Monday, December 5, 2016

Tuesday's Prospects

Screening of the Monday, Dec. 5 markets identified no prospective high options volatility trades.

Seven symbols from my pool have sufficiently high implied volatility or close to it to warrant further analysis:

COST
FXE
GDXJ
TBT
TLT
UNG
XLU

Each is disqualified: COST because earnings are near; FXE, TLT and UNG because I already hold positions; GDXJ and TBT because they they have the same underlying as positions I hold; and XLU because I recently passed on it after analysis.

Although I've been unable to find positions under my guidelines, I shall also consider trades posted on Dough as part of my current learning project.

I have suspended work on my small lots shares approach through December until I determine how to move forward, given the poor trading results of July through October. See Small Lots Approach: Analysis 7/2016 through 10/2016.


-- Tim Bovee, Portland, Oregon, Dec. 5, 2016


A Field Guide to Lies: Critical Thinking in the Information Age
by Daniel J. Levitin


Monday's Outcomes

I analyzed XLU but declined to enter a position.

By Tim Bovee, Portland, Oregon, Dec. 5, 2016


JFK and the Reagan Revolution: A Secret History of American Prosperity
by Lawrence Kudlow

XLU Analysis

Utilities SPDR ETF (XLU)

I shall use the JAN series of options, which trades for the last time 46 days hence, on Jan. 20.

Implied volatility stands at 20%, which stands in the 51st percentile of its annual range and the 44th percentile of the most recent rise. The price used for analysis was $46.68.

Here is a chart of XLU's daily implied volatility since late August.

XLU Implied Volatility, 8/25/2016 to 12/5/2016

Although the implied volatility's annual range, must barely, means my guideline that implied volatility be in the upper half of its movement for the past 12 months, the most recent range is somewhat lower.

And the implied volatility movement is ambiguous. Does the decline over the last few days mean there is no way XLU will reach the 50th percentile? Or is it a pullback preparatory to a further rise?

In either case, it's not reasonable time to enter a short options play, which relies on a decline in implied volatility for part its profit.

Decision for My Account

I am declining to enter a position on XLU because of the trend in its implied volatility.

-- Tim Bovee, Portland, Oregon, Dec. 5, 2016


Visual Guide to Elliott Wave Trading
by Wayne Gorman

Monday's Agenda

I shall look at XLU as a volatility play. I'm deferring analysis on the week's four potential earnings plays until Wednesday for CIEN, COST and HRB, and Thursday for FNSR.

By Tim Bovee, Portland, Oregon, Dec. 5, 2016


Black Swan Start-ups: Understanding the Rise of Successful Technology Business in Unlikely Places
by Sami Mahroum

Sunday, December 4, 2016

The Week Ahead: International trade

The week after the monthly jobs report is always a slow one in economics. There is but one major economics report coming up this week: International trade, on Tiuesday at 8:30 a.m.

Leading indicators (in descending order of importance):

The interest rate spread between 10-year Treasuries and the federal funds rate, reported continually during market hours.

The M2 money supply, at 4:30 p.m. Thursday.

Manufacturers' new ordrs for consumer goods and materials from the factory orders report at 10 a.m. Tuesday.

The S&P 500 index, reported continually during market hours.

Average weekly initial claims for unemployment from the jobless claims report at 8:30 a.m. Thursday.

Index of consumer expectations from the University of Michigan consumer sentiment survey at 10 a.m. Friday.

Manufacturers' new orders for non-defense capital goods from the factory orders report at 10 a.m. Tuesday.



The Rise and Fall of American Growth
by Robert J. Gordon

Saturday, December 3, 2016

Monday's Prospects

Screening of the Friday, Dec. 2 markets identified five prospective trades.

I'll look at four stocks -- CIEN, COST, HRB and FNSR -- as potential earnings plays.

XLU qualifies for further look based on its implied volatility compared to its annual range.

I shall make final trading decisions on Monday, Dec. 5.

Four symbols with implied volatility in the upper half of the annual range are eliminated from further considerations for reasons unrelated to volatility.

I hold positions in TLT and FXE, and TBT and GDXJ duplicate sectors among my holdings.

EWZ and UNG are close to having sufficiently high volatility in relation to their annual ranges. However, I hold positions in both.

I shall also consider trades posted on Dough as part of my current learning project.

I have suspended work on my small lots shares approach through December until I determine how to move forward, given the poor trading results of July through October. See Small Lots Approach: Analysis 7/2016 through 10/2016.


-- Tim Bovee, Portland, Oregon, Dec. 3, 2016


Book of Value: The Fine Art of Investing Wisely
by Anurag Sharma


Friday, December 2, 2016

Friday's Outcomes

I exited two losing positions that trade for the last time on Dec. 16: FB and T.

