Friday, July 24, 2015

Weekly: AMZN disaster also AAPL GLD GPRO SWKS TSO UA


My AMZN disaster might not be what you are thinking. After the earnings news was out, I got over confident, and legged into sold strangles on AMZN JulW4 540 puts and 590 calls. I bought back the put leg for about a 750% loss as AMZN fell. Yikes! The rest of the week was also bad, with the overall stock market suffering big losses for the week. I don't track it closely, but I believe this is my worst week of the year. 
 
Other highlights include selling strangles on GLD, GPRO, TSO and a quick profit on SWKS after earnings.
Here are the trades: (p = puts, c = calls, third week expiration unless noted)

Fri Sell AMZN JulW4 540 p @567.0 One-day long position in Amazon. AMZN gaps higher on earnings. This is near the 10% probability line and 550 is support from the overnight trade. If it gets threatened I will roll down and out. ShadowTrader just said AMZN had a 2.5 standard deviation move (about 2% or 3% probability) and call sellers and short sellers were crushed by the gap. After 15 minutes I am down 100% as AMZN dips below 560. 

Half an hour after my first trade I sell some calls to hedge: JulW4 590 c. 560 looks to be the neighborhood for now, but markets have a way of frustrating people. 

Yeouch! Mid-day I cover AMZN JulW4 540 p @539.0 365 I take a 750% loss on these sold puts! I got over confident, a bit too big for my britches and paid for it.

Sell HON Aug 105 p @103.4 Rebalance in Honeywell as it drifts lower. Earnings were out last week and the follow through has been to the downside.

Cover SWKS Aug 80 p @98.6. I close my position in Skyworks Solutions for a 45% gain. I don't like the tape action and overall market after earnings.

Thu Sell AMBA Aug 105 p @126.9 Rebalance Ambarella as it continues to rally, up another 4 points this morning. Looks like it wants to take out the old high around 128 to get some short sellers to cover. Well, I am the one that got head faked as AMBA drops a point in the two minutes it takes for me to type this.

Sell AAPL Aug 115 p @126.6 Rebalance in Apple as it drifts higher. For now, my bearish stance is wrong.

Wed Sell GLD Aug 111 c @104.5 Rebalance in gold as it moves lower.

Sell AAPL Aug 135 c @124.1 New short position in Apple. Talking heads on TV and a lead story on Marketwatch seem far too happy about buying this dip. The recent high was around 134. Later in the day, I hedge as the sold calls by selling some puts: Aug 108 p @124.8. So the position is sold Aug 108/135 strangles.

Sell SWKS Aug 80 p @99.4 New long position in Skyworks Solutions. SWKS is a supplier to Apple and is down on that news. SWKS reports earnings after the close today, and I am looking for a rebound. If there is bad news, some of it is baked in by today's sympathetic decline.

Sell AMBA Aug 100 p @122.4 Rebalance Ambarella as the rally rolls on.

Sell JPM Aug 67.5 p @70.3 Rebalance JP Morgan Chase as it moves to a new 52-week high.

Tue Sell TSO Aug 120 c @98.0 30 As Tesoro moves lower, I hedge the sold puts by selling some calls.

Sell GPRO JulW4 strangles @60.1. I sell some weekly GoPro strangles ahead of earnings. I am going way out on the wings. My thinking is that there have been some recent big movers on earnings (GOOG NFLX IBM) so some premium sellers are either gun shy or lost big on some of these movers. I looking for about a 10% move on the news. My strikes are at 20% lower and 30% higher, which I see as a large margin of safety.

Mon Sell AMBA Aug 92.5 p @117.0 Rebalance in Ambarella as it moves higher. The AMBA bulls seem to be back in charge.
Sell SPY AugW1 203.5 p @212.4 Rebalance in S&P 500 by selling some August weeklies. These are around the 10% probability line, and the recent low was around 204.

Sell DIS Aug 110 p @119.7 Rebalance in Disney as the rally rolls on. I have a complicated position, net long.

Sell TSO Aug 85 p @100.2 New long position in Tesoro. Chart shows a nice break out from 94.

