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

Results for the Week ending August 26, 2011

RESULTS FOR WEEK ENDING AUGUST 26, 2011

Ok, so the results for the week weren’t exactly what I wanted, we did post a positive result for the week.  There is a great lesson that comes out of this week.

Here are the trades put on last week:

RUT   665   Put     $2.12

RUT   655   Put    ($1.49)     This gave a net Credit of $0.63, 6.3% ROI

SPX   1125  Put     $2.64ere Hh

SPX   1115  Put    ($2.06)     This gave a net Credit of $0.58, 5.8% ROI

GLD   177  Call     $4.00

GLD   179  Call    ($2.40)     This gave a net Credit of 1.60, 16.0% ROI

All was good until literally about 3.50PM Eastern Time.  The GLD had been rising a little all afternoon.  But as the close loomed GLD starting shooting up by $.20 - $.30 increments.  As time was running out Friday I had to make an adjustment on the GLD spread.  The total GLD transaction flow looked like this:

GLD   177   Call   $4.00

GLD   179   Call  ($2.40)

GLD   177   Call  ($3.90)   This gave an overall net Debit of ($2.30)

The adjustment was needed as GLD finished at 178.46.  This would make me owe $146 for every GLD 177 Call I had sold.  This time I had 10 contracts.  So the adjustment meant I was down $230 rather than $1,460.  This is one of those times where it is better to take a small loss on a particular trade and stay positive overall than to take the big loss and virtually wipe out the week’s gain.

Thus two BIG concepts reared themselves this week.  (1) Diversification gave us three potential profit streams.  (2) Adjustments, when it became clear that the GLD stream was going the wrong way we were able to make an adjustment to stem the bleeding and keep us in the green overall for the week.  Remember Rule 1 !!!!!

If you have any questions or comments you can post them below or email them to:  hashleycm@yahoo.com or tweet me @Awagel01

TTFN

Ash

PS - still working on getting the pics to come in right in blogspot.  The graphs are comign in all messed up.  When we get that situation fixed there will be much more in depth analysis.  Sorry for the delay.

Latest Update - Lots of Stuff and Info

TRADING RESULTS FOR WEEK ENDING:  August 12, 2011

Ok folks, after the PCLN mess we came back to what we know best and do well.  The high volatility for the week was a real hindrance to finding the path for the week.  Up one day, down the next.  We played this trend during the week to make our money. 

TRADES:

SPX    1195     Call     $2.15

SPX    1205     Call     $1.20     This gives a $0.95 Credit for a ROI of 9.5% per Thousand

SPX    1190     Call     $2.49

SPX    1200     Call     $1.54     This gives a $0.95 Credit for ROI of 9.5% per Thousand

GLD    166      Put     $0.44

GLD    164      Put     $0.29     This gives a $0.15 Credit and a ROI of 6.0% per Thousand

We put these trades on Wednesday afternoon.  At the time these were 2 SD away from the underlying price for the S&P and just under 2 SD for the GLD.  S&P was net losing for the week so we went the other way and put call options spreads on.  Just the opposite for the GLD.  Gold was going up – way up to record highs – so we went to the put side. We went out far enough to still get good returns (helped greatly by the high volatility) but still were far enough our that we could be thinking we were safe.  Turns out we were right.  The trend for Thursday and Friday was up for the S&P, and net down for gold, but were stayed safe by staying way wide with the SD.

Now to talk a little about the PCLN debacle.  This happened two Fridays ago.  This is a time where I should have stuck with the girl I brought to the ball.  I had my nice gain of almost 10% locked up, but thought I could make a little extra during the last minutes of the Friday trades.  I entered the trades and lost literally at the last minute when the strikes were violated.  I lost all my gain on that.  This is why I say the last minute trades are not for the faint of heart.  I basically lost the week of trading.  Lots of work for nothing but a hard lesson learned.  I still plan to do last minute trades, but have modified my rules to make anything over commission instead of trying to make a minimum of 3%. 

Now for the upcoming week:  Trades look like they will be SPX, GLD and maybe RUT or NDX.  Check the Twitter feed for the trades just after I do them. 

TTFN

Ash

Analysis for Week Ending 07 29 2011

RESULTS FOR WEEK ENDING JULY 29, 2011

First let me apologize for the lateness of this entry.  I had a massive allergy attack over the weekend and am still recovering.

This week was a weird week as all the debt crisis info was flitting about the airspace.  Each day seemed to bring a new rumor or a repudiation of a previous rumor.  With all the noise about it made for a difficult week on the trading.

Here are the trades put on:

SPX  1340 Call     $1.48  Sold

SPX  1350 Call     $0.68  Bought     This gave a $0.80 Credit for an 8.0% ROI

SPX  1335  Call     $1.58  Sold

SPX  1345  Call     $0.73  Bought     This gave a $0.85 Credit for an 8.0% ROI

NDX  2425 Call     $2.41  Sold

NDX  2450  Call    $1.56  Bought     This gave a $0.85 Credit for an 8.5% ROI

Using my basic criteria for trades here is the blow by blow:

(1)   We started out the trades just more than 1 SD away from the underlying when we made our Wednesday purchases.  As the market sunk that margin just grew and grew helping us be more assured of our margins.

