As noted on Dave Fry's chart, the S&P made a new record high with narrow participation and essentially all of the gains were one big move in the Futures to reprice the index. I said yesterday we have been getting 50% of the day's volumes in the close and yesterday was no different and that closing volume is all dumping into the ETF, IRA and 401K suckers that are forced to buy.
We took a couple of big bats against the Dow's move up yesterday, adding a DIA put at $166.80 (see yesterday's Member Chat for details) as well as going long on DXD at $26.20 – both with leveraged options plays, of course.
We still have plenty of bullish trades to protect but, when we bein to cash out our winners and start buying short plays on the index – you can tell the winds are changing. Our 500% trade on DDM from Thanksgiving was scheduled to top out in April anyway – and we sold in May to go away.
That trade was one of our "10 Trade Ideas That Can Make (and some have already made) 500% in a Rising Market" and I had just as much trouble convincing people to go long in November as I'm having convincing people it's time to cash out in May.
Not all the trades are done, but a quick summary of those positions is:
- ABX 2015 $13/18 bull call spread at $2.80, selling 2015 $15 puts for $2.05 for net .75, now $2.35 – up 213%
- 8 QQQ Jan 2014 $75/80 bull call spreads for $3 ($2,400), selling 1 ISRG 2015 $300 put for $23.50 ($2,350) for net $50, now net $2,600 - up 5,100%
- HOV Jan 2015 $3/5 bull call spread at $1.25, selling $4 puts for .90 for net .35, now net .82 - up 134%
- EWZ 2015 $44/49 bull call spread at $2.60, selling $35 puts for $1.95 for net .65, now net $2.25 - up 246%
- CROX 2015 $12/17 bull call spread at $2, selling $12 puts for $1.90 for net .10, now net $2.10 - up 2,000%
- 10 QQQ March $83/88 bull call spreads at $2.18 ($2,180), selling 1 AAPL 2015 $450 put for $32.50 for a net $1,070 credit, now net $4,610 – up 530%
- DDM April $105/115 bull call spread at $5, selling CAT 2016 $60 puts for $4 for net $1, now $7.35 - up 635%
- 10 DBA 2016 $22/26 bull call spread at $1.20 ($1,200), selling 10 DBA 2016 $21 puts for .65 ($650) and 1 CAT 2016 $65 put for $515 for net $35, now net $1.85 – up 428%
- AAPL 2016 $450/600 bull call spreads at $60, selling 2016 $400 puts for $35, now $80.80 - up 130%
- T Jan 2015 $30/35 bull call spread at $2.50, selling $33 puts for $2.40 for net .10, now $3.36 – up 3,260%
It should be noted that DDM actually missed our target in April and only just got over $115. When the spread expired, it was "only" $8.35 but the trade still worked at the short CAT puts fell to $1 for a nice net anyway. The point is, with a little PATIENCE in a choppy market, our 10 Thanksgiving trades are up an average of 1,267% – and they are not even all finished yet! In fact, that AAPL trade still has another $69.20 to gain – up another 85% if it just stays over $600 (now $590).
So it's very easy to make lots and lots of money betting on bull markets – we're certainly not going to miss much sitting on the sidelines. Our short DIA and DDM plays are designed the same way, they will make 500% or more if the market falls, which will protect our still-bullish portfolios very nicely BUT – if the markets hold these lofty levels – we may be inclined to add another round of bullish plays.
If we consider, for example, that the Russell is now lagging well behind the other indexes (see yesterday's post), then we could look at something like TNA (a 3x Ultra-long on the Russell), which is down to $69.20 from a high of $86. If this rally is real (we're not willing to bet that it is), then the Jan 2015 $70/80 bull call spread at net $3.45 should come back in the money and we can offset that with the sale of an FCX 2016 $30 put for $3.10 to net just 0.35 on the $10 spread.
That means, if the Russell heads higher and FCX (now $35) stays over $3, that spread will return a profit if $9.65 or 2,757%. That's how we hedge the upside. If you are willing to risk owning 2,000 shares of FCX at net $30.35 (a 14% discount to the current price) then you can buy 20 of those spreads and potentially make as much as $20,000 on your $750 investment.
Who says it's hard to find bullish trade ideas in this market?
We'll discuss some more on our Live Member Chat Room and in today's Live Trading Webinar but, to be clear, we're still playing for a correction first, then we'll be very happy to bottom-fish – even if we miss 100% or so of the gains by being too cautious.
