Friday, April 27, 2012

Buy AAPL (sell vertical)

Buy AAPL via selling vertical spread
Buy May 535 puts AAPL @604.5
Sell May 545 puts for net credit

Apple drifting lower, 555 was the low on the day before earnings, so I see that as significant support. My thinking is similar to the AMZN trade earlier today, but I wanted to wait until a down day for Apple before doing it. A vertical helps with the margin requirement and limits max downside. Trade off is a smaller potential profit than selling puts naked.

Elsewhere, the rally in IWM Russell 2000 ETF has flipped my position to net short.

Net short IWM

Buy AMZN (sell vertical)

Buy AMZN via selling vertical put spread
Buy May 185 puts
Sell May 195 puts AMZN@224.7 gaps up on earnings. 195 is yesterday's close. Not much premium from this trade, but with the market rally premiums have been decreasing. I do a vertical to help with margin requirements and limit downside if there is a market crash on this high priced underlying. In exchange, I give up over half the premium from selling the 195s to buy the 185s.

Net long GLD IWM SPY

Wednesday, April 25, 2012

Bespoke survey: bearish on treasury bonds

Someone on the Vanguard forum posted a chart (link1) about an investment survey. Here is the thread (link2).

The only number that stands out is the percentage that are bearish on U.S. Treasuries. It is interesting that they are not near as bearish on U.S. corporate bonds or municipal bonds. The rest of the numbers aren't extreme enough to give a signal.

I looked up Bespoke Investment Group, didn't find all that much background, founded in 2007 by Paul Hickey and Justin Walters. Their pitch is custom "tailoring" of portfolios.

Bullish treasury plays would include buying TLT (20-year Treasury bond ETF) or EDV (zero coupon U.S. Treasury ETF).

Buy AMGN and IWM (sell puts)

Buy AMGN via selling May 65 puts @70.0
Amgen up on earnings. Chart support levels at 68, 66 and 65, then 60. The 52-week high of 70 is resistance. Not much premium from selling these puts, but the market is moving too much for me to have a high confidence level on a higher strike.

Buy IWM via selling Jun 70 puts @81.0
This is a rebalancing move to get back to net long IWM. I was already short May 70 and 72 puts, short May 85 calls, long May 88 calls.

Elsewhere, Apple earnings, Fed news, and many other companies reporting earnings are making for big moves. LGF Lions Gate has a relief rally after a four week nose grinding decline.

Net long GLD IWM SPY

Tuesday, April 24, 2012

Buy MMM (sell puts)

Buy MMM via selling May 85 puts @88.8
Minnesota Mining and Manufacturing up on earnings. Chart support at 85 and then 80.

Yesterday, I placed a limit order to sell puts on MCD McDonalds, but did not get filled.

Net long GLD, IWM, SPY

Monday, April 23, 2012

Buy SPY (sell backratio)

Sell SPY backratio SPY@136.0
Buy Jun 128 puts
Sell 2x Jun 123 puts

This backratio is net bullish (delta positive) with a max profit at the lower strike of 123, sold for a net credit. I like selling backratios when volatility is up. A decline to 123 at June expiration is the best case scenario. A crash below SPY 118 means losses. If the stock market goes up or is neutral, I get to keep the small credit.

Net long GLD, IWM, SPY

Saturday, April 21, 2012

OT: $1000 prom nights and dinners

This is an off topic post. Making the rounds are reports that prom night spending now averages over $1000. To a frugal person, that is stunning, almost unbelievable. Even tougher to process is that low income households (between $20k and $30k per year) tend to spend more than the average. (link1 USA Today). High income families tend to spend less than the average.

Some can read into this, saying that is why the poor are poor, because they blow money on prom nights instead of saving or investing, or using the money to help start a small business. I can see the other side, that this is the one night where the low income kid gets to feel special and live like a wealthy person.

The second news item was the Titanic dinner for $12000 per table, coincidentally about the $1000 per person that prom folks are spending. (link2 Houston Culture). So even in what many see as tough economic times, some have money to spend.

Plenty of pundits advocate frugal living, getting out of debt, and saving more because the end of the financial world is coming. There is something to be said for the opposite, to spend and enjoy life while there are good times to be had. If indeed the sky falls, it usually comes with massive casualties (plague or war or revolution). There aren't many good times available when 25% of the population is dead or dying.

As always, I advocate a healthy balanced approach towards saving, spending and investing. I tend towards the frugal side, but can see the other side too. I don't think the sky is going to fall any time soon. The key word is balance. Find that balance.

Friday, April 20, 2012

12-3 for April

I count 12 winners 3 losers on individual option trades for the April option cycle. I give myself a gentleman's C grade for the month. Overall, my timing was poor, almost comically bad at times. A flat month usually means good times for option sellers, but some big blunders limited my profit. The bright side is another month in the green.

The three losers include a short strangle on APC Anadarko Petroleum, a short put on LGF Lions Gate, and one leg of a put spread on IBM. Winners include short puts on AXP, LGF, SPY, XRT, IWM, IBM, SLV, some with multiple layers of short puts, short calls on APC, IWM.