Sell GLD strangles @106.1 Aug 95 p / Aug 111 c 
Selling strangles is a bet on a trading range. This one skews bearish. It's been a long time since I traded gold. Chart pattern is a break down of major support, with resistance at 110. On the downside 95 on GLD translates roughly to $1000 on physical gold, which I see as psychological support. It is a small fish trade, not much premium. However, I often add sell more layers as the underlying moves.

Sell SKX Aug 110 p @124.0 Rebalance in Sketchers as it continues to move higher.

Position Summary:
net neutral IBB TSO
net long AAPL AMBA DIS HON IWM JPM NFLX SPY
net short GLD
long BRKB EBAY NKE UA ULTA WBA
closed/expired AMZN GPRO SWKS

Saturday, July 18, 2015

More Bull 47 - 5 for July Grade B+

I count 47 winners 5 losers for the July option cycle. For me, it is a month of modest gains punctuated by some mild discomfort from the dips on the news from Greece and China. 

Last month's I used the subject line "Bull Market is Intact." This month the message is the same. Big tech stocks are leading, with AMZN, GOOGL, FB, NFLX at all time highs.. This kind of leadership tends to bode well for the bull market. Another interesting group is oil refiners (TSO, VLO). I don't have any position in the refiners, but will look at them. Gasoline prices are near record highs, but oil prices are 50% off their highs. That's a lot of potential for profits. 
 
There has been much hand wringing over the valuation of the biotechs, but IBB is also near all time highs. I took a shot on the short side of IBB and so far it it a loser. I may bail on IBB for a potential break even with some added risk. I also bought some SPY insurance during the crisis week, some Sep put spreads. This bearish position has been a loser, though I've been selling weeklies against it, so I have already made back my insurance money.

Gold makes a new five-year low. Silver drops below $15 on the spot market, down over 66% from the highs around $49. Does that mean it is time to buy? Maybe for trading, but long term investors need not be in any hurry. Look for confirmation in the gold miners (GDX) and a technical chart bottom. With so much damage, there are so many layers of resistance.

Bonds are down too. TLT is down more than GLD for calendar 2015 (not counting dividends). The great bond bear market may be upon us. As always, virtually no one shorted or sold at the recent top (Jan/Feb 2015). I've been avoiding both gold and bonds because the premiums seem so small compared to how much they are moving.

So what next? The U.S. bull market for stocks is intact. To paraphrase the old Merrill Lynch commercial, "we're bullish on America." As always a 5% or 10% correction can happen at any time. However, a 20% decline or more (aka as a bear market) is not yet on the horizon.

Weekly: AMBA DIS EBAY FB NFLX SKX


Stock market has a nice up week, and my goes along for the ride, though my gains are modest. Earnings demanded some of my attention. YUM JPM HON are some of my stocks that reported earnings. Some new trades include: new long position in EBAY, renewed long in FB, selling strangles on NFLX, and more strangles sold on AMBA, betting on a trading range. 
 
I am assigned on some SKX Jul 120 calls. I bought two half-positions of SKX stock to meet the assignment. On HON I rolled out and up to avoid assignment. On JPM I covered the sold calls the day before expiration. I some other rebalancing trades. DIS did not get to the strike and readjust by doing an over write into August.

Here are the trades: (p = put, c = calls, sell means sell-to-open, all are third week expiration unless noted)

Fri Roll HON calls up and out @105.4:
Cover HON Jul 105 c / Sell Aug 110 c
Honeywell up on earnings news. I have a complicated position that includes half a position in shares. Rather than buy another half and look to assignment, I buy back the Jul 105 calls for a 5% profit, and roll up and out and sell some August 110 calls.

Sell DIS Aug 125 c @118.3 I sell another layer of calls on Disney. I have a ocmplicated position that includes half a unit of shares. I am over writing 2x units of August 125 calls, for a net long position.

Sell FB Aug 82.5 p @95.0 I open an August position in Facebook.

Thu Cover (buy to close) JPM Jul 70 c @69.7 JP Morgan Chase is uncomfortably close to my strike price, so I decide to close these for about a 35% profit (basis premium collected). I prefer not to dance with JPM on expiration Friday.

Sell NFLX strangles / Aug 95 p / Aug 125 c @109.0 gross
Netflix reacts well to earnings. I sell August strangles, which is a bet on a trading range. Later in the day I rebalance by selling Aug 97.14 p @114.2 NFLX up 5 full points from my initial position.

Sell EBAY Aug 60 p @65.7 New long position in Ebay, as it moves higher on earnings.

Wed Sell AMBA Aug strangles: Aug 85 p / 150 c @110.6 gross
Ambarella moving up again. I sell some August strangles with a slight bullish skew. Earnings are in September, so no earnings risk.

Sell BRKB Aug 135 p @141.6 I open an August position in Berkshire.

Sell SKX Aug 100 p @120.8 Rebalance again in Sketchers. Again, it's me buying high, selling low, making it up in volume (half kidding sarcasm here folks :). The intra day timing leaves much to be desired. Intermediate term, I've mostly been on the right side of SKX.

Tue Sell SKX Aug 135 c @118.8 Rebalance in Sketchers. Looks like I step in a pile of poo on Monday with my buy. I am doing damage control. Right now, it looks like Monday's spike high of 122 was short covering, taking out of stop loss orders and now gravity is taking effect. My position has become a complicated net long, with sold strangles, and owning shares. Despite my seemingly poor timing on entry's, as of now, SKX is one of my big winner trading stocks for 2015.

Mon Buy half position SKX @120.62 now have a full position in case of assignment against sold Jul 120 calls.
Buy half position DIS @108.04 to hedge against sold Jul 120 calls. Both DIS and SKX move lower after I get filled. Boo hiss.

Sell IWM JulW4 120 p @125.4 Rebalance in the Russell 2000 etf by selling a layer of weeklies.

Sell ULTA Aug 150 p @165.1 Add to longs in Ulta Beauty as the move up from a breakout continues.

Cover (buy to close) JPM Jul 69.5 c @67.8 With earnings due out before expiration, I take a 20% loss on this layer of sold calls.

Position Summary:
long BRKB EBAY FB NKE ULTA WBA
net long DIS HON SKX UNH
net neutral AMBA IBB JPM MRK SKX SPY
net short IWM NFLX

expired DATA DE EL MRK YUM UNH

Saturday, July 11, 2015

Weekly: High stress no reward WBA ULTA


It was a wild market week with 200 point Dow intra-day swings on many days. Readers know I tend not to like fast markets, so I didn't enjoy the week, basically broke even, got a few more white hairs from the stress. 

Highlights includes taking some losses on IWM JPM, new longs positions in WBA ULTA. Here are the trades:
(p = puts, c = calls, sell means sell-to-open, all are third week expiration unless noted)

Fri Sell WBA Aug 85 p @93.4 New long position in Walgreens Boots Alliance. WBA breaking out on earnings news. Chart base around 86.

Buy half position SKX shares @118.62 I hedge back to net long in Sketchers. I sold layers of puts and calls and am now buying shares in case there is an assignment on a move up past 120.

Thu Sell SPY Jul 198 p @207.2 Massive relief rally at the open. I continue to sell weekly puts on the S&P 500. This is the third week. I have a complicated position that includes a bear vertical put spread out to September. Selling weeklies against that pays for. The risk is that the decline happens right now and not further out in time. 198 is near the cluster of support levels early in 2015 and is about at the 10% probability line. By the time I type all this my put is 5 cents higher (shakes head). By the close, I am down over 130% on this leg.

Sell ULTA Aug 145 p @161.0 65 New long position in Ulta Beauty, as it breaks out from a flat base.

Wed In some parts of the world they say that if you don't like the weather, wait an hour, it will change. It is that kind of stock market with wide swings, dips and rallies. 

The Chinese stock market has some serious issues, a 150% run up in two years, and now a rapid 30% decline off the highs, with the government stepping in and being ineffective in stemming the decline. There is still Greece, and Puerto Rico so a lot of uncertainty for nervous investors. It is important to keep perspective. The U.S. market still hasn't seen a 10% correction from the top. VIX can barely get to 20.

Sell YUM Jul 95 c @86.2 Yum Brands diving today, likely because of exposure to the Chinese consumer market. Spreads are wide, and I hit the bid to sell these calls. Yikes. I sold the strangles 82.5/110, and it is getting uncomfortable.

Cover (buy to cover) IWM Jul 119 p @122.5 I reduce risk by closing this leg on the Russell 2000 etf for about a 100% loss. Don't want to sell more calls. Time to edge towards the storm shelter. The market weather is getting stormy.

