Monday April 27, 2015 – Weekly Market Update

I haven’t discussed the overall market in a while
and have instead focused on some specific
trade set ups.

For example, last week I mentioned GE and
the idea that you should wait for it to pull back
if you were inclined to buy the stock.

I suggested that support on GE should be around
the $26.70 area.

What is interesting about that is that last Tuesday,
GE dropped to $26.55 and has been mostly trading
above that level since then.

We will see if it rallies to the prior high at $28.68.

Another stock that I have mentioned is S. I went
back in last week and bought S, after my calls
from the previous week were assigned.

I was able to buy the stock again for just under $5 and
sell the $5 call that expired last Friday for 7 cents.

S closed at $5.27 last Friday, so once again my calls
were assigned.

The position ending up earning me 1.4% for four days.

Would you take that return? I would every week.

When a money market account pays .5% per YEAR …
I will gladly accept 1.4% for four days.

Of course, I like to earn a bit more selling weekly covered
calls, but the premiums are low now. I usually try and
earn about 3% per week selling weekly covered calls.

You maybe thinking why not trade weeklies? And I
do trade them. Usually on a Friday when there is
very little time value remaining in the options.

As an example, last Friday I bought the $570 call on Google
and paid $3.80.

If you think about, for $380 I controlled $57,000 worth of
Google stock. That is less than 1% at risk. Or another
way to look at it is your leverage is almost 99 to 1.

This is why I like to trade weeklies on a Friday.

As for the markets, today, the S & P 500 hit the objective
I have been calling for. That price was 2,125.

Today’s high is 2,125.92. The 2,125 price target is a price
my members have known about for sometime now.

Now the question is where does the market go from here?

I can tell you that 2,093 should be support now. And I
can also tell you the VIX is right at a key level.

If it moves up from here, the market will pullback.

Until next week, trade safely.

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