Our weekly advisory newsletter is designed to give you a full time professional trader’s view on the markets and where the opportunities are. This is a very different perspective than that of an analyst, journalist or news reporter as it is raw and straight from the coal face, based on the daily trading activities we are engaged in. This is a great background tool, in helping your knowledge grow to the level that you chose.
A full archive of these is available below, reflecting our transparency in sharing our trade ideas, for the record.
Your Options Weekly:
The Week Aheady
Options Mastery
Weekly Advisory Service
Market Overview
The market keeps making new highs in this rally, although the technical indicators are at the extreme level. This doesn't mean that the market can't go higher, far from it, it's just that previous extremes like these usually lead to a retracement. I still have the view that we will reach 4200 in the XJO index shortly. If that is the case then the market will have reached a 'normal' Fibonacci retracement level from the entire sell-off since November 2007. With the extraordinary amount of headlines this past week telling me that the worst is behind us, yet another sign that the rally is ending just popped into place.
The next few weeks look like being choppy with a fair amount of headwind to reach our target of 4200. During this time it is imperative that share portfolios get a long hard going over and it may be clean up time for a lot of your shares.
Other signs of the bear market re-emerging are the news that two of the country's biggest unions are proposing a price scheme that makes Australian made and produced goods 20% more expensive than their foreign counterparts. I don't know where to start on a proposal such as this; however the concept is simply ludicrous. The ACTU is also trying to get a proposal together to limit pay packages for company executives. This is a guaranteed way to make sure any potential recovery is dealt a fatal blow just when it is most needed.
The news on Friday night that the British economy has hit a record in shrinking is not the sort of news that instils confidence. The US is due to put out some of these numbers soon and it will be interesting to see if the same contractions are seen in America. I saw a confidence indicator in America had fallen for the 1st time since March, so the seeds of doubt are just starting to appear next to the 'green shoots' of hope.
Last week we had a couple of 'smash and grab' trades with Newcrest and Woolworths. They were both Bear Call Spreads and we sold them on Monday and Tuesday respectively and proceeded to buy them back on Wednesday and Thursday for a good profit. The WOW trade was particularly pleasing in that the trade set-up was ideal and identified similar behaviour surrounding the last results announcement.
This week
Bear Call Spread: Oilsearch (OSH) Bull Put Spread: Woolworths (WOW) Not today
Bear Call Spread
The simultaneous writing of one call option with a lower strike price and the purchase
of another call option with a higher strike price
OSH: $5.66 Sell: Aug $6.00 Calls 11.5c Buy: Aug $6.25 Calls 6c Margin Estimate: $2847
OSH Payoff Diagram
Licensing and Disclaimer:
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Trading involves risk of loss and may not be suitable for you. Past performance is no guarantee or reliable indication of future results. All advice and education content is of the nature of general information only and must not in any way be construed or relied upon as legal, financial or personal advice. No consideration has been given or will be given to the individual investment objectives, financial situation or needs of any particular person. The decision to invest or trade and the method selected is a personal decision and involves an inherent level of risk, and you must undertake your own investigations and obtain your own advice regarding the suitability of this product for your circumstances. Australian Investment Education Services Pty Ltd or related entities will not accept any liability for loss or damage however caused be it accidental, consequential, direct or indirect, as a result of the misuse of the information contained herein. Please ensure you obtain, read and properly consider the current Product Disclosure Statement prior to acquiring the products referred to herein, so that you are fully informed regarding the key risks and costs. Australian Investment Education Services Pty Ltd, its directors, employees and associates may, from time to time, deal in any financial products mentioned in this document (or derivatives of them), and may earn brokerage, fees or other benefits for those dealings
Explanation of this Series
The trades shown are based on the indicative prices used for the Newsletter. The objective of the newsletter is to generate trade ideas and show how theory and practice come together by developing trades using the strategies contained in the Options Mastery program. Specifically it is for education purposes only. The newsletter is written on Saturday morning (because the market is closed) and is based on Friday's closing prices, so there may be some variation in option prices. As a result, if trading these strategies on Monday, you will most likely receive different premiums and trade at different price levels. The required account size for each trade is outlined in the monthly summary. Specifically, the objective of Your Cashflow Weekly is to provide general advice on which strategies you may consider applying in today's market.
Assumptions & Process
For covered calls, the assumptions made are that the position is assigned, if in the money and returns are based on this, or if the position is out of the money, we assume the position is closed out i.e. stock sold and premium retained – the net figure of which is reflected in the outcome page. In realty, most traders would keep the stock and resell calls for the next month, or stop out of the stock. This provides a consistent measure and outcome, for educational purposes.
For spreads, we assume that the position is held to expiry – resulting in the entire credit being the potential profit or, if the trade finishes in the money that the spread is closed out at the maximum potential loss. While this does not reflect the most likely strategy applied by traders, it provides a controlled, measured and consistent basis for this service. In realty positions would likely be closed out earlier than expiry as a lower risk approach to the strategy. As this service is for educational purposes, you may follow the suggestions or consider an alternative exit strategy.
Therefore any implied results contained should not be relied upon for making an investment decision and specifically we advise that past performance is no guarantee of future return. Trading involves risk and the potential to incur losses as well as the potential for profit and we strongly recommend that you speak with your licensed advisor before making and financial decisions.
Brokerage on the examples illustrated is taken as 1% or $85 Min for all transactions and 0.5% for assignment, this amount must be debited from the attached figures to give a nett figure for the outcome. All options trades are reflected at $85 per leg for brokerage. A GST of 10% is added to brokerage rates, plus standard Option Clearing House fees of $1.02 per contract.
The summary of these potential trade ideas shows the figures quoted in the attached reports and then also shows the transactional fees that would be associated with taking these trades.
"I’ve been going back over the Behind the Mind & Option Mastery Progress webs on your webpage & I think you have a great formula here.
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Just thought I’d let you know what I think about the overall structure of what you are giving us. Best service I’ve heard about. That’s apart from the SMSs!!!!"
