Friday, November 15, 2013

16-1 for November, also roll XOP XRT put sales

Sixteen winners, one loser for the November cycle. Again, before new readers get too excited, almost all of these were high probability, low reward trades. The trader taking the other side was hoping for a 10-to-1 payoff for buying such risky options.
 
I have another positive month. It may seem like child's play to trade a mostly up market. However it is tempting to out think the room and try to be the hero and call the top.

I also sell puts on XOP XRT.
Sell XOP Dec 60 puts
Sell XRT Dec 81 puts

This is the Oil Exploration ETF (XOP) and the Retail ETF (XRT). Both trades are way out of the money, very low reward, high probability of success (aka as worm trades).

Going forward I am:
Long BA BRKB GDX GILD IWM IYR
Long KORS M NSC WHR TM XOP XRT
Net long APC
Net neutral LGF

Wednesday, November 13, 2013

Buy M (sell puts)

Buy M via selling Dec 45 puts
Macy's up on earnings. Yes, another worm trade. As option expiration approaches, I am putting some capital to work.

Long AMGN BA BRKB FDX GDX GILD IWM IYR
Long KORS M NKE NSC WHR TM XOP XRT
Net long APC GLD LGF SPY

Tuesday, November 12, 2013

Buy GILD (sell puts)

Buy GILD via selling Dec 55 puts
Gilead Science is a drug company. GILD has had a good run, and 55 is way out of the money, making this yet another worm trade.

Long AMGN BA BRKB FDX GDX GILD IWM IYR
Long KORS NKE NSC WHR TM XOP XRT
Net long APC GLD LGF SPY

Thursday, November 07, 2013

Rebalance APC LGF (sell calls)

Sell APC Dec 100 calls
Sell LGF Dec 39 calls

As the stock market moves lower, the short strangles take on more delta and lose money. I rebalance closer to neutral, though am still net long both Anardarko and LionsGate. Overall, lots of red minus signs for my trading account.

Long AMGN BA BRKB FDX GDX IWM IYR
Long KORS NKE NSC WHR TM XOP XRT
Net long APC GLD LGF SPY

Wednesday, November 06, 2013

Buy KORS & TM, sell APC strangles

Buy KORS via selling Dec 60 puts
Buy TM via selling Dec 115 puts
Sell APC strangles: Dec 85 puts/Dec 105 calls

Some late reports from me. Michael Kors is the luxury goods maker, TM is Toyota Motors, APC Anadarko Petroleum.
Long AMGN BA BRKB FDX GDX IWM IYR
Long KORS NKE NSC WHR TM XOP XRT
Net long APC GLD LGF SPY

Sunday, November 03, 2013

Fear of missing out: Marketwatch article

Fear and greed are what tends to drive the markets. Fear of missing out is one of the more common forms. Kirk Spano at Marketwatch has an article about so-called panic buying (link), or the fear of missing out. Performance chasing is another word for it.

Those that only listen to those bragging about profits, might think that market timing is easy because 90% of the reports on the Internet and in person, seem to come from winners. Keep in mind, that the reportage comes from a self-selective group, where the losers tend to be silent. The saddest cases are those that lose everything and never want to speak about the markets again. You rarely hear about the losers on Internet brag boards.

As always, this kind of article is a red flag. However, by itself it is not actionable. A person can continue to watch for other signs and stay alert. It is a not a low risk time to be buying stocks. The bear visits all markets. Trying to time market tops tends to be a difficult, low probability game. Readers know that I tend to favor high probability trades.

Saturday, November 02, 2013

85/15 the Taleb Portfolio

Roger Nusbaum has a blog entry about the Taleb Portfolio (link). Basically, it is keeping 85% to 90% very safe and taking big risks with the rest. In a recent study, 85% in CDs or cash equivalents, and 15% in triple-leveraged ETFs was a winning mix. The caveats as always, are that this is backwards looking. What worked last time may fail the next time.


/edit to add: stable markets would be a time when the 85/15 would under perform standard buy-and-hold. For example, if the stock market (or other market is someone is trading gold or bonds) is up say 5%, a triple-leveraged ETF would likely be down 10% to 15% for the year because of decay and costs, while the average ETF might be up 4.7% (after modest costs). Some might chirp that the interest earned from the CD or Treasury bills might make up for that. However, keep in mind, that if interest rates go up, the decay and carrying costs for the leveraged ETFs will tend to go up as well.

As a fan of process, I find ideas interesting. That said, I am a relatively old dog in the markets (I started trading in 1987), and never have been a big fan of the leveraged ETFs. Others find them useful. Leveraged ETFs are a way to avoid margin calls while using margin and a way to use leverage in retirement accounts.


As I always say, there are a thousand different ways to make money in the markets. Find one (or two or more) that work for you, that match your personality, your strengths. What works for another person may not work for me and vice-versa.

Friday, November 01, 2013

Sell LGF strangles

Sell LGF Dec 30 puts
Sell LGF Dec 42 calls
LionsGate Entertainment has Enders Game opening this weekend and Catching Fire on 11/22, so this a roll of the dice. A short strangle is a bet on a trading range. With the movie releases, option volatility is up.

Long AMGN APC BA BRKB FDX GDX IWM IYR
Long KORS NKE NSC WHR XOP XRT
Net long GLD LGF SPY

/edit to add: Early report is $28 million for the opening weekend for Enders Game. One estimate was $25 to $30 million, so right in the range is what a strangle seller hopes for. We will see if the stock moves on the news. 

Again a reminder, that I will be reporting trades way after the close for the next two months because of limited computer access.