Author: The INO.com Team

Put Spread Options - Defining Risk and Maximizing Returns

Posted on by The INO.com Team

As 2020 unfolds and the markets continue to break through record highs, investors should heed these lofty levels. We’re in the longest bull market in history and the U.S. has started and ended a decade without a recession for the first time in history. By nearly all measures, these markets are overvalued with stretched valuations.

Deploying a put spread strategy is a great way to define your risk while leveraging a minimal amount of capital to maximize returns. Whether you have a small account or a large account, a put spread strategy is an effective way to limit risk with a high probability of success. Trading options on stocks like Expedia (EXPE), Tesla (TSLA), Ulta Beauty (ULTA), Apple (AAPL), Disney (DIS), Facebook (FB), etc., that possess such a high price per share when account balances are limited are no longer an issue with put spreads. Put spreads enable you to leverage a minimal amount of capital, which opens the door to trading virtually any stock all while defining your risk.

Over the past 13 months, ~315 trades have been made with a win rate of 86% and a premium capture of 57% across 69 different tickers. When stacked up against the S&P 500, an options strategy generated a return of 9.1% compared to the S&P 500 index which returned 3.7% over the same period. These returns demonstrate the resilience of this high probability options trading in both bear and bull markets. These results can be replicated irrespective of account size when following the fundamentals outlined below.

Put Spread and Defining Risk

Options can be used in a leveraged manner hence using small amounts of capital to trade what otherwise would require much greater capital requirements. A put spread is a type of options trade that risk-defines your trades and involves selling and buying an option. Let’s review a put spread below.

The Put Spread: Continue reading "Put Spread Options - Defining Risk and Maximizing Returns" →

Market Falls On Weak Data And Virus Fears

Posted on by The INO.com Team

The first trading month of 2020 is closing out with a thud. For the second time this week, the DOW has fallen over 500 points, triggering a new red weekly Trade Triangle indicating that a move to a sidelines position may be in order. To add to that, with today's losses, the DOW is having its worst day since Oct. 2nd and has erased its monthly gains booking its first January loss since 2016, standing at -.6%.

As we head into afternoon trading, the DOW and S&P 500 will post a weekly loss of over -2%. However, The S&P 500 will try to hang on to a monthly gain of .+1%. The NASDAQ will lose over -1.5% on the week but will hang onto a monthly increase of +2.3%.

Manufacturing activity in the Midwest sank in January to the lowest level since December 2015, according to a survey of businesses released Friday by MNI Indicators. The Chicago Purchasing Managers Index (PMI) fell to 42.9 this month from 48.9 in December. Any reading below 50 indicates deteriorating conditions. Economists surveyed by Econoday had expected a small dip to 48.5. Continue reading "Market Falls On Weak Data And Virus Fears" →

Stocks Tumble On Coronavirus Fears

Posted on by The INO.com Team

A broad-based market sell-off has been the theme of the day to start the week. The reason for the sell-off? The Coronavirus, there are 2,862 confirmed cases so far in China, and the death toll in China has risen to 81. The World Health Organization's director-general is traveling to China to meet with government and health officials. In the U.S., the fifth case of coronavirus was confirmed over the weekend.

The DOW fell over 500 points, and one point or -1.6% at the open and has continued to trade at those levels, the S&P 500 dropped -1.4%, and the NASDAQ has lost -1.8%. All three indexes were poised for their worst day since October. Continue reading "Stocks Tumble On Coronavirus Fears" →

Coronavirus Sickens The US Market

Posted on by The INO.com Team

Hello traders everywhere. The stock market gave back early Friday morning gains after the second U.S. case of the deadly coronavirus was confirmed. The Centers for Disease Control and Prevention (CDC) said a Chicago resident who traveled to Wuhan, the Chinese city where the coronavirus originated, in December was diagnosed with the sickness. So far, the outbreak in China killed 26 people and infected more than 900 in the past week, raising concerns about its fallout on the global economy.

That report pushed the DOW was down over -175 points, the S&P 500 slid -08% and the NASDAQ fell -.75% on the day. Overall for the week, the DOW is on pace to lose -.8%, it's the first weekly loss in two weeks. The S&P 500 will also post its first loss in two weeks, with a loss of -.5%. However, the bigger shock to the system is that the NASDAQ will post a weekly loss of -.1% its first weekly loss in over six weeks.

Crude oil continues to under heavy pressure from rising inventories and weakening demand. Crude will post it's third straight week of losses with a loss of -7.9% trading below $54 a barrel. The EIA itself earlier this week said it expected crude oil production in the shale patch to continue increasing, adding 22,000 bpd next month to reach a total of 9.2 million bpd. The increase will come from the Permian and the Bakken, which will together add 50,000 bpd to their daily average, more than offsetting declines across the rest of the shale patch. Continue reading "Coronavirus Sickens The US Market" →

Strong Economic Data And Housing Boost Market

Posted on by The INO.com Team

Hello traders everywhere. Stocks traded at record intra-day highs Friday morning as strong global economic data, strong housing data, and a solid start to the earnings season led to another week of gains. This week's move for the S&P 500 and DOW are close to posting the best weekly gain in 5 months.

All three of the major indexes hit intraday highs in Friday morning trading with the S&P 500 hitting 3,326.44 up +1.7% for the week. The DOW continues to trade above 29,000, hitting a high of 29,373.62, posting a +1.7% gain. The NASDAQ will post a weekly gain of +1.9% and hit a record high of 9,393.48.

Chinese industrial data for December came in better than expected, with production rising +6.9% on a year-over-year basis. The overall Chinese economy grew by +6.1% in 2019, matching expectations. To be sure, that is also the slowest growth rate for the Chinese economy since 1990. Continue reading "Strong Economic Data And Housing Boost Market" →