Friday, October 10, 2014

Weekly: clock cleaned

I got my clock cleaned during the recent market decline. I lost about half my profits for calendar 2014 during the past few weeks. Keep in mind that I tend to be what some call a chicken trader, making small bets for small wins and losses. 

Risk and reward often go hand in hand with options. I didn't do much right, but I didn't panic, didn't trade emotionally, didn't try to get even. I still lost a lot. It seems like ages since Monday's up opening with SPY over 197 (close 190.52). One tiny pin point of light is my position in GLD is near break even. My foray into TLT has been a big loser.

Low lights of the week include a terrible one-day whipsaw in FDX, big losses in most positions, covering some short puts for 1000% percentage losses. Here are this week's trades:

Fri Cover short SLB 95 puts @93.4. Big ouch as Schlumberger continues lower. I cover these puts at about a 1000% loss (not a typo, a thousand percent basis the premium sold). Fast market means wide spreads on the exit. Rule #1 is to live to trade another day. Being short naked puts means the losses can spiral out of control in dollar terms once the strike price is crossed.

Cover short APC 90 puts @89.0. Ouch number two is Anadarko Petroleum, covered for another loss in the 1000% range.

Both SLB and APC are coming back a bit as I type so I may have covered on the low. What can a trader do? Either a trader takes losses or doesn't. For traders that take losses, there is always the chance that they get out near the worst possible time. It is the nature of stops, support/resistance trade that I favor.

At the open this morning, the decline has cost me about 40% of my modest profits for the year. It has been a painful time. While the losses are eye popping in terms of percentage of the premium collected, they are relatively small in dollar terms and in terms of the account.

Cover short IWM Oct 105 puts @104.9. Third loss makes an ugly trifecta for this morning. The loss on these Russell 2000 etfs is about 500% basis the premium collected. Similar deal, the underlying moves below the strike price of the short puts, so I am getting out. IWM ticks a bit higher after I get out. Grrr. The stock market is lower again, after some early short covering, but could change direction at any time. Some technicians are looking for support for SPY at the recent lows, which is about 1 point lower as I type.
Sell YHOO Nov 48 calls @40.1. I hedge my net long position in Yahoo! by selling some calls. I am short Nov 36 puts.

Thu Sell SLB Oct 103 calls @96.0. Rebalance short strangles in Schlumberger. I cover SLB Oct 115 calls and sell the 103s, rolling some of my short SLB calls down to reduce the delta. SLB threatening my short Oct 95 puts. To add to the mix there are earnings before expiration.

Wed Sell APC Nov 115 calls @92.2. Rebalance a net long position in Anadarko Petroleum. APC getting slammed today on news about a credit downgrade. I am short Oct 90 puts, Oct 120 calls, Nov 82.5 puts and deep in the red on the short puts.

Sell SPY Nov 204 calls @192.5. Minor rebalance to my net long position in the S&P 500 etf. 

Tue Crunch day as SPY falls 3 full points.
Cover FDX Oct 160 puts @157.7. I take a big loss on Federal Express. It's been a while since I slipped on a banana peel that badly. FDX seemingly broke out to the upside, but reversed within an hour and today's market weakness has it weaker still. One day loss is about 700% basis the premium collected. Ouch!

Sell SPY Backratio @194.7: Buy SPY Dec 180 puts
Sell 2x SPY Dec 175 puts
Not the best timing as SPY is down about 1.5 when I get filled on the way to a -3.0 close. Again, I like to do these put back ratios for a net credit making them a net long position, but with an explosive profit on a decline to the lower strike at expiration.

Mon Sell YHOO Nov 36 puts @41.3. Rebalance short Oct strangles in Yahoo! by selling November puts.
Sell BRKB Nov 130 puts @140.2. Add to net long position in Berkshire Hathaway by selling November puts.

Sell FDX Oct 160 puts @165. Rebalance short strangles on Federal Express by selling another layer of Oct puts.
WTF? Federal Express fades to negative for the day. My just sold puts are down over 100% in less than an hour. I sell Nov calls to hedge

Sell FDX Nov 175 calls @162.5 to hedge a net long position.

Position Summary:
net short SLB TLT

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