Saturday, January 31, 2015

Santa Monica CANSLIM meetup 1/28/15

Agenda for the meeting:
1) Current Market Outlook--Alex Marenco, former portfolio manager for O'Neil Data Systems, Inc.
2) TBA Lesson--Amy Smith, KRLA radio co-host, & Irusha Peiris, MarketSmith product coach.
3) Review of Watch List stocks submitted by members--Alex Marenco.
4) Ten stocks near a buy point from Alex Marenco's Watch List.

Meeting is sponsored by Investors Business Daily. For those that are not familiar with the CANSLIM method, the book it How to Make Money in Stocks. It focuses on high growth stocks with positive chart momentum. For those looking for my weekly report, it is the next post.

It is standing room only at the Santa Monica stock market meetup. I arrive fifteen minutes later and get one of the last chairs. They do bring out more chairs, but it is elbow to elbow. I sit next to a guy that tags himself as "the bear in the room." He rattles off a litany of doom and gloom that would frighten anyone away from the stock market. Surprisingly, later during the meeting he raises his hand for owning BABA.

Overall thoughts: a lot of very smart people presenting. The meeting is fast moving, covers a lot of stocks. Two that I added to my watch list are UA Under Armour and NXPI a semiconductor stock. I always tell people at the meetup that I am not strictly a CANSLIM trader, but I do use some information, some ideas that I get and incorporate it into my own trading style.

Market Outlook is choppy. There have been five signals changes before the Jan 28 meetup. There were 21 all of 2014, so it is getting choppier. The bull market is long in the tooth. A comment is made that a 20% bear market would be a good way to clean everything out. My thought is that it is like an overgrown forest and there is fire. Then new stock leaders can rise from the clearing.

They ask for a show of hands "who is making money in this market?" Only one hand goes up. Later, they ask how many still own BABA and maybe six hands go up in a room of 50. Earnings for BABA came out the next morning and there were at least six unhappy people as it went down about 10% on the report.

The meetup was on the day of the Fed meeting ending and the market was down hard. The Fed is talking about raising rates in June or July. However, if the stock market careens lower, they may put that on hold, and may even do another round of QE.

A question from the audience is about Europe, specifically Russia. One portfolio guy says he doesn't look at Europe at all, the other says he only looks at EWG, the German stock etf. Another theory fromo the audience is about the broad stock market decline being related to margin calls in the oil futures. It is possible, but it is difficult to make this cause and effect.

A few of my own market thoughts: the broad indices were down about 3% for January 2015. I looked up similar events in the Stock Market Almanac. Mostly it is slightly down, slightly up years when January starts like that. If forced to a number, I'd say -5% for 2015, or -2% from here. A lot of money continues to pour into oil stock ETFs. To me that means lower lows in oil and oil stocks are highly likely.

Friday, January 30, 2015

Weekly: long APC BA short BABA

What a wild week! Lots of big movers on earnings. SPY down for the week, but it was a choppy ride. I attend a CANSLIM meetup and will do a separate write up on that tomorrow. One question asked was "who is making money in this market?" Only one hand went up.

For me, my account took a big haircut, but I am still up for 2015. New longs this week are APC and BA. New short BABA. Here are the trades:
* p = put, c = call, all 3rd-week of the month expiration

Fri Sell XOM Mar 95 c @87.4. I rebalance short strangles on Exxon Mobil by selling some March calls to offset short March 75 puts.

Thu Sell BABA Feb 105 c @89.4. New short positon in Alibaba on disappointing earnings. Sold these calls during the first 15 minutes of trade, at the bid, to get an immediate fill in a wide market. My thinking was volatility would get crushed as the day continued. This turned out to be correct and I had around 50% profit basis the premium collected, by the end of the day.

Sell IWM Feb 123 c @116.3. Rebalance short strangles on the Russell 2000 etf. I sold these during the morning weakness and it is the opposite effect, sitting on about a 100% loss by the end of the day. The market giveth, the market taketh.

Sell UNH Mar 120 c @109. Hedge short Mar 95 puts by selling calls. I placed the order during morning weakness, where it sat, until the monster market rally came in. What a crazy market!?

Wed Sell BA Feb 123 p @137.5. New long position in Boeing after earnings.

Sell MMM Mar 145 p @164.5 Add to longs in 3M Corp by opening a March position. Earnings are just okay, but it removes one uncertainty.

