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:
net neutral FXI PANW SPY 

Friday, April 10, 2015


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:
net short TSLA

Friday, April 03, 2015

Trading Styles

If you are looking for the typical weekly trade summary, it is right under this post. With the market holiday, time for a rare bonus post. I don't give specific advice. However, I often tell novices that there are thousand ways to make money in the markets, and for each person to look for one or two that work for you. What works for me, may be a terrible fit for you, and vice-versa. So this post is about a few different styles.

My style tends to be low risk, low reward, high probability. I use a mix of technicals and fundamentals. My analysis tends to be shallow. I tend to have a lot of small to tiny positions, and I tend to use mental stops.

Classic trading training involves 33% winners, 66% losers, but with small losers and big winners. The CANSLIM method teaches this kind of risk management. With 7% stop losses and 20% gains as the first price target. So even if a trader loses 2 out of 3 times, it they are losing 7% on the losers and making 20% on the winners, they net out to plus six percent.

Some traders like charts. Others like to trade news. In the old days, there tape readers. These old timers could watch the ticker and get a good feel for the market or for their stocks. There are those that invest (rare for traders) mostly on fundamentals.

At the recent CANSLIM meetup, there was some discussion on concentration. IBD, CANSLIM, William O'Neill teach concentration. Maybe 5 stocks in the portfolio, no more than 10. 

Some at the meetup focus even more, perhaps putting half or one-third of their entire cash account into one position. Age plays a role. A young person with a high income, stable job, high savings rate, can take more chances. They will quickly replace any losses with new savings. 

Someone with limited income, or perhaps a big nest egg from an inheritance or other one-time event, would probably do better taking smaller risks and diversifying.

Indexing is as popular as ever. Search on Three Fund Portfolio, or Lazy Portfolio to get an idea of what that is about. The biggest colony of indexers call themselves Bogleheads, after Jack Bogle, founder of Vanguard. These folks keep it simple. They write out an Investment Policy Statement, and stick to that. Typically that will set an allocation for various asset classes (most stick to stocks, bonds, and international stocks), and what they plan to do if and when the market moves a lot. Whether to rebalance into a weak class or hold firm.

For technical traders there are many sub-types. There are trend followers, range traders, scalpers, home run hitters. Some use simple analysis. I tend to mostly look at a few moving averages, support and resistance and maybe a momentum indicator. I don't get heavy into indicators. Many beginners are attracted to stochastics. Bollinger bands, MACS are two more very popular tools. I never found much value in Elliot Wave theory, but others have been successful with that.

So if you are a beginner, try a lot of different things. Do you like reading balance sheets and digging through fundamental data, perhaps using screening tools? Do the charts "speak to you," or does it mostly seem like an arcane art. Do you have a high tolerance for losses, or is a high probability style with occasion big losses more suitable? Obvious the financail "unicorn" is high probability and high profits, but if a person had that, they wouldn't be reading my blog.

There are few rights and wrongs. There isn't a one-size fits all. Traders (and investors) can be successful using almost anything. What works for one person may be a terrible fit for another person. Keep a trading journal. Find what works for you.

Weekly: chop chop

For those that celebrate, Happy Easter and Happy Passover.

The market continues its choppiness. I get chopped up a bit more in UNH. UNH gapped higher on news, then gave that all up, and I traded against the moves and it cost me a bit. I opened up some May strangles on AMBA, IWM, and XOM. I add to longs in ASH. That's it for a quiet week for me. Futures gapped lower on the Good Friday employment news, so next week may be interesting.

Here are the trades (p = put, c = call, sell means sell to open, all are third week of expiration):

Thu Sell AMBA strangles: May 60 p / May 95 c @74.9
I sell May strangles on Ambarella. AMBA has been a strong stock. It is a bit extended on the upside. The strangle skews towards the bullish side.

Sell XOM strangles: May 77.5 p / May 90 c @84.4 
I sell May strangles on Exxon Mobil. XOM seems to be finding a bottom, but upside seems limited. This strangle also skews bullish.

Sell ASH May 110 p @127.3 35 I add to longs by opening a May position in Ashland.

Wed Sell IWM strangles: May 111 p / May 132 c @124.0
I sell strangles on the Russell 2000 etf. This is a bet on a trading range. The put is near the 90% probability of profit line, the call at 93% probability.