Tue Sell JPM Jul 69.5 c @66.8 Rebalance in JP Morgan Chase as it moves down towards the 50 day moving average. The 5-year chart looks bullish, and that supports a bounce off the 50 dma. However, the overall market is not acting well and may tug JPM lower.

Cover (buy to close) JPM Jul 65 p @66.3. JP Morgan now down a full point. I reduce risk by taking a 125% loss on this layer of sold puts. I am still net long, but decide to move away from this falling piano. Again, it is at support, right here and technical traders may be buying. Rule #1 is to live to trade another day.

Sell IWM Aug 131 c @122.6 Rebalance in the Russell 2000 etf as the market moves lower. I am still net long, wary of a whipsaw back to the upside because it is that kind of choppy market.

Sell SKX Jul 110 p @117.1 Rebalance in Sketchers.

Mon Greece votes no. Market gaps lower then fades the gap.
Sell NKE Jul 105 p @109.9 I add to longs in Nike. 105 is the chart gap. NKE going positive for the day.

Sell SKX Aug 95 p @116.1 Sketchers continues its amazing upside run and I continue to rebalance sold strangles.If it moves up to about 118 I'll take a half position in stock to offset the layer of sold Jul 120 calls.

Sell SPY JulW2 p @207.0 It is looking like a complete route for the bearish camp. I sell a layer of weeklies on the S&P 500 at the 10% probability line. Tiny much premium considering the substantial margin requirement, but these are weeklies, and I have money available. Well, it was a wild ride for the day and the bears came back in for a while. Tough market.

Position Summary:
long BRKB DATA DE EL FB NKE
net long HON JPM SKX UNH
net neutral AMBA IBB IWM MRK SPY
net short DIS YUM
short MCK

Friday, July 03, 2015

Weekly: Happy July 4th


Enjoy the holiday. Personally, I like the fireworks. Not so much in the markets, where I prefer calm conditions. This week was anything but calm. 
 
Schwab sent out a report that included a table with 14 news events and how the market reacted. The events ranged form the Kennedy assassination, Nixon resigning, to Lehman going under. Out of the 14 the median decline was about 5% in about a week. However, there where three events that led to bear markets (more than 20% decline) and three others that led to a correction (10% or so). So about 42% of the time the market reaction is significant.

Some highights: buying the SPY highs on Monday. I bought some insurance in the form of a long SPY September vertical put spread. New long position in NKE. I got washed out on a spike down in SKX and rebought at a higher price. The new thing was a fancy put backratio position in IBB (biotech etf), hoping for about a 20% decline in that sector by September expiration.

Here are the trades: (p = puts, c = calls, all are third week expiration unless noted, sell means sell-to-open):

Thu Sell SKX Aug 90 p @115.3 Rebalance with another layer of puts in Sketchers as the rally continues.

Wed Sell SPY JulW2 198 p @207.8 Rebalance in S&P 500 by selling a layer of weekly puts seven days out.
Sell IWM JulW2 119.5 p @126.0 Ditto for the Russell 2000 etf, sell a layer of weekly puts.

Sell NKE Aug 97.5 p @109.0 New long position in Nike. Recent NKE earnings were good.

Sell SKX Aug 95 p @112.7 Rebalance in Sketchers. I got shaken out of one leg earlier in the week as the stock knifed lower. I am adding back to the long side by selling some August puts.

Sell DIS Aug 105 p @115.0 Rebalance in Disney on the rally.

Sell IBB put backratio @368.6:
Buy 1x Sep 330 p / Sell 2x Sep 300 p debit
Okay, now I'm getting fancy. This put backratio on the Biotech etf is near delta neutral, and is for a debit. Best case is a decline to 300 at September expiration. If IBB is flat or up, I lose the modest debit. If IBB crashes, losses escalate below 270. I am taking a shot at a 10% stock market correction with more 10% down in the biotech sector.

Tue Sell HON Jul 97.5 p @102.6 Rebalance again in Honeywell.

Cover (buy to close) SKX Jul 105 p @108.2 Close this leg on Sketchers for about a 40% loss. SKX not acting well after a big run up, so lots of air on the chart. Minor support at the 50 day moving average around 102.

