Saturday, March 14, 2015

Weekly: treading water

Treading water might be a good analogy for this market. A lot of movement and energy expended to go no where. I spent the week focused on the problem positions that were near the strike price. So my week was similar, a lot of activity, not much to show for it. However, just keeping my head above water is a good thing during a volatile market.

The V-shaped stock market bottom some were expecting, turned into a W and then a squiggly line. SPY S&P 500 is now about flat for 2015. TLT bonds same. GLD gold now down after a bullish January.

Highlights include a new long position in LOCO, new short strangles in PANW and closing my position in GLD. I take losses on some option legs in AAPL HON XOM. Here are the trades:
(p = put, c = call, all 3rd week expiration unless noted).

Fri Cover (buy to close) BRKB Mar 130 p @144.9. Cover these puts on Berkshire for a 96% gain, to free up buying power.

Cover (buy to close) XOM Mar 82.5 p @83.6. Exxon Mobil keeps drifting lower. I close out two layers of puts at this strike price, profit one, loss on the other, basically out commissions plus the price of a cup of coffee on the pair.

Sell XOM Apr 75 p @83.5. After closing those two layers of March puts, I was net short XOM, so I rebalance back towards neutral by selling this layer.

Cover (buy to close) GLD strangles Mar 110 p / Mar 130 c @110.9.
I close strangles on gold for a tiny profit. The puts lose, the calls win. GLD has been in a drip, drip, drip steady decline with the rally in the U.S. dollar. GLD is near support at a recent low. I am out before the overall position turns into a loss. My thinking, is if gold was going have a decent relief rally, today looked to be the day on an up open, then it faltered again.

Sell HON Apr 105 c @100.3. Rebalance a complicated position in Honeywell. I've made quite a mess with HON.

Sell LOCO Apr 23 p @27.4. New long position in El Pollo Loco. LOCO holding up well today in a weak market environment. Chart looks supportive. Strike price of 23 is below the recent lows.

Thu Sell AMBA AprW2 58 p @68.9. Rebalance short strangles in Ambarella back to net long. as it continues to rally. AMBA one of the few stocks that held up well during the recent market sell off.

Sell DIS Apr 100 p @105.2. Rebalance short strangles on Disney on a strong up move.
Cover (buy to close) DIS Mar 90 p and 95 p @104.9, a few minutes later I cover two layers of March puts for a 90%+ gains to free up the buying power.

Sell HD AprW1 108 p @115.4. Rebalance short strangles in Home Depot.

Sell UNH Apr 105 p @114.8. Rebalance short strangles in United Healthcare.

Sell HON Apr 95 p @102.0. Rebalance a complicated position in Honeywell.

Wed Cover (buy to close) IWM Mar 100 p @120.4. I close this layer of Russell 2000 puts for a 96% gain to free up some buying power. After yesterday's activity, I am near the red line.

Cover (buy to close) HON Mar 100 p @100.7. I close this layer on Honeywell for about a 90% basis the premium collected. Tape action on HON is bearish. I have more layers of sold puts at 97.5 and below, so I am being cautious and taking my loss. Another idea is to sell yet another layer of calls, but that would be a riskier move. With the overall market acting so poorly, more risk isn't needed. Especially since I am near the red line on buying power.

Sell AMBA Mar 58.5 p @67.4. Rebalance short strangles on Ambarella. AMBA showing strength after a good earnings report. It is a bit extended on the upside. These puts are around the 10% probability line, which is where I tend to like to sell options.

Tue Cover (buy to close) XOM Mar 85 p @85.1. I cover this leg of a complicated position in Exxon Mobil as it crosses the strike price. XOM does pop back up. However,today is not a day to try and be a hero with the broad market tumbling, chart support broken. I have several legs of puts at lower strikes. So I take the loss, about 230% basis premium collected. Limit order is at the ask, and I get a better fill than my limit.
A bit later, I reduce delta in XOM by selling calls:
Sell XOM Apr 90 c @84.7. LImit order at the mid price gets a quick fill.

Sell FDX Apr 190 c @171.4. I sell calls on Federal Express to hedge some puts I sold yesterday. I place the limit order a tick below the mid price and gets filled instantly.

Sell HON Apr 105 c @101.8. I rebalance a complicated position in Honeywell by selling April calls. All the other option layers I sold expire in March. I also have a half position in shares. It is a messy position, heavy net long, so I reduce the delta by selling calls. Limit order at mid just sits, so I move it the limit down a tick and HON goes up a tick and I get filled.

Sell BRKB Apr 155 c @143.9. I hedge short puts in Berkshire Hathaway by selling calls. Limit order at mid sits for a while but eventually gets filled.

Sell DIS Apr 110 c @103.5. Hedge short puts in Disney by selling calls.

Sell WHR Apr 230 c @203.5. Hedge short puts in Whirlpool by selling calls.

Sell UNH Apr 120 c @113.5. Rebalance a complicated position in United Healthcare.

Sell HD AprW1 120 c @113.0. Hedge short puts in Home Depot by selling calls. I choose the April Week 1 calls because I want to stay near the 10% probability line for selling options. Minor resistance at the recent highs around 117.9.

Mon Sell AMBA Mar 57 p @66.4. Rebalance short strangles on Ambarella. I hit the bid on these puts as AMBA moves up. 57 is around the 50 day moving average.

Sell strangles on PANW @136.6
Sell PANW Apr 115 p / Sell PANW Apr 165 c
I sell April strangles on Palo Alto Networks. PANW popped higher on earnings and news and now is fading back. A short strangle is a bet on a trading range.

Sell WHR Apr 175 p @203.6. I open an April position in Whirlpool. WHR is yet another stock that moved up on earnings and is now fading. It is near the 50 day moving average. I am going way out of the money on these puts because it has run up so much during the past 52 weeks.

Cover (buy to close) AAPL Mar 125 p @127.0. I cover one layer of a complicated position on Apple. The other options I sold look to be relatively safe. I am selling because I don't like the intra-day chart action. I am taking about a 90% loss on this leg, basis the premium collected. Obviously, I would have been much better off if I covered at the highs of the day. If I could call tops and bottoms reliably, I wouldn't sell strangles, I would trade directionally and make 10x as much money on the capital invested.

By the time I type this, AAPL is now down. Whoosh! Maybe my other legs aren't safe. Low of the day so far is 125.06, high 129.57, then a slightly positive close. The sell off might be a down move to take out some day trading stop-loss orders. Long time readers know that I don't like fast moving markets.

Sell FDX Apr 155 p @173.1. I open an April position in Federal Express.

Position summary:
net short: DIS UNH
new long LOCO
closed GLD strangles
expired some AAPL weekly strangles, still have more for next week and next month

No comments: