Amazing trading blogs to read now

First of all, the regular blog that I blog a lot more frequently.

www.wiseoftheday.blogspot.com
Full of non-trading stuff, funny and nonsense articles...
Its a blog I started to share interesting stuff that will make us laugh and ponder...
The updates are much more frequent there!


These are the blogs that I read regularly.

For Options Trading
http://wilddreamsinoptionsselling.blogspot.sg/
By wild-dreams

He has a successful record in trading options on S&P  futures (mini ES).
Recently he started venturing into commodities options, such as crude oil, soyabeans etc.
Good to know his entry points.


http://theoptionsjourney.blogspot.sg/
By Tony.

He deal with options in Nikkei N225 and KOSPI K200.
The good thing about this blog is that whenever his trade goes wrong, you can see how he attempt to repair and salvage the trades to reduce his losses. All traders will hit some losses, instead of plain Stop - Loss, it is good to repair the trade, sometimes in advance.


Cillin Trading Journal
http://cillinsg.blogspot.sg/

Journal of a trader who trades from US Dollar Index, to commodities, to equity indices to forex.
He has many charts and analysis. My favourites are his COT (Commitments of Traders)
COT is a good guide to understand if you are dealing with futures in your trade. Find out how the big boys and the commercials are handling the commodities supply and demand swings.

The Weekly COT Report

The weekly report details trader positions in most of the futures contract markets in the United States. Data for the report is required by the CFTC from traders in markets that have 20 or more traders holding positions large enough to meet the reporting level established by the CFTC for each of those markets.¹ These data are gathered from schedules electronically submitted each week to the CFTC by market participants listing their position in any market for which they meet the reporting criteria.

The report provides a breakdown of aggregate positions held by three different types of traders: “commercial traders,” “non-commercial traders” and “nonreportable.” “Commercial traders” are sometimes called “hedgers”, “non-commercial traders” are sometimes known as “large speculators,” and the “nonreportable” group is sometimes called “small speculators.”

For stocks analysis blogs, I recommend these 2 for American stocks.

http://www.seekingalpha.com

I also love Seeking Alpha for its stock recommendation and outlooks.
For example this article on Dividend growth investing
http://seekingalpha.com/article/2704595-dividend-growth-investing-total-return-and-indexing-revisited

http://www.stockta.com/
And StocksTA for TA analyst on stocks. I use if I have to buy USA stocks to sell covered calls. (astonishing I kept getting assigned on calls, and I had to sell covered puts)


And for those who loves Singapore IPOs,
http://www.singapore-ipos.blogspot.sg/

This guy is awesome, he will provide a wonderful write up on any IPO that is getting listed in Singapore, and give a thoughtful analysis and the statistics for the IPO.

Whenever there is a new IPO coming, I will rush to his website for the latest read.

For all trading, I highly recommend using Interactive Brokers.

How to test for Fake Silver? How to test for Fake gold?

I took this graphic from www.silver.com
Pretty informative.
Great to know how to test for real silver, or how to test for real gold.
Happy Buying!

Book Summary- Trading Options at Expiration

Trading Options at Expiration: Strategies and Models for Winning the Endgame 

Jeff Augent

Core Points:-
Short straddles later on expiration day, when pinning is evident (such as it moved to 1 new strike and back to the old strike)

Long straddles during midday IV stability window (after 1030am)

Ratio trades are best to hedge against both sides 1:3, long/short OTM calls

Can also do evening before expiration days.

Reasons to trade on Expiration Day- Chapter 1

Expiration trading is a mathematical game distinctly different from stock trading
- reduced risk/return profile
- limited market exposure
- extremely high returns on a percentage basis
- directional neutral strategy

1) Implied Volatility Collapse- IV drop a lot on expiration, price distortions as large as 30% on Thurs and 100% on expiration Friday for ATM options

Friday Market opens- IV is stable or rising from open till 11:00. Volatility drops from 30% to 20%, where it is stable till 14:00. Then a sharp steady decline in IV till close.
Long positions designed to profit from underlying price changes are best structured after IV stabilises early in the day
Conversely , traders who structure early short positions often find that midday price changes can be costly, especially if IV temporarily rises.
Simple short positions designed to benefit from IV collapse perform best late in the day, after stock stabilises near a strike price and most large positions have been unwound. 

IV collapse can become more dramatic when unusual events distort the profile (earnings, etc)

GOOG - $538
Long $530 calls, and short $540 calls ratio 1:3

2) Strike Prices Effect- Stock prices hover around strike prices (pinning effect), can gauge using Open interest, and distance to nearby strikes.
pinning behavior due to delta hedging large numbers of long positions.

OR it jump crosses many strike prices and pin at later strike prices
stock prices hover around strike prices as large institutional investors unwind complex positions ahead of expiration.

Stocks such as AAPL and MA that often fail to close near a strike price, but have a very high strike cross frequencies are excellent candidates for certain types of expiration day trades such as long straddles. (pg 38)
Pinning - (page 41) rarely mentioned result of pinning is tendency of some stocks to exhibit unusually large price changes on Monday following expiration.
Tendency can be exploited by purchasing long straddles just a few minutes before expiration on stocks that close expiration Friday pinned to a strike price.
Statistically speaking, these straddles generate disproportionately large returns because they are mispriced.

