Watching the market sell in the morning and continue is no surprise as our politicians couldn’t collaborate a bill or whatever they are trying to do.  I am here to tell you that I have found out the genius behind this lack of organizational thoughts and ideas.  While they are on the Hill arguing we need to do this but it can’t include that, they are actually smiling as the people are rallying.

Yes, in watching the social stream I am noticing an agreement amongst the people….we hate our politicians.  This is one reason why I don’t get into politics and that is because I believe my vote doesn’t matter.  In a tallying sense maybe, but no matter who gets elected because of my vote there will always be some sort of conflict on the Hill to where people will be affected.  People are magnets of opposite poles and while one side may benefit one side will be negatively affected.

Our politicians are bridging that gap as of now even though the Fiscal Cliff scenario is a full go.  Whether we end up going over the Fiscal Cliff or not, you will not change it.  Like in military operations, you always go in with the perfect plan but that changes after the first round is fired.  It doesn’t pay to worry the about Fiscal Cliff, if it happens it happens and all you can do is adjust your plan.  I wanted to learn trading because it interested and no one cares more about my money more than I do and I trust no one else to watch or trade with my best interest in mind.

Yes our politicians are geniuses.  When people in this country are becoming more and more divided we all can pretty much agree on one thing that is our hate for politicians is parabolic.

Please elected officials quit the hodgepodge-ry and just do something or just tell us it won’t be done.

I won’t rehash old news as we you all probably know what happened overnight with the news from our politicians and the flash crash in the emini-SP.  The only complaint I have is about my trading decision.  Going into today I had a downside hedge against such a move as we are seeing in the emini-SP, currently trading around 1420.  You can see the position and thought process here  but without reading it was a SPX Jan/Dec5 1370 Put Calendar for a 4.15 debit, risking $415.

Yesterday I closed it out with 15 minutes of trading left as I was still heavy cash and only had 3 other positions on.  My theory on yesterday’s price action was that it was bullish.  I did not see the shorts able to push us lower when there was opportunity and instead they looked to cover and I liked the price action from a bullish standpoint into the close.  Now you may argue well that bullish action was on news that the bill will be passed and the Fiscal Cliff is averted.  Well you may be right but also I do not trade on hopes or foretelling of news.  All I can control is the risk I take on my trades.  I look at price and reaction and yesterday I liked the action for higher prices.  Now if we were to have a lower close yesterday I would have kept the SPX Put Calendar on, but we closed higher  so my plan was followed.

As for my current positions:

Long:

• AAPL – Jan 500/550/600 Iron Butterfly
• GLD – Jan/Dec4 165 Call Calendar

Short:

• GS – Jan 130/135 Bear Call Spread

With the big up day yesterday I was looking to start legging into market short position via the SPX.  I tweeted the following note pre-market:

Seeing that the risk graph is hardly readable upon double-clicking, the risk graph of the trade pre-market is below:

The trade was in the SPX.  I was looking to get long the SPX Jan ’13/Dec4 ’12 Put Calendar spread as noted in the screenshot above.  This spread shot up in price early in the morning and I wanted to get filled on it accepting the fact that I may have to pay up a bit.  The reason why I wanted to leg into a market short/hedge position was that we closed outside the 2nd standard deviation Bollinger Band.  This is not a perfect timing indicator but when we close outside that band it suggests a little euphoria and a possible stalling or pullback in the market.  Below you can see the yellow arrows that highlight where we closed outside that band the previous day and then closed back inside the band the next day:

This is one reason why I stated I was starting to leg in to a short position.  If I was wrong, I would have the ability to exit for a small loss or average in to the market short position expecting a pullback sometime in the near future.

As for my trade I attempted to put on the trade highlighted in the Twitter post of getting long the SPX 1370 Jan ’13/Dec4 ’12 Put Calendar spread for a debit of 3.95.  On the open I could see that this would not get a fill which I was hoping as we were trading up in the futures pre-market.  So I was content with paying up some.  After some cancellations I was finally filled as noted below in my “Cancelled Orders” and “Filled Orders”:

When I got filled I went to the option Time & Sales to see my order and could not find it.  The fill seemed awkward as I adjusted my fill to 4.30 and got filled at 4.15.  After some further scrutinizing I found out that I was filled on the next week (the Quarterly’s of Dec5) and not the order I submitted (Weeklys of Dec4) or was shown on my “Filled Orders” as shown above.

