Monday, March 31, 2014

1st quarter review, bonds & gold lead the pack

First quarter review, here are some ETFs that I track and sometimes trade:
TLT +7.1% U.S. 20-year Treasury
GLD +6.5% gold
SLV +4.3% silver
SPY +1.3% S&P 500
IWM +0.8% Russell 2000
EEM -1.9% Emerging markets

* These percentages are approximate and do not include the modest dividends.

Most of the gain for U.S. stocks for the quarter was from today's up move. For the most part, it was choppy trade and I am positive for the year, but only about 0.8%, or about in line with the Russell 2000 stock index.

At the extremes, gold was higher, and emerging markets lower. Gilead this month and Boeing last month are the two biggest losers for me, and why I am lagging behind. The option premiums for bonds and gold are too small for my favored strategy of selling naked puts to yield much gain.

April tends to be the a bullish month for stocks, and May more treacherous.

Sunday, March 30, 2014

One sentence financial advice from USA Today/Motley Fool

A list of one sentence financial advice, via USA Today and the Motley Fool. Here are the top 11, the rest of the 60+ are at the link.

1. Dollar-cost average for your entire life and you'll beat almost everyone who doesn't.

2. Only invest in products and companies you can explain to a six-year old.

3. Every five to seven years, people forget that recessions occur every five to seven years.

4. You're twice as biased as you think you are (four times if you disagree with that statement).

5. Read more books and fewer articles.

6. Read more history and fewer forecasts.

7. It's strange that you go to the doctor once a year, but check your investments once a day.

8. Be careful when reading about how stupid investors can be and not realize you're reading about yourself.

9. Your circle of competence is probably 90% smaller than you think it is.

10. You're only diversified when some of your investments perform worse than others.

11. Big risks will always be disregarded; small risks always blown out of proportion.

Friday, March 28, 2014

Weekly GILD a big loser

I take a big loss in GILD, open a position in GLD. Add to longs in several other stocks.

Fri Buy to cover GILD Apr 70 puts @68.9. Crunch! I take a huge percentage loss on these short puts on Gilead Sciences. Yes, it is oversold, but the small timers on the Yahoo finance board keep adding to longs, and the tape action continues to be terrible. Too much pain for me to stay in the game. I remain short May 60 puts and several layers of GILD calls.

Thu Sell GILD May 87.5 calls @71.5. I hedge my net long position in Gilead Sciences. I am getting smacked around like a ping-pong ball on this stock and it is not pleasant.

Sell IWM May 95 puts @114.5. I add a third layer of short May puts on the Russell 2000.

Sell AMGN Apr 135 calls @123.1. I rebalance my net long position in Amgen by selling calls.

Sell HON May 80 puts @90.6. I open a May position in Honeywell.

Sell IWM Apr 121 calls @114.3. A second layer of short calls (3 layers of short April puts) on the Russell 2000 ETF.

Sell UAL Apr 50 calls @43.9. I hedge my United Airline short puts by selling calls.

Wed I continue to put money that came free from option expiration to work. I am ever more cautious in some ways. The premiums collected yet smaller, the probabilities higher.

Sell UAL Apr 39 puts @45.3. Add to longs in United Airlines.

Sell MSFT May 35 puts @40.3. Add to longs on Microsoft.

Sell HPQ May 29 puts @32.9. Add to longs on Hewlett Packard.

Sell GILD May 60 puts @73.9. Rebalance my net long position on Gilead Sciences.

Sell DIS May 65 puts @79.9. Add to longs on Disney
I sold the above five in the morning, and by the close, they were all in the red.

Tue Sell IWM May 99 puts @117.6. I add to my net long position in the Russell 2000.

Mon Option expiration frees up capital and I put some back to work.
Sell IWM May strangles: May 97 puts @116.8
Sell IWM May 128 calls @116.8

Sell GLD May strangles: May 113 puts @126.3
Sell GLD May 142 calls @126.3
I sell May strangles on the Russell 2000 ETF and gold. Again, short strangles are a bet on a trading range. For GLD 114 was the minor low and 142 a minor high.

