Traditional ETFs (1 Aug 11)

Traditional ETFs

A Traditional ETF is essentially an index fund that trades like a stock.  There are traditional ETFs covering everything from broad stock indexes to individual commodities.  These ETFs are useful tools for inexpensively diversifying your portfolio, and they are available in all major asset classes.  If you generally like to pick individual stocks but you don’t know much about a certain sector or region, you could use an ETF to complement your stock allocation so that you’re more broadly diversified.

SPDR Gold Shares (GLD) $158.29

iShares 20+ Year Treas Bond (TLT) $97.92

iShares Silver Trust (SLV) $38.85

iPath S&P 500 VIX Short-Term Futures (VXX) $23.41

SPDR S&P Oil & Gas Exploration (XOP) $62.20

Smart investors love diversification and low costs, and ETFs have a well-deserved reputation for both.  With these facts about ETFs in hand, you can intelligently decide what role ETFs might play in helping you to reach your financial goals.

All positions displayed are for educational purposes only and are not intended to be recommendations.

Leveraged ETFs (1 Aug 11)

Leveraged ETFs

A Leveraged ETF offers the investor a simple way to buy a broad index or sector with double or triple the exposure of the underlying index. A Leveraged ETF will allow investors to put a leveraged bet on either side of the market, long or short.  This means that you can buy a 2x or 3x bearish ETF which will increase when the market heads south; these are commonly referred to as inverse leveraged ETFs.  Conversely, you could buy a 2x or 3x bullish fund which will increase when the market moves higher.  These instruments are particularly useful for gaining exposure to the bearish side of the market in a rollover IRA or traditional IRA, where margin and short selling are restricted.

PowerShares DB Gold Double Long (DGP) $54.26

ProShares UltraShort Russell2000 (TWM) $44.28

Direxion Small Cap Bear 3X (TZA) $37.64

Direxion Large Cap Bear 3X (BGZ) $36.37

ProShares Ultra Silver (AGQ) $212.80

Trading leveraged ETFs comes with a significant amount of risk, especially if the market begins moving against you. This is why advisers recommend using a stop loss order.  A trailing stop  causes a stock to be sold if it falls a particular dollar amount from the most recent high.

All positions displayed are for educational purposes only and are not intended to be recommendations.

Bull Call Spread (1 Aug 11)

Bull Call Spread (ETFs)

A Bull Call spread is a debit spread created by purchasing a Call with a lower strike price and selling a Call with a higher strike price.  Both options expire in the same month.  This is a bullish strategy and should be implemented when you expect the market to close above the strike price of the short Call option—the point of maximum reward (at expiration).   

GLD  $158.28

Buy to Open (1) Aug 11 155 C @ $4.80

Sell to Open (1) Aug 11 160 C @ $2.00 

Net Debit: $2.80 ($280.00)

Breakeven: $157.80

Max. Profit: $220.00

Pct Return: 78.6% (20 days)

OIH  $157.96

Buy to Open (1) Aug 11 153 C @ $7.85

Sell to Open (1) Aug 11 158 C @ $4.70 

Net Debit: $3.15 ($315.00)

Breakeven: $156.15

Max. Profit: $185.00

Pct Return: 58.7% (20 days)

XOP  $62.20

Buy to Open (1) Aug 11 59 C @ $4.45

Sell to Open (1) Aug 11 64 C @ $1.45 

Net Debit: $3.00 ($300.00)

Breakeven: $62.00

Max. Profit: $200.00

Pct Return: 66.7% (20 days)

SLV  $38.85

Buy to Open (1) Aug 11 35 C @ $4.25

Sell to Open (1) Aug 11 40 C @ $1.05 

Net Debit: $3.20 ($320.00)

Breakeven: $38.20

Max. Profit: $180.00

Pct Return: 56.3% (20 days)

All positions displayed are for educational purposes only and are not intended to be recommendations.

Bear Put Spread (1 Aug 11)

Bear Put Spread (ETFs)

A Bear Put spread is a debit spread created by purchasing a Put with a higher strike price and selling a Put with a lower strike price.  Both options expire in the same month.  This is a bearish strategy and should be implemented when you expect the market to close below the strike price of the short Put option—the point of maximum reward (at expiration).   

XRT  $53.26

Buy to Open (1) Aug 11 56 P @ $3.30

Sell to Open (1) Aug 11 51 P @ $0.66 

Net Debit: $2.64 ($264.00)

Breakeven: $53.36

Max. Profit: $236.00

Pct Return: 89.4% (20 days)

All positions displayed are for educational purposes only and are not intended to be recommendations.

Long Put (1 Aug 11)

Long Put (ETFs)

A Put option gives the buyer the right to sell stock at a specific price (strike price) on or before a specific date in the future (expiration date).  When you purchase a Put option you are basically betting that the price of the underlying stock will fall.  The Put buyer loses money if the underlying stock does not fall before the expiration date.

