Affordable Futures Contract

/ES E-mini S&P500

/ES is the most liquid product. Beta is lower and it is affordable.

Ticker Symbol /ES
Current price: 2368.25
Tick size: 0.25
Tick value: $12.5
$/tick size $12.5/0.25 = $50/index point
Contract size:
(Cost of 1 Contract)
(Liability)
$50 x S&P500 Futures Index or 1/5 of a standard S&P futures contract
= $50 x 2368.25 = $118412.50 (about $120,000)
Initial margin: 5500 (base on ThinkOrSwim), TOS requires $5500 in order to trade
Leverage: $120,000 / 5500
= 21.8
Trading Hour: CME Globex:
Sunday – Friday 6:00 p.m. – 5:00 p.m. New York Time/ET (5:00 p.m. – 4:00 p.m. Chicago Time/CT) with 15-minute trading halt Monday – Friday 4:15 p.m. – 4:30 p.m. New York time/ET (3:15 p.m. – 3:30 p.m. Chicago Time/CT). Monday – Thursday 5:00 p.m. – 6:00 p.m. New York Time/ET (4:00 p.m. – 5:00 p.m. Chicago Time/CT) daily maintenance period.
CME ClearPort:
Sunday – Friday 6:00 p.m. – 5:00 p.m. New York time/ET (5:00 p.m. – 4:00 p.m. Chicago Time/CT).  Monday – Thursday 5:00 p.m. – 6:00 p.m. New York Time/ET (4:00 p.m. – 5:00 p.m. Chicago Time/CT) daily maintenance period.

 

/ZW Wheat

Current Value 440’6 cents / bushel
Contract Unit 5000 bushels
Contract value:
(Cost of 1 Contract)
(Liability)
$4.406 x 5000 bushels
= $22030
Initial margin: 1100 (base on ThinkOrSwim), TOS requires $1100 in order to trade
Tick size: $0.25
Leverage: $22030 / 1100
= 20
Trading Hour: Sunday – Friday, 7:00 p.m. – 7:45 a.m. CT and
Monday – Friday, 8:30 a.m. – 1:20 p.m. CT

/ZC Corn

Current Value 364’75 cents / bushel
Contract Unit 5000 bushels
Contract value:
(Cost of 1 Contract)
(Liability)
$3.6475 x 5000 bushels
= $18237.50
Initial margin: $990
Tick size: $0.25
Leverage: $18237.50 / $990 = 18.4
Trading Hours: Sunday – Friday, 7:00 p.m. – 7:45 a.m. CT and
Monday – Friday, 8:30 a.m. – 1:20 p.m. CT

CORN Corn

Current Value $19.02
Commision $6.95
Margin for Stock $22916.38
Margin for Options $11458.19
Trading Hours Sunday – Friday, 7:00 p.m. – 7:45 a.m. CT and
Monday – Friday, 8:30 a.m. – 1:20 p.m. CT

SLV SILVER

Current Value
Contract Unit 5,000 troy ounces
Contract value:
(Cost of 1 Contract)
(Liability)
Initial margin:
Tick size:
Leverage:
Trading Hours:

PPG PLAT

Current Value
Contract Unit
Contract value:
(Cost of 1 Contract)
(Liability)
Initial margin:
Tick size:
Leverage:
Trading Hours:

 

UNH UnitedHealth Group

Dated 05 Mar 2017

Fundamental

Price

Typical P/E ratio: 18

Intrinsic value:

UNH is a healthcare company. Earning growth rate is estimated to be 16%.

  • Determine a future stock price.
    Future stock price = Future EPS x Future P/E Ratio
    Future EPS = Present EPS x (1+ EPS growth rate)^number of years
    = $7.25 x (1 + 16%)^5 years
    = $15.23
    Future P/E Ratio is 18.
    Therefore, Future stock price = $15.23 x 18 = $274.14
  • Present Intrinsic Value = Future stock price / (1 + MARR)^number of years
    = $274 / (1 + 15%)^5 years
    = $137

Earnings Date

  1. 17 Jan
  2. 19 Apr
  3. 19 Jul
  4. 18 Oct

Seasonal

Month  Aug-Sep Oct  Nov  Dec
Week  34-37  43  47-51  52-53
Trend

Technical

Support Resistance Level

$25, $50, $120, $168

Logs

2017-03-17
Short Float 0.79%
P/E 23.63, Forward P/E 16.10
Technically uptrend.
Seasonally bullish till week 13 (end of Mar)
Chart is all a high within a channel. No trade.

