This information on this page is for learning purposes only, no guarantee is given or should be assumed as to your results.
Entered at about 12:05 MST after yesterdays bounce.
Approximately 1/2 way through developing bear market. Invested 1/2 trading account into TZA (3X small cap bear index). Entered trade at approx $14.76 Dow down approx 15% from all time high. Past average correction territory of 13%, now into a Possible Longer term bear market with a downside potential of 30% or more and a potential run of 13 months or more. We are now in month 3.
Alternatively you can utilize mid term BEAR CALL spreads, longer term PUT leaps or short term STRANGLES / STRADLES with current market conditions. Be careful with time decay trades if you insist on using them –make sure you are in a stable area of the market.
10/17/2016 9AM MST Purchased additional TZA, protected with Jan,20,2017 strike 29.00 puts.
If you wish, here is trade that will take advantage of a stagnant market. Again, utilize as many contracts as you see fit dependent upon your own situation. Make sure you use these ratios.
Buy to open 1 contract, expiring 11/11/16– 21 call
Sell to open 2 contracts, expiring 11/11/16– 29.5 calls
Buy to open 1 contract, expiring 11/11/16–39.5 calls.
This is called a butterfly spread. The initial cost is approximately $529.00/ (the above trade- which is also the maximium loss) There is a 68.27% probability that the security will stay between 24.69 and 33.88 during the trade duration. The highest profit (will be realized if it expires with TZA at 29 or so. If it stays within the trade range as stated above then virtually no losses will occur. This trade needs to be monitored and has high commission costs which must be factored in.
02/21/16 Head and Shoulders chart formation has just completed for the DOW. This is another confirmation of the bear market ahead. Currently have TZA shares protected by 59.00 PUTS expiring 3/11/16 in place.
01/11/15 The Precipice of a bear market is upon us!
This may be a good time to either stay out or play reverse ETF’s. Historically Bear markets can typically last up to 18 months with drops of 20% or more.
12/21/15. Sell 70 puts expiring 12/24/15
12/4/15 08:00 MST Sold 75 Puts exp12/18/15 at 4.5 for approx. 1.5 points profit, Purchased 70 Puts exp12/24/15 at 2.75.
11/30/15 Rolled up the 72 puts to 75 puts, Same expiration, to protect recent gains of approx. 3 points on TNA. One thing to keep in mind. If it is a slow moving stock then buy your puts 3 months out or more, For fast moving volatile stocks buy 2-3 weeks out.
11/25/15 Purchased Dec 24,2015 (strike at 72) weekly puts to protect the recent TNA advance. Make sure you cover the underlying completely– for every 100 shares you own buy 1 put contract.
11/2/2015 Invested 30% of capital in TNA, hedged with purchased TNA PUT contracts 1 point in the money using weekly options expiring 2-3 wks out. If TNA continues its rise I will roll forward the strike and the expiration date every 6 to 8 points, OR simply roll out the expiration date 5-7 days prior to expiration -whichever comes first. Should the ETF regress I will set a sell point on the PUT contracts to capture profits while leaving the long end [TNA] to advance unhindered.
Use technical analysis and your own goals and risk profile to work out the fine points of this trade.
9/16//15 The FED rate hike decision brings with it a good possibility of volatility, a short term strangle or straddle on a chosen market index may fair well.
8/20/15 Selling short term (<1week) calls ( usually a little out of the money) against long calls will also protect the downside of the trade (lowering your cost basis) as we have recently seen happen with TNA. Generally speaking spreads help the trader to make money more consistently instead of having to wait.
7/28/15 Entered into TNA near 83.00 with 6% investment. If it falls I will scale in utilizing 3 more intervals at 7%, 8% and 9% respectively. If it continues to rise I will scale in with 3 more intervals at 14%, 6% and 4% respectively. in each case my total investment will not exceed 30%. This can be done using direct ETF ownership or calls.
If you purchase calls 3-6 months out or more consider selling short term weekly calls to help pay for them. This also can turn into a steady income above and beyond what you initially paid for the LT calls if the underlying stagnates. However, if this is to work, you must watch the underlying closely to guide your decision making as the trade progresses. If you have limited experience in graphing trades and/or with this particular ETF then I recommend just holding the long position.
7/8/15 If you continued to roll the spread forward then be sure to set your stop losses to keep your profits. If you got out of the trade early because your max loss point was breached then don’t despair, there will be more opportunities. This is why we always recommend keeping your portfolio balanced with multiple trades and/or hedges. Often it is difficult to predict the exact time frame needed for any one trade to pan out.
