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Carley Garner
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Senior Market Analyst and Broker, Stocks & Commodities Magazine Columnist and Author Carley Garner is an experienced futures and options broker and co-owner of DeCarley Trading in Las Vegas, Nevada. She is also the author of "Currency Trading in the FOREX and Futures Markets",... More
My company:
DeCarley Trading
My blog:
The Stock Index Report
My book:
A Trader's First Book on Commodities
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  • Will Options Expiration Save Stock Index Futures?

    April 13, 2012

    For information or to purchase Carley Garner's latest book, Currency Trading in the FOREX and Futures markets visit http://www.currencytradingthebook.com/

    Will options expiration save stock index futures?

    Equities lost ground ahead of the weekend but with options expiration on tap, the markets might find a way to find a short-term low early next week. More often than not, equities have a tendency to trade firmer on the Monday through Wednesday heading into the monthly expirations, and with the market trading at a relative discount it seems the stage might be set for such a move.

    Friday's bloodshed actually started Thursday evening following "disappointing" news of a smaller than expected GDP figure in China. Nevertheless, China is still growing at a rate of 8%...and I have a hard time seeing that as a complete disaster. Adding fuel to the fire was activity in the credit default securities that increased the cost of insuring Spanish debt. In other words, today's selling was based on fear of the fundamentals of other economies rather than domestic issues. Obviously, the globe has become a melting pot of economies in which we are all linked together so this is something we should accept for the long haul.

    The banks were hit hard on Friday over concerns of a European debt crisis bleed but the fact that we will hear the latest earnings reports from major banks next week likely sparked some of the manic trading. If bank stocks were able to lead the market lower this week, they are capable of doing the opposite next week (assuming their earnings numbers are a meet, or beat).

    According to the Stock Trader's Almanac, the income tax deadline (Monday this time around) is generally bullish and in line with our seasonal research, they claim the Dow has only been down five times since 1981 on the Monday before the April expiration.

    If we get some follow through selling on Sunday night/Monday morning, look for support in the June S&P near 1359 and 1348. If we get an expiration rally, we'll be looking for the mid to low 1390's. If we're wrong about the market finding a bottom, the next major area of support is 1330ish.

    If you are day trading, look for support at the levels mentioned above and intraday resistance near 1378 and 1386.

    (click to enlarge)

    (click to enlarge)(click to enlarge)

    * Due to time constraints and our fiduciary duty to put clients first, the charts provided in this newsletter may not reflect the current session data. However, market analysis and commentary does.

    **Seasonality is already factored into current prices, any references to such does not indicate future market action.

    Please note: An e-mini S&P and e-mini NASDAQ chart are used because they better for charting purposes, but trade recommendations can be applied to either the full-sized S&P or the mini. Unless otherwise noted, profit and loss will be based on the mini version.

    Futures and Options Trading Recommendations

    **There is unlimited risk in naked option selling and futures trading

    Position Trade -

    Flat

    In other Markets...

    3-30 Clients were advised to sell June Bond strangles using the 143 calls and the 131 puts for a combined premium of 60 ticks ($937.50).

    4-2 Clients were advised to sell June soybean 1570 call options for 8.5 to 8.0 cents.

    4-4 Clients were advised to sell corn strangles. Strikes and fills varied slightly (730/600 strangles for 14.5 cents, or 720/605 strangles for about 16.5 cents)

    4-9 Clients were advised to buy back the June 131 puts for about 10 ticks to lock in a profit of about 20 ticks before commission and fees ($312.50). We are recommending to leave the short calls open for now.

    4-10 Clients were advised to sell the June bond 135 puts for about 30 ticks. Later in the session, we recommended to buy back the 143 calls at a loss (about 1'03 before considering profit on puts) and sell the 146 calls in their place. The "new" strangle provides more room for error on the upside and carries a slightly bearish delta with plenty of profit potential if volatility erodes.

    4-10 Clients were advised to buy back their 730 corn calls for about 3 cents to lock in a profit of about $250 before commission and fees.

    (Our clients receive short option trading ideas in other markets such as gold, crude oil, corn, soybeans, Euro, Yen, and more. Email us for more information)

    Carley Garner

    Senior Analyst / Commodity Broker

    DeCarley Trading

    cgarner@DeCarleyTrading.com

    1-866-790-TRADE

    Local : 702-947-0701

    http://www.facebook.com/decarleytradingcommoditybroker

    http://twitter.com/carleygarner

    http://www.linkedin.com/in/carleygarner

    http://www.DeCarleyTrading.com

    http://www.CurrencyTradingtheBook.com

    http://www.ATradersFirstBookonCommodities.com

    *Due to the volatile nature of the futures markets some information and charts in this report may not be timely.

