Close X Cookies are necessary for the proper functioning of 24hGold.com. By continuing your navigation on our website, you are accepting the use of cookies.
To learn more about cookies ...
EnglishFrench

Bearish? Here?s How to Keep Your Cool

IMG Auteur
Published : February 27th, 2013
471 words - Reading time : 1 - 1 minutes
( 1 vote, 1/5 )
Print article
  Article Comments Comment this article Rating All Articles  
0
Send
0
comment
Our Newsletter...
FOLLOW : Italy, Panic
Category : Technical Analysis


The Dow was up 116 points yesterday – all of them presumably gratuitous — recouping about half of the previous day’s losses. This was in odd contrast to an S&P 500 index that barely got off the launching pad Take a look at the 60-minute chart below if you want to see how S&P buyers spent the day head-butting their way modestly higher. Our guess is that they were outmatched by fresh supply coaxed forth by Monday’s semi-fearsome selloff. Recall that it was attributed by the news media to worries about Italy’s election results. Are the rabble about to seize power in Rome? It would seem not. Italy didn’t even rate a mention on the Google news page yesterday, unless you count a story about the Pope that had a Vatican dateline. We can only surmise that the panic over Italy’s would-be descent into anarchy that had engulfed newsrooms has not spread to the general populace, let alone to Wall Street.


So what to make of these almost daily swings of 100 to 200 points, each opposite the last? Our suspicion is that the stock market is building a broad top. By definition, that means it has been visiting pain on bulls and bears alike. We’re in the latter camp, although untouched by pain as yet. About two weeks ago, we bet the “Don’t” line with the acquisition of some put calendar spreads in the Diamonds, a proxy for the Dow Industrial Average. Although we usually shun options with distant expirations, because time only works against the retail buyer of puts and calls. In this case, however, we put on the spread with the goal of “rolling” it twice by summer. Specifically, we bought the June 130-March 130 put spread for $1.50 when the Diamonds were approaching a Hidden Pivot rally target in mid-February. DIA has since fallen, making our dozen spreads an easy sale these days for $2 (“an annualized return of 800% !!!!!!” in the parlance of direct-mail marketers).

‘Rolling’ a Calendar Spread

Rather than exit the spread, though, we plan on rolling it in April, and then again in May. This implies keeping our June puts while we roll out of the Marches and into short Aprils just before March expiration. Then, before April expiration, we’ll covering the short April 130 puts while shorting the same number of Mays. Ideally, if the Diamonds continue to fall between now and June, we’ll be able to short puts in each successive months for higher and higher prices. In all likelihood, if the Diamonds were to fall just 2%-3% from current levels, we’d be able to recoup the entire cost of the June puts, giving us a cost- and risk-free play on the downside between now and June 21. What a great way that would be to celebrate the summer solstice!


Data and Statistics for these countries : Italy | All
Gold and Silver Prices for these countries : Italy | All
<< Previous article
Rate : Average :1 (1 vote)
>> Next article
Rick Ackerman is the editor of Rick’s Picks, a daily trading newsletter and intraday advisory packed with detailed strategies, fresh ideas and plain old horse sense.
Latest comment posted for this article
Be the first to comment
Add your comment
Top articles
Latest Comments
Elizabeth Warren: The 14 Trillio...
02:15sneezy67
Good ideas...good information....but somewhat behind the curve...the water has already gone under the bridge.
Man Grabbed, Crushed to Death By...
00:00user4779
The "lump of labour" fallacy raises its tired old head yet again, mixed in with B-movie-style sci-fi speculation about a terrible robotic future wo...
Max Keiser Interviews GoldCore’s...
03 Julovertheedge
"The IMF said that Greece requires additional bailout funds of around 50 billion euros until 2018 under the current bailout conditions, and slashed...
Greece’s referendum
03 Julend
"History may judge him instead to have played a poor hand very well indeed." I'm quite sure both Macleod and Varoufakis will be quite disa...
Gold Daily and Silver Weekly Cha...
02 Julglasstiger
Jesse, you use the term "could care less" frequently. Is this American speak for "couldn't care less"? Similar I suppose to the ubiquitou...
One more book, Mr. Stockman
02 Juluser4779-1
While it is true that "[Gold standards] were abused, suspended, and ultimately abandoned in favor of a currency that central banks could inflate at...
Panicked Hedge Funds Now Praying...
30 Junovertheedge1
"... and the silly game theory ..." Obviously you have no knowledge of game theory and its applications. Otherwise you wouldn't have used ...
The Gold Standard: Generator & P...
30 Junuser4779
Is it really so bad for Americans that they do not spend their lives labouring on a production line to make mass-produced goods, and have left this...
Most commented articlesFavoritesMore...
World PM Newsflow
ALL
GOLD
SILVER
PGM & DIAMONDS
OIL & GAS
OTHER METALS
Mining Company News
Gray Rock(Au)GRK.V
Gray Rock Closes Non-Brokered Private Placement
CA$ 0.02+0.00%Trend Power :
Corporate news
PetrobrasPBR
Petrobras to Sell Stake in Bijupira & Salema Fields for $25M - Analyst Blog
US$ 8.83+2.08%Trend Power :
Corporate news
BP plc(Ngas-Oil)BP
BP to Settle Federal, State GoM Oil Spill Claims for $18B - Analyst Blog
US$ 41.29+5.14%Trend Power :
Corporate news
Clean EnergyCLNE
ALLETE Clean Energy Acquires Wind Farm in Pennsylvania - Analyst Blog
US$ 5.37-0.56%Trend Power :
Corporate news
Junex(Ngas)JNX.V
Junex Closes a Portion of its Private Placement for Proceeds of $5 Million
CA$ 0.80+0.00%Trend Power :
Corporate news
Yingli GreenYGE
SHAREHOLDER ALERT: Pomerantz Law Firm Reminds Shareholders With Losses on Their Investment in Yingli Green Energy Holding Co. Ltd. of Class Action Lawsuit and Upcoming Deadline - YGE
US$ 1.15-3.36%Trend Power :
Corporate news
Sandspring Res.SSP.V
IIROC Trading Halt - SSP
CA$ 0.12+0.00%Trend Power :
Corporate news
Fortune Minerals(Ag-Au-Co)FT.TO
Receives Notice of Default Under Prepay Facility and Reaches Agreement in Principle to Settle
CA$ 0.05+11.11%Trend Power :
Corporate news
PetrobrasPBR
Indian Tycoon Plans to Invest $2.5 Billion in Brazil Oil and Gas
US$ 8.83+2.08%Trend Power :
Corporate news
Potash Corp.POT.TO
K+S says no basis for talks suggested by Potash Corp
CA$ 39.26+0.98%Trend Power :
Corporate news
Comments closed