redman59

Average person with a full time job and interest of the market. Prefer reading trading blogs over trading books. Grew up near Rochester, MN & now live near Gettysburg, PA. For more information visit http://redman59.com/
Joined Oct 27, 2011
174 Blog Posts

redman59

Joined Oct 27, 2011
174 Blog Posts

$AAPL Adjustment and Today’s Outdoor Adventure (w/Pictures and Video)

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Waking up this morning and looking at the emini-SP500 futures  we could see that the market was set to open higher from a ramp that began at 0245 EST.  But like many other times in recent weeks, this was nothing new and it was later met with selling during the trading hours.  As stated in last night’s blog post, the two positions that I did have on in $AAPL and $IBM both saw news over the  weekend plus 2 days of market closure.  Both positions were short the Weekly options and long the Nov options creating positive theta and benefiting from the extra days the market was closed.

I knew that I had plans to go out for some outdoor adventure today at around 1030 EST as the local river was high and flowing and I wanted to get my money’s worth out of my kayaks.  So I wanted to make sure that these two positions would be setup so that any volatility would not have me wanting to check my phone while trying to dodge debris in the river…overall just wanted peace of mind.

My main concern was in $AAPL and how this would react to their news.  On the open it gapped down -9.78pts (-1.62%) and continued to see selling for the first 15 minutes.  That marked the bottom for the day and remained in an uptrend throughout the day ultimately putting in a doji candle near the 200 SMA, which it did undercut on the selling.  My plan in pre-market was to buy a Weekly put option which would flatten my T+0 line and if we saw the whoosh under the 200 SMA then my position would be just fine and there would not be cause for concern on loss of profits or even worse, making the position a loser.  Below is my Risk Graph from last night’s blog:

Below you can see my order fill for the Weekly 570 put position and how it affected the Risk Profile (screenshot taken about 30 seconds after the fill):

The main difference in the Risk Profiles is the T+0 (white) line.  By buying this put for $105 I protected my downside in case $AAPL saw some furious selling while I was away from the computer.  It essentially created a flat line   that reduced my delta’s but also reduced my theta, so I do not benefit as much from passage of time.  But this is a bullish bias position and not so much an income position so theta was not as much as a concern as direction is.  Also I see the downside protection much more valuable for the $105 cost and have no problem with the fact that it does reduce my upside profits by the cost of $105.  This can be see in the 2 Risk Profiles at the +5%  where the first one before the Weekly put addition was +$280 and now it is +$175 (shown as +$176.78).  I do plan on adjusting this and rolling  the short 580 call tomorrow or Friday when the next Weekly options become available.

As for my other position in $IBM, it saw favorable upside action that also ended up with a doji-type candle and it failed to hold above the 10EMA, which I believed it would get to based on prior analysis shown here.  I’m liking the action here in $IBM and will adjust the position watching it around the +-1.50pts from the 195 price level.  I plan on adding another Calendar in the direction of the move as I feel it is limited to 192 on the downside and the 198-200 area on the upside.


*Today’s Adventure in Swift Water*

I did state earlier that I did leave and do some kayaking down the river.  With adjustable and light positions and all the rain received from Hurricane Sandy; it was hard not to pass up the opportunity to take the kayak down the river with the high water levels and accelerated current.  Smart? Probably not the smartest thing with 40-degree weather and unknowns in the river such as logs and other debris that weren’t there before, but a fun opportunity that doesn’t come often.  It was a skittish at times but luckily I did make it through without dumping the kayak.  I put my phone in a Pelican Case and tracked it via the MyTracks app and the stats are below (including 10 minutes walking & 5 minutes stopped):

Total Distance: 10.84mi
Total Time: 2hr 5min
Avg Speed: 5.27 mph
Max Speed: 9.02 mph

The walking and stopped times would affect the speeds, but overall the current was fast as I did not oar froward but more controlled it.  I didn’t go down a populated area as I live in a farm community but many fields were washed out and many looked liked lakes.  So no devastating pictures like that of the cities that were involved.  But I was able to take a short video shot and some pictures even though it is hard to tell the actual water level on them.  It was hard to control the vessel and take video/pictures so they aren’t the best, damn current.  Needless to say it was deeper than I would have thought even up on the land that was not part of the river as I would venture out and still not be able to touch my oar to the bottom.  Needless to say I am glad I didn’t tip over and have to swim (life jacket was worn).  But below is a short video clip (with audio) and some pictures below for you visual folk:

 

 

 

Theta Burn and Position Update in $AAPL and $IBM

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It looks like everything will be in full-swing on a market level tomorrow Wednesday.  I have nothing new to say that you probably have not read as far as news of Hurricane Sandy or market stats when it has been unexpectedly closed 2 days in a row.  Here in PA near Gettysburg we have flooded areas (only affecting houses near rivers, not towns) but no big damage like that seen in the news.  I wish the best for those with damage.