06/03/2015 I am considering a roll on the spreads expiration up to the JUL1 (WEEKLYS). As of now I will loose approx. $1.50 on the previous spread if I close it in the morning. For tomorrows opening I will try get this trade: Sell JUL1 80 CALLS $12.5./ BUY JUL1 92 CALLS $4.00. It has a BREAK EVEN expiration point of 88.5. approximately a 2.5 to 1 PL ratio, max loss $3.5. max gain $8.50. After doing the math with this new trade, the entire position will become profitable should TNA fall below 88 before expiration. Should it fall below 80 my maximum profit would be $7.00
Some other considerations: The volatility index has become even lower the last few months which contributes to lower option costs. Should the market fall an increase in the volatility portion of the option price (according to our pricing model), would offset the loss we will incur on the purchased options since we bought them near their strike price. (Option prices are always relatively expensive when at their strike price)
5/26/15 (7:45 MDT) Here is a bear call spread on TNA with a 1 – 3 ratio: I will try to get these prices:
JUNE 15 92 calls at $1.20 BUY
JUNE 15 80 calls at $ 9.65.SELL
5/21/15 1/2 the profit has been realized from the JUNE 15 (sold) contracts. Conservative traders would take this profit and close the short end. Although the position (as a whole) is down the additional profit will eventually be realized when the underlying security retraces.
5/13/15 If you haven’t taken any profit from the position as of yet you may consider this trade: I.E. Lets say you hold 700 shares of TZA, Sell 10 contracts of the JUNE15 11.00 call against it. Price you will receive is approx. 40 cents, which equates to around $400. This will protect you on the downside while slightly limiting your returns on the (most probable) up side. Currently at a 51.41% volatility the probability of it going above 11.48 is only 25.44% while the probability of it finishing below 9.40 is 28.74% at expiration. Plug the numbers in to see the graph. I.E
4/30/15 8:14 AM (MDT) Adding another 12% to TZA position. 7% gain since position was initiated. I have set my stop loss points. it has been over 40 days since we noted the put/call ratio abnormality.
04/27/15 11:25 AM (MDT) Beginning to build up a TZA position starting with (in this case) a 35% investment.
03/19/15 Unusual trading volume on TZA, Call volume ran at 4.3X the put volume with these contracts. These types of anomalies often indicate a trend change. Yielding a.23 PUT/CALL ratio.
03/02/15 NASDAQ approaching 5000, watch markets closely as it breaks 5000 and nears all time high of 5048.62. Possibility of correction!
02/25/15 It looks like I ended up missing the big run. TNA has since climbed to over 86. Possibly over a 20% return for some.
It may be preparing to turn back into its ST historical range now that earnings week is almost over, it will be interesting to see if there is a breakout. I am currently working with some other trade strategies.
02/02/2015 8:00 AM (MST) Sold entire TNA position.
8% loss on this trade.
Unfortunately my 8% loss threshold was reached and I was forced to swallow my pride (so to speak) on this trade. Cutting your losses is always a top priority. I’m not going to kick myself, I wont’ think twice about it, I’ll just do it — mechanical is as mechanical does — It’s part of the game. It doesn’t matter what this ETF does after it’s sold -the decision is made.
The market is becoming volatile Lets see how much of correction we’re going to have before getting back in or at least wait for it to calm down.
If I find myself repeatedly liquidating a position or(positions) prematurely then I have these choices:
1. Tolerate a higher loss percentage.
2. Stop working with this security or this type of trade.
3. Wait for market conditions to change.
4. Increase my account size.
01/28/15 7:30 AM (MST)
Bought another 25% interest TNA.
01/08/15 8 AM (MST)
Bought another 25% interest in TNA.
01/07/15 12:41 AM (MST)
BUY Limit order of 25% interest in TNA at 72.50
12/23/14 1:53 PM (MST)
Closed out TNA position at 80.50 for an approx.11% gain.
12/14/15 7:51AM (MST)
Close out RDWR position for gain of .15/contract on long side and .35/contract on short side.
12//12/14 1:50PM (MST)
Added to TNA position. Purchased at 71.63. Doubled the original position.
12/09/14 8:45AM (MST)
Sold TZA at $13.78 for about 2% profit. Will keep TNA on for now.
