Another Market Illusion

No way the markets sold off today. It was all an illusion created by disgruntled bears. Watch and see if the bullsters come charging over the hill and get the ball rolling to the upside again. A sell off? Out of the question. We all know that markets do not sell down and stocks do not lose value. That is anti-American, to say the least. And it is also a forbidden practice on Wall Street, that is to hear the bulls tell it. And that is all there is on the Street; bull(s).

Today, I sold my Research In Motion (RIMM) May 170 put options at $18.20 ($1,820). They were purchased yesterday for $15.40. I waited until the end of the day to sell this position with RIMM making new daily lows as it fell below $152. The options in the last few minutes ticked up to $18.80 at the bid as RIMM cracked the $151 level. I decided to take my $2.80 in profits and run for the hills. I would not be surprised to see RIMM quickly gain back several points on Friday. I didn't add any new positions. But Potash has finally pushed into the mid 190's, so I missed some gains by selling too early. That is the life of a trader.

I talked yesterday about the CNBC stock picking contest. I managed to move to #7100 at yesterday's close. The only way to come close to winning one of these contests is to bet the farm on one or two new positions almost every day. And then hope you catch a few big movers or higher leveraged swings...that is buying a lot of shares of a low priced stock. It is fun to play in this kind of contest and test yourself a bit. I know it is only play money, but you can do a few things that you might want to do in the real world. Things like quickly jettisoning losers and taking the time to find a few good potential plays using your own stock picking prowess.

This strategy of buying deep-in-the-money-options is something I have just recently taken a liking to. This is my vision for the future. I feel that I could average 15 points ($1,500) of trading profit per option, per month. By trading 20 contracts at a time, This would equate to an average of $30,000 a month (20 contracts X $1,500). Some months I might only make 5 points. Then, I might have a great month and haul in 30 points. This would work out to about $300,000 a year with 10 months of trading. This might seem impossible, but I don't think it is.

If the markets slow down and trade sideways, it makes it harder to trade out-of-the-money options which have more time costs associated with them. Of course, many will argue that it is wiser to sell options under these conditions. So be it. The higher priced stocks typically make moves of 2, 3 or 4 points even if they are moving sideways. Therein lies great profit potential. Moves of $2-5 for higher priced stocks are very common. They say that markets only move about 25% of the time; that is, when they have a trend rally. So, I guess this would be putting the probabilities in my favor. I like to buy options and with proper money/risk management there are great profits to be had.

Last but not least is the idea of Spiritual Trading. You may be asking if there is such a thing. Little do you know the hidden secrets of Wall Street. Yes Matilda, the spiritual side of everything is viable. And you can bet your last dollar that their is a spiritual side to every equation in real life. That certainly includes the money equation. And since trading involves money, there just might be another reason why you fail to make millions in the markets. More on this at a later date. Right now, the Gods are watching you, and I don't mean the kind of Gods found in religions. Have you said your prayers of thanks today? Talk about secrets to the prosperity we all so richly deserve.... It will be fun for me to augment this idea to the max.