Weekly: Brexit goes boom

Stock markets tumble on Friday as the UK votes to leave the EU, the Brexit. I got caught in the bull rally trap. It was a good week to be a cautious trader. My losses for the week ended about the same as SPY -1.4% or so. The other piece of crap was Telsa bidding to take over Solar City. I will live to trade another day. I did a lot of tap dancing, but it could have been many multiples worse.

I'm sure some aggressive traders were hit hard by the big moves this week, though a few may have had a huge up week. I plan to skip a week of blogging because of travel. Hopefully it will be a quiter week. I'll have two weeks of updates on July 9th. I am looking for more downside, because many novices want to buy this decline. I sold a lot of calls thinking that any upside will be limited.

Here are the crap trades for a crap week (c = calls, p = puts, all are third week expiration unless noted, sell means sell-to-open, cover means buy-to-close, number is price per contract):

Mon Big rally on Brexit poll movements to stay. After option expiration, I have a lot of dry powder and put some to work.

Sell SPY JunW4 201 p 26

Sell SPY JulW2 195 p 44

Sell CMG Jul 305 p 50

Sell ULTA Jul 220 p 80

Sell AVGO Jul 135 p 40

Sell TSLA strangle: Jul 180 p / 265 c 82

Sell TSLA Jul 180 p 51

Sell TSLA Jul 265 c 31

Sell BRKB Aug 125 p 54

Tue Sell SPY JunW4 199 p 25

Wed Telsa down hard on news that it wants to acquire Solar City. I tap dance all day long. For the most part, the hole keeps getting bigger.

Sell TSLA Jul 240 c 61

Sell TSLA Jul 160 p 48

Sell MCD Jul 110 p 20 McDonalds lower on downgrade. I go long, but with a tiny position.

Sell TSLA JunW4 215 c 27

Sell TSLA JulW2 222.5 c 53

Cover TSLA JunW4 200 p 490 about a 500% loss

My gut tells me to stay with this one. In hindsight, I thankfully didn't listen to my gut and followed my rules as TSLA touched 189 before the week was over.

Sell TSLA JunW4 210 c 27

Sell TSLA Jul 225 c 111

Sell TSLA JunW4 207.5 c 36

Sell TSLA JunW4 185 p 36

Sell SCTY Jul 26 c 26

Sell FDX strangle 135/170 for 54: 

Sell FDX Jul 135 p 24

Sell FDX Jul 170 c 28

Sell ULTA Jul 255 c 54

Thu Sell TSLA JulW1 222.5 c 40

Sell TSLA JulW1 170 p 44

Sell TSLA JulW2 165 p 46

Sell SPY JunW4 203 p 34

Fri Brexit yes is to leave. Markets tumble. At the open, I am lucky enough to have modest losses.

Sell SPY JulW2 213.5 c 24

Sell SPY Jul 214 c 30

Sell GLD Aug 115/150 strangle 71: GLD Aug 115 p 41

Sell GLD Aug 150 c 30

Sell GLD Jul 117 p 18

Sell VGK Jul 48 c 29

Mid-day worried about a sell off into the close

Cover TSLA JunW4 185 p 04 for 90% gain

Cover SPY JunW4 203 p 27 for 12% gain

Online newbies lean towards buying this dip. I sell calls thinking any up side is limited and more downside may be coming.

Sell IWM Jul 119 c 17

Sell MCD Jul 125 c 22

Sell AVGO Jul 165 c 43

Sell GDX Aug 21/36 strangle 36: 

Sell GDX Aug 21 p 20

Sell GDX Aug 36 c 16

Sell TSLA Jul 210 c 148

Sell VRX Jul 27.5 c 17

Sell WFC Jul 50 c 13

Sell CMG Jul 465 c 52

Sell TSLA JulW1 170 p 38

We didn't get the hard sell off into the close that I feared. Market may tick up on Monday as some novice mutual fund buyers want to buy the dip. I lean towards more

Monthly: Up, Down, Sideways, 51-10 Grade C+

I count 51 winners, 10 losers for the June option cycle. I eek out a gain, but it felt like a crap month. About two weeks ago, I was feeling pretty good, then my fortunes reversed and most of the gains for the trading month slipped away. My two big winners for 2016, my so-called lucky stocks, CMG and TSLA turned against me. Despite the recent setbacks, these two still top my winning ticker symbols list for 2016. 

I managed the Monsanto takeover mess, and booked some more losses, but they were manageable. Considering I was short three legs of calls before the takeover news, the losses were as bad as imagined. Part was due to luck, but I didn't freeze on the news.

A lot of people are looking at the Brexit vote, whether the UK leaves or remains in the European Union. Longer term, it will have ripple effects. Shorter term, it is often the higher percentage play to go against the crowd. As for the bigger picture, here are some etfs I track, best to worst for calendar 2016:

YTD for 2016, dividends are not included

SLV +25.9% silver

GLD +22.2% gold

TLT +12.5% U.S. 20-year treasury

EEM +3.4% Emerging market stock

SPY +1.3% U.S. large cap stock

IWM +1.3% U.S. small cap stock

my account +2.2%

So, some good news and bad news. The bad news is that we didn't go all in on gold, silver and treasuries on Dec 31, 2015. The good news is that I am up for the year, about even with the U.S. stock indices, after factoring in a 1% SPY dividend yield. The other good news is that +2% isn't terrible for six months, and ahead of most short term CDs and savings accounts.

When people hear "options trader," many think gun slinger, YOLO (you only live once) kind of traders that take huge risks. Not very many think about cautious, near delta neutral traders like me. I don't care what others think. I hope you are the same. My rule #1 is to live to trade another day. Risk and reward are often correlated. I rarely take on a lot of risk, so my returns are going to be on the small side.

