As a potentially profitable opportunity presents itself, John will send you an alert with specific trade information as to what should be bought, when to buy it, and at what price. Read more
As a potentially profitable opportunity presents itself, John will send you an alert with specific trade information as to what should be bought, when to buy it, and at what price. This is your chance to ?look over? John Thomas? shoulder as he gives you unparalleled insight on major world financial trends BEFORE they happen.
Position Update - (UNG)
Second Chance to buy the United States Natural Gas Fund (UNG) July, 2014 $23 puts (not a new position ? only for those who missed the first time)
Strategy Update
2-4-2014
expiration date: July 18, 2014
Portfolio weighting: 5%
Number of contracts:? 30
Those who missed their chance to buy the United States Natural Gas Fund (UNG) July, 2014 $23 puts last week now get a second bite at the apple. Another winter storm has taken the puts all the way down to $1.50 this morning.
Warm weather will return and the (UNG) will take another dive. Supply will catch up with demand, and we have six months to wait it out with this position. Expect a lot of volatility. This is why they call this contract the ?widow maker.?
A Second Bite of the Apple
As a potentially profitable opportunity presents itself, John will send you an alert with specific trade information as to what should be bought, when to buy it, and at what price. This is your chance to ?look over? John Thomas? shoulder as he gives you unparalleled insight on major world financial trends BEFORE they happen.
Further Update to: Trade Alert -(TLT)
Buy the iShares Barclays 20+ Year Treasury Bond Fund (TLT) June, 2014 $106 puts at $2.42 or best
Opening Trade
2-3-2014
expiration date: 6-20-2014
Portfolio weighting: 5%, or $5,000
Number of Contracts = 21 contracts
After sitting on my hands, shuffling the papers around my desk several times, and going for my umpteenth coffee refill, I finally pulled the trigger on my iShares Barclays 20+ Year Treasury Bond Fund June, 2014 $106 puts trade. It finally entered no brainer territory.
It hit me what had been driving markets this year, but it took a ten pound sledge hammer to do it.
Bonds have had it absolutely right this year. They took off right out of the gate on January 2 and never looked back.
Stocks on the other hand have been much more confused and disoriented, like an airplane pilot doing aerobatics on Instrument Flight Rules. They initially rose a little bit, right along with bonds, which almost never happens. You knew that wasn?t going to last.
Then they flat lined for two weeks. It took almost a month before traders realized that the punch bowl was gone and it was time to head into ?RISK OFF? mode. The tardy call can be traced to the fact that you calculate your average stock traders? IQ by taking a bond trader?s and then dividing by two.
What all this means is that the bond market has been correctly calling market direction two weeks before the stock market has. This is bound to continue.
There is another factor to consider here. Bond traders have now seen a whopping great eight point rally in a month, taking the yield on the ten year Treasury bond down a massive 45 basis points, from 3.05% to2.61%. That is just too much profit to sit on. That is a world ending performance for bonds. Except that the world isn?t ending. Armageddon, it is not. So the pros that got this one right are increasingly going to be sellers on rallies from here on.
If I am wrong on this one, it will be only by a couple of basis points, with the ten year possibly making it to the high 2.50?s. The global synchronized economic recovery is still on schedule. The economic data and corporate earnings are just too good to see yields drop to 2.50% or lower.
Profit margins are at all time highs, and rising (see chart below). The heart-rending volatility we have seen so far in 2014 is therefore technical in nature, and not fundamentally driven. It is just a matter of a few days or weeks until the fundamentals reassert themselves, as they always do.
That could happen as early as Friday, when a blockbuster nonfarm payroll is expected to hit. The shocking 84,000 December number reported in January was a weather driven anomaly. Expect this week?s January figure to come in strong, as well as providing big upward revisions to the December report.
Which brings me to the iShares Barclays 20+ Year Treasury Bond Fund June, 2014 $106 put. Only a global synchronized recession would prevent the (TLT) from trading below $103.58, my breakeven point on an expiration basis, over the next five months.
