Weekly:Yellin and Yelling

This week was dominated by Fed day and the huge rallies in stocks, bonds, gold that came after. I scrambled to cover short calls. I lost patience with GLD and got out before the Fed news. I got whipsawed on some moves, and glad I covered on some others. My overall market position might be described as short strangles with a bullish bias, so I made money, but not as much as bullish traders did. It was a tough week to be a bear.
 

Most of the week was spent rebalancing, covering layers of calls on rallying stocks, and covering winning positions early to free up the buying power. I spent most of the week near the redline of buying power, so maybe some over trading. I may look to cut back on the number of trades. The broker always makes money, but activity doesn't always equate to profits. My monthly update will come before Monday.

Here are this week's trades (p = puts, c = calls, all 3rd week expiration unless noted):

Fri Cover (buy to close) HON Mar 105 c x2 @105.2. I close these with about 80 minutes left to trade, rather than "dance with the devil" at expiration. I have two layers, one closes with a decent profit, a breakeven profit on the other. So rather than risk the psychological damage of letting these winners turn into losers, I get out. The other side is that there are only 80 more minutes to trade, and maybe I wouldn't have to cover at all, if Honeywell drifts down. Readers know that I do not see myself as a nimble trader, so playing the last hour at expiration doesn't appeal to me.

Roll (buy to close) HON Apr 105 c @105.4. A few minutes later I roll my April leg up. I close the April 105 calls for about a 300% loss, basis the premium collected, and sell HON Apr 110 calls. Last month's expiration marked a short term high in HON. While that might happen again, I am thinking that this expiration may be a head fake and HON may continue higher. I still have half a position in shares and some short puts. Despite some poor timing on my rebalancing moves, I am still up overall for 2015 on HON.

Sell MNST Apr 130 p @138.1. Rebalance short strangles on Monster Beverage.

Sell UNH Apr 110 p @120.1. Rebalance short strangles on United Healthcare. Looks like it might be a pin situation for UNH at the 120 strike.

Thu I close the last of my Apple options to free up buying power.

Cover (buy to close) AAPL Mar 115 p @129.0

Cover (buy to close) AAPL Mar 138 c

A modest profit overall on Apple, with six trades. There was one 70% loser on the March 125 puts the rest 90%+ winners. I close early to free up the buying power. I used to think of Apple as one of my nemesis stocks, a stock to be avoided because of prior losing trades. I have dispelled that curse.

Wed (Fed day) Sell FDX Apr 185 c @172.2. Federal Express moves lower on earnings. I rebalance short strangles.

Sell MNST Apr 145 c @134.5. Rebalance short strangles on Monster Beverage. MNST broke out on earnings a while ago. Since then it has drifted lower. Resistance at the break out high of 143.9.

Sell APC Apr 70 p @81.4. I open an April position in Anadarko Petroleum. Despite crude making new lows, APC is above its recent lows. This divergence is encouraging.

Sell XOM Apr 77.5 p @85.3. Rebalance short strangles on Exxon Mobil. Similar deals. I was washed out of some Mar 82.5 puts about 8 trading days ago. I am edging back in at a lower strike and near net neutral.

Sell IWM Apr 114 p @124.0. My token response to the rally after the Fed announcement is to rebalance some strangles on the Russell 2000 etf.

Cover (buy to close) HON Apr 105 c @103.5. Honeywell moving higher after Fed news. I was short two layers of April 105 calls and cover one of them for a 55% loss, basis the premium collected. HON has been a "devil-dog" stock for me for the past month or so. I've been mostly selling the lows, buying the highs. My over all HON position is now back to net long.

Cover (buy to close) XOM Apr 90 c @85.7. I close this leg at break even after commissions. That's the main reason for getting out, it is crossing back over the break even line.

Sell DIS Apr 105 p @108.3. Rebalance short strangles on Disney.

Tue I close some SPY and AAPL legs for a buck per contract to free up some buying power.

Cover (buy to close) SPY Mar 179 p x2 @207.3

Cover (buy to close) SPY Mar 218 c @207.3

Cover (buy to close) AAPL Mar 105 p @126.5

Cover (buy to close) AAPL Mar 140 c 2x @126.5

Sell JWN Apr 72.5 p @80.1. I open an April position in Nordstroms.

Mon Cover (buy to close) UNH MarW4 118 c @117.3. Ouch. United Healthcare moving higher this morning and I cover this leg of short calls for about a 110% loss (basis the premium collected).

Sell UNH Apr 110 p @117.8. Two minutes later, I sell some put as UNH at the bid, as it continues to push higher. I am short strangles, but it is a complicated layered position.

Cover (buy to close) UNH Mar 120 c x2 @118.2. It's a runaway train to the upside, and I am getting crushed on calls that I sold. I get out of a double layer of calls, both at modest losses.

Sell HON Apr 97.5 p @102.0. Honeywell is another problem position, and I rebalance a messy position by selling another layer of puts.

Sell PANW Apr 125 p @141.9. Rebalance short strangles on Palo Alto Networks.

Sell DIS AprW2 102 p @107.4. Rebalance short strangles on Disney.

Sell AMBA Apr 55 p @69.6. Ambarella has held up well and continues to advance. I add to a net long position by selling another layer of puts. 50 day moving average is around 58 and I see that as significant support.

Sell FDX Apr 160 p @176.9. Rebalance short strangles on Federal Express.

Cover (buy to close) MMM Mar 145 p @164. I close my position in 3M Corp for a 95% gain, to free up buying power. The flurry of activity today, has me at the red line.

Position summary:

long AMBA APC LOCO JWN VRX

net long UNH XOM

net neutral BRKB DIS IWM MNST PANW SPY WHR

net short COST HD HON

expired AMGN GDX ILMN LUV UNP

closed AAPL MMM

Weekly: treading water

Treading water might be a good analogy for this market. A lot of movement and energy expended to go no where. I spent the week focused on the problem positions that were near the strike price. So my week was similar, a lot of activity, not much to show for it. However, just keeping my head above water is a good thing during a volatile market.

The V-shaped stock market bottom some were expecting, turned into a W and then a squiggly line. SPY S&P 500 is now about flat for 2015. TLT bonds same. GLD gold now down after a bullish January.

