Second New Resistance?!?

Well Traders, today was probably the last significant trading day of the year with many people beginning to start their holiday vacations. There will still be some trading, but my guess is that the volume will be light until the first week of January. Light volume can be a scary thing as less people can make pretty significant moves in the market, so be careful out there!

Today the $NDX fell another $7 points. More importantly, it tried to pierce the 30 Day Moving Average, but was unable to hold onto its advance keeping it below that resistance level for another day. Which begs the question, has the 30DMA now become a new level of resistance? Time will tell, but since it was such strong support for over 4 months, perhaps the roles are reversed? This will be important as we set up our next trade for February in a couple of weeks since I can't get the money I want to make a January trade worthwhile. Oh, I could move my Bear Call and Bull Put spreads closer to make up the money, but why risk it? Iron Condors are supposed to be very conservative, defensive plays since there is usually a poor risk/reward ratio. Now is not the time to be foolish and gamble.

We'll look at the next trade in the coming weeks, but in the meantime, I'll try to keep up with this blog every few days or so since I myself am going on vacation too.

Happy Holidays and Happy Trading!

BREAKDOWN?!?!?!

Well Traders, today may have been a significant day. It is the first time since early August that the $NDX has fallen below the 30 Day Moving Average. That is a Bull run of over 4 months! Whew!

Here is the chart:

You'll notice that the $NDX touched the Bollinger Band support area (just above my gray "support area" at $1,761), then ended up higher than it opened, but still down almost $6 points for the day. So we are kind of at a crossroads in my humble opinion. The break below the 30 Day Moving Average is significant because it hasn't been here in a long time. It is now becoming more and more range-bound, bouncing between $1,761 and $1,824. If you wanted to play a tight Iron Condor (which I would never really recommend) you may think about it for January. Basically, you have to have solid conviction (and brass cajones) to think that those support and resistance levels would hold for a little over three weeks. If you played a tight $1850/$1875 Bear Call, you could make about $4.10, and a $1750/$1725 Bull Put may get you $6.40 for a total credit of $10.50. Your risk would only be $25.00 - 10.50 or $14.50. That is some serious bling if you have the guts to try it. Too risky for my blood.

I have not entered a January Iron Condor because my order wasn't filled today. I am only willing to make these plays for a certain ROI, and if I can't get that, Homey don't play. I'll try again tomorrow, but it looks like I may have to go back to my 6 week plays again in order to get the credit I want to make the play worthwhile.

Happy Trading!

Double Top?

(Click to enlarge, use the "Back" key to return to the blog.)

Well Traders, most of what we do when we create charts is estimate. With our own biases, we do our best to see what the chart is showing us, and somehow put that into an analysis that makes sense to us. Sometimes we see things that just aren't there, or we see things we hope are there. in any case, it is always an inexact science.

Today, I see what may be a "Double Top" formation, albeit a weak one. I have circled the two "tops" in orange to highlight them. The formation, if valid would indicate that an absolute top (for the time being) has been reached and that the market will fall off from here. That may or may-not occur, but again, charting is an inexact science.

As you see, the $NDX is becoming somewhat range-bound, which for an Iron Condor is a beautiful thing...assuming it remains range-bound. Since the range is in such a tight timeframe, I am very hesitant to use it ($1,824 - $1,761) at this time until more time elapses and the undex continues to be rangebound. Even then, you still always play smart.

I have not placed a January trade yet; still waiting on some feedback from my mentors regarding this play. You will see the highlighted areas in which I name my Bear Call and Bull Put spreads for the trade. Right now, it doesn't look like it would make much money, but an Iron Condor isn't supposed to at first. When played correctly, it is a way to make some decent income without the risk of say, a directional option. That being said, the narrower a trading range, the more profitable an Iron Condor can be, so I would LOVE to see a fairly tight and predictable range develop here for a few months. By March/April, I am sure the "Sell in May and go away" clause will initiate and I may look at only Bear Calls to take advantage of a usualy predictable pre-summer falling market.

Happy Trading!

A Quandry for January

Well Traders, looks like I may be in a bit of a quandry with my January Iron Condor. Today's big $20 point run-up was somewhat unexpected, though not totally. I suspected some breakout was close based on the Bollinger Bands squeezing. Couple that with a Bullish 30 day Moving Average and odds were, there would be a Bullish breakout possible. While it isn't a full-blown breakout, it did cause me to re-think my January play.

Here is the $NDX chart:


As you see, the diagonal resistance (formerly diagonal support on the Ascending Channel) is still holding. However, with the big run-up today, and the usual 4th quarter rally seemingly heating up again, I have decided to use the median line of the Ascending Channel designate my Bear Call spread at $1925/$1950. I have three resistances going for me at this time. The first is the aforementioned diagonal resistance line. The second is the previous high at $1824, which has only been tested once, so it isn't really strong resistance at this point. The third and final resistance is the Median line in the Ascending Channel, which does intersect the Expiration Date line at $1931 making it a little higher than the $1925 Short in my Bear Call. Call it a calculated risk.

For the Bull Put, things were a little easier. I chose a Bull Put at $1625/$1600. There are three supports protecting it: the first at $1761-$1750, a previous strong resistance (now considered strong support), the second support is at $1695, and third, there is very strong support at $1630 (trust me, you'll see it on a one-year chart).

I could have also gone Uber-conservative on the Bear Call by playing a $1975/$2000 spread, but there is no money in it. I could also choose a $1950/$1975 Bear Call, which would place it above the Median line intersect, but again, there is no money in it. The key is to find some balance of risk to reward that makes the trade worthwhile without being too risky. Remember, I have had to roll-out the last two months, and I'd like to get into plays where that isn't necessary. I hope this is my first one to accomplish that.

