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Jeff Bishop’s Total Alpha Strategy | Market Internals

Over the last six weeks, the S&P 500 has gained nearly 10%.

Back then it was a news-driven market—a time when itchy twitter fingers and fake news mattered.

And while the media circus will only intensify as we approach the 2020 election, the market has currently muted the news…

Markets continue their relentless push higher on anemic trading volume—last week marked the sixth consecutive that the SPY and QQQ closed in the green.

And while one could make a strong argument that the SPY doesn’t deserve to be up here, and that the fundamentals don’t support these levels—the market remains judge, jury, and – if you’re on the wrong side of the trade – executioner.

So how am I tippy toeing around this mess?

By being stock specific, sticking to my money pattern, and using options to exploit the opportunity.

You can still find trades if you know where to look. Even with a slow market, my Bullseye Trade in Nike (NKE) pulled out a 72% winner on the week.

Not to mention a massive winner in Total Alpha with my option spread.

This week could mark a turn in equities. And I’ve got you covered in the Jump. I break down the economic and corporate schedule, as well as discuss what upcoming micro and macro factors could influence stocks and the global markets.

Market Internals

A lot of traders think that the light volume makes a market bullish. That’s factually untrue. Take Thanksgiving week for example.

We all know volume lightens up as we approach the holiday. Here’s a couple of stats for you in the last 9 years if you bought the SPY on the days prior and sold at the close of the Wednesday before Thanksgiving.

  • Friday – Win 66.67% of the time, but lose 0.29%
  • Monday- Win 55.56% of the time, but lose 0.32%
  • Tuesday – Win 77.8% of the time, and make 0.04%
  • Same day Wednesday – Win 55.56% of the time, but lose 0.02%

Light volume just creates more volatility. But, it does mean big money is less likely to make important decisions.

Budgets and China

Impeachment remains the focus of nearly every news station. Yet, there’s important work happening behind the scenes.

Nancy Pelosi and Steve Mnuchin get closer to a budget deal to fund the government. The border wall and the Department of Homeland Security (DHS) remain the sticking points. Trump still wants $5 billion that Democrats won’t offer.

In all likelihood, we’ll see a shortened version of last year without a shutdown. The bills won’t fund the wall, and Trump will pull money from other areas he has discretion over. Still, he’s always a wild card. The deadline for passage is Nov 21st.

And speaking of deadlines…negotiators hit a snag once again between China and the U.S. Trump set December 15th as the deadline for another 15% increase on a range of products. That would put it square in the Christmas shopping season.

Chinese negotiators want additional tariffs removed and continue to balk at being tied to a specific amount of agricultural purchases. The U.S. continues to hammer them over intellectual property transfers among other issues.

Markets took all developments in stride this past week. No one trusts the reports anymore to make trading decisions. Until actual statements of what is or isn’t happening come out, they look at everything else as rhetoric.

Little Data Coming Out

Data starts to come in slower as we reach the holiday season.

Housing starts and permits on Tuesday provide data on a key sector that remains strong. We also get existing home sales on Thursday morning.

One of the standouts for the economy remains home construction. They create more jobs through direct and indirect means than most other sectors.

A decade past the financial crisis, we still see strong demand in the home market. Low rates continue to make purchasing affordable. But, if bonds continue their selloff, that could drive rates higher and crimp home demand.

Friday will give us the manufacturing PMI. I don’t expect we’ll get a hot number, but you never know. Core CPI came in above 2% for the consumer already. If inflation starts to rear its head, that would put the Fed in a real tough spot.

But keep an eye out for energy

Tuesday afternoon, we get the American Petroleum Institute’s weekly data along with Wednesday’s Department of Energy report. With the weekly natural gas inventory on Thursday, we’ll see if energy stockpiles show any signs of a drawdown.

Crude remains reasonably bullish, which would certainly help out some poorly performing companies. Energy companies got destroyed on the earnings front.

If crude and natural gas start to turn bullish, that would be a huge windfall for the energy sector (XLE) and exploration companies (XOP).