Highlights include a new long position in LOCO, new short strangles in PANW and closing my position in GLD. I take losses on some option legs in AAPL HON XOM. Here are the trades:

(p = put, c = call, all 3rd week expiration unless noted).

Fri Cover (buy to close) BRKB Mar 130 p @144.9. Cover these puts on Berkshire for a 96% gain, to free up buying power.

Cover (buy to close) XOM Mar 82.5 p @83.6. Exxon Mobil keeps drifting lower. I close out two layers of puts at this strike price, profit one, loss on the other, basically out commissions plus the price of a cup of coffee on the pair.

Sell XOM Apr 75 p @83.5. After closing those two layers of March puts, I was net short XOM, so I rebalance back towards neutral by selling this layer.

Cover (buy to close) GLD strangles Mar 110 p / Mar 130 c @110.9.

I close strangles on gold for a tiny profit. The puts lose, the calls win. GLD has been in a drip, drip, drip steady decline with the rally in the U.S. dollar. GLD is near support at a recent low. I am out before the overall position turns into a loss. My thinking, is if gold was going have a decent relief rally, today looked to be the day on an up open, then it faltered again.

Sell HON Apr 105 c @100.3. Rebalance a complicated position in Honeywell. I've made quite a mess with HON.

Sell LOCO Apr 23 p @27.4. New long position in El Pollo Loco. LOCO holding up well today in a weak market environment. Chart looks supportive. Strike price of 23 is below the recent lows.

Thu Sell AMBA AprW2 58 p @68.9. Rebalance short strangles in Ambarella back to net long. as it continues to rally. AMBA one of the few stocks that held up well during the recent market sell off.

Sell DIS Apr 100 p @105.2. Rebalance short strangles on Disney on a strong up move.

Cover (buy to close) DIS Mar 90 p and 95 p @104.9, a few minutes later I cover two layers of March puts for a 90%+ gains to free up the buying power.

Sell HD AprW1 108 p @115.4. Rebalance short strangles in Home Depot.

Sell UNH Apr 105 p @114.8. Rebalance short strangles in United Healthcare.

Sell HON Apr 95 p @102.0. Rebalance a complicated position in Honeywell.

Wed Cover (buy to close) IWM Mar 100 p @120.4. I close this layer of Russell 2000 puts for a 96% gain to free up some buying power. After yesterday's activity, I am near the red line.

Cover (buy to close) HON Mar 100 p @100.7. I close this layer on Honeywell for about a 90% basis the premium collected. Tape action on HON is bearish. I have more layers of sold puts at 97.5 and below, so I am being cautious and taking my loss. Another idea is to sell yet another layer of calls, but that would be a riskier move. With the overall market acting so poorly, more risk isn't needed. Especially since I am near the red line on buying power.

Sell AMBA Mar 58.5 p @67.4. Rebalance short strangles on Ambarella. AMBA showing strength after a good earnings report. It is a bit extended on the upside. These puts are around the 10% probability line, which is where I tend to like to sell options.

Tue Cover (buy to close) XOM Mar 85 p @85.1. I cover this leg of a complicated position in Exxon Mobil as it crosses the strike price. XOM does pop back up. However,today is not a day to try and be a hero with the broad market tumbling, chart support broken. I have several legs of puts at lower strikes. So I take the loss, about 230% basis premium collected. Limit order is at the ask, and I get a better fill than my limit.

A bit later, I reduce delta in XOM by selling calls:

Sell XOM Apr 90 c @84.7. LImit order at the mid price gets a quick fill.

Sell FDX Apr 190 c @171.4. I sell calls on Federal Express to hedge some puts I sold yesterday. I place the limit order a tick below the mid price and gets filled instantly.

Sell HON Apr 105 c @101.8. I rebalance a complicated position in Honeywell by selling April calls. All the other option layers I sold expire in March. I also have a half position in shares. It is a messy position, heavy net long, so I reduce the delta by selling calls. Limit order at mid just sits, so I move it the limit down a tick and HON goes up a tick and I get filled.

Sell BRKB Apr 155 c @143.9. I hedge short puts in Berkshire Hathaway by selling calls. Limit order at mid sits for a while but eventually gets filled.

Sell DIS Apr 110 c @103.5. Hedge short puts in Disney by selling calls.

Sell WHR Apr 230 c @203.5. Hedge short puts in Whirlpool by selling calls.

Sell UNH Apr 120 c @113.5. Rebalance a complicated position in United Healthcare.

Sell HD AprW1 120 c @113.0. Hedge short puts in Home Depot by selling calls. I choose the April Week 1 calls because I want to stay near the 10% probability line for selling options. Minor resistance at the recent highs around 117.9.

Mon Sell AMBA Mar 57 p @66.4. Rebalance short strangles on Ambarella. I hit the bid on these puts as AMBA moves up. 57 is around the 50 day moving average.

Sell strangles on PANW @136.6

Sell PANW Apr 115 p / Sell PANW Apr 165 c

I sell April strangles on Palo Alto Networks. PANW popped higher on earnings and news and now is fading back. A short strangle is a bet on a trading range.

Sell WHR Apr 175 p @203.6. I open an April position in Whirlpool. WHR is yet another stock that moved up on earnings and is now fading. It is near the 50 day moving average. I am going way out of the money on these puts because it has run up so much during the past 52 weeks.

Cover (buy to close) AAPL Mar 125 p @127.0. I cover one layer of a complicated position on Apple. The other options I sold look to be relatively safe. I am selling because I don't like the intra-day chart action. I am taking about a 90% loss on this leg, basis the premium collected. Obviously, I would have been much better off if I covered at the highs of the day. If I could call tops and bottoms reliably, I wouldn't sell strangles, I would trade directionally and make 10x as much money on the capital invested.

By the time I type this, AAPL is now down. Whoosh! Maybe my other legs aren't safe. Low of the day so far is 125.06, high 129.57, then a slightly positive close. The sell off might be a down move to take out some day trading stop-loss orders. Long time readers know that I don't like fast moving markets.

