An Oportunity in the Futures Markets - Short Crude

Hello everyone,

In an effort to raise capital and further establish our day-trading here at CRI in earnest, I have included Futures Trading into our blog posts here. Specifically, I have established a 'combine' relationship with TopStepTrader.com (more on them below) and for the next four trading weeks will execute our posted trades through their simulated trading platform using the futures markets exclusively. While I may post options trades if they present themselves, most will be futures trades. I am really excited about this development and look forward to both meeting and exceeding TopStepTrader's expectations going forward!

On to today's trade

Today's trade was all about technical trading within a non-news event session. Crude oil, along with most markets, fell overnight on the intervention in the currencies markets by the Japanese central bank. The intervention halted the Yen's appreciation vs. the greenback but also sent most dollar denominated assets (like NYMEX Crude Oil) lower. 

On the regular open, the North American cash-market gaped lower across the board and then bounced. Our trade started at the end of the bounce. The chart above (times shown on chart are Eastern Time Zone) shows that crude put in a very tight double top pattern at 11:15 AM. You will notice that our first short was at 10:19 (TopStep's trading platform is in Chicago, so trade times listed are in CST), the market then tired to rally but failed again at 11:55(EST) and you will notice our second short was at 10:57(CST). The market moved then quite briskly down into the target zone (91.90 - 92.09) and I covered the short positions as each target was hit.

This trade was very fast - a total of a little more than an hour. I cleared $.56 from the combined position for a total net profit of $550 ($10 in commissions). Needless to say, I was quite delighted to see this happen in such a short period of time and was more than happy to call it a day...

That's all for this post,

Brian Beamish FCSI

The Canadian Rational Investor

the_rational_investor@yahoo.com

CRI's Trading Forum

All appropriate disclaimers apply, DO NOT risk capital in options &/or futures trading that you cannot afford to lose.

More on TopStepTrader:

I was given these guys name by a friend of mine who trades for herself. She and I were brokers together 10 years ago and I am very fortune that I have been able to keep contact with her over the years. After visiting the company's site and trying their demo for a couple of weeks, I am very impressed with what I have learned about them so far. If I understand the company correctly, they are searching for traders who can constantly make profitable trades in the market. Should they find someone who meets their screening criteria (type of trading, frequency, profit/loss ratios, etc.) they will find/introduce them to institutions (funds, banks and even individual investors) who will put up a trading stake (typically $50,000) and split any future profits with the trader on a very generous basis. Since we are already trading a very tough market for consistent profits (making money in long options positions is one of the hardest things to do in the market and far more difficult than regular futures or stock trading) a program like this seems like a natural fit for someone like myself. I would Ideally like to turn this little trading/investing business I have created (therationalinvestor.ca) into a multi-billion dollar empire; it seems to me, this is a means to that end. Regardless of my person ambitions, if you consider yourself a trader and would like to do it for a living, you might want to give these guys some serious consideration...

Those that are good are lucky and those that are lucky are generally good

Hey all,

sometimes when trading a little luck can go a long way. Today's exit on USO is a great example. As readers will recall, I entered a second short trade late yesterday on what looked like a well defined bear flag formation in the crude oil market. Indeed the signal was correct and the target of $29.30 was hit almost right on the open early this AM. Unfortunately, sometimes life doesn't agree with the market. Specifically, I had a horrible sleep last night and didn't get to my trading-post until 8AM (pst). The target had been hit (the option I bought for $1.13 hit a high of $1.41) and then it reversed. While I could have dumped the position at cost, the chart was a 'V' bottom off the lows, so I decided to hold off and see if we would get a test of the lows through the trading day. 

That test did come (with an hour before the close) and I liquidated the position at a small profit. Patients paid off here and I was able to turn a mistake (sleeping in) into a non-problem. Yes, I could have made a lot more money had I been awake but sometimes life hands you lemons and you just have to try and make lemonade. Today I was able to do so and so that is exactly what I did.

