Friday, November 28, 2014

Trade summary: chips chips chips, and bailing out.

Today's trades:  Closing a winner & exiting a position as I had grown bored of waiting for.

Here's the brick:


This morning I decided to exit my position of GM - General Motors.  It had bobbled up and down since I had opened the position.  The market crash (and recovery) made both strikes go completely in-the-money and then back out again.  I've lost interest waiting for it, as typically my moves come to fruition in a little less than 1/2 of the time from open to expiry.

CLOSED: GM - General Motors
5 contracts DEC $32/30 bull put spread 
Position open: 18-aug
Position closed: 28-nov
Position open: 102 days
Maximum Premium : $206.11
Maximum loss: $793.88 (1000-206.11)
Closed @ 24% capture ($56.11)
Yield on risked capital: 2%
Representing an annualized yield of 9%

As for Qualcomm (QCOM) It worked much faster than anticipated.  The stock had cratered on some lawsuit type news.  But as they sell chips to EVERYBODY EVERYWHERE, (and that this type of suit is frequent, and easily dismissed) I made my move.

CLOSED: QCOM - Qualcomm
5 contracts DEC $65/60 bull put spread 
Position open: 11-nov
Position closed: 28-nov
Position open: 17 days
Maximum Premium : $318.01
Maximum loss: $2181.99 (2500-318.01)
Closed @ 77% capture ($243.01)
Yield on risked capital: 11%
Representing an annualized yield of 229%

Now THAT's more like it!

Stay HUNGRY my friends!

Tuesday, November 25, 2014

Trade Summary: It's THE PHONE COPS MAN!!!

No, I'm not Dr. Johnny Fever, but I did decide to take a snoozer position in T - AT&T.




The brick:


5 contracts T April 2015
Max profit $172.10
Max loss (1000-172.10) $827.90
Days to expiry: 145
Projected annualized gain for worthless expiry: 19%  
Yeah, it's going to be boring.  T hasn't touched $32 for over 9 months.  Will probably take it's sweet time to hit my target.
Stay HUNGRY my friends.

Monday, November 24, 2014

Trade report: seaching complete!





Today one of my GTC (good till cancelled) orders closed my Google spread for December. 

Here's the brick:


CLOSED: GOOGL - Google
5 contracts DEC $500/495 bull put spread 
Position open: Oct 24
Position closed: nov-24
Position open: 31 days
Maximum Premium : $284.06
Maximum loss: $2215.94 (2500-284.06)
Closed @ 71% capture ($209.06)
Representing an annualized yield of 107%

I'll be looking to re-enter new spreads in the future on any upcoming days of market retreat.

Stay HUNGRY my friends!

Thursday, November 20, 2014

Trade Summary: anticipated success and re-entry, plus a new position

My $14 short puts in AVO - Avigilion Inc (security cameras n' stuff) are looking like they will expire worthless tomorrow, as the stock is trading today at $17.80.

So I added a new position of short puts on them with a January expiry.  I hope this position will again expire worthless, although the number of puts is small enough that I would begrudgingly take assignment.

Additionally I added 1 measly short put on IBRK - Interactive Brokers.  It's my brokerage.  Why not own some?  Plus, with their "take no prisoners" approach to dealing with customer margin-calls, they will no doubt generate MORE income during market corrections and market crashes.  So its earnings should be pretty crash-resistant.  This is why I sold an ATM (at-the-money) call in the hopes I would get assigned.

Using an ATM short put with Interactive Brokers is CHEAPER than just buying the stock outright.  Here's the breakdown:

Sell the short put and collect the premium.  Take the assignment (a $0 cost at IBKR) and hold the stock.  I plan on holding this one forever.  Hopefully one day I'll have enough shares of IBKR so the dividends will pay for all the trading fees I spend each month.  (Looks like I'll need about 2000 shares)  But right now, that would be "considerably" overweight to have a 54k position.  (Current share price $27)

Here's the brick:

Stay HUNGRY my friends.

Wednesday, November 19, 2014

recap: why do I trade spreads?

I've had a few comments go by questioning my methodology when deciding on a decent risk/reward for my positions.  In my usual spirit of brow-beating, all of you naysayers are woefully uninformed. (Read: WRONG).