Tomorrow, I'll share the analysis sheet I created on EXCEL to show you the trade layout.

Happy Trading!

Final Day...

Well Traders, no need for a chart today. The $NDX barely moved which leaves my December Iron Condor in a Golden position. Tomorrow, I should be able to have my positions closed out at 4:15 PM and save on commissions.

Tomorrow, I'll show you my January Iron Condor trade.

Happy Trading!

Winding Down...

Well Traders, only two more full trading days for my December Iron Condor trade and at this point, it looks like we have a winner! The $NDX was down almost $10 points today ending at $1,782, well below my Bear Call spread of $1,850/$1,875, and really, really far above my Bull Put spread. So, with my values down to $0.15, $0.10, and $0.05, it looks like I'll be able to let my trade close at 4:15 PM Thursday, and save myself some commission payments since CyberTrader doesn't charge them if the option expire. Nice way to save a little extra cash!

It is time to start setting up January's trade. Here is my chart:
You'll see that I have projected the chart out to January's Expiration Date so I can estimate potential movement, and target strikes. Using the Ascending Channel (which the index has broken out of), I have three (3) lines. The lowest is the AC support line, which is now acting as resistance. If I use this line, and assume the $NDX will not be able to break above it by the ED, then you can see that it intersects the ED vertical line at about $1,895. This would mean I could set a $1,900/$1,925 Bear Call, or to be a little safer, a $1,925/$1950.

If I use the middle (Median) line of the AC, we can see that it intersects the January ED at about $1,931. This means I could be a little daring and use a $1,925/$1,950 Bear Call spread, or to be a bit safer, use a $1,950/$1,975 spread instead.

Finally, if I use the top line of the AC, then we see that it intersects the January ED line at about $1,965. Again, to be daring we could use a $1,950/$1,975 spread, or a $1,975/$2,000 spread to be safer. This would be the Uber-conservative approach since the $NDX is already out of the AC, and using the upper line would virtually assure a winning trade. (Note the operative word "virtually," since nothing is guaranteed in the market...nothing...ever!)

It will come down to risk/reward and what the Iron Condor will be worth when I enter the trade. Remember, we don't want to have to do anything after we enter, so the wider the spreads, the better chance we won't have to do anything. I have had to roll my last two trades (both were profitable) the last two months due to the strength in the market, but with the recent breakdown out of the Asecending Channel, the $NDX may be cooling off a bit. Of course, taking less risk yields less reward too...so we have to find a nice balance. The next two days wil tell me a lot about where I need to place my trade for January.

Happy Trading!

Follow Your Blocker...

Well Traders, we are coming down to the wire on my December Iron Condor and things are looking good so far. Most of the value in my trade is gone, and with only three full trading days left, and a full $57 points from my Bear Call, it would take some HUGE days to break this trade. That is never out of the realm of possibilities, but let's hope it doesn't happen here.

As you will see from the chart above, the $NDX rallied up to the Ascending Channel support line, but was unable to break through...again. The previous support line is acting as resistance now and if it continues to do this for the next three days, my trade will be golden!

The Time Value left in this trade is down to next to nothing. The highest amount left on the board is $0.40 on my Bear Call. The others are $0.15, $0.10 and $0.00. Basically, I am at a point that if I get no serious run-up the next few days, I'll let the trade expire on Friday, and maximize the profits left over after the roll-out.

Time to start looking at January's trade.

Happy Trading!

New Resistance??

Well Traders, the $NDX tried to make a nice rally today reaching $20 points higher after a lower open, then fell off in late afternoon trading to finish up only $8.75 for the day. What does that mean for my trade? Well, if you look at the chart above (remember to click on it once or twice to enlarge it, then use the "back" key to return to the blog), you'll see that the index tried to break back into the Ascending Channel, was able to do it momentarily, but was unable to remain there for the day. This may mean that the previous lower support for the Asecending Channel now becomes resistance, which would be wonderful for my December Iron Condor.

If you look on the chart, if the lower support of the AC does indeed remain as resistance, then it will effectively block the $NDX from breaking into my Bear Call, and my trade will be profitable next Friday morning. According to my projections, the AC will keep the $NDX to no more than about $1,815-$1,820, which is all I need since my Bear Call is an $1,850/$1,875 spread.

As it is already, the value on the $1,850 Short has diminished from $7.20 to only $0.85, meaning on Monday, time value will really begin burning off fast unless there is a HUGE run-up (which is always a possibility).

As for next week, it will be time to start planning the January Iron Condor, or maybe just a one-sided spread depending on what the chart and projections are telling me. The January IC will be executed on Friday as part of my shortened time strategy. I am also doing this because it gets VERY confusing looking at two Iron Condor trades on CyberTrader at the same time. I'll play more contracts for less time.

Have a great weekend and Happy Trading!

It's a Beautiful Day!!

Well Traders, "It's A Beautiful Day," as the $NDX confirmed my suggested weakness yesterday and took a nice $21 point dip. The index is now at $1,777, almost $75 points from my Bear Call spread...nice!

By looking at the STO, it looks like a downward decent has started and we may see a couple of more down days on the Index. Couple this with Options Week next week, which is usually Bearish, and it looks like my Decemeber Iron Condor may pass the smell test. We'll have to wait and see.

