We're closing in on August expiration this Friday so please consider closing out any plays that have already earned most of their credit. When a credit spread has less than $.05 cents remaining closing out with the vast majority of your profits is a great way to eliminate any further risk. On the other hand, if you don't like paying commissions on a play you are convinced will expire worthless let it ride--just know that there's a certain value in locking in a profit.
Trader’s Tip:
Historically,
• The “Summer Rally” is the weakest rally of the year and usually ends in July.
• Since 1987, August has been the 2nd worst month for both the Dow and the S&P 500; 5th worst month for the NASDAQ.
• In the last 13 years, the S&P 500 was up only twice on the next to the last day.
• Friday, August 13th is a bullish trading day.
From a stock (not options ) trading perspective, August is usually a good month to stay out of the market and go on vacation as it leaves most traders frustrated. The middle of August is usually stronger than the beginning and the end
Key Dates:
• August 19th--options expiration for some indices.
• August 20th--options expiration for all equity and all other index options.
• September 16th--options expiration for some indices.
• September 17th--options expiration for all equity and all other index options.
Market Outlook
Last Friday, stocks extended their losses and fell for the 4th straight day after a July retail sales report failed to live up to investors’ expectations. The Commerce Department reported that retail sales rose a paltry 0.4% blind-siding economists who were expecting more. With weak consumer spending and no rebound in sight, traders are beginning to sell--and with few reasons for stocks to rise that selling should accelerate.
The Labor Department announced that the number of people filing for unemployment benefits rose for the first time last week, casting doubt on the economic recovery. The central bank confirmed those fears stating that the economy is indeed slowing down. In an attempt to stimulate lending, they announced they would start buying government debt in hopes of lowering interest rates--but with bank rates already close to zero it's doubtful this latest move will do much to improve the economy.
Congress passed a $26 billion dollar aid package last week aimed at saving thousands of government jobs nationwide. Unfortunately, this bill only postpones the difficult choices that lie ahead for states struggling with declining revenue. With deficits climbing to dangerous levels and an election on the horizon, this is probably the last time the government will come to the rescue.
The Euro Zone’s economy grew by a better than expected 1% but virtually all that growth was attributed to one country--Germany. The German economy has expanded at its fastest pace in nearly four years, however, this will probably be the high point for Germany and the Euro Zone as demand among their major trading partners continues to contract.
What are the Secrets of the Week?
As you can see the economy is slowing and there's probably going to be some rough sailing for some months to come. But in some ways that can be to our benefit as the markets price in the likelihood of a downturn. With volatility premiums rising we can sell further out of the money and collect more in premium and we've got two plays lined up this week that are perfectly positioned to take advantage of it--so let’s get started.
You can get in on this week's trades along with two new high-probability trades per week by visiting www.cashflowheaven.com/ws.
Stack the Deck on Every Trade,
Robert
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