Although we penciled-in some downside action this week, it remains to be seen if the bears’ latest fight turns into a brawl or another whimper. We have talked about some of the bearish signs that have appeared this week but also said the damage has been minimal as the bulls continue to hold support (and the VIX).
As much as the talking heads and slick talking pros have said the market needs a 5%-10% pullback, we have mentioned we still see another 1%-2% upside potential and that a mini-trading range could develop until the next leg higher (or lower).
These types of environments can be frustrating and another reason why it’s not wise to short a dull market. If and when the 10% slide comes, we will be ready for it, but in the meantime it remains “a stock picker’s market”.
We have done well avoiding the pitfalls of overtrading and being impatient as we said February is always a tricky month to trade and that March could be volatile.
We have been mostly long call options since the beginning of last year and while we did nibble on a few put options at the beginning of February, we are 27-8 for all of our closed trades. Our Daily Portfolio is showing a gain of 154% and our Weekly Wrap is pushing profits of nearly 30%.
We have used “cheap” options for much of the year and by that we mean most of the premiums we have paid to place a trade have been under $1. When there is a clear trend, we will pay up to $2 for nearer-term options.
We do this to reduce our risk. Options that are priced higher than $2 can have big drawdowns if you losses are capped at 50% and there is major volatility. Under the same assumptions, this is also 3 or 4 “cheaper” option trades if you are buying 50-75 cent options. By doing chart work and homework, we usually don’t carry 50% stops on options under $1 because you can get “stopped out” of a lot of good trades by falling into this type of portfolio management.
We have mentioned our new subscribers keep tabs on other major options newsletters because they tell us how frustrated they were before they found us. Most option newsletters don’t have Track Records and most of them don’t take their own trades.
We don’t roll that way and why we keep our people as we continue to grow. We work hard to get our results and we care more about making you money than providing useless trades with no accountability. This is what a lot of the bigger boys do and why they care more about their numbers than yours.
We do have another New Trade today on a stock that is a current recommendation for our Weekly Wrap as well. Shares are pushing 52-week highs again and are the verge of a blue-sky breakout.
Shares are just south of $6 and could be headed to $8 by late April. If so, the call options we are targeting could return upwards of 350%. The current price on the option is 55 cents and they could be worth $2.50 if our Price Target of $8 triggers. There is heavy action in the trade so it is very liquid and the bid/ask is just a penny spread.
As we head to press, the Dow is down 36 points to 16,314 while the S&P 500 is off 4 points to 1,863. The Nasdaq is higher by 3 points to 4,310 and the Russell 2000 is up a point to 1,188.
Subscribers, check the Members Area for the New Trade and current updates!
Breaking News!!! Our World Wrestling Federation (WWE, $29.76, down $0.04) call option trade has officially been closed for a 203% return as we were stopped out of the remaining quarter of the March 30 calls (WWE140322C00030000, $1.40, down $0.30).