Notice how the Index has fallen through the Ascending Channel? A fall below $1,761, and then through $1,750 would indicate that a peak was achieved, and we may be looking Bearish for awhile. This will help my January set-up greatly. But before we get too giddy about that, we need to see how $1,760 acts as support...it bounced here last time on both 11/28 and 12/1.

Happy Trading!

Checking on the $SPX Trade

Well Traders, I just wanted to check in on a friend's $SPX trade to see how he was doing with it. So far, it looks like it will be a solid trade. You'll notice from the chart above that the index is trading at the upper part of the Bollinger Band and that the STO is in Overbought territory giving a good indication that the index should begin to move lower the next few days.

The Ascending Channel indicates that the trade could break through his Bear Call spread, but at this point, with this little time left, I don't necessarily see that happening. With only 6 more market days for the trade, at this point I have to think that this will work out as planned, and that maximum profits will be taken. Good job!

Happy Trading!

An IMPORTANT Correction!!

Well Traders, my friend Dave D. pointed out an important mistake I made with my December Iron Condor analysis that actually works in my favor. It was my understanding that the $NDX option expired the opening tick on the Friday after the third Thursday, which would put the December trade expiring on December 21. Dave D. pointed out that the Expiration Date was the 15th because the actual Expiration Date of the $NDX is the "opening tick of the third Friday of the month", which makes it 12/15.

This is important because it cuts off a week of time value from my trade, accelerating the TV burn-off, and enhancing the probability of the profitability of this trade.

Here is the graph with both the new Expiration Date line at 12/15, and the old one at 12/21. You'll see that the trade looks much better now and assuming there is no wild outbreak on the $NDX, I am feeling much better about this.

Thanks again Dave D. & Happy Trading!

Losing Steam?!?!

Well Traders, a good day for me. The $NDX was down a little over $5 points which is good for my December Iron Condor. Today's candlestick formation was another "spinning top" indicating that there is indecision. The fact that this was a lower spinning top than yesterday, and with the STO getting closer to the Overbought zone, seems to indicate to me that the index is losing some strength.

That being said, technically speaking, the $NDX is still trading within its Ascending Channel, so there is NOT a trend reversal at this point. The fact that the index is at the support level of the channel may indicate a run-up may occur. Of course, I am hoping the run-up party is over and it falls back towards $1760 or lower. Time will tell.

Happy Trading!

Indecision???

Well Traders, even though the $NDX was up almost $5 points, the "spinning top" candle formation may indicate some indecision.

There has been a slew of bad news recently and perhaps some of it is starting to sink in? Technically speaking, I expect the $NDX to continue upward until the STO and MACD tell me different. How much, and how fast remains to be seen.

Time is not on my side yet, and I could really use another good down day to maybe check out early, or at least give me some breathing room with over two weeks left until expiration. That break may come next week, which is options week, and is typically a down time in the market. We'll have to wait and see what happens.

Happy Trading!

Just Like Clockwork...

Well Traders, the $NDX is acting just like clockwork. As you remember on Friday, the index fell to the $1761 support level (after breaking diagonal support) and rebounded with a furious rally at the end of the day to maintain the diagonal support. The STO and MACD were indicating an upturn and low and behold, that is exactly what we got! This is one of the most beautiful Ascending Channel charts since it just stays withing the range and bounces merrily along inside.

This also worries me.

As you will note, the December 21 Expiration Date looks like my $1850 strike price may not hold, meaning this will not be a successful trade. Even the bad economic news on Friday and with Pfizer's news on the Dow today (which was also up huge) hasn't been enough to temper this very hot market. I could certainly use a nice big down day, but technically speaking, it looks like a few more days of sweating an uptrend before we see another pullback. A few more $25 up days and I'll be singing the holiday blues!

Happy Trading!

Some Gift Ideas...

Well Traders, if you are Wall Street crazy like me, here are some gift ideas to drop in Santa's lap for the holidays. Snazzy dresser? Then you may love Lee Allison Ties. In particular, their Wall Street tie is a personal favorite. Tim Knight, of TraderTim.blogspot.com is a total Bear, so he would probably LOVE what the Bear is doing to the Bull. Here's a quick pic:
Have a great bookshelf in need of bookends? How about this Bull & Bear Pair from Wall Street Gifts?

Or, for some nostalgia, how about a Ticker Tape Machine replica also from Wall Street Gifts?


Hope Santa treats you well this year!

Happy Holidays!

Winds of Change?!?!

Well Traders, a very interesting Friday on the $NDX. The index actually broke my diagonal support line intraday, before a furious rally in the last 90 minutes to close just at the diagonal support line. The $NDX actually hit about $1761, which is the top of my "support area" shaed in gray.

What does it all mean?

Well, this could be the start of a softening of the $NDX, though I would have liked to have seen the index remain below the diagonal support line at the close for more conviction. Still, there is the "support area" to contend with. As long as the $NDX remains above this area, there is still the possibility of a run-up.

At this time my trade is just about even, after the roll-out. This weekend helped to cut out some time value, and another down day on Monday will help greatly. My Bull Put spread is getting nearly worthless, whihc means I have just about maximized the profits on the bottom.

A continuation of a downtrend through the "support area" would be ideal, as it will enable me to set up my January trade in a few weeks.

On a down note, my beloved Alma Mater, USC lost an improbable game 13-9 to upset-minded and cross-town rival, UCLA, whose defense played an inspired game, snapping the Trojans' NCAA-record of scoring 20 points a game at 63. Congrats to the Bruins!

Happy Trading!

As predicted....BOING!!!

Well Traders, the $NDX is behaving very nicely in the sense that it is trading in the Ascending Channel just beautifully. This is not necessarily good news for me with my December Iron Condor, but it not a bad thing either...yet.