Here then is the exit chart with appropriate notes:

That's all for this post,

Brian Beamish FCSI

The Canadian Rational Investor

the_rational_investor@yahoo.com

CRI's Trading Forum

All appropriate disclaimers apply, DO NOT risk capital in options trading that you cannot afford to lose.

2nd short entry of the day - USO

Hey all,

I left off last post with the notion that I would entertain further short trades as they developed. The Nasdaq itself has deteriorated further and those options that I sold have gone up further. While I won't moan about money left on the table I will suggest that the market is indeed heading lower. To that end, I did come across an interesting short entry on oil.

Here is the chart with entry notes

 

The market is very oversold on a short term basis so I wouldn't be surprised if this trade takes some time to develop. Having said that, the bear chart pattern is in and I shall risk on the trade up to 30.28 (point C on the chart).

That's all for this post,

Brian Beamish FCSI

The Canadian Rational Investor

the_rational_investor@yahoo.com

CRI's Trading Forum

All appropriate disclaimers apply, DO NOT risk capital in options trading that you cannot afford to lose.

Sell on Rosh H - buy on Yom K

Hey all,

Today's trade is about being short through the Jewish holiday. For the coming week I shall be looking for ways to make money on the short side of the market as the Jewish holiday forbids orthodox Jews from playing in the market through their high holy days. Regardless of your religious bent, one must respect the fact that a good portion of the market will simply not be playing the game and as a result a good portion of the demand side of any stock equation shall be skewed to the bearish side during this period.

Having said that, we also have a bearish tone continuing to dominate the global landscape (ie European debt.) and shall do so until this whole issue comes to some serious conclusion. Historically, that is usually coupled with some dramatic price action in the market - so the 'correction' in the market shall continue still.

Today I traded the Nasdaq 100 ETF short and here is the entry chart with notes

What is most interesting here is that while I was writing the entry blog, my target ($51.75) was hit. I have exited the trade at $1.42 for a quick $.14 profit. On $1.275 that equates to just under 11% gross profit. Not bad for 20 minutes of risk exposure...

here then is the exit chart with notes

I may be back in on the short side soon, but that will be that trade...

That's all for this post,

Brian Beamish FCSI

The Canadian Rational Investor

the_rational_investor@yahoo.com

CRI's Trading Forum

All appropriate disclaimers apply, DO NOT risk capital in options trading that you cannot afford to lose.

A little scalping in an overbought market

Hey all,

I literally didn't have time to post a blog on entry so I have combined the entry and exit into today's post.

I heard this morning that if we closed higher today it would represent a four-day-rally - only the second or third time this has happened over the past quarter. Couple this with the latest headlines one can't help get the feeling this bear market rally may be a bit long in the tooth. Until we get some dramatically bullish news it seems only logical to look for a bit of consolidation. 

The consolidation today started with continued wranglings out of Europe re. P.I.G.S. debt. and the introduction of more competition within the tablet pc market. The pullback got fuel when the weekly crude inventories number came in with a build when the market was looking for a draw-down. While not earth shattering, they were generally bearish news events and as a result, a consolidation ensued.

Technically, the market carved out a nice descending wedge pattern through late yesterday and most of today. Using our simple bull/bear flag analogy, when the market moved through 54.98 one could have a high degree of confidence in seeing 54.75. Couple this with the tighter and tighter 'wedge' that formed through the day and one could easily see a violent resolution to the price pattern. 

While I fully admit that this market looks like it wants to go quite a bit lower (probably into the 54.00 area, I am more than happy to take profits at the bear flag target (54.75) and did so when that number was hit. As indicated on the chart, 17% on your money (in less than a day) on a nice simple trade makes me very happy.

That's all for this post,

Brian Beamish FCSI

The Canadian Rational Investor

the_rational_investor@yahoo.com

the-rational-investor.com

All appropriate disclaimers apply, DO NOT risk capital in options trading that you cannot afford to lose.