Below you can see that my order went through as my short strike of the calendar spread was filled on the Dec5 Quarterlys:

Also if you are with familiar with thinkorswim I went to my P/L where my position is and did the “Analyze Closing Trade” and  it came up as the short strike being the Dec4 ’12 option and the Dec5 ’12 wasn’t even available in a custom order.  So needless to say I am a little confused so I will call tomorrow to see what the hell I actually have as my short strike.  I am still happy with the analytics of the position so I am not too concerned.  The only thing that does bother me is that it cheats me out of 1 week of rolling the short strike.

Also I put this trade on for a 4.15 debit and right now the mark is showing a $87.50 profit (21.08%) so it is hard to get upset.  But either way I need to address this tomorrow. Also I wrote this wondering if anyone has had the same experience.

My son was sick today so I kept him home from school.  As he felt better later in the day we took him out for lunch as going back to school would not matter.  So we took him to his favorite restaurant.  While I went to post a picture of my food that would make The Fly curse and ban me for gratuitous gluttony, I saw the news about the shooting.  Needless to say it is speechless and words cannot explain the amount of sadness and grief I feel for those children, parents, and family.

My friends know that there is one thing I love and that is the innocence of children.  They say things that make me laugh after much time has passed over what they said and they can be brutally honest, often at times when you need to hear it.  I love the innocence of kids.  How someone could take the life of one is beyond any comprehension I have and I have nothing else to say.

I later posted the following comment to Twitter:

I remember as a kid we did tornado drills & went to the locker room, now my kid does active shooter drills & they lock the classroom

When I came back I missed President Obama’s speech so I watched reruns of it.  I will admit that I am not a huge Obama supporter or agree with his agenda or beliefs.  When I watched his speech I believe he did speak as a father and came through as a President and all I can say is thank you Mr. President Obama.

Now for those readers that want to talk about gun control, I believe iBC’s Woodshedder provided good information with a superb linkfest as titled “Who Do We Blame For The Connecticut Tragedy?”  There is good research information in here and worth a read.

As for my personal thoughts, I do not think that semi-automatic rifles need to be available to the public nor are needed for hunting.  I grew up in a state where they were allowed for hunting (MN) and moved to a state where they are not (PA) and needless to say from my experience, they are not needed.  On the flip-side, one innocent life is as precious as multiple innocent lives and a semi-automatic weapon is not needed for those that are proficient with the use and operation of a non semi-automatic weapon.  In my opinion gun control is not the problem here.  Just like a drug addict or alcoholic, if someone has the determination to commit the act they will find a way to attain the means.

For those of you that want to call me a gun freak or gun control advocate or even a hippy conscientious objector-type please note my history.  I grew up hunting/trapping my whole life and enlisted in the military serving in security forces and infantry with a deployment to Afghanistan with Lima Company 3rd Battalion 2nd Marines.  After my enlistment I’ve spent my time in protective services currently in the law enforcement field with semi-annual qualifications with full & semi-automatic weapons.  The above beliefs are mine and will not change.

Through social media I have confirmation by Senor Tropicana that the tabbed blogger election will take place tomorrow night.  Seriously, in my opinion this is the election that matters.  I have to admit I did not participate in the presidential election because I am that guy that says “does my vote really matter”?  I don’t think so.  Looking at the PA results, my vote did not matter so to hell with the wait in line.  I told my 9 yr old son that there are 3 arguments you will never persuade the other party and they are politics, religion, & abortion so with that I am done with that conversation because it is a waste of time.