Mon Sell UNH Apr 115 p @122.2. Rebalance short strangles on United Healthcare. When is good news, bad news? When you are short calls and the stock gaps higher. Cheese. I am short 124 and 125 strike puts. Will close each on a close above each price level.

Saturday, March 28, 2015

Weekly: tide goes out

Money flows out of my account this week. There was a headline on Marketwatch about money flowing out of U.S. stocks. Headlines like that tend to be supportive for bulls. As for my week, I didn't do much, and what I little I did do turned out badly. I got whipsawed out of some positions in DIS and HD. That said, it wasn't as if I was aggressively positioned one way or another. The losses make me ever more cautious.
Trades (p=put, c=call, 3rd week of expiration unless specified):

Thu Cover (buy to close) HD Apr 112 p @112.4. Ouch! Home Depot knifes lower at the open and I cover this leg of puts for a 350% loss in three days. Like I said ouch. I don't think it is time to be cute or patient or brave. It is time to be mechanical and unemotional. HD broke the strike price 112 then bounced. The strike price is my mental stop. I got a mediocre fill in a fast and wide market. A few minutes later, HD bounces hard, so I was whipsawed out for the big loss. It happens. It is a hazard of using stops. The hazard of not using stops is risking huge losses if the move continues.

Wed Cover (buy to close) DIS Apr 105 p @105.4. When in doubt get out. In this case for about a 65% loss basis the premium collected. Disney had a nice run up, but now that it is moving down, I'm not seeing chart support until 103. I got into this layer of puts as a rebalancing move. I am getting out early because I have more layers of sold puts at lower strike prices.

Sell HON Apr 105 p @102.0. Rebalance a complicated position in Honeywell. I feel like Charlie Brown from the Peanuts, and Lucy Van Pelt pulled away the football again. HON made a high at expiration back in February and another one now at March expiration. I thought, I was getting head faked, but it was the real deal.

Sell UNH Apr 124 c @116.6. Rebalance short strangles in United Healthcare.

Mon Sell HD Apr 112 p @117.6. Rebalance short strangles on Home Depot.

Position Summary:

Sunday, March 22, 2015

47-9-2 for March, grade B-

I count forty seven winners, nine losers, two break even trades for the March option cycle. As always, a reminder to new readers, don't get excited by the high win percentage. 80% to 90% is about the odds when I go in. Profits tend to be small, and losses can be large. So B- is about right for 81% winners (47/(47+9+2)=81%) because it is around the expected win rate for my style of trading.

It is close to the end of the 1st quarter so I'll update the year to date gains, not including dividends.

SLV +6.5% Silver
IWM +5.3% Russell 2000
TLT +4.4% US 20 year bonds
SPY +2.4% S&P 500
EEM +2.0% Emerging markets
GLD +0.0% Gold

With a late burst Silver takes the suprising lead. Bonds and stocks also had a good week. My trading account is up about 6% in round numbers, which I see as good not great. I know that +6% for 11 weeks sounds boring to many option traders. Risk can translate into reward in options, if a person is correct. I never had much luck buying options, only selling.

Market commentary: Predictions are mostly for entertainment. My market timing skills tend to be about as good as flipping a coin. That said, the bull market is intact for stocks. Bear market intact for gold and silver. 

Some talking heads are talking about a bubble in IPOs and biotech. I got too cautious too early on the biotechs I am trading (AMGN ILMN VRX). Another strong group has been healthcare (UNH), and that group may be nearing a similar blow off top situation. Sometimes a steep rise evolves into another flat base instead of the downslope of a parabola.

There aren't hard numbers about what defines a blow off top. It is more of a picture on a chart. During major tops such as SLV experienced, it doubled the 200 day moving average before peaking. TSLA did similar during its huge run up, but then made higher highs, even after going to 100% above its 200 day moving average. 

Another thing to look for is a 30% to 60% up move during a short time period. Again, no hard definition for short time period, but 30 to 60 days is the ball park I am looking at. So a 30% to 60% gain in 30 to 60 days, after a doubling in stock price or more in the prior year, two, or three years. Lots of wiggle room in that barn, but it may be worth looking for blow off tops for some stocks. Timing the time tends to be difficult, but it can be an entertaining game. In a blow off, smart money tends to be selling at 30% or more, under the ultimate top.

