6-23-09 End of the Day Update

First off I have decided not to produce an excel spreadsheet of my trades for 2009. Too much work. Yet I will somehow present my results graphically maybe with a line graph. Although I am still in the negative for the year I am slowly chipping away at the red. Patiently I am awaiting to get on the green side very soon and stay there for the rest of my life, lol.

Anyways nothing much happened today in the market. Not really surprising after the housing data was released. The news just was not enough to provide green shoot followers to have any momentum to push stocks higher today. Below is a graph of the daily chart of SPY.


Right after the housing data at 10am the SPY tumble below its daily vwap-pink line, which to me indicates a weakening in equities. However right around 888 SPY found support and pulled onto the vwap. The rest of the day the market try going higher but every time it failed and hit the vwap line. The SPY never gained any type of momentum to the upside even after yesterday's significant losses. This leads me to believe traders are uncertain about the market. With uncertainty comes lack of optimism and that makes the market sell off.

Tomorrow will be interesting to see if stocks can end positive. FOMC will post their results of their meeting around 2:15pm(Est). Anything can happen depending on what the FOMC says. Yet the trend seems to continue from last week which was a down week. So I would rather stay away from the market tomorrow until the FOMC results if all possible. It is too uncertain with the market being neutral today and usually any major news will result in major swings either up or down. In the long run I feel the market will go down due to the uncertainty.

Really Not Organized...

After reading my old posts I realize how disoriented I am. The stock market sucks. Makes life difficult and confusing. I wish I did not lose so much in '08. Now I have to make significant ground. Anyways what I mean to write is to hopefully, before the end of the month post an excel spreadsheet of my progress. I clearly have failed to do that, and there is no excuse.

Now to get myself even more confused I want to document an interesting discovery for the SPX weekly options. (Take note that there options that expire on a weekly bases. CBOE- Chicago Board Options Exchange had provided certain options to expire either at the end of a Thursday or Friday of a trading week.) I love these options because I am winning. I feel I am better when I make a weekly trade then a monthly or daily. Its not to say I would not lose more or win more. It is just my preference. In any case if your curious CBOE's link about weekly options:
http://www.cboe.com/micro/weeklys/introduction.aspx

1. SPX (Settlement on a Friday Morning.)
2. XSP (Mini-SPX, Settlement on a Friday Morning.)
3. OEX (100 of SPX Components on a 1/10th size, Settlement on the end of a Friday trading day.)
4. XEO ((European 100 of SPX Components on a 1/10th size, Settlement on the end of a Friday trading day.)

A word of caution these options except for XEO, are cash settlements. That means on settlement day there is no ownership in the stock when you hold one of these expired options. Instead you either pay the difference or recieve the difference in price between your option and the strike price. For instance if you purchased an OEX call option at 400 and at Firday's settlement the strike price of OEX was 440, you actually get $40*100 minus the premium for purchasing the option. There is no stock purchase and vise-versa if you sold a call, or also known as naked short a call or covered call, at 400 you would automatically be required to pay $40*100=4000 and minus the premium you got for selling the call. The "100" simply comes from the fact the the option is actually worth a multiple of $100. Hey I did not make the rules.

There is a subtle difference in XEO versus OEX. You can settle OEX at any time before or at the end of the OEX option expire date. XEO on the other hand can only be settled on settlement date. I only see this difference as a drawback to trading the XEO options but then again there maybe a scenerio where XEO would be better than OEX.

I babble long enough and still haven't posted my discovery on the SPX. For the week of June4 options on SPX as of Friday, June 19th's closing price the picture below are the vertical options.

Notice the 900/925 put options have a mark of $8.40 when the intrinsic value=present value is only at $3.77. There is a big volume of 144 put contracts traded versus 22 call contracts on the 900/925 spread. The put spread has over 200% difference between the instrinsic and mark value and on top of that the instrinsic value of the call spread is a little over 25%! Either someone or the market is telling us this upcoming week is a down week. I am playing on that and will trade through OEX instead because the contracts do not have such a spread between the intrinsic and present values relative to the quantity of contracts traded so far.

Is this True Prosperity?

Every Chinese New Years there is the traditional ritual of married adults handing out red envelopes to friends' and relatives' children. Though today I am adult I still receive red envelopes because I am not married. (I do not know why Chinese people have this ritual, but if I have to make an educated guess it would be to share one's prosperity to the people they care for the most.) Take note if you are not Asian or never received a red envelope that usually there is money in them.

Out of random last week I started looking over into all the red envelopes I received through the years. Each year my pile of red envelopes grows with the very recent ones at the top of the pile. (I do not put the money into a bank even though I lose out from inflation. I consider the money to be special. Although that does not mean I don't spend it, lol.) Anyways what I found astonishing maybe a rare occurrence but it is something to take note of.

My envelopes at the top were mostly five dollars while the ones at the bottom were twenties and tens. If I have to guess I started this collection about 8 to 10 years ago and all the people that usually gives me red envelopes did so every year. I found it very interesting that I get less dollars each year even though the United States has a yearly average of 3% inflation. It seems to me my relatives and close friends are getting poor or being cheap. In my pessimistic opinion they are worst off today than 10 years ago.

To not just be a one sided opinion I can list some reasons why I receive less money each year:

1) I work full time so adults consider me capable of making lots of money therefore I do not deserve more from them.

2) Over the years my extend family has grown. Cousins have gotten married and started their own families. Therefore a lot more children to spread the amount of wealth.

3) This ritual of passing out red envelopes has gotten a little old for the givers and they do not consider it as important as it was when they were younger. I can give an example. Usually a 20 something guy would got out to bars to socialize. He probably would spend whatever little amount of money he has on beers and games. When the same guy is in his late 30s or early 40s his priorities has changed. He probably has most of his money paying down a mortgage and/or debt. Priorities with givers has also changed. They are getting old therefore they need to save more to ensure they are well off when they retire.

To come full circle I am writing this excerpt because I feel people today are living on less than 10 years ago. The gap between rich and poor has expanded. What I have here is one more example.