Sell FDX Apr 155 p @173.1. I open an April position in Federal Express.

Position summary:

net neutral: AAPL BA FDX ILMN IWM PANW WHR XOM

long AMGN APC ASH GDX JWN MMM / net long: AMBA BRKB COST HD HON MNST SPY

net short: DIS UNH

new long LOCO

closed GLD strangles

expired some AAPL weekly strangles, still have more for next week and next month

Weekly: Mark Cuban, a Freaky Friday, market top?

A hard down day on Friday ruined what was an okay week for me. The trifecta of falling bonds, gold and stocks, puts me and a lot of other bulls into the red. After so many up weeks, it is not a good feeling. I initiate new longs in COST HD and new net long positions in AMBA MNST. All four recently had good earnings reports and gapped up on the news. The puts I sold are at or below the breakout base point.
 

I attend another Canslim meetup. I have mentioned a few times that a stock market top is unlikely as long as the local group was poorly attended. That if at a top, the room would be full. Well, guess what? The Santa Monica group is turning away people, and the Hermosa Beach room was jammed full.

So I am calling market top? Going back to my post from May 2014, Tea Leaves for a Market Top (link), the answer remains no. I am still looking for an inverted yield curve, when short term interest rates exceed long term rates. Still looking for a significant divergence between transports, IYT, and SPY S&P 500, with IYT usually topping well ahead of the broad market. So even though sentiment is troubling, and valuation has been troubling for a while, this doesn't look like a top. 

Mark Cuban all over the media calling bubble subtracts from the bear case. Cuban's sale of Facebook stock in the 30s as a data point for his market timing. Cuban bought like a 150k shares of FB near the IPO price, sold for about a 20% loss, or $200,000 a couple of months later. If he had kept it, his FB stock around 80 now, would be at about a 100% gain by now. 

Cuban does have a point about IPOs, but IPOs are only a small slice of the market. Some recent IPOs saw a parabola trip, up then down. GPRO LOCO are two examples.

I also read the monthly missives of Liz Ann Sonders from Schwab. She looks at a lot of fundamental data, and doesn't see signs of a major top either. However, a long awaited correction and more volatility may occur.

Here are the trades:

* p = puts, c = calls, third week expiration unless indicated otherwise.

Fri Sell SPY May put backratios @209.5

Buy SPY May 188 p / Sell 2x May 183 p

Stock market lower on employment news. I sell some put backratios for a credit. These are delta positive, theta positive. There is a chance of a big profit on a move to the lower strike. On a move below SPY 178, losses grow.

Sell AMBA Apr 50 p @63.7. 70 New long position in Ambarella. AMBA had decent earnings a couple of days ago. It is a CANSLIM type of stock. Chart support at 50. AMBA is a supplier to GPRO and also for wearable cameras for police departments.

Sell AMBA Mar 75 c @64.5. 15 A bit later in the day I turn the Ambarella into a short strangle with a positive skew. This is a reaction to overall market weakness.

Sell COST Apr 160 c @149.7. 36 I hedge my recent put sale in Costco by selling calls.

Sell BA Apr 170 c @153.3. 19 I hedge my short puts in Boeing by selling calls.

Thu Sell UNH MarW4 108 p @115.4. Rebalance a complicated position in United Healthcare with week 4 puts. I am once again tending to sell the lows, buying the highs and trying to stay near delta neutral. I took the bid on these options, which is painful on the wide spread. However, a mid-order on another was probably not going to get filled. To quote Laurel and Hardy, another fine mess.

Sell COST Apr 140 p @150.4. New long position in Costco. COST gaps higher on earnings news.Chart support at 140.

Wed Sell MNST Apr 155 c @138.4. I hedge the puts I sold on Tuesday by selling calls as Monster Beverage declines. Some might ask the reasoning. The idea is to keep delta about the same. The risk is of a big rally bringing these calls into play. So now I have a short strangle.

Sell HD Apr 105 p @115.0. New long position in Home Depot. HD reported strong earnings about a week ago. Has been consolidating a bit lower. Good chart support at 105.

Sell IWM strangles @122.4:

Sell IWM 110 p and Sell IWM 130 c

A short strangle is a bet on a trading range. I tend to sell them about six weeks out, and sell the options around the 10% probability line. So there is an 80% chance of profit, but if there is a big move, losses can be large.

Tue Sell UNH MarW4 118 c @113.3. I rebalance short strangles on United Healthcare by selling some week four calls. I choose these because there is a decent bid. This leaves me net long. The nearest options I am short are the Mar 111 puts.

Sell XOM Apr 95 c @87.4. A similar rebalance of short strangles, in Exxon Mobil. Nearest short options are the Mar 85 puts. I am hoping the chart low around 86 acts as support.

Sell MNST Apr 125 p @140.6. New long position in Monster Beverage. MNST gapped higher on recent earnings. 125 is about the level of the base.

Mon Sell HON Mar 100 p @103.9. I rebalance a complicated position in Honeywell. I have mangled the managing of this position. I have some shares, short some strangles. Mostly I have been buying the highs and selling the lows, which is kind of the opposite of how to make money.

Position summary:

long APC ASH BA BRKB DIS GDX LUV JWN MMM UNP VRX WFC

net long AAPL AMBA AMGN GDX HON MNST UNH XOM

net neutral FDX ILMN IWM PANW SPY WHR

new longs: COST HD / new net longs: AMBA MNST

Weekly: Mr. Spock's logic

Many are commenting on the passing of Leonard Nimoy. Nimoy is most famous for playing Mr. Spock on the original Star Trek TV series. Some would say the current stock market is not logical. 

Sometimes the thread of logic isn't always straight. With the recent drop in oil prices, many traders have been trading airline and oil stocks. For the most part profits have been modest, with more than a few losers on the more obvious bets. Looking a bit wider, Monster MNST had blow out earnings. The logic is that these drinks are often bought at gas stations by young people, and that their customers had a bit more money.

A person at the local CANSLIM meetup was trying to follow that gas money trail to other areas. Home Depot HD also recently had great earnings. So while the hot money was playing airlines and oil companies, taking opposides of the oil drop trade, the bigger money was to be made in the logic trail.

