AS the market has gone nowhere over the last several weeks, I've been sitting on my hands... a lot.   Following the sell off and inevitable dip buying ( sarcasm) the market is now back at highs, and may have even broke out above 2400.  If you watch our  (almost) daily video's you know that our posture is bullish, however  we do not expect big moves to the upside.  We may continue  sideways, we grind a bit higher.  Then of course there is the daily possibility that the wheels come clean off the political machine.. then all bets are off, so to speak.    I'd recommend you watch our (almost) daily videos if you'd like a sense of our market posture.     

That said,  I am looking for bullish entry signals that meet my rules.  For review, I am trading the Chaikin Money Flow Buy signal.  My Plan and entry rules can be found HERE.   

AET ( Aetna Inc) recently generated a Money Flow Buy. 

First, lets talk about Health Care.   If you follow our weekly sector analysis, you've noticed health care has been in the top 3 for several weeks. ( ranked based on Chakin power bars)   You can follow our weekly sector analysis HERE.    While out performing the market based on the Chaikin Power Bars, money flow has been weakening, although remaining positive, relative strength is strong vs the SPY and the sector recently began rolling up. 

Back to AET.   While money flow over the previous year has been mixed, most recently its been quite strong.  Also, price remains  above a rising long-term Chaikin M and , Short-Term 21 day MA.  AET has positive relative strength vs the SPY and is rolling up out of oversold.  Earnings are well outside our 30 day window, and as I mentioned above the  Health Care ETF, XLV has been out performing on a fundamental basis for many, many weeks.    So, this trade meets all the rules of my trading plan.   

With the stock trading at roughly 142.00 on the day I entered, I sold the  140 put ( JUL 2017) and collected 2.98 in credit.   I have added this trade to my trade log.  

Here is an overview of my Money Flow Buy  MF Strategy so far this year.   I've been assigned on two trades, TXT and FLR, the rest of my trades have expired worthless.    Remember,  my goal is to have the stock assigned, not sell puts that expire worthless. 

Happy Trading!

​-AA

An update to my Money Flow Buy Strategy is long overdue.   Following the multi-week pull back in equities that we recently experienced,  my strategy of selling puts as a stock acquisition strategy is hanging in there!    I let several short puts expire into April expiration, as we awaited the results of the  first round of the French election.     Seemed like a good opportunity to take some risk off the table and capture some gains.   Although, rolling puts into what was an elevated VIX environment  would have yielded slightly higher option premium.  With anything.. there's a trade-off. 

In addition to closing several positions, via short options expiring worthless,  I was also assigned on 4 of my 12 short premium plays.    Here's a break down YTD. 

As you see, several positions expired worthless.   Positions in FB, SWKS, MU, CELG, GLW, RCL, CB and ANTM all expired OTM.   In total I collected $2,513.00 in premium in these trades, with FB leading the way.    

I was assigned on TXT, FLR, GS and JPM.  the rally over the first few days of this week  helped a lot in those names. I'm now holding long shares, having been exercised on the short option(s)    This is where you can see the benefits of selling premium on Money Flow d Buy Signals as an acquisition strategy.   Example, my cost basis on JPM is 85.68 after the recent retreat in price I'm still in the black thanks to the 4.32 I collected in premium before the stock was put to me.   While I'm underwater in GS, I'm less so, thanks to the 9.38  that my cost basis was reduced by selling premium prior to the stock being put to me.   Matter of fact,  had I purchased the stock at the close the same day I sold the premium (2/6) I would have paid 239.98,  I initiated a trade the very same day, but instead sold premium and reduced my basis. i'm now long GS at 235.62.  Yup, still under water, but less water.   I will now sell calls against my long shares to off-set basis even further.   Your'e basic covered call strategy. 

If you've been watching our daily video's, you know that our market stance has turned cautiously bullish as the power bars have once again turned positive and price is above both MA's.  On that, I'm looking to re-load on any Money Flow Buy that meets my rules for this strategy. 

