Boring Stocks bought and Cool Stocks Sold

Profitable trades and New Trades

I am a little bit long coming into the three day weekend, and I can't wait for next week. In reality, I am about flat P/L wise this week because of the recent market action. The tape is telling me that shorter term traders really want to short the /ES,but the bigger players still seem to be long. Something that does look interesting is a bond short, maybe a position in TBT. For example, I am thinking shorting the 66/67 call spread, but maybe a debit spread would be better into this low vol. As for the $19 strike price covered call in CLF it turned out well today. I was able to buy it on the move lower during the open, and it shot up. If anyone actually did the trade I would recommend taking it off, or you might get the stock called away from you. I also put on a downside trade in XRT and maybe XLF. Along with that, I somehow want to get short YHOO. Maybe a covered put position might work especiallyy if you want a good deal of positive time decay and want to hedge up some delta (I have put on 2 covered stock positions in 2 days). Just remember, it is the strategy that matters not the direction.

Major Markets Action and Odd Market Signals

Today ES tape action was really bearish until  when the cash markets opened and then the market rallied straight up. Along with this bonds were very bullish and didn't deteriorate throughout the whole day. The yen got a little weak when it was strong as the ES was falling. The Euro continued to be bearish, and it is continuing  its decoupling. Overall, the major markets are showing conflicting signals, but the ES seems really expensive especially compared to bonds and the euro. The really interesting part of the Euro decoupling is how bearish the euro is economic wise and market wise.  So, overall I am going to be flat to slightly long in my portfolio until we see a little more vol expansion.

New Position and Stocks of Interest

As for my entire portfolio it is totally flat. I have almost no directional risk, but I really rather not have any. I have some short premium on in VXX and a few vertical spreads. I am watching RHT and BBRY, possibly for some butterfly spreads (Earnings tonight and tomorrow).  For example, tomorrow I will be putting on a May expiration XLF 18/19 put debit spread.  Despite this, the past few days have been taking off winners, so naturally my new p/l has been negative. And to be honest I have had a very tough 1st quarter of 2013, but I am recovering. The only good strategy in this type of market is selling premium, but the lower the vol the riskier it gets. I will say it again the SPX is trading at 11% IV percentile. As for some other trades, I am putting  on another covered call in CLF. CLF fell to 15% today on a Morgan Stanley downgrade (stock down 15%). I will enjoy fading this move. I do not want to put on a short put because I want to limit the downside, and I would prefer to do the put in some other stock. Maybe the puts will be in BBRY if I don't do the butterfly.

Directional Risk

I finally was able to get rid of some of my directional risk with a JCP 1 strike OTM covered call. I would of done a short put, but I would prefer not to have another short put in my portfolio. Anyway, I do not think directional risk is a good thing when the market is acting like it is ready to fall. There is some very conflicting signals in the market about direction. The elimination of the short-term risk has hurt me a little, but It is more of a long term position. Despite this, my opinion is the SPX is way over priced compared to implied vol, but I am not going to try to predict when the market falls apart.

March 25, 2013 Opinions

I simple cannot believe this market. I have exhausted all possible longs (through options) in my portfolio, and I am still short 9.89 delta beta weighted against the SPY as for my options portfolio. I went ahead and shorted puts in VXX because of the high return on capital and my bearish  view of the market. I do prefer to be flat delta. I am bullish on VXX, SLV, P, BBRY, FXI, EEM, GRPN, SLV and ZNGA. I am bearish on the financials, bonds, SPY, Gold, GOOG, YHOO, Natural Gas, Oil, XLU, EWJ, TLT and etc. Most markets in general is just so expensive. The only really cheap major markets are agriculture products and some major currencies (especially the Euro). Bonds may become cheap if the market keeps rising, but I am not sure.

Strange Conditions

These market conditions are very strange. The ES is expensive compared to oil, gold/silver, EUR/USD, VIX, and it was expensive to bonds (bonds rose with the ES for a while but snapped into shape quickly). First of all, I am preparing for longs in the Euro, bonds, silver, oil, COP (Conoco Philips), and the yen. I have given up any hope of stock trades for the time being. The only exception to this is my long in FXY (Yen). I will probably execute my bias through vertical spreads. My personal trading flaw right now is my interest in shorting the ES. This is a dangerous move with a ton of money flow into stocks. The VIX does look really appealing since it is so cheap. (the vix was up today .37% on a  large up day in stocks). Lastly, the dollar is rising with the es which is very odd. Overall, most correlation are pointing to market fear. Thus making the ES very expensive, but I am not very trusting of non-options directional plays (there is opportunity in some pairs though).

March Decoupling

March 1, 2013