Sell IWM Jul 129 c @124.6 Rebalance in the Russell 2000 etf.

Mon Sell JPM Aug 72.5 c @68.1 Rebalance in JP Morgan Chase.
Sell SPY JulW1 202 p @208.6 I sell some weeklies expiring in three days on SPY. Support is at 204. I am selling near the 10% probability line. The bears hit the market with a flurry, but the market popped back up. Not much premium considering the margin requirement, but it is only three days. By mid-day SPY makes new lows, so this was a bad move. Later in the day with SPY @206.2 I buy a vertical put spread:

Buy SPY Sep 190 p / Sell SPY 182 p @206.2 for a debit of close to $1 per unit after commissions. This is a bit of insurance against a melt down. Typically, I might do a backratio, but the tape action is so bearish, paying $1 per unit for a bit of insurance seems like a good idea.

Sell IWM Aug 133 c @125.7 Rebalance in Russell 2000 etf into the decline.

Sell DIS Aug 125 c @113.8 Rebalance in Disney by selling another layer of calls.

Sell HON Jul 105 c @101.9 Rebalance in Honeywell.

Position Summary:
long BRKB DATA DE EL FB NKE
net long DIS HON IWM JPM MRK SKX UNH YUM
net neutral AMBA IBB SPY
net short SKX
short MCK

Saturday, June 27, 2015

Weekly: AMBA FB UNH -MCK


Modest losses for the week. Highlights include new positions in AMBA FB UNH. Sold layered strangles in Ambarella, sold puts in Facebook, Sold strangles and rebalanced in United Healthcare. Took a 130% loss in MCK Mckesson. Elsewhere, the stock market waited on news from Greece. As of this writing on Saturday, it looks like no deal and Greece may be kicked out of the Euro, but things can and will change. China's stock market had a 7% down day, though FXI didn't fully reflect that damage.

Bonds TLT continues its down trend. For the year the losses in bonds are modest, however, from the late January top, the losses feel a lot worse. TLT high was about 138 and now about 115 for about a 20% haircut. That's ouch for those that rode the train up and now down. For the moment, it seems like investors are selling bonds and putting that money into stocks. How long can that game continue? Hard to say. I often let the chart action tell me what to do instead of trying to predict.

Here are the trades (p = puts, c = calls, sell means sell-to-open, all are third week expiration unless noted):

Fri Sell AMBA Jul 80 p @107.1 Rebalance sold strangles in Ambarella. AMBA up again, so I sell another layer of puts to balance back near neutral. Later in the day, I sell a second layer of calls as AMBA retreats. Sell AMBA Jul 131 c @102.4. I know, I know I got it wrong, it is supposed to be buy low, sell high not the other way around, but some days are like that. Delta neutral traders often find themselves doing the opposite to balance out a position.

Thu Sell UNH Jul 130 c @119.9 Hedge sold puts by selling calls in United Healthcare. Position is now a sold strangle, which is a bet on a trading range (110 to 130). Later in the day I sell another layer of puts: Sell UNH Jul 113 p @122.6 46 as UNH rallies. Oops.

Cover (buy to close) MCK Jul 230 p @229.7. McKesson reaffirmed guidance yesterday and the stock dropped. Good enough was not good enough. I am getting out for a 125% loss on this leg as MCK crosses the strike price to the downside. Half an hour MCK is bouncing, so it looks like I got whipsawed. Again, this can and will happen if a trader uses stops. Just seems to be happening a lot lately (JBLU MRK two other recent losses).

Wed Sell AMBA strangles @99.4 Jul 130 c / Jul 75 p New position in Ambarella. The recent high was 128, and I see that as resistance. AMBA in the news with a parabolic chart formation, a short seller making comments crashing the stock, then Cramer and two analysts coming in to defend the stock. Bias is down, with support at 75. Selling a strangle is a bet on a trading range.

Tue Sell JPM Aug 65 p @69.5 Rebalance JPM Chase again as it continues to climb.

Sell DIS Jul 108 p @114.1 Rebalance to net long in Disney.

Sell UNH Jul 110 p @122.2 New long position in United Healthcare.

Sell FB Jul 80 p @87.5 New long position in Facebook. FB at all time highs on news. I am selling puts way out of the money for a tiny premium, so am only dipping my big toe back into FB on the long side.