You can review my plan and follow results HERE

Happy Trading! 

​AA

Just kidding, lets not.   I would much rather talk about the Money Flow Buy signal we saw in  Anthem this week. $ANTM    

First, I wanted to mention TastyWorks.  They've lit the fuse on a commission price war, and they are winning.   As an active trader, I have seen a substantial savings on commissions since I made the switch.  
​ I don't work for TastyWorks, I'm not affiliated with them... I'm just a fan of what they are doing.   If your'e paying ticket charges.. your'e paying too much!   Take a look at their fee structure.   No ticket charges... no commission to close.... Seriously!?     Faster than any platform I've ever used... yes, even that one! 

OK, now lets talk about $ANTM.   Earlier this week ( 3/15) Anthem generated a Money Flow Buy Signal.  As you can see in our weekly Sector trend report, XLV ( Heath Care ETF)  Has been strong for the past several weeks, second only to the financials.   

ANTM has a Very Bullisg PG, above a Long-Term Chaikin Moving Average, Positive Money Flow, Positive Relative Strength and, at the time of the signal, the oscillator was in the oversold zone.   Earning are outside of 30 Days and  the industry and trend are both strong.   This meets everyone of my trading rules. 

I sold the APR 160 put 1 time for a 1.75 credit.   Quick note, while I aim to sell the 30-40 delta put... sometimes you get a 24 or a 40 something.... which was the case here.   I chose to sell the 24D.  

I will keep you updated on this trade.. whether I get assigned, roll out or change my opinion and exit. 

You can see all my Money Flow Buy trades YTD HERE. 

Earlier in the week MU ( Micron Tech) Generated a Money Flow Buy Signal.   

You'll notice at the time of entry, i the trade met all my rules.  Very Bullish PG, Above a L-T Chaikin MA, Positive Money Flow, Positive Relative Strength. and as a bonus the OB/OS oscillator was just rolling up out of OS.   As an double bonus, MU also gave a Relative Strength Buy signal on the same day.  I sold 3 of the APR 23 Puts  for a credit of 1.16 (ea)   Since selling the puts back on Tuesday, they've already decreased in value by 30% ( as of close 3/1)  after the big rally post Trump speech.  

Trading results to date using this plan: 

I continue to look for Money Flow Buy signals that meet my 2017 trading plan.  ( Scroll down in my Blog to read the plan)   A very brief reminder;  I am selling puts on Money Flow Buy signals.  Its a bullish way to acquire stock and reduce cost basis.   

One of my first trades using this strategy was JPM.  Back on January 17th, I sold the FEB $85.00 put and collected 2.17 in premium. 

You can see the MFB signal in the chart above.  At the time, JPM was selling for roughly $85.22,  and on the date of the signal, the -.35Delta option was the 85 put.   Since then, the stock has rallied to roughly 90 bucks.   Well, earlier this week, ahead of February expiration, I rolled my sold put into March expiration.   

I rolled to the -.26D put in March ( I like to stay in .30 -.40 delta,  however there wasn't an available option at the time of the roll)   I am now short the $85.00 MAR put. I collected an additional .65cents credit for the roll.   That means I have now collected $2.82 in premium, meaning that if the stock gets "put to me" I'm insulated from  loss down to $82.18.  Nearly 10 points lower than it currently sits.  I'd love to have the stock "put to me" but, I'll be  happy collecting monthly premiums and reducing my basis 'til that happens.

I have several rolls coming up in the March cycle.... stay tuned!

Happy Trading!

​AA 

Here we go, my third Money Flow Buy of 2017!  Quick review, I'm selling .30-.40 Delta puts in stocks that generate a Money Flow Buy signal.   My hope is that I acquire the stock at a discount.  If the sold put doesn't result in the stock being"put to me", I'll  sell another put  in the next month, each time reducing my cost basis by the amount of premium collected.  

​So, my trade this week was Facebook,  They are past earnings, above a rising long-term moving average,  and strong industry & strong trend.   I've checked all my requirements on this one. 