I wish I was that smart, but rarely am. Sometimes the logic trail can lead a person up the wrong path. Just because one person likes a product or store, it may not mean the stock is good. Trading and investing is easy in hindsight, not so easy in real time.

As for my week, mostly quiet, up a tiny bit overall. Apple caused some heart burn by moving up the I-Watch announcement date from April to March. This meant both puts and calls went up in price, and cost me both way. Honeywell's weakness was another concern. After the recent Goldilocks market of just right, I am that much more sensitive to "too hot, too cold," market conditions. Here are the trades (p = puts, c = calls, all are week 3 expiration unless noted):

Fri Sell HON Mar 105 c @103.0. Rebalance a complicated position in Honeywell by selling another layer of calls. This one is messy.

Thu Sell AAPL Mar 138 c @127.0. Rebalance short strangles on Apple as it keeps sliding. As it keeps moving lower, I keep tap dancing. I am short multiple layers of puts and calls. The Mar 125 puts are deep into red ink, because I sold them near the highs of the recent move. Wow, by mid-day, Apple rallies to over 129 and I get whipsawed on these calls. On days like this, I wish I were a more nimble trader. Unfortunately, that isn't going to happen. I don't think that quickly, and am not in front of the computer all day.

Sell DIS Apr 95 p @104.9. Add to longs in Disney by opening an April position. A lot of folks are looking forward to the new Star Wars movies. The box office will be a fraction of the potential. Toys, theme parks, clothing, collectibles are all sources for revenue.

Cover (buy to close) IWM Mar 103 p @123.2. I free up some buying power by covering these puts for a big gain. With so many days until expiration, I can likely make better use of the capital before then.

Wed Sell AAPL MarW2 140 c @129.5.

Sell AAPL Mar 140 c @129.4. Rebalance short strangles on Apple by selling two layers of 140 calls, the Mar week 2, and the regular Mar week 3's. The burst higher is looking like a trap. It has been a common pattern early in 2015, a push higher than a sharp retracement. AAPL bouncing a bit, so not so good timing on these moves.

Sell UNH Mar 120 c @114.0. Rebalance short strangles on United Healthcare. Same deal, stock popped higher, now dropping. I rebalanced on the way up, and now am counter balancing on the way down.

Tue Sell BA Apr 135 p @154.1. New long position in Boeing. Chart breakout level is 135. BA was downgraded yesterday, which means to me it likely has more room to run. At tops, it is all upgrades and higher price targets.

Mon Sell UNH Mar 108 p @114.5. Rebalance short strangles on United Healthcare as it continues to rally. A bit later, I sell another layer of puts:

Sell UNH Mar 111 p @116.4. Another rebalance. Apparently, UNH up on Medicare rate news. I am short the Mar 120 calls.

Sell VRX Apr 160 p @197.4. Renewed long position in Valeant Pharma. VRX up huge on earnings. Breakout is from an ascending base, which can be dangerous. However, there are likely a lot of shorts that are scrambling to cover on the news. In hindsight, I became too cautious too soon on VRX.

Sell AAPL Mar 125 p @132.5. Rebalance short strangles in Apple by layering more puts. AAPL at new all time highs.

Position Summary:

long APC ASH BA BRKB DIS GDX LUV JWN MMM UNP VRX WFC

net long AAPL AMGN GLD HON UNH XOM

net neutral BABA FDX ILMN IWM PANW SPY WHR

renewed long VRX

49-1 for February, grade A

The stock market was down about 3% in January, and up about 5% for February. This was a just right, a Goldilocks scenario for strangle sellers with a bullish bias. Some winners with multiple layers of strangles include IWM and UNH. The lone losing leg was part of a SPY put backratio, so really isn't a loss. I count each leg separately, just because it gets difficult to figure when I layer positions.

It wasn't a perfect month, but with so many winners, only one loser, the grade is A. I initiated profitable new positions in some big name stocks such as AAPL BABA PANW. 

Even in an A month there is room for improvement. I tried to do more Boeing trades, but never got filled, as BA kept moving higher. Another runaway train to the upside was VRX Valeant Pharma. TLT the bond etf saw a parabola kind of chart. It is unrealistic to think that I could have shorted the exact top. Gold has been in the doldrums. I am still at a slight profit on my GLD trades for the year.


I forgot the position summary in the Friday post, so I'll put it here:

Position Summary:
long: AMGN APC ASH BRKB DIS GDX LUV JWN MMM UNP WHR
nlong: GLD HON XOM
nneutral: AAPL FDX ILMN IWM PANW
nshort: SPY UNH
expired: BA VRX WFC

Weekly: Goldilocks and the sad bears

It was a Goldilocks market for me, as all my short February options came in safe. Bears are sad and frustrated with new record highs in SPY. I'll post my monthly summary on Saturday. Here are the trades from the shortened trading week (Monday was a holiday):

Fri Turned into a bit of a wild day with news about Greece. I sold some weekly options for the first time in a very long time. I also bought some shares of HON to hedge my short calls.

Sell XOM Mar 95 c @89.4. 19 I rebalance short strangles in ExxonMobil.

Sell PANW MAR1w 122 p @142.0. Rebalance short strangles.

Sell AAPL MAR2w 118 p @129.0. Rebalance short strangles

Buy half a position in Honeywell shares @105.26 to offset short HON Mar 105 calls.

Thu Sell HON Mar 97.5 p @ 104.6. 39 I rebalance short strangles in Honeywell. I plan to buy shares on a close above 105.2, to offset short Mar 105 calls.

Sell PANW Mar 115 p @139.0. 65 I rebalance short stranges in Palo Alto Networks.

Wed Cover AAPL Feb 117 p @127.7. 01 I buy to close these Apple puts for a buck, to free up buying power. I place some limit orders, sell to open, and want a bit more wiggle room, just in case something strange happens before expiration this Friday.