Winning tickers so far for 2015 include: ILMN FDX UNH WHR PANW XOM. Some of this is straight risk/reward and implied volatility. I took some bigger risks on some of these tickers and for some the higher than market IV rewarded me. A remarkable bit of trivia is that I don't have any losing tickers so far for 2015. HON, UNH and XOM have been frustrating at times, but all are at a profit for the year.

Going forward? Again, I fall back to my post Tea Leaves for a Market Top (link). Until we see a divergence in transports (IYT), an inverted yield curve (short term interest rates greater than long term rates), a confirmation of a bear market move by breaking through technical support, the bull market is intact. 

Sentiment is a bit mixed. I mentioned the large crowds at the local stock market meetups. Best to sit near the exit in case someone rings the bell to get out, but for now stay at the stock market party.

Saturday, March 21, 2015

Weekly:Yellin and Yelling

This week was dominated by Fed day and the huge rallies in stocks, bonds, gold that came after. I scrambled to cover short calls. I lost patience with GLD and got out before the Fed news. I got whipsawed on some moves, and glad I covered on some others. My overall market position might be described as short strangles with a bullish bias, so I made money, but not as much as bullish traders did. It was a tough week to be a bear.
Most of the week was spent rebalancing, covering layers of calls on rallying stocks, and covering winning positions early to free up the buying power. I spent most of the week near the redline of buying power, so maybe some over trading. I may look to cut back on the number of trades. The broker always makes money, but activity doesn't always equate to profits. My monthly update will come before Monday.

Here are this week's trades (p = puts, c = calls, all 3rd week expiration unless noted):

Fri Cover (buy to close) HON Mar 105 c x2 @105.2. I close these with about 80 minutes left to trade, rather than "dance with the devil" at expiration. I have two layers, one closes with a decent profit, a breakeven profit on the other. So rather than risk the psychological damage of letting these winners turn into losers, I get out. The other side is that there are only 80 more minutes to trade, and maybe I wouldn't have to cover at all, if Honeywell drifts down. Readers know that I do not see myself as a nimble trader, so playing the last hour at expiration doesn't appeal to me.

Roll (buy to close) HON Apr 105 c @105.4. A few minutes later I roll my April leg up. I close the April 105 calls for about a 300% loss, basis the premium collected, and sell HON Apr 110 calls. Last month's expiration marked a short term high in HON. While that might happen again, I am thinking that this expiration may be a head fake and HON may continue higher. I still have half a position in shares and some short puts. Despite some poor timing on my rebalancing moves, I am still up overall for 2015 on HON.

Sell MNST Apr 130 p @138.1. Rebalance short strangles on Monster Beverage.

Sell UNH Apr 110 p @120.1. Rebalance short strangles on United Healthcare. Looks like it might be a pin situation for UNH at the 120 strike.

Thu I close the last of my Apple options to free up buying power.
Cover (buy to close) AAPL Mar 115 p @129.0
Cover (buy to close) AAPL Mar 138 c

A modest profit overall on Apple, with six trades. There was one 70% loser on the March 125 puts the rest 90%+ winners. I close early to free up the buying power. I used to think of Apple as one of my nemesis stocks, a stock to be avoided because of prior losing trades. I have dispelled that curse.

Wed (Fed day) Sell FDX Apr 185 c @172.2. Federal Express moves lower on earnings. I rebalance short strangles.

Sell MNST Apr 145 c @134.5. Rebalance short strangles on Monster Beverage. MNST broke out on earnings a while ago. Since then it has drifted lower. Resistance at the break out high of 143.9.

Sell APC Apr 70 p @81.4. I open an April position in Anadarko Petroleum. Despite crude making new lows, APC is above its recent lows. This divergence is encouraging.

Sell XOM Apr 77.5 p @85.3. Rebalance short strangles on Exxon Mobil. Similar deals. I was washed out of some Mar 82.5 puts about 8 trading days ago. I am edging back in at a lower strike and near net neutral.

Sell IWM Apr 114 p @124.0. My token response to the rally after the Fed announcement is to rebalance some strangles on the Russell 2000 etf.

Cover (buy to close) HON Apr 105 c @103.5. Honeywell moving higher after Fed news. I was short two layers of April 105 calls and cover one of them for a 55% loss, basis the premium collected. HON has been a "devil-dog" stock for me for the past month or so. I've been mostly selling the lows, buying the highs. My over all HON position is now back to net long.