Mon Sell FDX Mar 200 c @176.1. I hedge my short puts by selling calls on Federal Express.

Sell SPY Feb 213 c @204.0. SPY looks weak, I see little chance of new highs by February expiration. As SPY rallies against this recent move, I compensate by selling SPY Feb 189 p @205.3.

Sell APC Feb 68.5 p @82.7. New long position in Anadarko Petroleum

Position Summary:
net neutral GLD WHR
short BABA

Saturday, January 24, 2015

Weekly: new long LUV, new neutral GLD

Spreads were wide on many of the less active stock options. Mostly I go for the mid or a penny or two below the mid. Sometimes I get filled, sometimes not. New positions: sell puts on LUV for a new long position, sell strangles on GLD for net neutral.

In the news was the ECB news, more earnings, and Mercury going retrograde. I remember hedge fund manager David Tepper talking about his reaction to the Fed's most recent QE news. Tepper thought it would be good for just about all U.S. stocks and went all in on the long side. It remains to be seen whether the European version will be good for stocks, more particularly for us, U.S. stocks. I am out of my depth there, but it is worth looking at. So far, the European QE has been very good for U.S. bonds, and pretty good for U.S. stocks.

Fri Sell HON Mar 87.5 p @101.3. Add to longs in Honeywell as it moves up on earnings.

Sell UNH Mar 95 p @113.0. Rebalance short strangles on United Healthcare. UNH had a big follow through day to the upside and is nearing the strike of the short Feb 116 calls. If it does go up through 116, I plan to buy stock to cover.

Sell ILMN Mar 150 p @197.0. Rebalance short strangles in Illumina. It can be hard to get a fill on ILMN options. I tried for a couple of days. This one got filled a dime below the mid with a wide bid/ask spread.

Sell IWM Feb 107 p @118.2. Rebalance short strangles on the Russell 2000 etf.

Thu Sell UNP Mar 100 p @118.5. Add to longs on Union Pacific Railroad as it moves up after earnings.

Sell UNH Feb 102 p @109.7. Rebalance short strangles on United Healthcare. UNH closed strong yesterday and opened strong this morning. I get filled as it corrects back.

Sell LUV Mar 35 p @43.8. New long position in Southwest Airlines. LUV makes new highs on earnings news. Support at 37.

Sell FDX Mar 155 p @179.4. Add to longs in Federal Express by opening a March position. As the market rallies, I add long delta.

Wed After options expiration, I often plow the capital right back into the market. I wanted to note that the Mercury retrograde alignment starts today 1/21/15 and ends 2/15/15. Last retrograde cycle was a difficult market time for me. Some may say this is superstition, but I am making note of it. Perhaps with the shaky start to 2015, the retrograde changes the energy and we start trending.

Sell BRKB Mar 130 p @147.5. I add to longs by opening a March position in Berkshire Hathaway.

Sell GLD strangles @123.9. 
Sell Mar 110 p / Sell Mar 145 c
GLD premiums up a bit due to pending European Central Bank (ECB) news. 109 is the recent low, and the 145 strike balances it out nicely.

Sell XOM Mar 75 p @91.5. I rebalance short strangles by selling some March puts on Exxon Mobil.

Sell UNH strangles @108.6: United Healthcare up on earnings
Sell Feb 100 p / Sell Feb 116 c

Position Summary:
net long XOM / net short UNH
new long LUV 
new net neutral GLD 

Saturday, January 17, 2015

38-2-1 for January, grade A-

Thirty eight winners, two losers, one break even for the January cycle, grade A-. I experience modest gains and a high win percentage during this turbulent start to 2015. The two losers were BBY and SPY. Both had offsetting profits, so I didn't lose money on any ticker symbol for the month. A bit of skill, a bit of luck, and some stock picking are factors. Best winners include FDX (Federal Express) and IWM (Russell 2000 etf). 
My SPY backratio insurance did not come into play despite the down start to the year. I have more put ratios for February and March. Basically, these help with a 10% decline into an expiration Friday.

I initiated new longs in GDX the gold mining etf and so far that has worked well. These are tiny positions. Biotech was mostly a big winner for me in 2014, but this year the road looks to be more difficult. I don't have any position in bonds, even though it looks near parabolic to the upside. Oil continues to attract a lot of attention, so I think there is more time needed to form a bottom. It may be years before the price of oil recovers in a meaningful and lasting way.

