Leading Off…

March 21, 2014

Tim Reazor
Chief Investment Strategist
Noram Asset Management

I was asked an important question today by a reader – she asked – What could I do to make money in a choppy market?    She noted what I had stated earlier this week about directional trades and how I wasn’t a fan of initiating new ones.  So she was left wondering what I do in environments like this one to make money.

We sell credit spreads for our clients.  We apply a technique on very specific stocks that allows us to collect premium with a greater than 80% success rate.  Our game plan is pretty simple.  Take in credits, never naked by the way, and generate income for clients every week.

If we do our job correctly this is a powerful low risk income generator our clients.  This technique is perfect for both small accounts and large – because it’s scalable.

If we generate $500.00 every week by harvesting premium it adds up quickly.  $500.00 * 52 weeks = 26,000.00.   Before you get excited you have to understand what makes this work so well.

1.We only trade the top 2% of the market with this strategy

2.We sell premium using standard deviations

3.We understand that more credit means more risk – there is a happy medium

4.We look for these trades later in the week.

5.This works for both up markets and choppy corrective markets

6.It’s forgiving – the underlying security can go up, sideways or down and we can still make money.

It’s not foolproof – there is still risk – this is the market after all.   So how do we contain risk – we trade the top 2% of market, the correct strategy for the market environment, standard deviations keep us safe, trade appropriate size for the account and know how to defend if need be.

If you have any questions or if you’d like us to do this for you please let me know.  You can reach me by email – Tim@NorAmCapital.com

Notes for Friday – it’s quadruple witching so expect increased volume and some interesting action.  Also, if gold breaks 1330 look for a move to 1315 and then down to 1288.   The S&P and Nasdaq are both close to breaking out…. Here’s the problem, the VIX looks like it wants to move higher too.  If the vix does in fact press higher markets will move lower… will it happen tomorrow (I’m writing this on Thursday evening) most likely no.

Look for clarity next week.  Keep an eye out for Yen and bonds.   If both go higher, stocks will most likely go lower.  If they push lower, markets will most likely head higher.

What does this mean?  The markets are still without a definitive trend.

Best Regards,

Tim

 

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Moreover, no reader or listener should assume that any information or discussion presented serves as personalized investment advice from NorAm Asset Management, Inc. or from any other investment professional, and is not an offer of solicitation for the sale or purchase of any specific securities, investments, or investment strategies. You need to have your own, individual investment advice suitable for your personal situation.

 

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