If the (TLT) makes it back to unchanged on the year at $101 by the June 20 expiration, this position will be up $5,418, or $5.41% for our notional $100,000 portfolio. If it makes it down to $101 sooner, we will make even more money, as there will still put some remaining time value in the put option.
That is up 108% from my initial cost. For that I am willing to take a few basis points of heat for a few days or weeks. It is an ideal buy and hold position, like, for example, you were just about to take a long trip to New Zealand and Australia.
Sounds like a no brainer to me!
Here are the specific trades you need to execute this position:
Buy 21 June, 2014 (TLT) $106 puts at?????..?$2.42
Net Cost:????????????....??..??.......$2.42
Potential Profit with (TLT) at $101 on expiration: $5.00 - $2.42 = $2.58
($2.58 X 100 X 21) = $5,418 or 5.41% for the notional $100,000 model portfolio.
The Fat Lady Is Singing for the Bond Market
As a potentially profitable opportunity presents itself, John will send you an alert with specific trade information as to what should be bought, when to buy it, and at what price. Read more
As a potentially profitable opportunity presents itself, John will send you an alert with specific trade information as to what should be bought, when to buy it, and at what price. This is your chance to ?look over? John Thomas? shoulder as he gives you unparalleled insight on major world financial trends BEFORE they happen.
Position Update - (UNG)
Long position United States Natural Gas Fund (UNG) July, 2014 $23 puts at $1.68 or best
Strategy Update
1-31-2014
expiration date: July 18, 2014
Portfolio weighting: 5%
Number of contracts:? 30
(UNG) $23 puts cost basis at?????$1.68
Those who followed my advice to buy the United States Natural Gas Fund (UNG) July, 2014 $23 puts at $1.68 yesterday are now in the enviable position of owning a security that is running away to the upside.
At this morning?s high the puts traded at $2.40, a one day gain of an eye popping 43%. I am getting emails from a lucky few that they got in as low as $1.55 after receiving my Trade Alert.
The question is now what to do about it.
I just called friends around the country, and it appears that a warming trend is in place that could last all the away into mid February. It is starting in Florida and Texas and gradually working its away north, although they are still expecting eight inches of snow in Chicago this weekend.
Mad Day Trader Jim Parker is confirming as much with his proprietary trading model, the chart from which I have included below. He says that we put in an excellent medium term high in the UNG on Thursday at $27. This morning we tested daily support at $23.26 and it held the first time.
But with warmer weather, this is almost certain to break on a future downside push. Then we train out sites on the 18-day moving average at $22.25. After that, $22.07 is in the cards, the top of the gap that we broke through only as recently as January 27, only four days ago.
There our United States Natural Gas Fund (UNG) July, 2014 $23 puts, with a present delta of 40% (forget this if you don?t speak Greek), should be worth $2.83. You might get more, if implied volatilities for the puts rise on the downside, which they almost always do.
That would be a one-day profit of 68%, adding $3,000 to the value of our notional $100,000 model trading portfolio, or 3% to our performance this year, which I would be inclined to take.
Now it is time to get clever. It would be wise to enter a limit day order to sell your $23 puts right now at the $2.68 price. Since the first visit to these lower numbers usually happens on a big downside spike, the result of stop loss dumping of panic longs accumulated by clueless short term traders this week, you might get lucky and get filled on the first run. If you don?t keep reentering the limit order every day until it does get done, or until we change our strategy.
This has been one of my best trades in years, and it appears that a lot of followers managed to successfully grab the tiger by the tail.
If there was ever a time to upgrade to Jim Parker?s Mad Day Trader service, it is now. He will see the breakdowns and the reversals with his models faster than I, and get his Trade Alerts out quicker. Why wait for the middleman, who is me? These fast, technically driven markets are where Jim really earns his pay.
If you want to get a pro rata upgrade from your existing newsletter or Global Trading Dispatch subscription to Mad Hedge Fund Trader PRO, which includes Mad Day Trader, just email Nancy in customer support at nmilne@madhedgefundtrader.com, or call her now at 888-716-1115.
Do it quick because she is about to get overwhelmed.