As you will see on the chart above, the $NDX bounced off the bottom channel support line and looks to be making its way back up again. This was interesting to me because the $NDX was actually DOWN for the day until about 2:30 PM, which is when the oil pits shut down. Then all of a sudden, like "out of sight, out of mind," the markets went to full rally mode completely ignoring the surge in oil prices. It was interesting to say the least.

I will be curious to see if there will be a "buyer's remorse" today and see if the markets fall, or if everyone is in the holiday spirit and the Bulls go shopping.

Finally, based on the current chart, playing some Calls or Bull Puts on the $NDX may be the way to go for January. As long as there is no "top," there is no way to really define a trading range, unless you move the chart out to January's Expiration date and use the top of the channel as your 'top." That is a chart for another day.

Happy Trading!

Following the Plan

Well Traders, I am back from a nice Thanksgiving vacation in Los Angeles with my family. Besides enjoying some time with my loved ones, the highlight of my trip was watching my Alma Mater, USC, beat the snot out of Notre Dame...again. If the Trojans get past pesky UCLA this Saturday, they will be playing their 5th consecutive BCS game, their third in a row in the BCS Championship game, and the fourth consecutive game which could decide the National Championship. Should that happen, I'll be an extremely happy camper.

Back to business.

Yesterday, the $NDX (and the other indexes) took a huge, and expected hit. As I mentioned last week, the $NDX was very overbought, and trading at the upper resistance part of its Ascending Channel. So, I anticipated a pullback, which occured. This was obviously extremely beneficial to my Iron Condor as it put my trade over $75 points away from my strike with about 3 weeks left in my trade. Today, we had a modest hike of $5+ points, which is fine. The $NDX has established a new resistance level at $1824, but right now, it looks to be bouncing off support at the lower Ascending Channel support, as well as the $1760 area known as "Helm's Deep." I anticipate maybe one more down day, and then another rise within the channel thereafter. The only question is how far a drop, and how high and how fast the rise? Hopefully, I'd like another drop to around $1750, and a very slow rise the next 3 weeks to make the play a success. We'll have to wait and see.

Happy Trading!

A Friend's $SPX Trade

Wayne B who is another Trader whom I collaborate with recently set up a December Iron Condor on the $SPX. He has entered a 1445/1440/1365/1360 spread for a credit of $1.10. That is a risk/reward ratio of about 28%, which is pretty good. Here is a picture of the $SPX graph as well as some technical drawings I made on it:Depending on how you trade, this may or may not work for you. Personally, I may have played it a little differently.

As you will see from my annotations, I have shown the two spreads on the graph shaded in gray. I have also noted the Expiration Date as well as the previous Friday (some folks get out a week before). According to the Ascending Channel I have drawn, I probably would have made my Bear Call spread further up based on the run-up estimated. As you can see, it looks like (and it is only an educated guess) the $SPX could get to $1460 by the Expiration Date. This would be the Short I would have entered, with my Long being $1465. Wayne chose to be more aggressive by playing a closer Bear Call spread.

Wayne's Bull Put spread on the bottom is close to what I would have placed. He chose a $1365/$1360 spread whereas based on support at $1360, I would have chose a $1360/$1355 spread. I am not saying what Wayne did was wrong...each trader plays these based on their own trading goals and risk tolerances. Wayne chose a much more aggressive (and higher paying) Iron Condor than I would. Let's see how he does and if his play works out for him! Good luck Wayne!!!

Happy Trading!

Ho Hum...

Well Traders, it was a Ho Hum kind of day. The $NDX was down in early trading only to end up for the day a little over 5 points. Tomorrow is a short day, the markets are closed for Thanksgiving, Friday is a half day (and who the hell is going to be trading that day anyway), then comes the weekend. So I will have some really good days to burn off some time value from this play. I'll be curious to see where it ends up on Monday.

Here's the chart:Nothing really earth-shaking, but the MACD is falling, indicating some downward pressure, and the STO is so overbought that there has to be a down day or two imminent very soon.

Ideally, I'd like to see the $NDX fall to the lower support line in the channel (and even break through indicating a top has been reached), which will give me some breathing room. We'll see what the future holds.

Happy Trading and Happy Thanksgiving!

New Resistance?

Well Traders, the $NDX has been kind of waffling around this new level for a few days. This could be just pre-holiday boredom, or perhaps a new resistance level has been created. The chart shows the new resistance line and the completely overbought nature of the $NDX, as well as the MACD showing signs of downward pressure. This will bode well for my trade as this is a short week due to the Thanksgiving Day holiday on Thursday and shortened markets on Wednesday and Friday. So, this is virtually a FREE week for my time value to be burned off. So, as long as the market doesn't go nuts the next few days, my trade should be looking fairly good beginning next week.

Ideally, I'd like to see a fall-off towards the bottom of the Ascending Channel for some extra protection, but let's see where this goes.

I'll probably have one more post tonight, then take the next few days off for the holidays.

Hope you Thanksgiving is a wonderful one!

Happy Trading!

Learning From Your Mistakes

My Father always told me, "you'll learn more from your mistakes than your successes." So here is a look at what went "wrong" with November's trade.

Today is Options Expiration day for the $NDX, and although I am already out of my November Iron Condor (for a profit), I think it is vital to review the play and see what I could have done better.