Market signals to watch

I’m keeping a close eye on the VIX. It finished last week near $12, which is insanely cheap.

VIX weekly chart

Pure statistics say we should see a bounce in the VIX, which should lead to a market pull back. I like to play the VIX through options on the UVXY, which was actually my Bullseye Trade of the week.

I’ve been trading these positions with long calls on certain stocks in my Total Alpha portfolio. No one knows the exact timing for the turn. So I create low-cost strategies that offer huge potential payouts.

In fact, it wasn’t that long ago that I showed traders how I work these markets live. You can catch a replay of the workshop through the link below.

Click here to watch replay

Source: TotalAlphaTrading.com | Original Link

Jeff Bishop’s Total Alpha Strategy | The Jump on the Week

I can’t recall another time where I’ve witnessed a stock market rally to all-time highs—with such unease, disgust, and hatred.

And you know what else?

There is an incredible disconnect with the market’s performance and what the raw data is saying…

And let’s not forget about all the uncertainty:domestic political tensions as the 2020 election heats up, Brexit uncertainty, cracks in overnight lending, and a contraction in the Chinese economy.

However, here we are, at all-time highs—and a record number of net shorts in the VIX futures.

I see a massive screw factor here driven by Wall-Street money. How else do you explain such passive behavior in volatility against a weekly SPYchart as this:

SPY weekly chart

Traders use Bollinger Bands to gauge volatility, when a stock or ETF experiences extreme volatility, it will trade above or below the Bollinger Band.

You’ll have to go back to the beginning of 2018, to find the last time a stock indice closed over the weekly Bollinger Bands, and not since 2016 has the SPY moved from near the lower band to the upper band (a two standard deviation move) in a quarter.

It feels like…

Big money wants to hide their true intentions with some good ol’ fashion market manipulation.

Heck, they play in their own dark pool exchanges to cover their tracks…moves that Taylor Conway exploits in Shadow Trader.

Before I get sidetracked and go full-on Alex Jones on you, let me regroup, and get back to what really matters—and that’s providing you with the tools, education, and tips to becoming an elite trader.

In this issue of the Jump, I breakdown charts in XLE and XOP, go over market-moving events (economic and corporate), as well as, give you my thoughts on volatility.



Total Alpha Trading


A tweet, a meet, and a Thanksgiving treat

The global public cannot escape the never-ending barrage of political coverage that dominates headlines like never before. It takes a Ph.D. in forensics to sift through rotting stories to find a kernel of valuable information.

Trump and Xi continue their dalliance like some sort of teenage courtship. Will they meet, or won’t they? Does December bring more tariffs? Who kisses who on the cheek first?

It’s a sleight of hand that obscures any real certainty. At one point markets needed absolute clarity to pick a direction. Now, they simply need assurance of freely flowing Fed policy.

Short of any new tweet or revelation, the markets face little in their march towards turkey day. Instead, the focus shifts on how far retailers are willing to encroach into the meal and NFL football. Make no mistake, Black Friday through Cyber Monday will drive the conversation through year’s end.

In fact, November tends to be one of the best months for the SPY. Over the last 20 years it turns a profitable month nearly ¾ of the time!

But back up to the Alibaba contrived ‘Singles’ day. Marked by four 1s on the calendar, the Chinese  Valentine’s Day should signal the arrival of a horseman of the apocalypse. Instead, it proffers a critical measure of spending.

We don’t know the extent of the economic slowdown in China. Single’s day not only tells us about the Chinese economy but any fallout from turmoil in Hong Kong.

Will the energy rally fizzle?

The standout the last few weeks happens to come from the economic laggards. Energy stocks once left for dead, rose from the grave bidden by a cold winter.

XLE weekly chart

The recent run in Oil and Natural Gas gentrified the once dilapidated sector. Exploration companies hadn’t seen bids in so long I expect they looked like apparitions.

XOP weekly chart

A cold winter itself wouldn’t create sustained investment. But, a theme that’s seeded itself in the underbelly of the trading community might yet blossom.

