There must be some kind of way out of here,
Said the joker to the thief
There’s too much confusion
I can’t get no relief.
Businessman they drink my wine,
Plowman dig my earth
None will level on the line, nobody offered his word, hey!
These lyrics sum up the current market and global action and we had Jimmy playing in the office this morning as we headed towards the opening bell. Futures were showing a slight pop and the bulls are pushing our top-end resistance targets for the week.
Volatility is a little subdued despite it being quadruple-witching day. This occurs 4x a year in March, June, September and December and is when all contracts for stock index futures, stock index options, stock options and single-stock futures expire. It is usually a very volatile day and we still have the second half of trading to go before the weekend so anything can still happen.
There are so many headlines; subplots, rumors, and what if’s floating on Wall Street today which is making it difficult for traders to pick sides. We are calm and relaxed as we have placed our trades and now we will wait to see what happens next week. Of course, no matter what happens, remember we have JULY options which have 5 weeks or 35 days before they expire. We have some call options and we have some put options but most of our plays are company specific which means we hope the fundamentals and charts play out by mid-July – no matter what the market does.
We were able to close our 21st– straight profitable trade this week but our winning streak could get snapped if our only June option recommendation doesn’t come back by the closing bell. We have been on a roll since late March as we have closed 37-out-of-38 winning trades, including the one today that might push that back to 37-for-39.
This equates to a 95% win rate which is unfathomable in the options industry, especially in this type of market. The talking heads and slick talking pros will tell you to stay out of volatile and whipsaw markets but we have been telling you ALL YEAR it’s when you can make MONSTER profits, if you are on the right side.
For 2012, we are sporting an incredible 99-20 record for all of our option trades which is an 83% win rate. In other words, our current pace is averaging 4-out-of-5 winners per week which has turned a $10,000 trading account into over $80,000 had all of our recommendations been taken using positions up to $2,000. The return on capital equals over a 700% return. Seriously, no bull.
To put this in perspective, a successful trader is consider a “professional” if they get 55% of their trades (or bets) right. If a sports better or option trader can average a 60% win rate, they are considered “gurus”. Of course, we don’t do TV and we do very little advertising so we like to consider ourselves “mentors” because we want all of you to learn how the market works and how to find your own trades.
We like to remain humble because the market can make anyone look foolish at anytime so we respect what the market gives us. Some years are better than others in this business but we have never had a losing year because we do our homework.
We have mentioned all of this because next week could be monumental as far as the direction the U.S. and global markets take over the next few months. There are just 3 things that can happen and most investors seem split on if there will be a huge breakout, or, a return to lower levels. These are the first 2 possible outcomes.
The other is a “flat” market which we doubt happens given the magnitude of the events taking place next week. If there is not a winner in the Greece elections, which could happen, then we could stay within the current trading range while we wait for coalitions to form.
Our portfolio is fairly light right now although our current open trades are more to the short side than long. Nobody knows where the market will end up on Monday or by next Friday’s close but if there is a upside breakout or a downside breakdown, there will be an opportunity to take advantage of the market’s next BIG move which is coming.
We have open positions so we should see an impact on our trades next week which is what makes option trading so thrilling. We gave you a lot of good clues this week on what to watch for and most of our indicators were in play and have held.
We have been trading the market for over 20 years and when we see the Dow moving triple-digits in a matter of hours, and 100-point swings on the daily closes, something major is usually around the corner.
As we head to press, the Dow is up 62 points to 12,714 while the S&P is higher by 7 points to 1,336. The Nasdaq is showing a gain of 18 points to 2,854.
We will be back Sunday night with our Weekly Wrap which will give you an early jump on what to expect for next week. Futures will open at 6pm Sunday night and for those of you who have watched our videos and are trading course members, you know where to go to check them. The Greece news should hit the wire around 11pm Sunday night.
We will also be sending our Daily newsletter for Monday morning a little early, maybe even Sunday night to give you time to prepare for possible profits and/ or New Trades. Depending on the news, we could see a 1,000 point swing in the Dow over the next 2 months so make sure you stay locked-and-loaded.