we average the bid/offer.

If one knows what direction a stock is moving, short-term options can be profitable.  The problem with options, of course, is that they, like ourselves, decay with time.

The cheaper options expire more quickly (one can always buy long-term options is one wishes to speculate on long-term stock or market moves).  I like short-term expirations, cheap options, and getting in and out (with profits).

I have many short-term trading systems.  I will use several in this Options Corner.  The first I start with I call "M5 3 Chart Trade" which really relies on the M5 3 Momentum Indicator to trigger the trade, always in the same direction of the major trends.

Successful trading!  We know the game is fixed; but let's ride on the back of the dragon for as long as we can.

More information on the CGTS systems can be found at:

Clark's Gate Timing System
Hanoi, Vietnam
84 4 221 92210