EWZ  $29.09

Buy to Open (1) Jan 12 70 P @ $5.65 

Net Debit: $5.65 ($565.00)

Profit Target (50%): $8.50 ($850.00)

Stop-Loss Point (50%): $2.80 ($280.00) 

XRT  $53.26

Buy to Open (1) Jan 12 55 P @ $5.00 

Net Debit: $5.00 ($500.00)

Profit Target (50%): $7.50 ($750.00)

Stop-Loss Point (50%): $2.50 ($250.00) 

SPY  $129.33

Buy to Open (1) Jan 12 130 P @ $8.55 

Net Debit: $8.55 ($855.00)

Profit Target (50%): $12.80 ($1,280.00)

Stop-Loss Point (50%): $4.30 ($430.00) 

IWM  $79.74

Buy to Open (1) Jan 12 79 P @ $5.73 

Net Debit: $5.73 ($573.00)

Profit Target (50%): $8.60 ($860.00)

Stop-Loss Point (50%): $2.90 ($290.00) 

REMEMBER: “When there is a small movement in the stock, there is a magnified movement in the option”.  The “Long Put” strategy can be easily transformed into a “Bear Put Spread”, “Calendar Put Spread”, or “Diagonal Put Spread”.   

All positions displayed are for educational purposes only and are not intended to be recommendations.

Long Call (1 Aug 11)

Long Call (ETFs)

A Call option gives the buyer the right to buy stock at a specific price (strike price) on or before a specific date in the future (expiration date).  When you purchase a Call option you are basically betting that the price of the underlying stock will rise.  The Call buyer loses money if the underlying stock does not rise before the expiration date.

GLD  $158.28

Buy to Open (1) Jan 12 160 C @ $7.60 

Net Debit: $7.60 ($760.00)

Profit Target (50%): $11.40 ($1,140.00)

Stop-Loss Point (50%): $3.80 ($380.00) 

SLV  $38.85

Buy to Open (1) Jan 12 39 C @ $4.35 

Net Debit: $4.35 ($435.00)

Profit Target (50%): $6.55 ($655.00)

Stop-Loss Point (50%): $2.20 ($220.00) 

VXX  $23.71

Buy to Open (1) Jan 12 24 C @ $4.50 

Net Debit: $4.50 ($450.00)

Profit Target (50%): $6.75 ($675.00)

Stop-Loss Point (50%): $2.25 ($225.00) 

REMEMBER: “When there is a small movement in the stock, there is a magnified movement in the option”.  The “Long Call” strategy can be easily transformed into a “Bull Call Spread”, “Calendar Call Spread”, or “Diagonal Call Spread”.   

All positions displayed are for educational purposes only and are not intended to be recommendations.

Momentum Stocks (1 Aug 11)

Momentum Stocks

This strategy is a simple but highly effective rotation strategy that buys the best performing stocks trading within 10% of their 52-week high.  This strategy focuses on a powerful concept:  buying stocks making new highs or climbing toward their 52-week high and are within a 10% striking distance.   

   

EQT Corporation (EQT) $63.48

Range Resources Corp (RRC) $65.16

Green Mountain Coffee (GMCR) $103.95

Noble Energy (NBL)  $99.68

Alexion Pharmaceuticals (ALXN)  $56.80

Statistics have shown that stocks making new highs have a tendency of making even higher highs.  These are the stocks we all dream about.  Getting in and watching it go up.

All positions displayed are for educational purposes only and are not intended to be recommendations.

Covered Call (1 Aug 11)

Covered Call (Stocks)

When selling a Call option on stock that you own, you are giving someone the right to purchase (100) shares at a specific price (strike price) on or before a certain date (expiration date).  In return for this right, the option buyer pays you a premium that is yours to keep regardless of whether the option is exercised or not.

CVI Energy Inc (CVI)

Buy (100) shares @ $26.85

Sell to Open (1) Aug 11 30 C @ $0.45

Net Debit: $26.40 ($2,640.00)

Max Profit: $360.00

Return If Assigned: 13.6% (20 days)

The goal of the Covered Call writer is to generate 5%-15% returns or more on a monthly basis on stock that is owned with no more risk than owning stock outright.

All positions displayed are for educational purposes only and are not intended to be recommendations.

Momentum ETFs (1 Aug 11)

Momentum ETFs

ETFs have changed the investing landscape, opening doors for novice retail investors to professional hedge fund managers to trade just about any commodity, sector, index, future, currency, or other complex investment vehicle like a stock.  The Momentum ETFs strategy is simple but highly effective that buys the best performing ETFs trading within 10% of their 52-week high.  Statistics have shown that stocks making new highs have a tendency of making even higher highs.  These are the stocks we all dream about.  Getting in and watching it go up.

                       

SPDR Gold Shares (GLD) $158.29

SPDR S&P Retail (XRT) $53.26

All positions displayed are for educational purposes only and are not intended to be recommendations.

Leveraged ETFs (25 Jul 11)

TO ALL:

Here are the “potential trades” for next week:

Leveraged ETFs

A Leveraged ETF offers the investor a simple way to buy a broad index or sector with double or triple the exposure of the underlying index. A Leveraged ETF will allow investors to put a leveraged bet on either side of the market, long or short.  This means that you can buy a 2x or 3x bearish ETF which will increase when the market heads south; these are commonly referred to as inverse leveraged ETFs.  Conversely, you could buy a 2x or 3x bullish fund which will increase when the market moves higher.  These instruments are particularly useful for gaining exposure to the bearish side of the market in a rollover IRA or traditional IRA, where margin and short selling are restricted.

