It’s All up to You – and the Trades You Make (RSX, XHB, SOCL)

Know it well, friends – no one can do you damage of any size or scope like you can do to yourself.

That’s the first and last word on trading and on life.

Looking for a reason why you’re broke or sad or lonely or angry or feel cheated or depressed or otherwise negative about something or someone? We say take a look in the mirror.

Because 999 times out of a thousand…

fault

If not for your failure to act or your failure to refrain from acting, you wouldn’t be in the mess you’re now in.

So why not 1000 times out of a 1000?

 

The reason we qualify the matter is because there is such a thing as evil in this world. And where it strikes, it makes victims of perfectly healthy, happy individuals. And we have to allow that in one case out of 1,000 the victimhood was unearned, uninvited, and indeed struck from out of the blue and was without apparent cause.

[We purposefully use the term ‘apparent’ because to do otherwise would open a theological quandary that’s unthinkable. But more on that another time.]

Take Responsibility

 

In the world or investments and trading, where gains and losses are theoretically unlimited, and no one rings a bell at the top or bottom of a market, we’re absolutely on our own. And we’ve no one to blame if we fail to cope properly with the daily vicissitudes of price, profit and loss.

So… when we close too early and cut our profits short, or close too late and end up bankrupt, can we point an accusatory finger at that guy on the internet who said bippety-bloo-bah-day?

Nope.

Let’s be clear. We’re not trying to evade responsibility for our market calls – you know us too well for that. We here at the Options Trader Elite post all our trade results, and thank Heaven, the Creator has given us a tremendous record of success.

continue

Amen!

What we are saying is that you have the ultimate responsibility for your destiny and that of your family. You are where the buck stops. Whom you choose to let into your circle and permit influence is entirely at your discretion.

Choose well.

And don’t complain.

Get it on, Huey!

 

We have one trade to report today. It was initiated on august 26th of this year in a letter called Russian Bear Turns Bull.

There, we speculated on a potential turn higher for the Russian stock market, bogged down under the diplomatic and financial weight of its military campaign in Ukraine.

We recommended a covered CALL position on the Market Vectors Russia ETF (NYSE:RSX) and sold an additional PUT to boot.

As it turns out, Russian equity weakness didn’t end in the summertime. It has continued. And even though our options all expired worthless, reducing our cost per share of RSX to just $24.60, we’re still underwater.

RSX currently trades for $21.47, meaning we have 14.5% to climb in order to get back into the black.

So what do we do?

 

Well, we’re not going to sit around and wait for the climb, that’s for sure.

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We’re reinstating the covered CALL position by selling the RSX February 24 CALL for $0.22 and two December 20 PUTs for $0.20 each, thereby reducing our adjusted cost base for the shares to $20.85. We also expect a dividend payment at the end of December in the vicinity of $0.70 to further lower our price per share to $20.15.
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We’re reinstating the covered CALL position by selling the RSX February 24 CALL for $0.22 and two December 20 PUTs for $0.20 each, thereby reducing our adjusted cost base for the shares to $20.85. We also expect a dividend payment at the end of December in the vicinity of $0.70 to further lower our price per share to $20.15.[/mepr-rule]

As per the dividend, nothing has been announced as yet, but the last two years have seen payouts in the same range, and despite a three and a half year decline in the stock, the dividend has been increased every year since the ETF’s inception.

We’ll see what comes.

In the meantime, we believe Russia has good prospects.

Look here –

rsx
This is a weekly chart for RSX, and technically there’s a great deal to be excited about.

• First, weekly volumes have nearly doubled since the year began and the last two price bottoms were set (in blue),
• We also have positive divergence (in red) from both RSI and MACD indicators against those same two 2014 price bottoms, and
• Last week we got a very positive Japanese candlestick formation known as a bullish engulfing pattern (in black, at top).

Taken together, these items paint a picture of a turn higher from the latest bottom – at least for the near-term.

Reinstate the covered CALL.

The New Deal! The Real Deal!

 

We’re going to recommend a second trade today, as the RSX initiative is an ongoing concern.

Here’s the background –

The market has been a scattered affair of late, with some sectors rising dramatically off their October bottoms, others struggling to post gains and still others falling outright. And as we slowly re-gear toward a synchronization of all market sectors, we believe there will be pockets of outperformance – and that’s precisely where we want to position ourselves.

How?

As always, we prefer to hedge our bets against losses, so we’re going to play strength against weakness in order to better manage our capital outlay.

The Trade

 

The sector we like for a rise today is social media, a group that really hasn’t managed much over the last five months and has made only incremental gains since the October bottom.

Look here –

socl
The social media group has done very little to impress.

On the other hand, look now at the homebuilders, whose stocks have absolutely flown on recent economic news. The SPDR S&P Homebuilders ETF (NYSE:XHB) is up 22% this last month and, as you’ll see, needs to take a break.

xhb
XHB recently flirted with an extreme overbought RSI read, an indication that market technicians will be wary of throwing any more cash at her for the near term.

That being the case, we’ll use PUTs to play this pair – long the homebuilders and short the social media.

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Options Trader Elite recommends you reset your RSX covered CALL position as outlined above, and 2) buy the XHB March 30 PUT for $0.56 and sell the SOCL March 17 PUT for $0.50 in equal numbers. Total debit for the trade is $0.06.[/mepr-rule]

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Options Trader Elite recommends you reset your RSX covered CALL position as outlined above, and 2) buy the XHB March 30 PUT for $0.56 and sell the SOCL March 17 PUT for $0.50 in equal numbers. Total debit for the trade is $0.06.[/mepr-rule]

You profit on any outperformance from SOCL in the next half-year.

With love of the hunt,

Hugh L. O’Haynew, Senior Analyst, Normandy Research

See what people are saying...

  1. John Samuels

    Very well thought out. Keep it up!

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