Saturday, May 23, 2015

Weekly: CRM LOCO MCK SKX YUM

The stock market has a relatively quiet pre-holiday week. As I often do for Memorial day, here is a link to Trace Adkins song "Arlington" (link). Take a moment to remember the sacrifices others have made for this country.

My trading week was punctuated by a loss in LOCO, new positions in CRM MCK YUM and more activity in SKX. Overall, it was a go no where week for me. 
Here are the trades:
(p = puts, c = calls, sell means sell-to-open, all are third week expiration)

Fri Sell BRKB Jul 135 p @144.9. I add to longs by opening a July position in Berkshire Hathaway.

Sell DE Jul 85 p @92.9 Add to longs in John Deere as it moves higher on earnings.

Thu Sell CRM Jun 65 p @73.6 New long position in Salesforce.com. Chart support at 66.

Wed Sell SKX Jun 110 c @103.6. I rebalance my position in Sketchers. So far my timing has been poor.
Cover (buy to close) LOCO Jun 23 p @22.2 El Pollo Loco continues to knife lower. I cover this leg for a 400% loss, basis the premium collected. A minute later I close one layer of sold calls.

Cover (buy to close) LOCO Jun 25 c @22.1. This leg goes out at a 43% gain. I am doing this to avoid the possibility of a double smack down, losing on both sides of a sold strangle, if the stock bounces quickly.

Sell YUM strangles: Jul 82.5 p / 110 c @95.4
I skew bullish selling July strangles on Yum Brands. YUM has had a good run up after their earnings. Selling strangles is a bet on a trading range, that the stock stays in between the two strikes of 82.5 and 110.

Sell SKX Jun 100 p @107.6 90 Rebalance the strangles I sold yesterday in Sketchers as it continues its run to the upside.

Tue Sell JPM Jul 60 p @67.0 Add to longs in JP Morgan Chase bank. Banks look to be a good group as interest rates are climbing.

Sell MCK strangles @243.0: Jul 230 p / 260 c
New position in McKesson. Selling strangles is a bet on a trading range. Breakout chart base at 230. I skew bullish for a new net long position.

Sell IWM Jul 112 p @124.9 Rebalance my position in the Russell 2000 by opening a July position.

Sell LOCO Jun 25 c @23.2 Rebalance short strangles in El Pollo Loco as it moves lower. I want to give it a bit more rope instead of covering my sold puts for a big loss, so I am reducing delta by selling another layer of calls.

Sell SKX strangles @105.8: Jun 95 p / 115 c
Sketchers higher on analyst comments. This new trade skews bearish.

Position Summary:
long BRKB DE DIS EL JBLU JPM
net neutral ACT DATA SKX
net long CRM HON IWM MCK YUM
net short FXI / short LOCO

* long means I sold puts, net long means I sold both puts and calls skewing bullish, net short same thing skewing bearish, short means I sold calls.

Saturday, May 16, 2015

Are we there yet? 42-12 Grade B-


I count forty two winners, twelve losers for the May option cycle. Overall I was a bit too cautious on the stock market, closing some trades too early, not aggressive enough on the long side. The caution felt justified at the time, but cost me some profits with the stock market at record highs.

On summer car trips, kids sometimes ask "are we there yet?" No, we are not at a stock market top yet. As difficult as the market has been for many bulls, stock market bears continue to be the most frustrated group. Bond market bears got a biscuit this month, but the main course isn't on the plate yet either. Gold may be forming a bottom, but there are a lot of cross currents. 

As always, my market opinions tend to be about as good as flipping coins, so don't invest based on my opinions. In general, I find that market predictions are mostly for entertainment. I make money by managing risk (position sizing, limiting losses), not from predictions.

Some are looking the divergence of the transports (IYT vs SPY) vs. the broad market. Yes, this is a warning sign and means any advance is suspect, if that continues. Yes, valuations (Schiller PE10) are stretched. Yes, dividend yields are low. So caution is advised, but full bore bearishness is not warranted. Not until the yield curve inverts, not until price action confirms a down trend.