I do believe the tabbed blogger spot for iBC is important.  Three of my favored bloggers did make the finals and they are: Rhino, Elizamae, and Raul3.  These men share great content on many levels and I wish them the best of luck.  With their content I believe they add to the level of education of markets.  Just look at the iBC tabbed bloggers and you can see that they are men of non-fuckery and take this game seriously.  As I have stated previously, getting your blog/name out is difficult and iBankCoin (thru the Peanut Gallery/Blogger Network) has provided leverage in that arena.

These selected folks have contributed and provided valued information and I wish them the best and continued shared information.  In true boxing and Rocky fashion getting to the top is the easy part but keeping that spot is the hard part.  There is somebody always hungry,  especially when it comes to trading.  Needless to say, the men selected earned it!

So I leave a while ago to go slay the bear back on Nov 15 as I stated here.  In that mean time iBankCoin holds a contest for the blogger tab.  Needless to say among whacking animals for the good of my family and newly purchased smoker, I missed the mark to nominate my self.  Would I receive any votes, who knows.  As far as the hunting went, I did not get to slay the physical bear but we saw a hell of a rally with subsequent fuckery.  Did I care to miss it…hell no!  I had the best personal time of my life and still would not trade it for anything.

As far as the personal blogger tab.  I thank the men of iBC for what they are doing as readership is hard to come by and this site has created views beyond my expectations.  I wish the best for those that made it to the final round. Honestly I would not choose to put myself in the contest for selfish reasons.  I must say after this trip I am planning on taking more personal time and if elected as a tabbed blogger, that is an obligation to itself and you owe it to the readers of iBC and I do not think I could fill it to the expectations of readers.

When looking at the final six that made it, I am glad that 3 that I have chosen did make it.  Those gentleman include: Rhino, Elizamae, and Raul3.  These three offer a great combination  of personal stories to fundamentals to technical analysis of various markets.  Needless to say if any of the 3 were selected I would be happy and each would earn congratulations.  So congratulations to all those made it and make the readers of iBC keep coming back and make proud to the crew of iBC…you definitely have my support as I have enjoyed your shared content.

http://youtu.be/0lWdZgw0fqk

I do not mean bear as in the market here I mean it as in the animal.  In Pennsylvania bear hunting season begins Saturday and I will be off in the remoteness of woods looking to slay the black or hopefully cinnamon bear of PA.  I must say that it comes at a no better time as I really have no desire to allocate money here.  Yesterday I closed out an $AAPL Nov 545 Call for a -67.7% loss and I previously had on and still hold an upside Nov 580/610/610/640 Iron Butterfly that will look to expire worthless for a -100% loss.  These are definitely losers on a trade management and account basis but I put them on accepting that loss in my portfolio.  The loss results in a -2.86% loss in my portfolio.  Not happy but still manageable to overcome in the future.

I am reminded by a post by @jfahmy titled “Don’t Get Discouraged”  that links to other posts that he wrote and all of them are worth a read for times like this.  While many trade declining markets like these and are successful, I have chosen to sit out not feeling like I need to trade.  Early on I had the feeling that I needed to be trading no matter what the market conditions were.  Now when I see markets such as we are witnessing I choose to sit a majority to the side maybe taking some swings at the market like I did in $AAPL (which resulted in losses).  So if you find yourself uncomfortable or notice a change in your mood, just step aside for a bit and save the money.  Not losing money can be as gratifying as making money.  This is something that I have learned through the years and it can feel damn good not to be wrapped up.

So with the current action and political uncertainty that is shoved down the throat by media outlets I can not think of a better time to take a break.  November usually marks a slow time for me anyway as hunting season fully kicks in and it is the time to take part in other activities and come back in full swing.  I have only made trades in $IBM and $AAPL since the end of October and my nightly market research has slacked.  For me this is not a bad thing as this is my break, besides my 2 week fishing vacation to Minnesota in the summer.  I plan on making no trades until the week after Thanksgiving and will choose to take this as a vacation.  This November so far has had me concentrating more on deer muzzleloader hunting, rabbit hunting, and now it’s time for bear hunting to be followed by deer rifle hunting.

