Expiry: Jan 09 SPY, TBT

Expiration is here and I have 2 open positions that expired today.   I was a pretty good month.  I had a few good trades, one bad, and one so-so.

Expired Trades:

SPY:  BRCS .35 credit : ROI 54%

TBT:  BLPS .45 credit : ROI (-81%)

TBT: Calls  1.45 Debit : Sold for .80 : ROI (-45%)

Close: RIG BRCS Jan 50/55 ROI: 10%

This was a short trade and with the end of the day bounce today and the small bounce in Oil I’m closing this trade 1 day early. I want to come back to RIG and sell it again but I need to wait until Oil has it’s move up and RIG needs to trade up to about $54 OR break it’s middle BB downside. I didn’t get enough credit for the spread this go around anyway so I’m glad to get a little bit out of it.

Basis: Credit 1.48 Sell: 1.12 ROI: 10%

Rolling: MSFT Jan 15/20 BLCS to Feb 15/20 ROI 4%

Ok, I once again have been taught a valuable lesson by this bear market – take profits when there is less than 8 days until expiry.    MSFT had been trading below $20 since Jan 2 and then last week it rallyed Wed and Thursday above $20.  I chose to hang on to the position and wait until later this week to close.  It was a mistake.  The stock promply sank under $20 on Friday.  It then sank yesterday to below $19.  Ugg!!   However a late day rally in the Naz pushed it to about 19.20.

So  I decided time was up and I still believe the stock is ok where it is so I rolled it to Feb to get more time.  I made a tiny profit which all told covered commisions with a little left over.  I’m happy I could roll without a loss so next time I hope I will, in the words of Steve Miller, “take the money and run.”

The trade:  Debit  3.36  BEP 18.36

Closed Jan spread for 3.81 Credit.  Basis: 3.65 Debit  Net:  .16  ROI 4%

Open Feb 15/20

Open: MSFT BLPS Feb 09 18/17

Opening another BnB trade. MSFT is holding up well above 19 so I’m going to the well again. Also my other Jan MSFT trade is expiry this week.

The trade: Credit .31
Buy Open: Feb 17 Puts
Sell Open: Feb 18 Puts

Close: XRT BRCS ROI +35%

With the terrible retail numbers out today XRT fell hard triggering my GTC sell order on my short @ .05.  This closes out the remainder of this position which I had already closed 2/3 of it yesterday.

my average credit was .37  making my total ROI 35%

Not bad.  I learned a little of a new retail ETF I had not traded before.  I am more familliar with the RTH but the RTH is more costly so I think I will look for more trades on the XRT again.

Adjusting: XRT Selling 2/3 of position

The XRT busted a move up last week and stayed up above the short strike. It’s now under the short so I wanted to take some small profits now with only 3 days left.
After adding to the position last week my average credit was .37

Sold 2/3 for .20 giving ROI of 27%  for this part of the trade.
Not too bad on the return but I thought it would have done better considering the very weak retail environment.  On the plus side I seem to be getting better at my position management.  A year ago I would have let the whole position go until expiry day risking a loss to eek out an extra .10 cents or so.  I’m learning.  This is good.

Open: RIG BRCS Jan 09 50/55

RIG is a stock I like but it has a couple of problems.

1) Oil has come way down making deep water drilling less attractive in a cost to benefit

2) The day rates are still dropping for their rigs and that is not reflected in the stock.

This is also somewhat of a pairs trade where you go long a stock and hedge it by going short another stock.   This is not an eact pairs trade but I am using it to hedge my PBR  BLCS I open yesterday.

I have to admit, after I got filled I thought I may have pulled the trigger to soon and maybe should have waited a couple of days to see if the stock drifts up.  I noticed that the stock hovering around the middle BB meaning it has a short term bullish bias.  It did go 1.50 today after I sold the calls so the position is ITM now.

My other concern is if oil spikes up and stays up for a while it will likely drag RIG up with it.  I also should have considered going up one more strike but the credit wasn’t as good.  This may be a new rule for trading spreads.  I will watch it closely and if things get too volitile I may shut the trade down early and re-think the position.

The Trade:

Credit 1.48 : BEP : 51.48

Buy open: Jan 50 Calls

Sell Open: Jan 55 Calls

Open: PBR BLCS Apr 09 22.5/30 Calls

Getting long on an energy name I really like.  The thesis is oil is range bound and should be above $35 in April which should make this stock solid.  It’s likely to be a little volitile as oil is right now so that’s why I’m giving myself plenty of time to be right and using the bull call spread.

Max profit is 3.80 which is a tad more than 100% ROI.  It’s a good R/R  for me and I have 3 1/2 months to be right.

The trade:

Debit 3.70 :  BEP 26.20 : MP 3.80

Buy open: Apr 09 22.5 calls

Sell open: Apr 09 30 calls

Close: ISRG BRCS Jan 09 115/120 ROI +32%

Not a bad return on this trade since I just opened it 3 days ago.  It worked better than I had hoped mostly because the market fell off a cliff today.  I had a GTC close order in place for .15 which triggered at the end of the day.