CAT Caterpillar

Dated 05 Mar 2017

Fundamental

Price

Typical P/E ratio: 16

Intrinsic value:

CAT is a construction equipment company. Earning growth rate is estimated to be 25.14%.

  • Determine a future stock price.
    Future stock price = Future EPS x Future P/E Ratio
    Future EPS = Present EPS x (1+ EPS growth rate)^number of years
    = $4.37 x (1 + 25.14%)^5 years
    = $13.34
    Future P/E Ratio is 16.
    Therefore, Future stock price = $13.34 x 16 = $213.44
  • Present Intrinsic Value = Future stock price / (1 + MARR)^number of years
    = $231 / (1 + 15%)^5 years
    = $116

Earnings Date

  1. 26 Jan
  2. 22 Apr
  3. 26 Jul
  4. 25 Oct

Seasonal

Month Apr May Sep Oct Dec Dec
Week 16 18-20 38-39 40-44 51 53
Trend

Technical

Support Resistance Level

$23, $42, $60, $79-80, $97, $116

Logs

2017-03-17

Short Float 4.91%
Forward P/E 21.08
Fundamental nothing.
Technically seems very flat. Not much coming news.
Don’t trade.

CRM Salesforce

Dated 05 Mar 2017

Fundamental

Price

Typical P/E ratio: 207

Base on P/E and forward P/E, the potential value of the company is $360. The company is not issuing any dividend.

Not easy to trade this CRM.

Earnings Date

  1. 28 Feb
  2. 18 May
  3. 31 Aug
  4. 17 Nov

Seasonal

Month Feb Sep Sep Oct
Week 5-8 41 42-44
Trend

 

KO Coca-Cola Company

Dated 05 Mar 2017

Fundamental

Price

Typical P/E ratio: 19

Intrinsic value:

Coca Cola is a drink company. Earning growth rate is estimated to be 2.9%.

  • Determine a future stock price.
    Future stock price = Future EPS x Future P/E Ratio
    Future EPS = Present EPS x (1+ EPS growth rate)^number of years
    = $1.49 x (1 + 2.9%)^5 years
    = $1.72
    Future P/E Ratio is 19.
    Therefore, Future stock price = $1.72 x 19 = $32.68
  • Present Intrinsic Value = Future stock price / (1 + MARR)^number of years
    = $32.68 / (1 + 15%)^5 years
    = $16.34

Earnings Date

  1. 09 Feb
  2. 20 Apr
  3. 27 Jul
  4. 26 Oct

Seasonal

Month Jan Mar-Apr May Jul Sep Dec Dec
Week 1-4 11-17 19 26 37 44-48 53
Trend

 

Technical

Support Resistance Level

$20, $25, $31, $36, $38, $41, $47

Logs

2017-03-17

Short Float 0.74%
P/E 28.32, Forward P/E 21.78 -> Price is currently at its typical P/E ratio.
Seasonally Coca-cola is bullist till week19 or 2nd week of May.
Earning season at mid-Apr. Position has to be closed before Apr expiration.
Volatility is extremely low at 11%. Average is about 13%
Current price is $42.23. Buy calendar spread at strike 43, with some bullish view.
Technical chart show it is in a slight up trend. This few month is still in the bull month.

PYPL Paypal

Dated 04 Mar 2017

Fundamental

Price

Typical P/E ratio: 33

Intrinsic value:

Paypal is an online payment business. Earning growth rate is estimated to be 16.6%.

  • Determine a future stock price.
    Future stock price = Future EPS x Future P/E Ratio
    Future EPS = Present EPS x (1+ EPS growth rate)^number of years
    = $1.15 x (1 + 16.6%)^5 years
    = $2.48
    Future P/E Ratio is 33.
    Therefore, Future stock price = $2.48 x 33 = $81.79
  • Present Intrinsic Value = Future stock price / (1 + MARR)^number of years
    = $81.79 / (1 + 15%)^5 years
    = $81.79 / 2.01
    = $40.90

Earnings Date

  1. 26 Jan
  2. 27 Apr
  3. 21 Jul
  4. 20 Oct

Seasonal

Month
Week
Trend

No seasonal model available as the ticker starts only in Jul 2015.