A few months ago, I blogged about my trading difficulties when Mercury went retrograde. That three-time a year configuration for Mercury starts again on January 18th. I am a fan of anything that works, so I will watch myself. I won't be fearful, I will be observant. 

Many eyes will be on the European Central Bank (ECB), as to what it might do next. It is widely anticipated that a massive quantitative easing program will be announced next week. What is announced and what is expected may not be in alignment and the markets may react. Earnings reports continue, and there are often trading opportunities around those earnings events.

Friday, January 16, 2015

Weekly: Cow patch crap

It is a trip through the cow patch for me, one misstep after another. During this stressful market week. I was short strangles in BBY when it tumbled, I sold puts on ILMN and watched it drop 16 points an hour after going long. Friday's relief rally means that I come out okay at the end, but may have a few more grey hairs for the experience. I'll post the monthly recap in a little bit. Here are this week's trades: (p = puts, c = calls, all are traditional 3rd Friday of the month expiration)

Fri Sell ILMN Mar 230 c @182.0. Hedge short puts by sellings calls on Illumina to reduce my delta. ILMN is 14 points lower from when I sold the March puts. The ILMN Jan 200 calls I sold are about to expire in my favor.

Sell AMGN Feb 175 c @153.5. Hedge short puts by selling calls on Amgen. Later in the day, I get the ping-pong effect as AMGN rallies after I get my fill. I rebalance again, by selling AMGN Feb 130 p @157.5.

Sell XOM Feb 77.5 p @90.9. Rebalance short strangles on Exxon/Mobil as some short January puts expire.

Thu Buy to close (cover short) BBY Jan 34.5 puts @34.0. Best Buy gaps lower after holiday results. This wasn't the earnings report, it was the Christmas holiday quarter sales. It is tough to trade the fast moving market. There seem to be some terrible fills on market orders. 

I get out for a -105% loss on this BBY leg, basis the premium collected. I am still short BBY Jan 32 puts and Jan 42 calls. I thought about shorting the stock to cover the short puts, but the market is moving too fast for me. What if there is a giant rally and I am caught short? Seems unlikely, but there have been some big mood swings. Holding is too risky for my timid tastes, given the wild market swings. If there is another big down day and that 105% loss might go to ten times that.

Wed Sell WHR Feb 230 c @195.0. I hedge my recent put sales in Whirlpool. With the wide spreads, my order is at the mid and I get a quick fill.

Sell JWN Feb 85 c @76.9. I hedge short Feb puts in Nordstroms by selling calls.

Sell IWM Feb 125 c @115.8. I rebalance my short strangles on the Russell 2000.

Tue Different day, more crap, morning upside and then more downside. I feel like I stepped into a pile of crap with some of my recent trades. All a trader can do is scrap the crap off their shoes/boots, and move on, and hopefully not step into too many more cow piles.

Sell IWM Mar 100 p @119.3. I rebalance short strangles on the Russell 2000 etf. The move up had me net short and I move back to near neutral.

Sell WHR Feb 155 p @202. I rebalance short strangles on Whirlpool.

Sell ILMN Jan 200 c @184.7. I hedge my short puts by selling some calls. Illumina down over 10 points from when I sold Mar 160 puts 23 hours earlier.

Sell IWM Mar 128 c @116.2. I rebalance again on IWM as I got whacked on the morning move.

Mon Stock market head fakes to the upside in the morning before it reverses and drops quickly. I add to longs in United Healthcare and Illumina, and rebalance short strangles on Exxon Mobil.

Sell UNH Feb 85 p @102.5.
Sell XOM Feb 97.5 c @90.0.

Sell ILMN Mar 160 p @196.1. ILMN options can be tough to trade because there are wide spreads and not much volume. I like the chart, and the way the stock has been strong during the shaky market start for 2015. Wowsers! A few minutes after I get my fill ILMN bumps up a couple of points than drops to 180 in a few minutes. Yikes! At the moment, there is nothing showing as far as news. ILMN is not the most liquid stock. It is coming back to 192 as I type so my thinking is that the most likely event is a fat finger mistake.