The shale boom in the U.S. brought a flood of production and investment, not seen the Beverly Hillbillies struck oil. Easy money from banks greased the spokes of the derricks that fracked their way through the lands.

Yet, today’s lenders harken back to an age of stodgy bankers requiring actual performance. Being burdened with investments in losers like WeWork, Uber, and other failed startups does little to bolster lending confidence.

Ironically, it’s beginning to claim the least capitalized of the drillers. Larger companies face fewer competitors. Their large coffers allow them to invest in operations without relying on the banks.

Put simply – the few and the profitable remain.

The EIA report due out Thursday gives a look like last week’s one on Oil. Last week saw crude inventories rise. Yet, the longer maintenance cycles of refineries helped extend the backlog. I want to see how the weekly inventories do on Wednesday and in the coming weeks.

A downgrade few agree with

Indian politics stepped into the spotlight this past week on a Moody’s downgrade. The rating agency (cause they never get things wrong) downgraded Indian debt to negative from stable. Bank of America Merill Lynch sees a “shallow recovery” in early 2020.

The fast-growing economy decelerated to a six-year low of 5% in June. Despite the reasonably pro-business government, the country faces a growing population without jobs.

The bottom line

The market’s way overextended. But, that doesn’t mean they can’t make one last move just to slap you in the face. That doesn’t mean we crash out from here.

But, I like being long volatility when others bet against it…

Next Week’s Calendar


Monday, Nov 11th

  • Singles day! Time to cry alone in public.

Tuesday, Nov 12th

  • 4:30 PM EST –  API Weekly Inventory Data – Our first look at crude inventories
  • Major earnings: Advanced Auto Parts (AAP), CBS (CBS), Noble Energy (NOG), Tyson Foods (TSN), Skyworks (SWKS)

Wednesday Nov 13th

  • 8:30 AM EST – October Consumer Price Index – A good inflation indicator
  • 10:30 AM EST –Weekly DOE Inventory Data – A slick look at oil
  • 11:00 AM EST – Fed’s Powell addresses Joint Economic Committee of Congress – The Fed equivalent of a parent-teacher conference
  • Major earnings: Stratasys System (SSYS)…and pretty much not a lot else

Thursday, Nov 14th

  • 8:30 AM EST – Jobless claims – One of the economic bright spots
  • 8:30 AM EST – Produce Price Index – Find out if tariffs burden input costs
  • 10:30 AM EST – Weekly EIA Natural Gas Inventories – Will the rally continue?
  • Major Earnings – Applied Materials (AMAT), Wal-Mart (WMT), Nvidia (NVDA)

Friday, Nov 15th

  • 1:00 PM EST – Baker Huges Rig Count – Will Derrick show up to the party?
  • Major Earnings: Hewlett Packard (HP), JC Penny (JCP)…how are they still around?

Source: TotalAlphaTrading.com | Original Link

Jeff Bishop’s Total Alpha Strategy | Three Winning Volatility Trades

There are three ways I think you can play the next volatility spike in the market. If played correctly, it could generate substantial returns for myself—and life changing for others.

3 Winning Volatility Trades

First, the VIX isn’t a stock. You can’t trade it on the open exchange.

There are three main ways to trade the VIX: ETF products, futures, and options.

ETF products come in two varieties – leveraged and unleveraged.

VXX tracks short-term volatility through futures and other products. The ETF trades on the open exchange like a normal product.

However, because the VIX is mean-reverting, and futures strategies cost money to execute, the VXX loses value over time.

VXX weekly chart

The UVXY works similarly but as a leveraged product. This means it tracks the daily movements of volatility by twice the normal amount.

With the same costs as the VXX plus degradation from being a leveraged product, the UVXY erodes in price much faster over time.

UVXY daily chart

My favorite trades work with either options and/or stocks on the ETFs, or options directly on the VIX.

So let’s get to it, shall we?

  1. Covered calls

Good ‘ol covered calls never stray far from my heart.

They’re one of the first option trades we learn how to do.

Now, I’ll show you how to work them properly.

