Editor's Note: JW Jones offers more content at OptionsTradingSignals.com.
Over the past few weeks the broad stock market has seemingly grown increasingly more bullish. Market pundits, traders, and even high-profile money managers are stating publicly that the easy trade over the next few years will simply be being long, high-quality stocks. While time may prove these managers wise, it's likely a bit early to be that bullish.
As traders, our job is to create profits consistently regardless of price action. The best traders are masters of blocking out the noise and emotion, and letting various forms of data guide their decision-making. At this point in time the bulls have the bears pushed against key resistance at the SPX 1150 area. However, the bears have their eyes set on the 1130 level and from there the key SPX 1040 support area.
If the S&P 500 breaks out over the 1150 area with strong volume we could move higher to test recent highs; however, if the 1040 area were to give way to the bears the bullish parade would end. At this point in time, it's too early to tell which side is going to win this battle. The monthly chart of SPX tells the entire story.
Click to enlarge
Until proven otherwise, my bias is to the downside. What might surprise most readers is the reasoning behind my thinking. My expectation of lower prices has nothing to do with macro economic conditions, it has nothing to do with unprecedented intervention that we've witnessed by the United States federal government, and it has nothing to do with housing numbers. The reasoning behind potentially lower prices is simple: defined risk. The SPX chart above and even the daily chart listed below are both indicative that the SPX 1150 area is a critical psychological level for market participants. We're literally at a precipice right here, right now.
Click to enlarge
When major resistance or support is very near the current spot price of any underlying, typically low risk/reward setups can be found. After spinning through several ideas and option strategies, an out-of-the-money (OTM) butterfly spread seemingly made a lot of sense. The OTM butterfly spread would benefit from the passage of time and wouldn't be as exposed to a comeuppance in volatility. This strategy could produce a great potential return for a defined amount of risk.
After some brief analysis, the best proxy was using the Spider ETF SPY as opposed to the SPX index. The bid/ask spreads are quite wide on SPX at times, particularly when volatility is rising. Consequently, it can be arduous to get decent fills from the SPX market makers in rapidly moving market conditions, which seem to be the norm recently. Besides the normal option expiration on monthly or quarterly basis, options that expire every week have grown in popularity recently. A primary reason why volumes have exploded is due to the weekly expirations routine offering of unbelievable risk/reward setups, particularly through the utilization of Theta (time) decay trading setups.
After running through various expiration dates, it made sense to utilize the October weekly options that expire on Friday, October 8. Since I have a bias to the downside, I used an OTM put butterfly. Traditional butterflies are typically written where the current price is straddled by the wings of the butterfly spread. In an OTM butterfly, an option trader places the entire position out of the money. It helps reduce the cost of the butterfly, and because the option contracts are out of the money, they're not impacted as harshly by rising volatility. In addition, these OTM butterflies usually have very attractive risk/reward characteristics.
SPY was trading around $114.13/share at the close on Thursday, so the OTM butterfly I constructed had the following strikes: Long 1 OCT WKLY. SPY 108 Put / Short 2 OCT WKLY. SPY 111 Puts / Long 1 OCT WKLY. SPY 114 Put. Here's a snapshot of the SPY October weekly option chain as of the close Thursday:
Click to enlarge
Label Complains That Amazon Devalues Artists By Making Music Cheap
from the you-got-it-backwards dept
This is unfortunate. Nearly two years ago, we wrote about the indie music label Asthmatic Kitty, which seemed to take a really forward looking attitude towards the new music market. In that interview, the label noted the reality of the new world, and why it was important to focus on reasons to buy, rather than assuming that people would just pay to hear music. This is what was said at the time:
I operate under the conviction that people buy records because they want to own them, not because they want to hear them. It is too easy these days to hear a record without having to buy it. I don't resent that fact, rather I feel we at Asthmatic Kitty embrace it through streaming albums and offering several free mp3s (even whole free albums). And why do they want to own it? They want it to illustrate to others their taste and identify who they are as a person. I also believe they want to be part of something bigger than themselves, they want to belong.