Here is today's chart:

As you can see from the analysis (click to enlarge it, sometimes twice, then use your "back" button to return to the Blog), the index is moving perfectly in the Ascending Channel. Now, I chose to use a strict numerical distance based on the index price on my start date (250 points, 125 up, 125 down) to place my trade. Quite frankly, I felt 125 points would be sufficient (it wasn't) for a successful play. Upon reflection, had I used the channel as a guide, I would have seen the $1,850/$1,875 Bear Call should be safe for the top based on the channel and the expiration date. I was counting on very strong resistance at $1,750 and $1,761 based on previous, unsuccessful attempts to break through. Unfortunately my resistance points did not hold, so that threw my trade a wrinkle.

For January's trade, I will be more diligent to pay attention to what the technical analysis is telling me, then see if the trade is worth it. If the market is still this "hot," it may be worthwhile to wait for it to consolidate into a trading range which is more easily defined, then place an Iron Condor trade. If I am looking at $350-$400 point spreads because the market is uptrending so strong, perhaps that is NOT the time to be in Iron Condors? Maybe I need to say, "If I can't make $3,500 safely with less than a $300 point spread (i.e. technically showing the spreads are "safe" based on support and resistance, channels, etc.), then perhaps I should be looking elsewhere to invest?"

Happy Trading!

Rollin', Rollin', Rollin'...

Well Traders, today started out beautifully with the $NDX dropping to below $1,760. I felt that the top I anticipated due to the STO was about to come true and a rollback was in motion.

Boy, was I wrong!

The markets took a huge, and I mean HUGE swing (up 100 points on the Dow in 20 minutes), and I was left to make a snap decision once the $NDX hit my first roll point of $1,785. I could have done one of several things: 1) take my loss and exit the trade, 2) close my Short and let my Long run, or 3) roll the Upper Leg and try to salvage the trade.

I didn't feel it was necessary to close the trade altogether because there was still plenty of time left, so that ruled out #1. #2 is very tricky. A run-up like this may lead to a sell-off due to profit taking, or fear of a 52 week high so I wasn't ready to try closing my short and letting my Long run. So that left #3. I rolled out from my 1825/1850 position to a 1850/1875 position. I did this using 16 contracts which will basically cut my profit from $3,800 to about $1,600. I certainly am not happy about this and quite frankly, perhaps with such a strong trending market, I'd be better off with Calls than an Iron Condor. I certainly could have made some serious cash over the last few days with $NDX Calls when the index shot 85 points in about 8 trading days!

I know the Iron Condor is better played in a neutral, or less volatile market, which this is not, but the whole purpose of this is to try an achieve a monthly return on my money in order to achieve $1,000,000. To do that, I should play every month, regardless of conditions. Maybe this is a foolish position to be in, but I believe you should be able to be successful every month by playing wide spreads. Perhaps my time frame is wrong? Perhaps I need to be playing on 4 week trades with more contracts and wide spreads instead of 6 week trades? I don't know yet, but I am willing to try soon to find out. Honestly, I thought 125 points was plenty far, especially considering I had some very tough resistance at $1,750. Well, we all know how that turned out.

Anyway, like I mentioned yesterday, there is no resistance for a long time here, so that is a concern of mine. This market is just crazy...housing sucks, economic data isn't great, debts are high, options dating scandals abound, and yet the market just zooms up. I guess it is par for course and I know I am not alone.

I need to regroup here and have a plan of action if this market stays en fuego!

Happy Trading!

Breakout!!

Well Traders, it finally happened. The Huns of the $NDX broke through "The Great Wall of $1,750" as well as "Helm's Deep" of $1,761. Now, there is no resistance in the foreseeable future and the $NDX should be able to run at will from here. That concerns me.

As of now, my December trade is only slightly negative. There is some major economic announcements this week that may make or break my position. Hopefully, it will help me, not hurt. We'll just have to wait and see.

Here is the chart with today's breakout:

I need to be particularly dilligent with my roll point. Since I am still over 4 weeks away from expiration, if the market shoots up I may close my Short position on my Bear Call and let the Long position run because right now, may be the start of a major move upward. So, if that is the case, might as well take advantage of it with my Long.

I am still a little bit away from my Upper Roll Point, but another big day will get me there fairly quickly. The only thing that may be in my favor is the STO, which is Overbought, and may signal a downturn is ahead.

Happy Trading!

The Assault Continues...

Well Traders, the Huns of the $NDX have been relentless. Today, the index moved up 10 points to close above $1,750 at $1,751. Fortunately for me, the weekend will give pause to the battle raging (and burn some time value too!) and allow the "Great Wall of $1750" and "Helm's Deep" of $1761 regroup and hopefully, repel any assault next week.

Here is the chart:

As you will see, the pink oval has highlighted the last four days of battle with my Strong Resistance point. While the barrier has been breached, for now it has not been overrun. That is good. I need for this level to maintain resistance for a few more weeks to allow the time value to burn off and the trade to become profitable.

You'll also notice how the last few days are closely riding the lower support line for the Ascending Channel. This may indicate that $1750 and even $1760 may fall. However, with STO high and beginning to fall, I may get lucky and have this run-up lose steam and fall away, which would be sweet!

So far things are okay. They could be better, and they certainly could be worse. Let's see what next week brings.

Enjoy your weekend!

Happy Trading!

Double Top or Reloading?

Well Traders...an interesting day to say the least. The $NDX laid siege to my "Great Wall of $1750" and breached easily in the early going. Then the market laid siege to "Helm's Deep" and went as high as $1760 before the Hun were repelled once again.

I LOVE the fact that my resistance points while breached intraday, have held their ground, just as I set up with my trade. As you will notice, the falloff was pretty good today. The index is still within its Ascending Channel, so while today was Bearish, the overall trend remains Bullish.

