August 14th, 2009
"This book provides a realistic look at trading commodity options without the textbook theoretical approach trotted out in many options trading books. It is a valuable book for all option traders." ~ Your Trading Edge Magazine, in reference to "Commodity Options" written by Carley Garner
Chop, chop, TGIF!
Equities have been trading relatively violently between major support and resistance areas for some time. The choppy, yet directionless, trade has complicated speculation tremendously. As a result, many traders took much of the day off. According to our sources at the CME, there were approximately 10 locals standing in the S&P open outcry pit in late afternoon trade. To put this into perspective, on a busy day there may be as many as 160 and on a slow day somewhere in the 50's. A number below 20 is nearly unbelievable and would seem more realistic in a commodity that "nobody" trades such as oats...not the Big Board!
Stocks were able to shrug off bad news yesterday, but today was a different story. Although the latest inflation data was neutral, the Michigan Consumer Sentiment index was decisively pessimistic and equities quickly reacted. With the consumer being a large part of the economy, their lack of confidence in the recovery will act as a plow in the improvement.
Crude oil fell to its lowest level in two weeks and this most certainly flared the equity selling. Aside from energy stocks dragging the major indices lower, investors have been looking to crude price, specifically demand fundamentals, for hints in regards to the economic recovery.
Our bearings are a bit off on this market. We are looking for an early morning rally to bring the S&P to the 1026 area before the selling resumed. However, a rally wasn't in the cards. If our upside targets in the indices (1025 in the S&P, 1524 in the NASDAQ and 549 in the Russell)are going to be met, it will need to be early next week. Otherwise, it seems like a larger correction may be underway. In the meantime, we see critical support in the S&P near 985 with the next level being around 950. Our next support area in the Russell is still 549 with the next area being 524. NASDAQ traders should look for the next major support near 1525.
Futures traders, keep in mind that just because we don't put daily recommendations out on this newsletter doesn't mean that we can't help you with different and/or more aggressive strategies!
* Due to time constraints and our fiduciary duty to put clients first, the charts provided in this newsletter may not reflect the current session data. However, market analysis and commentary does. Charts provided by Track 'n Trade, Gecko software.
**Seasonality is already be factored into current prices, any references to such does not indicate future market action.
Please note: A mini S&P chart is used because it is better for charting purposes, but trade recommendations are based the full sized S&P unless otherwise noted.
S&P 500 Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading
Position Trade -
July 22 - Buy cheap August S&P puts. We like the 880's and the 885's, you shouldn't pay more than $6.50
July 15 - We like selling the August 975 calls, fills ranged from $7 to $9 today.
- July 28 - We recommended to sell the 925 puts for a little over $8 to take a bit of the heat off of the 975 calls
- July 29 - We recommended to buy back the 975 and sell the 995 to give the trade a bit more breathing room and lower the delta
- August 5 - We recommended to get into a more comfortable position ahead of the employment report by buying back the 925/995 August spread and selling the September 940/1045 spread for a credit of about $3.
Russell Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading
Position Trade -
Flat
Please note: A mini-NASDAQ chart is used because it is better for charting purposes, trade recommendations will denote whether a mini or full sized contract should be used.
NASDAQ Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading
Position Trade -
July 28 - Sell the e-mini NASDAQ at 1630 or better.
- August 3 - We recommended to buy an August at the money (1630 call) for about $600, this limits the risk of the trade to the premium paid for the option plus commissions and fees.
- August 10 - We like the idea of trying to take a profit on the futures contract near 1580.
- August 11 - If you weren't able to exit on the dip this morning, look to exit the futures shortly and hold on to the call option (if you bought it).
- August 12 - We recommended to try to sell liquidate the long call tomorrow near break-even if possible. If not, take what you can get.
- August 13 - You should be completely out of this trade...and may have done well depending on your exit prices.
Carley Garner
Senior Analyst / Commodity Broker
DeCarley Trading
1-866-790-TRADE
Local : 702-947-0701
http://www.carleygarnertrading.com/
http://www.decarleytrading.com/
*Due to the volatile nature of the futures markets some information and charts in this report may not be timely.
There is substantial risk of loss in trading futures and options.
Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.