Sell BRKB May 110 puts @124.2.
Sell WFC May 44 puts @48.9.
I open May positions in Berkshire and Wells Fargo.

Position summary:

Friday, March 21, 2014

26-4 for March, grade C

Twenty six winners, four losers for the March option cycle. Grade C. The choppy, whipsaw trade continues to be difficult for me to navigate.

Again, before folks get too excited about the win percentage, that is about the odds going in, and the payoffs are scaled to fit those odds. Those buying options with a 10% chance of profit are hoping for a 10-to-1 payout. Selling those options means a high probability of profit, but a slim profit.

Winners include Amgen, Disney, Honeywell, Valeant Pharma. Losers include short calls on Berskhire, Federal Express, and the Russell 2000 ETF. Most of those calls would have gone out in my favor, had I held tight. However, one of the short calls would have become a monster loss.

I made some tiny profits on bonds TLT and gold GLD. The bad news is that option premiums are tiny, and the margin requirements high, so I can justify selling more selling puts on these TLT or GLD.

I am back to green for the year, but commissions are almost equal to my modest profits. Readers can tell I have been a lot more active this year, in terms of number of trades. So far that increased activity has not translated into much, except more in commissions.

Position summary:

Weekly: GILD ruins my week

A down air pocket in GILD on news, ruins an otherwise relatively calm expiration week. I will post the monthly recap a bit later.

Fri Sell GILD Apr 80 calls @72.0. Gilead Sciences down hard on news. I sell calls to hedge my short put position.

Thu Sell IWM Apr 107 puts @119.3. I add another layer to my Russell 2000 net long position.

Wed Sell BA Apr 110 puts @123.9. Worm trade on Boeing

Sell UNH Apr 72.5 puts @79.8. United Healthcare break out to new highs.

Tue Sell DAL Apr 30 puts @33.1. Worm trade on Delta Airlines.

Position summary:

Friday, March 14, 2014

Weekly: Another difficult week

I'm sure someone did well this week, but it wasn't me. I made several moves, and just about all ended the week in the red. Here's the recap:

Fri Sell MSFT Apr puts @38.0
Sell SLB Apr 80 puts @89.5
Worm trades on Microsoft and Schlumberger. What are worm trades? Low risk, low reward trades. Using a fishing analogy, the option premiums are so small, that it is like digging for worms on shore vs. going out on the water for fish.

Sell GILD Apr 87.5 calls @.30 @75.3 hedge
Gilead Sciences down hard on patent news. I sell calls to hedge against short puts.

Thu Sell May SPY put backratio @185.10
Buy SPY May 170 puts
Sell 2x SPY May 165 puts
I sell a put backratio. I tend to do these when volatility increases. It is net bullish with an explosive profit with a drop to the lower strike at expiration.

Wed Sell WFC Apr 44 puts @47.7
Sell HPQ Apr 27 puts @29.5
Sell UAL Apr 38 puts @46.1
Sell ASH Apr 85 puts @95.0
Sell VRX Apr 97.5 puts @141.5 add
Worm trades in Wells Fargo, Hewlett Packard, United Airlines, Ashland mostly on the chart formations. I add to longs in Valeant Pharma.

Position summary:

Saturday, March 08, 2014

Weekly: bull tramples on

The bull lurches forward. I closed several short call positions at losses. I have Internet access issues all week. When in doubt get out. My biotech positions take a hit. So far the broker has made more than I have for calendar 2014. 

The glass half full version is that at least I am in the green. Considering how choppy the market has been, and how bad some of the individual losing trades have been, that is a something to be grateful for.

Fri buy to cover BRKB Mar 125 calls @121.7. I cover this round at a small loss as Berkshire keeps going up.

Buy to cover FDX Mar 145 calls @138.9. I cover these Federal Express calls at a big loss. Too much pain (stop loss). I am still having Internet connection issues, so when in doubt get out.

With perfect hindsight, I could have gotten out of the IWM calls that I closed Thursday at much better levels today, but it could have been worse too had I covered at the open with the gap up.

Thu buy to cover BRKB Mar 120 calls @120.6. Ouch, I cover my short calls as Berkshire marches higher. I am finding it difficult to trade this choppy stock market.

Buy to cover IWM Mar 120 calls @119.9. Another ouch. The stock market rally makes some calls buyers big winners. That means the call seller (me) is the big loser.

I continue to have Internet issues, so I am erring on the side of closing trades rather than rebalancing, letting it ride or doubling down. I continue to be wrong about the movements of this choppy market. VRX is also taking on water, but I have a lot of rope on that one.

Tue I have some Internet problems.
Sell BRKB Apr 105 puts @118.1 rebalance. I sell puts on Berkshire Hathaway to rebalance my complicated position.

Sell VRX Apr 115 puts @146.4 add to longs. I open an April position in Valeant Pharma.

Sell GILD Apr 70 puts @83.5 add to longs. Open an April position in Gilead Sciences.

Position summary:

Saturday, March 01, 2014

Weekly: hold my nose and buy

Overall, a plus week. It is another week with upside bias and some choppy action. My intra-day timing leaves much to be desired. I came into the week with a lot of free capital because of expiring options. Early in the week, I hold my nose and buy, via selling puts.

Fri Sell IWM Mar 110 puts rebalance @118.5. Rally keeps rolling. I am short layers of puts, but also short Mar 120 calls. I will close the short calls on a close above 120. Yes, a pullback is inevitable, but how much pain can the bears take?

Sell AMGN Apr 105 puts rebalance @126.3. Amgen moving up strong. I rebalance a complicated position, adding long delta by selling puts.

By the end of the day Friday, it is whipsaw city again. The stock market bears find a small bone to chew on, as the market comes off its record highs.

Thu Sell VRX Mar 115 puts add @145.9. Add to long position Valeant Pharma earnings are ok.

Wed Sell IWM Apr 125 calls hedge 20 @116.8. I hedge my short puts by selling calls on the Russell 2000 etf.

Sell FDX Mar 145 calls hedge @133.1. I hedge my Federal Express short puts by selling calls.

Sell HON Apr 85 puts add to longs @93.9. I open an April position in Honeywell, adding to short puts for March.

Sell IWM Apr 105 puts rebalance @117.9. Oops, more bad intra-day timing on selling some of those calls. I need to rebalance almost immediately by selling puts on the Russell 2000 etf.

Sell AMGN Apr 140 calls hedge @122.6. Amgen down on news. I sell some calls to hedge my short puts.

Tue I am again holding my nose and buying (via selling puts) to put some capital to work for the April cycle. Yesterday's batch went to various shades of red (losses) after I got in.

Sell FDX Mar 120 puts @133.3. Initiate long position in Federal Express.

Sell IWM Apr 101 puts @116.8. Add long delta to a complicated position in the Russell 2000 etf.

Sell DIS Apr 80 puts @80.4. Add longs for Disney.

Sell KORS Apr 85 puts @101.5. Add longs for Michael Kors.

Sell BA Mar 115 puts @127.4. New long position in Boeing.

Mon Big rally today. With so many expiring February positions (over 40), I hold my nose and add to longs to put capital to work.

Sell SPY Mar 169 puts rebalance @185.4. I add a bit of delta to my ccmplex S&P500 etf position.

Sell AMGN Apr 110 puts rebalance @126.2. Same deal with Amgen, I add delta to rebalance as the stock rallies.

Sell BRKB Apr 105 puts add to longs @113.7. I add to longs on my complicated Berkshire Hathaway position.

Sell HON Mar 87.5 puts, add to longs @95.7. I add to longs on Honeywell.

Sell IWM Apr 103 puts, rebalance @117.1. I rebalance my complex position in the Russell 2000 etf.

Position summary:
net long AMGN SPY
net neutral BRKB FDX
net short IWM