RESULTS FOR WEEK ENDING NOVEMBER 25, 2011

Hope you all had a Happy Thanksgiving!  A great holiday for us foodies and those who just love to eat.  A mess of leftovers is in the fridge.  Another rule – make what you like for holiday meals so you have great leftovers!!  Now, here are the trades put on for the week, both were call spreads:

S&P 500 Index SPX

SPX     1200     Call     $1.19

SPX     1210     Call    $(0.61)        This gives a Net Credit of $0.58 for a 5.8% ROI

Russel 2000 Index RUT

RUT     710     Call     $0.84

RUT     720     Call    $(0.28)         This gives a Net Credit of $0.56 for a 5.6% ROI

Breakdown

SPX

I returned to my normal pattern of trading the indexes.  I have always liked the SPX for its high premiums, but sometimes the volatility of the index spooks me.  This week events in the world made it pretty easy to go the index route.  The failure of the Congressional Super-Committee to come to any agreement on the deficit issue (I refuse to call it a crisis – we have seen this coming since the end of Geoge W’s first term and have kicked it down the road ever since.  And yes for those of you who are wondering I am a card carrying Republican.  But I can criticize an unfunded mandate whether a Dem or a GOP puts it forth, same goes for an unfunded war in Iraq, but that is for another blog post.)  Then the Europeans got into the act with their bond sale issues.

As can be seen in the chart last week continued the trend from the previous week of heading down.  This movement led me to make the call spread for the week.  I entered the trade on Wednesday per usual.  With the benefit of hindsight I could have made a few extra bucks entering on Monday or Tuesday, but my rule is trade on Wednesday or Thursday.  Also with the short week due to the holiday the Wednesday trade helped us take even more risk off the table with regards to time. 

RUT

Many of the same things said for the SPX held true for the RUT.  Recently these have been moving very similarly, although the RUT has not swung as wildly.  Following another rule I like to diversify my spreads in different indices and/or stocks.  I also like to have both put and call spreads going at the same time, but this week that would have been a practical impossibility.  All indices and stocks I like to spread all were heading the same direction.  So, I picked two I was really familiar with and looked for returns that held to my rule list (For a complete rule list look in the archive, July 5, 2011 is the date I first put up the trading rules.) .

Giving up thanks to freestockcharts.com for the charts.  a very good free stock chart site that I use a lot.  I am still learning how to use this tool and as I do my charts here will hopefully get a little more sophisticated!!

I will be putting up a book list and some reviews of books that I have found useful soon. 

If you have any questions or comments please leave them below or contact me at the following:
email:  hashleycm@yahoo.com
Twitter:  @awagel01

L8r

Ash

RESULTS FOR WEEK ENDING NOV 18, 2011

As you can see this entry is a little behind.  I got caught up in the preparing for the Thanksgiving holiday and had to do some extra travel and various sundry things that took me away from getting this post ready.  That being said I hope I can shed some insight into your trading this week.  Here are what my initial positions were:

 S&P 500 Index SPX

SPX     1225      Put     $2.47

SPX     1215      Put    $(1.69)   This gave a Net Credit of $0.78 for a 7.8% ROI

Russell 2000 Index RUT

RUT     705      Put     $1.82

RUT     695      Put    $(1.24)    This gave a Net Credit of $0.58 for a 5.8% ROI

NASDAQ 100 Index NDX

NDX     2290     Put     $3.00

NDX     2280     Put    $(1.24)    This gave a Net Credit of $1.76 for a 17.6% ROI

Breakdown

Things were going well with all of the spreads for most of the week.  Then on the 17^th things began to unravel for the SPX and NDX spreads. The decline that didn’t stop until the 28^th of November started on the 17^th.  My NDX and SPX positions which were call positions needed repair.  I had to make the following adjustments:

SPX

SPX     1215     Put     $7.69

SPX     1225     Put  $(12.81)    This gave a Net Debit of $5.12 for a -51.2% ROI

This gave a total Net Debit of $4.54.  Right now I am heading toward a BIG loss, but headed off an even bigger one if I didn’t do this adjustment as by expiration SPX broke through the 1200 into the high 1190s.