The big loser was about -330% on the recently rolled LGF Apr 13 puts which I initiated when the stock was 15.1 and rolled with the stock at 12. The short LGF Apr 12 puts got rolled at a profit. Some positions such as APC and SLV were closed early. The SLV puts would have expired worthless. The APCs would have been a lot worse had I stayed in.

Going forward I am short puts on BRKB, LGF, SPY, TLT, and have complicated positions on GLD and IWM that are net long.

net long GLD, IWM

AXP American Express
BRKB Berkshire Hathaway
IBM International Business Machines
IWM Russell 2000 ETF
LGF Lions Gate Entertainment
SLV Silver ETF
TLT Treasury bond ETF
XRT Retail sector ETF

Roll LGF short puts (12s)

I roll my short LGF Apr 12 puts @12.0
Buy Apr 12 puts
Sell May 12 puts

This is my second tier of short Lions Gate puts, not a duplicate post. I rolled the 13s yesterday. The stock is hovering right at the strike price of 12. An assignment at ThinkorSwim is a higher commission rate than a roll.

Elsewhere, stocks have a positive tone on expiration Friday. I look for trades, but with premiums drying up, the risk doesn't seem to worth the small premiums offered.

net long GLD, IWM
expiring today AXP IBM XRT

Thursday, April 19, 2012

Roll LGF short puts

I roll my short LGF Apr 13 puts @12.0
Buy Apr 13 puts
Sell May 13 puts

LGF (Lions Gate) has been a sinking ship for me. I am also short Apr 12 puts. I sold puts when the stock was 14 and 15, so the roll is at a loss. If need be, I will roll the short Apr 12 puts too. Longer term, this stock has some good movie properties, but so far it has been a big loser. Thankfully, the dollar amount is small, even if the loss percentage is huge (about -330% basis the premium of the sold puts).

The rest of my short puts and calls on other stocks and ETFs for April look to expire safely.

net long GLD, IWM

Monday, April 16, 2012

Buy BRKB and SPY (sell puts)

Buy BRKB via selling May 72.5 puts @79.3
Buy SPY via selling May 122 puts @136.9

I sell puts on Berkshire Hathaway and the SP500 ETF. I skipped the April cycle for BRKB because that stock often dips down during tax time, which is now about over. I open a small position on SPY for May, the April 116 puts look to expire safely this Friday. I pick 122 because that is 20 points off the high. I see support at SPY 125. This tends to be a decent time in the option cycle to sell the next month out as so many roll their positions.

Elsewhere, LGF (Lions Gate) is now a significant drag as it is down again, despite decent box office results. SPY opens higher now lower. AAPL and PCLN finally correcting, Apple now down four days in a row. GLD not acting well. My GLD position is now delta positive, because of the move down.

net long GLD, IWM

Thursday, April 12, 2012

Rebalance GLD add more IWM

Buy GLD via selling May 150 puts @162.6
I was already short a call vertical spread (long GLD May 185, short May 173 calls) and losing money on that position. This move still has me net short gold, but reduces the negative delta. I see GLD 150 as major support.

I also buy IWM via selling May 72 puts @80.4.
I was already short layered puts and a vertical call spread. This adds to my net long position on Russell 2000. There is support at 75 and a lot of noise below that.

The other day (failed roll) I did move my order on selling IWM calls and that move of selling IWM May 85 calls isn't turning out too well either. For me, it feels like one bad move after another during the past few weeks.

net long IWM
net short GLD

Tuesday, April 10, 2012

Cover short IWM calls, roll failed

I cover my short IWM Apr 85 calls (Russell 2000 ETF), and try to do a roll by selling the May 85 calls. However, by legging out and then entering a new trade, the market slips and I am left hanging. IWM is down another half point or so and even though I adjusted my roll order, it doesn't look good. It is frustrating, but it happens to all traders that try to leg into trades during fast moving markets. Sometimes it works in my favor, sometimes like today--crunch. I may adjust the price down again to try and get a fill later in the day.

The stock market is correcting, but two of the leading stocks AAPL (Apple) and PCLN (Priceline) haven't corrected much. Thus frustrating many of the would-be bears as so many traders try to call the top in these two big stocks. Hulbert cites a low reading on gold sentiment (usually bullish for gold), and that is troubling because I am short GLD delta. I remind myself, that 80% of the demand for physical is from Asia, and that if the stock market corrects, some may have to sell gold to meet their margin calls.

Bonds (TLT) are acting better and have entered a six month period where they tend to do better. LGF (Lions Gate) is nudging up a bit. I plan to roll my short puts if it looks like an assignment is likely. Same for the my short IWM Apr 77 puts, plan to roll to short May 75 puts if an assignment looks likely.

net long IWM
net short GLD

Tuesday, April 03, 2012

Roll GLD calls (now short)

Buy back short GLD Apr 178 calls
Sell GLD May 173 calls

With this call roll, I am now short GLD by being short a vertical call spread. GLD@159.6 to .7 as I do two separate orders. I am now:
Long May 185 calls
Short May 173 calls

It's been a rough week or so of trading for me, with almost every recent move turning sour. I am trying to lay low and not add to the list.

net long IWM
net short GLD