That's right, we did it again!
Yesterday's Live Trading Webinar was open to the public (see yesterday's post) and, during the session, we found a trade on the Russell 2000 that made $500 per contract and, into the close of the Webinar, we decided to go long on the Nikkei (/NKD) at 16,985, looking to get back to 17,200 and we NAILED IT into the close for a $1,075 per contract win in just hours! Futures trading is fun – don't be afraid – check out our Options Opportunity Portfolio and get access to all of our Live Trading Webinars.
Also in yesterday's morning post (and on our Twitter feed) I mentioned the Alert we sent out to our Members in the morning, noting the following long plays in the Futures:
- 1,900 on the S&P (/ES), closed 1,907 – up $350 per contract
- 16,100 on the Dow (/YM), closed at 16,320 – up $1,100 per contract
- 0.975 on Gasoline (/RB), closed at $1.045 – up $2,940 per contract
- $30 on Oil (/CL), closed at $32.50 – up $2,500 per contract
Yes the futures are risky (and we were down before we were up in the Webinar) but they give you a tremendous advantage in volatile markets as you can use them to better balance your portfolio before the market opens or after it closes – rather than sitting and sweating while you wait for the opening bell to trade. Since we practice a generally Balanced Portfolio Approach at Philstockworld, we mostly play the Futures for fun but the experience we get while having fun really comes in handy when there is an after-hours surprise in the market. You've probably seen this commercial recently:
And no, it doesn't matter who your broker is (most of us use TD's Think or Swim) but this commercial hits it right on the head – being able to trade the Futures gives you a tremendous edge on the market. Let's say you only used one of our trade ideas and made just $1,000 yesterday on a single contract. What percentage of your portfolio is that? How many times a year would it be nice to save $1,000 here or $1,000 there by being able to balance your positions based on news you received before or after the trading floor had closed?
Not wanting to trade the futures because they are risky is like only wanting to have dull knives at the dinner table: It will usually work out OK – until it's steak night!
The same thing goes for our Options Hedges – another valuable tool you should have in your toolbelt. Our Short-Term Portfolio carries the primary responsibility of protecting our 4x larger Long-Term Portfolio (20% allocation to short-term positions) and, in it, we keep our option hedges that protect us against downturns. At the moment, we have 50 S&P Ultra-Short (SDS) March $22/27 bull call spreads that we paid net 0.85 for ($4,250) as our primary hedge (we're not that bearish, yet) and it pays $25,000 if SDS is over $27 at March expirations (18th) and SDS is currently $22.37 and moves 2x to the S&P, so it would take a 10% drop in the S&P for us to hit our $27 target on the 2x ETF.
To pay for that spread, we sold 5 Apple (AAPL) 2018 $80 puts for $9 each ($4,500) in which we got paid cash up front in exchange for our promise to buy 500 shares of Apple should it drop another 15%. If that doesn't happen by January 19th, 2018, then the put contracts we sold expire worthless and the $4,500 is free. This is a trick that works with any stock you REALLY want to own at a discount (see "How to Buy a Stock for a 15-20% Discount").
As I noted above, we're not that bearish – yet – but we will be adding more aggressive hedges into the weekend if we can't hold our weak bounce lines (see yesterday's post for levels) and, frankly, not making our strong bounce lines into tomorrow's close is still going to be a big concern and we're a long way from making those this morning.
Today is a big data day with Chain Store Sales, Jobless Claims, Productivity Report, Consumer Comfort, and Factory Orders – all ahead of tomorrow's market-moving Non-Farm Payroll Report. After Conoco (COP) this morning, there's nothing too exciting on the earnings front until next week – which is the biggest earnings week of the quarter. After that is our favorite time of the year, when we get to make short-term bets on earnings calls that come in towards the end of the period – when we have enough information in each sector to make intelligent guesses on the remaining company reports – be sure to tune in for that fun!
Meanwhile, today is a bit of a watch and wait day though we will, of course, still want to go long on the S&P (/ES) above the 1,900 line and the Russell (/TF) above the 1,000 line while we'd love a re-entry on Natural Gas (/NGK6) at $2.15. There are, of course, ETFs for all of those (SPY, IWM, UNG) but we love the quick "In and Out and Back to CASH!!!" trading of the Futures – especially in suck a volatile market!
Our biggest concern at the moment is that much of this rally can be attributed to the rapid decline of the Dollar this week – down from 99.50 to 96.50 is more than a 3% decline and that SHOULD give a 3% lift (at least) to commodities and equities and, indeed, Gold has rocketed up to $1,155 (we're long GLD) and Silver has shot up to $14.90 (we're long SLW and /SI Futures) and Copper has jumped back to $2.12 (we're long /HG and FCX) but the equity indexes are dead in the water and, perhaps, only supported – for the moment – by the Dollars weakness and about to take a huge plunge in the near future!
How's that SDS hedge looking now? As I said, we'll be looking to add more hedges if we're forced to stop out of our Futures longs and, even if they are successful, we'll be taking those profits and using them to purchase more hedges if we fail to take back those strong bounce lines.
That's our game plan, what's yours?
