One reason I have this
blog is to help me learn by writing about my trading. The main thing
I might have done differently is wait a bit long on Wednesday before
covering. I covered most of the puts in the first 15 minutes of
trading (which turned out to be near the lows for many of those
stocks). Waiting another 15 minutes to 30 minutes would have been so
much better. Had I held on until expiration, I believe all of those
losers came back above the strike price by expiration Friday. Big
gaps like that rarely keep moving in the direction of the gap. I
acted like a trading robot, closing so many positions in a short time
period, as they touched on my mental stops.
The fantasy hindsight
replay has me closing out all my long puts and doubling down on short
puts at the bottom on Wednesday, but readers know that I am not such
a bold trader. I tend to be a relatively slow moving options trader
with a dislike for fast markets. I am not nimble, don't have good
instincts. don't have a good gut. On the plus side, I am good with
numbers, with odds, and am patient. My style of trading works towards
my strengths. Many are bored by what I do. I always tell novices to
find a style a method that works for you. There are a thousand ways
to make money in the markets. Find one or two that work for you, that
fit your personality.
The lowlights of the
trading week include closing out short puts on AMGN BRKB HON FDX IBB
MRK MSFT WFC, all for losses. I also sold some calls on Thursday,
which wasn't the best move either. One bright spot was my GLD bull
calendar, up about 60%. My TLT bear calendar is down about 75%. I
initiate new longs in UNH UNP. It is a jelly side down kind of week
(a piece of bread with jelly spread on one side seems to land jelly
side down more often than not). Since the Alibaba IPO day market
peak, about 60% of my modest profits for the year have been given
back. I brush myself off and move ahead. Hopefully, I am a bit wiser
from this recent turbulence. I'll post a monthly summary with more
thoughts within a day. Here are this week's trades:
Thu Another big
gap down this morning on the stock market, but near unchanged by the
close. I don't do that much better with intra-day timing as I sell
some calls to hedge some of my short puts.
Sell GLD Nov 128 calls
@119.0. I was long a call calendar, and am selling the Novembers
before the Oct 123 calls expire (hopefully worthless). I may get a
bit more premium by selling now instead of on Monday after
expiration.
Sell YHOO Nov 44 puts
@37.6. Rebalance short strangles on Yahoo!, I am short the Nov 36
puts, Nov 48 calls, and some October options which hopefully expire
safe.
Hedge short puts on
Nordstroms, Nike and Disney by selling calls.
Sell JWM Nov 77.5
calls @67.4
Sell NKE Nov 95 calls
@84.8
Sell DIS Nov 92.5
calls @81.3.
New long positions in
United Healthcare and Union Pacific Railroad.
Sell UNH Nov 75 puts
@85.4.
Sell UNP Nov puts
@104.0.
Wed Disaster
morning with SPY gapping down 3 full points. I cover any short puts
that move into the money, closing six positions in the first 15
minutes for huge losses. It is not a time to be cute, not for someone
like me, who isn't in front of the computer all day, and tends to be
a slow moving position trader. I see it as time to survive. As the
fills come in, SPY is bouncing off the lows, so I could have gotten
out at better prices on most.
C'est la vie.
Obviously, I would have been better off holding on for 20 minutes or
so. Some might criticize and say that I panicked. No, I followed my
rules. Fast markets are not my friend. My account is still up a tiny
bit for the year, with about 85% of the year's peak profits now gone
(it was at 50% on Sunday!).
Cover MSFT Oct 43 puts
@42.5. Microsoft gaps lower after Intel earnings. Loss is 800% basis
the premium collected.
Cover MRK Oct 55 puts
@54.8 220% loss
Cover AMGN Oct 130
puts @129.7 350% loss
Cover FDX Oct 150 puts
@149.7 500% loss
Cover IBB Oct 250 puts
@249.9 600% loss
Cover BRKB Oct 135
puts @134.9 240% loss
By the end of trading, it looks like Wednesday morning was a wash out low. Most of the
positions I covered were up sharply off their low by the end of
trading. Some were actually positive for the day (shakes head).
Sell VRX Nov 140 calls
@114.8 .50. One final trade for wash out Wednesday, I hedge my short
puts on Valeant Pharma by selling calls.
Tue Cover WFC
Oct 50 puts @49.3. Another day, another loser. Wells Fargo bank
earnings disappoint and the stock breaks support at 50, which is also
my strike price. Loss is about 700% basis the premium collected.
Despite this morning's stock market relief rally, I am following the
mechanical rule of closing positions if they break the strike price.
As I type this, WFC drifts higher, so I could have gotten out at a
better price by waiting five minutes. It is an illusion
that I can call highs and lows, and when stocks will turn on a dime.
Sell AMGN Nov 155
calls @133.7. I rebalance a net long position in Amgen by selling
calls.
Sell HON Nov 95 calls
@86.2. I hedge short puts by selling calls on Honeywell.
Sell MMM Nov 145 calls
@135.2. Hedge short puts on 3M Corp by selling calls.
Mon Sell AMGN
Nov 115 puts @136.6. I open a November position in Amgen. SPY has
broken support at 190.5 so we will see what happens next.
Sell JWN Nov 60 puts
@69.2. I open a November position in Nordstroms, as the stock market
continues lower. AMGN another 2 points lower so I continue to do
poorly on the short term timing.
Cover short HON Oct
87.5 puts @87.4. I take the loss on Honeywell at it crosses the
strike price of my short puts. The loss is about 700% basis the
premium collected. HON chart is a waterfall decline. Wow.
Sell BRKB Nov 150
calls @137.8. I rebalance my net long position in Berkshire Hathaway
by selling calls.
Sell ASH Nov 110 calls
@98.8. I hedge my short puts in Ashland by selling calls. Chart
resistance at the 110 level.
Position summary:
long UNH UNP
net long APC ASH BRKB
GLD IWM MMM SPY
net neutral AMGN DIS
FDX JWN NKE VRX
short TLT / net short
HON
closed or expired: IBB
MRK MSFT SLB TTM WFC
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