Our job is no longer to sell folks things they want to hear. They want an experience and to identify themselves as part of a community. Ownership then becomes a way of them supporting your community through investing in that community. Fostering that in an honest, transparent and "non-gross" way takes a combination of gracefulness, creativity and not taking oneself too seriously, while still taking art and music seriously.
Apparently, however, they do resent Amazon for making music available cheaply. Reader Colin points us to a recent article about how Asthmatic Kitty has sent out a letter to fans of artist Sufjan Stevens, complaining that Amazon's pricing is too low and asking people to go to Bandcamp and pay more instead. They do admit to being somewhat conflicted about this, at least:
"We have mixed feelings about discounted pricing," the label explained.
"Like we said, we love getting good music into the hands of good people, and when a price is low, more people buy. A low price will introduce a lot of people to Sufjan's music and to this wonderful album. For that, we're grateful.
But we also feel like the work that our artists produce is worth more than a cost of a latte. We value the skill, love, and time they've put into making their records. And we feel that our work too, in promotion and distribution, is also valuable and worthwhile."
While they're certainly not attacking Amazon or fans, the whole email does feel a little off. The simple fact is, if people want the music (as the label seemed to recognize last year), they can find it somewhere for free. Amazon's prices are meaningless when it comes to the "value" of the music. Price and value are not the same thing. Rather than complaining about the price that Amazon sets on the album, why not give people additional reasons to pay directly at Bandcamp -- such as providing valuable extras if they do. Or discounts on other merchandise. There are all sorts of positive ways to get people to find it worthwhile to spend money without making them feel guilty and bad for paying a price that is legitimately offered by a retailer.
47 Comments | Leave a Comment..
robert shumake
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robert shumake
Exclusive: Sigma and Foveon discuss the forthcoming SD1: Digital <b>...</b>
Exclusive: Sigma and Foveon discuss the forthcoming SD1: One of the few real surprises at Photokina 2010 was Sigma's announcement of its forthcoming SD1 DSLR, and that at its heart would be a new Foveon sensor that would offer 15.4x3MP ...
Fox <b>News</b> poll: Angle by three in Nevada, Raese by five in West <b>...</b>
A new Fox News battleground state poll on the race for the seat held by the late Sen. Robert Byrd for 51 years shows Republican businessman John Raese with a 5-point lead over Democratic Gov. Joe Manchin among likely voters — 48 percent ...
Fox <b>News</b> Poll: GOPer Raese Leads By Five Points In WV-SEN | TPMDC
The new Fox News poll of the West Virginia Senate race is giving Republican businessman John Raese a solid lead against Democratic Gov. Joe Manchin, in the race to succeed the late Dem Sen. Robert Byrd.
robert shumake
Editor's Note: JW Jones offers more content at OptionsTradingSignals.com.
Over the past few weeks the broad stock market has seemingly grown increasingly more bullish. Market pundits, traders, and even high-profile money managers are stating publicly that the easy trade over the next few years will simply be being long, high-quality stocks. While time may prove these managers wise, it's likely a bit early to be that bullish.
As traders, our job is to create profits consistently regardless of price action. The best traders are masters of blocking out the noise and emotion, and letting various forms of data guide their decision-making. At this point in time the bulls have the bears pushed against key resistance at the SPX 1150 area. However, the bears have their eyes set on the 1130 level and from there the key SPX 1040 support area.
If the S&P 500 breaks out over the 1150 area with strong volume we could move higher to test recent highs; however, if the 1040 area were to give way to the bears the bullish parade would end. At this point in time, it's too early to tell which side is going to win this battle. The monthly chart of SPX tells the entire story.
Click to enlarge
Until proven otherwise, my bias is to the downside. What might surprise most readers is the reasoning behind my thinking. My expectation of lower prices has nothing to do with macro economic conditions, it has nothing to do with unprecedented intervention that we've witnessed by the United States federal government, and it has nothing to do with housing numbers. The reasoning behind potentially lower prices is simple: defined risk. The SPX chart above and even the daily chart listed below are both indicative that the SPX 1150 area is a critical psychological level for market participants. We're literally at a precipice right here, right now.
