Saturday, September 26, 2015

Weekly: Biotechs fall

A quieter week for me. Market as measured by SPY down a bit, my account up a bit, mostly from puts on IBB. 

Highlights are IBB falling while I am short, new long positions in GPRO and NKE. Here are the trades: (c = calls, p = puts, sell means sell-to-open, weeklies use the W suffix so OctW1 means October week one)

Mon Sell SPY OctW2 185 p @197.0 Rebalance in the SP500 etf. I came in net short, so am adding long delta on the morning rally.

Sell GPRO Oct 25? p @32.9 New long position in GoPro. Barrons has a negative story on the camera maker.

Thu Wash out lows take me out.
Roll: Cover IBB SepW4 325 p @325.8 / Sell IBB OctW1 Oct 290 p / The closed leg is for about a 400% loss, but I have an offsetting position.

Sell HON shares half position (last batch of shares) @92.12 about a 13% loss

Fri Sell NKE Oct 115 p @125.4 New long position in Nike. NKE higher after earnings.

Saturday, September 19, 2015

White Caps 71-5, grade A- for September

When the wind picks up, there are white caps on the ocean. After last month's big losses, I made profits. I am not all the way back, but neither is the market. This cycle, I sold a lot of weekly options and most came in safe. Unfortunately, some of the losers were whoppers, and winners are all small to tiny. So even with above average win rate (80% is average for this method) the grade is A minus.

I got whipsawed in SPY and NFLX. I did a lot of trades in SPY and IBB. Despite a couple of bad whipsaws where I got stopped out in SPY, overall it was a big winner for me this cycle. Same with IBB.

One trite saying: "if I knew better I'd do better," meaning that if knew where prices were going, of course I'd make more money. After getting burned a couple of times, I moved further out in price and closer in on time, for higher probability and lower profit. This helped the win percentage, and also brought in some decent profits.

Going forward, my market predictions tend to be no better than coin flips, so mostly I watch the market action and try to listen to what it is saying. This tends to be better than me trying to predict. I do use support and resistance on the chart, and do trade off news events. The market reaction to the Fed news seems rather bearish, but we have all seen the wide swings in mood and price.

Will the lows hold? If I had to guess, I'd guess no, that lower lows are coming. If I get that first question correct, the next question becomes when. Some are looking at experience of the 2010 flash crash. 

Back in 2010, it took four months for that market to find a bottom before a rally took hold. For this 2015 action, we are only one month in, so it is still early in the correction process. Time and price can be equally important for options traders.

There is a chance that this correction becomes a bear market. The German and Chinese stock markets and many others around the world, are already in bear market mode, defined as down over 20% from their highs. I am still thinking the bear comes to the U.S., after the second Fed rate hike (whenever that is), but that is only a guess, a working trading theory. Sometimes I am wrong.

Friday, September 18, 2015

Weekly: Bass-akwards

The week felt backwards to me. I thought we might get a decline into Fed day and then a small rally. Instead, there was a rally, then a decline, for a slightly down week. As a premium seller, I came out with a profit.

Highlights include lots of options expiring worthless, especially in IBB and SPY, plus new long positions in BABA CLR (already closed) PANW V. I am out of NFLX, which is currently my worst trading ticker for 2015. Might be best to avoid it for a while. The monthly report will be out in a little while.

Here are the trades (p = puts, c = calls, weeklies are indicated by the W suffix, eg: OctW1 is October week one, all the rest are third week options).

FriSell IWM Oct 122 c @115.8 Rebalance in Russell 2000

Cover (buy to close) SPY SepW4 191 p @195.8 I take a 15% profit on this leg while it is still in the green.

Sell HON Oct 105 c @98.8 Rebalance in Honeywell.

Sell SKX OctW1 160 c @140.6 Hedge sold puts by selling calls on Sketchers.

Cover (buy to close) CLR Oct 21 p @27.6 I don't like the action in Continental Resources so get out for a 40% profit.

Wed Close two trades for a buck per contract to free up buying power:
Cover (buy to close) SPY Sep 155 p / Cover NFLX 130 c

Sell SKX Oct 120 p @142 Open an October long position in Sketchers

Sell IWM Oct 105 p @116.6 Add more long stock market delta in the Russell 2000 etf. I am net short on SPY, and am doing some offsetting longs in IWM because the margin requirement is lower.

