Sell Put Options – Market Trapped In A Range – Pre-Holiday Trading

May 18, 2015
Author: Peter Stolcers, Founder of OneOption

See what I'm trading. This week I caught some great stock trades like CMCM, OPK and STRP. CLICK HERE TO TAKE THE FREE TRIAL. You will see trades it in the chat room and you will see the stocks I'm trading in Pete's List. Posted 8:20 AM ET - Last week, the S&P 500 made a new all-time high. The volume was light and we did not see follow-through buying. We are in pre-holiday mode this week and the action will be dull. The FOMC minutes will be released on Wednesday and I'm not expecting any surprises since the statement was boring a few weeks ago. Flash PMI's will be posted Thursday morning. China's results will be weak, but their market will tread water because the PBOC has been easing. Earnings season is winding down. Retailers will post results this week and the numbers will be soft. Analysts will dismiss Q1 on the notion that bad weather reduced consumer spending. Unfortunately, the week after Memorial Day also looks quiet. The jobs report will not be posted until June 5th. I have been selling out of the money put credit spreads. Last week's rally gave me breathing room and these positions are in excellent shape. Time decay will kick in this week. If by chance we get a market decline below SPY $209, I will hedge intraday by shorting the S&P futures. Aggressive traders can look for stocks that are breaking out through horizontal resistance. Sell at the money put credit spreads and buy them back if the breakout fails. These stocks tend to rally for a few days once they breakout. This strategy has a bullish bias to it and I would only suggest it for nimble traders. I have also been trading low-priced stocks that are breaking out. I don't have to worry about time decay and I can wait for the move to gain traction. Last week I caught CMCM and OPK. This is the type of pattern I'm looking for. If you have not taken the free trial, you should. You will see stocks like this in the chat room. The only potential wrinkle in the next few weeks is Greece. Rumor has it they were going to skip an IMF payment last week. They scraped enough money together and they dodged another bullet. Greece has massive payments coming up in the next few weeks and this could come to a head. If it does, any negative reaction will be overblown. We are in a news vacuum and traders will look for anything to latch onto. In reality, the credit risk is fairly low. Most of the debt is held by sovereigns, the ECB and the IMF. Banks and private investors only hold about 15% of the debt. A default is not going to shock anyone. This is not like AIG or Lehman. Once the selling stops, a buying opportunity will present itself. This nagging problem will finally go away and the ECB/IMF will have sent a message to other EU members. In the absence of a Greek crisis, we could be in for a very dull stretch. Asset Managers are not going to chase stocks when they are trading at a forward P/E of 18 and when global economic conditions are soft. When the market pulls back, the bid is still strong. Interest rates are at historic lows and equities remain the only game in town. Buyers and sellers are paired off and we are likely to stay in this trading range. Look for opportunities to sell premium. . . image

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