Weekly: all time highs, new: AAPL PANW

Another positive week for me. New positions are short strangles in AAPL and PANW. Stock market near all time highs.
Trades: * p = puts, c = calls, sell means sell-to-open, all are third week of expiration

Fri Sell PANW Mar 110 p @134.4. New long position (which I quickly change to a strangle) in Palo Alto Networks. This is a cyber-security play. PANW is a bit extended from its base. My puts are several support levels lower. A bit later I sell calls to make it a short strangle
Sell PANW Mar 165 c @133.0. PANW droops so I hedge my short puts by selling calls.
Sell IWM Mar 110 p @121.3. I rebalance short strangles on the Russell 2000 etf. Even with this move I am net short IWM.
Sell XOM Mar 85 p @93.1. I rebalance short stranges on Exxon Mobil. My position is net short even with the adjustment.

Cover several layers of SPY options: Cover SPY Feb 120 calls, Cover 2x SPY Feb 175 puts. I cover these for a buck or two to free up buying power. I often let these expire worthless, but want to have a bit of free buying power for flexibility.
Cover FDX Feb 150 puts @176, same deal, cover for a buck, to free up buying power

Thu Sell AAPL Mar 115 p @126.4. I rebalance short strangles again on Apple as it continues to rally.
Sell HON Feb 100 p @103.2. I rebalance short March strangles in Honeywell. I am short Mar 105 calls, so it nearing my mental stop.
Sell DIS Mar 95 p @103.4. I add to longs in Disney as it moves higher.

Cover short puts on Union Pacific Railroad and Exxon Mobil for $1 per contract, to free up some buying power. At ThinkorSwim covering short options that are five cents or less are commission free trades. (Sell to open is charged.)
Cover UNP Feb 90 p @123.
Cover XOM Feb 75 p @91.5.

Wed Sell AAPL Feb 117 p @123.4. I rebalance short strangles in Apple as it continues to rally.

Tue Sell AAPL strangles @120.9: 
Sell Mar 105 p and Mar 140 c
Apple moves to all time highs. My strangle is delta positive. A short strangle is a bet on a trading range.
Sell AMGN Mar 130 p @151.2. I open a March long position leg on Amgen. I am short February strangles.

Mon Sell ASH Apr 110 p @125.7. Add to longs in Ashland as it has run higher after earnings, breaking out from a base at 115. ASH options often have a wide spread, my order is a tick below the mid.

Cover (Buy to close) GLD Mar 145 c @119.0. I cover this layer of short gold calls for no commission to free up buying power. I am still short strangles on GLD. There are six weeks until expiration, only about a 2% chance for these to come into the money, but I may have better uses for that capital in the next six weeks.

Sell XOM Mar 82.5 p @91.8. I rebalance on Exxon Mobil yet again. Adding a layer of short puts to increase my delta.

Position Summary:
long APC ASH BA BRKB DIS GDX LUV MMM UNP VRX WFC
net long AAPL AMGN UNH
net neutral BABA FDX GLD ILMN JWN PANW WHR
net short HON IWM SPY XOM

Weekly: Best week in a year

I heard on the radio that the stock market had its best week in a year (52 week period). SPY made up all of January's losses and sits near break even for 2015. Gold and bonds had a down week, but are still outperforming stocks for calendar 2015.

I don't track my week-to-week progress that closely, but it was a good week for me. A few of my short calls went into the red, but it was close to a Goldilocks scenario, just right for my positioning. For newer readers, understand that I tend to be a cautious trader, often taking small positions and hedging them, so a good week for me, is going to be like watching paint dry for the all-in river boat gambler types.

I did a lot of rebalancing trades. I scramble to add delta by selling puts as the market rallies. Here are the trades:

* Sell means sell-to-open, p = puts, c = calls, all are third week expiration

Fri Sell GLD Mar 130 c @119.4. I rebalance short strangles on gold on the decline. GLD had a news driven pop, but is now fading.

Sell IWM Feb 113 p @120.1. 25. Rebalance short strangles on the Russell 2000 again, as the market nudges higher. Even with this add, I am net short, with the short Feb 123 call leg deep in the red.

Buy to close IWM Feb 92 p @120.0.

Buy to close BABA Feb 105 c @86.4.

Buy to close DIS Feb 80 p @102.0

I close several positions for a 90%+ profit (basis premium collected), to free up some buying power. With my recent flurry of sell to open activity, the margin needle is in the yellow zone. I prefer keep a decent amount of dry power to allow more flexibility. The current situation means my typical strategy of selling to open naked puts on some high value stocks such as BWLD or LNKD (AMZN, NFLX even worse) might use up too much of my remaining buying power.

Thu Sell IWM Feb 112 p @119.3. I rebalance short strangles on the Russell 2000 as the rally continues to roll.

Sell BABA Feb 94.5 c @86.8. I rebalance short strangles on Alibaba as it drops. A big move down on a big rally day is a bearish indication.

Sell JWN Mar 67.5 p @79.1. I rebalance short strangles on Nordstroms by adding a March leg.

Sell HON Mar 92.5 p @102.2. I rebalance short strangles on Honeywell as it rallies.

Wed Sell DIS Mar 90 p @99.5. Add to longs on Disney as it moves higher on earnings.

Sell WHR Feb 190 p @213.0. Rebalance short strangles on Whirlpool as it moves up on earnings.

Tue I scramble to rebalance and add longs as the market continues to rally. Many options have wide spreads and I place my orders at the mid or one tick below mid and mostly get filled. I am mildly surprised by the rally.

Sell IWM Mar 103 p @118.0. Russell 2000

Sell XOM Mar 82.5 p @91.4. Exxon Mobil

Sell APC Mar 65 p @85.2 Anadarko Petroleum

Sell ASH Mar 100 p @119.9. Ashland

Sell WHR Mar 160 p @200.0. Whirlpool

Sell HON Mar 92.5 p @100.8. Honeywell

After that flurry of six morning trades, I make it seven with a trade late in the day:

Sell XOM Feb 84.5 p @92.1. More rebalancing for Exxon Mobil.

Mon Sell UNH Feb 115 c @105.9. I rebalance short strangles on United Healthcare. The stock moved up nicely on earnings, but has been fading. I have a complicated net long position.

Sell HON Mar 105 c @97.9. I hedge short puts on Honeywell by selling calls. HON had a similar pop-and-drop on earnings.

