With the biggest turnaround in the stock market in 80 years now upon us, the greatest danger facing investors is no longer being invested in equities – it’s rather missing out on what could BE a profoundly successful investing year.
That’s right, despite Wall Street’s worst start to a year ever, the major indexes have now sprung back into the black for 2016, and that has folks looking over their shoulders, wondering if it behooves them to do like their neighbors and colleagues and get back into the investment saddle.
We just can’t go out anymore…
Now, whether the turnaround is due to the latest round of earnings, which were far better than expected, or the latest fed-meddling, or because folks are genuinely getting used to the Donald’s hair, is immaterial to us.
We prefer to look at the scoreboard. And the bottom line is – we got too deeply oversold.
Chase the Market – Without Losing Your Head
The greatest profits are made from market-following systems, and we do our best to give you that here at Normandy. We don’t find it necessary to spot the turns precisely – because there’s no need. Our job is to act only after we’re relatively certain that a trend has been established. At that point we hop on board with leverage.
We use options to acquire that leverage and regularly hedge our calls to ensure against losses. In that manner we can achieve the full measure of profit in a shorter time, with less risk than buying the underlying security and hoping we’ve nailed the tops and bottoms of every move.
And because we’re focused on the intermediate term trend, we also have a better chance of pulling profits from a three to twelve month move than the scalpers or ‘swingers’ out there who bet on tiny moves over the short term and employ far more money.
As the chart above shows, our focus lies in riding the meat of the move – not snagging the turns. Once we can establish a bull move (for example) is in progress, we hop on. Once the move has progressed to a reasonable resting point, we evacuate. Our options’ leverage does the rest.
We’re going to close out four trades now before delving into this week’s initiative.
As you’ll see, we’ve had some very nice scores that are worth taking off the table.
We start with our November 3rd initiative. The letter was called Market Meltup Begins; Old Order Fades, and there we recommended you buy a TSLA March 230 CALL for $22.40 and sell a TSLA March 230 PUT for $23.05. Your credit on the trade was $0.65.
Tesla Motors is a swinger, and we knew we’d see some action. By last Friday’s expiry she had completed a round trip lower to $140 per share before springing trampoline-like to close in-the-money at $232.74.
The 230 put, of course, expired worthless, but from the CALL side, we bought the shares for $230. Today, they’re selling for 238.32. Considering the size of the move and the current RSI reading (in blue box), we urge you to get rid of them, pocket the $832, along with the $65 premium, for a total take of $897 on nothing expended. Consider it 5880% ($15 commission expense).
Nothing at all…
In our November 10th installment, we recommended you consider buying the GLD March 99 PUT for $2.00 and selling the FB March 90 PUT for $2.19. Total credit on the trade was $0.19.
The letter was called Nothing Precious About It and, as it turns out, there wasn’t much precious about the trade either. All options expired out of the money and we ended up bagging our initial $19 credit.
Beats a loss.
Third, was a trade we launched on the 1st of December in a letter called Why Go to Hell in a Golden Hearse? In that missive we recommended a China trade. We told you to buy two (2) iShares China Large Cap ETF (NYSE:FXI) January (2017) 51 CALLs for $0.52 each. That was a debit of $1.04 that we then suggested you erase by selling two FXI February 33 PUT options for $0.54 each. You ended up with a credit of $0.04 on the deal.
The two short puts ended up in the money, sticking us with 200 hundred shares for $33 each. We now recommend you dump them. With FXI trading at $33.71, you have a marginal profit of $142. Take it. We don’t want to sit on anything that ties up valuable trading funds at this stage.
Profit is 2.2%.
Long term open CALLs on FXI are still in place.
The Grande Finale
Our last trade on the block today was opened just a week ago in a letter called Kill the BuzzTurds. It was a Netflix-based trade that asked you to buy the NFLX April 29th 98 CALL for $8.35 and sell the NFLX April 29th 98.50 PUT for $8.30, for a total debit of $0.05.
And just a week later, it has borne fruit.
The CALL is trading now at $9.25, while the put fetches just $6.85. Sell the former and buy the latter and you come away with $2.35 (including the debit) on just $0.05 laid down.
That’s forkin’ brilliant. It’s also 4700% in a week.
Take it to the Convention, Bro!
This week we’re offering you a new look at an old friend.
It’s Microsoft (NASDAQ:MSFT), and as the chart below shows, she’s looking very healthy.
There’s little that’s bearish about the chart. The stock is above all its moving averages, all of which are themselves trending higher. RSI and MACD are above their respective waterlines, offering a bullish signal as well (blue squares).
In short, it looks good.
Our only problem is just how fast the rest of the market has jetted higher.
For that reason we’re going to bet on a longer term gain for MSFT, but a near term sideways meander.
We’re selling a strangle and buying a longer term call with the proceeds.
Sing up below to get access to this weeks options/stock recommendation – we have yeilded our subscribers over 2384.99% since 2010 – dont miss out…
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Wall Street Elite recommends you consider selling the MSFT April 29th 57 CALL for $0.62 and 51 PUT for $0.84. Use the proceeds to then purchase the MSFT May 55 CALL for $1.55. Total debit on the trade is $0.09.
With kind regards,
Hugh L. O’Haynew