PowerShares DB Gold Double Long (DGP) $53.69

ProShares Ultra Oil & Gas (DIG) $61.05

Direxion Energy Bull 3X (ERX) $85.20

ProShares Ultra QQQ (QLD) $96.00

ProShares Ultra Silver (AGQ) $217.92

Trading leveraged ETFs comes with a significant amount of risk, especially if the market begins moving against you. This is why advisers recommend using a stop loss order.  A trailing stop  causes a stock to be sold if it falls a particular dollar amount from the most recent high.

All positions displayed are for educational purposes only and are not intended to be recommendations.

Leveraged ETFs (Trading Plan)

Leveraged ETFs

Relative Strength Factor

Overview:  This strategy is designed to rotate to the segments of the market with the best performance.    The strategy is simple but highly effective that buys the best performing ETFs based on the Relative Strength Factor (90.0).  The Relative Strength Factor is a percentile ranking of the funds performance.  It is measured over (1) year and weighted to emphasize more recent performance. 

     

Strategy	Outlook	Risk	Reward
Long Stock	Bullish	Price Paid	Unlimited

Step #1:  Identifying Stocks.  Use “ETFScreen.com” which will help you find quality stocks based on the Relative Strength Factor (90.0) or higher.  The better performing funds have higher values. 

Step #2:  Review Charts.  Determine trend on weekly chart first, then look for trades on the daily chart only in that direction.  When the weekly trend is up, it allows you to trade only from the long side.

Step #3:  Determine Position Size.  Develop a system for consistently allocating the same amount in every trade.  For example, you decide to invest $2,000 per trade, that’s what you invest every time.

ProShares Ultra Oil & Gas (DIG) $61.61

$2,000.00

÷

$61.61

=

Buy (32) shares

Step #4:  Target Price.  A predetermined profit target is the easiest method of taking profits off the table.  When you enter your trade, set a specific gain (20%-25%) that you seek and then take your money off the table after that gain has been achieved.

$61.61

x

1.20

=

$73.93

Step #5:  Stop-Loss.  This strategy allows investors to determine their loss limit in advance, preventing-emotional decision-making.  Set a stop-loss (10%-15%) below the price you paid will limit your loss. 

$61.61

x

0.90

=

$55.45

Step #6:  Trailing Stop.  Trailing stop orders are used for long stock positions to maximize and protect profits in rising markets and limit losses in falling markets.  With this order, you do not enter a specific activation price, but rather, you create a moving activation price by setting a stop parameter (ATR x 2).

$1.96

x

2.0

=

$3.92  (Stop Parameter)

If the price moves up, the activation price increases to “trail” the new value.  If the price drops, the activation price does not change.  When the price drops to an amount equal to or less than the previously recalculated activation price, the order is activated and becomes a “market order”.

$61.82 (Recent High)

-

$3.92

=

$57.90  (Activation Price)

Bull Call Spread (25 Jul 11)

TO ALL:

Here are the “potential trades” for next week:

Bull Call Spread (ETFs)

A Bull Call spread is a debit spread created by purchasing a Call with a lower strike price and selling a Call with a higher strike price.  Both options expire in the same month.  This is a bullish strategy and should be implemented when you expect the market to close above the strike price of the short Call option—the point of maximum reward (at expiration).   

OIH $151.53

Buy to Open (1) Aug 11 158 C @ $6.95

Sell to Open (1) Aug 11 163 C @ $3.85 

Net Debit: $3.10 ($310.00)

Breakeven: $161.10

Max. Profit: $190.00

Pct Return: 61.3% (27 days)

GLD $156.12

Buy to Open (1) Aug 11 152 C @ $5.30

Sell to Open (1) Aug 11 157 C @ $2.29 

Net Debit: $3.01 ($301.00)

Breakeven: $155.01

Max. Profit: $199.00

Pct Return: 66.1% (27 days)

IVV $135.05

Buy to Open (1) Aug 11 133 C @ $3.70

Sell to Open (1) Aug 11 138 C @ $0.80 

Net Debit: $2.90 ($290.00)

Breakeven: $135.90

Max. Profit: $210.00

Pct Return: 72.4% (27 days)

SPY $134.58

Buy to Open (1) Aug 11 132 C @ $4.07

Sell to Open (1) Aug 11 137 C @ $1.12 

Net Debit: $2.95 ($295.00)

Breakeven: $134.95

Max. Profit: $205.00

Pct Return: 69.5% (27 days)

DIA $126.60

Buy to Open (1) Aug 11 124 C @ $3.75

Sell to Open (1) Aug 11 129 C @ $0.80 

Net Debit: $2.95 ($295.00)

Breakeven: $126.95

Max. Profit: $205.00

Pct Return: 69.5% (27 days)

All positions displayed are for educational purposes only and are not intended to be recommendations.