So for those of you who just buy stock: what do you need to make money?
1. you need the stock to go up and then you need to SELL it.
2. you need the stock to pay a dividend if it doesn't go up.
3. if the stock goes down, you're boned.

How much can you lose?  ALL OF YOUR MONEY!!!

So what happens if I do one of my spreads on the same stock?
1. if the stock goes up, I make money
2. if the stock goes nowhere I make money
3. if the stock goes down 10-15% I MAKE MONEY
4. If the stock goes down MORE than 20% I can "kick the can down the road" if I expect the stock to recover.
5. if the stock goes to ZERO, I only lose a maximum of $100-500 per contract. (Depending on the "width" of the spread.

Additionally, I do NOT have to sell the position to make money.  It will EXPIRE on it's own (if I choose not to close it) if the stock has not fallen more than 15%

So my risk/reward is VASTLY superior to the buy and hold only.

Stay HUNGRY my friends.

Trade summary: Apple

I forgot to blog this on Monday.  Anyway, it was time for me to close my last Apple spread.  It had done it's magic.

Here's the brick: (No commission shown it cost $7.89)


CLOSED: AAPL - Apple Computers
5 contracts APRIL 2015 $85/80 bull put spread 
Position open: sep-4
Position closed: nov-17
Position open: 74
Maximum Premium : $512.19
Maximum loss: $1987.81 (2500-512.19)
Closed @ 78% capture ($412.19)
Representing an annualized yield of 97%

I'm still bullish on Apple, so I'll be looking to add a new position 3-6 months out with higher strikes.

 In other news, it looks like I'm running an average annualized yield of 40-45%.  I'm unable to give you an exact number so far because my account wasn't even fully funded until last month.  Once I get more than 6 months of data in the new account (look for it 5 months from now) then I'll be able to give you the reports that show my rate of return.

Stay HUNGRY my friends.

Friday, November 14, 2014

Trading summary: greasy computers

The last couple days have not presented me with any opportunities except perhaps for today's trade.  I chose to be super conservative so my strikes are low and my risk/reward is right on the bottom of my acceptable limit.

Today's moves: XOP - SPDR S&P Oil & Gas Explore & Prod. (ETF)
It's oil, and it's liquid. (Both the product, and the trading).

MSFT - Microsoft.  85% chance you're using it's products right now.

Here's the brick:
So here's the breakdown:
5 contracts XOP JAN 16, 2015
Max profit $156.49
Max loss (1000-156.49) $843.51
Days to expiry:63
Projected annualized gain for worthless expiry: 39%

5 contracts MSFT FEB 20, 2015
Max profit $222.10
Max loss (2500-222.10) $2277.90
Days to expiry:98
Projected annualized gain for worthless expiry: 36%

In other news, since I'm not using all my money all the time, I don't get annualized returns like my past few trades all the time.  That said, so far so good.  I've been averaging 35% annualized returns for the past 3.5 months my new account has been open with Interactive Brokers.  Most of my moves are 3-6months out though, so this number should increase a little over time.

I'll post more charts in the future as right now, a 3 month chart with only 3 data points isn't all that useful for hammering home my point: You most certainly CAN beat the index!  And with hardly any time, or huge amounts of money to push around.

Stay HUNGRY my friends!

Thursday, November 13, 2014

Trading Summary: closing more winners

As it's getting harder and harder to come up with entertaining, yet brow-beating, denigrating, and insulting commentary to attempt to shame convince you to trade options through humiliating encouraging you.  So in lieu of any of that, here's the daily round up.

I didn't trade yesterday, hence no post.  But today I closed 2 winners.

Here's the brick:
NB: bear spread is the INVERSE of the bull spread. (buying the bear spread closes the bull spread)

CLOSED: DIS - Disney
5 contracts Dec $82.50/80 bull put spread 
Position open: Oct-8
Position closed: Nov 13
Position open: 36 days
Maximum Premium : $232.69
Maximum loss: $1017.31  (1250-232.69)
 Closed @ 69% capture ($162.69)
Representing an annualized yield of 150%


CLOSED: MA - MasterCard
5 contracts Dec $65/60 bull put spread 
Position open: Sep 11
Position closed: Nov 13
Position open: 62 days
Maximum Premium : $326.71
Maximum loss: $923.21  (1250-326.79)
 Closed @ 74% capture ($251.79)
Representing an annualized yield of 65%

Stay Hungry my friends!