12/08/14 9PM (MST)
Here is a trade that takes advantage of a strong stock (RDWR Radware LTD) within a very strong sector (Computer security) utilizing high volatility 32.54% on the sell end of the spread. This trade works especially nice since the stock just settled around the strike price. Buy the June 15, 18 PUTS (around .55) and sell the Dec. 14, 22 PUTS (around .35). As always stay within your money management parameters. The risk graph shows a slight slope.
The MAX risk for this trade is the Price you paid for the purchased options minus the credit received from the sell side plus the distance between the current price and 18, which is currently around $400.00/ contract. Plug this trade into the Risk graph SW using your numbers to see the risk graph.Your broker may require you to keep this risk as a margin requirement.
This type of trade is one that will require multiple adjustments if kept in place for more than a week, something to consider before putting it on.
11/21/14 6:24AM (MST)
Since I decided not to take the profit from the initial run up of TZA I am Making TZA into a strangle with TNA. as I originally proposed.
Decided to enter into TZA at $13.50 due to technical indicators coming in line ( rounded bottom, MACD and Volume ).
With very low volatility and high bullish sentiment I am considering a strangle using TNA and TZA sometime before Nov 20,21 when these highly important Economic indicators are released — Initial jobless claims, Consumer price index and existing home sales. I decided to take profits on the recent TNA run. Some Technical indicators and chart patterns show a dip may be coming as well.
Due to today’s FED meeting at 2PM EST, it may be wise to consider taking your profits from the recent upswing. The market can become very volatile at this time.
After all that volatility I ended up less than even, a good argument to stay out during such turmoil, especially if you don’t have the stomach for it –but I think it’s safe to ride the market up for a bit, considering the FED remarks on future bond purchases, central bank actions and continued low interest rates. I had problems getting in and out at the right price since the daily swings were so dramatic.
Possible major new market correction brewing. The extremely high volatility with accompanying market swings may not be unsuitable for some investors. Either stay out or in my case I will be utilizing a downside ETF on the S&P 500 or Russell 2000 such as TZA. A volatility play such as VXX is also good to consider.
Always keep to your money management limits and have an emergency exit plan in place as nothing is ever certain. This is the last day of the trading week which means many investors may be taking money off the table to protect themselves in light of recent events. October has historically been a bad month for stocks –black Monday in October 1987.
Added 30% to FAS position. BEP 104.28
Sold FAZ manually for a 2% profit on market selloff, BUY order went thru on FAS so I am now holding it alone.
Still holding FAZ, but since the position has gained I now have a trailing BUY order for FAS which will morph the position into a strangle to protect profits if needed. This is just one way to work both sides of the trade. The market is entering a very volatile period. Straddles and strangle trades work very well in this type of market.
If your still holding the strangle then set your stop loss points on the trade to keep the profit you have made and/or allow for more. If you had already decided to liquidate the FAS end and hold the FAZ alone then you can simply close the position or In my case, if the position drops to 15.00 I will add another 20% to the original position since I am still within my money management parameters. I was a bit short sighted on the swing but I will stay with my recent convictions on the trade.
It is important to keep enough cash in reserves for situations like this.
Added 15% to FAZ position. BEP at 16.38
Sold off FAS at 109.00 approx. 2.5% gain on this end. ETF retraced back to 108.8 by end of day. I am still holding FAZ for now. An upside down W pattern in the 5 day technical chart may indicate a Short term drop.
Make a decision ahead of time as to your profit goals and loss (range) tolerance using your money management tools. Your trading account and trade size have to be large enough such that you have a sufficient range to withstand the natural ebb and flow of the security as well as making you a reasonable profit with it’s typical movement in the trading period you set —this is extremely important.
If your holding the Oct 1,14 options remember that time decay is accelerating fast into the last week. Always update your Break even points whenever the trade is adjusted in any manner.
Recently purchased FAZ / FAS 7/1 ratio with ETF’s. Can also use options (Strangle or Straddle). This ETF tracks the Russell 1000 financial services index. As usual, if your working with options, use your option graphing software to determine contract purchases.
If your going to work with options one possibility would be to do a strangle on FAZ by purchasing equal number of contracts on both the 16.5 Call and the 16.0 Put expiring on Oct .1, 2014 (Debt spread). It offers a probability of closing between 16.22 –17.84 at 30.4% and between 14.6 —16.22 at 34.27%. Some things to keep in mind as the trade progresses. If one side profits quickly into the outermost area of probability it may be wise to take the profit from that end while leaving the other end to backtrack. (Morph the trade). Don’t attempt to squeeze every nickel from the trade –work the probabilities. In this trade time decay is working against you since expiration is under a month away.
