Wednesday, December 3, 2014

Trading summary: Cleaning up

Colgate Palmolive - A consumer staples company.

The brick:

5 contracts CL May 2015
Max profit $282.10
Max loss (2.5k-282.10) $2.2k
Days to expiry:165
Max Yield on risked capital: 13% 
Projected annualized gain for worthless expiry: 28%

This is perhaps not the best timed move, but I've had so many positions come off (and come off EARLY) so I wanted to get some more theta decay going in my account.  (Premium erosion over time)

I've been in and out of $CL a few times already in my new account, so it seemed like a good choice to get back in.

Also, I CLOSED my short puts on IPL (Inter Pipelines).  It had moved to nearly 50% max profit since YESTERDAY.  While not realistic, that represents an annualized yield of 1373%.  I was hoping for an assignment.  So I'll take my profit and try again the next down-day for oil.

In review, some readers have tweeted that my risk/reward seems crazy low for these moves.  And by the numbers, it does look that way.  However, I'm doing "defined risk" trades so I have an absolute maximum loss.  If you buy a stock or sell short puts, your losses can be potentially MUCH larger than mine.  Additionally, if I were selling short calls, or short strangles, then the losses are theoretically INFINITE.

Stay HUNGRY my friends.

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