Verifone Spread Gaining Momentum

I think if this 5 * QQQ - 7 * PAY $spread, which is currently trading at $106, trades below $100, we should have the momentum in place to push it down to its average of $70 or much lower. If you look at the chart of QQQ vs PAY (graph at the bottom of the image located below), you can see how much potential energy is embedded in the spread. We are short this $spread.

 

Makes sense? Click here to view this spread in the Spread Analyzer.

 

Written by Michael Bigger. Follow me on Twitter and StockTwits. 

 

 

Early Holiday Gift to Our Math Geeks

Thank you to everyone who attended our webinar last week and watched the replay. We had record numbers of viewers, so we know a lot of you are interested in learning more about statistical arbitrage spread trading.  If you are looking at candidates and having trouble finding any that are cointegrated, we are giving out an early holiday gift! Follow this link to find a sample scan with many cointegrated spreads.  In fact, there are so many, you will probably wonder how to narrow down the list.  In that case, here are two videos that will help you identify profitable spread candidates in this scan. Enjoy!

 

Don't forget to send us your candidates on twitter using the "Tweet" button on Spread Analyzer.

 

Here is an updated free scan for 1/11/2013 

 

Michael Bigger (@biggercapital). Follow me on twitter and StockTwits.

Jen Galperin (@slimshappy).  Follow me on twitter and StockTwits.

   

P.S. Here are Jennifer's tweet about her favorite candidates : I tweeted today some of the trading candidates that I found from the scan Michael circulated on the blog. If you are interested, take a look and let me know which ones you like. My favorite is probably $USO $OIL. my candidates

 

 

 

Update on Sunday, January 13, 2013 at 1:42PM by Michael Bigger

New free scan for 1/11/2013 here.

Simple Concept, Big Money

In our pursuit of stock trading profit, we view securities being connected to each other by a spring force. This force is invisible but very powerful. When one security moves, other securities are pulled in the same direction by the spring force this stock exercises on other securities at varying degrees.  Because the connection is flexible like a spring, the movements are not always 100% in sync, and that is where the trading opportunities come in.  When you see one security moving, you can take a position in other securities connected to it.  Understanding the force that connects them together is essential to exploiting the opportunity.  Because there is a lag in the pull this force is somewhat predictive. Think about it this way: You are tenth in line waiting for a traffic light to turn green. I bet you that when the first car gets going you won’t be far behind.  You may even find yourself stepping off the brake when you see the light turn green, you don’t wait until all the cars have gone through the light!  With the elastic force, you can anticipate market movements ahead of the crowd, and elevate your trading to the next level.   

These laggish pulls have all kind of wonderful applications in pairs trading, signal building, options trading, and so forth.  Depending on how you think about the spring force, you can find many different ways to interpret and exploit these opportunities.  

 

Can you think of one way to incorporate this in your trading strategy?

 

Written by Michael Bigger. Follow me on Twitter and StockTwits.  

Day-Trade Priceline Earnings

Tuesday in the after hour market, Priceline ($PCLN) reported earnings and gapped down 13%. Expedia ($EXPE) followed and went down 4% on the news. I quickly went to our Spread Analyzer to run a 2 year query on $PCLN versus $EXPE (see the results below). I noticed that the Pearson correlation of 20.83% was very low for the pair and that there was a good chance for $EXPE to bounce back some. I bought $EXPE for 56.5 and quickly flipped it for a $.50 per share profit.  I was able to use the Spread Analyzer's stats to exploit the relationship between the two stocks. In this case I did not catch the falling knife, but used a non-correlated competitor to take advantage of the news.

  

There are all kind of ways to use stats and pairs trades to make money. Anything you want to add?  

  

Written by Michael Bigger. Follow me on Twitter and StockTwits. 

  

  

  

   

Day-Trade Coach Earnings

Earlier this week I had a great trade on $COH earnings.  I was able to use the new features of Spread Analyzer to help me discover a good opportunity and capitalize on it in a seamless way.  Here is a short video showing the trade and how I used the technology.

 

  

Produced by Jennifer Galperin.  Follow me on twitter and StockTwits.

Value Investing Made Smarter

The Best Trading Video Ever

If I had one trading video to recommend, Charlie D's trading video would be it. This video was created in 1989 and it is a must watch for all traders. I want to thank the trader on Twitter who lead me to it (unfortunately I can't remember who it is).

Here is a cool example of how we applied Charlie D's advice recently. On June 28 after the market closed, this tweet from Aris David caught my attention.

FYI, Europe covered before the close FTSE last minute rally $EWU

Our signal had a  super strong buy signal going into the U.S. close and we were waiting for a dip to buy. After the market closed at 4pm, the S&P futures went down 7 points and we decided to buy a bigger futures position based on our signal and Aris' information. We thought someone new something about Europe given how the FTSE closed and the S&P selloff presented an attractive opportunity. We had more conviction and we committed.

That is what spread trading is for us. Trading the relationships. Not only the statistical relationships between stocks, but information against information; a stock price against its intrinsic value; price against news. Spread trading is about exploiting two levels of potential energy and their relationship.

The next day, the market went up about 2 percent. Someone knew and we exploited it.

Do you understand why spread trading is so interesting?

Written by Michael Bigger. Follow me on Twitter and StockTwits. 

Tools to Make Spread Trading Easy as a Summer's Breeze

In this video, Jennifer discusses the tools we have added to our Spread Analyzer to make spread and pairs trading easy as a summer's breeze.

 

Trading Your Google Glasses

With the introduction of its Nexus tablets and its glasses, Google (GOOG) will have an abundance of fresh news in the next few months which will create trading opportunities.

 

This situation is appealing to us because the stock is statistically cheap against the Technology Select SPDR (XLK) as you can see on the Spread Analyzer image displayed below. GOOG is also cheap againstIntel (INTC) and the triple Qs (QQQ), but we like the $spread better against the XLK given the volatility of the spread. This vehicle will move quite a bit on fresh news and traders can take advantage of this by leaning on GOOG's cheapness. You can look at the $spread within the analyzer right here for more clarity. You can play around with the timeframe or run GOOG against any others stocks of your choosing. We are long GOOG against INTC, QQQ, and XLK.

  

Go ahead play with it, rate your $spreads, and if you tweeted about it, one of our traders will be happy to make an assessment of it.

 

Written by Michael Bigger. Follow me on Twitter and StockTwits.  

 

VMware Versus the Technology Select Spider Spread

We are monitoring the $XLK $VMW $spread based on recent insider activities. We are hoping that we can get a spike in the 10 * $XLK - 3 * $VMW to the 20 level. We have used the My Alerts feature of our Spread Analyzer to monitor this $spread for us. Located below, are all the documents supporting our thesis, as the insider buying we think is bullish for VMW (bearish for the spread). If the $spread reaches the $20 level, we will be happy sellers.

Written by Aris David. Follow me on Twitter and StockTwits.