A Great Trading Strategy for 2010

Many global commodity, energy and equities markets have recently experienced 50%+ price moves. After periods of extreme volatility the market volatility usually declines sharply as price moves revert to the long term mean or average.

For example, the S&P 500 Index experienced a 50% decline during the severe 2000 – 2003 bear market. The S&P 500 Index bottomed out on March 11th 2003 and finished 2003 with a positive 26.3% return. Volatility decreased sharply after 2003 as the S&P 500 Index price moves reverted to the historical mean. In 2004 the S&P 500 Index advanced 9.0% and in 2005 the index advanced 3.0%.

We are following a similar pattern in 2009. After a 56% price decline, the S&P 500 Index  bottomed on March 9th 2009 and advanced 23.4% in 2009. If the S&P 500 Index follows a similar price pattern to the 2003 - 2005 period, the volatility should decrease in 2010 and 2011 with below average price moves as the index reverts to the mean.

50% Return on Blue Chip Stocks in a Flat Market
If we do experience smaller price moves and volatility in 2010 and 2011, one of the best strategies to implement during flat markets are option spreads on blue chip stocks. I have been initiating option spreads on blue chip companies like Coca-Cola, Colgate Palmolive, Johnson & Johnson, 3M, Procter & Gamble, Pepsico, Abbott Labs and Helwlett Packard. Learn how these spreads will produce more than a 50% return on average if these stocks remain flat over the next year. These are great returns for blue chip stocks in flat markets.

FUTURES AND OPTIONS TRADING INVOLVES HIGH RISKS WITH THE POTENTIAL FOR SUBSTANTIAL LOSSES.

PLEASE READ. PAST RESULTS ARE NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. THERE IS A SUBSTANTIAL RISK OF LOSS TRADING STOCKS AND OPTIONS WITH OR WITHOUT THIS OR ANY OTHER ADVERTISED PRODUCT, SERVICE OR SYSTEM. ALSO, HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN INHERENT LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. SINCE THE TRADES HAVE NOT ACTUALLY BEEN EXECUTED, THE RESULTS MAY HAVE UNDER-OR-OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN.