Longs Beware of the Vix!

Usually I have some wise man tape reading words, but today I do not (my terrible attempt at comedy). Anyway the markets are mixed you have some major stocks down (TSLA, XLE, GMCR), but then there are some stocks that are are strong (FB, AAPL, GOOG), but my watch list seems pretty mixed. The RUT and Nasdaq are leading and the S&P is simply following. I think we will see danger when no one expects it. Beware of the VIX! Until then wait for the higher vol to sell and stay small.

Considering tough markets......

 Take a look I talked a bit about tough markets:
http://www.ustream.tv/recorded/40894342

Calm down Strategic Traders

This is a miserable time for a lot of strategic options traders. The market is up 31% this year, and there have only been two occurrences from 1992-2012 of the market being up more than 30%. Also,  we have been parabolic in the S&P (we have gained 171.25 S&P points in the last 3 months or more than 10%). However, do remember that moves like this are extremely unlikely. In the last 63 years, the S&P is only up 2.5% or more in one day 243 times! This has to prove that strategic options trading works. The probabilities do work and volatility based trading does work. If you stay consistent with the way you trade the markets will turn around. Another example, would be selling calls in AAPL, BIDU , and AMZN in the last two years. These stocks were some of the technology leaders and had huge parabolic moves. However, selling the 69% OTM calls into strength and covering the trade after a couple of weeks in these three underlying's made $8,905.5 in two years, but buying the calls lost over $11,000. This proves the strategy; therefore, stick with what we (strategic options traders) have been always doing.

Sleep City S&P's

The S&P's/the market right now are sleep city. We had a 21 point down day and then a 21 point up day. The Vix is low and stocks are not moving. The only markets that have seemed to be moving a lot are bonds and Euro's. Therefore, I am flat delta. There is some serious strength in the market considering the last two days. I guess that should tell me to be long, but I don't see any huge amount of reasoning for it. That is especially true when volatility is low and I don't what to trade much short premium like I usually do. This makes it hard to find interesting opportunities. There are a few things such as EWW, GMCR, and EWZ for example, but that is all there is. In times like these it is almost impossible to be strategically diversified. Therefore, most of my positions are vertical spreads. I may implement some calendar spreads in maybe the SPY or IWM in the stock markets. Bonds (TLT) is interesting for a calendar spread and maybe some long call spreads. The major short premium plays remain in a couple gold and silver stocks (GDX and SLW mainly), and there are a few earnings plays that still may be out there. Overall, this is not a great time to be aggressive in your trading. The returns are simply no there. The way to play the market right now is stay involved but save your capital for better days.