    There is substantial risk of loss in trading futures and options.

    Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.

    Seasonal tendencies are a composite of some of the more consistent commodity futures seasonals that have occurred over the past 15 or more years. There are usually underlying, fundamental circumstances that occur annually that tend to cause the futures markets to react in similar directional manner during a certain calendar year. While seasonal trends may potentially impact supply and demand in certain commodities, seasonal aspects of supply and demand have been factored into futures & options market pricing. Even if a seasonal tendency occurs in the future, it may not result in a profitable transaction as fees and the timing of the entry and liquidation may impact on the results. No representation is being made that any account has in the past, or will in the future, achieve profits using these recommendations. No representation is being made that price patterns will recur in the future.

    Apr 13 6:11 PM | Link | Comment!
  • High Flying Treasury Futures

    April 13, 2012

    Check out the latest Futures for You column in Stocks & Commodities Magazine, written by Carley Garner of DeCarley Trading!

    High flying Treasury futures

    Bonds and notes soared into the weekend on a high note. Buyers were eager to own safety assets following a weak Chinese GDP report and a flare in the European Debt crisis. As a result, the benchmark 10-year Treasury note found itself below 2% again and comfortably within the multi-month trading range that was only briefly violated in Mid March. You might recall many analysts calling it the beginning of the end of the bond bull, but here we are again. Readers of this newsletters know we were willing to buck the consensus and look at is as an opportunity to be bullish and a discount. Thus far, that has proven accurate but it seems as though the buying might have nearly run its course for now.

    Seasonal pressures call for bullish prices later in the month and going into May, but we typically see some weakness in sympathy to what has historically been one of the best months for the stock market of the year. In addition, stocks tend to trade positive going into their option expiration (which is next Friday); we think stability on Wall Street will prevent the current Treasury rally from getting too much more out of hand. Nonetheless, the door is open to one more round of buy stop running.

    Yesterday's inflation report on producer prices showed little change in price pressures and today's consumer price index was much of the same. The CPI rose .2% according to the Labor Department; although most consumers realize prices have gone up tremendously it isn't showing up in the data for various reasons. For now, the financial markets seem to have grown accustomed to what is being perceived as a low inflation environment and are therefore unwilling to dump their Treasury holdings in search of higher yields.

    This week's reopened auctions were a bit rocky, next week the government will sell $16 billion in 5-year TIPS on April 19th, $4 billion more than the last outing in December. Traders will likely see this as rather inconsequential relative to next week's economic schedule. We will soon hear details on March retail sales, housing stats, manufacturing indexes on the East Coast and leading indicators.

    The bulls could seek out a few lingering buy stops above. If so, the June 10-year note could make a run for the 132 to 132'15 area and the long bond could test resistance near 142'05 and maybe even as high as 143. At this time, we doubt prices will be able to see much higher levels than those noted and see a good probability of some sort of range trade to be carved out (such as 143 to 139 in the long bond).

    (click to enlarge)

    (click to enlarge)

    * Due to time constraints and our fiduciary duty to put clients first, the charts provided in this newsletter may not reflect the current session data. However, market analysis and commentary does.

    **Seasonality is already factored into current prices, any references to such does not indicate future market action.

    Treasury Bond and Note Option and Futures Trading Recommendations

    **There is unlimited risk in naked option selling.

    3-30 Clients were advised to sell June Bond strangles using the 143 calls and the 131 puts for a combined premium of 60 ticks ($937.50).

    4-9 Clients were advised to buy back the June 131 puts for about 10 ticks to lock in a profit of about 20 ticks before commission and fees ($312.50). We are recommending to leave the short calls open for now.

    4-10 Clients were advised to sell the June bond 135 puts for about 30 ticks. Later in the session, we recommended to buy back the 143 calls at a loss (about 1'03 before considering profit on puts) and sell the 146 calls in their place. The "new" strangle provides more room for error on the upside and carries a slightly bearish delta with plenty of profit potential if volatility erodes.

    In other markets....

    4-2 Clients were advised to sell June soybean 1570 call options for 8.5 to 8.0 cents.