The 78% May win percentage (.78 = 42 / (42+12)) is in line with expected probabilities. Grade is B-, which I see as average. Again, for new readers, I tend to sell out of the money options with a 80% to 90% probability of profit, using the strike price as a stop. In the real world, this translates into about 80% winners. Profits tend to be small and steady. The losers can sometimes be large and sometimes can come in clumps if the market makes a big move. I took two big losses in HAR this month, my first real clunkers of 2015. GPRO CAT were some other small losers. Some closed winners include AMBA JWN KMX PANW STJ.

I keep watching bonds and gold but the option premiums and bid/ask spreads in GLD TLT GDX are not appealing at this time. Bonds (TLT) may be in the process of forming a head and shoulders top. Stocks continue to be valued at the high side. When the low interest rates are factored in, the valuations don't look as bad. 

I attend the local IBD CANSLIM meetup. The CANSLIM style focuses on high growth stocks with positive price momentum. Many of these IBD stocks are popping then flopping. There have also been some land mines (like HAR) with gap downs.

Weekly: no fanfare

Without much fanfare SPY makes a new closing high. Gold moved higher. However, the premium on GLD options seems too small to be selling puts, and the chart isn't decisive enough to be buying premium. Bonds had a huge relief rally on Friday. Option premiums and spreads on TLT give a poor risk/reward.

As for my week, I did some damage control in ASH HON LOCO, new positions in ACT DATA DE YUM. I made money, but again felt like I left a lot on the table. 
Here are the trades: (p = puts, c = calls, all are third week expiration, sell means sell-to-open).

Fri Sell LOCO Jun 29 c @24.9 El Pollo Loco down on earnings. I rebalance my short strangles. The sold puts are at 23. JWN also out with earnings and stock is holding.

Sell DE Jun 80 p @88.8 New long position in John Deere. DE down on analyst comments.

Cover (buy to close) STJ May 75 c @74.9 St. Jude Medical runs up to 75.1 in late trade. I cover my sold calls six minutes before the close, rather than risk another spike higher at the close.

Thu Cover (buy to close) HON Jun 105 c @106.3 I roll my calls up, buying back the 105s selling the 110s:
Sell HON Jun 110 c 50. The 105s are closed for a 300% loss. Despite the poor timing on so many of my Honeywell trades, I am up a tad for the year on HON.

Sell DATA strangles: Jun 100 p / Jun 130 c @112.8
New position in Tableau software, short strangles, skewing bullish. Again, a short strangle is a bet on a trading range.

Sell DIS Jun 100 p @109.8 Add to longs in Disney. I am selling way out of the money puts. Some like to think of this as placing a limit order at the strike price.

Wed Cover (buy to close) HON May 105 c @105.0. I take about a 25% loss as Honeywell crosses the strike price of these calls to the upside. I shake my head, as I follow my mechanical stop loss levels. HON has been a difficult stock for me for calendar 2015.

Sell HON Jun 95 p @105.0. A few minutes later I sell these Honeywell puts. I currently have half a position in shares, short Jun 105 calls, now short Jun 95 puts.
HON closes at 104.4. My trades this year with HON remind me of the Peanuts cartoon, with Lucy Van Pelt pulling away the football when Charlie Brown runs to kick it. Poor Charlie Brown never learns, never gets to kick the ball. Thankfully, I around break even for HON. As I sometimes write, if my "bad" trades are break even, it is going to be a good year.

Tue Sell ASH Jun 135 c @125.6 Ashland lower after a big investor says they sold their stake.

Sell ACT Jun 335 c @296.7. Actavis lower after yesterday's earnings pop. Another pop-and-flop. Grrr. I am short strangles now.

Mon Sell ACT Jun 260 p @302.7. New long position in Actavis. ACT gapping higher on earnings. I selling puts way out of the money because so many of these IBD (Investors Business Daily) kind of stocks have popped then dropped.

Sell YUM Jun 80 p @90.1. New long position in Yum Brands. Earnings were about three weeks ago. Chart base is 80. Not much premium on these way out of the money puts.

Sell MRK Jun 57.5 p @60.5. Add to longs in Merck. The earnings gap was around 58.

