Market CommentaryMore Market Commentary
I have recently focused on the options-skew index as a tool to help me define overbought/oversold markets. It is not the most conventional or even cleanest tool, since we’re talking about outlier trades. By definition, the options-skew index measures the tail risk of the SPX 500 basically over 30 days. Traders who add to the skew are looking for outlier moves of 2-3 standard deviations, which happen 5% or less of the time. These are cheap bets, but, if they come through, they pay off nice...Read More
Day trading is tough enough as it is. Don't make things harder on yourself when you are using options.
There are a number of things you must concern yourself with if you are going to employ this methodology, but three are key – liquidity, delta, and theta.
I hear many "options professionals" tell their clients to just trade in-the-money options, as they offer a lot more leverage than going out and buying the underlying, and they act just like the underlying, as the market moves up and down.... Read More
There’s one main reason the vast majority of traders fail – they are undercapitalized.
Why should capitalization matter so much?
Because, as I recently discussed, our attitudes toward money are anything but neutral. Undercapitalization means you are likely trading with “Scared Money,” which will trigger a host of underlying psychological issues.
Specifically, monetary fluctuations activate latent core issues having to do with security, power, status, self-worth, trust, etc. When...Read More
The S&P 500 mini futures got the oversold bounce we were predicting yesterday, thanks to what has become the “new normal” – an unofficial and sometimes covert intervention from the Federal Reserve anytime the market shows signs of faltering.
Yesterday it was a closed-door presentation by Fed Chair Janet Yellen to a group of congressional Democrats indicating that there will be no “immediate” increase in interest rates.
The US equity market, which had been trading lower, promptly reversed cou...Read More
On Thursday, the S&P futures bounced nicely off the first target at 1984. The bounce was strong enough to shoot price near the now familiar 2027 level, which is now operating like a pivot during this consolidation.
2027 is now key resistance. A move above 2027 that holds for more than an hour is likely to be significant…. meaning the end of the correction.
A Note on Volume Profile
The histogram on the left side of the chart shows the volume distribution in the S&P futures for the entire year...Read More
Featured StoriesMore Featured Stories
It is naïve to assume that seemingly unrelated markets move independent of each other. The financial and commodity markets are littered with relationships that might be helpful for those attempting to speculate on price changes. Further, simply assuming that the historical relationship you once read about in college textbooks is consistently valid is a mistake. At the hands of government intervention, the relationship between many markets has morphed into something unrecognizable to season...Read More
- One Risk Aspect Often Overlooked When Assessing Risk
There are many aspects to trading risk. The risk to capital exposure due to excessive position size relative to one’s stops is obvious. Co-relation of your positions in today’s highly co-related markets is another aspect that must be considered, and, of course, you know about the risk of not diversifying your assets.
But have you ever considered the risk you are assuming from your brokerage account? I am talking about your brokers’ ability ...Read More
"Everybody's got a plan until they get punched in the face."Mike Tyson
In the past 10 years, we have helped hundreds of retail traders learn to trade futures. Most begin by using a simulation account – paper trading – and most of them quickly learn to trade profitably ... as long as they aren't trading real money. But many of the same people who can accurately assess opportunities and fearlessly trade them using paper money turn into timid, indecisive losers the minute they have to do exactly...Read More
There are three simple but powerful questions which can transform our trading when we ask them of ourselves consistently over time. They are powerful because they form the basis of mental flexibility and mental agility. Wouldn’t you like to be mentally more resilient and deft?
The three questions can be asked anytime you are preparing for trading, executing, and managing trades, or reviewing your trading results — in other words, anytime you are engaged in a trading-related activity. The t...Read More
Given a growing global demand for platinum, palladium, and rhodium, three of the six metals in the platinum metals group , and the increasing cost to mine platinum, we are focusing our efforts to accumulate platinum over the course of the year. PGM, specifically platinum, is an excellent store of value and it performs well as an inflation hedge. One could argue that platinum – and the other meals in the PGM - are a better long term hedge than gold, as there are a number of industrial uses fo...Read More