By Tim Bovee, Portland, Oregon, Dec. 2, 2016


Penny Stocks: How to Become a Pro at Trading Penny Stocks
by David Nelson

Friday's Agenda

Both of my prospects -- XLU and IYR -- are showing implied volatility levels this morning below my guidelines, and I am passing on them without further analysis. See Friday's Prospects for details.

I'm emulating Dough this month as a learning exercise, and if their team places trades I find interesting, I shall follow them.

With expiration of the DEC options 14 days away, I shall complete exits of my losing positions: FB and T.

By Tim Bovee, Portland, Oregon, Dec. 2, 2016


Weapons of Math Destruction: How Big Data Increases Inequality and Threatens Democracy
by Cathy O'Neil

Thursday, December 1, 2016

Friday's Prospects

Screening of the Thursday, Dec. 1 markets identified two prospective high options volatility trades.

I shall make final trading decisions on Friday, Dec. 2.

Seven prospects in the pool have sufficiently high implied volatility to qualify for further analysis:

COST
EWZ
TBT
TLT
XLU
FXE
GDXJ

Out of them, I shall analyze XLU as a potential trade.

I already hold positions in EWZ, TLT and FXE. TBT and GDXJ are close enough to holdings to be disqualified. COST publishes earnings Dec. 12 and I shall wait until closer to that event to consider it.

Two are close to having sufficiently high volatility to qualify.

ORCL
IYR

I'll consider IYR for a potential trade. ORCL publishes earnings on Dec. 15 and I shall defer consideration until closer to the date.

I shall also consider trades posted on Dough as part of my current learning project.

I have suspended work on my small lots shares approach through December until I determine how to move forward, given the poor trading results of July through October. See Small Lots Approach: Analysis 7/2016 through 10/2016.

-- Tim Bovee, Portland, Oregon, Dec. 1, 2016


The Business Blockchain: Promise, Practice, and Application of the Next Internet Technology
by William Mougayar


Thursday's Outcomes

I exited a volatility play on XLV for a profit. I entered a position on GLD based on a Dough trade.


The Art of Risk: The New Science of Courage, Caution, and Chance
by Kayt Sukei

GLD Analysis

SPDR Gold Trust (GLD)

The idea for this position came from trader Nick Batista at Dough. The structure produces a higher risk/reward ratio in return for wide wings on the iron condor and also has a lower implied volatility percentile than my guidelines allow.

The position, although hedged on both sides, has a long bias.

Like Nick, I shall use the JAN series of options, which trades for the last time 50 days hence, on Jan. 20.

Implied volatility stands at 19%, which stands in the 35th percentile of its annual range. The price used for analysis was $111.73.

Iron condor, short the $117 calls and long the $127 calls,
short the $110 puts and long the $100 puts,
sold for a credit and expiring Jan. 21.
Probability of expiring out-of-the-money

JANStrikeOTMΔ
Upper11778.1%24
Lower11059.1%38

The premium is $2.38, which is 24% of the width of the position’s wings.

The risk/reward ratio is 3.2:1.

Decision for My Account

I've entered a position on GLD as described above. The stock at the time of entry was priced at $111.75.

-- Tim Bovee, Portland, Oregon, Dec. 1, 2016



References

Tradecraft: Playing the odds to build winning stock market trades from options, a description of how I trade, can be read here.


Elliott wave analysis tracks patterns in price movements. StockCharts has a good explainer. The principal practioner of Elliott wave analysis is Robert Prechter at Elliott Wave International. His book, Elliott Wave Principle, is a must-read for people interested in this form of analysis, as is his most recent publication, Visual Guide to Elliott Wave Trading

Alerts


Two social media feeds provide notification whenever something new is posted.


Disclaimer
Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.
No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decisions for his or her own account, and take responsibility for the consequences.
License

Creative Commons License

All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.

Earns Prospects 12/5-12/9

Out of 97 earnings announcements by companies on U.S. exchanges from Dec. 5 through Dec. 9, six have sufficient liquidity to warrant further analysis and possibly a trade next week.


actionsymearns dateam/mid/pm
12/5TOL12/6am
12/7CIEN12/8am
12/7COST12/7pm
12/7HRB12/7pm
12/8AVGO12/8pm
12/8FNSR12/8pm

Three symbols presently have implied volatility in the upper half of their one-year ranges: CIEN, HRB and FNSR. Another symbol, COST, is within easy reach of that level.


A Complete Guide to Volume Price Analysis
by Anna Coulling

Thursday's Agenda

I have no entries on my desk based on my own analysis. See Thursday's Prospects.

I shall be following Dough during the the day as part of my education project and shall mimic their trades that I find interesting.

We're less than three weeks out from the expiration of the DEC options series. Time to exit the losers. I'll be working on that today.

Also, it's time for the weekly search for earnings announcements. Expect a post on that later in the day.

By Tim Bovee, Portland, Oregon, Dec. 1, 2016


The Volatility Smile (Wiley Finance)
by Emanuel Derman and Michael B. Miller