Trading with the trend and cycles of historical patterns is my love. Understanding that each new trade carries with it the uncertainty of unlnown, uncharted waters is the risk. History is the "edge".
Having said that, KMP is at a cycle low as I type. That does not mean it won't go lower before its next EX date at the end of April. I have not had a lot of success trading KMP. The reason is that I have not consistently traded it each cycle. I have chosen a cycle here and there and have chosen more down cycles than up. Then getting mad , I quit KMP, just to see the next cycle gain an all time high of 7.00 profit. Anyone else?
So what's the secret? Trade every cycle!! If the probability is 70% success trading every cycle, then trade every cycle for a probable 70% win. Trading off and on allows for greater uncertainty especially if you are out of rhythm with the market, like I have been in the past. Then you are likely to hit the 30% losing trades.
So getting back to KMP. Going back 5 years we are at a 70% historical low point, exactly 30 days between EX dates which have about a 60 trading day cycle. The average gain from here, historically, is 2.5 dollars to the next EX date in late April.
Personally, I am trading the April contract. It will expire before next EX, historically. I am trading a Long Call Butterfly 82.50/87.50/92.50 in the traditional 1:2:1 ratio for close to 2.50 or better. That places BE at 85.00 to 90.00 by April OPEX. Max profit and loss are both the same at 2.50 at 87.50 for the max profit and at or outside the wings of 82.50 or 92.50 for your max loss at OPEX. I think 87.50 will be close, hence the trade.
Trade accordingly and good luck!
I've been reviewing KMP and looking for the best fit short duration trade. The following is very appealing. All may play(no Butterflies...;-)) More recently than in previous years we see the PPS of KMP topping out during the last 6 days prior to EX date.
Buy on the close of X-23(this date squares closely with my post above at X-30 entry. Here is some more historical data. Hold and sell on the Open of X-4. This is a 19 trading day play, in and out for an avg of 3.70/trade historically going back 17 consecutive winning quarters.
You read that correctly...;-) The last losing quarter was Oct 2008 during the Blitzkrieg of the market. This trade was 100% profitable every quarter over the last 17 consecutive quarters....just had to say it again...
That would place your first trade on Monday or Tuesday, the 25th or 26th of this month(assuming an EX date around the 26th of April).
Happy Saturday, Doc...I have been wondering for a while now, how you find all these great cyclical stocks...is there a screening tool somewhere, or some software you have developed or do you just paw over charts all day?
Thinking about that, I have decided you must have to software helping out with your analysis. Put this together with the notion of the "wisdom of the crowd" (don't even get me started on that because I think it's mostly nonsense), if you were to share those tools with some of us, there would be many more like-minded traders out there helping with the search.
What do you think?
PS. I did enter PSEC the morning after, as I said I would try to do...got in just a little cheaper actually than would have been the night before.
No software. I have good resources though and a better battle plan. My resources are public domain web sites which have produced CFP only. I already had the others. These are as mundane as dividend dot "you know what". There are only a few stocks extant which meet the criteria I require. Those criteria are:
1) Avg daily volume of 200k+
2) Monthly div payers
3) High yield 10%+..(MAIN was an exception)**
4) Two year minimum history of monthly runs
**Main has fulfilled all of the other criteria so well I include it even though it yields less than 10%. GLAD was dropped, thanks to Igster or ?(forgive me) because of vol
Next they had to meet the two main inclusion factors once they had the volume to support the bid/ask speed of trades:
5) A cyclic pattern during the monthly cycle which was repeatable sometime during the cycle from low to high on the approach to EX date
6) 80% minimum win rate(That is, the number of winning months out of the total # of sample months had to be 80% or above, using the model)
The model was hand cranked from hundreds of hours of observation(years) and research of those factors which "best fit" directional changes in stock movement.. There are many factors I've considered and used over the years from John Bollinger's Volatility Bands to Stochastics Momentum indicators, Trendlines , MACD, R & S, Fibonacci retracements etc.
There are people out there like MMlechair(sp sorry) and JimRies..., who have done this professionally and I do not presume to know as much as they do about all of the intricacies of stock movement. But, with my model you do not have to. That is the beauty. I have distilled the little I know down into this simplified K.I.S.S. model, the acronym taking me back to a guy I started with called Ken Roberts, in Oregon, way back in 1991.
You now know this as GLAD/3%. Jess helped push me toward the realization that the 3% rule even produced better results using it on a daily forward basis(thanks Jess!!).
Doc !! KMP Question and Observation. Do you sell all on open X-1? It seems when PPS running 88+ with volume on X-1 opening on X is the same. I may sell half on the open X-1 and the balance on open X to get the Dividend. But only with strong market activity.
I do not have any guidance to offer on your question as KMP is a #$%$ shoot post EX. The last few quarters would have worked out selling on EX and then there often is a Jan 12 quarter where you are down almost 3 dollars on the close of EX.
Not consistent enough for me post EX. To answer your broader question, I sell all on EX-1.
KMP stays on my MLP watch list . KMP is a great MLP to own , buy at a good price collect the Dividend and the price seems to recover fast. At the present time Capital seems to be moving from Preferred to Common and MLP. I consider this a cant miss baring something unforeseen . If you goof up collect the Distribution and wait a bit.