Position Summary:
net neutral ACT ASH IWM SPY
long BRKB DE DIS EL JBLU JPM MRK SKX YUM
net long DATA FXI HON LOCO
expired/closed AMBA APC CAT FB GPRO HAR JWN KMX PANW STJ UNH VRX XOM

Saturday, May 09, 2015

Weekly: Hamster Wheel


In their monthly update, Schwab described the current stock market as a Hamster Wheel. It felt that way for me this week. Friday's big rally was like a bit of hamster kibble for my efforts. There was some good, some bad. Like many traders, the bad tends to stick in my mind. 

I made money, but felt like I left a lot on the table. I got chewed up and spit out by GPRO, and lost on one leg of JPM on the Friday rally. My defensive moves from last week were premature, overly cautious. Highlights include new longs in EL JBLU. 

Here are the trades from the Hamster Wheel week: (p = puts, c = calls, sell means sell-to-open, all are third week of expiration unless noted: Disney is a May week 5)

Fri Sell EL Jun 82.5 p @88.6. Add to longs in Estee Lauder. Chart base is around 83.

Cover (buy to close) JPM May 65 c @65.1. I close this leg on JP Morgan Chase bank for about a 75% loss as JPM crosses the strike price to the upside. By the time I type this up JPM drifts lower to 64.7, so not the best timing on the exit.

Sell IWM Jun 111 p @123.1 Rebalance my position in the Russell 2000 etf as it rallies.

Cover (buy to close) GPRO May 54 c @50.6. Close this leg on GoPro for about a 180% loss. I am waving the white flag. I mangled this trade. I was chewed up and spit out by the tape action, losing on both sold puts and calls.

Sell DIS MayW5 103 p @110.0. I sell some week-five puts on Disney. Tape action hasn't been great after good earnings, but it is a name worth buying on a pull back.

Sell JBLU Jun 19 p @21.8. New long position in JetBlue. Not much premium, because I am giving it some room.

Thu Sell SKX Jun 80 p @95.2. Add to longs in Sketchers.

Sell ASH Jun 115 p @129.6. Add to longs in Ashland.

Wed Sell EL Jun 80 p @86.3 New long position in Estee-Lauder. EL broke out from a chart base after a great earnings report. Anecdotally, these mid level names seem to be holding a bit better than the most popular stocks.

Sell HON Jun 105 c @101.1. Hedge my half position in Honeywell stock as it declines. HON has been a "problem ticker" most of 2015 for me.

Sell FXI Jun 56 c @49.9. Rebalance my complicated position in the China Large Cap etf.

Cover (buy to close) GPRO May 46.5 p @47.9. I take a 350% loss, basis premium collected, on this leg for GoPro. GPRO did bounce off the minor support at the chart gap around 47. However, the overall stock market is bleeding red with SPY - 2.0, so I am not in a mood to trade technical bounces so am taking my loss while it is still manageable in dollar terms. Low of the day was 46.50, same as the strike price. I am still short May 54 calls and May 58 calls.

Tue Sell IWM Jun 130 c @121.5. I hedge yesterday's put sale on the Russell 2000 by selling calls. My bullish idea has been met with lower prices.

Sell GPRO May 54 c @48.1 Rebalance my position in GoPro.

Sell SPY put backratios: 
Buy SPY Jul 190 p, Sell 2x SPY Jul 185 p @209.3
These backratios are for credit, net long delta, with the potential for a large profit on a decline to exactly 185 at July expiration. They protect against a 10% decline, though loses cascade on a drop below SPY 180 (about a 15% drop from here). If the market is up or flat, I keep the small credit.

Mon Sell IWM Jun 109 p @122.7. I often sell these Russell 2000 puts near the 10% probability line around the start of the month. A good, easy way to edge back in, after last week's beating. Marketwatch lead story this morning is about the stock market bubble popping, a good sign for bulls.

Sell JPM May 62 p @64.1 Rebalance my position in JP Morgan Chase bank. I was already short May 65 calls and June 60 puts on JPM.

