Friday, July 03, 2015

Weekly: Happy July 4th


Enjoy the holiday. Personally, I like the fireworks. Not so much in the markets, where I prefer calm conditions. This week was anything but calm. 
 
Schwab sent out a report that included a table with 14 news events and how the market reacted. The events ranged form the Kennedy assassination, Nixon resigning, to Lehman going under. Out of the 14 the median decline was about 5% in about a week. However, there where three events that led to bear markets (more than 20% decline) and three others that led to a correction (10% or so). So about 42% of the time the market reaction is significant.

Some highights: buying the SPY highs on Monday. I bought some insurance in the form of a long SPY September vertical put spread. New long position in NKE. I got washed out on a spike down in SKX and rebought at a higher price. The new thing was a fancy put backratio position in IBB (biotech etf), hoping for about a 20% decline in that sector by September expiration.

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

Thu Sell SKX Aug 90 p @115.3 Rebalance with another layer of puts in Sketchers as the rally continues.

Wed Sell SPY JulW2 198 p @207.8 Rebalance in S&P 500 by selling a layer of weekly puts seven days out.
Sell IWM JulW2 119.5 p @126.0 Ditto for the Russell 2000 etf, sell a layer of weekly puts.

Sell NKE Aug 97.5 p @109.0 New long position in Nike. Recent NKE earnings were good.

Sell SKX Aug 95 p @112.7 Rebalance in Sketchers. I got shaken out of one leg earlier in the week as the stock knifed lower. I am adding back to the long side by selling some August puts.

Sell DIS Aug 105 p @115.0 Rebalance in Disney on the rally.

Sell IBB put backratio @368.6:
Buy 1x Sep 330 p / Sell 2x Sep 300 p debit
Okay, now I'm getting fancy. This put backratio on the Biotech etf is near delta neutral, and is for a debit. Best case is a decline to 300 at September expiration. If IBB is flat or up, I lose the modest debit. If IBB crashes, losses escalate below 270. I am taking a shot at a 10% stock market correction with more 10% down in the biotech sector.

Tue Sell HON Jul 97.5 p @102.6 Rebalance again in Honeywell.

Cover (buy to close) SKX Jul 105 p @108.2 Close this leg on Sketchers for about a 40% loss. SKX not acting well after a big run up, so lots of air on the chart. Minor support at the 50 day moving average around 102.

Sell IWM Jul 129 c @124.6 Rebalance in the Russell 2000 etf.

Mon Sell JPM Aug 72.5 c @68.1 Rebalance in JP Morgan Chase.
Sell SPY JulW1 202 p @208.6 I sell some weeklies expiring in three days on SPY. Support is at 204. I am selling near the 10% probability line. The bears hit the market with a flurry, but the market popped back up. Not much premium considering the margin requirement, but it is only three days. By mid-day SPY makes new lows, so this was a bad move. Later in the day with SPY @206.2 I buy a vertical put spread:

Buy SPY Sep 190 p / Sell SPY 182 p @206.2 for a debit of close to $1 per unit after commissions. This is a bit of insurance against a melt down. Typically, I might do a backratio, but the tape action is so bearish, paying $1 per unit for a bit of insurance seems like a good idea.

Sell IWM Aug 133 c @125.7 Rebalance in Russell 2000 etf into the decline.

Sell DIS Aug 125 c @113.8 Rebalance in Disney by selling another layer of calls.

Sell HON Jul 105 c @101.9 Rebalance in Honeywell.

Position Summary:
long BRKB DATA DE EL FB NKE
net long DIS HON IWM JPM MRK SKX UNH YUM
net neutral AMBA IBB SPY
net short SKX
short MCK

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