Cover (buy to close) XOM Apr 90 c @85.7. I close this leg at break even after commissions. That's the main reason for getting out, it is crossing back over the break even line.
Sell DIS Apr 105 p @108.3. Rebalance short strangles on Disney.

Tue I close some SPY and AAPL legs for a buck per contract to free up some buying power.
Cover (buy to close) SPY Mar 179 p x2 @207.3
Cover (buy to close) SPY Mar 218 c @207.3
Cover (buy to close) AAPL Mar 105 p @126.5
Cover (buy to close) AAPL Mar 140 c 2x @126.5

Sell JWN Apr 72.5 p @80.1. I open an April position in Nordstroms.

Mon Cover (buy to close) UNH MarW4 118 c @117.3. Ouch. United Healthcare moving higher this morning and I cover this leg of short calls for about a 110% loss (basis the premium collected).

Sell UNH Apr 110 p @117.8. Two minutes later, I sell some put as UNH at the bid, as it continues to push higher. I am short strangles, but it is a complicated layered position.
Cover (buy to close) UNH Mar 120 c x2 @118.2. It's a runaway train to the upside, and I am getting crushed on calls that I sold. I get out of a double layer of calls, both at modest losses.

Sell HON Apr 97.5 p @102.0. Honeywell is another problem position, and I rebalance a messy position by selling another layer of puts.

Sell PANW Apr 125 p @141.9. Rebalance short strangles on Palo Alto Networks.

Sell DIS AprW2 102 p @107.4. Rebalance short strangles on Disney.

Sell AMBA Apr 55 p @69.6. Ambarella has held up well and continues to advance. I add to a net long position by selling another layer of puts. 50 day moving average is around 58 and I see that as significant support.

Sell FDX Apr 160 p @176.9. Rebalance short strangles on Federal Express.

Cover (buy to close) MMM Mar 145 p @164. I close my position in 3M Corp for a 95% gain, to free up buying power. The flurry of activity today, has me at the red line.

Position summary:
net long UNH XOM
net short COST HD HON
closed AAPL MMM

Saturday, March 14, 2015

Weekly: treading water

Treading water might be a good analogy for this market. A lot of movement and energy expended to go no where. I spent the week focused on the problem positions that were near the strike price. So my week was similar, a lot of activity, not much to show for it. However, just keeping my head above water is a good thing during a volatile market.

The V-shaped stock market bottom some were expecting, turned into a W and then a squiggly line. SPY S&P 500 is now about flat for 2015. TLT bonds same. GLD gold now down after a bullish January.

Highlights include a new long position in LOCO, new short strangles in PANW and closing my position in GLD. I take losses on some option legs in AAPL HON XOM. Here are the trades:
(p = put, c = call, all 3rd week expiration unless noted).

Fri Cover (buy to close) BRKB Mar 130 p @144.9. Cover these puts on Berkshire for a 96% gain, to free up buying power.

Cover (buy to close) XOM Mar 82.5 p @83.6. Exxon Mobil keeps drifting lower. I close out two layers of puts at this strike price, profit one, loss on the other, basically out commissions plus the price of a cup of coffee on the pair.

Sell XOM Apr 75 p @83.5. After closing those two layers of March puts, I was net short XOM, so I rebalance back towards neutral by selling this layer.

Cover (buy to close) GLD strangles Mar 110 p / Mar 130 c @110.9.
I close strangles on gold for a tiny profit. The puts lose, the calls win. GLD has been in a drip, drip, drip steady decline with the rally in the U.S. dollar. GLD is near support at a recent low. I am out before the overall position turns into a loss. My thinking, is if gold was going have a decent relief rally, today looked to be the day on an up open, then it faltered again.

Sell HON Apr 105 c @100.3. Rebalance a complicated position in Honeywell. I've made quite a mess with HON.

Sell LOCO Apr 23 p @27.4. New long position in El Pollo Loco. LOCO holding up well today in a weak market environment. Chart looks supportive. Strike price of 23 is below the recent lows.

Thu Sell AMBA AprW2 58 p @68.9. Rebalance short strangles in Ambarella back to net long. as it continues to rally. AMBA one of the few stocks that held up well during the recent market sell off.

Sell DIS Apr 100 p @105.2. Rebalance short strangles on Disney on a strong up move.
Cover (buy to close) DIS Mar 90 p and 95 p @104.9, a few minutes later I cover two layers of March puts for a 90%+ gains to free up the buying power.