They are cry'in still so I want to be flat

Hey all,

I took a chance into Friday's close on SLV and bought some calls. While volume and momentum suggest a counter trend rally may bring prices back price up a bit - this market is still very weak. When doing this week's CTS report SLV stood out (along with most metals markets) as especially weak and one a smart investor ought to just leave alone.

Bearishness persists as the market gaped lower on the open this Monday morning as margin requirements were raised by the exchange. We did get another buying opportunity early this AM (as suggested when I entered the trade) and I bought another 5 of the October $35 calls at $.50. This brought my average cost on the position (excluding commissions) down to $.625. The market did rally and the options did start to move higher. Even though still down on the day, SLV did rally enough to actually put the market in a short term overbought condition. As a result, I thought it was best to just slide off to the sidelines and take a small loss on the trade. I did that by selling the entire 10 contracts at $.62. With commissions, the trade worked out to about a $60 loss. While not happy with the loss, I think its best to just let this market settle down a little before risking our hard earned (and easily lost) capital.

That's all for this post,

Brian Beamish FCSI

The Canadian Rational Investor

the_rational_investor@yahoo.com

the-rational-investor.com

All appropriate disclaimers apply, DO NOT risk capital in options trading that you cannot afford to lose.

Buy'in When they are Cry'in - SLV

Hey all,

As is often the case, markets that I exit often continue their respective moves even after I am gone. I then am left only to watch as the option (that I have sold) continue to climb. Indeed, the GLD Put options I sold yesterday at around $4.00 are today more than $9.00! Oh, well, I made my money, so I have no reason to complain...

Onto today's trade. 

Today witnessed the single greatest percentage decline in Silver prices I can remember - and I've been doing this in earnest now for more than 15 years. At one point more than 15% lower in one day! This of course should come as no surprise as we all know how crooked the silver trading pits are. It really was just a question of time before they pulled the floor out from under all the public who bought on the way up. Indeed, many small investors are either stopped out of their positions or are heavily underwater. The 'weak hands' are in the process of being removed from the market if they haven't already been so. Trading may be a bit volatile over the coming sessions as an exact bottom is really anybody's guess. One might argue that the $30 level (a big fat round number) was acting as a magnet for any type of pullback. That level has now been touched (and even traded below for a little while) so my hunch is we need to start cleaning things up a bit going forward.

There are a few hints that the cleanup process is already underway. What is most interesting to me (on a day where the market is down 14%) is the dramatic momentum divergence that has developed through today's trading. The fact that huge gaps exists (left from the move on the way down) and momentum is starting to point up (not down) leads me to believe that the market is getting ready to take back some of this bearish price action. While a move right back up top is maybe asking a bit much, we ought to see some kind of bounce, its just a question of where is a realistic target. For some guidance as to where we ought to look for the market to go over the next week or two lets take a look at the 50% rule. A 50% retracement of the two day slide would bring price back into the $34.30 area [(Wed. high $39.63 + today's low $29.05}/ 2 = $34.34]. While this won't represent a monster bull run, a 10% bounce from these short term oversold levels seems realistic and will be my target on the expected bounce. 

It seems rather ironic that it was just a few years ago we would not see a $4.00 swing in silver prices for a whole year - and now its my expectation to see it in a few days.

Not wanting to commit too much capital on this initial entry, I have gone ahead and bought about $400 dollars ($395.05 - where $.82 is breakeven...horrible commissions!) worth of October 35 Calls (5 at $.76 + comm) on SLV. Should we get a pullback Monday morning I will look to add to the position but my hunch is that the next buy signal (which I will add to the position) will be from higher not lower levels.

Only time will tell, but I think we have the odds in our favor going long SLV from these level. Not bet-the-farm long just a little long...

That's all for this post,

Brian Beamish FCSI

The Canadian Rational Investor

the_rational_investor@yahoo.com

the-rational-investor.com

All appropriate disclaimers apply, DO NOT risk capital in options trading that you cannot afford to lose.

Sometimes a day-trade takes a couple days to develop

Hey all,

Sometimes it takes a few days for a trade to develop - today's trade is such an example. 

A couple of trading days ago we saw a nice break on the gold market through key support at or near $175 on GLD. I became very bearish and bought October $165 Put options at $2.68. The following day the market rallied back into resistance and the option price came down. I was tempted to blow the position out at a loss (readers will recall I suggested I would risk down to $2.30 area on the option) but decided to hold on to see if the overhead resistance would be taken out  at or near the $177.50 area. That level was never taken out. Indeed, the market promptly put in a new double top through Wed. and I went and bought more Puts (Point (B) at $1.95).

Today the world is melting down as the US Fed announced late Wed. that the economic situation is still very poor and that it would continue to promote its 'operation twist' to help the consumer credit market. Regardless of the underlying reason, the market came down hard and GLD for example has moved into a dramatically oversold condition (Point (C)). The option position moved into a very profitable situation and so I took profits this AM. I sold half the position on the open (at $3.90) and then sold the remaining position a little later at $4.20. Could this option go higher- sure; but I am more than happy to take a healthy profit on the trade. I'm done and I'm happy :)

That's all for this post,

Brian Beamish FCSI

The Canadian Rational Investor

the_rational_investor@yahoo.com

the-rational-investor.com

All appropriate disclaimers apply, DO NOT risk capital in options trading that you cannot afford to lose.

Riding the gold bear back down the mountain

Hey all,

today's trade is all about gold. As prices moved to dramatic extreme's over the late summer, prices became overbought and needed time to correct. I believe we are entering that correction phase and prices ought to work their way lower over the coming sessions. 

Today, prices moved slightly higher on the open and then promptly collapsed. The consolidation and then subsequent failure at these lower levels has carved out a nice Bear Flag formation that we can use to trade. Indeed, based on the failure through 172.86 I prepared to buy a put position. I waited for the w%r to become overbought on the 3 min charts and then took a position in the October $165 puts. Because there is so much time left on this option, the premiums were a bit high. As a result, I was able to buy 4 contracts at $2.68 ($1087) with my stake (where the total capital invested is no more than 1/3 of my stake) and will risk down to $2.32 on trade. I came to this number since we never risk more than 5% of the total stake ($3500) on any one trade. 5% of $3500 is $175 - commission ($30) = $145/4=.36 on the option price.

 

That's all for this post,

Brian Beamish FCSI

The Canadian Rational Investor

the_rational_investor@yahoo.com

the-rational-investor.com

All appropriate disclaimers apply, DO NOT risk capital in options trading that you cannot afford to lose.

Upside target was hit - after it shook me out

Hey all,

Every once in a while you get shook out of a market only to see it go to exactly where you thought it would go. Today was an example of such an event. Readers will recall the massive bull flag formation that developed through Tuesday's trading. I went long on the breakout only to be stopped out as the market pulled back first thing this morning. The market then turned and went literally straight up to our target of 120.05. UGH! There really isn't anything one can do about it. Respect the fact that the market does indeed do this sometimes and move on. I will take some comfort in the fact that we picked a target and indeed the market went to the target -  and move on.

That's all for this post,

Brian Beamish FCSI

The Canadian Rational Investor

the_rational_investor@yahoo.com

the-rational-investor.com

All appropriate disclaimers apply, DO NOT risk capital in options trading that you cannot afford to lose.

Surge failed on open this AM

Hey all,

The surge in stocks has hit a snag this AM and I am stopped out of our long position on SPY with the break of the most recent lows at or near 117.03. Loss on trade was just a little over $100.00. Considering we don't want to risk more than 5% of our stake on any one single trade, $100 represents less than 5% risk threshold so I am happy just moving to the sidelines. Having said that, I still believe this market wants to move higher and will continue to look for a re-entry on the position going forward.

That's all for this post,

Brian Beamish FCSI

The Canadian Rational Investor

the_rational_investor@yahoo.com

the-rational-investor.com

All appropriate disclaimers apply, DO NOT risk capital in options trading that you cannot afford to lose.

Stocks surge coming out of the September full moon

Hey all,

there are a great many market prognosticators that use the moon cycle to predict climactic turning points in the market. I noticed that Monday was a full moon and that stocks looks washed out and bonds looked over done (got stopped out of long bond position). Indeed, as the market was heading out of Monday, stocks put in a bottom in the last hour and surged dramatically. Today we have consolidated those gains and have broken out again. This classic Bull Flag formation paints a target just above the 120 area on SPY. Because this is the Sept. monthly options expiry week I thought it best to avoid the underlying issues with options expiry and move out the October contract. So with that in mind, I bought 7 of the October 125 Calls on SPY for 1.56. While quite a bit above our target, to most effectively use $1000 I had to go here. Should we get our anticipated move into the 120 area this option ought to appreciate considering the amount of time remaining.

 

That's all for this post,

Brian Beamish FCSI

The Canadian Rational Investor

the_rational_investor@yahoo.com

the-rational-investor.com

All appropriate disclaimers apply, DO NOT risk capital in options trading that you cannot afford to lose.

Out almost a quickly as got in

Hey all,

The breakout in the bond market was short lived. After registering a double top, the market quickly failed at most recent support (113.74) and I exited at a loss.

 

That's all for this post,

Brian Beamish FCSI

The Canadian Rational Investor

the_rational_investor@yahoo.com

the-rational-investor.com

All appropriate disclaimers apply, DO NOT risk capital in options trading that you cannot afford to lose.

Back in the bonds again

Hey there,

European banks continue to get slammed as credit spreads move higher across the board across the pond. To that end, US gov't treasuries are turning higher and have registered yet another bull flag on the intraday chart. The target here is 114.61 area (not a heck of a lot higher) but a trade is a trade.

That's all for this post,

Brian Beamish FCSI

The Canadian Rational Investor

the_rational_investor@yahoo.com

the-rational-investor.com

All appropriate disclaimers apply, DO NOT risk capital in options trading that you cannot afford to lose.

Bond Suplimental - TLT target was hit but I was long gone

Hey all,

i exited this trade at cost because I did so well on the corresponding oil short position. Having said that, I thought I would post a note because the target was indeed hit on the TLT trade and the options did very well. I am not in the trade but it is interesting to see it play out as expected.

 

That's all for this post,

Brian Beamish FCSI

The Canadian Rational Investor

the_rational_investor@yahoo.com

the-rational-investor.com

All appropriate disclaimers apply, DO NOT risk capital in options trading that you cannot afford to lose.

Bonds didn't move on stock drop - going to exit with capital

Hey all,

Coming into today's session I was short crude oil (through puts on USO) and long bonds (through calls on TLT). Crude oil gapped violently lower into my target zone so I took 60% profits. Since we are getting little reaction from the bond market I am inclined to take my money off the table here and just sit back and enjoy profits elsewhere.

Here then is the chart on the exit in bonds,

That's all for this post,

Brian Beamish FCSI

The Canadian Rational Investor

the_rational_investor@yahoo.com

the-rational-investor.com

All appropriate disclaimers apply, DO NOT risk capital in options trading that you cannot afford to lose.

Crude gap lower - taking profits!

Hey all,

On the violent gap lower this AM, put options bought late Thursday have appreciated a lot. Taking profits!

That's all for this post,

Brian Beamish FCSI

The Canadian Rational Investor

the_rational_investor@yahoo.com

the-rational-investor.com

All appropriate disclaimers apply, DO NOT risk capital in options trading that you cannot afford to lose.

Is the latest move higher in Crude a trap?

