Thursday, October 30, 2014

My ship came in!

Yes, I am a sailor, and have had aspirations to be the media-crew-member (and submitted an application to be) the on-board reporter for a Volvo Ocean Race boat.   (9 months at sea, 30 days at a time, on a carbon-fibre sailing yacht with 8 smelly, unwashed crew-mates, no showers, freeze-dried food, open oceans, Atlantic, Pacific, Indian, and southern ocean crossings, pirates, fishing-nets, hurricanes, squalls, 100kph winds... what could go wrong?)

But that bloated intro completely digressed from my analogy:  My ship came in: as in, I closed a spread today (9:58am EDT) on $MA.  I opened the position on August 22 and closed it today on Oct 30.  Which is a grand total of 69 days.

Mastercard (and Visa) reported excellent earnings for the past quarter and the stocks surged 6-7% at open.  My position blew right past my target of 75% capture (75% of the available premiums stay in my pocket), so I decided to close the position.

The numbers:
August 22 I opened the following:
bought 5 contracts of $MA 65 puts expiring Jan 2015 for $0.8020.  $3.98 commission  = -$404.98
sold 5 contracts of $MA 70 puts expiring Jan 2015 for $0.1.672. $4.02 commission. = $831.98

So the difference = $427 (my max gain)
Max loss = 5 contracts * $5 spread = $2500 - (premiums collected) = $2073.

My close cost me
$65 puts (sold to close $0.18) for $85.55  ($2.45 commission)
$70 puts (bought to close $0.34) for -$172.45 ($2.44 commission)
For a difference of $86.90.

Thus I kept $342.10 of the maximum of $427.  An 80% capture.

So the gain of $342.10 over the maxim loss of $2073 = 16.5% gain.  Which doesn't sound like all that much, but as the position was only open for 69 days, theoretically that's a 86.6% annualized yield.

Even still: all of you buy and hold, can't beat the index nay-sayers: I made a 16.5% return in 69 days.  Think about that for a while!

Final notes: my explanations in the future will not be so verbose.  I'll post trade summaries including position, closing price, percentage capture, and how long it was open.

Finally, I still have a $MA position open.  It expires in April of 2015 and hasn't yet hit my target.  Will continue to hold.

1 comment:

  1. Nice job! I am on the same boat with ya for MA, April 2015 :) I hold a few shares of $MA & $V... it's nice to see a gap up.

    I was going over my past trades and I've done too many stupid trades. I traded many times with Potash from 2010-2014. WHen I added all my buys/sells together, I never made money on them as POT has been trending down in the past few years. I gotta rethink my whole trading strategy.