I wish traders the best that are trading these markets and don’t feel like you are missing out by standing aside, the market will always be there.  I will say that I like the idea of upside butterfly spreads going out to January.  This is a way one can play the upside with limited risk, low gamma, and still make a decent percentage gain on any rally that we may see.  As for me I am spending today packing for the 5-day trip to Sinnemahoning State Park in middle-PA in hopes of slaying the bear.

Greener times await…

Going into today I was looking to put on a long volatility trade (ie. calendar spread) on AAPL. Much of the influence came from this post by @OptionPit “AAPL Setting Up For Excellent Calendar Spread“.  I can’t say enough in how much I have learned from Mark Sebastian in analyzing volatility and income trades and when I read this I liked the trade.  I saw it as a low gamma trade that should be not too difficult to manage for an end of day trader.  Going into today AAPL was get hit pre-market based on news that it didn’t sell as many iPhones as expected, but that news argument is a whole different story and the only thing that mattered was that AAPL was getting hit.  As expected, on the open AAPL volatility saw a gap and had me step aside from my plan going in and analyze other options if I wanted to take a trade.

Watching the price through the day I then decided I might have a better edge selling short-term volatility via weekly options rather than buying long-term volatility.  I then decided to watch the 5 minute chart for intraday entry on AAPL and the AAPL VIX ($VXAPL).  These individual volatility charts are a must watch in my opinion if you are putting on income trades, more information can be found here courtesy of CBOE.

Going in I planned on putting on a 10-wide Iron Butterfly as it contained much of the weekly range I was looking for and at the right risk.  Below is a chart with the following notes:

• On the left is the AAPL daily chart
• Top-right is the AAPL 5-minute chart
• Bottom-right is the AAPL VIX 5-minute chart
• Notes can be found on the charts

A key takeaway here is patience and letting the trade come to you.  I used to chase the fill when putting on spreads and I have since learned to put the trade on and let the fill come to me as before I was losing that edge on my adjustment looking for that fill.  It took time but now if I don’t get the fill I brush it off and look for the next trade.  In this case I put the order in at 1:55pm and got filled at 2:03pm.  I put the trade on as I believed we would see buyers come in as AAPL was nearing the opening range lows and AAPL volatility was reaching highs.  Seeing this I believed the right trade was a short-term Iron Butterfly that would have dual benefit from a rise in price and a drop in volatility.

Looking at the chart above you can see where I put on the trade.  Luckily the stars aligned and the trade worked out perfectly.  I definitely lucked out as both scenarios worked in my favor.  I say lucked out because no one knows what future price or volatility will be but the key is to go in with a plan and look for as much edge as possible.  This trade found the edge and price & volatility changes just so happened to work in my favor allowing this to be a good strategy.  Also I went into the trade planning to hold this longer than a day.  But I was happy with the gains, they came quicker than I thought, and right now I am looking for singles/doubles versus the homerun.  So I took my money and ran.  Below is a picture of the trade risk profile on a 1-lot with the red hash marks showing the end of week breakeven’s and the live price.  Total risk was $750 per spread and the picture was taken at end of day but the gain I took was $120 per spread (+16%) so the profile was around the same look.

This is in response to a recent blog post titled “Is Apple Stock About To Crash?” written by J.C. Parets @allstarcharts. I, like many others, had to click on the link to see what he had to say about America’s beloved stock. After reading it I thought he raised some good points and made the reader aware of reasons to be cautious of upside price in the future. I also was looking forward to the comments session, why?

I have noticed that if you post anything negative about AAPL, “they” come out. I have been deployed overseas to a third world country and have worked in a jail interacting with some foul people but these hardcore AAPL fans at times scare me more than any of those other people. I have noticed that if a day trader posts that they are short, people come out berating them about how healthy the valuation metrics are or how many products they have sold. Makes absolutely no sense.

Here are some points risen by @allstartcharts:

• daily and weekly charts of $AAPL making higher highs in price, but lower highs in Momentum
• currently not a bad risk/reward with a stop above the highs that the bulls couldn’t hold on to
• “I’ll take a 1.5% risk with the prospects of a few hundred point correction any day” (his risk tolerance at that point could be totally different from others)
• It’s all about finding good risk vs reward opportunities
• and at the end “And the best part is that I don’t care about how many iPhones they’re selling. I care even less about the $100B cash on the books. And the P/E ratio? My computer shuts off automatically if I ever type that in.”