Technical

Support Resistance Level

$32, $35, $39, $44

Logs

 

Buying a SPY PUT options

Entry on Wednesday 15th Feb 2017.

SPY at all time high

Market gap down and did not recover

Almanac indicates next 2 days high probability of down.

Economic announcement.

Poor consumer oil demand.

Rising interest prompt people to cash out their profit and reduce their loan.

Many stocks at all time high.

Wednesday entry brough0.25 delta PUT at $1.

The market internal seems struck at SPX 2338.

Drop down to 2336 during market noise.

Replace order to $1.05 chasing the options.

But looking at the TRIN, the whole market seems bullish.

The TICK is bearish. These indicate a bear trap of bull covering.

The chart really went up a little.

The market order is close to my $1.05. Immediately I change my mind and revert back to bring the options at $1.

Shortly after, the order is filled at $1, when SPX is at about 2340.

VIX increasing while the SPX increase is unusual and indicate that the market is fearful (of bear) while the market rise.

Shortly after the order is filled at $1 when the SPX is at about 2340, the chart rally up to 2341.28.

The day is an algo day, and gap is not big enough to peek at the market direction.

Didn’t managed to use MRE as entry.

The behavior is quite tally with the Almanac with 70% bull. The next two day will be super bearish.

Putting this trade a high probability.

Today news retail report seems positive.

Not much news to move the market for the next 2 days.

Super strong bull at 11.17am with SPX now at 2344.23 with PUT option down to $0.97 at 11:37.

SPX went down to 2341.63 is higher than my entry, but my PUT is worth $1.04, $4 profit.

According to plan. However this is still a bull covering. I suspect my PUT value should remain this value of $1 as the SPX climbs higher. VIX is increasing.

Other odds, Trump’s presidential day (holiday), Hanjin shipping bankrupt. People may want to get out of position before the holiday.

On Friday, it is a very bearish day in the morning session.

However in the afternoon, the market went up to 2351.16 making the day a bull day.

Why I lose this trade?

  • buying a bear position in a uptrend seasonal.
  • Trump’s rally period.
  • a bit greedy. Thought that the morning is very bearish but didn’t expect the afternoon to change complete direction.
  • holiday rally.
  • should put a trailing stop to protect capital first.
  • sold 2x options resulting in a naked options position (sold 2x $0.91 options). Did OCO wrongly, while duplicating an order.

 

Lucky on Tuesday (21Feb 2017), market gap up at $0.75 making $15 back, breaking even, covering all the cost. Options continue to drop to $0.65 but I don’t bother already.

Comparing Dow Jones 30, S&P 500, NASDAQ composite 2000

Dow Jones 30 companies are also in S&P 500 Index. Download compiled list.

DJI, Dow Jones 30
 Company Name Sector Industry Earn dates Seq.
MMM
3M Industrials Industrial Conglomerates  24 Jan 2017  9
AXP
American Express Industrial Conglomerates Consumer Finance  19 Jan 2017  4
AAPL
 Apple Information Technology Computer Hardware  31 Jan 2017  20
BA
Boeing Industrials Aerospace & Defense  25 Jan 2017  14
CAT
Caterpillar Industrials Construction & Farm Machinery & Heavy Trucks  26 Jan 2017  16
CVX
Chevron Energy Integrated Oil & Gas  27 Jan 2017  19
CSCO
Cisco Information Technology Information Technology  15 Feb 2017  27
KO
Coca-Cola Consumer Staples Soft Drinks  09 Feb 2017  26
DIS
Disney Consumer Discretionary Broadcasting & Cable TV  07 Feb 2017  25
DD
DuPont Materials Diversified Chemicals  24 Jan 2017 10
XOM
Exxon Mobil Energy Integrated Oil & Gas  31 Jan 2017  21
GE
General Electric Industrials Industrial Conglomerates  20 Jan 2017  6
GS Goldman Sachs Financials Investment Banking & Brokerage 18 Jan 2017 3
HD Home Depot Consumer Discretionary Home Improvement Retail 21 Feb 2017  28
IBM IBM Information Technology IT Consulting & Other Services  19 Jan 2017  5
INTC Intel Information Technology Semiconductors  26 Jan 2017  17
JNJ
Johnson & Johnson Health Care Health Care Equipment  24 Jan 2017 11
JPM
JPMorgan Chase Financials Banks  13 Jan 2017  1
MCD
McDonald’s Consumer Discretionary Restaurants  23 Jan 2017  8
MRK
Merck Health Care Pharmaceuticals  02 Feb 2017  23
MSFT Microsoft Information Technology Systems Software  26 Jan 2017 18
NKE
Nike Consumer Discretionary Apparel, Accessories & Luxury Goods  28 Mar 2017  30
PFE
Pfizer Health Care Pharmaceuticals  31 Jan 2017  22
PG Procter & Gamble Consumer Staples Personal Products  20 Jan 2017  7
TRV Travelers Companies Inc Financials Property & Casualty Insurance  24 Jan 2017  12
UTX
United Technologies Industrials Industrial Conglomerates  25 Jan 2017  15
UNH
UnitedHealth Health Care Managed Health Care  17 Jan 2017  2
VZ Verizon Telecommunications Integrated Telecommunications Services  24 Jan 2017  13
V Visa Information Technology Internet Software & Services  02 Feb 2017  24
WMT
Wal-Mart Consumer Staples Hypermarkets & Super Centers  21 Feb 2017  29