You will also note that the STO is Overbought and has begun heading down. That is even better for the Condor as more downward pressure will start increasing my profits. I did notice that even with the early morning upward pressure, the "loss" was not increasing that much meaning that the Bull Put was keeping pace and the increase amount wasn't enough to affect the overall trade due to the distance to the Bear Call.

I would LOVE for another down day before the weekend which will give me two "free" days in which to burn off time value.

This may also be a "Double Top" pattern formation. Here is the one-year chart on the $NDX:

If this is indeed a Double Top, then we are at the beginning of a pretty major index decline on the $NDX. Personally, I'd be happy as a clam if it just started trending between my two horizontal support and resistance levels. That would make trading this pretty sweet! On the downside, this could just be a reload in the channel preparing for another run up. We'll see.

Happy Trading!

Battle for Helm's Deep ($1,760)

Well Traders, there is a battle raging on the $NDX. Today, the "Great Wall of $1750" was breached intraday and that concerns me. I only have one more line of defense (around $1,761) to slow this advance before I will need to think about making some adjustments. It feels like the "Battle of Helm's Deep" from the Lord of the Rings epic. I am drawing my "line in the sand."

The day started great with the markets down and my Condor seemingly getting a reprieve. Then around 2 PM, when the Dem in Montana was declared the victor, and President Bush announced that Don Rumsfeld was resigning, a spark was lit and away we went!

Fortunately, the "Great Wall of $1750" held once again as the $NDX finished at $1,749.75. The index has breached this wall twice in two days, so I am not sure how much longer it will hold.

I have noticed a possible new trading range which I have highlighted in light orange. It may be nothing, but the index has seemed to rattle around in there. I'll keep this box until a breakout occurs.

I am still $35 away from my first roll point and at this pace, I may get there by the end of the week....ugh, NOT what I had hoped for! Hopefully, we'll get a couple of down days before the weekend which will allow me to burn some time value off. I am also still over $70 points away from my upper strike price ($1,825) with about 5 weeks to go, so with earnings season winding down, we'll see if we can keep the dogs at bay and pull out a winner for December.

Happy Trading!

The Great Wall of $1750

Well Traders...the Barbarians are at the gate! The $NDX has been en fuego the last two days, and today was somewhat precarious. The index moved up to $1750, and even broke through for a moment before falling back again. Why is this significant? Look at my original chart for my December trade:

You'll see that when I set up this trade, $1750 was identified as Strong Resistance. This was important because it identified an area that would help my trade remain "safe." If the index breaks this level, then I will need to be very cautious about more upward movement. Either a roll-out or closing a leg may be appropriate should my $1785 level be approachd soon. My hope is that, the index will fall off yet again, and head back down towards support. From there, I would love for the $NDX to become range-bound for a few months (between my Strong Support and Strong Resistance levels). That would give me an easy area to trade in.


Happy Trading!

Closed November's Condor...

Well, Traders...I learned a valuable lesson today. How to lock in your profits near the end of your Iron Condor trade. MassMutual Financial Group has a saying..."You can't predict, but you can prepare." Well, I wasn't as prepared as I wanted to be in November.

The trade was still very profitable, and I NEVER complain about profitable trades, but I did not set in some stop-losses to "lock-in" my gains in case the market made a major swing, which it did yesterday and today. So, note to self, if you are deeply profitable a) get out and be happy or b) set stop-losses to get out if things start to move against you.

Of course, I could have waited to see if the market pulled back tomorrow, but if it continues its bullish run, I could have turned a profitable trade into a negative trade and what sense would that have made? As of this moment, the $1750 strong resistance level is holding, we'll have to wait and see if it repels the Huns knocking at the gates or not...stay tuned!

Happy Trading!

Answers to some questions...

Hello Traders. Today and tomorrow should be VERY interesting with the markets and the elections. While the election should be finalized overnight, and the control of Congress be known in the morning, I will be curious to see if any early returns with GOP candidates winning moves the market up, and with any Dem candidates winning moving the markets down.

I have received emails from several of you who are following my blog (thank you!), so I thought I'd post this one and encourage all of you to post comments or questions on this blog. It may be a question that others want to ask.

Question 1: Are you using the NDX exclusively, or will you be doing Dec trades on the SPX and/or the OEX as well? How do you decide which one to trade in a particular month?

As of now, I only trade the $NDX. Why? I don't know...it seems like it is "richer" for less contracts. It is also more volatile and dangerous, but not as dangerous as it was in 2000 & 2001.

Question 2: How do you manage your portfolio to provide 6 weeks for the iron condor trade each month?

Well, no matter how long the trade is, the margin is the same. But I believe you are asking about the overlap. I have enough in my account to be in 2 1/2 trades at any one time. What I mean is that there is enough capital in there if I have to roll one trade (with a 50% increase in the contracts). There really should never be a time that you have to roll two trades simultaneously.

Question 3: Your graph on the blog shows the Dec expiration for the 21st. I thought it was on the 14th. Which is correct?

That is correct. Remember, unlike the $SPX and the $OEX, the $NDX expires on the third Thursday, not Friday. This was an unusual month in which it starts on a Friday, so the normal options expire a week before the $NDX.

Question 4: Do you use the Delta at all to determine when to roll or exit a trade? I remember that Michael used this greek.

I actually look at the profit/loss on the trade that is in trouble. I figured that at around 40 points greater than 15 days to expiration, the trade may still have a little profit or breaking even and I can roll out and still maintain the integrity of the trade. Michael Drew uses a delta of .25-.30 which is fine too. Everyone will find their own trading style that they feel most comfortable with.

