$2,500 in 61 minutes!
Is that a good hourly wage – I haven't had a real job in years, so I'm a bit out of touch. That's what we accomplished yesterday in our Member Chat Room as I put out a note at 10:12 to add 50 TZA (and ultra-short ETF on the Russell Index) next weekly (Oct 4th) calls at $1, saying:
Those TZA Next WEEK $21.50s are down to $1 with TZA at $22.25 and that's too good to pass up – 50 in the STP with a stop at .75.
Then, just 61 minutes later, at 11:13, we took the money and ran as I said to our Members:
Wheeee on the Russell – TZA $21.50s are already $1.50 and THAT is the way you make a very quick $2,500 and we're done in the STP as we're back at the 1,070 line that's been holding in the Futures (/TF) and we have plenty of other long-term short plays if we keep going down.
This was our 3rd day in a row using TZA to make quick money OFF THE SAME LINE and we exited at about the same spot – it's just that, this being the 3rd time in a row, we were smart enough to place a big bet in our virtual portfolio (the first two times we had just tossed out the trade idea without officially including it). This is not really that complicated folks – we see a pattern, we wait for it to repeat and we place the most optimal bet we can on it.
This channel represents moves in the Russell Index between 1,080 (where we look for a short position) and 1,075 – merely a 0.46% wiggle on the Russell but enough to send TZA (a 3x Ultra-ETF) flying higher as we play the change in sentiment as much as we play the slight shift in direction. These are the quick, simple cash-to-cash trades we're going to be concentrating on in Q4 at Philstockworld and it's why my call to get to cash (in short-term unhedged portfolios) at Tuesday's highs shouldn't make you fear we're going to turn off the lights into the end of the year.
Cash gives us the flexibility to take advantage of these opportunities and, of course, for those of you trading the Futures (or are going to learn to in Las Vegas this November), you know these opportunities come up on almost a daily basis.
Indeed (who says "indeed" anymore?), we could have played the RUT Futures (/TF) from 1,080 to 1,075 and those pay $100 per point, per contract, so $500 proift per contract in the Futures but, in this particular case, the Futures have a $5,280 per contract margin requirement so it was CHEAPER and MORE PROFITABLE to use TZA for this particular trade and, of course, more people are set up to buy call option that are set up to buy Futures contracts.
Futures work best for catching micro-moves like we play in oil, where a single Oil Futures Contract (/CL) has a $4,510 margin requirement but pays $10 PER PENNY, PER CONTRACT. By using oil Futures, we can take advantage of 25-cent moves to make $250 (you can lose it too – that's why we give seminars in how to manage the trades!) and oil has been like a little cash machine on the short side for us since spiking to $110 in early August.
From our primary shorting position at $108.50 to our target (just hit) at $102.50, even if you just made that one trade – the gain was $6,000 PER CONTRACT! In fact, back on August 14th, I suggested we all get together and short all 281,000 open NYMEX contracts (1,000 barrrels per contract) and we got a quick ride to $104, as predicted, into the rollover and those 281,000 contracts made $843M in 7 days. Then we went back to $110 (with a very brief spike to $112) with 340,000 open contacts and, had President Obama listened to me and offered to sell the oil for $110 per contract, the exit at $102.50 would have been good for a $2.5Bn profit in less than a month.
So we're not just making money for ourselves here – we're trying to fix the deficit as well…
The option alternatives to Oil Futures are in our Short-Term Portfolio and we've been using USO, where we bought 10 Oct $40 puts for $2,000, which closed at $3,000 yesteray (up 50% in 9 days) as well as 20 January SCO $24/28 bull call spread, which we bought for net $4,400 on the 18th and closed at net $5,000 yesterday and that's up just 13% so far – but it's a more conservative play, of course and well on it's way to realizing it's full potential $3,600 gain in 4 months.
Boring is good! This is going to be our trading theme for Q4 as we try to get our Members out of bad (but fun!) trading habits and into "The Zen of Incredibly Boring Trading." ©
We're into cash because the markets are extremely uncertain but, if we can make $2,500 in a single day trading with $5,000 – what need is there to have $100,000 at risk when you go to sleep every night? Hopefully some of the uncertainty will wash out as we get past this Fiscal Cliff nonsense and past the Fed nonsense and into Q3 earnings reports – but not yet! In fact, today we hear from 3 Doveish Fed Governors (see Monday's Fed rundown) as we barrel into the end of the Quarter on Monday:
- At 8:30 AM, Boston Fed president Eric Rosengren will give opening remarks at a conference on stable funding at the New York Fed.
- At 10:15 AM, Chicago Fed president Charles Evans sits on a panel at the Norges Bank conference in Oslo, Norway.
- At 2 PM, New York Fed president William Dudley speaks on the U.S. economy in Syracuse, with a Q&A to follow.
So it's a lovely day to sit in cash and watch all the nonsense and maybe we'll find something cool to trade (we found 5 actionable trade ideas in yesterday's Member Chat) or maybe we'll just relax and continue to relax on Monday as the Quarter draws to a close and we get ready for the earnings reports, along with next Friday's Non-Farm Payroll numbers, of course.
Have a great weekend,
– Phil
ps – Our Futures play for Fed dovery is the Dow (/YM) Futures long off the 15,200 line with very tight stops below. Dow pays $5 per point per contract and has a margin requirement of $2,750 per contract.
