Potential trade setup to consider

[Cutten]

Summary: if the S&P hits the 940 highs from earlier this year, start scaling into puts. If it happens I could see a move to 950 or even 1000, but think that's a good fade.

Reasons:

1. shorts and sidelines cash-rich investors will probably capitulate if we break the 2009 highs, causing a temporary spike in prices driven by short-term emotional/margin-call factors rather than any underlying factors. Such capitulation moves are usually a good fade.

2. we've rallied a LOT in 6 weeks - biggest since the 1930s in % terms. One more week would make it extremely overextended.

3. shorts/sidelines guys haven't capitulated just yet, and longs aren't crowing yet, so I think it's worth waiting

4. long-term fundies still suck enough to generate bad newsflow later this year.

IMO this works both as a short-term and long-term trade. However, the short-term should pay off quicker, with more bang for buck and less risk. I would start buying some puts at 930ish and then try to put the bulk of them on once I see a 1-2 day major spike up and media capitulation to the bull side.

If this works you could make 5-10 times your money on a limited risk position.

 

[NY0BScalper]

I very much like this idea. However, if I may play at least some of my position in the underlying instead of puts unless I see really attractive pricing.

Kudos.

 

[alexfleming]

Hey Guys & Girls,

Thanks for the info have been meaning to get on to these forums for ages as everyone keeps telling me there's tons of free info & tips, some of which is actually worth knowing!

Anyway, really just wanting to say hello to everyone on here and introduce myself.

My name's Alex and am guessing and hoping we share similar interests in terms of trading markets etc etc so am glad I've found this forum with hopefully like minded individuals who may be able to share and exchange tips and info with me???

Hope to hear back from some of you out there in cyberspace, so keep me posted. For now, however, cheers for reading...

Regards
Alex

ps - It's a lovely Sunday afternoon here so should really be enjoying the weather but this forum is pretty addictive!!! (-;

 

[riskfreetrading]

Cutten:

I like the way you write and explain things. BUT, I have never seen them work. The last one I read from you was about bonds. You were eloquantly explaining why bonds were cheap and heading higher when they were trading around 115 area back in December-January, and continued explaining the bullish case.

Bonds are now in the 101 area. The lowest since and during your explanations.

So, what went wrong, so that we can see if there is something wrong in your current analysis?

I think you are knowledgeable, but I do not understand why you get it wrong. You must have deep pockets to stay alive if you are really following your own analysis.

 

[piezoe]

Quote from NY0BScalper:

I very much like this idea. However, if I may play at least some of my position in the underlying instead of puts unless I see really attractive pricing.

Kudos.

Usually with the more liquid issues, if you go out deep and far enough you will find a premium minimum that is reasonable. I like to go deep and far out with puts, and if i can't do that at a reasonable premium, will just give them a pass.. Going deep, of course, gives you a reasonable delta so you get say 80% of the stock movement translated into the put.

 

[noddyboy]

Quote from Cutten:

Summary: if the S&P hits the 940 highs from earlier this year, start scaling into puts. If it happens I could see a move to 950 or even 1000, but think that's a good fade.

Reasons:

1. shorts and sidelines cash-rich investors will probably capitulate if we break the 2009 highs, causing a temporary spike in prices driven by short-term emotional/margin-call factors rather than any underlying factors. Such capitulation moves are usually a good fade.

2. we've rallied a LOT in 6 weeks - biggest since the 1930s in % terms. One more week would make it extremely overextended.

3. shorts/sidelines guys haven't capitulated just yet, and longs aren't crowing yet, so I think it's worth waiting

4. long-term fundies still suck enough to generate bad newsflow later this year.

IMO this works both as a short-term and long-term trade. However, the short-term should pay off quicker, with more bang for buck and less risk. I would start buying some puts at 930ish and then try to put the bulk of them on once I see a 1-2 day major spike up and media capitulation to the bull side.

If this works you could make 5-10 times your money on a limited risk position.

I like this trade idea, but why not sell calls?

 

[alexfleming]

hey guys & girls,

have been on this forum allll day and in effect, have missed the beautiful sunny day, so am hoping I get some good contacts out of it all...

warmest regards
alex

ps - thought i'd start the sharing with everyone, from this guy who's been trading for years and always churns out loads of good free stuff that he sources. he was the one who told me to sign up to this forum as well as a few others.

have been following him for a while now, maybe someone else knows him, his name is Dominic Nardone and makes plenty as a forex day trader. not sure if i can give out his website on here though???

can someone advise, especially if they want it...?

 

[Cutten]

Quote from noddyboy:

I like this trade idea, but why not sell calls?

Because if right you will make far less per unit risked than you will with puts. And if you are significantly wrong, you will lose a lot more with the calls.