Author: The INO.com Team

Stock Market Erases May Losses

Posted on by The INO.com Team

Hello traders everywhere. As we enter the last couple of hours of June trading, I thought I'd take a look at the monthly charts and see where we stand. Not shockingly the S&P 500 and DOW both erased their May losses gaining +6.6% and +7.1% respectively while the NASDAQ is just short of erasing it's -7.9% loss with a June gain of +7.3%. These gains are mostly due to two things, the promise of a China trade deal and optimism that the Fed will announce a rate cut of at least 25 basis points in July.

The only laggard of the seven instruments that I track to have a losing month is the U.S. dollar which will post it's most significant monthly loss since December of last year standing at -1.4%.

Gold is having it's best month in quite a while gaining +8% for June as traders flock to the haven hedging their bets that a trade deal will get done. This is the first time since April of 2018 that gold has traded above the $1400 level. Continue reading "Stock Market Erases May Losses" →

And Still, We Wait

Posted on by The INO.com Team

Hello traders everywhere. "We were about 90% of the way there (with a deal) and I think there’s a path to complete this," Mnuchin told CNBC's Hadley Gamble on Wednesday, without providing detail on what the final 10% of an agreement might entail. He said he's confident President Donald Trump and Chinese President Xi Jinping can make progress in stalled trade talks at the forthcoming Group of 20 (G-20) meeting this weekend. Yet, here we are still waiting on a trade deal with China.

We're also still waiting on a decision from a confused Fed. Investors are betting the Fed will cut rates by at least 25 basis points in July. Those expectations helped lift the major stock indexes this month. The Dow and S&P 500 were both up at least 6% for June entering Wednesday’s session. The Nasdaq was up 5.8%. Continue reading "And Still, We Wait" →

Options: How About Those Losing Trades and Managing Risk Profile?

Posted on by The INO.com Team

Let’s discuss losers and managing options trades that move against you despite the high probability of winning the trade at the onset. When engaging in options trading, losing trades are inevitable however managing these trades via risk-defined trades, position sizing, diverse sector allocation, buying-to-close for a gain or loss, allowing assignment to occur at expiration, selling covered calls on the assigned stock and rolling the trade out to a different strike level can mitigate risk and allow long-term successful options trading. In the end, following a set of options, trading fundamentals will enable your portfolio to appreciate steadily month after month for consistent portfolio appreciation. Since options are a bet on where stocks won’t go, not where they will go, this is accomplished without predicting which way the market will move. These fundamentals provide long-term durable high-probability win rates to generate consistent income while mitigating drastic market moves. Following these option trading fundamentals, I’ve demonstrated an 86% options win rate over the previous 8 months through both bull and bear markets while outperforming the S&P 500 over the same period by a wide margin producing a -0.1% return against a -5.6% for the S&P 500. This outperformance is due in part by proactively addressing losing trades to manage the overall risk profile.

Losers Negate Winners

The goal in options trading is to leverage cash and/or stock and sell options using the underlying cash and/or stock to collect premium income. This can be performed in a high-probability manner where a statistical edge is to the options trader’s advantage. Despite the odds being in your favor, occasionally trades can move against you in a major way and negate a large swath of winning trades. Let’s say 12 trades were placed and closed with an average income per trade of $65, translating into $780 in income. If one trade goes south and assignment occurs at $8 below the strike, then this would more than wipe out the $780 in profit and result in an overall loss on the portfolio, translating into a net $20 loss over these 13 trades since options trade in blocks of 100 shares. The onus is on the trader to circumvent this situation and manage these trades before this huge loss in relation to all the option-income received. The example used above is the primary rebuttal from cynics when it comes to an exclusive portfolio driven by options trading. Even if this assignment occurs, the stock was purchased at a substantial discount relative to where the stock traded when the option was placed. Additionally, the assignment can be held until the underlying stock recovers beyond the assigned strike price. Continue reading "Options: How About Those Losing Trades and Managing Risk Profile?" →

Stocks Eyeing Gains For The Second Week In A Row

Posted on by The INO.com Team

Hello traders everywhere. After disastrous May during which major indexes lost more than 6%, U.S. stocks have clawed back much of those losses. The recent rally was sparked last week when Federal Reserve officials signaled in interviews and speeches that they are watching the risks of a sharper-than-expected economic slowdown, a sign the central bank might consider lowering interest rates in coming meetings. We are currently 5 days away from the first of those meetings, be sure to keep an eye on the headlines for potential moves in the markets.

Last week the major indexes all gained over 3.8% for the week and this week all three indexes look to post gains for the second week in a row with the S&P 500 posting a gain of +.4%, the DOW +.3%, and NASDAQ follows with a gain +.7%.

The U.S. dollar will post a weekly gain of +.9% after losing -1.07% last week. Gold continues to march higher with a weekly gain of +.6%, but it cannot compete with Bitcoin which bounced back after losing -8% last week, gaining +7% this week.

The only major market that we track to post a weekly loss is crude oil, which will lose -2.5%. That marks the third week out of the last four that oil has had a losing week.

Key Levels To Watch Next Week:

Continue reading "Stocks Eyeing Gains For The Second Week In A Row" →

DOW Surges On Rate-Cut Hopes

Posted on by The INO.com Team

Hello traders everywhere. The DOW surged over 300 points Friday on renewed hopes of a July rate cut by the Fed and possibly as much as three cuts by the end of the year. All three of the major indexes will post weekly gains over +4%, which is incredible considering that nothing has changed from last week. We still do not have an agreement in place with both China and Mexico when it comes to trade deals and the threat of increased tariffs is still real.

The Dow is up +4.8% this week. It is also on pace to snap a six-week losing streak. The S&P 500 and Nasdaq were up +4.6% and +4.9% this week capping off an incredible comeback after a soft open to the week and continuous weekly losses. They are all on pace to notch their biggest weekly gains since November of 2018.

Earlier in the week, ADP reported that the private sector added fewest jobs in May since 2010 with jobs only rising by 27,000 last month which was way below expectations of a 180,000 increase. To add to that Labor Department reported on Friday that nonfarm payrolls increased by 75,000 jobs last month, much smaller than the 185,000 additions estimated by economists, suggesting the loss of momentum in economic activity was spreading to the labor market.

Will the Fed cut rates in July?

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Key Levels To Watch Next Week:

Continue reading "DOW Surges On Rate-Cut Hopes" →