Friday, March 24, 2017

Weekly: first hard down day of the year

The stock market went over 100 days without a 1% decline, before Tuesday's hard down day. Like the first rain of the year in dry climates, there was a lot of slipping and sliding. I came in to the week with a lot of dry powder from the recent option expiration. I took some lumps, but my overall losses were modest.

Here are the trades (p = puts, c = calls, sell means sell-to-open, number at the end of the line is price per contract).

Mon Sell SPG strangle: 
Sell SPG May 140 p 38
Sell SPG May 190 c 25
 
Sell WYNN Apr 97.5 p 32
Sell JPM May 77.5 p 22
 
Sell TIF May 80 p 28
 
Sell IWM strangle: 
Sell IWM May 123 p 53
Sell IWM May 150 c 19
 
Tue Sell NTES strangle: 
Sell NTES Apr 240 p 51
Sell NTES Apr 350 c 21
 
Sell DIA Apr 214 c 16
Sell IWM Apr 144 c 14
 
Sell SPY Apr 243 c 16
Sell BA Apr 190 c 16
 
Sell AAPL backratio: 
Buy AAPL May 130 p 132
Sell 2x AAPL May 120 p 40 each
 
Sell GS Apr 262.5 c 31
Sell JPM May 97.5 c 22
 
Cover BRKB Apr 165 p 111 for a 20% gain
 
Wed Sell AAPL May 125 p 64
Sell MAR May 80 p 45
Sell TLSA Apr 300 c 42
 
Thu Sell SPY May 214 p 67
 
Sell NVDA strangle: 
Sell NVDA Apr 90 p 20
Sell NVDA Apr 130 c 17
 
Sell TIF May 82.5 p 31
Sell DIA May 183 p 38
 
Fri Sell DIA 215 c 28
Sell SPY May 245 c 34
Sell IWM 145 c 34

Saturday, March 18, 2017

Monthly 39-6, Grade C+ Signs of a Market Top?

First the recap, I count 39 winners 6 losers for the March option cycle. Grade is C+. The steam roller rally caused losses on some sold calls. I also took a loss on some COST puts and some legs of multi-legged strategies. Overall, I felt frustrated and out of synch for most of the month.

I am up about 4.8% for calendar 2017. As usual, that's good news and bad news. Good news is a decent gain. Bad news is that I am well behind the 6.0% for SPY buy and hold investors. Here are a few other etfs (dividends are not included, SPY already paid about a 0.5% div):

EEM +12.8% Emerging markets equity
SLV +9.0% silver

GLD +6.7% gold
SPY +6.0% U.S. large cap

IWM +2.7% U.S. small cap
TLT -0.4% U.S. 20 year Treasuries

Again, my trading account +4.8%. With the rally, there are lot of posts and questions about market tops. It's been a while since I posted a full list so will do it again:

Signs of a market top:

1 ) Inverted yield curve, when short term rates exceed long term rates.

2 ) Transports lead the first leg lower. IYT is a good proxy for the DJ Transport index.

3 ) Confirmation will come with the technical breakdown on major indices. SPY, IWM, DIA break their 50 day and 200 day moving averages.

4 ) Excessive optimism. It isn't scientific, but the sentiment at the local "coffee shop" or similar arena can be extremely powerful. When novices start giving advice, when novices start bragging about their big profits, that's a time to head for the hills. Not sure fire, but still something to look for.

4a) Look a bull on the cover of Barrons or Fortune or similar publications. The sign of the bull is often the sign of the top.

4b) Look for projections for huge future gains from talking heads on TV, and lead articles on financial magazines and websites.

Of course nothing is 100%. Corrections can happen at any time. However, major tops tend to have most if not all of the above.

Weekly: Long VRX

Another quiet week. I initiate new longs in Valeant Pharma VRX. Bill Ackman dumped the last of his shares. News like that can mark an intermediate or long term low. As always nothing is 100% and I sold out of the money puts.

Here are the trades (p = puts, c = calls, cover means buy to close, number at the end is price per contract.