Click to enlarge
When major resistance or support is very near the current spot price of any underlying, typically low risk/reward setups can be found. After spinning through several ideas and option strategies, an out-of-the-money (OTM) butterfly spread seemingly made a lot of sense. The OTM butterfly spread would benefit from the passage of time and wouldn't be as exposed to a comeuppance in volatility. This strategy could produce a great potential return for a defined amount of risk.
After some brief analysis, the best proxy was using the Spider ETF SPY as opposed to the SPX index. The bid/ask spreads are quite wide on SPX at times, particularly when volatility is rising. Consequently, it can be arduous to get decent fills from the SPX market makers in rapidly moving market conditions, which seem to be the norm recently. Besides the normal option expiration on monthly or quarterly basis, options that expire every week have grown in popularity recently. A primary reason why volumes have exploded is due to the weekly expirations routine offering of unbelievable risk/reward setups, particularly through the utilization of Theta (time) decay trading setups.
After running through various expiration dates, it made sense to utilize the October weekly options that expire on Friday, October 8. Since I have a bias to the downside, I used an OTM put butterfly. Traditional butterflies are typically written where the current price is straddled by the wings of the butterfly spread. In an OTM butterfly, an option trader places the entire position out of the money. It helps reduce the cost of the butterfly, and because the option contracts are out of the money, they're not impacted as harshly by rising volatility. In addition, these OTM butterflies usually have very attractive risk/reward characteristics.
SPY was trading around $114.13/share at the close on Thursday, so the OTM butterfly I constructed had the following strikes: Long 1 OCT WKLY. SPY 108 Put / Short 2 OCT WKLY. SPY 111 Puts / Long 1 OCT WKLY. SPY 114 Put. Here's a snapshot of the SPY October weekly option chain as of the close Thursday:
Click to enlarge
Label Complains That Amazon Devalues Artists By Making Music Cheap
from the you-got-it-backwards dept
This is unfortunate. Nearly two years ago, we wrote about the indie music label Asthmatic Kitty, which seemed to take a really forward looking attitude towards the new music market. In that interview, the label noted the reality of the new world, and why it was important to focus on reasons to buy, rather than assuming that people would just pay to hear music. This is what was said at the time:
I operate under the conviction that people buy records because they want to own them, not because they want to hear them. It is too easy these days to hear a record without having to buy it. I don't resent that fact, rather I feel we at Asthmatic Kitty embrace it through streaming albums and offering several free mp3s (even whole free albums). And why do they want to own it? They want it to illustrate to others their taste and identify who they are as a person. I also believe they want to be part of something bigger than themselves, they want to belong.
Our job is no longer to sell folks things they want to hear. They want an experience and to identify themselves as part of a community. Ownership then becomes a way of them supporting your community through investing in that community. Fostering that in an honest, transparent and "non-gross" way takes a combination of gracefulness, creativity and not taking oneself too seriously, while still taking art and music seriously.
Apparently, however, they do resent Amazon for making music available cheaply. Reader Colin points us to a recent article about how Asthmatic Kitty has sent out a letter to fans of artist Sufjan Stevens, complaining that Amazon's pricing is too low and asking people to go to Bandcamp and pay more instead. They do admit to being somewhat conflicted about this, at least:
"We have mixed feelings about discounted pricing," the label explained.
"Like we said, we love getting good music into the hands of good people, and when a price is low, more people buy. A low price will introduce a lot of people to Sufjan's music and to this wonderful album. For that, we're grateful.
But we also feel like the work that our artists produce is worth more than a cost of a latte. We value the skill, love, and time they've put into making their records. And we feel that our work too, in promotion and distribution, is also valuable and worthwhile."
While they're certainly not attacking Amazon or fans, the whole email does feel a little off. The simple fact is, if people want the music (as the label seemed to recognize last year), they can find it somewhere for free. Amazon's prices are meaningless when it comes to the "value" of the music. Price and value are not the same thing. Rather than complaining about the price that Amazon sets on the album, why not give people additional reasons to pay directly at Bandcamp -- such as providing valuable extras if they do. Or discounts on other merchandise. There are all sorts of positive ways to get people to find it worthwhile to spend money without making them feel guilty and bad for paying a price that is legitimately offered by a retailer.
47 Comments | Leave a Comment..
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