Question 5: If you are building a contact list for the blog, will you be sending out an email each time you add something, or do I/we just need to check it every night?

No emails...there is enough spam out there. Just check back from time to time and see how I am doing.

Question 6: How did your iron condor trades do for October, with the unexpected steep climb in the indexes? I ended up taking the conservative route and rolling up both the spx and rut, and lost money in the process.

October was tough. Tough more for the fact it was a narrow trade for the $NDX (only 175 points), and I did roll out once. Which is why I do much larger spreads (over 250 points) from now on. I'd rather be safe and less stressed, then hanging on every moment. Besides, my "conservative" strategy should get me to $1,000,000 in under 5 years. Certainly nothing wrong with that!

Happy Trading!

Well THAT was interesting!

Well traders, nothing like a HUGE day right out of the gate to make things exciting. The $NDX soared over 28 points today on M&A excitement, plus I am sure the run up on all indexes was exacerbated by some very unhappy Bears who had to do some short-covering (Sorry TraderTim) !

So, what was the damage? Actually, not much. I am still over 50 points to my upper roll point (1785), and the $NDX will have to break through some tough resistance at $1750 to get there. I am hoping this was just some pre-election excitement and that it will hit resistance and gently fall off the next few days to around $1700. That would make me a happy camper. However, if more "irrational exuberance" is shown on the $NDX, I'll be ready to roll the trade.

My December Condor is still plenty safe. I am still over 95 points to my upper strike and over a whopping 160 points to my lower strike, so no worries. Yet.

Happy Trading!

$50k + Iron Condor + 6 Years, 6 Months = $1,000,000

So here is the layout on how starting with $50,000.00, you can achieve $1,000,000 in less than seven (7) years.

We start with 5 contracts worth $12,500 in margin, and in which each contract will yield $350/month. Therefore, starting with 5 contracts, we are yielding 5 x $350 = $1,750/month. Once we reach $75,000 in the account (we have added $25,000), then we increase from 5 contracts to 10, worth $25,000 in margin and yielding $3,500/month, etc., etc.

There are some key concepts here.

1. ALL monies MUST be rolled into the account to grow. That means no disbursements, even from taxes can be taken from here. Monies WILL be paid out in the future.
2. Start with 5 contracts.
3. Once $25,000.00 has been added to the account, increase the size of your play by 5 contracts. Keep doing this until you are playing 100 contracts.
4. Once $1,000,000 is reached, you can take monthly payments of $35,000, yes, that is NOT a mis-print. 100 contracts yields $35,000/month, PLUS, you still have your $1,000,000 principal.
5. Play strategically. Don't get greedy and place tighter spreads to get a big pop one month...if it goes bad, it will take you months to recover.
6. Play smart. If the trade begins to look like it is going to go sour, either roll out, or get out! Better to break even then take a big hit, and when you are playing many contracts, a big hit could be devastating.
7. Remember, you are trading at your own risk. This blog is just an account of what I am doing. Do what YOU feel like doing. My trades are not recommendations or endoresements.
8. Remember the BIG PICTURE. We are trying to get to $1,000,000 by being disciplined, patient and prepared. If we are successful, the $1,000,000 will be here before we know it.
9. Pay your taxes! If you have a tax "burden" on $35,000/month, I can think of worse problems to have!

Happy Trading!

Takeoff!

And awaaaaaaay we go!

Well Traders, I executed the first Iron Condor to Riches for December. Now the fun begins! I have included a graph of the $NDX with some of my notations on it so you can follow along. As always, click on an image (sometimes twice to make it clear) to enlarge it, then "back" on your browser to return to the blog.

As you will see, the $NDX is in a serious uptrending channel that looks like it will blow through my upper spread before the expiration date. However, because of the strong resistance level the index hit and fell away from (for the fourth time this year), I believe it may have trouble piercing that and continuing. There is always a chance it may break through, but this is part of the planning process. You will also see I have indicated my first roll points (1785 & 1615) as part of my exit strategy. If the index hits either of these points with greater than 15 days to expiration (i.e. before 12/6), I roll my trade.

You must ALWAYS have an exit strategy with any investment. "Plan your trade and trade your plan!" To not have this is a recipe for disaster!

So having this graph set up, all I need to do is watch what goes on and be prepared to move if the trade gets in trouble. Pretty simple really. Since the spreads are wide, it will take some serious market action to get to either point, but that does NOT mean I can get complacent. Always watch your trades, and have alerts set up to warn you in case you are out and about and something happens. To quote MassMutual Financial Group..."You can't predict, but you can prepare."

So here is a look at my Iron Condor Analysis Sheet I created on EXCEL. It has formulas set up to calculate everything I need, every time. Beats having to do it by hand every month...what a pain that would be. So as you see, all the info I need to execute this trade is on here. The strike prices, the credit amount, the risk/reward, my exit points by dates, my profit range. Pretty comprehensive if I do say so myself! Anyway, this sheet makes life pretty easy for me. once the trade is completed, I fill in the bottom (which you can't see) and grade the trade based on success/failure. I also include my starting graph (the one on the top), and the finishing graph (the one printed on the day I close the trade) to see how I did, and keep in a journal for future reference.

For those of you who like to "gamble" a little more, here is my risk/reward analysis for December. this shows the spread distances and what the potential credits for each spread are. You will see the tighter the spreads, the more lucrative the trades can be. It is actually a strange risk/reward sequence because the tighter spreads are far more rewarding in that they pay more than they can lose, but you'll need to be in the clamest of seas to achieve that treasure! I believe it is less stressful to slowly accumulate wealth, then risk disaster for a few more bucks.