Hey all,

through the trading day today we saw numerous bearish reversals. Crude oil was no exception. The 60 min chart Crude Futures suggests prices want to come back down after putting in a nice double top price pattern. The USO (oil ETF) does look potentially bullish but has not confirmed the bottom yet. Was today's reversal a failure at an important level for crude oil (and the broader market too)? Only time will tell, but it does make for interesting trading. I bought the Sept. 34 put on USO at .65. I would be willing to ride a small move higher from current levels but if the top is broken then I will exit at a loss.

That's all for this post,

Brian Beamish FCSI

The Canadian Rational Investor

the_rational_investor@yahoo.com

the-rational-investor.com

All appropriate disclaimers apply, DO NOT risk capital in options trading that you cannot afford to lose.

Bonds look to benefit if stocks come off

hey all,

Today's trade is as much about being long bonds as it is about being short stocks. The market has rallied off its recent lows on hopes of an economic boost from either Bernanke or Obama (take your pic). The charts seem to indicate that bottom ought to be tested once again. Here then is the 15 min chart charts for the TLT and the Sept 114 calls. As well, I have included a call out of the 5 min TLT chart to see the potential bull flag formation. I bought on the heavy volume breakout highlighted on the 5 min chart.

That's all for this post,

Brian Beamish FCSI

The Canadian Rational Investor

the_rational_investor@yahoo.com

the-rational-investor.com

All appropriate disclaimers apply, DO NOT risk capital in options trading that you cannot afford to lose.

Stop hit on gld

 hey all,

Here comes our first blog loss. It should be interesting to see how losses fare over the coming days/weeks ahead.

Here then is the chart with trade log:

While the prospects for a lower GLD remains down in short term - stops where hit so I had no choice but to exit the trade and book the loss. Considering the two rules of investing. The loss of $144.16 falls well within my 5% risk threshold on any one single trade (rule #2) and has to be expected as the model I work with historically runs at about 70-75% accuracy and therefore meets the accuracy threeshold of 66% (rule #1). Having said that, no-one likes a loss, yuck! At the same time, if gold is up significantly overnight, I would be happier having exited.

That's all for this post,

Brian Beamish FCSI

The Canadian Rational Investor

the_rational_investor@yahoo.com

the-rational-investor.com

All appropriate disclaimers apply, DO NOT risk capital in options trading that you cannot afford to lose.

Happier stocks may be the end of gold run in the short term

Hey all,

Gold took a big hit today and failing through the day as stocks rebound. Looking for a test of the day lows on gld and have a nice 5 min bear flag entry signal to enter puts.

That's all for this post,

Brian Beamish FCSI

The Canadian Rational Investor

the_rational_investor@yahoo.com

the-rational-investor.com

All appropriate disclaimers apply, DO NOT risk capital in options trading that you cannot afford to lose.

Quick flip for some fast cash

Hey all,

 

Market looked like it wanted to turn higher, bought ATM IWM calls (sept 69) and wasn't gready. Placed the sell order ahead of tgt being hit and got nice fill.

 

 

 

That's all for this post,

Brian Beamish FCSI

The Canadian Rational Investor

the_rational_investor@yahoo.com

the-rational-investor.com

All appropriate disclaimers apply, DO NOT risk capital in options trading that you cannot afford to lose.

Close of Today's SLV short (puts) trade 090611

Hey all,

took profits on spike lower in SLV. I probably could have gotten more but I was itching to take a nice profit in this horrible market. Net gain $206.93, woot!

That's all for this post,

Brian Beamish FCSI

The Canadian Rational Investor

the_rational_investor@yahoo.com

the-rational-investor.com

All appropriate disclaimers apply, DO NOT risk capital in options trading that you cannot afford to lose.

SLV Short (puts) trade 090611

Hey all,

here is today's trade idea. Short slv (through the Sept. $40 put option) for a move into $40.47 tgt zone on underlying.

That's all for this post,

Brian Beamish FCSI

The Canadian Rational Investor

the_rational_investor@yahoo.com

the-rational-investor.com

All appropriate disclaimers apply, DO NOT risk capital in options trading that you cannot afford to lose.