Now We?re Cooking With Gas
As a potentially profitable opportunity presents itself, John will send you an alert with specific trade information as to what should be bought, when to buy it, and at what price. This is your chance to ?look over? John Thomas? shoulder as he gives you unparalleled insight on major world financial trends BEFORE they happen.
Further Update to: Trade Alert -(UNG)
Buy the United States Natural Gas Fund (UNG) July, 2014 $23 puts at $1.68 or best
Opening Trade
1-30-2014
expiration date: July 18, 2014
Portfolio weighting: 5%, or $5,000
Number of contracts=? 30 contracts
I received a crackly, hard to understand call late last night from one of my old natural gas buddies in the Barnet shale in Texas. Chances are that CH4 peaked in price last night with the expiration of the front month contract. It was time to sell.
I spent five years driving a beat up pick up truck on the tortuous, jarring, washboard roads of this forlorn part of the country, buying up mineral rights from old depleted fields for pennies on the dollar.
The sellers thought I was some moron hippie from California, probably high on some illegal drugs. ?You want to redrill these fields and throw dynamite down the holes?? It was a crazy idea. Since I was offering hard cash, they couldn?t sign the dotted line fast enough.
During the late nineties nobody had ever heard of fracking. Even in the oil industry only a few specialists were aware of it. My old buddy, Boone Pickens, claims he was doing it in the fifties, but then nothing the wily oilman ever does surprises me.
Only a few reckless independent wildcatters were experimenting with the new process. The oil majors wouldn?t touch it with a ten-foot pole. It was unproven, dangerous, and could never deliver sufficient volumes to get them interested. With the deep pockets a trial lawyer could only dream about, they couldn?t afford the liability risk of polluting a town?s drinking water. So it was left to small fry like me to finance this ground-breaking technology.
I ended up developing a couple of fields, riding gas up from $2 to $5 MMBTU, then selling them off to the gas companies. My partners and I made a fortune.
We have remained in touch over the years. Whenever something indecipherable happens in the international capital markets, they call me for an explanation. When something special sets up in the natural gas market, I get the first call.
On Election Day we all go out and get drunk because their conservative vote cancels out my liberal ones, so why bother? We do this at Billy Bob?s in Fort Worth, a favorite of former President George W. Bush, where the 24-ounce chicken fried steaks fall over both sides of your plate.
I didn?t reenter the gas market until the Amaranth hedge fund blow up took the price up to $17 in 2006, and then down like a stone. I figured out that the United States Natural Gas Fund (ETF) suffered from a peculiar mathematics that was death for long side investors.
The natural gas futures market often trades in a contango. This is when front month contracts trade at a big premium to far month ones, adjusted for the cost of borrowed money. This premium completely disappears at expiration, when the commercial buyers, like electric power plants and chemical companies, take physical delivery of the gas.
What (UNG) does is buy contracts three months out, run them into expiration, and then roll the money into new contracts another three months out. The premium they pay rapidly falls to zero. Then they repeat the process all over again. It is a perfect wealth destruction machine.
I have seen a period when natural gas rose 40%, but the (UNG) dove 40%, thanks to the costly effects of the contango. Needless to say, this makes the (UNG) the world?s greatest short vehicle in a falling market. It is a fantastic heads I will, tails you lose security.
There is another crucial factor making natural gas such a great natural short that few outside the industry are aware of. You cannot store natural gas to the degree you can semi liquid oil. Unlike Texas tea, natural gas wells can?t be capped without damaging their long-term production. It has to flow and be sold at whatever price you can get. If you don?t, it goes away. This means that when the price of natural gas falls, it does so with a turbocharger, also making it an ideal short play.
To make a long story short, I made another fortune riding gas down from $17 to $2. I haven?t touched it for 2 years. Other hedge fund manager friends of mine made billions on this trade, and then retired to a sedentary life of philanthropy.
At this point, natural gas is up an unbelievable 56% in three months, thanks to Mother Nature?s brutal assault on most of the country, except here in balmy California. Demand is at an all time high, prices a 5-year peak, and speculative long positions in the futures market at an eight-year apex. Storage was taken down to a six month low of 1.2 trillion cubic feet with today?s 230 billion cubic foot draw down.