Position Summary:
short CAT FB GPRO HAR UNH
net neutral AMBA FXI KMX PANW STJ
net long DIS IWM SPY
long APC ASH BRKB EL JBLU MRK SKX XOM

short means I sold calls
net neutral: short strangles or similar, delta near 0
net long: short strangles, with a bias to long
long typical means I sold puts

Saturday, May 02, 2015

Weekly: Down Goes Frazier

I took some profits and experience a couple of bad losses. The losses dominated and it was a bad week. With the big boxing match on Saturday, Howard Cosell's famous call for Foreman-Frazier came to my mind.
https://www.youtube.com/watch?v=JZEIMQ42-oU (link)

Following the boxing analogy, I take a couple of body blows. HAR is the main culprit, gapping down on earnings. The worst part might be how badly I was chewed up and spit out, by the tape action. Either a trader takes losses or doesn't. Either uses stops or doesn't. With a financial bloody nose, I tread ever more cautiously. The huge rally on Friday adds to my frustration. 

All I can do is dust myself off, get up from the mat, clear my head, and get ready for whatever comes next.

The April 27 Barrons had an article about big money managers. Most of their wealthy clients are cautious. Many are pulling money out of the stock market. Again, this might be the most hated bull market I have ever seen. 78% of the advisors and clients expect a 10% stock market correction within 12 months. Rarely do markets accommodate the crowd. One scenario is a speculative phase, with a swift and sharp move up. A speculative phase would increase risk and reward. As always predictions are mostly for entertainment. Risk management is where I tend to make my money.

Here are the trades (p = puts, c = calls, sell means sell-to-open, all are third week expiration): 
Thu Disaster! Harmon Intl (makes car audio equipment) gaps lower on earnings. I bail out of my sold puts for huge losses:

Cover (buy to close) HAR May 125 p @124 About a 650% loss
Cover (buy to close) HAR May 120 p @122 About a 350% loss
I am still short HAR May 165 calls. OMG. I close both sold puts in the first ten minutes, not waiting for a bounce (or possibly more damage). Market for HAR is fast and wide. I use limit orders, closer to the ask than the bid. Rule #1 is to live to trade another day. While a 650% loss is painful, it comes with the style of selling options at the 10% probability line. The trader buying options with a 10% chance of profit is hoping for a 10x pay out. As the option seller, sometimes I have to pay off on the long shot. These two losses put a rather large dent in my profits for 2015. Mid-day update, wowsers, HAR back over 133 by mid-day. Grrr. These things happen.

Cover PANW May 145 p @151.0. I take a 100% loss in three days, on this leg for Palo Alto Networks (cyber security). After the shell shocker loss in HAR I am reducing risk. I don't like the tape action in PANW, and am short two other layers of puts.

Sell GPRO May 57.5 c @50.9. I hedge sold puts by selling calls on GoPro as it dips after the big up day.

Sell DIS May 118 c @109.3. Hedge sold puts in Disney by selling calls. Earnings due before options expire.

Cover (buy to close) FB May 75 p @79.4. I close this leg on Facebook for a 45% profit. FB breaks minor support at 80.

Wed I take some risk off the table by closing some positions in KORS UA UNH WHR:

Cover (buy to close) UA strangles May 75 p / May 90 c @79.5. I close the short strangle on Under Armor. UA broke 80 to the downside, so I am closing both legs for a tiny profit while I still can get out of the position with a plus sign. The puts are at a big loss, but the calls more than make up for that. For the summaries, I count each leg separately.

Cover (buy to close) KORS strangles May 60 p / May 67.5 c @61.5. Michael Kors giving up the ghost today, so I close this one for a 25% profit, basis premium collected. Same thinking here, to get out while I can get out with a profit. Both legs come in as small winners.

Cover (buy to close) UNH May 110 p @114.3. United Healthcare down hard after breaking the 50 day moving average. I am still short two layers of calls. I close this leg for about a 150% loss. Even if both calls come in safe, the overall position will still be slightly in the red.

Cover (buy to close) WHR May 165 p @179.4. Whirlpool earnings a day or two ago were poor. I sold way out of the money, so am able to book a 35% profit. Again, getting while I can get out green. WHR can be a fast moving stock and options bid/ask spreads sometimes are ridiculously wide, so the exit can be difficult.

Cover (buy to close) CAT May 89 c @87.7. I take a 400% loss on this leg on Caterpillar. Simple explanation is I made a mistake, bad trade, bad timing, bad loss. I decide to take my medicine instead of using the strike price as a stop level.

Sell GPRO May 46.5 p @53.4 New long position in GoPro. The gap is at 47 on the chart. These are near the 10% probability line that I prefer.

