Front Month Options

Japanese scientists found higher levels of lithium in drinking water seemed to correlate with lower suicide rates.

"Bubbles" Alan Greenspan, the core culprit to our economic demise, recently announced that "hyperinflation" is a threat to the economy. From a Floydian contrarian and logical point of view this is proof we will not have hyperinflation. In fact, Floyd is more concerned about the third and fourth quarter 09 for all U.S. companies. The first quarter corporations were able to do huge write offs to their bubble induced mistakes and acquisitions, and the second quarter still has plenty of games that can be played in financials.

A small child can figure out that with unemployment at 9.5% and the true unemployment at over 20%, and a savings rate that has risen to 6.9%, that there is less money being spent.

This is deflation. Bubbles Greenspan is a free entreprise boy that trained under Ayn Rand. Want the detail of why "Bubbles" led many Presidents through the "good times" as he lowered interest rates, and promoted "creative mortgaging," and was not able to slow any bubble......simply pay Alan $100k for his speeches and he'll tell you his side. It's why he's talking hyperinflation now?

How can he talk about what he "did". :)

Study up. Here's how our economic crisis began, long ago.

http://www.nonfamous.com/wp/2008/10/23/alan-greenspan-is-an-idiot/

http://www.huffingtonpost.com/2008/10/24/greenspan-shrugged-how-di_n_137465.html

http://www.nytimes.com/2007/09/15/business/15atlas.html

http://www.commondreams.org/views/041800-106.htm

And as we know now, Clinton took advantage of the bubble economics to "look good" and "balance the budget." In came Emperor George and Shooter Cheney, and the neocons took over, influenced by Goldman Sachs, as they allowed oil to become a speculators game, stopped even watching Wall Street (their buddies getting rich, right up to Paulson's bail out to his friends before exit), and oh yeah, Iraq. Getting rid of the evil ones.

It's almost amazing it's not worse, isn't it?

Advanced Mentoring Student MP had a great deal of trouble learning "question false facts," Flodyian trading logic, and even more with "we only see what we see." MP wrote this weekend with an "ah ha." Please study:

"Often times, especially when I was just started as a trader, I was not able to "see" what was happening on a larger scale because I was so focused on the moment to moment activity or I was so convinced that the market was "going to" do something because it "had to" that I missed other opportunities to trade...

This three minute card trick video reminds me of two things that you constantly mention during trading...

1. All is not as it appears

2. We only see what we want to see...

Enjoy..."

http://www.youtube.com/watch?v=voAntzB7EwE


And another key question from subscriber LR:

"Hello Floyd,

A short question : it is not very risky to buy a PUT or a CALL that has expiration period in 12 days?
I mean, even if the market will move in the desired direction, in 4 days' time due to time decay an option will lose a lot from its initial value, am I right?
Or you suggest this because you are sure that the market will not be flat and will move strongly one way or another in a very short time ?
As far as I can remember, last year you didn't trade options from the current month, do I remember well?
I would also like to suggest to you to specify in your alerts why any of your previous recommendations shouldn't have been entered (even if the buy price was right, it was not recommended to enter a certain position etc).

thank you,


P.S. the last week had very good trades, I believe I'm starting to learn and the 90 days paper trading seems to me the most intelligent advise I should have taken long time ago."

At OEX we always use "front month" (meaning the same month) options typically until 8 to 10 days until expiry, at which time we begin looking at the next month issues. In recent months we've found low volume and high premiums on "next month" premiums during this period and have bought and held front month options successfully for an extended time period.

The following article might explain why:

http://www.bloomberg.com/apps/news?pid=20601087&sid=aAIJo685vdz4

And lastly, the market yesterday. Ahh, just ten days ago The New York Times, Time, and even the USA Today (complete with color comics) were showing us a true bull run market. We saw more immediate sell off yesterday to lows of 8166 Please note this in comparison to our overall Dow projections. It was also smart to recalculate the Dow yesterday by midday, noting that the "drop" had barely hit s1, and many call traders were rewarded by a best buy at 1.40 and sell to 2.20 as the market inched up after 1.30 p.m. By the end of the day it had reached 8347. Check those Dow projections again.

Puts were also available at a regular buy, as the market moved up, and this should answer a question that many new subscribers ask...."how long is a signal we give good for." The answer is: the day that we give the signal.

Entry at best buy may not take place at opening, and may take several hours to fill, or may never fill. We missed the initial run to the downside yesterday a.m., but were able to catch the upside for a day trade, and still buy a put.

The market remains at a crossroads. We are bearish and continue to see downside, around whipaw, to our lower Dow projections. However, there remains a 41% of bottoms and a return to an upside, hence why we're open (and already profitable) with two signals.