Sell SPY put backratio @199.3:

Buy SPY Apr 179 p / Sell 2x Apr 174 p

This is for a credit, delta positive, theta positive, a net long position. If the market is up or unchanged, I get to keep the modest premium. Max profit occurs if the market moves down to the lower strike at expiration. If there is a crash below SPY 169, it starts to lose a lot of money.

Sell BABA Feb 80 p @89.3. I hedge short puts by selling calls on Alibaba. My thinking, is if this was going to crash, the earnings report would resulted in follow through to the downside. The trading low is in the 82 range, IPO price 68. Both those numbers are support.

Position Summary

long APC ASH BA BRKB GDX MMM UNP VRX WFC

net long AMGN BABA FDX HON IWM SPY UNH

net neutral GLD ILMN JWN WHR XOM

net short IWM

Santa Monica CANSLIM meetup 1/28/15

Agenda for the meeting:

1) Current Market Outlook--Alex Marenco, former portfolio manager for O'Neil Data Systems, Inc.

2) TBA Lesson--Amy Smith, KRLA radio co-host, & Irusha Peiris, MarketSmith product coach.

3) Review of Watch List stocks submitted by members--Alex Marenco.

4) Ten stocks near a buy point from Alex Marenco's Watch List.

Meeting is sponsored by Investors Business Daily. For those that are not familiar with the CANSLIM method, the book it How to Make Money in Stocks. It focuses on high growth stocks with positive chart momentum. For those looking for my weekly report, it is the next post.

It is standing room only at the Santa Monica stock market meetup. I arrive fifteen minutes later and get one of the last chairs. They do bring out more chairs, but it is elbow to elbow. I sit next to a guy that tags himself as "the bear in the room." He rattles off a litany of doom and gloom that would frighten anyone away from the stock market. Surprisingly, later during the meeting he raises his hand for owning BABA.

Overall thoughts: a lot of very smart people presenting. The meeting is fast moving, covers a lot of stocks. Two that I added to my watch list are UA Under Armour and NXPI a semiconductor stock. I always tell people at the meetup that I am not strictly a CANSLIM trader, but I do use some information, some ideas that I get and incorporate it into my own trading style.

Market Outlook is choppy. There have been five signals changes before the Jan 28 meetup. There were 21 all of 2014, so it is getting choppier. The bull market is long in the tooth. A comment is made that a 20% bear market would be a good way to clean everything out. My thought is that it is like an overgrown forest and there is fire. Then new stock leaders can rise from the clearing.

They ask for a show of hands "who is making money in this market?" Only one hand goes up. Later, they ask how many still own BABA and maybe six hands go up in a room of 50. Earnings for BABA came out the next morning and there were at least six unhappy people as it went down about 10% on the report.

The meetup was on the day of the Fed meeting ending and the market was down hard. The Fed is talking about raising rates in June or July. However, if the stock market careens lower, they may put that on hold, and may even do another round of QE.

A question from the audience is about Europe, specifically Russia. One portfolio guy says he doesn't look at Europe at all, the other says he only looks at EWG, the German stock etf. Another theory fromo the audience is about the broad stock market decline being related to margin calls in the oil futures. It is possible, but it is difficult to make this cause and effect.

A few of my own market thoughts: the broad indices were down about 3% for January 2015. I looked up similar events in the Stock Market Almanac. Mostly it is slightly down, slightly up years when January starts like that. If forced to a number, I'd say -5% for 2015, or -2% from here. A lot of money continues to pour into oil stock ETFs. To me that means lower lows in oil and oil stocks are highly likely.

Weekly: long APC BA short BABA

What a wild week! Lots of big movers on earnings. SPY down for the week, but it was a choppy ride. I attend a CANSLIM meetup and will do a separate write up on that tomorrow. One question asked was "who is making money in this market?" Only one hand went up.

For me, my account took a big haircut, but I am still up for 2015. New longs this week are APC and BA. New short BABA. Here are the trades:

* p = put, c = call, all 3rd-week of the month expiration

Fri Sell XOM Mar 95 c @87.4. I rebalance short strangles on Exxon Mobil by selling some March calls to offset short March 75 puts.

Thu Sell BABA Feb 105 c @89.4. New short positon in Alibaba on disappointing earnings. Sold these calls during the first 15 minutes of trade, at the bid, to get an immediate fill in a wide market. My thinking was volatility would get crushed as the day continued. This turned out to be correct and I had around 50% profit basis the premium collected, by the end of the day.

Sell IWM Feb 123 c @116.3. Rebalance short strangles on the Russell 2000 etf. I sold these during the morning weakness and it is the opposite effect, sitting on about a 100% loss by the end of the day. The market giveth, the market taketh.

Sell UNH Mar 120 c @109. Hedge short Mar 95 puts by selling calls. I placed the order during morning weakness, where it sat, until the monster market rally came in. What a crazy market!?

Wed Sell BA Feb 123 p @137.5. New long position in Boeing after earnings.

Sell MMM Mar 145 p @164.5 Add to longs in 3M Corp by opening a March position. Earnings are just okay, but it removes one uncertainty.

Mon Sell FDX Mar 200 c @176.1. I hedge my short puts by selling calls on Federal Express.

Sell SPY Feb 213 c @204.0. SPY looks weak, I see little chance of new highs by February expiration. As SPY rallies against this recent move, I compensate by selling SPY Feb 189 p @205.3.

Sell APC Feb 68.5 p @82.7. New long position in Anadarko Petroleum

Position Summary:

long APC ASH BA DIS GDX HON LUV MMM SPY UNH VRX WFC

net long AMGN FDX ILMN IWM JWN UNP XOM

net neutral GLD WHR

short BABA

Weekly: new long LUV, new neutral GLD

Spreads were wide on many of the less active stock options. Mostly I go for the mid or a penny or two below the mid. Sometimes I get filled, sometimes not. New positions: sell puts on LUV for a new long position, sell strangles on GLD for net neutral.