A bit later, there is a news report about ILMN presenting at a conference and giving luke warm earnings projections. Another factor is that it is a Investors Business Daily CANSLIM stock. The low of the day is about 8% below the buy point. The CANSLIM method preaches a 7% stop loss, so strict followers would have been taken out by the sharp drop. For those that want to sing the manipulation song, yes, it does happen. As small fish traders, not much we can do about it. Sometimes there are lawsuits and years later, it is the lawyers getting a slice, and the investors a slice.

Position Summary:
net long ILMN JWN XOM
net neutral AMGN IWM SPY WHR

Friday, January 09, 2015

Weekly: New Year starts with a bang

2015 starts off with a rollercoaster ride, ending with the week on a down note. My trading account is up a tad, so I managed the ups and downs better than I have in the recent past. Some highlights include many rebalancing trades, new position in XOM (near neutral), new longs GDX, WFC, many rebalancing trades, and opening some February positions on existing longs. Here are the trades (p =puts, c = calls, all are third week of the month expiration):

Thu Sell WHR Feb 155 p @194.5. Rebalance back to net long on Whirlpool and Amgen.

Sell AMGN Feb 135 p @161.2.
With the wide option spreads, I am entering the orders at the mid or a penny or two below the mid as day limit orders. Sometimes I get filled right away, sometimes it takes a while and the stock to come back. Sometimes the order sits and expires. It isn't easy to trade these wide spreads, though on actively traded stocks fills are more likely.

Sell SPY Jan 196 p @204.9. Rebalance SPY back to net neutral. Those Mar 218 calls I sold are deep in the red. I selling puts to hedge. The strike is below both sets of recent lows.

Sell FDX Feb 150 p @174.1. Add to longs in Federal Express
Sell XOM Jan 86 p @91.7. Rebalance short strangles in Exxon Mobil by selling calls. The strike is below the recent low of 86.1.

Wed Sell XOM Feb 77.5 p @90.7. Rebalance short strangles on Exxon Mobil.

Sell VRX Feb 105 p @144.1. Add to longs in Valeant Pharma, one of my best bull stocks from 2014.

Sell MMM Feb 135 p @159.9. Add to longs in 3M Corp. MMM is at the 50 day moving average line on the chart.

Sell JWN Feb 70 p @79.3. Rebalance my position in Nordstroms back to net long. 70 is a support level.

Tue Cover AMGN Jan 148 p @155.2. I close these short puts near breakeven to take some risk off the table.

Sell UNP Feb 95 p @113.9. Add to longs in Union Pacific railroad.

Sell GDX Mar 16 p @20.3. Add to longs in gold miners.

Sell SPY Mar 218 c @199.5. Rebalance in a minor way my net long position in SPY by selling calls.

Sell XOM Feb 97.5 c @89.4. Hedge short puts by sellings calls. The thought in my mind "well, that didn't work, buying the dip in oil," so I move closer to a neutral position in Exxon Mobil.

Sell ASH Feb 95 p @117.2. Add to longs in Ashland Corp. ASH was one of my best bull stocks during 2014.

Mon New long position in the gold mining etf. 16.45 is the 52-week-low, so I pick the strike below that.

Sell GDX Feb 16 p @19.1

Sell SPY Backratio @203.3: Buy SPY Mar 184 p
Sell 2x SPY Mar 179 p for a credit
Again, I like to sell SPY backratios after a tick up in volatility. These are delta positive, theta positive, for a net credit. There is the possibility of an explosive profit on a decline to the lower strike. A decline below 174 and losses start to spiral. In an up or unchanged market, I get to keep the small credit.

Sell DIS Feb 80 p @92.5. I add to longs in Disney. 80 is several support levels away.

Sell WFC Feb 45 p @52.3. New long position in Wells Fargo

Sell IWM Feb 122 c @117.0. Rebalance short strangles on the Russell 2000 etf. I reduce my net long position by selling calls. The minor high is 121.41.

Some trades from the prior week:
Fri 1/2/15 Sell BRKB Feb 135 p @151.1
Turns out that the early morning rally is a head fake. The double pump fake has the market moving lower, then closing near unchanged.

Wed 12/31/14 I rebalance short strangles back to neutral on the Russell 2000 etf.
Sell IWM Jan 113 p @120.6

Tue 12/30/14 Sell BBY Jan 34.5 p
Mon 12/29/14 Sell JWN Jan 75 p

Position Summary:
net neutral APC NKE WHR XOM YHOO

new positions: GDX, WFC long, XOM net neutral