Sell HD AprW1 108 p @115.4. Rebalance short strangles in Home Depot.

Sell UNH Apr 105 p @114.8. Rebalance short strangles in United Healthcare.

Sell HON Apr 95 p @102.0. Rebalance a complicated position in Honeywell.

Wed Cover (buy to close) IWM Mar 100 p @120.4. I close this layer of Russell 2000 puts for a 96% gain to free up some buying power. After yesterday's activity, I am near the red line.

Cover (buy to close) HON Mar 100 p @100.7. I close this layer on Honeywell for about a 90% basis the premium collected. Tape action on HON is bearish. I have more layers of sold puts at 97.5 and below, so I am being cautious and taking my loss. Another idea is to sell yet another layer of calls, but that would be a riskier move. With the overall market acting so poorly, more risk isn't needed. Especially since I am near the red line on buying power.

Sell AMBA Mar 58.5 p @67.4. Rebalance short strangles on Ambarella. AMBA showing strength after a good earnings report. It is a bit extended on the upside. These puts are around the 10% probability line, which is where I tend to like to sell options.

Tue Cover (buy to close) XOM Mar 85 p @85.1. I cover this leg of a complicated position in Exxon Mobil as it crosses the strike price. XOM does pop back up. However,today is not a day to try and be a hero with the broad market tumbling, chart support broken. I have several legs of puts at lower strikes. So I take the loss, about 230% basis premium collected. Limit order is at the ask, and I get a better fill than my limit.
A bit later, I reduce delta in XOM by selling calls:
Sell XOM Apr 90 c @84.7. LImit order at the mid price gets a quick fill.

Sell FDX Apr 190 c @171.4. I sell calls on Federal Express to hedge some puts I sold yesterday. I place the limit order a tick below the mid price and gets filled instantly.

Sell HON Apr 105 c @101.8. I rebalance a complicated position in Honeywell by selling April calls. All the other option layers I sold expire in March. I also have a half position in shares. It is a messy position, heavy net long, so I reduce the delta by selling calls. Limit order at mid just sits, so I move it the limit down a tick and HON goes up a tick and I get filled.

Sell BRKB Apr 155 c @143.9. I hedge short puts in Berkshire Hathaway by selling calls. Limit order at mid sits for a while but eventually gets filled.

Sell DIS Apr 110 c @103.5. Hedge short puts in Disney by selling calls.

Sell WHR Apr 230 c @203.5. Hedge short puts in Whirlpool by selling calls.

Sell UNH Apr 120 c @113.5. Rebalance a complicated position in United Healthcare.

Sell HD AprW1 120 c @113.0. Hedge short puts in Home Depot by selling calls. I choose the April Week 1 calls because I want to stay near the 10% probability line for selling options. Minor resistance at the recent highs around 117.9.

Mon Sell AMBA Mar 57 p @66.4. Rebalance short strangles on Ambarella. I hit the bid on these puts as AMBA moves up. 57 is around the 50 day moving average.

Sell strangles on PANW @136.6
Sell PANW Apr 115 p / Sell PANW Apr 165 c
I sell April strangles on Palo Alto Networks. PANW popped higher on earnings and news and now is fading back. A short strangle is a bet on a trading range.

Sell WHR Apr 175 p @203.6. I open an April position in Whirlpool. WHR is yet another stock that moved up on earnings and is now fading. It is near the 50 day moving average. I am going way out of the money on these puts because it has run up so much during the past 52 weeks.

Cover (buy to close) AAPL Mar 125 p @127.0. I cover one layer of a complicated position on Apple. The other options I sold look to be relatively safe. I am selling because I don't like the intra-day chart action. I am taking about a 90% loss on this leg, basis the premium collected. Obviously, I would have been much better off if I covered at the highs of the day. If I could call tops and bottoms reliably, I wouldn't sell strangles, I would trade directionally and make 10x as much money on the capital invested.

By the time I type this, AAPL is now down. Whoosh! Maybe my other legs aren't safe. Low of the day so far is 125.06, high 129.57, then a slightly positive close. The sell off might be a down move to take out some day trading stop-loss orders. Long time readers know that I don't like fast moving markets.

Sell FDX Apr 155 p @173.1. I open an April position in Federal Express.

Position summary:
net short: DIS UNH
new long LOCO
closed GLD strangles
expired some AAPL weekly strangles, still have more for next week and next month