In the news was the ECB news, more earnings, and Mercury going retrograde. I remember hedge fund manager David Tepper talking about his reaction to the Fed's most recent QE news. Tepper thought it would be good for just about all U.S. stocks and went all in on the long side. It remains to be seen whether the European version will be good for stocks, more particularly for us, U.S. stocks. I am out of my depth there, but it is worth looking at. So far, the European QE has been very good for U.S. bonds, and pretty good for U.S. stocks.

Fri Sell HON Mar 87.5 p @101.3. Add to longs in Honeywell as it moves up on earnings.

Sell UNH Mar 95 p @113.0. Rebalance short strangles on United Healthcare. UNH had a big follow through day to the upside and is nearing the strike of the short Feb 116 calls. If it does go up through 116, I plan to buy stock to cover.

Sell ILMN Mar 150 p @197.0. Rebalance short strangles in Illumina. It can be hard to get a fill on ILMN options. I tried for a couple of days. This one got filled a dime below the mid with a wide bid/ask spread.

Sell IWM Feb 107 p @118.2. Rebalance short strangles on the Russell 2000 etf.

Thu Sell UNP Mar 100 p @118.5. Add to longs on Union Pacific Railroad as it moves up after earnings.

Sell UNH Feb 102 p @109.7. Rebalance short strangles on United Healthcare. UNH closed strong yesterday and opened strong this morning. I get filled as it corrects back.

Sell LUV Mar 35 p @43.8. New long position in Southwest Airlines. LUV makes new highs on earnings news. Support at 37.

Sell FDX Mar 155 p @179.4. Add to longs in Federal Express by opening a March position. As the market rallies, I add long delta.

Wed After options expiration, I often plow the capital right back into the market. I wanted to note that the Mercury retrograde alignment starts today 1/21/15 and ends 2/15/15. Last retrograde cycle was a difficult market time for me. Some may say this is superstition, but I am making note of it. Perhaps with the shaky start to 2015, the retrograde changes the energy and we start trending.

Sell BRKB Mar 130 p @147.5. I add to longs by opening a March position in Berkshire Hathaway.

Sell GLD strangles @123.9. 
Sell Mar 110 p / Sell Mar 145 c
GLD premiums up a bit due to pending European Central Bank (ECB) news. 109 is the recent low, and the 145 strike balances it out nicely.

Sell XOM Mar 75 p @91.5. I rebalance short strangles by selling some March puts on Exxon Mobil.

Sell UNH strangles @108.6: United Healthcare up on earnings
Sell Feb 100 p / Sell Feb 116 c

Position Summary:
long APC DIS FDX GDX HON MMM UNP VRX WFC
net long XOM / net short UNH
net neutral AMGN ILMN IWM JWN SPY WHR 
new long LUV 
new net neutral GLD 

38-2-1 for January, grade A-

Thirty eight winners, two losers, one break even for the January cycle, grade A-. I experience modest gains and a high win percentage during this turbulent start to 2015. The two losers were BBY and SPY. Both had offsetting profits, so I didn't lose money on any ticker symbol for the month. A bit of skill, a bit of luck, and some stock picking are factors. Best winners include FDX (Federal Express) and IWM (Russell 2000 etf). 
 
My SPY backratio insurance did not come into play despite the down start to the year. I have more put ratios for February and March. Basically, these help with a 10% decline into an expiration Friday.

I initiated new longs in GDX the gold mining etf and so far that has worked well. These are tiny positions. Biotech was mostly a big winner for me in 2014, but this year the road looks to be more difficult. I don't have any position in bonds, even though it looks near parabolic to the upside. Oil continues to attract a lot of attention, so I think there is more time needed to form a bottom. It may be years before the price of oil recovers in a meaningful and lasting way.

A few months ago, I blogged about my trading difficulties when Mercury went retrograde. That three-time a year configuration for Mercury starts again on January 18th. I am a fan of anything that works, so I will watch myself. I won't be fearful, I will be observant. 

Many eyes will be on the European Central Bank (ECB), as to what it might do next. It is widely anticipated that a massive quantitative easing program will be announced next week. What is announced and what is expected may not be in alignment and the markets may react. Earnings reports continue, and there are often trading opportunities around those earnings events.

Weekly: Cow patch crap

It is a trip through the cow patch for me, one misstep after another. During this stressful market week. I was short strangles in BBY when it tumbled, I sold puts on ILMN and watched it drop 16 points an hour after going long. Friday's relief rally means that I come out okay at the end, but may have a few more grey hairs for the experience. I'll post the monthly recap in a little bit. Here are this week's trades: (p = puts, c = calls, all are traditional 3rd Friday of the month expiration)

Fri Sell ILMN Mar 230 c @182.0. Hedge short puts by sellings calls on Illumina to reduce my delta. ILMN is 14 points lower from when I sold the March puts. The ILMN Jan 200 calls I sold are about to expire in my favor.

Sell AMGN Feb 175 c @153.5. Hedge short puts by selling calls on Amgen. Later in the day, I get the ping-pong effect as AMGN rallies after I get my fill. I rebalance again, by selling AMGN Feb 130 p @157.5.

Sell XOM Feb 77.5 p @90.9. Rebalance short strangles on Exxon/Mobil as some short January puts expire.

Thu Buy to close (cover short) BBY Jan 34.5 puts @34.0. Best Buy gaps lower after holiday results. This wasn't the earnings report, it was the Christmas holiday quarter sales. It is tough to trade the fast moving market. There seem to be some terrible fills on market orders. 

I get out for a -105% loss on this BBY leg, basis the premium collected. I am still short BBY Jan 32 puts and Jan 42 calls. I thought about shorting the stock to cover the short puts, but the market is moving too fast for me. What if there is a giant rally and I am caught short? Seems unlikely, but there have been some big mood swings. Holding is too risky for my timid tastes, given the wild market swings. If there is another big down day and that 105% loss might go to ten times that.

Wed Sell WHR Feb 230 c @195.0. I hedge my recent put sales in Whirlpool. With the wide spreads, my order is at the mid and I get a quick fill.

Sell JWN Feb 85 c @76.9. I hedge short Feb puts in Nordstroms by selling calls.

Sell IWM Feb 125 c @115.8. I rebalance my short strangles on the Russell 2000.