    4-4 Clients were advised to sell corn strangles. Strikes and fills varied slightly (730/600 strangles for 14.5 cents, or 720/605 strangles for about 16.5 cents)

    4-10 Clients were advised to buy back their 730 corn calls for about 3 cents to lock in a profit of about $250 before commission and fees.

    (Our clients receive short option trading ideas in other markets such as gold, crude oil, corn, soybeans, Euro, Yen, and more. Email us for more information)

    Carley Garner

    Senior Analyst / Commodity Broker

    DeCarley Trading

    cgarner@DeCarleyTrading.com

    1-866-790-TRADE

    Local : 702-947-0701

    http://twitter.com/carleygarner

    http://www.facebook.com/decarleytradingcommoditybroker

    http://www.DeCarleyTrading.com

    http://www.currencytradingthebook.com/

    http://www.ATradersFirstBookonCommodities.com

    *Due to the volatile nature of the futures markets some information and charts in this report may not be timely.

    There is substantial risk of loss in trading futures and options.

    Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.

    Seasonal tendencies are a composite of some of the more consistent commodity futures seasonals that have occurred over the past 15 or more years. There are usually underlying, fundamental circumstances that occur annually that tend to cause the futures markets to react in similar directional manner during a certain calendar year. While seasonal trends may potentially impact supply and demand in certain commodities, seasonal aspects of supply and demand have been factored into futures & options market pricing. Even if a seasonal tendency occurs in the future, it may not result in a profitable transaction as fees and the timing of the entry and liquidation may impact on the results. No representation is being made that any account has in the past, or will in the future, achieve profits using these recommendations. No representation is being made that price patterns will recur in the future.

    Apr 13 5:52 PM | Link | Comment!
  • Climactic Quadruple Witch

    March 16, 2012

    Sign up for our next complimentary online trading webinar, Currency Option Trading: FOREX vs. Futures hosted by PFGBEST on March 22nd at 3:30 pm Central.

    Climactic Quadruple Witch

    Today marked the first day in a long while in which economic data was less than stellar. However, it didn't really matter. Momentum traders are pushing prices to the limits, the shorts are getting squeezed, and sidelined cash (or cash in Treasuries) is making its way into equities. Once the ball is rolling, it is sometimes difficult for prices to turn the corner (as evidenced by the Feb/March rally).

    The Consumer Price Index showed an increase in price pressures to the tune of 0.4%, but the move was expected. Industrial production and the latest reading on consumer confidence missed expectations. Although these alone aren't reason to sell, it might be enough to at least get buyers to pause.

    Last month's crude rally has essentially flat lined, but energies have a tendency to rally in late March through April. Should we see what has been the norm on average over the last 15 years, crude oil might make a run at new highs. This is something traders should keep on their radar. After all, the positive correlation between crude oil and the S&P has fizzled; should WTI crude rallies back above $110 it will probably be back on the front page of newspapers. We doubt that $110 will be enough to cripple market sentiment but $115 isn't out of the question and somewhere in that general area seems to be the line in the sand between tolerable and threatening.

    Bullish sentiment has grown to incredibly high levels. In fact, we are near levels not seen since the peak in 2007. While that alone doesn't mean traders should "sell the farm", it certainly is reason for caution.

    Today's trade was a non-event; likely due to the fact that the March options and futures were both expiring. Our guess is there were numerous bearish traders (short March calls and futures) that held on to the bitter end. If so, the market's natural reaction will be to back and fill early next week (at least on Sunday night and early Monday).

    We are sticking to yesterday's overall idea:

    We continue to see risk of a blow off rally to the 1417 area in the S&P and near 2730 in the NASDAQ. However, momentum indicators are suggesting the market might be capitulating. If so, the bears (if there are any left) might finally get what they are looking for and should be on the lookout for these levels as possible entry prices.

    If you are day trading, resistance comes in near 1402, and then 1409 (and of course 1417); support near 1393 (soft), 1388 and then 1376.

    * Due to time constraints and our fiduciary duty to put clients first, the charts provided in this newsletter may not reflect the current session data. However, market analysis and commentary does.

    **Seasonality is already factored into current prices, any references to such does not indicate future market action.

    Please note: An e-mini S&P and e-mini NASDAQ chart are used because they better for charting purposes, but trade recommendations can be applied to either the full-sized S&P or the mini. Unless otherwise noted, profit and loss will be based on the mini version.

