I have to come clean and admit that I occasionally like a little excitement in my trading. Sure I love to make money and be profitable with high probability spreads that have defined risk, but that can be dull. And I don't mind dull to make money. Understand I use these strategies (Verticals, Iron Condors) continually as my revenue generator so that I can take very small pieces of capital and get kooky with them. When I say kooky I mean that I still monitor and define my risks, but I may implements strategies I know have a relatively low probability of success. Often times for me this can mean BUYING options or straddles in products I know are unpredictable. I am not a very frequent option buyer as you can tell. Fans of Seinfeld can relate in this way: Remember when George decided he was going to do the opposite of whatever he thought he should do and the results were terrific? He promptly told a woman he was bald, unemployed and lived at home and she fell for him. My point is that we all get rules and probabilities and guidelines for success and understand we need to put the probabilities in our favor, but once in a while it is fun to just let loose. Again, very small amounts of capital and limited risk with this!

The instruments one can use to fulfill those needs of excitement are often easy to find. Watch the news or read the paper and it becomes evident fairly quickly where the real flyers in the market are. Finding them is easy, but now what do we do with them? You are wise enough to realize if something has the potential to really take off and be profitable, generally it also has some inherently large risks. That is the reason we play in limited risk and limited capital in these areas.

Let's talk about some recent volatile instruments, commodities, oil, financials, currencies, solars and a smattering of some sector ETF's. I am not going to prescribe anything in particular so don't hold your breath. I will tell you I have played with Google, FSLR, LEH, and BSC (ouch) C, YHOO and some Oil and Currency ETF's. What have I done? I have bought small amounts of stock, options, sold naked puts, sold verticals and calendars all in products I would normally avoid. Notice everything above has limited risk and I watch it diligently.

The problem with trading in this manner? First, it may not be successful. Second, these are products you may fully understand but don't often trade. Experience in a product is huge and that is why many successful traders use the same products consistently. Finally, what frequently happens is that folks dabble small in a flyer and if they are profitable they start over allocating to that product. You can guess how that turns out.

Remember the most important aspect of this article. This is your SMALL play money and not meant to be a staple of your trading strategy. Scratch those itches and play, but be smart!

thinkorswim, Inc. and its registered employee, Steve Quirk, do not solicit or recommend any form of trading in the individual stocks (or their derivatives) mentioned above. Please do careful, independent research before investing any money as well as weigh the possible consequences on your particular financial situation before doing so. The risk of loss may be substantial.

Every three months I get excited and ready for the commencement of earnings season, the highly anticipated time of the year when company fortunes rise and fall according to a little number we call EPS. Actually, if we take a deeper look into stock price fluctuations following earnings releases, the pivotal data has not been current EPS, but rather future revenue guidance.

Recent market volatility (the S&P 500 sold off 45 points on Fri. June 6th, accompanied with poorer jobs data and higher energy prices) could signal another volatile earnings season to come. Does anybody remember January through early April when the VIX traded in the 30's? Much of that volatility can be attributed to a disappointing earnings season. Alcoa symbol (AA) typically signals the beginning of the next earnings season, as it is the first Dow symbol to report. Look for the company to release results on July 7th. Currently, the implied volatility in AA July options is around 52%. I would imagine that volatility will rise as we get closer to the earnings date.

As we get closer to that date, I will offer up to you some basic earnings trading strategies. I will show you what traders look for in terms of gauging implied volatility, calendar spreads, straddles, and strangles. So, stay tuned...

Happy Trading

thinkorswim, Inc. and its registered employee, Joe Mazzola, do not solicit or recommend any form of trading in the individual stocks (or their derivatives) mentioned above. Please do careful, independent research before investing any money as well as weigh the possible consequences on your particular financial situation before doing so. The risk of loss may be substantial.

Just My Opinion 6.29.08

The overall market looks bad and all the news is so bearish. It seems every morning we wake up to something else that some company has been hiding or is coming clean on. CEO's say one thing, two weeks later do another, then two weeks after that, most are gone. There is no trust in most of the financial stocks management. That is with good reason considering what has happened in the last year and until they prove otherwise, that will probably continue. It doesn't matter what most of them say. The public, or financial analyst for that matter, doesn't know what to believe from them.

We are coming up to the end of the quarter and conventional thinking always says that the market gets marked up for the end of the quarter. However, I have seen many large down moves on the last day of a quarter. I don't know what is going to happen this time, but I do believe we are getting close to a tradable bottom, and a washout on the last day of this quarter would be a good opportunity to buy for a trade for the short term. The rallies in this down market could be very large and fast, but I don't believe that they will hold. I am more inclined to be patient and sell large up moves, not on the first day, but a couple days into a rally. There isn't any reason right now for the market to head higher in a meaningful way. So in my opinion, I think we will get a chance to buy a washout some time this week and sell sometime in the next two weeks for a trade. I can see possibly leaning to the short side if the rally is big enough. I am not a short seller at the current levels. Of course, this is all dependent upon no major news events.

Also, the OPEC president said he can see oil at $170 by year's end and blames the FED for that because of the weak dollar. Most thought oil was a sale at $100 and now most think that oil can't go down. I think we are getting close to a large down move in oil, but ideally I would like to see a large up move and reversal in one day. I also believe the Dollar will rally against the Euro. This is more of a longer-term call. The European bank is only concerned with fighting inflation and will probably raise rates at their next meeting. However, they have bigger financial problems that raising rates will ultimately fuel, negating any benefits in their fight against inflation. When this all starts to play out, I believe the Dollar will rally against the Euro. I have no opinion about other currencies.

Stay nimble in this market, admit when you are wrong and take your losses like you take your gains because the market really doesn't care what we think. We want to always have capital to trade the next trade, or day depending upon what we want to do. Make sure that you are allocating funds that you feel comfortable risking. You never want to be forced out of a position before it has time to do what you had thought it would do for you simply because you are uncomfortable with the amount you have at risk at any given time.

One more thing. Barron's had an article about GM and a couple of convertable bonds this weekend. They look very interesting to me. I just wanted to give you a heads up on these and you should do your own homework and investigate these on your own. I am not an expert on convertable bonds and I will be asking questions before I decide if I am going to buy any. SNY

Neither thinkorswim, Inc. nor Scott Snyder, (employee of thinkorswim Advisors dba RED Option) solicit or recommend any form of trading in the individual stocks (or their derivatives) mentioned above. Please do careful, independent research before investing any money as well as weigh the possible consequences on your particular financial situation before doing so. The risk of loss may be substantial.