Tue Different day, more crap, morning upside and then more downside. I feel like I stepped into a pile of crap with some of my recent trades. All a trader can do is scrap the crap off their shoes/boots, and move on, and hopefully not step into too many more cow piles.

Sell IWM Mar 100 p @119.3. I rebalance short strangles on the Russell 2000 etf. The move up had me net short and I move back to near neutral.

Sell WHR Feb 155 p @202. I rebalance short strangles on Whirlpool.

Sell ILMN Jan 200 c @184.7. I hedge my short puts by selling some calls. Illumina down over 10 points from when I sold Mar 160 puts 23 hours earlier.

Sell IWM Mar 128 c @116.2. I rebalance again on IWM as I got whacked on the morning move.

Mon Stock market head fakes to the upside in the morning before it reverses and drops quickly. I add to longs in United Healthcare and Illumina, and rebalance short strangles on Exxon Mobil.

Sell UNH Feb 85 p @102.5.
Sell XOM Feb 97.5 c @90.0.

Sell ILMN Mar 160 p @196.1. ILMN options can be tough to trade because there are wide spreads and not much volume. I like the chart, and the way the stock has been strong during the shaky market start for 2015. Wowsers! A few minutes after I get my fill ILMN bumps up a couple of points than drops to 180 in a few minutes. Yikes! At the moment, there is nothing showing as far as news. ILMN is not the most liquid stock. It is coming back to 192 as I type so my thinking is that the most likely event is a fat finger mistake.

A bit later, there is a news report about ILMN presenting at a conference and giving luke warm earnings projections. Another factor is that it is a Investors Business Daily CANSLIM stock. The low of the day is about 8% below the buy point. The CANSLIM method preaches a 7% stop loss, so strict followers would have been taken out by the sharp drop. For those that want to sing the manipulation song, yes, it does happen. As small fish traders, not much we can do about it. Sometimes there are lawsuits and years later, it is the lawyers getting a slice, and the investors a slice.

Position Summary:
long APC DIS FDX GDX HON MMM UNH UNP VRX WFC
net long ILMN JWN XOM
net neutral AMGN IWM SPY WHR
expired APC BBY KMX MSFT NKE YHOO

Weekly: New Year starts with a bang

2015 starts off with a rollercoaster ride, ending with the week on a down note. My trading account is up a tad, so I managed the ups and downs better than I have in the recent past. Some highlights include many rebalancing trades, new position in XOM (near neutral), new longs GDX, WFC, many rebalancing trades, and opening some February positions on existing longs. Here are the trades (p =puts, c = calls, all are third week of the month expiration):

Thu Sell WHR Feb 155 p @194.5. Rebalance back to net long on Whirlpool and Amgen.

Sell AMGN Feb 135 p @161.2.
With the wide option spreads, I am entering the orders at the mid or a penny or two below the mid as day limit orders. Sometimes I get filled right away, sometimes it takes a while and the stock to come back. Sometimes the order sits and expires. It isn't easy to trade these wide spreads, though on actively traded stocks fills are more likely.

Sell SPY Jan 196 p @204.9. Rebalance SPY back to net neutral. Those Mar 218 calls I sold are deep in the red. I selling puts to hedge. The strike is below both sets of recent lows.

Sell FDX Feb 150 p @174.1. Add to longs in Federal Express
Sell XOM Jan 86 p @91.7. Rebalance short strangles in Exxon Mobil by selling calls. The strike is below the recent low of 86.1.


Wed Sell XOM Feb 77.5 p @90.7. Rebalance short strangles on Exxon Mobil.

Sell VRX Feb 105 p @144.1. Add to longs in Valeant Pharma, one of my best bull stocks from 2014.

Sell MMM Feb 135 p @159.9. Add to longs in 3M Corp. MMM is at the 50 day moving average line on the chart.

Sell JWN Feb 70 p @79.3. Rebalance my position in Nordstroms back to net long. 70 is a support level.


Tue Cover AMGN Jan 148 p @155.2. I close these short puts near breakeven to take some risk off the table.

Sell UNP Feb 95 p @113.9. Add to longs in Union Pacific railroad.

Sell GDX Mar 16 p @20.3. Add to longs in gold miners.

Sell SPY Mar 218 c @199.5. Rebalance in a minor way my net long position in SPY by selling calls.

Sell XOM Feb 97.5 c @89.4. Hedge short puts by sellings calls. The thought in my mind "well, that didn't work, buying the dip in oil," so I move closer to a neutral position in Exxon Mobil.

Sell ASH Feb 95 p @117.2. Add to longs in Ashland Corp. ASH was one of my best bull stocks during 2014.


Mon New long position in the gold mining etf. 16.45 is the 52-week-low, so I pick the strike below that.

Sell GDX Feb 16 p @19.1

Sell SPY Backratio @203.3: Buy SPY Mar 184 p
Sell 2x SPY Mar 179 p for a credit
Again, I like to sell SPY backratios after a tick up in volatility. These are delta positive, theta positive, for a net credit. There is the possibility of an explosive profit on a decline to the lower strike. A decline below 174 and losses start to spiral. In an up or unchanged market, I get to keep the small credit.

Sell DIS Feb 80 p @92.5. I add to longs in Disney. 80 is several support levels away.

Sell WFC Feb 45 p @52.3. New long position in Wells Fargo

Sell IWM Feb 122 c @117.0. Rebalance short strangles on the Russell 2000 etf. I reduce my net long position by selling calls. The minor high is 121.41.


Some trades from the prior week:
Fri 1/2/15 Sell BRKB Feb 135 p @151.1
Turns out that the early morning rally is a head fake. The double pump fake has the market moving lower, then closing near unchanged.

Wed 12/31/14 I rebalance short strangles back to neutral on the Russell 2000 etf.
Sell IWM Jan 113 p @120.6

Tue 12/30/14 Sell BBY Jan 34.5 p
Mon 12/29/14 Sell JWN Jan 75 p

Position Summary:
net long AMGN BBY FDX GDX HON JWN SPY
net neutral APC NKE WHR XOM YHOO
long ASH BRKB DIS ILMN KMX MMM MSFT UNH UNP VRX WFC

new positions: GDX, WFC long, XOM net neutral