October 18, 2018

It Doesn’t Look Like Macy’s Has the Muster

VantagePoint Trading Software is a forecasting tool that uses both end of day data and artificial intelligence to provide traders a forecast of market movement. These forecasts are 1-3 days in advance and help traders improve their timing on making trades and maximizing profit potential. The artificial intelligence software forecasts market movement for stocks, futures, Forex and ETFs.

U.S. stock index futures are under pressure again as investors digest minutes from the Fed’s most recent meeting that highlighted it was staying on course for rate hikes despite growing criticism from President Trump. The yield on the benchmark 10-year Treasury note and 30-year Treasury bond was 3 bps higher at 3.21% and 3.38%, respectively. *Source:  Seeking Alpha

Let’s consider Macy’s Inc. (Ticker: M):

The VantagePoint platform recently indicated continued downside momentum.

Using the predictive indicators embedded within the VantagePoint platform and its predictive AI technology, we will point out three significant things. We have a bearish crossover indicated by the blue predictive indicator line crossing below the black simple moving average October 16th.  We can combine that with the VantagePoint propriety neural index indicator moving from the GREEN to the RED on that same day.  This indicator measures strength and weakness for a 48-hour period, in this case, weakness.  The move to the RED position further makes the case for a potentially bearish scenario. We also have the predicted high and low below yesterday’s actual high and low indicating further weakness.  I want to play the VP bearish indication.

Strategy Discussion

If you are strictly a stock trader, simply Selling M in the $32.00 area is a prudent move.  You are anticipating a move to the downside.  It is always a good idea to enter a buy-stop order to mitigate potential losses.  Placing that buy-stop in the $33.25 area will achieve that goal.

For active traders with a shorter investment time horizon, you can consider a setup utilizing options. Given the market conditions outlined above, taking a passive, premium credit approach may be the best path to success.

Because of the reasons given above, the sale of a credit call spread may be one way to approach this situation.  You want to collect as much premium as possible while at the same time staying within the bounds of your risk tolerance levels.  You may want to consider the M October 26th weekly expiration 32.5/33.5 call spread, selling it for $0.35.  The most you can gain is the premium collected and the most you can lose is the width of the wider spread less any premium collected.  Max gain = $0.35 and max loss = $0.65.

This means that you are laying odds of 1.86:1.

Given the trading and market environment outlined above, a trader must evaluate whether this reward/risk ratio is appropriate for his/her risk tolerance.

Position Update

You may recall our position we highlighted in MOS.  We had November 2nd weekly expiration 30.5/32 put spread, buying it for $0.35.  Here’s what the chart looks like today:

After a week of essentially sideways trade, our spread held up its value quite well.  Today, note that the VP indicators are not exhibiting the same bearish pattern we identified last week and we decided to exit the position for a very small loss of $0.02.

The important thing to take from this is not to force trades that are simply not working.  It is best to put your time, energy, effort and money towards something that has a better probability of a positive outcome.

If you would like to learn more about the VantagePoint platform and take advantage of the exclusive offer that our clients enjoy, please visit:

https://discover.vantagepointsoftware.com/prosper-demo/

about the author:

Mike Shorr

Since 1994, Michael has been an on-the-floor market maker, Vice-President of Interest Rate Derivatives for Knight Financial Products and Director of Education and Options Instructor at Trading Advantage. He makes the oftentimes complex world of options and trading accessible to the novice and advanced trader alike. Michael has a Bachelor of Science degree in Statistics and Finance from the University of Illinois Champaign-Urbana. He presently is Director, Trader Education at ProsperTradingAcademy.

Read Similar Articles

May 8, 2024

What Is Delta In Options Trading?

Understanding the Delta of an option is crucial for both new and seasoned traders. It’s one of five specific calculations called “Greeks,” which help measure specific factors that could influence the price of an options contract. Delta is a metric that helps you gauge how much the value of an option contract is expected to […]

Read Article
January 4, 2024

Funder Trading Review – Best Prop Trading Firm in 2024?

If you are actively trading in the stock market in 2024, chances are you’ve heard a new buzzword flying around: Prop Trading, short for Proprietary Trading. Whether you’ve tried prop trading or not – or have even heard of it at all – its popularity is quickly growing because it provides everyday traders with a […]

Read Article
September 26, 2022

Coach’s Roundtable: FOMC Fallout & Resilient Market Sectors

Every week, the coaches at Prosper Trading Academy offer their insight on some of the most challenging questions covering recent stock market developments, trading tips, and relevant news stories. This week, Scott Bauer, Charlie Moon, and Mike Shorr give their thoughts on why certain stock market sectors are staying resilient amid the FOMC fallout, and […]

Read Article

Read Similar Articles

May 8, 2024

What Is Delta In Options Trading?

Understanding the Delta of an option is crucial for both new and seasoned traders. It’s one of five specific calculations called “Greeks,” which help measure specific factors that could influence the price of an options contract. Delta is a metric that helps you gauge how much the value of an option contract is expected to […]

Read Article
January 4, 2024

Funder Trading Review – Best Prop Trading Firm in 2024?

If you are actively trading in the stock market in 2024, chances are you’ve heard a new buzzword flying around: Prop Trading, short for Proprietary Trading. Whether you’ve tried prop trading or not – or have even heard of it at all – its popularity is quickly growing because it provides everyday traders with a […]

Read Article
September 26, 2022

Coach’s Roundtable: FOMC Fallout & Resilient Market Sectors

Every week, the coaches at Prosper Trading Academy offer their insight on some of the most challenging questions covering recent stock market developments, trading tips, and relevant news stories. This week, Scott Bauer, Charlie Moon, and Mike Shorr give their thoughts on why certain stock market sectors are staying resilient amid the FOMC fallout, and […]

Read Article