(2)   The spread size was our normal $10 making the math easy for ROI and Margin calculations.

(3)   Minimum premium of $0.40 per contract.  We way overshot this getting twice as much with $0.80 and $0.85 for our spreads.

(4)   Going with calls when the market was falling was the contrarian way to go and made our margins more locked in each day.

(5)   We had spreads on two different indices the NDX  and the SPX, so we were looking at all the indices and not just centering in on one particular.

Something I have been experimenting with is looking to put on last minute trades to complete the condors on spreads I have going on.  I have done this the past three weeks and it has proved successful.  I am not recommending this for others as this is more an art than science!!!!!  But if you want a little more spice in your life than you could try this approach.  If this works for you here are my guidelines I use when looking for these last minute trades:

1.       I start looking about 2:30 PM Central Time (3:30 PM Eastern) using the last 30 minutes lessens the considerable risk I am undertaking.

2.      Watch the trends and price changes very closely.

3.      See if there is a spread you can put on that will gain money.  With Optionshouse, my online platform, I do not incur any more margin as long as I keep the position size equal on the call and puts.  I do have to pay the commission on the trade.

4.      If there is not a trade to do – don’t make one. 

5.      If the trade feels too risky to you – it is and don’t make one.

6.      You have already made your money for the week, don’t lose any by making a trade here that you are unsure of.

7.      These trades require a strong stomach.  Only do them if you can take the anxiety that it causes.

If you do try these there is potential for good size rewards.  You can add as much as 25% to your income total for the week.  But as I have said these are quite risky until you get a feel for them. 

Here is the last minute trade I did last week:

SPX  1290  Put     $0.40  Sold

SPX  1280  Put     $0.05  Bought     This gave a $0.35 Credit

Market closed at 1294.42 Friday giving me a nice little profit.  But as you can see the close and my sold put were very close together.  Due to the nature of these last minute trades this will always be the case whether you go call or put side.  I put the trade on when the underlying was 1294 so it changed little in the 20 minutes overall, but there were some gyrations where the underlying came very close to my strike but never hit it.

QUESTIONS:

I have a hard time consistently making a profit.  I get 4 out of 5 trades right, but I am barely breaking even.  What can I do to be more consistently making money?

I ran into a similar problem.  Well,….the exact same problem.  For me it came down to position sizing.  I was all in on my trades.  Now I break up my trades, putting only a portion of my capital in one trade.  Diversification is what it is called.  I learned that lesson that hard way as well.  Try putting two or three trades in two or three different indices or with multiple strikes. 

You try for 4%, but I can only find 2.5% - 3% spreads.  How do you find consistently the 4% and more spreads?

Most of it is using my basic criteria.  Then it becomes a hunt and peck.  If I do not see a trade that meets my basic criteria towards the end of Wednesday I will take to lower percentage.  The 4% is a goal, not a baseline.  I have made 3-3.5% trades and have been happy with getting the money.  Remember the first two rules:

(1)   Make money each week

(2)   Don’t lose money made by going after risky trades.

+3% is better than -1% any day of the week.

Well, that is all folks.  I will Tweet when I make trades today (Wednesday August 3, 2011) and will also try to post here what trades I did.

TTFN

Ash

DISCLAIMER:  All the trades shown here are my real trades.  BUT I am not saying to blindly follow my trades.  Do your homework, your own due diligence.  If the trades you see me doing fir your style and your risk tolerance level, then feel free to copy them.  I am not recommending any stocks or options or any trades whatsoever to anyone who reads this.  I am just putting up my own experiences for educational purposes only.  I am not a licensed trader, I am just a geek who reads a lot and loves to play in excel to model.  If you send questions I will answer them, but will not recommend any particular stock or option or any other financial vehicle to you in particular.  I will only say what I would do in a circumstance.  What you do with that info is all you.

Analysis for week ending 07 22 2011

Ok, here are my results from last week.  Sorry for the delay, I had puking kids this weekend.

Last week I put up my basic criteria for trades.  In case you missed it here it is again:

1.      The short option strike price will be at least 1 Standard deviation from the underlying price of the index.

2.      The spread size usually is $10.

3.      The premium per contract is $0.40 minimum.

4.      If the index is rising I will look to the put side, and conversely if the index is falling I will look to the call side for the spread to enter.

5.      I will look at all the indices even if I find one spread that meets the above criteria.

Each trade below follows these criteria.

NDX     2425 Call     $1.83 Cr

NDX     2450 Call     $0.78 Dr     This gives a $1.05 Net Credit for a 7.00% ROI

SPX     1300 Put     $1.68 Cr

SPX     1290 Put     $1.13 Dr     This gives a $0.55 Net Credit for a 5.50% ROI

SPX     1315 Put     $0.84 Cr

SPX     1305 Put     $0.49 Dr     This gives a $0.35 Net Credit for a 3.50% ROI

I realize the last spread does not get to 4.00% ROI, but following all my other guidelines this was the best I could get.  Also the total committed capital gives me a 5.33% ROI so overall I am good.

