My broker’s rule is that they must be in the same account. There are margin requirements and buying call options to protect my short shares helps making the margin available (until opex) to play other equities. Check with your broker on that.

Also, what I think might help you is to set a loss-limit setting on your account. Contact your broker and put in this circuit breaker. Loss-limit can be set at 50% or 60% or 30% or whatever you want. It will be triggered if your trading loss exceeds the set point, all trades will be flattened (closed) automatically, without you having to enter the orders to close them. The only thing about this is that it will also close winning positions that you intend to hold for long term as well.

“We Jews have survived 5,000 years of persecution and bad bear markets by comic relief. And, in the end, we now own wall street.”

You got that one right buddy! in fact you guys OWN America Our soldiers are fighting for your cause all over the world, so you better be nice to US

I was wondering if you could recommend a book or web site about these cycles that you talk about. How do you come up with these dates that the market is supposed to go down on?

Appreciate any direction to resources.

The main trend is up, so unless SPX 1014 gets smashed to the downside, you’re asking for trouble if you short unhedged. You would only short at identified resistance levels (but who’s to say that they must act as resistance?); however, to prevent unexpected breakouts or M&A news, you buy double the call options.

For example, if I short 1000 shares of DOW at $29, I want to buy 20 DOW Dec 29 calls. Assuming each contract costs me $130, my hedging calls will cost me $2,600 and so DOW must fall below $26.40 for me to break even if I commit to have my calls expire worthless. If on the other hand, DOW continues to rise to $32, my short shares will be underwater. In this case, I will sell 10 DOW Dec 29 calls for anything more than $300 per contract, so now I’ve made $1,700 on the 10 call option contracts, which is sufficient to cover my cost base for the other 10 contracts leaving me with a net profit of $400. I can now decide if I wish to exercise those call options to close my short DOW position, or buy 10 DOW Jan 32 calls at $130 per contract and sell 10 DOW Dec 29 calls that I held, essentially making it seem like I shorted DOW at $32.

The advantage of the first option is you lock in a profit and can move on to your next target with no more residual risk. The advantage of the second option is you still keep your shares short, and have a chance to cash in on future drop. I employ the latter strategy on AXP, and that’s why I was really looking forward to every rip higher.

You only want to do this early in the options cycle. With less than two weeks left in the current options cycle, your decision should be 1) whether you want to employ the first strategy or the second, and 2) close current month options and open next month’s options.

You buy at support levels and go double put (who’s to say the support must hold?), or you can even go long with double put and write covered call. Write covered call at a strike price that you are comfortable selling your equities for (must be profitable, obviously) that may not have a chance of being reached, so that the call(s) will become worthless come opex. Double put protects you from a sudden price decline, as you can sell your puts for profit and still hold onto your equity. You keep on doing this for a while and there will come a time when the profit you make on all the transactions becomes more than enough to cover your initial cost of the equity purchase. After this stage, you’re risking money that you didn’t have in the first place anyway, so you can hold the equities for as long as you like (especially enticing if the stock is a dividend paying stock).

Now you see why bulls have the upper hand. Bulls never risk anything beyond what they put in, whereas bears risk everything. Being a short seller can be rewarding, but it can wipe out your account rather quickly if you missed the timing. This is why my trading method is timing based, not so much price based (like EW). When I trade based on price, my trade sizes are small. When I trade based on timing, I trade 100X the size. But I caution everyone here not to follow my trades because sometimes I can flip into suicidal mode when I attempt to front run a significant price movement, and not many people’s trading accounts can withstand that kind of abuse. Most of the time I do have technical reasons as to why I make the trading decisions, but the few times I deviate from those rationale I make sure I let people know (and you all saw that on November 6 when I posted my warnings).

But seriously, we must learn to listen to the market and stop fighting the trend. Until it’s broken the market will keep going in the current trend. Managing risk is the key.