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March 21, 2017 | Selloff Rewards Two Timely Option Bets

Rick Ackerman

Rick Ackerman is the editor of Rick’s Picks, an online service geared to traders of stocks, options, index futures and commodities. His detailed trading strategies have appeared since the early 1990s in Black Box Forecasts, a newsletter he founded that originally was geared to professional option traders. Barron’s once labeled him an “intrepid trader” in a headline that alluded to his key role in solving a notorious pill-tampering case. He received a $200,000 reward when a conviction resulted, and the story was retold on TV’s FBI: The Untold Story. His professional background includes 12 years as a market maker in the pits of the Pacific Coast Exchange, three as an investigator with renowned San Francisco private eye Hal Lipset, seven as a reporter and newspaper editor, three as a columnist for the Sunday San Francisco Examiner, and two decades as a contributor to publications ranging from Barron’s to The Antiquarian Bookman to Fleet Street Letter and Utne Reader.

Tuesday’s downdraft demolished a key S&P support, implying sellers aren’t through yet. The rare, exhilarating — for bears, that is — selloff also kicked into high gear two options positions we’d acquired just hours ahead of the move — one using call options in VXX; the other, DIA puts. The former doubled in price in under two hours, while the latter tripled from the 0.72 price where subscribers had bought them earlier in the session. The timing was not mere luck. In the case of the VXX trade — essentially a bet that the steady downtrend in this volatility-tracking vehicle that has persisted for than a month would reverse sharply — we used two Hidden Pivot targets in conjunction to nail the precise low. The first was a 15.50 target for the VXX itself; the second, a 0.50 target for April 9 16 calls. They bottomed more or less simultaneously within pennies of their respective targets, giving us great odds for betting on a reversal.  The chart used to target the VXX call options we bought is shown in the inset.  As for the DIA trade, subscribers had averaged down on puts, buying some for 1.08 last week, and some as recently as this morning for 0.76 or less. As is our custom, Rick’s Picks recommended exiting half of both positions when their value doubled. As a result, subscribers who followed my original guidance hold positions that cannot lose but which have the potential to produce very substantial gains if the market selloff continues.

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March 21st, 2017

Posted In: Rick's Picks

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