Friday, June 19, 2015

Weekly: whipsaw in MRK

I got whipsawed out of MRK as it declined then rallied. I bought enough shares to cover an assignment on sold calls on SKX. FXI declined, but the sold strangles came in safe. Overall, a profitable week. I'll post the monthly round up with a letter grade before Sunday.

Here are the trades: (p = puts, c = calls, sell means sell-to-open, all third week expiration unless noted).

Fri Sell SKX Jul 105 p @112.0 Rebalance in Sketchers as I prepare for assignment on two units of sold Jun 110 calls.

Sell IWM JulW1 121.5 p @128.0 Rebalance in the Russell 2000 etf by selling a layer of weekly puts.

Thu Cover (buy to close) IWM Jun 117.5 @127.5 Free up buying power to give more flexibility going into expiration. Later in the day I buy to close another batch, the IWM Jun 116 p @128.2 and also rebalance by selling another layer of July puts:
Sell IWM Jul 119 p @128.2

Buy half position SKX shares @112.36 I prepare for assignment on two units of sold Jun 110 calls sold on Sketchers. So far my SKX trades are at a nice overall profit, though I could have managed it better.

Cover (buy to close) EL Jul 92.5 @88.8 I cover the call side of a sold strangle on Estee Lauder for a 25% profit. I am bullish on EL so closed this leg of the trade while it is still at a profit.

Wed Cover (buy to close) MRK Jul 60 c @57.8 I got whipsawed by the decline in Merck. As it bounces back, I decide to close this leg for break even after commissions to avoid losing on both ends of the sold strangle.

Sell IWM Aug 112 p @126.7 Rebalance my position in the Russell 2000 etf back to net neutral. As the market rallies, I add another layer of sold puts.

Sell DIS Aug 100 p @111.5 I open an August position in Disney.

Tue Cover (buy to close) MRK Jul 57.5 p @57.1 The bloodletting in Merck continues and I cover another leg. These July's go out for about a 300% loss basis the premium collected. MRK moved below 57.0 and that was the next stop level. Totaling all my MRK trades for 2015, I am now at a small loss for the year. I am following my stop loss levels and getting out. The alternatives are to play hunches or hold and pray or perhaps even double down on the loser. 

Rule #1 is to live to trade another day, and I do that by following near mechanical stop levels.

Mon Cover (buy to close) MRK Jun 57.5 p @57.4 Merck moves lower through my mental stop level. I get out of this leg for about a 33% loss basis the premium collected.

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