Trading notes 1-1-15

After watching the market over the last few days and seeing the Santa Claus rally I feel confident that my instincts are good about where the market is going.

There may be a pullback at some point these next few weeks so I am going to watch the market carefully. People are getting out of positions now that they couldn’t have at the end of the year because of tax implications.  I am of course going to play the probabilities but I want to time my trades more effectively.

The stocks I am watching are Apple, Yahoo and Facebook I think that Apple may pull back based on the lack of confidence in their upcoming products. I think that Yahoo can go either way based on what Marissa Meyer announces in the next few days or weeks about what they're going to do in regards to their Alibaba shares. I think that Facebook is the more promising company for growth because it has a lot of other businesses under its umbrella I just think the other people playing the market don't have the same confidence in the company because they don't trust a young Mark Zuckerberg. But as Facebook keeps outperforming and over delivering I think the stock will go higher.

Trading Large Numbers of Options Contracts

I’ve been experimenting with using larger numbers of contracts on my credit spreads for a larger gain and after executing a few trades I can say that I do not recommend this strategy for everyone but it has been very lucrative.  You have to be a lot more vigilant when executing these trades and there are some tighter rules you have to follow.

• Make sure you are only trading larger name stocks with a large amount of volume (liquidity). Names like AAPL, SPY, BABA, etc.
• Make sure the lower leg of your trade has some bids out there so you can close your position or roll your position, preferably no less than .05.
• Never let these trades go to expiration.  You never know what the stock is going to do and you don’t want to be exercised with high volume contracts especially if you don’t have the money to cover the transaction. 

This last reason is the precisely why I do not recommend these trades for everybody but if you can stomach the risk they can be highly lucrative.  Just be ready to deed your house over to your broker if it goes south on you.

Yahoo and Alibaba are Climbing Higher

Alibaba and Yahoo have been steadily crankin' these past few weeks even when the rest of the market has been chopping up.  I've been trying my new strategy on YHOO options and have been doing well.  I also picked up some BABA too.  Technically they are both on a trend and the "trend is your friend." Fundamentally they both are sound companies and trading at low multiples,Yahoo especially. The P/E for the technology software service industry is 20-60 and YHOO is at a bargain rate of around 6.  With all that new 6-8 billion in cash from selling some BABA IPO shares, that is a serious discount. 

Alibaba IPO

It's a staple of China's internet economy. It is Paypal, Amazon, Linked In, Youtube, Twitter and a bunch of other companies all rolled into one in a country of a billion people. Now it's making a play for the international market namely the U.S... will it continue to grow? Will a billion people make more people...uh yes. Market movement is not absolute but population growth is.

Alibaba may have a rocky start, we all know how IPOs are...chaos... it may fluctuate for a day, 3 days, a week, a month...but like Facebook who had a horrible IPO it recovered and kept moving up...yes it is a guess but it's not about will it go up but when.