Expiration of the front month contract triggered a super spike in the (United States Natural Gas Fund to an astounding $27, while underling natural gas made it all the way up to $5.50, nearly triple the subterranean $1.90 low set in April, 2012.
This is happening in the face of one of the greatest supply onslaughts in history that will hit the market throughout the rest of this year. They?re still hiring and drilling like crazy in North Dakota.
The demand spike came hard and so fast that it caught many suppliers by surprise. That has created a bubble in the pipeline, a temporary shortfall in supplies, and triggered an incredible short squeeze in the natural gas market.
Winter can?t last forever. Eventually summer comes, and the shortage of natural gas pipeline will get more than made up by thousands of new fracking wells in the US.
If the UNG returns to the November, 2013 $17 low by July 18, the value of the (UNG) July, 2014 $23 put rises from our $1.68 cost to $4.72, a potential gain of 181%. That?s a fabulous risk/reward ratio, and we have six months to see it happen.
Keep in mind that liquidity could be an issue here. Yesterday, 1,549 contracts traded against on open interest of 2,297 contracts. The option market spreads here are also humongously wide and the volatility is of biblical proportions, which is endemic to the natural gas market.
Just to get a second opinion, I called Mad Day Trader Jim Parker, as I hadn?t been in this market for a while. He said it was warming up in Chicago, and he was venturing outside for a walk for the first time in three days. Out went the Trade Alert!
Below please find a chart for natural gas generated by Jim?s proprietary trading model. The bottom line here is that there is a high probability that we will drop from the current $5.17 down to $4.70, break that, go down to $4.17, break that, and possibly go as low at the November low of $3.40.
They don?t call this market the ?widow maker? for nothing, so expect a lot of heart wrenching volatility before you see a substantial payoff. So it best to enter a spread of small limit orders and hope for the best.
Here is the specific trade you need to execute this position for a $5,000 holding:
Buy 30 X July, 2014 (UNG) $23 puts at?????$1.68
Time to Sell Winter Short
Billy Bob?s in Forth Worth
As a potentially profitable opportunity presents itself, John will send you an alert with specific trade information as to what should be bought, when to buy it, and at what price. This is your chance to ?look over? John Thomas? shoulder as he gives you unparalleled insight on major world financial trends BEFORE they happen. Read more
As a potentially profitable opportunity presents itself, John will send you an alert with specific trade information as to what should be bought, when to buy it, and at what price. This is your chance to ?look over? John Thomas? shoulder as he gives you unparalleled insight on major world financial trends BEFORE they happen.
Further Update to: Trade Alert -(SFTBY) Stop Loss
Sell Softbank Shares (SFTBY) at $37.23 or best
Closing Trade
1-29-2014
Portfolio weighting: 20%
Number of Shares = 460 shares
I?m pulling the ripcord on Softbank (SFTBY)
The day I bought my second lot of shares in the internet giant on December 12 was the exact point where a year of upward momentum came to a juddering halt. The shares have been like an errant teenaged child who you keep giving the benefit of a doubt until he goes out and steals a car. That is show business.
The immediate cause for the selloff was a downgrade of Alibaba by an unnamed Chinese internet analyst, in which Softbank is a major shareholder. The imminent IPO of Alibaba was the whole reason for owning Softbank.
It doesn?t help that the global emerging market rout has sent traders into ?RISK OFF? mode, especially in China. The doubling of Turkish interest rates overnight focused a great giant spotlight on the problem.
When in doubt, sell, especially stocks with funny sounding foreign names. ?Brave new world? technology stocks, like Alibaba, have been put on hold. A full handle move up in the yen against the US dollar to a new high for the year was further fat on the fire.
But what really tipped me over to the sell side was to see the Nikkei Average up a robust 2.70% last night, but Softbank shares to drop by -1.30%. If it can?t catch a bid with this tailwind, it?s time to get out of dodge, or in this case, Kabutocho.
You knew this eventually had to happen. Since June, my Trade Alerts have enjoyed an almost unbelievable success rate of 90%. My followers have earned a +41.15% return on their capital, a multiple of what the market did. It was just a matter of time before I got slapped across the face with a fresh piece of sushi. But the entire world had to conspire against me to do it.