 

 

My first trading post

Sep 2016

2016-08-28

I have finished my Options class last Thursday. Learning Options is really challenging. I wondered if my age was a factor in my learning progress. The class provided me the confidence in using Options as an instrument to trade the US stock market. Options was really a very challenging subject when I was first introduced by Conrad in his pattern trading course in Jan this year. I was completely lost. Chen Pang provide the fundamental insight of Options in a very systematic style, making it easier for us to understand. This learning of Options trading instrument alone shock my confident and literally took me almost 8 months. Learning to trade from scratch, is a journey that I would not forget.

Ok. Now that I have learned Options, I set myself a target to practise it. As recommended, as a novice I should start trading Options on the SPY, which is the ETF of the S&P500 index.

My teachers Conrad, Brian, Chen Pang always remains us to have a trading plan before we start to trade.

So where should I start.

August & September is known to be bearish month. Ah… I did the programming for seasonal probability, but I am not so confident on my programming as it is not verified yet. Then I remembered that I have brought a large pile of trading books call “Stock Trader’s Almanac 2016”. Ok, I think I should start to base my trading of SPY base on this book.

Flipping to page 83 for the month of Sep 2016. Reading through the month, it seems that Sep is a bullist month. So many bull heads.

Base on the technical analysis and the outlook of the economy, I know I will be more comfortable trading the bear.

From the Almanac summary, it seems that the Sep starts up strong, and has been usually ending weaker. This seems good for a bear position.

Janet Yellen has just indicated on 26 Aug 2016 (Fri) that the market fundamental is good and indicated that the Fed rate hike odds have strengthened. Interest rate increase will be likely for the next month, and another one before the year ends. This can a good news for the economy, but we will not for sure knows how the market reacts. As a precaution, I have to wait 3 days before making my first entry. Friday’s (26 Aug 2016) market starts up strong, and starts to lost points after noon. I will not trade on Monday. Tuesday will be a good day to begin with.

From the Almanac, Tuesday (30 Sep 2016) is also known to be a bearish day with S&P down 15 of the last 19 years.

1st of Sep which is a Thursday is a bullist day. I will be selling a call vertical spread, so it probably ain’t going to affect much as I am aiming for the month’s end bear result.

Labour day will be on the 5th of Sep (Monday). Market will be closed. I happened to come across on the Almanac page 88, talking about the market statistic for the 3 days before/after a holiday. Two days before labour day, there is a significant chance of market going down. This would probably be 2 Sep 2016 (Fri). The day before 1 Sep (Thu) could be a bull, and a bear on Fri may just make sense. I will probably look out for a entry opportunity for this 2 days.

During the read, I can see that the second day after a Thanksgiving is a very bearish day. A day before Thanksgiving is a very bullist day. It is too significant in probability and I shouldn’t miss it. This year the Thanksgiving will be on the 24 Nov 2016 (Thu). So 23 Nov 2016 (Wed) to 29 Nov 2016 (Tue) is an opportunity to look out for a bear entry. 30 Nov 2016 (Wed) is the last day of the month, and is indicated in the Almanac as bearish. This is also similar for Chirstmas and New Year Day.