I opened the trade for 1.30 giving me a 1.15 return or +32%

Not bad for 3 days work.

Adjust: Sell Close TBT Jan 09 Calls (-.65 cents)

I sold the 43 calls today for a loss of .65 cents.  I paid 1.45 originally.

TBT stopped dead in it’s tracks because I think with all the new economic data coming out is so bad.  As a result people are running back to the bond market for safety although I think it will be short lived.  I didn’t close the whole position – I left the BLPS on to see if things turn up next week.  I didn’t want to wait for the calls to turn next week since time is running out.   This was an experiment with the Short Bonds ETF and I think it’s still is a good trade but I’m early and should have given myself more to be right.    I might try this trade again for Feb Calls but I have to wait until after next week expiry since I have too much risk on the table right now.

Open: COH BRCS Feb 09 20/22.50

Gone fishing;  with a gun.

I’m once again shooting fish in a barrel.  Coach missed earnings and the street punished them.  They are in the mid 18’s so this should be a low risk trade.

The Trade:  Credit .70

Sell open: Feb 20

Buy open: Feb 09 22.50

Open: ISRG Jan 09 115/120 BRCS

ISRG missed earnings and the market is punishing it.  The IV is still high so I got a 1.30 credit for the Jan calls.  Hopefully with 8 days left the stock will drift lower.

This one is volatile so if it closes above 118 next week I’m going to close it down to avoid a big loss.

The trade:  Credit 1.30

Sell open: 115

Buy Open: 120

Open: INTC BRCS Feb 09 15/16

Ok Intel had bad, bad earnings release.   Selling Call spreads right after companies report bad earnings is a high probability trade for me.   When a Co. releases bad earnings I wait for the market’s reaction.  If the market hammers the stock, it’s a good bet it will continue to drift lower over several weeks.   So this is an easy trade to make and it works most of the time.  When it doesn’t work I still mostly break even so I consider it a low risk trade.

I usually like to sell the near month calls but with only 8 days until expiry the credit wasn’t that good for the Jan calls.  So I ‘m going out to Feb.

The Trade: Credit .33

Sell open: Feb 09 15 calls

Buy Open Feb 09 16 calls

Adjusting: BRCS XRT Jan 21/22

XRT has continued it’s upwards run the last 2 days.  However the rallies are getting  smaller and I think things are about to run out of steam.  Currently the stock is sitting just @ $21.67 which is .67 in the money on the short 21 calls.

I got .55 for the new sold calls.

This new spread moves my BEP up to 21.37 .

My max loss is now 1.89 up from 1.44

It’s going to take some intestinal fortitude to hang in there but with 10 days to go I think it will reverse course and it could be a violent reversal with all the bad economic data we got today.  We will see.  I originally put this trade on with half my normal position size so I had room to play and now my position size is @ 75% .

Open: TBT Jan 43 Long Calls with BLPS

Ok, this is another experiemnt of sorts.  Here’s the thesis, TBT is the short ETF of the TLT.  The TLT is the iShares Leh 20 year  treasuries  Bond Fund  ETF.

The TLT has been on a tear of late with lot’s of folk fleeing stocks to safety.  Well, at least for now, the TLT looks way over extended @ $122 as people are pulling money out to buy into equities.  It blew right through below it’s 20 day EMA which is really bearish.

So I’m choosing to play this not with TLT Puts because the Puts are more expensive than the TBT Calls.  So I want to buy the calls instead but even those are a little expensive @ 47%.   So I want finance the purchase buy selling a Bull Put Spread.

I’m keeping the contracts small @ 1 contract because I’m not 100% sure I understand how to manage this trade.  My max risk is 1.85 so I’m more than willing to try the trade.  To get out I may book profits on the Long Call leaving the spread to continue to make money.  Stock is at 41.90 with 10 days until expiry.

The Trade: Net Debit 1.00

Buy Open:  1 Jan 43 Call  1.45

Buy Open: 1 Jan 42 Put  1.20

Sell Open: -1 Jan 43 Put 1.65

Open: Spy BRCS Jan 95/96

I put this one on during Friday’s Jan, 2 Santa rally.  SPY ran over 3% on the day and pushed itself right into resistance.  I do think it will manage to push beyond the 93 level resistance point sometime in the next few weeks but I don’t think it can hold it right now.  But just in case  I am wrong, I’m putting on half the normal position size since there is only 2 weeks left until expiry.

Support @ 85

Resistance @93

The Trade: Credit .35 cents

Buy to Open: SPY Jan 96

Sell to open: SPY Jan 95

2009 is here: 2008 was rough but had some good under the hood

Most of the articles, blogs I’m reading are of the “good riddance 2008” and “I want to erase 2008 from my memory” varieties.   I’m not in this camp.  Oh, don’t get me wrong.  It was brutal.  I lost money like everyone else.  However, when I look back at the year I realize I did a lot of things right.  I learned a heck of a lot about trading in volatile markets, learned about trading in bear markets, money management, and how to survive in bad markets.  I also preserved my capital and adjusted to the changing conditions quickly.