Timing this trade is the key. Jump in too early, and you bleed out slowly.

I like to use the VVIX as a gauge for potential volatility. When I see it starting to move higher, I take that as a signal for a possible spike in the actual VIX.

As a quick refresher, the VVIX is the VIX of the VIX. It measures traders’ activity on the VIX options.

Once I see the VVIX moving from the ’80s to the ’90s, I plan my move.

I like to do what’s known as a ‘buy-write.’ This is where I buy the stock and sell call options against it immediately.

It’s another form of a covered call.

My sweet spot is right at-the-money. That pays me the most extrinsic value possible on the trade.

I don’t like these trades to last more than a few weeks. If volatility hasn’t spiked by then, my timing was off.

The goal here is to have the ETF spike on a jump in volatility. That puts the options deep-in-the-money and converts the extrinsic value to intrinsic value.

Then, you simply close the trade and take profits.

Easy trade to execute. Timing is the biggest challenge.

  1. Long VIX options

VIX options aren’t my favorite option (pun intended). They can be very tricky to play, and may not pay out a lot.

But, done right, they have extremely high win rates.

This play relies on searching for extreme lows in the VIX coupled with lows in the VVIX. We actually saw this scenario recently.

VIX daily chart

You can see how the VIX got down near $12, which came very close to the lows of the year.

At the same time, the VVIX got relatively near its lows before turning around.

VVIX daily chart

This meant you could buy long calls in the VIX at extremely low prices for very cheap.

Since then, we’ve seen the VIX pop up nicely over $13, which could yield a solid profit.

  1. UVXY Call Spreads

This is another trade with a high win rate that pays handsomely.

The construction is pretty straightforward.

You want to sell a call spread at or slightly in-the-money when the VVIX gets up between $115-$120, the VIX is over $20, and the UVXY has spiked at least 40%.

It may seem like a lot at once. But, those criteria help you pick off the tops in volatility during market downturns.

You can see it in action in mid-august. The VVIX spiked up near $118, the VIX jumped over $20, and the UVXY nearly doubled.

UVXY daily chart

In this example, you would sell a call spread around $36-$38. You want to give yourself about 1-2 months on expiration.

That lets volatility get sucked out of the market at least once, putting you in a profitable position.

You don’t need to get full profit. If you manage to 25%-50% profit, you’re doing just fine.

This is, by far, my favorite trade to play. It may only come a couple of times a year, but it’s so easy and consistent.

These aren’t the only tricks I have in my bag.

If you’re ready to open up the toy chest then come join me at Total Alpha.

I’ll show you how you can become a multi-millionaire option trader.

Click here to join Total Alpha

Source: TotalAlphaTrading.com | Original Link

Jeff Bishop’s Total Alpha Strategy | Is the energy rally real?

Could Crude Oil and Natural Gas Break Out?

First, let’s start with the obvious.

Energy prices were way oversold. Both Crude Oil and Natural Gas sat near record lows.

Although Crude didn’t go nearly as low as it did in the winter of 2018, price remained extremely depressed.

Crude Oil daily chart

Crude found a lot of support around $50 a barrel since early summer.

News hit the wire in the later months of an attack on Saudi Oil fields that demolished production.

Yet, at the time, while price jumped almost 15% overnight, the Oil VIX spiked as well.

Oil VIX daily chart

So crude spiked and traders were pricing in a big move.

That tends to mean they expected price to drop pretty fast.

Why is that?



Total Alpha Trading


Well, if crude spikes on a production loss, the disruption lasts only a certain amount of time.

In fact, Saudi Arabia expected to have most of the production back on by that weekend.

Put these together, and you have a recipe for falling oil prices.

Today we have a different story.

Oil prices have not only climbed, but they’ve also brought along some long-forgotten sectors.

The S&P Energy ETF (XLE) climbed a whopping 10% off the October lows. That’s better than the SPY 8% increase.

XLE daily chart

Energy hasn’t just lagged the markets, it’s in a different continent altogether.

It’s actually been a bit of a surprise that more shale drillers haven’t gone bankrupt, given the depression in prices.