For Sep, there are many bulls in between. 16 Sep 2016 is a September Triple Witching, Dow up 10 of the last 13. Seems very bullist. Triple Witching is a day when many Options & Futures expire on the same day.

Bearish days on Sep are 21, 22, 23 where institute are doing portfolio restructuring. FOMC meetings is on the 20 Sep. 21-23 Sep will make sense. There is a chance that there may be a Fed hike. This will means that the 3 days will be quite wild. Must avoid.

Market has been climbing higher highs, and has been hovering at this peak for quite sometime. Base on the odds, it make sense to make my intended bear entry in Sep period. The following entry date are identified. I will look out for a chance for a minimum-risk-entry. MRE will be base on market internals and S&P500 index/price gap.

The Options to trade on will be the Sep, Oct, Nov, Dec expiration contract, selling a call vertical spread as a means to collect the Options premium.

A check from the historical chart for the past few years shows a high probability that Sep will ends up lower/sideway which is suitable for a short call vertical spread. Crossing over to Oct, need to be careful as it tends to move up for the pass 4 of 5 years.

Possible entry day to look at for

  • 30 Sep 2016 (Tue)
  • 1st/2nd Sep 2016 (Thu, Fri)
  • 21, 22, 23 Sep 2016 (Wed, Thu, Fri), be careful as FOMC is on the 20 Sep (Tue).

Next month

Oct is known as the jinx month. Major crushes happens on this month. Earning season also started.

Dairy of my first executed trade

Questions starts streaming in just as I am wondering when I should place my entry. I was wondering if I should wait for the MRE (minimum risk entry). But then it doesn’t seems logical because I am going to to a short call vertical spread which is a long term strategy (1-3 months).

Chen Pang has confirmed that MRE has little significant.

Me: “Actually does MRE really matters (or make a difference) if we are doing short vertical spread options? Short vertical spread is a 1-3 months duration trade, right?

Chan Pang: “If your trade time target is 1-3 months, then MRE does not really matter.

Then it makes me wonder if monitoring of market’s internal, trade entry after lunch time, etc… makes sense.

Me: “Selling Options when volatility is at the high give us more premium to collect. I am thinking this should be the same for selling vertical spread. And I am thinking now to take entry when VIX is at a high. Does this thought my mine make some sense?
Chen-Pang Wong. How do you normally take the entry, when you are doing such a long term trade (using vertical spread)? Since short term fluctuation doesn’t make too significant difference, MRE, monitoring algo day or not, making entry after lunch, monitoring market internals, don’t seems to make much sense to me now. How do you execute your order (short vertical spread) after your trading plan is firmed?
Thank you for your sharing.”

Anyway, I proceed to look at the market internal and think that today is perhaps a good day for entry. It is a very bullist day as predict in the Almanac. So today might be a good opportunity for entry as tomorrow is a bearish day (Last day of the month).

What I have posted on Options group facebook:

“Short Vertical Call spread:
2016-08-29 00:01:37

Short SPY 217 Oct(21) $4.17
Long SPY 218 Oct(21) $3.52
Max Loss = $175
Max Gain = $325
Short leg delta = -0.56 (I think it is about 0.56, don’t know where to look for this value)

Hot now. I was really sweating, because I was placing my first real Options trade. Waiting for a limit order on the spread to maximise the premium, but it never seems to hit. The chart seems peaking and it is getting late night, I lower down my limit, and ding I hear that sound. Base on Almanac, today is a bullist day. Like a divine book, so accurate. Tomorrow high chance bearish, due to month end. Next month’s probability of a down side is between -0.2% to -0.5%. The S&P already reach a new peak. There is probably no major event which can let it peak further.
Hope for the best, there is little I can do now. Losing money now as S&P 500 is climbing higher. I did my first options trade, I did my first trade on the US market. Can go to sleep now.”

After this trade was done, I am wondering if waiting for the S&P500 to move up to a higher price would be helping in my position of selling the same vertical spread strike of 217/218. Should I just continue to wait for the S&P number to go higher, or should I just execute without worrying so much. What is the difference it would made if I waited for the same strike pair?

After looking at the Options chain, I do notice that the spread premium is going to increase as the strike gets more and more into the money. So much so that it may be going into the next strike, which means that I will be able to short call a vertical spread at a even higher strike collecting a similar premium. Which this will provide me a better chance of getting the direction that I wanted.