Tue Sell STJ May 75 c @71.9. Hedge sold puts by selling calls. St. Jude Medical is another pop higher on earnings, now flopping with no follow through.
Sell MRK May 58 p @60.1. New long position in Merck. MRK higher on earnings. On the chart, 58 is the gap.

Mon Sell PANW May 145 p @157.5. Rebalance my position in Palo Alto Networks as it continues higher.

Sell DIS May 103 p @110.3. Add to longs in Disney, which is higher on a strong opening for the new Avengers movie, Age of Ultron.

Saturday, April 25, 2015

Weekly: new highs

New highs might be in a tiny font because the fanfare is subdued. While there are stirrings of the public getting in, most people on the street still have a tepid attitude towards what has been one of the great bull markets. Some big company earnings came out this week. I did okay with my FB earnings play, new longs in SKX STJ, new short strangles in CAT HAR KORS LOCO UA. (p = puts, c = calls, sell means sell-to-open, all are third week expiration unless noted).

Fri Sell FB May 88 c @82.1. I hedge the May 75 puts I sold a while ago, by selling calls. This gets me to near neutral. The big up days in AMZN, GOOG, MSFT likely means a lot more attention for those stocks and less for Facebook.

Thu Close FB backratio @83.9: sell May 85 c / buy 2x May 90 c
FB earnings a bit disappointing. I was hoping for a couple of bucks of rally. I see any profit when buying premium going into earnings as a good thing, so I get out very early in the day for about a 45% profit after the substantial commissions. Using a baseball analogy, I swung hard, and ended up with a bloop single off the end of the bat. It looks like I could have done better by waiting 20 minutes as FB goes green for the day. If my "bad trades" are coming in at +45% it is going to be a great year. The three other FB legs where I sold premium doing great on the flat report.

Sell CAT May 80 p @86.2 New long position in Caterpillar. CAT up on earnings. Not much premium in these puts, but I am giving myself some room. About an hour later, CAT now in the red, I sell May 89 c @84.2 19 to turn it into a short strangle. Another earnings pop that turns into a flop. Grrr.

Sell HAR May 125 p @147.1. Rebalance short strangles in Harmon Intl car audio supplier. HAR continues to move up after its break out on earnings.

Sell SKX May 80 p @86.2. New long position in Sketchers (sneakers). SKX up on earnings, followed by two analyst upgrades. Another pretty chart formation.

Wed Sell FXI Jun 45 p @52.2. Rebalance my position in the large cap China etf by opening a June position. On the chart, 45 is the 50 day moving average.

Sell STJ May 70 p @73.1. New long position in St. Jude Medical. STJ up on earnings. The chart is a beautiful text-book breakout pattern from a flat base.

Sell UNH May 125 c @117.5. Rebalance short strangles in United Healthcare. UNH not acting well. Recent high is 123.8.

Tue Sell FB May 75 p @84.3. Rebalance a complicated position in Facebook, back to net long, as FB rallies ahead of earnings.

Sell PANW May 135 p @149.9. Rebalance short strangles on Palo Alto Networks as it breaks out from a chart base. This gets me to net long.

Sell BRKB Jun 130 p @142.1. Add to longs by opening a June position in Berkshire Hathaway.

Sell FXI May 46.5 p @51.7. Rebalance short strangles in the large cap China ETF as it bumps higher.

Sell UA strangles: May 75 p / May 90 c @84.0.
New short strangle with a bearish slant on Under Armor. UA down after earnings.

Sell KORS May 67.5 c @62.4 23. I hedge yesterday's newly sold puts by selling calls on Michael Kors.

Mon Sell HAR strangles: May 120 p / May 165 c @143.2
Harmon International, car audio supplier is up after an analyst upgrade. Earnings due out in early May so volatility is elevated on the May options. A short strangle is a bet on a trading range.

Sell LOCO strangles: Jun 23 p / Jun 35 c @28.7
El Pollo Loco is a regional restaurant chain. I like the 23 price point on the chart. LOCO a bit extended on the upside so I hedge by selling otm calls.

Sell KORS May 60 p @62.0. New long position in Michael Kors, clothes, purses, accessories. KORS down on analyst downgrade. Chart looks like it may be capitulation, with another down day on the news, after a long down trend. This is much closer in than I tend to sell puts.

