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With options trades being the main focus, we allow our readers to gain a unique perspective into the world of technical investing. Not only is Options Trader Elite educational, but it covers everyday topics and trends that the modern investor needs to know about and be aware of.

Over the years, we have gathered a loyal following in the global investment community — from individual investors to CEO’s of well-known investment banks. Options Trader Elite provides free chart analysis on stocks, commodities, bonds, real estate markets and all the associated indicators from our trusted analyst, Hugh L. O’Haynew


Options Trades

The Ghost of GLD Ghosts Past

A happy New Year to all.

Let’s get straight to business.

We’ll start with the golden delicious – what appears to be a bounce in the precious metals that has many people wondering if we’ve seen the bear’s bottom.

How rude!

We say, no.

But have a look for yourself –

Gold (GLD) Moving Average Chart

On the bullish side, the chart shows the SPDR Gold Trust (NYSE:GLD), a decent proxy for the metal, moving higher over the last few sessions, and her Relative Strength Index (black circle, at bottom) ascending above its midway waterline.

But beyond that, there’s little on offer that’s positive.

We still have all the moving averages unfurled and trending lower, including the no-nonsense 137 DMA, which has proven itself an indomitable line of resistance for the last twelve months (in red). So even if the move has another five percent upside from here, we believe it will meet with a freight train’s worth of selling when it encounters the 137 DMA.

Moreover, there’s absolutely nothing in the volume figures that would indicate we’ve seen a bottom (in blue). For the last six months we’ve seen declining volumes for GLD, precisely the opposite of what’s expected at a major market turn.

MACD (at bottom, in black) has also yet to confirm RSI’s bump above the waterline, and even with positive price action, would still be a week or more away from surfacing itself.

All of which leads us to believe that, at best, we’re witnessing a minor retracement within a larger move down. If you want to bet on it, you can, but you run a big risk, because it could be sharp and quick and over before you have a chance to close out any position that’s profitable.

Beware.

But what about gold (GLD) futures…?

That said, many among the smart set are pointing to diminishing speculative volumes in the futures pits as a sign that something genuinely bullish is afoot here. And we believe that’s worth a brief discussion.

First, have a look –

 CFTC Net Longs, Gold (GLD)

The chart shows unequivocally that the excitement over gold that obtained for the last four years has burned itself off to the point of being all but extinguished – certainly a positive omen for gold speculators, no?

But remember – this chart is net longs less shorts, and does not show overall trading volumes, while GLD, the precious metals vehicle for common louts like us, clearly indicates that a selling frenzy (of even the most modest dimensions) has yet to occur.

So while the bigwigs have apparently reduced their speculative hold on the metal, the average ham and egger is far from following suit.

Our conclusion: don’t buy in just yet.

But How Could it Be!?

We received an intelligent piece of correspondence last week that we’d like to share with you. It pertains to the precious metals and comes from a subscriber who wonders why we believe gold still has room to fall while silver’s bottom is already in.

He wrote –

Are you really saying gold down 25%, and silver going up?

... Read More.

Godzilla Investing

Sometimes we rant.

It’s never too long, usually, and we don’t do it often, so when an occasion like New Year’s affords us an excuse and the spirit of the rant settles upon us, we figure it’s time to take a minute and let loose.

First off, we had a good year. It was a good year because we remained independent. We laid out our own investment hypothesis and stuck with it regardless the noise. We made tactical adjustments along the way if our thinking, or just our timing, proved askew.

And we can’t emphasize that first point strongly enough.

Success is never the product of doing what the other guy’s doing, or just did, or says he’s going to do. It comes from the formation of a clear picture in your own bedraggled, imperfect mind and holding fast to it, even as the winds and the hail and the monsoons buffet and shake your very foundations. Remaining focused on the big picture is essential.

 OTE12311311

Don’t look there!

That said, there are certainly individuals from whom we’ve a great deal to learn, and still others, whose thinking is so extreme and far from the herd that we always seek them out – even if it means rejecting their position 99 out of 100 times. Fresh thought is a key factor in this business. And it’s not to be found in the mainstream media, financial or otherwise.