NDX

NDX     2280     Put     $10.19

NDX     2290     Put   $(13.70)          

NDX     2280     Call    $5.89

NDX     2290     Call  $(3.21)   This gives a Net Debit of $0.83 for a -8.3% ROI

Again this helped avert an even bigger loss as the NDX pushed into the high 2100s by expiration.

So this week wasn’t the best, but we averted a complete disaster through making the adjustments.  Still overall I am up close to 83% and am looking to be up 100% by year end.

Later after the close Friday it seemed that there was some unusually high programmed trading and algorithmic trading that took over the Wed-Fri markets.  As one sell limit was reached that triggered others and the indexes just cascaded down.  Unfortunately this is one of the risks we really can’t manage or hedge out.  These programmed trading platforms each have their own proprietary programs that generate buy/sell signals for the trading houses.  Once the triggers are hit they automatically generate trades that look like trades you and I make just on a MUCH bigger scale.

Looking back on the trading rules I have, I actually followed my rules and still got lit up a bit.  That is going to happen.  When you are trading you have to go into the game realizing that occasionally you will lose on a trade here and there.  The goal is to minimize those losses when they do occur.  That is what I did this week.  Take the punch and go to my corner to shake it off.  Remember we are still up very well for the year and get ready to hit it again next week.

I am working on some book reviews and will start posting links to articles I read or are sent to me by you fans.

TTFN

Ashley

RESULTS FOR WEEK ENDING NOVEMBER 11, 2011

Here is the breakdown of the trades for the week:

Green Mountain Coffee Roasters

GMCR     80     Call    $1.01

GMCR     90     Call    ($0.19)     This gives a Net Credit of $0.82;  ROI = 8.2%

Priceline.com

PCLN     505    Put       $1.66

PCLN     495    Put      ($0.96)

PCLN     550   Call       $0.31

PCLN     560   Call      ($0.14)     This gives a Net Credit of $0.87; ROI = 8.7%

Breakdown

GMCR

These trades were entered Wednesday afternoon.  The GMCR trade was spurred by the announcement that they totally tanked on earnings.  I went out and looked at the chart for GMCR:

As can be seen, the price had fallen from the 90s into the 60s then the bad earnings news came out.  Also look at the spike in volume that came out on earnings news.  This means LOTS of people were wanting out of the stock. This is a tailor made situation for the call spread strategy.  Since I was looking on the day earnings were announced the premium on the 80 and 90 calls were still high.  So I took advantage of that and created the 80-90 credit spread buying the 80 calls and selling the 90 calls.

PCLN

Earnings were announced on Wednesday 11/07/2011.  PCLN beat earnings going 7% above consensus estimates.  We put the PCLN put spreads on Thursday morning after the earnings announcement.  The 495 level was just over the 1 Std Dev mark and combined with the great earnings numbers we felt confident that the stock would not slide that far.  PCLN slid back a little every day except Friday. 

Thursday at the close of the trading day we put on the call spread for a couple of reasons.  First as can be seen by the chart 550 seems to be the resistance level.  Second the price slid despite the earnings announcement down to the 525 level.  With no unusual activity coming up over the last three days of the week the call spread seemed a good bet.  Lastly since we already have a put spread out there we can make a call spread of equal size without needing any margin. 

Normally I trade in index options.  VERY rarely do I put out spreads on equities.  This week was an exception.  The indexes I usually rely on just did not have anything to offer this week.  The SPX index which is my fave, was swinging 20-30 points a day in both directions.  My fallbacks the RUT and NDX were doing the same.  After going through my checklist for each of the indexes and equities offering weekly options PCLN & GMCR were the only ones I felt comfortable trading.  This is a process I go through each week.  Most of the time (90+%) I stick with the indexes, but this week the opportunity took me in another direction.

I have some questions that were emailed to me and have had some people ask me some things in person as well.  Coming soon some book reviews and I will be starting an educational segment to highlight options and the basics as well as focusing in on how I trade.

Sooo…if you have any questions please email to hashleycm@yahoo.com or hit me up on Twitter at awagel01.

TTFN

Ash