Another interesting point comes from the Oil & Gas Exploration companies. The S&P ETF XOP tracks a basked of these companies including Marathon Petroleum (MPC), Murphy Oil (MUR), Apache (APA), and others.

While the XLE remains well above the lows of the last several years, the XOP appears to be rising off the bottom.

XOP weekly chart

Nothing has fundamentally changed yet in the production landscape. However, these stocks were up nearly double their current value at the end of 2018.

Even a measurable increase in oil and natural gas prices could send these stocks soaring.

And natural gas doesn’t look too shabby at the moment.

Known as the ‘widow maker,’ natural gas follows some well known seasonal patterns.

Yet, the recent surge in price comes on the heels of an extremely odd winter.

Parts of the southeastern U.S. remain at record highs, while extreme cold grips other parts of the nation.

This created an unusually high burn of energy and fuel consumption.

Natural Gas weekly chart

Natural gas experiences wild swings in prices regularly. Last winter price shot up from $3 to $5 in a matter of days.

Current prices remain below prior years and are coming off of already depressed levels.

My take

This appears to be nothing more than a sucker’s rally in the short-term. We could easily see natural gas prices explode higher on short-covering or other technical factors.

Yet, time and again as prices rise, production increases to match. The same thing occurs with crude oil.

That dynamic hasn’t changed for years and shows no signs of deviating.

That said, the XOP ETF looks enticing here. The $20 level offers a great stop to work with.

Fundamentals don’t need to change for the ETF to double from here. It could do that entirely on the back of a renewed economic outlook.

Given that I’m not seeing heating oil prices rise, I don’t know that we aren’t being fed an excuse to match the price action.

I won’t sit here and say that crude prices could run up towards $64.

But, I think there are plenty of better opportunities out there to trade.

I’d rather put my capital to work on setups I know work out.

That’s why I grabbed an opportunity in SDC the other week.

The stock signaled it bottomed, giving me a chance to put on some call options.

$22,962 later, I’m a happy man.

If you want to learn how to spot trades like these, come join me at Total Alpha.

It’s one of the best places to learn an array of trades to fit your needs and style.

Click here to join Total Alpha

Source: TotalAlphaTrading.com | Original Link

Jeff Bishop’s Total Alpha Strategy | This Week’s Intermarket Analysis

In some ways, I feel bad.

Not everyone reads this newsletter or heeds its words.

They laughed at my pronouncement the market would shoot higher off the Fed.

And I let them…

…it made their soul-crushing defeat taste all that more delicious.

Yes, many traders stood aghast as the market closed Friday at all-time highs.

How could it possibly ignore all ominous signs?

Guess what – taking the best trade in the world at the wrong time is another form of losing.

You want to make money in this market?

Accept the importance of timing… submit to its sultry allure.

I created my ‘money pattern’ to signal trend changes… not sell free eBooks.

Think timing the market is impossible?

Then how do you explain this:


Maybe you think it’s luck.

But my multi-million-dollar account says otherwise.

Market heroes live to tell their tales

The market works like a siren of the seas… it lures in the unsuspecting and then eviscerates their wills.

Believe me – I get it.

No one wants to be the last sucker to buy at the high. So, we wait until the sweat beads on our foreheads.

We click the mouse… buying in near the highs. Heaven forbid we miss out.

It feels so good… for about a day.

Then the market yanks the floor out, chewing up the last bits of your soul.

Others continuously claim the top, shorting at the ‘highs’… only to be stretched beyond their stops.

They throw up their hands in exasperation and cover their positions.

It’s, of course, the very instant they wake up to find the market gapping down 1,000 points.

We have the SPY and QQQ all-time highs.


SPY daily chart


QQQ daily chart

It’s only once the market fully breaks the spirits of men that it changes direction.

And so far, I haven’t seen enough pain… the pure anguish and disbelief of price rising on fumes.

One interesting point – financials near their all-time highs.


XLF weekly chart

Typically, financials fall in the face of easy money. Lower interest rates bring lower profits for financials.