Weekly: Stop losses lead to frustration

It was a frustrating week. Several stop loss levels got triggered and I took some big losses. A mild recovery later in the week was a small consolation prize for my losing week. Two of my "lucky" stocks for 2016 went bad, as I took big losses in Chipotle and Tesla. Most galling was CMG, had I held to expiration, it would have come out fine. Instead I took big hits on two legs.

 

Stop losses are a philosophical question for traders. Either a person uses stops or doesn't. If a person uses stops, there are going to be times like this week, when the stops get run and then the stock reverses. It is mostly a matter of when not if. If a trader uses technical support levels, everyone else can see those same chart levels.

The other side is that if a person doesn't use stops a trending move can cause massive damage. The losses can go exponential for those that sell naked options on leverage. In fast markets, margin calls and forced liquidations can and do happen. This too is also a question of when not if. Yes, the odds or a huge trending move are smaller, but when it does happen, it can wipe out a leveraged account.

Here are the trades (c = calls, p = puts, all are third week expiration unless noted, sell means sell-to-open, cover means buy-to-close, number is price per contract):

Mon Cover TSLA Jun 217.5 p 365 -500%

Cover CMG Jun 397.5 p 913 -700%

Cover CMG Jun 395 p 800 -600%

A royal "flush" as I cover three legs for huge losses. The declines in Chipotle run through my stop levels. TSLA doesn't break it, but sold another leg of 217.5 puts so cover a bit early. Time to regroup, try and clear my head after these destabilizing hits. My consolation prize is at least I wasn't short LNKD calls (LinkedIn went up about 50% today and anyone short calls was obliterated).

Tue Cover TSLA JunW5 217.5 p 675 about a 400% loss

Sell CMG Jun 365 p 55 Chipotle closes higher after being down 10 points

Wed Sell IWM Jul 121 c 23

Sell SPY Jul 216 c 28

Thu Cover VRX Jun 22.5 p 56 about a 45% loss

Sell GLD strangle 115 p /145 c for 42

Sell Jul GLD 115 p 23

Sell Jul GLD 145 c 19

Sell TLT strangle 127 p /150 c for 36

Sell TLT Jul 127 p 16

Sell TLT Jul 150 c 20

Sell SPY Jul 192 p 82 add delta as market rallies

Sell IWM Jul 101 p 30

The monthly update will come tomorrow (Sat).

Weekly: CMG TSLA VRX

It was a see-saw week and I got the short end of the stick at the end. My account was down, mostly from CMG and TSLA. Just when I thought we might be settling in for calm summer trading, there is a sharp drop on Friday. We will see if there are more storms and I get stopped out on my positions, or if blue skies return and I escape. 

 

Here are the trades (c = calls, p = puts, all are third week expiration unless noted, sell means sell-to-open, cover means buy-to-close, number is price per contract):

Mon Sell to close TSLA Jun 200 p 72 for a 92% loss

I bought these puts for over $800 per contract, so getting out at $72 seems terrible. The big picture is that I used this leg to sell many layers of weeklies puts so overall I am on the sum of all TSLA positions.

Sell TSLA Jun 202.5 p 82

Sell TSLA Jun 250 c 16

A bit later, I sell a layer of strangles with a bullish skew.

Tue Sell VRX Jun 28.5 c 16 Valeant lower after earnings

Sell XLE JunW4 64 p 16 rebalance

Sell TSLA JunW4 200 p 88

Sell TSLA JunW4 260 c 36

Tesla rally rolls on, I sell another brace of strangles

Sell VRX strangles 56: Sell VRX Jul 15 p 26

Sell VRX Jul 35 c 30

Sell TSLA Jun 210 p 60 rebalance

Sell VRX Jul 15 p 15 rebalance

Sell SCTY Jun 20 p 20 rebalance

Wed Sell TSLA Jun 217.5 p 81 rebalance

Cover TSLA JunW1 200 p 02 buying power

Sell TSLA JunW4 217.5 p 140 rebalance

Thu Sell TSLA Jun 257.5 c 22

Fri Cover GLD Jun 109 p 01 95% profit

Sell TLSA JunW4 240 c 112 rebalance

Weekly: Sorry... AVGO SIG ULTA

Sorry for the late update. I had some computer trouble. Anyway, some new positions involve selling strangles on AVGO, ULTA, and selling puts on SIG.

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

cover means buy-to-close, number is price per contract):

Tue Sell XLE Jul 59 p 26

Sell IWM strangles Jul 103/122 69

Sell IWM Jul 103 p 50

Sell IWM Jul 122 c 19

Wed Sell TSLA JunW2 242.5 c 28

Sell XOP strangle 44: 

Sell XOP Jul 30 p 30

Sell XOP Jul 42 c 14

Sell VRX Jun 22.5 p 41 rebalance

Sell ULTA strangle: 

Sell ULTA Jul 210 p 109

Sell ULTA Jul 260 c 46

Sell IWM Jun 107.5 p 14 rebalance

Sell CMG Jun 475 c 90 rebalance

Thu Sell CMG Jun 397.5 p 111 rebalance

Sell AAPL Jun 102 c 19 rebalance

Sell SIG Jun 75 p 35 new long position

Sell MON Jul 90 p 60

Fri Buy SPY Sep vert put spread 186

Buy SPY Sep 200 p 428.5

Sell SPY Sep 190 p 244.5

Sell IWM Jul 107 p 62

Sell WFC Jul 45 p 20

Sell AVGO strangle: 

Sell AVGO 150 p 45

Sell AVGO 175 c 27

Sell XLE Jul 72 c 16

Sell GDX Jul 20 p 17