Friday, January 08, 2016

Weekly: Stormy weather

Wow what a week. The sky seemed to fall. Stock markets all around the world, mostly moved lower. I took it on the chin, taking some big whopper losses. I was a bit too aggressive, opening up new long positions and that added to the damage. For the week my trading account is down about 3% in round numbers. Any way you slice it, that's a log of damage.

I attended the local Canslim/IBD sponsored meetup on Thursday. The mood seemed a bit too upbeat, so more downside action might be on its way. A couple of nuggets are that corrections typical last 2 to 3 months. Say we started it on 12/28 or so that would mean March 15th as a time frame for the correction to end. If this is a bear market, 9 months is average.

However, the caveat is that we had an extraordinarily long bull market, so both the correction or bear may also be prolonged. I am following my trading rules, and taking losses as they come.

I made a lot of trades this week, a lot of bad ones, maybe two or three that were okay. Here they are: (c = calls, p = puts, sell means sell-to-open, cover means buy-to-close, all are third week expiration.

Mon 1/4/2016: My response to the steep sell off is rebalancing. All of the calls I sold this morning are balanced off by previously sold puts. I plan to hit eject if my stop loss levels are breached, up or down. The stop is usually the strike price of the sold option.

Sell DIS Feb 115 c 64
Sell IWM Feb 119 c 33

Sell BA Feb 155 c 43
Sell FB Feb 120 c 45
Sell MCD Jan 122 c 18

Sell SPY backratio: buy SPY Feb 182 p 141
sell 2x SPY Feb 177 p 97 gross credit 53 per unit
This put backratio is a net bullish position with an explosive profit if the underlying is near the lower strike at expiration. In this case another 180 is about another 10% down for SPY and would give a very high profit. An up move or sideways means I keep the credit. In a full on crash the position losses a ton of money.

Sell AMZN Jan 710 c 51

Tue Sell DIS Feb 115 c 44
Sell DIS Jan 108 c 19 rebalance as Disney continues to drift lower. I sold Jan 100 puts and it is getting close to bail out time on that leg. On a close below 100, I hit eject.
Sell TSO Feb 82.5 p 66

Wed Sell BA Feb 150 c 73

Sell DIS Jan 108 c 17
Cover DIS Jan 100 p 175 for about a 350% loss on this leg. I cover a bit early with DIS still above 100, but it looks like a dying quail at this point. I also am short some Jan 97.5 puts and a bunch of other options.

Sell CMG Jan 480 c 65 Chipotle down hard again. I rebalance my position by selling another leg of calls.

Cover CMG Jan 600 c 05 I cover this leg for no commission at 95% profit

Sell CMG Feb 550 c 179 I go naked on this leg. The news seems more serious, so buying the dips like I have been doing, seems like a really bad idea right now.

Later in the day:
Sell CMG Feb 300 p 210 strong bid on this strike, and stock seems to have found some support, at least for the day.

Sell AAPL strangles slight bearish bias:
Sell AAPL Feb 75 p 26
Sell AAPL Feb 120 c 30

I do another SPY backratio. This one brackets a 13% to 18% SPY decline into March.
Sell SPY backratio:
Buy SPY 172 c 132 gross credit 32 per unit
Sell 2x SPY 165 p 85

Buy SPY vertical put spread, a tiny bit of protection though it has a cost.
Buy SPY Apr 190 p 535 gross 183
Sell SPY Apr 182 p 352

Sell IWM Feb 117 c 27 Rebalance

Thu Sell COST Feb 170 c 29
Sell BA Jan 144 c 20

Cover BA Jan 135 p 315 for a 1300% loss
Sell DIS Feb 80 p 24

Sell AAPL Jan 105 c 22
Sell TSO Feb 130 c 51

Sell ALK Feb 85 c 50
Cover AMZN 555 p 194 for a 30% profit

Another day in the woodshed, with more red ink. My consolation prize is that my losses are not as big as some other investors.

Fri New strangle position in Valero Energy, perhaps the worst entry of a very bad week. Yikes.
Sell VLO Mar 57.5 p 92
Sell VLO Mar 85 c 43

Sell AMZN Jan 537.5 p 42
I got scared on Thursday and covered the AMZN 555's. I am getting a crumb by selling these lower priced options further out.

Cover ALK Jan 72.5 p 215 for about a 1500% loss. A big whopper loss to close out a terrible week. Monday may bring more covering for whopper losses. I will continue to follow my mechanical rules. As painful as it is to take a big loss, much more painful is letting losses go exponential and perhaps threaten the entire account.

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