In reading this I can tell already that his style is not from a fundamental approach but from a technical approach (the last bullet point clearly tells me this). I can also read this as he is spotting a same pattern that in the past (looking back to April 2012) has shown a drop in AAPL stock price and right now his risk to reward tolerance tells him that an opportunity is present. Could this be wrong and the price shoot up, certainly. But this is why we trade with risk and reward in mind as traders can expect to lose often.

So why in the comments are there mentions of fundamentals or iPhone 5. No where in the post are these things mentioned. Also who’s to say price is baked in or price is not baked in, no matter what there will be some reason for price action. You can’t trade reasons, you can only trade price action. Needless to say I thought he brought an awareness to current structure that gives a warning to traders on how momentum indicators are not confirming price action, simple as that. Also keep in mind the writer’s perspective. How do you get a reader’s attention that only sees the blog post title?

I personally don’t heavily allocate to divergence but use it as that, a warning and that it might be wise to take profits or leg into a position. This post was written to show how powerful the fan base of AAPL is. I almost find it scary that people are so attached to a product and leave comments as if you insulted their kid or someone close to them. Read the post or any in the future for what they are. Remember there are thousands of traders out there and everyone’s style is different. Keep in mind the writer’s style and time frame. In the end when the position is closed and you both make money, what’s there to complain about?

Also I have no connection what-so-ever to the author @allstarcharts. I am merely a reader of his blog site. I wrote this because I previously experienced similar reaction to posting a negative news bit or thought about AAPL and receieved criticism to the point where I had to check my account to see if I was short AAPL and displayed it publicly. In a sense I find it humorous how attached some people are and will criticize when one has nothing to do with the other; ie. day trading AAPL having a long time holder telling me I’m an idiot….apples to llamas.

Last night I wrote about how I ignore the subjective social noise of skeptics and people looking for reasons to be bearish. I know that they are definitely there but I choose to be subjective by looking at charts and price action and more importantly by zooming out. Looking at the weekly charts of the indices it was hard to be bearish. You could see that money was rotating out of the $DJIA and looked to be rotating towards risk assets given the performance and “catch up” of the $RUT. In going through my Reader feed tonight I can see that @chessNwine mentioned this as well in his Weekly Strategy Session , which is always a plus as I respect his market thoughts and observations. Also on the weekly $SPX it showed that volume increased with the move up and decreased on the move down, a bullish scenario.

Tonight I wanted to talk about the opposite of bearish social noise and that is the bullish social noise that could be seen today on the powerful breakout(s) that we saw across the board today. These types of moves can also be crushing not only to those that were overly short but to those that were on the sidelines or took profits before today. All of a sudden traders are posting their profitable trades and it can be hard not be envious. It can also be demoralizing for those that were on the sidelines and now they felt they missed the move so they panic and buy.

In my opinion, if it wasn’t part of your plan before the day or it is not a strategy that you are accustomed too, then just step aside. Let those traders that are posting their profits post them and just be happy for them, whether it was real or not. Be aware that the break out did happen and plan for your next course of action. I personally have found that the best thing to do on a day like this is book some profits and not watch the social stream as much as I do as on boring days. I will later go through after market hours and gather the information that was posted during the day. In a sense I am removing myself from the psychology of the trade/traders and letting things settle down.

So what did I do today? I booked some gains on swing positions in $CAT and $IBM and I then went for a run. I have found that getting away from the desk on days of gains like we saw today can be just as rewarding as on days that losses are acquired. I have found it to be more constructive to my trading removing myself rather than staying at the desk all day and watching the market euphoria or trying to call a foolish market top for the day. For the record I did miss out on some good gains I would have seen today. Yesterday I closed out my long positions in $GOLD and in $MOS. Watching their egregious gains today sucked but I also remembered the reasons why I sold and would do it again. Needless to say you don’t need to be hero in this market, just follow your plan.