One final observation. I am ammending one of my "rules" to state that each trade will be executed on the Thursday (not Friday) 6 weeks prior to expiration. I found a substantial time value drop from yesterday to today. I think that is because the $NDX is a Thursday option expiration, not Friday.

Hope you all have a great weekend, and check back from time to time to see how the trade is going.

Happy Trading!

All systems go!

It's GO time Traders! Before I execute my trade tomorrow, I briefly wanted to go over a couple of charts of the $NDX so you can see where my thought process lies before December's trade.

Remember, we want the price of the $NDX to fall in-between our spreads by the third Thursday in December, that gives us maximum profits. So, the key to playing the strategy correctly, is to be where the market won't be. That means being a little dilligent, a little creative, and a little Miss Cleo (who couldn't see her own arrest coming ironically enough).

Let's look at the 1-year chart courtesy of INVESTools:


You can see the full size image by clicking on it (sometimes twice), then hitting your "back" button to return to the blog.

As you see, the $NDX has been on a tear since July. This is NOT the ideal condition for an Iron Condor, but really my spreads are so far apart that I should be able to handle even a strong trending market like this. The dream scenario is like November through April, that sweet range-bound flat channel. A market like that could allow you to play tighter spreads for more money and that may be a strategy to consider in the future...but not now. All I am looking for is the same spread each month being conservative, all the while looking at the BIG picture down the road.

Let's look at a closer picture since the channel began back in August:

So this is the set-up for December's trades. We recognize a very strong uptrending channel, two strong support and resistance levels, and our expiration date line. So now, at about 2 PM on Friday, I'll enter my trade based on the current $NDX price, then set my strike prices accordingly. After that, I'll update this chart showing my profit range, as well as my "danger zones," i.e., the exit points of this play based on time.

By the way, tomorrow may be very interesting in the $NDX since it looks like the index may be breaking out of its channel (and falling away from that strong resistance level).

Happy Trading!

T-minus one day and counting...

Well, we are on the eve of the very first Iron Condor to Riches play and I must say, I am extremely excited at the journey ahead. I hope this blog will inspire you, as well as give you insight as to my methodology in trading this system.

This may not be a daily blog. The reason for that is because my spreads will be so wide, there may not be much action for days in-between. But fear not, I will provide as much info as is necessary, with much "filler" to bore you.

Keep in mind that, even though I trade for a living, I am not a "professional" trader in the sense I have no Series 7 license, hence I am not a stockbroker. Nonetheless, I am of the opinion that stockbrokers are salespeople. They tote the company line, tell their clients what stocks the company analysts are pushing, and get paid by churning out commissions. At this time, I do not charge for any advice or recommendations I am giving. I am doing this in the spirit of information and learning. Therefore, I will not, nor cannot be held responsible for any losses (or gains) made off what is written here. You are adults, and as adults you understand investing carries risk. You are responsible for your own due diligence so what I write here really isn't an endorsement of anything, just a journal of what I am doing, not what you should be doing. Clear?

Okay, enough of that mumbo jumbo, let's get to the heart of the matter.

Let me lay out the goals of what I am going to do...my "business plan" so to speak.

Goals

• Consistently generate profits from an Iron Condor strategy w/ 100% success


• To roll each month's profits into my account, growing the capital


• Using increasing capital to allow for larger sized trades in subsequent months


• To achieve $35,000 in monthly distribution by March, 2010.


• To achieve $1,000,000 in my account by March, 2011 at which time, I will begin taking money out of my account

Rules

• To plan every trade, and trade every plan


• Exit strategies will be established BEFORE any trade is entered


• Exit strategies will be adhered to without fail EVERY TIME


• All Iron Condors will be entered the Friday six weeks before the expiration day


• If 90% or more profit is achieved before 1 week to expiration, exit the trade


• Play conservatively and consistently every month


• Play to WIN

Tomorrow, I'll give you some charts and EXCEL sheets on the very first play so you can see my thought process and maybe trade your own along the way. I encourage you to leave your comments and suggestions...as it will be nice not having to "go it alone."

Happy Trading!

The Slow and steady Road to Riches

Hello Fellow Traders:

So here is my first entry into what I expect to be an exciting journey into making $1,000,000 using an "Iron Condor" strategy. For those of you who don't know what this is, it is an advanced options strategy. I learned this process as an INVESTools PhD. student and for those of you considering trading for a living, I would highly recommend their program. Let me know if you are interested as I can arrange to have Jason Smith, my INVESTools contact, take you through a demo of their web-based software. Email me here: GSOTrojan@aol.com

My first play for my Iron Condor (December's contracts) will be this Friday, November 3. This will be just over 6 weeks from the December expiration date which is enough time to make the contracts worthwhile, but not too far out in to be unable to anticipate the market's move. The key to the Iron Condor is being able to anticipate an index's ($NDX, $OEX, $SPX) move within a 6 week time frame.

What you are looking for is time value to act in your favor, by burning off quickly. This is a concept which is normally against "normal" options trades as time value is usually your enemy. In an Iron Condor, as time value burns off, your play becomes more profitable until the last day (the expiration day) at which time your trade meets maximum profitability as long as the index price falls within your price targets. Yes, you can always exit early if you are happy with your profits and don't want to risk any sudden market moves when you get close to the expiration date.

I will share my trade on Friday with a graph layout of my chosen index, as well as my analysis sheet showing my strike prices and my exit strategy.

"Plan your trade and trade your plan."

Should make for a great ride...hope you'll come along!