Position Summary:
long: APC ASH BRKB DIS SKX STJ VRX XO

net long: AMBA FXI HON JPM KMX PANW 
net neutral: CAT FB HAR IWM KORS LOCO SPY UA WHR 
net short: JWN UNH


Saturday, April 18, 2015

Sell in May? 57 - 3 - 1 for April, grade A-

Another month of solid gains. I count of 57 winners, 3 losers, 1 unchanged, for the April option cycle, grade A-. Stock market consolidation can be good for option premium sellers. Some ways I have been evolving is doing a few more weekly options, and trading some big name stocks. I still do mostly traditional third week of expiration, but occasionally find something in the weeklies. In the past, I haven't had good experiences trading some of the big name option stocks such as Apple or Tesla. 
 
Again, for new readers, don't get too excited by the high win percentage. 80% to 90% is expected for my style of trading. The option buyer is hoping for a big 10x payoff, with only a 10% chance of profit.

The big question on many minds is whether sell in May and go away will work or not this year. Back in May 2014, I wrote "Tea Leaves for a Market Top." I keep going back to that. Some pieces of the puzzle are now present. The transports (IYT) are diverging from the overall market (SPY or VTI). The local stock market meetups are full of people. The Santa Monica meetup has to turn people away. Newbies are coming into the market. The main piece that is missing is the inverted yield curve. Quantitative easing in Europe and expansionary monetary policy in much of Asia remain big engines driving the global markets. 
 
The U.S. Fed is getting ready to tighten. There have been many articles about how the stock market keeps going up after the first Fed rate hike. The cliche I learned is two steps and a stumble, meaning the market goes down after the second rate hike. With so many people playing this game, it might be a good idea to leave the party early. No need to stay for the very last dance. However, the market's last bull phase can be rewarding as speculative behavior can be excessive. Some might say it is already that way, but only in hindsight will we know for sure.

I'm almost always cautious, but even more caution might be a good idea. For the most part, stock market bears have been frustrated. There are a few isolated stocks that have had decent down moves, but pickings have been slim and difficult. In the last days of a bull, the action can be choppy, so timing the tops is an extremely difficult game.

For now the bull market is still in force. The last piece of the bear market case, perhaps the most important piece, is an inverted yield curve and that tends to happen with Fed rate hikes. Some may wait for stock market technicals to confirm the down move by breaking below some long term moving averages. If it is a shallow correction, instead of a bear market, those moving averages can be good times to buy. Again, we won't know if it is correction or bear market until the dust settles.

Weekly: boat limps into harbor

It felt like a very long week, mostly due to the action on Friday. The down move has my boat limping into expiration harbor after the storm. I survived okay, but it wasn't smooth sailing. 

A few highlights include a new position in JPM, some damage control in XOM, adding long to FB ahead of earnings. I am up a bit for the week. TSLA was a lot of the gain, as all five April legs sold on TSLA came in profitable. UNH earnings came in good, HON not so good. 

I'll post the monthly round up in another day or so. Here are this week's trades (p = puts, c = calls, all are third week expiration unless noted):

Fri Sell JPM May 65 c @63.2. I hedge the Jun 60 puts I sold, by selling May 65 calls on JP Morgan Chase. With a new Star Wars movie trailer in the news, I paraphrase Hans Solo, "I have a bad feeling about this," with SPY down hard on news from China.

Sell HON May 105 c 101.7. Honeywell down after earnings news. The layers of April options I sold look to be safe, but I have a half position in shares that I am hedging by selling calls. I bought the shares when I was short 105 Mar calls and HON went to 106. It hasn't exactly worked out as planned. Despite some poor timing, I am still up a bit for 2015 tallying up all the trades for HON.

Sell UNH May 130 c @119.4. United Healthcare was up on earnings the other day. I sold some May 110 puts, and am hedging those by selling calls.

Sell FB AprW4 90 c @81.2. I reduce delta on a complicated position in Facebook by selling these earning's week calls (earnings out next week, these are week four options).

Cover (buy to close) TSLA Apr 190 p @203.7. Cover Tesla puts for a few bucks to free up buying power.