If your doing multiple strangle trades (4 or more) of this type with other indexes then engineer the trades with your brokerage software such that if one or two of the positions max out in profit it will cover the losses of the others by a factor of 3 — or as close as possible. Deja vu all over again.
Realistically, in my opinion, your going to have to have an account balance of at least 20K -25K to make multiple spreads of this kind of trade work. Remember that you have a time limit with options and your total risk is the debt you paid to put on the trades plus commissions. (I.E.) If your purchased 10 contracts on both ends of this trade your total risk is just around $1000.00 using todays prices. However, ETF purchases can be kept in place indefinitely.
XLU Utility (Sector) Includes a regular dividend.
TZA Direxion Daily Small Cap Bear 3X Shares TZA:NYSE; 30-40% of portfolio since March $14.31 Yearly Low. —-A rotation of money from smaller, high multiple, high growth, somewhat speculative stocks (Russell 2000) into lower risk areas. This is partly due to the stimulus tapering.
Set a trailing stop-loss at $1.00 below market price.
Buy TNA when ETF is around $69.50. Hold remaining capital in reserves.
If using a dual holding (delta neutral) strategy, buy at a 5:1 ratio with TZA. [I.E. If your working with ETF’s at 15K then (at current prices) buy approx. 78 shares of TNA and leave remaining to purchase approx. 400 shares of TZA to balance out trade when it becomes necessary.] If using options then use a trading software program to determine the number of contracts.
Make decision ahead of time as to your profit taking rules. Sometimes, if the market moves to quick and to fast you will have to wait to take profit from the other side of the position.
If you haven’t already taken the profit from the TNA side then Buy TZA in proper allocation to balance out the position with a slight lean toward the downside.
Set your profit loss stops on TZA, Approx. $1.20 gain since purchased w/ this ETF at 16.57. I set mine to sell at 16.17. I will always keep a trailing stop/loss from this point on in this position. You can use various methods to determine when to sell such as standard deviation points, Fibonacci retracement, technical or fundamental analysis, minimum position profit, -etc.
Automatic sell of TZA (Leg profit approx. $325.00). If you desire Set buy back for TZA — Although expecting positive run on TNA which I’m still holding.
Setting interim cost basis of TNA at 67.61.
Although the TNA leg has profited $3.49/share there are various ways to proceed with this position. One way is to consider selling option calls against TNA. Utilize 1 contract for every 100 shares of TNA held, again use your software or the brokerage site to create the P/L graph and determine the buy and sell points. As always use a near term expiration to take advantage of the time value. This will give you profit if the position remains stagnant. Make sure you get a good relative sell price if you decide to do it. Keep in mind that selling calls will also limit your upside profit potential as well as buffer your downside risk, however you can adjust the number of shares held to control this.
[A good way to profit with trades utilizing time erosion (credit spreads) is to put on 4-8 of them simultaneously and engineer the P/L graph for all the positions in a 3 up 1 down manner such that if just 1 or 2 of the trades maxes out in its profit potential they will override the losses of the others by a factor of 3. However, this strategy needs a large enough account balance to compensate for slippage, commissions as well as day to day fluctuations in the market while still meeting your money management parameters.]
Another approach is to buy more of the original position in smaller and smaller increments at set price points as the ETF increases or in larger and larger increments as the ETF decreases then eventually liquidating the position when your profit goals are met. This strategy may require tighter stop-loss points — it also requires larger positions and subsequently larger account balances since slippage and commissions tend to eat away at profits. To help with this use technical and fundamental analysis to determine where in the cycle the security is. As always you need to determine your own risk tolerance. .
If your simply going to continue holding the TNA shares then consider the following: You can set a price point (profit loss protection) where you will eventually buy back the entire lot and take the profit or you can slowly sell the shares after your profit goals on the position have been met to protect yourself from loosing what you have gained –just in case there is a big reversal in the market.
At the end of the day you have to use the methods that are comfortable for you. I like to do what I call the “Stomach test” on all my positions – if I’m unable to go away after the trade Is made and be comfortable with letting it alone then something is wrong with the trade -at least from my standpoint. —Obviously this does NOT apply to day trading.
Never Forget: BULLS MAKE MONEY, BEARS MAKE MONEY, PIGS? ——-well —not so much!Follow