Tuesday, November 11, 2014

Trading report: Trying to close some winners, and a NEW position - chips chips and chips

Currently on the board are orders to close spreads on Mastercard, Apple, and Google.  This page will be updated if the orders fill.

After a few days of "digestion" on the news that QCOM is facing some lawsuits I made another move.  Same strikes as my current position, but with a shorter duration.

Here's the brick:


So here are the opening numbers:
5 contracts
Max profit $317.70
Max loss (2500-317.70) $2182.30
Days to expiry: 66

So there you go!  This is on the low side of my target for risk/reward, but the duration is shorter than I normally do.  If this expires worthless in 66 days, it will represent a 81% annualized return.

Stay HUNGRY my friends!









Monday, November 10, 2014

Trading summary: Drugs and burgers

Today's trades: closing 2 spreads.  I didn't stick to my target goals.  But with the amount of time left on the contracts, it wasn't worth holding them for the last few pennies.
 

So, here's the brick to see the closing times, commissions and prices!

NB: (as always) buying a BEAR put spread closes the corresponding BULL put spread.



PFE - Pfizer
5 contracts Jan 2015 $28/26 bull put spread 
Position open: Aug 27
Position closed: Nov 10
Position open: 75 days
Maximum Premium : $175.28
Maximum loss: $824.72  (1000-175.28)
 Closed @ 67% capture ($121.28)
Representing an annualized yield of 67%


MCD - MacDonalds
5 contracts Dec $87.50/85 bull put spread 
Position open: Aug 19
Position closed: Nov 10
Position open: 83 days
Maximum Premium : $141.01
Maximum loss: $1108.99  (1250-141.01)
 Closed @ 59% capture ($91.01)
Representing an annualized yield of 34%

Stay HUNGRY my friends!

Thursday, November 6, 2014

Trading update: Banking on America

I closed a short-put position.  (Buying them back)

BAC - Bank of America
$17 Nov 21 expiry.

Opened @ $0.70 (opened Oct 15th)
Closing @ $0.13 (closed Nov 6th)

81% capture

My apologies to my readers who are option-novices. This might seem a little cryptic.  I won't be trading tomorrow...  3 day weekend!

Stay hungry my friends!

Wednesday, November 5, 2014

Back to basics: a crash course in options

In a decidedly uncharacteristic post, here is (hopefully) a helpful post for option novices.

What are these option things that you keep talking about?

Options are contracts (traded electronically like stock) for buying or selling of 100 shares (or 10 for mini options) of a specified stock at a fixed price for a fixed time.

The specified stock is generally referred to as "the underlying"
The specified price is generally referred to as "the strike price"
The specified time is generally referred to as "days to expiry" (on the "expiration date")
The amount of money that exchanges hands is "The premium" 

But since these are all contracts, the terms of the contract must be met before the option expires. Otherwise, the value of the option plummets to zero.

Now lets take a little aside: in the stock market, when something plummets to zero, that's a bad thing. (Unless you're a short-seller, which I'm not.)  But with options for any given expiry date, 1/2 of them on the board will have no residual value because the terms were not met.

Back to business: how do the terms get met?  The stock price has to be "in-the-money" (ITM). If your option position is "out-of-the-money" (OTM) at expiry, then it will expire worthless.

If your position IS ITM at expiry (and sometimes before) , you will get assigned.  (This could be the forced buying or forced selling of the underlying shares depending on which type of option you have).

Now that doesn't sound all that hard does it?

Unfortunately for the novice, this is where the mind-job begins!

The options that traders trade come in two types: puts and calls.

If you BUY a call, you want to BUY shares if (and only if) the share price climbs up to your strike price.  eg: you like company ABC, but they have been having trouble lately. You're only interested in buying the shares once they have fixed their issues and are climbing in value.  Thus you would buy a call for ABC with an expiry as long as you would like.  (Longer terms cost more though)

If you BUY a put, you want to SELL shares if (and only if) the share price FALLS below your strike. eg: You own shares of ABC. You like them, but are worried that their new drunken CEO might spoil the party.  You BUY a put to insure your position and your profits.  If the drunken CEO bankrupts the company your put will deliver you your desired price thus saving your money from yet another CEO scandal.

