TVO Market Barometer 8/26/15

TVO MB 8-26-15b

One of the advantages of options trading is that your total risk can never exceed the premium paid for the contracts. Keep that price at a reasonable dollar amount (usually no more than 10% of your capital) and losses will stay under control, but put more on the table and your account can evaporate quite rapidly. With that said, after a tumultuous drop in SPY and 4 consecutive buy signals later, we’ve finally received our proprietary Heat Gauge sell signal, so tomorrow we’ll sell our calls at the close. While it’s looking like a loss at this point, limiting our position size ultimately keeps our drawdown to a minimum. The HG cooled down considerably and overall volume did advance today (by a modest 1%), so it’s safe to say that at least some big institutions have begun their buyback programs. We’ll be watching our TVO oscillator closely (now at -4.2) for a reversal to see when we can finally begin ours. -MD

For more on market volume, The TVO System, or how to trade options follow me on Twitter (@TradingLicks) and StockTwits!