Tue Sell SPY Sep 191 p @198.4 Rebalance in the S&P 500 etf.
Sell IBB SepW4 325 p @357.8 Rebalance in the biotech etf.

Sell SPY SepW4 191 p @198.5 Rebalance in the S&P 500 etf (again). 
Sell IWM Oct 107 p @115.8 Add stock market delta via the Russell 2000 etf.

Sell PANW Oct 155 p @183.5 New long position in Palo Alto Networks. 
Mon Sell BABA Oct 45 p @62.0 New long position in Alibaba. BABA down because of a bearish cover story in Barrons. Sure it could decline, but buying puts based on negative cover stories tends to be a losing strategy. This means selling puts tends to be the percentage play.

Sell V Oct 62.5 p @70.0 New long position in Visa.

Saturday, September 12, 2015

Weekly: Whippy market continues

Overall market is up about 2% for the week, after being down about 3% the week before. I took some more losses in my problem tickers HON and NFLX. I opened new long positions in BWLD CLR and sold strangles on AAPL ahead of their event. 

Another story from the coffee shop: one guy is waiting for the Fed news before making his move to buy mutual funds. I told him, that I thought the Fed day would be a non-event, and that surprised him. My thinking is that no matter the news, a lot of people have a lot of energy on the event. Most have prepared for the most likely outcomes, so a big move due to the widely anticipated news is unlikely. 
Here are the trades for the week (p = puts, c = calls, sell means sell-to-open, all options are third week expiration unless otherwise noted with a W suffix, eg: OctW1 would be first week of October)

Fri Sell CLR Oct 21 p @28.1 New long position in Continental Resources. CLR down with the group with a Goldman Sachs report citing a $20 per barrel target for crude oil. Goldman sometimes will be a few days within a turning point. In this case, oil has been trending lower for a while and this may mean we are close to a bottom.

Wed This morning, the rally getting uncomfortable for me because I sold calls on the dip.

Cover (buy to close) HON Sep 100 c @100.8 Cover this leg for a 110% loss.

Sell SPY SepW4 185 p @198.8 Rebalance in the S&P 500 etf. I am short some 200 strike calls so it is getting warm in here. Right after this, I sell another layer:
Sell SPY OctW1 185 p @198.8 I am still way net short SPY which for now is a market timing mistake.

Sell BWLD Oct 175 p @201 New long position in Buffalo Wild Wings

Sell NFLX SepW2 90 p @100.8 Rebalance in Netflix

Sell SPY SepW4 204.5 c @196.8 Rebalance in the S&P 500 etf. Hours later:
Sell SPY OctW1 204 c @195.0 Rebalance in the S&P 500 etf. Sheesh, another wild day.

The wide swings tip my "boat." It again feels like I am buying the highs and sold the lows, though some of that is mechanical stop losses kicking in. I continue to take losses. Honeywell and Netflix have been particularly frustrating. My mental stop on Netflix got taken out yesterday, and today it is rallying. This morning, I got stopped out on Honeywell and it is fading. A minor positive so far, Apple's big press day is turning out to be a non-event for the stock, which is the perfect scenario for me, the strangle seller.

I've been telling people I meet in person about watching golf on TV. Golfer Bubba Watson used to get upset and lose his cool after missing a shot, or a putt. He is working on remaining calm after average mistakes. This is a lesson for me too, divorcing myself from the outcome. Humorously, "if I knew better, I'd do better." I have some rules in place, and the best thing to do is follow those rules. Sure there are times to change what a person is doing, both in golf and in the market, but not based on emotion, not based on one missed shot, or one losing trade. 
Tue I add long delta to rebalance on the gap open up:
Sell IWM Sep 108 p @114.6 Russell 2000 etf
Sell SPY Sep 183 p @196.5 S&P 500 etf

Sell NFLX SepW2 110 c @96.0 Rebalance in Netflix. Tape action is disappointing on a big rally day.

Cover (buy to close) NFLX Sep 95 p @94.0 I close this position for about a 300% loss as Netflix crosses below the strike price. A few minutes later I roll down with:
Sell NFLX Sep 75 p @94.3

Sell IBB 310 p @346.0 Rebalance in the biotech etf. Later in the day a second rebalancing trade:
Sell IBB 312.5 p @349.3 
Sell AAPL strangles @111.2: AAPL Sep 98 p / Sell AAPL 120 c

Saturday, September 05, 2015

Weekly: Whipsawed

Market action was all over the place. I feel out of synch with the markets, and was down just a bit of rht week. SPY was down about 3%. I got whipsawed out of some SPY option positions on Tuesday, with the big rally on Wednesday it felt painful. Then Thursday saw a big rally fade, and Friday another gap down.