Now how do you use this to your advantage?  There are many many ways to do this. But that's well beyond the scope of this brief, introductory post.  Because you can use calls (by selling them) to SELL your shares and you can use puts (by selling them) to BUY shares.  (Yes I know, that's completely the opposite of the above)

Now I can hear your heads shaking and eyes rolling.  Take a break!  Read this again later.  Ask me questions.  Look up the terms, and the strategies online.  Covered call, short-put (naked put).  Once you understand a naked put (or cash-covered put) then we're ready to talk about my go-to moneymaker: the bull-put-spread.

Stay HUNGRY my friends!



Trade update: Closing some winners, and closing a roll

Today I opened a new position on GOOGL (Google) a $500/495 bull put spread expriing in March 2015.  Collecting $0.926 (per share).

I closed my position on $WMT (Wallmart) for $0.09 giving me a 76% capture representing an annualized gain of 34%.

The meat of this post: a ROLL:

Last month, I didn't know if I would be home on the last trading day of my $YUM spread which was expiring October 17th.  So I ROLLED. 

What does that mean?  I closed the position for a loss, and opened a NEW position further out which completely covered the losses of the close and then some, thus giving YUM a chance to recover form the disasterous market pot-hole that we hit in mid-october.

As it turns out, the roll was unnecessary as the value of YUM moved back above my strikes, but by then it was too late as I had rolled 2 days prior.  So the roll extended my time-frame and got me an extra $16.49 in the process. (There was more to collect, but it's time to move on from that position)

So for simplicity's sake, I'll fudge the numbers together to aggregate the 2 positions.
5 contracts of YUM Oct rolled to NOV $67.50/65 bull put spread 
Position open: August 21
Position closed: Nov 5 (and rolled October 15th)
Position open: 76 days
Maximum Premium : $157.16+56.39 = 213.55  (max premium from each position)
Maximum loss: $1036.45
Closed @ 81% capture ($157.15+16.49 = $173.64)
Representing an annualized yield of 80%

Stay Hungry my friends!

Tuesday, November 4, 2014

Daily trade report: Coffee, Chocolate, and Princesses.

New positions!!!

I closed my Starbucks November put spread this morning, and later this afternoon entered 2 new positions.  One on Disney, and one of Hershey.

Here's the screen-cap:

Opened NEW positions of: 
Hershey: May 2015 $85/80 Bull put spread $0.70 credit per share ($70 per contract)
Disney: April 2015 $82.50/80 Bull put spread $0.55 credit per share ($55 per contract)

I CLOSED the following:
5 contracts of Starbucks (SBUX) NOV $70/65 bull put spread 
Position open: August 19
Position closed: Nov 4
Position open: 77 days
Maximum Premium : $177.71
Maximum loss: $2322.29
Closed @ 77% capture ($142.71)
Representing an annualized yield of 29%

In hindsight, this trade wasn't worth the risk as my risk/reward was more than I typically want. But really though, it did make money and a 29% annualized yield is nothing to sneeze at.


Stay hungry my friends!

Monday, November 3, 2014

Daily trade report: Coffee and computers

Today I tried to close a position Starbucks, but as it's quite far OTM (out of the money) the contracts are rather illiquid (no buyers and sellers) and my order didn't get filled.  I was however, able to close my position of Microsoft. 

Here's the closing screen-cap for your viewing pleasure:  Remember the "bear put" is the OPPOSITE of the "bull put" so BUYING the bear spread CLOSES the bull spread.

5 contracts of Microsoft (MSFT) DEC $42/40 bull put spread 
Position open: Sep 3
Position closed: Nov 3
Position open: 61 days
Maximum Premium : $155.51
Maximum loss: $844.49
Closed @ 78% capture ($115.51)
Representing an annualized yield of 78%

Does that sounds a little bit better than holding an index ETF?

Am I getting through to you "can't-beat-the-index-naysayers" yet?

Stay hungry my friends.

Sunday, November 2, 2014

Transparency - putting my money where my mouth is

This post will contain some super scary looking graphs. What are they?  They are the account reports of my new trading account with Interactive Brokers.  I'm hesitant to post them because while they do show the day-to-day ups and downs of my account, the huge v-shaped notch in the graph, while accurately representing the "panic-now-cash-value" of my holdings, however the panic now choice of exiting positions is just not something I do.

I'm also leery of posting them because I'm sure the bulk of my new readers do NOT understand what a "roll" is, nor how well it mitigates risk, and lets the market get over it self.  Heck: It's even a cash-positive move most of the time.

Additionally, the roll trade I did perform near the bottom of this ugly graph as it turns out was NOT necessary, and has stymied my account balance as the market and my account recover from last months' correction.  (More of a pot-hole really)

My trade didn't lose me any money, but it did slow down the exit of the position until this month.

So I suppose in the name of accountability, I'll cut to the chase and post them.

Graph 1: The last 30 days.  So the entire calendar month of October.  PURPLE line:

















 Graph 2: My account since I started trading and live-tweeting every bull-put spread: GREEN line




 
Yes, I do realize that dip is a horrible horrible number and no doubt I've scared off many of you "can't-beat-the-index-naysayers" but as you can see from these charts, a AM still beating the various indexes. The hard part? The experience required to not panic and run for the hills arms flailing.

Even as my account liquidation value made this precipitous fall, the positions I held were mostly still all within reason.  (The market values for most of the underlying stocks had not crossed the upper strike price on my positions).  A couple had flirted with being completely in the wrong, but at the same time, most of them are not due to expire for 2-6 months, so as always there was time to wait and see.

Now that the markets have recovered, they are all mostly back where they should be.

You have to know when to hold 'em and know when to fold 'em.  Mostly with this strategy, you sometimes roll your way out of trouble, but if you've done your homework you almost never have to fold.

Stay hungry my friends!

P.S. Please don't let the scary charts scare you.  It's not nearly as bad as it looks.













Trade Summary: catching up

As per the live-tweeted trades on twitter, here are the resulting numbers from trades I closed a while back, but hadn't blogged about until good ol' Steve at http://www.kapitalust.com gave me the kick I needed to brag keep updating you folks on my trades.  So here they are in order of CLOSING:

5 contracts of Microsoft (MSFT) September 26 $42/40 bull put spread 
Position open: August 7
Position closed: August 21
Position open: 14 days
Maximum Premium : $199.81
Maximum loss: $800.19
Closed @ 78% capture ($159.81)
Representing an annualized yield of 475%

5 contracts of YUM Foods (YUM) September 19, $67.50/65.00 bull put spread
Position open: August 12
Position closed August 21
Position open : 9 days
Maximum premium: $174.45
Maximum loss: $1074.55
Closed @ 61% capture ($109.45)
Representing an annualized yield of 416%

1 contract of Tesla Motors (TSLA) August 29th $257.50/255.00 bull put spread
Position open: August 26
Position closed: August 29
Position open: 3 days
Maximum premium: $43.42
Maximum loss: $1206.58
Closed @ 100% capture (expired worthless)
Representing an annualized yield of 2557%

5 contracts of Macdonald Dettwiler & Associates (MDA) October $76/74 bull put spread
Position open: August 14
Position closed: September 9
Position open 26 days
Maximum premium: $220
Maximum loss: $780
Closed @ 55% capture ($130)
Representing an annualized yield of 191%

2 contracts of Apple computers (AAPL) January 2015 $80/75 Bull put spread
Position open: August 11
Position closed: September 25
Position open: 45 days
Maximum premium: $126.49
Maximum Loss: $873.51
Closed @ 49% capture ($64.49)
Representing an annualized yield of 55%

There are a few other trades that went by in my twitter feed: Some naked puts on MasterCard, an option assignment, then a covered call to sell it.  But the most striking returns generated from my account are from bull put spreads.  So that's what I'll keep blogging about.

On October 15th, I "rolled" a position to give it more time, so it's still open in my book and not ready to report.  Although you will have seen the tweet go by reporting the trade.

Am I getting through to you "cant-beat-the-index-naysayers" yet?

Stay HUNGRY my friends!