3) Time Decay- time decay significantly on Thurs before Expiration Friday (31.3% remaining time), and the Friday 1 week before Expiration Friday (32.8%)
Market adjust to the overnight time decay in the day next morning.
Conservative may create short positions in morning and close them at end of trading session. (pg44) This is best on the Friday preceding expiration week, compensation price change of 19%. However market response is not 100% efficient. The full amount of intersession loss is often not realised unless the trade is left on until the next open.

Sample Trade (page 46)
Stock $123
10 Long $120 calls 
30 Short $125 calls
If stock consistent, generate 95% profit.
If stock climb $2, still profit (52%) due to long trades. Furthermore if stock pinning effect holds and stock pins to $125, positions can be held till expiration ($125 calls expire worthless)
Downside- stock decline rapidly the next day. Unlikely, even if stock open down 10%, the long side can still retain half its values, and can close with just a small loss. Risk/Return very favourable.
The bigger risk is stocks rallied beyond the upper strike price, and way beyond the long hedge.

Conservative traders (including the author) can structure this trade on Expiration Friday after market opens, as the profit potential is enormous and risk is limited to very moderate time decay.
a) simplest is to purchase long straddles on stocks with a history of large expiration day price changes
executed at point of symmetry when stock crosses a strike price during midday flat IV window.
Open Interest and Option volume at various strikes can indicate price movement 

Chapter 2- Finding out the population statistically more probable for our day trades.The population of stock, must be heavily traded, with large open interests.

a) AAPL, APA, DNA, DVN, FDX, GOOG, GS, IBM, LMT, MA, MON, RIG, RIMM, SHLD, X
b) AAPL, GOOG, GS, MA, RIMM
These (a) stocks and (b) stocks are 73% and 125% mor e likely than expected to close expiration within $0.20 of a strike price.

Table 2.2 Summary Data for 5 stocks (12 expirations)
Comparing the number of minutes that contains a strike price cross to the number of minutes where each stock traded more than $1 from a strike (The final column lists the number of expirations within $0.30 of a strike)
________________________________________________________________________
Ticker    Minutes >$1 from strike    Strike Crosses    Ratio   Expirations <$0.30 from Strike
________________________________________________________________________
AAPL       2847                                   147                     19.37          2
GOOG     2740                                   498                     5.50            4
GS           2845                                   285                     9.98            2
MA           3100                                   306                     10.13         1
RIMM       1952                                   223                     8.75           3

AAPL is statistically 19 times more likely to trade $1 ITM than to cross a strike while GOOG is only 5.5
Hence Short Straddles on GOOG, and Long straddles on AAPL

MA has high Strike crosses (306), and only 1 expiration <$0.30 for 1 year. In percentage term, 6.6% of expiration day minutes involved a strike cross for MA. MA has more long straddles.
GOOG has high IV after earnings, good for short positions. Ratio trades as well as short straddles, with GOOG having pinning effects.

AAPL- most strike crosses occure earlier in the dayy when the stock is more active, long straddles are often a profitable trade. 38% and 76% occurred before 12:00 and 14:00.
In most cases, holding these trades beyond 14:00 will reduce or eliminate all profits.
More than 50% profit is commonly

Evening before Expiration Day
Ratio trade 1:2 or 1:3 depends. Best to take advantage of time decay that is heavily on Thurs.
Another option is long call/short call both OTM
Stock-$164, long $165/ short $170 (1:3)
Best to close on Friday evening and restructure new trades meant for Expiration Day Trading.

Earnings declaration
Long straddle and long strangle don't work due to efficiency of market and large stock movement needed.

Chapter 3- Ratio trade, long, short straddleRatio trade on Expiration Friday
1 long vs 3 short (1:3 ratios not fix, adjust based on as delta neutral as possible)
As both sides can generate significant profit, it is not meaningful to think of it either as a long position hedged against downward spikes, or short positions hedge with long options. Both are correct.

If it goes in short direction, the decline in prices due to IV collapse more than offset the increase in values of the shorts. (unless it goes down in very large amount)
If it goes in long directions, the long positions appreciate in value.
Cost of trade is minimal, as short positions pay for the long positions.

Long straddle
-most profitable when stocks in constant motion (page 134)

-after a long calm period, when stocks display high level of activities (page 134)
- move from 1 strike price to another strike price

long straddle after 1030am, when IV stabilise. (page 132)
Timing very important as initiating a long trade at the open or very late in the day can be dangerous because both are commonly characterised by rapidly falling implied volatility. In additional, when a stock trades near a strike price, the closing hour is often distorted by unusually small price changes

Short straddle
- A short position is an excellent choice whenever a stock climbs from 1 strike to another late on expiration Friday, crosses the new strike, then falls back and stabilises (page 137)

Long straddle during mid day stability window when IV was relatively steady and stock was active
short straddle late in the day after the stock had gravitated to strike price, and IV was collapsing.
Strike price effects drove the jump from from $210 to $220 (long straddle) then it sticks to $220 (short straddle)