It also won’t be found on Kitco.com.

What’s Kitco?

Kitco’s an immensely popular website among the precious metals diehards, and one we often visit to get a taste of the prevailing gold-zeitgeist soup. As contrarians, we’re ever looking for a bland brew at bottoms and an overly salty content at tops.

And how’s it taste presently?

Unfortunately for the bulls, there’s still a goodly measure of sodium floating about the stew at the moment, leading us to believe that our own bearish take on gold is still relevant – and the trend toward $900 is still on.

That’s a rant?!

Just warming up.

The rant begins here, friends, with a critique, as it were, of one of the most asinine ‘analyses’ we’ve seen on the Kitco site in our many years of sipping there.

It comes courtesy of a fellow whose name we daren’t mention, but whose article can be found HERE, for those with the stomach, and a full bottle of choice antiemetic close by.

OTE12311322

The lout talks a smooth ruse, but seems to think the market in stocks is about to crash. Moreover, the swindler states that we’re already downbound! He writes –

I can assure you we are not done with the secular bear market in stocks.

Oh?

Boy genius… Care to tell us how you arrived at that? Or how using a chart of unknown origin, you explain that -

[T]he stock market’s P/E ratio is again at a [sic] historically extended level.

Which he then claims is 26.3, but from where he gathers this so-called information we’re never made privy.…

... Read More.

More Premiums From The Techs

Let’s start by looking at a trade that netted us a killer profit.

We initiated the venture on October 29th, in a letter called The Government SPY Trade, in which we spoke of an Orwellian pact between big government and the internet’s biggest names, Apple, Microsoft, Google, Twitter, Facebook, et.al.

We proposed the notion that these companies were failsafe bets for investors because they simply had to succeed in order for big government and those with an interest in big government to succeed.

We suggested, also, that Facebook was our favorite of the bunch, and, based on recent outperformance of that stock over the broad market, we extrapolated that investors would continue to buy FB shares with greater alacrity than they would the SPDR S&P 500 ETF Trust (NYSE:SPY).

Our trade, therefore, suggested the purchase of Facebook January (2015) 52.50 CALLs for $8.95 and sale of SPY January (2015) 180 Calls for $9.00, leaving us with a $5 debit per pair initiated.

Twenty pairs opened cost you a measly hundred bucks.

And today?

Here’s the way the two have traded since the day we opened our trade –

 

OTE12181311

 

After winding and grinding this way and that, Facebook has now taken a fat lead in the race against the broad market, and we see that as an opportunity to close the trade (In blue, at top).

We also see the RSI approaching the overbought 80 level and therefore feel it prudent to take our cash while it’s on offer.

It doesn’t mean the trade has hit a wall, or that no more profits might be squeezed from it. Just that we’re satisfied with what’s available and are happy to come back and open a similar position in the future should circumstances warrant.

Here are the numbers

The FB CALLs are fetching $11.05 and the SPYs are trading for $9.69. That’s a difference of $136, less the five bucks you paid to play, and your profit is a very handsome $131 per pair.

That’s 2620%. It’s not fair. And it took just three weeks.

Anyone else sign on for 20 pairs?

Our best thinking says you cash in now – buy back the SPYs, sell the FB’s, get a bottle of Bourbon and go sit by the fire.

OTE12181322

Roll ‘em out!

We’re going to have a look now at a trade that we launched just two weeks ago in a letter called Selling the Farm (and the Bugatti, and the Firstborn, and…). It was a straight sale of PUTs on the same Facebook stock, with staggered strikes and expiries.

When we opened, it looked like this.

We sold –

  • 5 FB December 40 PUTs for $0.18 each, for a total credit of $0.90
  • 5 FB January 38 PUTs for $0.30 each, for a credit of $1.50
  • 3 FB February 36 PUTs for $0.65, for a credit of $1.95

 

Total premium generated for the move – $435

Our thinking at the time was that even given the middling outlook for the stock, we were safe to sell PUTs below what we believed were very strong support levels.…

... Read More.

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