If you do have to lose money, this is the way to do it. By owning shares instead of options I was able to limit my loss to 2.86% off the back of a 14.3% fall in the shares. The trade was part of the general deleveraging that I have been implementing with my trading book since the end of 2013. It?s far better to have leveraged gains and unleveraged losses than the reverse.
No doubt, everything I predicted about Alibaba and Softbank will come true, and vast fortunes will be made by shareholders. But for the time being, we will have to restrict ourselves to reading about it in the newspapers from the sidelines.
Here is the P&L calculation
Loss: $43.44 - $37.23 = -$6.21
(-$6.21 X 460) = $2,857 ? 2.86% for the notional $100,000 model portfolio.
Ouch!!
As a potentially profitable opportunity presents itself, John will send you an alert with specific trade information as to what should be bought, when to buy it, and at what price. Read more
As a potentially profitable opportunity presents itself, John will send you an alert with specific trade information as to what should be bought, when to buy it, and at what price. This is your chance to ?look over? John Thomas? shoulder as he gives you unparalleled insight on major world financial trends BEFORE they happen.
Further Update to: Trade Alert -(AAPL)
Buy the Apple (AAPL) February, 2014 $460-$490 bull call spread at $26.85 or best
Opening Trade
1-28-2014
expiration date: 2-21-2014
Portfolio weighting: 10%
Number of Contracts = 4 contracts
Let me tell you my thinking here.
More than 51 million iPhones sold is good enough for me, 3.2 million more than they moved a year ago, and they are more expensive devices. iPads leapt from 22.9 million to 26 million, including the five high end ones I bought.
The earnings announcement wasn?t that bad, with record quarterly YOY revenues of $57.6 billion reported. Earnings per share jumped a middling 5%, from $13.81 to $14.50, partially in response to the company?s own massive buyback program.
Gross margins came in at 37.9%, which would be gigantic if Apple were in any other industry but technology.
The dividend was nailed at $3.05 per share, setting the yield today at 2.43% annualized, a mere 30 basis points below ten-year Treasury bonds.
However, I think that traders have become so conditioned to selling on the news that the stock wasn?t going to take a dump no matter what the company said. This is why I went into the release flat on Apple this time. It?s too early in the year to lick wounds. At today?s low of $502, we were down $73 from the recent high, or 12.7%.
If you look back at the collapse after the September, 2012 $706 peak, it took two months for the shares to fall $100. For us to lose money on the Apple February, 2014 $460-$490 bull call spread, it would have to fall twice as fast as back then, and it has to do it in only 17 trading days. Sounds like a good bet to me.
We are also getting huge valuation support down here, with an ex cash multiple of 9, versus a market multiple of 16. Investors are going to hold a gun to the head of their portfolio managers to get them to average up in this neighborhood.
You also have corporate raider, green mailer, and former Manhattan neighbor of mine (activist, to be polite) Carl Icahn Twittering away about how cheap the stock is, and buying another $500 million worth of shares today to cash in on the plunge. You can see him coming in every time the stock takes a run at $507. Carl was not a factor in the last melt down.
For your edification, I have included a proprietary chart from my colleague, Mad Day Trader Jim Parker, showing huge technical support at the $470-$480 level. It is days like this that Jim is worth his weight in gold. Too bad he isn?t heavier.
The best execution can be had by placing your bid for the entire spread in the middle market and waiting for the market to come to you. The difference between the bid and the offer on these deep in-the-money spread trades can be enormous. Don?t execute the legs individually or you will end up losing much of your profit.
Keep in mind that these are ballpark prices only. Spread pricing can be very volatile on expiration months further out.
Here are the specific trades you need to execute this position:
Buy 4 February, 2014 (AAPL) $460 calls at????.$50.65
Sell short 4 February, 2014 (AAPL) $490 calls a?$23.80
Net Cost:????????????....??..?.?......$26.85
Profit: $30 - $26.85 = $3.15
($3.15 X 100 X 4) = $1,260 ? 1.26% for the notional $100,000 model portfolio.