Mon Sell JPM Jul 65 p @68.8 Rebalance in JPM Morgan Chase bank.

Sell SKX Jul 125 c @113.9 Something a bit different, I sell into strength on Sketchers and am now net short. SKX has had a two-month run up after stellar earnings.

Position Summary:
long BRKB DATA DE EL FB
net long DIS HON JPM SKX YUM
net neutral AMBA IWM MRK SPY UNH
short MCK

Saturday, June 20, 2015

Monthly 47-11-1 bull market is intact, grade C


I count forty seven winners, eleven losers, one break even trade for the June option cycle. While I made money, I had my first whopper loss for 2015 plus a stupid trade so grade is a C. Both the big loser and whopper loss were in AMBA. I also got whipsawed in JBLU and MRK. I made money in SKX, but could have made more had I managed it better. It was not the best month for me, even though the profits were okay. 
 
I am up about 9% for the year. Considering how cautiously I tend to trade, I see that is a good number. Of course, I would like it to be better.

As for markets, bonds got hit (TLT), China popped then flopped (FXI), airlines dipped then recovered, biotech (IBB) made a new all time high, gold showed some feeble signs of life (GLD). While the Russell 2000 (IWM) made new highs, the transports remain weak (IYT), and the dip in bonds has been painful. Foreign stock markets have been among the biggest winners in calendar 2015, but there was some give back.

The U.S. bull market is still intact. The final phase can be speculative with huge gains in very few stocks. Some of the recent IPOs and other high flyers like AMBA PANW are indicating some signs of froth. I tend to be a timid options trader. Rule #1 remains, live to trade another day. For me, that often means following near mechanical trading rules to take losses and reduce risk. Thanks for reading.

Friday, June 19, 2015

Weekly: whipsaw in MRK


I got whipsawed out of MRK as it declined then rallied. I bought enough shares to cover an assignment on sold calls on SKX. FXI declined, but the sold strangles came in safe. Overall, a profitable week. I'll post the monthly round up with a letter grade before Sunday.

Here are the trades: (p = puts, c = calls, sell means sell-to-open, all third week expiration unless noted).

Fri Sell SKX Jul 105 p @112.0 Rebalance in Sketchers as I prepare for assignment on two units of sold Jun 110 calls.

Sell IWM JulW1 121.5 p @128.0 Rebalance in the Russell 2000 etf by selling a layer of weekly puts.

Thu Cover (buy to close) IWM Jun 117.5 @127.5 Free up buying power to give more flexibility going into expiration. Later in the day I buy to close another batch, the IWM Jun 116 p @128.2 and also rebalance by selling another layer of July puts:
Sell IWM Jul 119 p @128.2

Buy half position SKX shares @112.36 I prepare for assignment on two units of sold Jun 110 calls sold on Sketchers. So far my SKX trades are at a nice overall profit, though I could have managed it better.

Cover (buy to close) EL Jul 92.5 @88.8 I cover the call side of a sold strangle on Estee Lauder for a 25% profit. I am bullish on EL so closed this leg of the trade while it is still at a profit.

Wed Cover (buy to close) MRK Jul 60 c @57.8 I got whipsawed by the decline in Merck. As it bounces back, I decide to close this leg for break even after commissions to avoid losing on both ends of the sold strangle.

Sell IWM Aug 112 p @126.7 Rebalance my position in the Russell 2000 etf back to net neutral. As the market rallies, I add another layer of sold puts.

Sell DIS Aug 100 p @111.5 I open an August position in Disney.

Tue Cover (buy to close) MRK Jul 57.5 p @57.1 The bloodletting in Merck continues and I cover another leg. These July's go out for about a 300% loss basis the premium collected. MRK moved below 57.0 and that was the next stop level. Totaling all my MRK trades for 2015, I am now at a small loss for the year. I am following my stop loss levels and getting out. The alternatives are to play hunches or hold and pray or perhaps even double down on the loser. 

Rule #1 is to live to trade another day, and I do that by following near mechanical stop levels.

Mon Cover (buy to close) MRK Jun 57.5 p @57.4 Merck moves lower through my mental stop level. I get out of this leg for about a 33% loss basis the premium collected.