So does their rally mean they take the Fed at their word when they say they’re ‘done?’

Don’t bet against central banks

Betting against central banks for the last 10 years was equivalent to handing a stranger $20 to punch you in the face.

Even at record highs, U.S. bonds offer incredible yields compared to the rest of the world.


TLT daily chart

I want to get paid… well anything, as opposed to paying money to own someone’s debt – that’s what investors are saying.

Think about that for a moment.

That’s like asking to hold someone’s pet scorpion because they’re cute.

However, bonds could easily take a trip down to their 200-day moving average. That would give stocks enough time to melt some faces, while still keeping the bond uptrend intact.

Gold tells a similar story.


GLD daily chart

As countries feverishly work to devalue their currency, precious metals continue their meteoric rise.

It’s neat to see Nathan Bear’s TPS setup forming here in gold. Probably means another leg higher is in the cards.

Even palladium wants to party.


PALL daily chart

However, palladium may be in a league by itself. It’s used as a catalytic converter in cars to scrub your exhaust.

Yes, I had to look up what palladium is used for. I had no idea either.

Demand soared as countries like China begin to ratchet up environmental efforts.

Did the Fed finally break the dollar?

The dollar was the odd standout for the past year.

Normally, easy money policies create a ‘risk-on’ environment.

That leads stocks, commodities, metals, and other dollar-based goods to rise.

All of that happened… except the dollar rose too.

This week marked the first return to normalcy. The dollar retracted coming off the Fed announcement.


UUP daily chart

My Take

Listen to the pundits for the top. They’ll tell you.

When analysts deign us with opinions of S&P 500 $4,000… you know it’s time.

The SPY could easily rise to the weekly upper Bollinger Band at $307.50.

However, the major markets look like they want to normalize.

This could be a retracement. But, with the VIX near record lows, it may mean a lot of sideways action.


VIX daily chart

The market could buy enough time for earnings to catch up.

Until then I play things close to the vest.

Shorter time frames let me play the trend without getting left in its wake.

I’d rather take my future into my own hands instead of leaving it to buy and hold.

Luck is for those who don’t know how to trade the markets

For the rest of us, there is Total Alpha.

Get a real education on how to win.

Click here to join Total Alpha

Source: TotalAlphaTrading.com | Original Link

Jeff Bishop’s Total Alpha Strategy | Your Jump on the Week

The last few minutes of Thursday’s trading session primed the pump for the Friday drag race… as it appears no one wanted to be short stocks going into the weekend.

SPY 5-minute chart

Traders dove into long positions with reckless abandon as panic buying ensued.

A combination of FOMO— sprinkled in with some margin calls— stoked the flames and fueled a rally that took the S&P 500 back to all-time high levels.

In this week’s Jump, I break down the earnings and IPO calendar, as well as, a complete breakdown on the SPY and Nasdaq, as they both hover around historical levels.

What’s in the news

Pundits would lead you to believe Friday’s rally stemmed from renewed trade war hopes.

That’s a bunch of crap.

They refuse to acknowledge technical analysis, and would rather assign the headlines to fit the market moves.

Economic advisor Larry Kudlow even acknowledged the December 15th tariff hikes with China weren’t off the table.

But, that doesn’t mean news won’t drive the market. We’ve seen a tweet send stocks into a tailspin.

I’ll be watching the political environment for real clues to any resolution to the major issues… and there are major issues.

We still don’t know the ending of the Brexit story. It’s impressive the minimal impact this has on the market given the Grexit of a few years ago would swing the market hundreds of points on even less news.

I don’t proclaim to be more than an observer of British politics. But, the longer they delay Brexit, the less of an impact it has. Simply put, if they do exit, delays give them more time to plan. On the flip side, delays also make an exit less likely.

Trade news remains entirely unpredictable. The Chinese economy is clearly suffering from growth contracting to its worst levels in decades.



Total Alpha Trading


Data Points

That doesn’t mean the U.S. has felt nothing. GDP showed tepid growth of 1.9% in the last quarter. That’s just above Canada’s 1.6% growth.