I perfected my version of selling stocks short which involved selling Call spreads and buying Puts and financing their high prices by selling Call spreads at the same time.   It was an easy and safe way for me to short stocks.  Don’t get me wrong, I’ve used selling call spreads before, but never had I been able to sell them so often with such dramatic results.  The high vol. made it very profitable to sell the spreads, something I’d never gone through before.    As I told a friend, for a long time it was like shooting fish in a barrel – especially with the financial stocks.

In June, the market was about to force me to take notice of the fact that I wasn’t being as diligent about my position sizes and my total market exposure.  I also was too over weight in one area.  I was doing well in the energy and energy services spaces and my account was up for the year.  Then great hedge fund  sell off started.   The sell of was so fast and furious that in one week I was blown out of most every position I had on at the time.   I went from being up for the year to being down.  I was lulled into thinking the market had returned to stability.   I was too bullish and had almost no bearish positions on to help hedge myself.  Big mistakes but I did survive and I learned huge lessons.

So now you see I’m not one to completely dismiss 2008.  There was good mixed in amongst the horrendous action.   I am looking forward to seeing 2009 as it can’t help but be a better year.

Good cheer and wishes to everyone in 2009.

Open: BRCS XRT Jan 21/22

I said I didn’t want to trade anything before the end of the year and I almost made it.  It is, after all, Dec 31st.

The thesis on this retail ETF is that it’s a had a good run into the end of year mini rally and retail stinks overall.  No one is bullish on retail and in fact it should be down right horrible this year.

Resistance is at 21.25 with the stock currently at 20.35. It’s just poking above it’s 50 MA on low volume.  MACD is starting to turn down.

I’m putting only half of my usually position size on this trade because there is only 2 weeks left and because I’m still not certain of what the market will do after Jan 1st.  Better to be safe.

The Trade:  Credit .28 cents Risk .72 cents

Sell Jan 21 Calls

Buy Jan 22 Calls

Close: SPY Short IC Dec5 Qtrly

Ah, my experiment with quarterlies and selling ICs has concluded. I sold 1 IC for a .45 credit and a last week I bought back the short Call for .05 and today I bought back the vertical Puts for .35.

So, after commissions I broken even on this one. I’m ok with breaking even with a small experiment. I wanted take advantage of a year end rally which never occured, and practice selling ICs and play with the Qrtly options.

What did I learn:

• Quarterlies are nice.  It gives 4 extra expiration days each year;  they seem liquid enough.
• I definitely need to give more time when selling the ICs, but to be fair I knew going in 3 weeks was too short.  5-6 weeks seems more reasonable.  It gives better credits and more time to adjust.
• Don’t skew the trade in one direction or another more than about 0.5% .  I skewed this trade bullish thinking we would get a rally but we didn’t.  We got a pull back instead.  That gave me no cushion on the downside.   I positioned the Put vert just above support instead of below support and I skewed the Call vert to far above resistance.
• I think accounting for at least a 4.5% move in either direction seems smart as long as the vol isn’t whipsawing everyone.   With IV so high right now I think shooting for 5% or more is possible.
• the better trade would have been 86/85 Puts  93/94 Calls.   I put the trade on when the SPY was around 89.  That would have been a range of +/- 4.5% for the SPY to move.   I could have gotten a better credit and I wouldn’t have had to defend the position.  Likely I could have let it all expire worthless and kept the whole credit or maybe bought back the shorts if they got to .05 cents.
• If I had more time I could have bought back my short call and maybe sold a lower Call spread or rolled it out to the next month.

I need to continue to refine my IC trading skills but this was a good start.  I’m looking at putting on a Feb short IC  after the first of the year.  I want to wait since right now I can’t get a feel for market sentiment.

Original Trade:

The Trade: Credit .45 / Risk .55

• +1 Dec 87 Put
• -1 Dec 88 Put
• -1 Dec 95 Call
• +1 Dec 96 Call

Update: 12/23 SPY moved enough that I was able to buy back my short 95 call for .05.

Santa Rally?

This has been anything but a typical year for the markets so why I, and lot’s of other poeple, would think we would get the typical year end Santa rally I’m not sure.   I have a SPY IC on that I’m playing with (1 contract  for the Dec Qtrlys) thinking we’re range bound @ 88 – 92.  The IC is skewed to the upside to account for a rally but thus far I’m going to be lucky to keep it above the short 88 put strike.

My short 95 call is almost worth zilch now so I’m trying to close it for .o5 or better.  If that happens I’ll try to sell a 92/93 or maybe a 91/92  call spread to help make a little more coin.   Or I could just leave it alone since time is short.  Plus I’ll have the long 96 call left over as a lottery ticket.  Like I said this is an experiment for the most part.   You can read the trade post for the the details of the trade if you want more info.  It’s below.

As for the rest of the year, I’m not putting on any new trades.  Volume is low, uncertainty is high, economic news stinks and people are downright skittish.  Not a market I want to trade right now.

Jan 09 can’t come soon enough for me.

Merry Christmas everyone.