    Futures and Options Trading Recommendations

    **There is unlimited risk in naked option selling and futures trading

    Position Trade -

    2-8- We typically recommend short options, or even long options, simply because the risk are lower and there is much more room for error. However, given the circumstances we are willing to go out on a limb and recommend selling the NQ futures contract at the current level (near 2540). The next resistance is near 2562, so traders with plenty of margin might consider adding at that price. Similarly, conservative traders might try to hold out for a possible move to 2560ish before entering the initial position. Our initial downside target will be about 2450 in the March contract.

    2-9 Clients were advised to liquidate any "add-on" positions near 2540 (for those trading multiples only).

    *Clients still involved in the NASDAQ trade have sold May 1520 puts for about 32 points to hedge their upside risk.

    3-13- It was recommended that clients sell the May S&P 1450 calls for about $8.75 in premium or $437.50 per contract.

    In other Markets...

    2-16 - We advised clients to sell March 124 Yen puts for about 29.

    2-22 - Clients were advised to sell April Yen 120 puts for about 30 ticks.

    2-22 - Clients were advised to offset their March Yen 124 puts at a loss of about 40 ticks and to sell the April 121 puts for about 40 in an attempt to recoup the premium.

    3-2 - Clients were advised to exit short April Yen 121 puts at a loss of about $425, and to sell April 126 calls and 119.50 puts for $1,000 in premium. The goal is to recoup the premium lost as volatilty dies.

    3-5 - Clients were advised to sell April Euro strangles using the 127 puts and the 136.50 calls for about 61 ticks or $762.50.

    3-7 - Clients were advised to sell May crude oil strangles using the 123 calls and the 90 puts. Premium collected was near $1.04 ($1,040).

    3-12 - Any client holding short 120 puts in the Japanese Yen were advised to sell April 125 calls near 38 ticks to lower the delta of the exposure (mitigate risk to the downside) ahead of the BOJ announcement.

    3-13 - Clients were advised to buy back the 125 calls sold yesterday to lock in a quick profit of about $250 per contract as well as the April 126 call sold earlier in the month as part of a strangle for a profit of about $300 before transaction costs. The corresponding puts are underwater, we hope to offset them in the near future or re-sell calls on a rally.

    3-13- Clients were advised to buy back their May crude oil strangles for a quick profit of about $460 before commissions and fees.

    3-13 - Clients were advised to buy back short Euro 136.50 calls near 7 ticks to lock in a profit of $275 per contract (22 ticks). We will continue to hold the short put side of this trade.

    3-14 Clients were advised to buy back any remaining Yen puts (119.50's and 120's) at a sizable loss (depending on fills, some well over $1,000) and replace them with May 116's and 115/124 strangles, respectively. We'll look to recoup losses in upcoming strangle trades in crude/Euro.

    3-14 Clients were advised to sell the May132 30-year bond put for about 29 ticks.

    3-14 Clients were advised to buy back their short Euro 127 puts for about 19 ticks to lock in $175 per contract (added to the profit on the call side of this trade, the total profit was about $450 before transaction costs).

    3-15 Some sold 131's for about 28 ticks

    (Our clients receive short option trading ideas in other markets such as gold, crude oil, corn, soybeans, Euro, Yen, and more. Email us for more information)

    Carley Garner

    Senior Analyst / Commodity Broker

    DeCarley Trading

    cgarner@DeCarleyTrading.com

    1-866-790-TRADE

    Local : 702-947-0701

    http://www.facebook.com/decarleytradingcommoditybroker

    http://twitter.com/carleygarner

    http://www.linkedin.com/in/carleygarner

    http://www.DeCarleyTrading.com

    http://www.CurrencyTradingtheBook.com

    http://www.ATradersFirstBookonCommodities.com

    *Due to the volatile nature of the futures markets some information and charts in this report may not be timely.

    There is substantial risk of loss in trading futures and options.

    Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.

    Seasonal tendencies are a composite of some of the more consistent commodity futures seasonals that have occurred over the past 15 or more years. There are usually underlying, fundamental circumstances that occur annually that tend to cause the futures markets to react in similar directional manner during a certain calendar year. While seasonal trends may potentially impact supply and demand in certain commodities, seasonal aspects of supply and demand have been factored into futures & options market pricing. Even if a seasonal tendency occurs in the future, it may not result in a profitable transaction as fees and the timing of the entry and liquidation may impact on the results. No representation is being made that any account has in the past, or will in the future, achieve profits using these recommendations. No representation is being made that price patterns will recur in the future.
    Mar 16 5:10 PM | Link | Comment!
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