Mon Cover SPY Mar 215 p 02 for a 96% gain
Sell BA Apr 165 p 73

Roll COST down and out: 
Cover COST Mar 165 p 122 for a 400% loss
Sell COST Apr 155 p 57

Tue Sell VRX Apr 7.5 p 14
Sell TSLA strangle: 
Sell TSLA Apr 210 p 82
Sell TSLA Apr 310 c 44

Roll BRKB up and out: 
Cover BRKB Mar 165 c 990 for a 340% loss on this leg
Sell BRKB Apr 170 c 666

Wed Sell COST Apr 155 p 39
Sell VRX Jul 7.5 p 50

Thu Roll TSLA: Cover Mar 220 p 01 for a 98% profit
Sell TLSA Apr 220 p 82

Fri Sell BRKB Apr 180 c 80

Saturday, March 11, 2017

Weekly: Waiting for the Fed

It is a quiet week for me. Many of the new trades involve Costco. Fed may raise rates on Wednesday. Oldtimers will remember "Three steps and a stumble," made popular by Marty Zweig and others. Under this system, the third rate hike was a sell signal. 

Personally, I am still looking for the transports to turn down first, and also an inverted yield curve. Though market action tends to be the main thing. If and when the 50 day and 200 day moving averages are broken to the downside, I will tend to be much more defensive.

Here are the trades: (p = puts, c = calls, sell means sell-to-open, number at the end is price per contract).

Mon Sell COST Mar 172.5 c 28

Wed Sell COST Apr 180 c 21
Sell GS strangle: Sell GS Apr 220 p 78
Sell GS Apr 295 c 18

Thu Sell COST Mar 170 c 22
Sell XLE Mar 72 c 08

Fri Sell COST Apr 175 c 50

Saturday, March 04, 2017

Weekly: Was that the top?

Will the big rally day mark an intermediate top? My guess is nay, no top yet. Transports are still confirming the highs. Financials, semiconductors are still leading groups. Most of the major averages are moving together to new highs. Other signs of a market top are an inverted yield curve, bullish sentiment infecting common people. 
 
Today's anecdote is from the local coffee shop about someone saying the market has to back down, because it has gone up too far too fast. This isn't the chatter at major tops. At a major top, people are bragging about their huge profits and looking forward to making a lot more money in the next leg up. Now, there is a hint of that, but not the exuberance, the naive excitement that is often seen at tops, not yet.

The stock market was up this week, my trading account down a bit. So it was a frustrating week for me. I covered sold calls in BA BRKB DIA for huge losses. It stinks, but it is what I do, I take the loss when my mental stop levels are violated. There is always the risk of a whipsaw, the market reversing immediately after you cover. Rule #1 is to live to trade another day.

Here are the trades for my frustrating market week: (p = puts, c = calls, sell means sell-to-open, cover means buy-to-close, number at end is price per contract):

Mon Sell BRKB Apr 165 p 144
Sell DIA Apr 194 p 69

Sell BA Mar 170 p 42

Sell TSLA strangle: 
Sell TSLA Mar 210 p 55
Sell TSLA Mar 287.5 c 36

Tue Cover BA Mar 180 c 345 for a 1200% loss vs. premium collect. Crunch. I gave it as much rope as I was willing to give it.

Wed I am blown out of the water with the gap up open and cover some sold calls for huge percentage losses.

Cover DIA Mar 208 c 305 for a 1800% loss
Cover BRKB Mar 165 c 1018 for a 240% loss

Sell TIF Mar 82.5 p 50
Sell COST Apr 160 p 63

Sell RCL Apr 85 p 42
Sell TLSA Mar 220 p 45

Fri Costco lower on earnings news.
Sell COST 185 c 28
Sell COST Mar 180 c 10

Sell DIA Mar 214 c 14
Sell BA Apr 210 c 11

Saturday, February 25, 2017

Weekly: Elephants on the move

The rally rolls on. The DJIA is now at 11 record high closes in a row. Something that hasn't happened since 1987. 1987 had the huge October crash. There was a euphoric run up before the crash, and the recovery was also relatively quick. It feels like a difficult market to trade. However, the elephants, the big money is buying virtually every day. One reason is that so many were under invested before the election. More than a few sold at resistance levels, thinking a pullback was a sure thing. 
 