Sell JWN May 82.5 c @77.6. Nordstroms not acting well, lagging the retail etf, so I am hedging sold puts by selling calls.

Sell FXI May 58 c @50.0. Hedge sold puts by selling calls on the China ETF.

Later in the day, I cover some puts, just in case there is a knife down at the close. I am in no mood to "dance with the devil" on expiration day.

Cover (buy to close) COST Apr 140 p @143.6]
Cover (buy to close) FB Apr 79.5 p @80.6
Cover (buy to close) TSLA Apr 197.5 p @204.5. 


The market rallies a bit into the close, so my precautionary moves cost me a buck, two or three on some of these contracts. Rule #1 is live to trade another day, Ninety minutes ago there was little way to tell if the closing action would be wild or mild.

Thu Cover (buy to close) XOM May 82.5 p @87.6. I got head faked yesterday, closing out short May 90 calls on strength. I decide to cut my risk and bail from this leg of Exxon Mobil for break even. I don't have a good feel for XOM at the moment. When in doubt get out.

Sell UNH May 110 p @121.4. United Healthcare up on earnings. My short strangles for April look to be safe. I rolled the dice holding through earnings and rolled a 7. All the April legs look relatively safe with only one day left and earnings news out.

Wed Cover (buy to close) XOM May 90 c @88.4. Exxon Mobil up again today. I cover this leg for about a 300% loss, basis the premium collected. I am doing this so that the loss from this leg doesn't exceed the gain from selling other legs, so the overall position comes out okay. Some might say this is convoluted logic. My thinking is that if my bad trades tend to be near break even, it will end up as a good year.

Tue Sell PANW May 165 c @144.2. I hedge my short May 125 puts by selling calls on Palo Alto Networks. Earnings are after May expiration, and I don't see it breaking out of its base before then.

Sell XOM May 82.5 p @87.0. I rebalance short strangles on Exxon Mobil as it rallies. I am short the May 90 calls, so it is getting a bit uncomfortable.

Cover (buy to close) HD Apr 105 p @114.0. Cover for two bucks for buying power.

Sell JPM Jun 60 p @63.1. New long position in JP Morgan Chase bank. JPM up on earning. I like the chart pattern. I am selling puts further out in time and closer in price than I often do, because the setup looks very good. I will see if this works or not. When timid traders get a bit more aggressive, sometimes they get burned.

Mon Sell TSLA Apr 197.5 p @212.1 Rebalance my position in Tesla Motors with yet another layers of puts as TSLA creeps higher. My short calls are a 222.5.

Sell FB AprW4 74 p @83.4. I add more delta as Facebook moves higher. These expire after earnings, so implied volatility is elevated. There is a thick band of support on the chart at 77 and lower. I have a complicated position in FB, net long. 

Position summary:
long APC ASH BRKB DIS VRX WHR XOM
net long AMBA HON IWM JWN JPM KMX UNH
net neutral FXI PANW SPY 
 
expired/closed AAPL BA COST FDX HD LOCO MNST TSLA
 

Friday, April 10, 2015

Weekly: AAPL FB TSLA FXI


I figured some big name ticker symbols might get some attention. I initiate complicated positions in Facebook and Tesla Motors. I dipped my big toe in the water with new longs in Apple and the China Large Cap ETF. Stock market is up about 1.6% for week, which is a pretty good week. With the gap down on Monday after the Good Friday employment report, aggressive bears got skewered. Traders that keep trying to call a trading top have to be discouraged at the up week after a gap lower open on weekend news. 
 
I was tempted to use the topic header Spring has Sprung. After a couple of tepid weeks, making only a few trades, I made a bunch of trades this week. I already gave the highlights, so on to the trades. (p = puts, c = calls, all are third week expiration unless noted).

Fri Sell FXI May 44 p @50.2. New long position in the China Large Cap ETF. On the chart, 44 is the break out base. 44 is also at the 10% probability line, where I prefer to establish new positions.

Sell AMBA May 60 p @76.3. I add delta to a complicated position in Ambarella as it moves up. AMBA is a supplier to GPRO and some police camera makers. Probably moving up on news of more orders by police departments.