I entered these trades last Wednesday after watching the market and charts.  The trend in the NDX  was declining while the SPX was slowly increasing.  Using my contrarian view I entered the trades you see above. 

QUESTIONS:

I have had a few questions left for me and I am seeing a pattern so here are some of those questions:

1.       What trading platform do I use?  I use Optionshouse.  But any online broker will do.  I use Optionshouse because the commissions are dirt cheap.  If you like lots of tools or bunches of analytics Optionshouse is not for you (as you can probably tell buy now I do not get any endorsement $$ for mentioning my broker!!!)  Their toolkit is limited to say the least.  I like to do my own research and have other tools I can use.  If you like tools then Think or Swim is the place for you.  They have the biggest and to me the best tools.  If you are a TD Ameritrade person … they are working on bridging the TOS platform to the TD platform so be patient.

2.      Do you buy back your options before expiration?  Not if I can help it.  My goal is to let all my spreads expire worthless.  Weeklies don’t often give the big movements to have the luxury of buying back the options before expiration.

3.      Why do you use weekly options?  I use weekly options because I can generate returns of 3-8% per week, making my trading capital work for me.  Also I have fallen into a comfortable methodology of trading.  This is key.  I know other strategies and from time to time use them.  But I make my bread and butter trading weekly vertical spreads.  I know my analysis well, I have a good feel for how the weeklies operate and I am getting better at using the greeks on the weeklies.  KNOW your strategy well and use it often and you will be on your way to successful trading.

4.      How did you learn about weekly options?  I learned of them in an Investtools seminar.  Yes, I paid the outrageous amount for their master’s program.  It is a good program and I learned tons on fundamental and technical analysis.  Plus I learned a lot on the TOS platform.  Good education program, but I think a bit overpriced.  During a seminar the leader of the seminar said he was starting to use them and during each of the breaks I prodded him with questions.  He even had to pawn me off on other presenters I was monopolizing his time.  I started researching them after that and the rest as they say is history.

Well that is it for now.  Any questions leave below or email at hashleycm@yahoo.com

TTFN

Ash

Analysis of Week Ending 07 15 2011 Trades

Ok here is the analysis from last week.

I normally trade only the NDX (Nasdaq 100), RUT (Russell 2000), SPX (S&P 500) indices.  These are traded through the CBOE (Chicago Board of Options Exchange).  If I cannot find any spreads that fit my criteria then I will look at other weeklies.  The CBOE maintains a list of available weeklies. Here is the link: Available Weeklys.  Our goal is to have the spreads we enter being worthless at expiration so we can keep the full premium.

The first day of the week I start looking at the indices to see if there are any trades that fit my criteria.  Here is that criteria:

1.      The short option strike price will be at least 1 Standard deviation from the underlying price of the index.

2.      The spread size usually is $10.

3.      The premium per contract is $0.40 minimum.

4.      If the index is rising I will look to the put side, and conversely if the index is falling I will look to the call side for the spread to enter.

5.      I will look at all the indices even if I find one spread that meets the above criteria.

After going through these criteria I found the NDX had the best opportunity.  The other indices were really not giving anything for premium.  So Wednesday morning I put on the following spreads:

NDX    2400      $3.00 Cr

NDX    2410      $1.90 Dr     This gives a $1.10 Net Credit

This gives $110 per contract with a contract size of $10.  The NDX 2400 is more than 1 Std Deviation from the underlying strike price as NDX started Monday at 2392 and went down from there.

I also put on the following spread (this is a call spread):

NDX     2415     $1.72  Cr

NDX     2425     $1.17 Dr     This gives a $0.55 Net Credit

The returns for these spreads are pretty impressive!  11% and 5.5% respectively.  A high margin of safety with the underlying price starting at 1 SD (Std Deviation) from the strike price and growing.  As the week progressed NDX never got back to the Monday opening price.  Just what we like to see.

Friday morning NDX starting running up so I decided to look and see if I could put on a put spread to increase my earnings.  Now when doing this I only looked at the NDX for the put side.  A couple of reasons for this:

1.      I can make the spread margin requirement free up to the amount of current NDX  spreads I have on at the moment.

2.      I have already put a lot of work on the NDX to enter the call side, I can use this info to see if the put side is a good trade.

Ok, the trend is starting to go up, I look for a trade at least 1 SD away from the 2320 mark.  I find one ate the 2280-2295 mark.  The spread size is a little larger than what I like to usually do, but at the late hour with time decay working I had to increase the spread size to be able to make any money on the trade.  Here is the put spread I found:

NDX     2295   $1.23  Cr

NDX     2280   $0.93  Dr     This gave me a Net Credit of $0.30

Now this trade fell below my 4.00% ideal (2.0%), but with the trend in my favor and not having to commit any margin, this trade becomes worthwhile.  I am not committing any more resources but still getting return.

Friday ended up with all positions winning.  All spreads ended up worthless at expiration.  We used our trading rules and stuck with them, and we ended up making good money this week.  Starting Monday we will replay this all over again looking for the next good trade. 

Any questions leave them as comments below or email to hashleycm@yahoo.com

TTFN

Ash