$FB generated a Money Flow Buy Tuesday 2/7.  I sold the  March '17 Put that fell between .30 - .40 Delta, in this case it was the 130 strike.  I collected 2.30 per contract sold.   If $FB  is below 130 on or a near expiration,  I will  "be put" 100 shares per contract sold... if $FB is above $130 at expiration, I keep the premium collected, and I'll sell another put between .30-.40 delta. 

​

If the stock is put to me this cycle, I will have reduced my cost by $230.00 per 100 shares or 2.30 per-share.  

I also entered a money Flow Buy signal in $GS ( Goldman Sachs).  I must have forgotten to update the blog, sometimes that happens when the day jobs get busy, apologies. 

​

$GS met all of the rules I've set for entry.  Including above a rising long-term moving average,  strong industry & strong trend and past earnings.

Looks like I sold the 235 strike put in March '17 for a 5.00 credit.   ( this strike would have been between 30 - 40 Delta on the day i initiated the trade)   Looks like $GS has given up a little ground since then, as I am down slightly on the trade.   Not to fear, the goal of the strategy is to have the stock put to me, so as long as it dosent give up much beyond $235, I'm a happy camper.  (  Just kidding, I don't camp!) 

I'll keep you posted on both of these trades, as well as my first trade of the year, which was $JPM.   As of the time of publication of this post, I am up 334 bucks on a 2 lot at the 85 strike for the FEB '17  expiration.  Getting close, both in terms of price going ITM and expiration.    I will manage this trade  in the next week and report back. 

​Happy Trading! 

​I entered my first trade of 2017 this week.   I am forward testing Chaikin "Money Flow Buy" signals.   Quick refresher, I am selling puts on MF buy signals, to reduce the cost basis bullish stocks I want to add to my portfolio.   A full explanation and rules of my 2017 plan can be found here. 

JPM gave us a MF Buy earlier this week. it meets all of my requirements.
Bullish or Very bullish power gauge rating, Price above a rising long-term Chaikin MA, Positive money-flow, positive relative strength, earnings are behind it. (  Additionally, I prefer to see an oversold oscillator and strong industry and trend, but these are not required to enter the trade. ) 

I sold 2 FEB 17 85 strike put contracts, for a credit of 2.17 each.  This IS a bullish trade, my goal is to acquire the stock.   If I don't get assigned, I'll sell another put next month,  collect more credit and further reduce my cost basis on JPM.  I will  update you on this trade at FEB expiry. 

Watch the video below to see how I'm going to use Chaikin Analytics "Money Flow Buy" signal, along with a few of my own rules to acquire bullish stocks at a discount. 

​ As we approach the 6 month mark  forward testing the Chaikin Oversold Buy Signal, It's become apparent  there’s  is a part of my strategy that is not working. 

Lets take a second to review exactly what  the signal entails, and what my strategy is.   First, the Oversold Buy Signal requires the following to happen:

In addition, we also need to see positive money flow and positive relative Strength to initiate a trade in our forward test of the Oversold buy Signal.  Note - We avoid stocks within 30 days of earnings for this strategy.

When a name meets the criteria outlined, we will purchase  long dated options,  we will hold for 30 days or until the price touches the outer volatility bands on the Chaikin platform, whichever occurs first.    However, Mike and I have been purchasing different option strike prices.   Both of us have been purchasing calls that expire about 6 months from the time of purchase.  We purchase longer dated options in an effort to minimized the affects of the Greeks.  

​ Mike is playing the part of a larger account holder,  and I'm trading as though I have a much smaller account.  To that end, Mike has been purchasing the .70 Delta option, which is a ITM ( in the money) strike, while I've been targeting the .30 Delta which is OTM (out of the money) strike.    The ITM options will behave more like stock than the OTM strike. in particularly, the further ITM strike will be less affected by Theta ( time decay).    In a nutshell, at  the .30 Delta I need a big move in my  direction during the planned 30 day hold to make up or theta  and make the trade a winner.   Even if the price was to go my way, if it doesn't go fast enough and far enough.... I still lose.   Why would anyone purchase the .30D ?  simple, cost.  The OTM options demand far less premium, as the probability of landing in the money at expiration is far less. 

