Well that didn't take long, did it?
Our Nikkei and EWJ short positions continue to rake in the cash as that index drops another 122 points overnight but, more to the point, we nailed the switch to the fresh horse of China for our readers, as FXI topped out right at our $42 target, almost to the penny, before dropping back into the close and this morning the Shanghai Composite dropped 5.43% from above the 3,000 line – all the way back to 2,856.
Now, I can only tell you what's going to happen and how to make money betting it – the rest is up to you. For our Members (and you can get this kind of money-making information every day by joining us HERE), our trade idea for shorting FXI with options was the Jan $40 puts at 0.88, and we picked up 20 of them in our Short-Term Portfolio for $1,760 – and those should do very nicely for us this morning.
Our whole Short-Term Portfolio performed well yesterday, gaining $5,000 (5%) as the market dropped, which is what it's designed to do as a counter-balance to our bullish Long-Term Portfolio, both of which we reviewed extensively over the weekend (sorry, Members only).
There are just 13 position in our STP and they are, of course, generally bearish. Very bearish, actually as they gained 5% on a day the S&P only dropped 0.71% – today should be interesing indeed (and we have a Live Trading Webinar for our Members at 1pm).
We titled yesterday morning's post "Monday Melt-Down" and I sent out an Alert to our Members and for FREE to our FaceBook Followers regarding the dreaded "Hindenburg Omen" as well as actual news I found disturbing over the weekend. As I mentioned, we already had a substantial short position in our Short-Term Portfolio and, frankly, we thought the drop would begin last week. In our $25,000 Portfolio Review, we elected to pick up the DXD (ultra-short Dow ETF) Jan $22 calls at 0.70, and those should be doing well this morning as the Dow Futures are pointing to another 100-point drop today.
Per our fabulous 5% Rule™, we know that 18,000 is going to be hard for the Dow to get over. In the big picture, it's 12.5% over the very significant 16,000 mark, which we retested in October and that means the Dow overshot the 10% line at 17,600 – so we're looking for a pullback to there, at least, but hopefully a retrace below there to 17,400 for a very nice gain on DXD. Again – I can only tell you what's going to happen and how to make money betting on it, those are the rules – the rest is up to you…
Yesterday morning I told you the VIX was ridiculously low at 11.88 and we popped 23% intra-day to 14.67 before settling down at 14.21, still up 20% on the day. These are the simple, FUNDAMENTAL kinds of mismatches we teach our Members to look for at Philstockworld and, once we identify them – it's very easy to construct an option play to take full advantage of our premise if an when it comes to pass.
We also teach our Members to understand options and how they are priced, so we know that a higher VIX is an opportunity for us to sell more premium – just as the low VIX has been giving us the rare opportunity to buy some puts and calls – something we don't usually like to do in our "BE THE HOUSE – Not the Gambler" strategy.
We hope the VIX goes a lot higher (a market sell-off) as we have plenty of CASH!!! on the sidelines (have I mentioned I like cash recently?) and plenty of stocks on our Buy List (Members Only) that we'd love to see go on sale. It's also almost time for our picks for 2015, so it would be really nice if we can get good prices on our targets.
Being mainly in cash makes sell-off days like today fun and, as the sign says at the top of our site "Fun and Profits" is what we're all about here!
