Open: HPQ BLPS March 27.5/30

HPQ had nice earnings sending the stock higher and it’s was close to it’s 52 week low before it announced.  It hasn’t been below $27 in the past year so I think this is a good trade.   Also, there was huge call buying in the March 30 strike.  This seems very solid for me.  If it continues to work I may start trading HPQ in place of MSFT as my BnB tech trade.

The trade:  1.00 credit  1.50 risk

Open: ABX BRCS Mar 35/37.5

GOld has run up to $1000/ounce which is a double top and resistance.  The miners/gold producers are rolling over and while long term I believe gold will bestrong and the miners should follow, right now things are pullling back.  The MACD and STO are rolling over and it’s broken the 50MA down which means it’s going lower.

The trade is Credit .62 on 1.88 risk.  Not as good a risk reward as I would like but I’m keeping my position smaller than normal.

Close: HBC BRCS Feb 40/45 ROI +93%

HBC got hammered today along with the rest of the market and since there are 4 days until expiry I decided to buy back the short for .10 cents.  This trade worked out well and I’m thinking of putting it on again for March expiry since all the banks including the ones in Europe have started tocome out and say they need more money.   This one is going lower.  The only problem is do I wait and see if it gains a few dollars closer to $40 or do I just put on a BRCS 35/40?  I need to wait and see what the rest of the week brings.

Buy to CLose Feb 40 .10 debit

Open: USO Mar $27 Short Straddle with wings

Ah my new love, the short straddle.  I’ve become very fond of this strategy since I started playing with it a few months ago.  This will be my second real straddle trade although I’ve done several paper ones.

I’ve been watching oil through the lens of the USO for a while.  It’s become very predicatable and a not as volitle as it’s 65% IV  would suggest.  It’s pretty range bound between $25-33 and I think will stay that way for a while.  It’ still in a downward trend, mostly because I think because people think oil is broken.  I don’t think that but as long as others do the IV will stay high.  That gives me a chance to feast on that juicy premium.

The other reason I like this trade is I’m only risking 1.80 to make a potential 3.13 and I REALLY like that risk/reward.   My break evens are 23.60 and 30.19 which gives it some room to run.  I also think there is high risk that things could bolt up or down without much cause so I put on some wings for protection by buying the 22 put and the 32 call.  That pulls my BEPs in on each side about 1.50 and reduces my credit but it’s worth it in this case.  After all, I’m still learning this trade and I’m learning the USO so these wings are more like training wheels.   Also, my buying power reduction is half as much than it would be without them and I like that too.

The trade: Credit 3.13

Sell Open: USO Mar 27 call and put credit  4.43

Buy open: Mar 32 call debit .60

Buy open: Mar 22 put  debit .70

Close: CLF BLCS Apr 20/22.5 +37%

I decided to book the profits in this position for a couple of reasons.  One being it was trading @ $30 in the morning before the Tim Geitner spoke and I thought the market would likely sell off after he was finished.  I was correct.  It sold of hard.

The second being this stock along with others in it’s space have been showing strength lately in addition I believe the spread wasn’t positioned quite right – it need to be wider and the long leg deeper in the money.  So once the market is done selling off I may re-enter this trade albeit a little differently.

Had I positioned this one better, I could have bought some puts at the same strike as the short strike which would have the same affect as closing the position.  If I bought 1/2 as many puts as I had short contracts, I would have closed 50% of the position.  Or I could have bought the same number puts as longs and would be completely closed.

Why do this?  Well, for one I have over 2 months left on this trade which is a lot of time.  By buying the puts I can ride the stock down if it sells off, sell the puts for a profit and be right back in the trade with less cost.  Also, the bid/ask on the stock is a bit too wide making slippage a problem.   The stock sold off 11% from it’s $30 perch which could have yielded me a nice profit for the next day and I could have sold the puts and waited for the stock to run again – because I don’t think the thesis is over and it should run again soon.

Why not do it this way with the current trade?  Because the cost of the put exceeds the  initial cost of the spread which would put the position underwater if the stock doesn’t correct.  Ie. it’s not truly closing out the position because I would have to pay more for the put than I originally paid for the spread.

Close: Apr 20/22.5 BLCS for Credit 1.85

ROI: +37%

Close: MSFT BLPS and BCLS ROI:+9.5%

I’m closing out all my positions in MSFT during our current Nazz rally.  RIMM, AAPL, et al. are pulling up most big cap techs and this rally comes after MSFT’s earnings miss last week which sent the stock down into the 16’s and made my position down 40%.   In normal bull markets I would be more inclined to leave some or all of the position on to collect max profits but this market can turn on you in 5 minutes so the reward isn’t worth the risk right now.

I’ll capture a small profit so given that last week I thought I was in for a loss, I’ll take what I can get.  Again, this kind of prevent action is part of my new tightening of my money management rules.

Close: Feb 20/15 BCLS  3.35 credit

Close: Feb 17/18 BLPS .23 debit