Yet, home prices remain strong and inflation low. Corporate earnings are beginning to look more and more like an accounting shell game.

Recent beats in Health Care and Technology raised the decline quarter over quarter from -3.8% last week to -2.7% this week.

The real laggard has been energy.’

What could really change the dynamic would be a rise in oil and natural gas prices along with international construction.

However, with low global demand and new supply, we’re unlikely to see this change anytime soon.

In fact, it’s entirely possible that the global slowdown drags on energy and the S&P 500 for the next several quarters, if not a couple years.

Major markets point in different directions

The SPY and QQQ hit record highs in what looks like a blow-off top. Both finished up shy of 1% on the day on relatively decent volume.

SPY daily chart

QQQ daily chart

At the same time, the safety trades in Bonds and Gold worked higher. This typically doesn’t happen.

Economically, investors take a ‘risk-on’ trade by investing in stocks and equities. They sell bonds, gold, and U.S. dollars to fund the trade.

Conversely, the ‘risk-off’ trade works in reverse. Equities go down as bonds, gold, and the dollar rises.

Problem is… now we have everything going up (with the dollar being the only exception).

What’s troubling is the already lofty prices of Bonds shouldn’t be attracting investors.

The way I read it:

  • The equities rally is a fake-out based the low volume
  • Traders investing in bonds believe there is either no alternative or think someone else will buy higher
  • Gold continues to show a lot of demand, even with the sell-off in the dollar

That’s not to say that stocks can’t rise further. We could see them make their way to the upper weekly Bollinger Band at ~$307.50.

Earnings Income & Economic calendar

That doesn’t mean we can’t make some great trades.

Jason Bond’s Weekly Windfalls strategy works great in these environments. His spread strategy creates defined risk trades that pay out quite often… like over 80% of the time.

Just the other week he spiked a $7,000 win on AMZN ahead of its earnings.

We’re starting to get towards the tail end of earnings. But that doesn’t mean there aren’t a few nice ones on the horizon.

Major Earnings:

UBER – Monday
PTON – Tuesday
UPWK – Wednesday
ATVI – Thursday
HMC – Friday

IPOs: 36 KR Holdings (KRKR), 89 Bio (ETNB), Centogene (CNTG), CNS Pharma (CNSP), GFL Environmental (GFL), Tela Bio (TELA)

Economic Calendar:

Monday –

  • Factory Orders – 10:00 a.m.

Tuesday –

  • PMI Services  – 9:30 a.m.
  • ISM Non-Mfg – 10:00 a.m.

Wednesday –

  • Productivity & Costs  – 8:30 a.m.
  • EIA petroleum – 10:30 a.m.

Thursday –

  • Jobless claims  – 8:30 a.m.
  • EIA natural gas report – 10:30 a.m.

Friday –

  • Consumer Sentiment  – 8:30 a.m.
  • Wholesale Trade – 10:30 a.m.

Source: TotalAlphaTrading.com | Original Link

Jeff Bishop’s Total Alpha Strategy | Do earnings signal a recession?

No other single trade makes you money faster than selling options.

It’s not just the speed, but the consistency to produce winners that makes it one of the most appealing option strategies.

I know you can trade options in a lot of ways but I dare you to find something as good as this…

When you trade stocks you only have one way to make money (stock rises if you are long or it declines if you are short)—you give yourself upwards to three different ways to profit when you sell options.

I call it stacking the odds in your favor. And when you combine my “money pattern” with it, it’s pretty much unbeatable—hitting win rates as high as 70-80%.

Imagine putting yourself in the driver’s seat and having complete control of your trading.

However, selling options isn’t for everyone… and if you miss a step… it can be extremely costly.

But all of that can be avoided, and I’ll teach you the proper way to sell options, a way to maximize your profits while reducing your risk exposure.



Total Alpha Trading


Learn to sell option spreads

Option sellers hold an advantage over buyers. Think of options like insurance. No company would sell insurance at a loss. The same holds true for options. And just like insurers, selling options delivers a consistent stream of wins.