A few neighborhood observations: I saw that Bloomberg magazine had a cover full of bear faces. At the local coffee shop I mentioned my stop loss frustration this week. A stranger interjected "why would you do that?" She went on to tell me that this time she wasn't going to sell. A third anecdote is a 30-something on the Boglehead forum decided to bail out. The bears on the cover is bullish. The lady in the coffeeshop saying she wasn't going to sell "this time," bearish. The young index investor bailing due to panic, bullish.

The local Canslim meetup on Thursday was well attended with about 40 people. There was a look back at the 2010 flash crash. In 2010 there were four distinct waves down, lower lows and four months before the low. As of this writing, for 2015, the market is working on wave two down. The lows have not been broken. The clock started Aug 19, 2015, so not even one full month yet. Corrections usually take some time.

Here are the trades. Not a lot of highlights, half jokingly it felt like it was mostly me buying highs selling lows and making it up on volume. Sheesh. That said, I was only down a bit for the week so it could have been a lot worse. (p = puts, c = calls, sell means sell-to-open, all are third week expiration unless noted)

Fri Another day, another gap down at the open.
Sell SPY SepW2 200 c @192.8 Rebalance in the S&P 500 etf.

Sell NFLX shares half position @99.36 Last of my NFLX shares. This batch goes out at a 25% loss. I am still net long via options.

Sell SPY Sep 202.5 c @192.7 30 Rebalance in the S&P 500 etf (again).

Buy SPY Nov put vertical: @192.3
Buy SPY Nov 185 p / Sell SPY Nov 175 p A bit of insurance against a decline to new lows.

Thu Sell-to-close SPY Oct 199 p @196.3 Close this leg for about a 175% profit. This long put position served it purpose. Selling it rebalances me closer to delta neutral, though I am still slightly net short SPY.

Sell SPY Sep 195 p @197.0 Another rebalancing move as the S&P 500 continues to rally.

Sell TSLA Sep 200 p @252.0 Rebalance in Tesla Motors. I am going way out of the money.

Sell NFLX Sep 120 c @100.3 Rebalance in Netflix as it declines. Closest sold options are the 95 puts.

Sell SPY Sep 205 c @196.4 Rebalance in the S&P 500 etf.

Buy SPY Dec put vertical spread @195.9:
Buy SPY Dec 190 p / Sell Dec 182 p I nudge back to slight bearish on SPY as the rally fails. In isolation this vertical put spread might be considered a bet on a retest of the flash-crash lows around SPY 182 before December.

Wed Sell SPY SepW2 182 p @193.8 Rebalance in the S&P 500 etf.

Sell NFLX Sep 120 c @102.7 Rebalance in Netflix

Sell SPY SepW2 183 p @194.0 Rebalance in the S&P 500 etf (second for today).

Tue Market gaps down over 4 SPY points. I sold layers of SPY 192 puts so it is a scary move.

Sell SPY SepW1 200 c @193.8 Rebalance in the S&P 500 etf.

Sell BRKB Sep 140 c @131.3 Hedge sold puts by selling calls.

Sell SPY SepW2 203 c @193.3 Second rebalance in the S&P 500 etf.

Sell HON Sep 100 c @96.8 Rebalance a complicated position in Honeywell.

Sell SPY Sep 203.5 @192.5 Third rebalance in the S&P 500 etf.

Sell NFLX SepW2 120 c @104.6 Rebalance in Netflix.

Tue Last half hour cover for losses and rebalance:
Cover (buy to close) SPY SepW1 192 p @191.9 About an 800% loss

Cover (buy to close) SPY SepW2 192 p @191.8 About a 140% loss

Sell IBB Sep 370 c @332.4 Rebalance in the biotech etf
Sell TSLA Sep 285 c @238.2 Rebalance in Tesla Motors

Tuesday ended up as another meat-grinder day, with signficant losses for my account.

Mon Sell SPY SepW1 204 c @197.4 Rebalance in the S&P 500 etf

Sell IBB Sep 375 c @345.2 Rebalance in the biotech etf.