Worthless

Talk about a rough week....Next Friday April options will expire, and unfortunately it looks like a will have a handful of options that will expire worthless....The following are all April, and unless something drastic happens in the market next week, these April put options should expire worthless:

IYR
CBRL
EEM
QQQQ
RTH
SPY
XLF

I do still own QQQQ, RTH, SPY, CBRL later months (primarily MAY and JUNE), and although they have lost value, they do still maintain considerable value. I will update my current positions over the weekend.

The market is closed tomorrow, so I will have time to think about the past couple days....I plan of reviewing my trades, focusing on my mistakes, and moving forward so I am prepared for Monday.

Giving it a GO

I bought SPY 85 MAY PUTS at $3.90 a few minutes after the open. We just hit S&P 850 which should act as formidable resistance, but who knows because this rally has been NUTS! These are MAY puts, not APRIL. Learning from my mistakes, I need to be quicker with the trigger this time, and if I get the profits I am after, I am selling and moving on! (and if they are losses, sell and move on).

Options

I've given many examples of the power of options, and how they can produce 100%+ returns in a matter of hours. The problems with options is that they can expire worthless, and unfortunately I am running into that problem with my April put options. I have some April puts, and obviously, the market has gone completely against me the last 3 weeks. All of my April Puts will likely expire worthless.

What I did wrong here, is to hold onto front month options to long, in HOPE that the market would turn, rather than taking my losses quickly and move on.

For me, March was great, but April, so far, has been very bad. I have given back much of my March profits, which is discouraging. With the market closed tomorrow, and futures already up 150 today, I will likely wait until Monday to resume trading.

Concern over Jobs - Why we haven't bottomed

It's pretty simple, jobs = economic growth. Our last few jobs reports have been horrendous, but the market continues to look past the data, moving higher in anticipation of economic recovery. When asked about the dire jobs situation, I continuously hear analysts say jobs are a lagging indicator, and that the market will lead us out and the jobs data will follow. Rather than accepting their "lagging theory" as fact, I did some quick research on jobs data and market history, and I think I found an interesting relationship between the market, unemployment rate, and job losses.

Below is a chart of the DOW from 1966-1987. I highlighted in green the periods of greatest job loss. In each period I indicated the month of the highest number of job losses and the month of highest unemployment rate for each period.



It's clear that the month of the highest unemployment rate clearly lags the market turn around. However, the month of the highest job loss clearly DOES NOT lag the market turn around, in fact, it actually seems to mark the bottom or close to the bottom of the market downtrend, prior to an uptrend.

So, I will be keeping a close eye on job loss data. I will not position myself for a market turnaround until I see a decrease in job loss, and according to the data, there is currently no indication that job loss is easing.

Below is the last few month's of job loss data:

AUG. 08: -175
SEPT. 08: -321
OCT. 08: -380
NOV. 08: -597
DEC. 08: -681
JAN. 08: -741
FEB. 08: -651 (preliminary)
MARCH 08: -663 (preliminary)

If FEB. job loss data is finalized and is materially less than the job loss in Jan., than it would show me that the job market is getting better, and that the worst may indeed be behind us. However, if the FEB. numbers get revised upward, above JAN.'s number of 741., it will be clear to me that our job loss data continues to worsen and so will our economy and market.