But let me first explain how selling basic option spreads work.

Option spreads come in two versions – put spreads and call spreads. The goal is to have the stock close below the lowest strike price for calls and above the highest strike price for puts at expiration. This lets the options expire worthless, and you keep the credit you received.

Here’s how to construct an option spread.

First, you sell an option contract that’s out-of-the-money at a strike price. At the same time, you buy the same number of contracts at a strike price that’s further out of the money with the same expiration.


  • XOP trades at $40.I sell 5 Call option contracts at a $45 strike price for $1.50 expiring in one month.
    I buy 5 Call option contracts at a $47 strike price for $0.75 expiring in one month.
  • XOP trades at $40.
    I sell 5 Put option contracts at a $35 strike price for $1.50 expiring in one month.
    I buy 5 Put option contracts at a $33 strike price for $0.75 expiring in one month.

These trades pay you a credit… the difference between the price you sell the options contract and buy the other one.

In this example, you receive $1.50, and you pay $0.75. Your credit is $1.50 – $0.75 = $0.75.

This is the maximum amount you can make for this trade. So, your maximum profit in a spread is:

Maximum spread trade profit = Credit you receive for selling the closer strike option – The debit you pay for buying the further strike option.

Now, let’s talk about your maximum loss. The option contract you buy caps the downside at that strike price. That means you can only lose the difference between the strike prices.

So how does that work?

In the example, you got paid $0.75. You get to keep that money no matter what.

The total amount you could lose is $46.00-$47.00 = $2.00 (which is the same for the puts). That makes your total possible loss $2.00 – $0.75 = $1.25 per option spread.

Your maximum loss on a spread would be:

Maximum loss = Distance between strikes – Credit received

Use the charts as your guide

I’ve made selling option spreads at key levels in charts my bread and butter. It combines two components that work in my favor: technical analysis and option decay.

Decay works for options sellers and against buyers. Options will lose their value at an exponential rate as they approach expiration.

Here’s a graph to help you visualize how this plays out.

Then, I use chart analysis to find setups with a high probability of success.

One of my favorites – a crossover of the 13 and 30-period moving averages. NFLX shows a great example of this at work.

NFLX hourly chart

First, we have the moving average cross over. This lets me know the trend is changing to bearish.

Second, the trend is changing near a key resistance level. Notice how the stock couldn’t seem to get above ~$420.

I want to use these triggers to sell a call spread just above the resistance line. That gives me the most bang for my buck. Since I’m looking at the hourly chart I only want to go out a week or two with the expiration.

You can see how the stock traded lower over the next several weeks. This let me pocket the credit I received on the trade.

Create the right risk to reward

Balancing your risk and reward separates good traders from great traders.

Playing poker taught me to understand the relationship of bet sizing against possible outcomes.

Selling options has a much higher win rate than buying options. On my best days, I’ll win 40% of the trades where I buy options. I make up for this by getting big winners.

In fact, if you sold option spreads at one standard deviation (which is the range of price a stock will land 68% of the time) on the SPY every week, you would win well over 80% of the time. However, you wouldn’t win a whole lot.

The easiest way to understand this is through expected value.

Expected value tells you what you would make on the trade if you repeat it over and over. Every trade has a probability of success, not a guarantee.

You calculate the expected value as follows:

Expected value = (% chance of winning x potential profits) – (% chance of losing x potential losses)

Any value above 0 means you make money over time. Anything below 0 loses money.

Let’s look at the NFLX trade.

  • Netflix traded at $415
  • Selling $420 call going out one month would pay me $14
  • Buying the $425 call would cost me $12 for the same expiration

Max possible profit = $12-$14 = $2

Max possible loss = $425-$420-$2 = $3

To break even (expected value equals 0) I need to win this trade 60% of the time. Anything above 60%, I make money.

You may not be able to figure out your chances of winning initially. Take some practice trades in a demo account to build up some stats. Use those to evaluate your trade’s potential.

Source: TotalAlphaTrading.com | Original Link