Great option expiration trades keep coming every week while markets mark time.

Fellow Friends and Traders,

Well we finally got a mild 4% dip early in the week followed by a recovery brought on by good economic news. I continue to believe the stock market remains well ahead of the fundamentals of the economy. The magic carpet ride of the public using debt to support consumption is over. The fuel of leverage will no longer support growth and those benefits will be impossible to replace in a world where banks are reluctant to lend. The securitization markets are busted and the shadow banking system no longer operates thus institutional money creation is limited.

So instead of growing 6-8% coming out of a recession we will wimp along for quite a long time. Yes corporate earnings will rise modestly but unemployment will remain stubbornly high for some time. There is a reluctance to retire today. Lowered 401s, IRAs, saving and declining home prices have forced many to remain in the work force longer. This means there will be fewer job openings. Therefore it may feel like the recession never ended out on Main Street USA. "Retirement is kind of an elusive dream at this point," states the NY times.

There will be more major financial hits coming in the future. Earlier in April the Financial Accounting Standards Board voted to relax fair-value accounting rules. Financial companies are currently reporting better earnings because they haven't been forced to account for the losses yet. We have just kicked the can down the road and delayed the recognition of losses. Therefore it will take longer for the economy to recover because the government poured $billions into these failing companies, money that should have gone to grow the economy and support healthy ones.

Nevertheless, there will be exciting opportunities for us almost every week to make money. Take this week for example. Over two days, Monday and Tuesday, the S&P declined over 40 points and made a marginal low Wednesday. I wrote on that day’s final chart that if the 980-990 level held Thursday we could buy calls or some other bullish strategy. This trade was setup on the Daily chart. The daily Oscillator had declined from Jammed (98) to oversold (44) in a trend. It normally will take a day or two for the short term (5 and 30 minute) charts to complete their own setup. Thursday morning the 30" chart showed us triple divergence (3 lower price lows coupled with 3 higher Oscillator readings). "Option Magic" calls this a back-up the armed car, throw the $$$s in and make a deposit in your favorite bank trade. This trade setup works well over 90% of the time.

After an early morning aborted rally attempt we retested the Wednesday lows. The OTM calls were trading near $2.00 but had limited volume. Friday afternoon the calls traded over $6.00!  The most effective strategy was to buy the slightly OTM puts. These were trading like water and cheaper and go long E-minis.  This strategy would allow you to make money even if the market went lower. Either option trade was very profitable.  However you were able to trade a lot more put hedges than out right calls. As long as there is low volatility these very cheap expiration opportunities will continue every week. Pay Attention, learn and make very serious $s!

Next week the mantra remains. Sell all good news rallies until we lose money. Works like a charm and we haven't lost in over 9 trades! Let the Oscillator tell us when to buy the dips.

Hope you all had a great Holiday. Now back to making money.