Thu Sell FB Apr 79.5 p @82.6. I add delta to what has become a complicated position in Facebook.
Cover (buy to close) XOM Apr 75 p @84.2. Close a layer on Exxon Mobil for a buck per, to free up buying power.

Wed Sell TSLA Apr 190 p @210.2. Tesla gaps up and I rebalance again.

Sell PANW May 125 p @146.0. I open a May position in Palo Alto Networks.

Cover (buy to close) 2x SPY Apr 174 p @208.1. I free up some buying power by covering this leg of the put backratio for a buck per contract. I am to the yellow line on buying power, this gives me more room to maneuver.

Sell JWN May 72.5 p @80.1. Add to longs by opening a May position in JW Nordstroms.

Sell WHR May 165 p @195.0. I open a May position in Whirlpool. WHR down in sympathy with Electrolux which says appliance sales are weak.

Cover (buy to close) DIS Apr 95 p @106.0. Cover this layer on Disney, for a couple of bucks to free up money.

Sell FB call backratio / 
Buy May 85 c / Sell 2x May 90 c @82.2
I add to longs in Facebook with a call backratio, which is something new for me. This is a debit spread, max profit occurs on a move to 90 at May expiration. Unchanged, down or a big rally past 95 makes for losses. Delta positive, theta slightly negative, small debit. Why this? I am bullish on Facebook, but think any earnings rally will meet resistance at 90. Past moves have been more like 5 points. A five point rally would be good for this position.
Cover (buy to close) IWM Apr 110 p @125.5. Russell 2000 cover, to free up money.

Tue Sell BRKB May 135 p @143.9. Add to longs by opening a May position in Berkshire Hathaway.

Sell KMX strangles May 67.5 p / May 80 c @73.9
Car dealer CarMax recently gapped up on earnings. The last couple of times it did that, KMX drifted lower, but not quite filling the gap. A short strangle is a bet on a trading range.

Sell TSLA Apr 222.5 c @201.5. Tesla Motors moving lower after a big up day yesterday. I go net short by selling calls (was short puts). I now have a short strangle. By the time I type this, TSLA goes green for the morning. Sheesh.
A few minutes after selling the calls I rebalance by selling another layer of puts:

Sell TSLA Apr 185 p @203.4. (shakes head) Readers can see this as Exhibit A as to why I favor delta neutral, high probability option selling vs. buying premium and being directional. My intra-day timing is often poor.

Sell DIS May 95 p @106.0 I open a May position on Disney. On the chart, 95 is the old breakout level.

Sell VRX May 145 p @200.5 I open a May position in Valeant Pharma, way way out of the money to the 93% probability line. 145 is an old break out level on the chart.

Mon Stock market gaps lower at the open, but now is up for the day.

Sell FB Apr 77.5 p @81.7. New long position in Facebook. FB tried to break out from a base and is now back down. I see 80 as chart support, 79 is the 50 day moving average.

Sell TSLA Apr 175 p @202.5. New long position in Tesla Motors. TSLA reporting a 55% year-over-year sales gain. TSLA tested chart support and on the news is popping up. I am going way out of the money, to give myself lots of room. This means a higher probability but a much smaller premium (profit).

Sell SPY backratio @206.5: buy Jun 185 p, sell 2x Jun 180 p I sell these put backratios on SPY as a hedge against a 10% correction for my net long portfolio. If the market is up or sideways, I keep the small credit. If there is a 10% decline into expiration, there can be an explosive profit. If SPY crashes through the lower strike, losses occur. These add delta (net long).

Sell AAPL Apr 119 p @127.0. Renewed long position in Apple. Market rally continues to gather steam. 120 is chart support. Premium is tiny, but the market has been so choppy, I am giving myself some room.

Sell XOM May 77.5 p @85.1. Rebalance short strangles on Exxon Mobil back to net long.

Later in the day I add some more delta (add to longs):
Sell APC May 72.5 p @86.3. Add to longs on Anadarko Petroleum with a May position.
Sell IWM May 114 p @125.3. Rebalance short strangles on the Russell 2000 etf.

Position Summary:
long AAPL APC BRKB FXI HD JWN LOCO UNH VRX
net long AMBA FB PANW WHR
net neutral BA COST DIS FDX HON IWM KMX MNST SPY XOM
net short TSLA