My take is that the public and talking heads remain skeptical, even though the newsletter marketvane is at nose bleed bullish levels. The AAII sentiment, which is mostly long term oriented, experienced, individual investors is right at the long term average of 38.5% bullish.

This week, I got back into NVDA with a short strangle, and initiated a position in NTES (rather badly I might add). Here are the trades (sell means sell-to-open, p = puts, c = calls, number at the end of line is price per contract.

Tue Sell BRKB Mar31 165 p 133
Sell IWM Apr 125 p 56

Sell DIA Apr 190 p 58
Sell BA Apr 155 p 48

Thu Sell NVDA strangle: 
Sell NVDA Mar 80 p 15
Sell NVDA Mar 122 c 19

Sell SPY Mar31 220 p 45

Sell NTES Mar 330 c 55
Sell NTES Mar 255 p 60

Sell IWM Apr 151 c 15

Sell TIF strangle: 
Sell TIF Apr 75 p 42
Sell TIF Apr 105 c 32

Sell DIA Mar 200 p 37

Fri Sell BA Mar 165 p 28
Sell NTES Mar 262.5 p 68

Saturday, February 18, 2017

Monthly: Half a loaf and TINA, 59-4 Grade B

The bull market roars ahead. SPY is up 5.2% for 2017. My trading account is up 3.7%, so I am lagging. IWM is up 3.2% so I am in the game. Overall, it feels like I left money on the table. I usually lag if there is a big upside move, so it is not unexpected.

Here are some etfs year to date, best to worst:

SLV +12.9% silver
EEM +9.7% Emerging market stocks

GLD +7.4% gold
SPY +5.2% U.S. large cap (SP500)

IWM +3.2 U.S. small cap (Russell 2000)
TLT +1.0 U.S. 20 year treasury

My trading account +3.7%. This remains the most hated bull market that I can remember. A lot of people are still nervous, many have sold or are still on the sidelines. This is not the sentiment at major market tops. A correction of 5% can happen at any time, but a bigger decline remains extremely unlikely.

Why is the market up? A lot of people shorted the market. There is also TINA, there is no alternative. With bonds underperforming, CDs still paying relatively low rates. People with money have to put it some where. A bit has been flowing in precious metals with gold, and silver among the best performers for calendar 2017.

Friday, February 17, 2017

Weekly: Short Covering

As the rally accelerates I scramble and cover a couple of short calls on COST and DIA. It was a frustrating week, even though I ended up slightly in the green. My initial position in NVDA was spot on, but I exited my long leg on earnings day. 

The feeling is like a baseball hitter what he thinks is a home run and trots to first base, only to see the ball careen off the wall, and be stuck on first base. As is almost the case, I am lagging behind during the sharp rally.

Here are the trades (p = puts, c = calls, sell means sell-to-open, cover means buy-to-close, number at the end is price per contract.

Mon Cover (buy-to-close) BRKB Feb 165 c 108 for a 27% profit on this leg

Roll BRKB Feb 160 c to Mar 165 c -255 debit
Cover (buy-to-close) BRKB Feb 160 c 555 -125% loss on this leg

Sell BRKB Mar 165 c 300
Sell SPY Mar3rd 224 p 26

Sell DIA Mar 197 p 73
Sell SPY Apr 212 p 70

Wed Cover DIA Feb 206 c 56 for a 200% loss
Cover SPY Feb 205 p 01 for 98% gain

Sell COST Mar 165 p 75
Sell BRKB Jun 150 p 107

Thu Cover COST Feb 175 c 97 for a 260% loss on this leg
Cover SPY Feb 216 p 01 for a 96% gain

Sell NTES Mar 250 p 76 earnings