Here is my record so far with the OBS forward test.  As you can see, the 30 delta strikes haven’t been working very well with this strategy.   

AS you can see more red than green, and what green there is, doesn't get us back in black.
With results like this, you have to stop and re evaluate,   which is what I’ve done.  

Moving forward, I’ve adjusted how I will trade OBS signals.  While I’ll still trade a smaller account, I’ll try to give myself a better chance of winning without requiring more capital.  Rather than purchase a single out of the money option, I will now purchase bull call spreads.  That is a bullish strategy where you purchase an at or in the money call, and at the same time sell an out of the money call option against it.  By doing so, I’ll solve two of my problems, I’ll be long an ITM option, and will now be benefiting from theta decay, as the sold option will decay at a faster rate than the purchased  option.   


Lets look closer at how Bull Call Spreads work.  Lets ay we want to purchase a Bull Call Spread on stock XYZ, which is trading at $100.00 I want to purchase a 99 strike call  for, say, .70 cents, and sell a 101 strike put against it for, say, .45 cents.  The trade will cost me a net debit of .25cents( $25.00)  my max profit would be the width of the spread minus the debit paid.   So, in this case  200( 2 dollars wide)-25( .25 cent net debit)= 175.00 max profit.    As time passes, theta will affect the option further away from the money more than the option closer to the money,  dramatically lessening the affect of time decay.   Of course, there is a trade off, we cap our gain’s at the sold option.   So, if stock XYZ rallied to 105, we stop benefitting at 101, as that is our sold option strike.     So, while we  feel less of an affect of time decay and need less of a directional move, we cap our gains at the sold strike.  

​By adding a positive theta component, and purchasing an ITM strike, I hope to see a noticeable improvement in my W/L ratio.   It's like so many things in life... You get what you pay for!
I believe the key to trading is developing a consistent expectancy,  I would much rather have consistent  single digit percentage winners, than sporadic larger winners mixed with larger losers.
 
I’ve already implemented this change, and have a few spread trades logged, I will keep you posted on the result of this strategy change when I close them shortly. 

​Happy Trading!
 
AA 

After a successful and encouraging back-test of the Chaikin Oversold Buy Signal, Mike and I continue to forward test  the Oversold Buy.   ( If you missed our back-test you can find it HERE)

As we forward test, it's important to point out  that Mike and I are exclusively using options as opposed to purchasing shares of stock, also  Mike and I tend to buy options at different deltas.   I prefer ( or am forced for lack of capitol) to purchase OTM ( out of the money) options... typically around the .30 delta.  Mike, on the other hand prefers to purchase options  ITM (in the money) or close to it, he generally selects an option close to .70 delta.  Of course, the option closer to the money is going to behave more like actual stock, and the theta bleed will be a bit slower.  I'll need a big move to compensate the theta decay.     As it turns out, I havent been getting many big moves.  As the market churns sideways,  I haven't revived a big enough pop on  the OSB signals I've taken to counter the affect of theta decay on a OTM option.    #traderproblems  #thetahater  

I recently closed my position in $TMO that I took on an Oversold Buy Signal back on August 4th.  Per our rules for the forward test, we hold for 30 days, or until the stock touches the outer volatility band.  So, the 30 day timer went off, and all I heard was Wha  Wha Whaaaa.    TMO ended up being a big loser for me,  a little over 71% loser!  ouch.     Had this been live trading, I would have defended or exited the position sooner but, rules are rules... so I stuck to them.       While that's a pretty significant loss,   our back-test suggested that we should get a handful of winners that will eventually bring us a positive P/L.

Here's a look at my Oversold Buys so far in our forward test: 
​

I have several trades approaching the 30 day mark.  I will update each as I exit. 

Happy Trading. 

​AA