I do know from an options position standpoint that those that have positive theta positions will benefit.  We have seen an additional 2 days of theta decay that was not built in.  As far as my current positions go in $AAPL and $IBM, they should benefit from this time decay as I was short the weekly options in both and long the November options that expire on November expiration.  In my post on Friday I detailed the positions in $AAPL and $IBM and I wanted to show the Risk Profiles in both to show how the option greeks changed, mainly theta.

In $AAPL on Friday my Risk Profile looked like that below:

Now as of Tuesday night the greeks and Risk Profile look this below:

The main component here is theta.  As you can see with the added days of market closure as of Tuesday night the theta (time decay) has changed from 23.57 per day to 62.47 per day.  In theory and price and all else being equal, I have went from gaining $23.57 per day to gaining $62.47 per day while doing nothing and the markets were closed.  You can also see by the blue highlighted area above the 1 Standard Deviation range into Fridays (11/2) expiration.  This is telling me I have a 68% probability of $AAPL being in that area, making the downside near a max gain.  Now with the recent news of the firings and other patent/iPad-mini reviews who knows where $AAPL will be, but from a probability standpoint that is the expectation.

As for $IBM, it also caught some news during the market closure in that it issued a $5 billion dollar buyback in stock.  This can be seen as favorable news for the stock which should be favorable for the position I have as it is bullish in direction.  As of my last post the Risk Profile is below:

In the last post I stated that this was a 1/2 position as I have no faith in the bullish action of this market but based on prior action and a technical indicator (for analysis click here) I thought that $IBM would see some upside, benefiting this options strategy.  But if we saw some downside my plan was to add another Call Calendar or roll the short strike.  As of Tuesday night you can see this Risk Profile below:

Again focusing on theta as this position benefits from “lost days” or time/theta decay you can see that it went from 30.68 to 50.76 in those unexpected 2 lost days, benefiting the position around $50.  Again this is with all else (price/greeks) being equal.

I am sure that the Risk Profiles will change on Wednesday’s open as there is a lot going on now in the market with end-of-month mutual fund scrambling and news affecting these two stocks specifically.  Either way it should make for an interesting day and these positions should make for a good study on option greeks, specifically theta.

Earnings Update in $AAPL and New $IBM Trade

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Previously I was long the $AAPL earnings trade as I put in my Twitter timeline.  Thankfully this played out after earnings as we are aware of their miss on EPS and downward forward guidance.  The price action from what I could understand is that it was  “baked” in to the recent selling as the volatility sellers looked like geniuses on Friday’s open.  $AAPL closed at 609.54 on Thursday and opened at 609.43 on Friday, so really no movement at all and predicted by just about no one as many expect a volatile move.

So going into the earnings reaction I posted in a blog this trade that was long the $AAPL Nov/Oct4 550/580 Call Diagonal spread, selling the Oct4 580 and buying the Nov 550 for a 29.20 debit or $2920.00.  The Risk Profile can be shown below:

After the earnings release I decided that I would like to roll the short option to the next month that would increase my profit from positive upside action from a $80 gain to a $280 gain at expiration 11/2 .  I then rolled the short call by buying back the Oct4 580 Weekly call and selling the Nov1 580 Weekly call for a 2.00 credit.  I could have received a better credit by $100 if I would have waited as $AAPL sold off shortly thereafter I rolled the short call, but hindsight is 20/20 and my downside expectations still held.  I have included the order entry as well as the new Risk Profile :

So you can see that the position is still positive and upon Thursday I plan on rolling the short call again to the next month on a dip (given that I am still in the trade).  I will be absent Friday (maybe some mobile trading) so my decision will be made Thursday.

On Friday I also entered into a $IBM 195 Call Calendar and the risk profile can be seen below:

My reason for this trade can be seen below on the chart.  I took into account it’s recent hit on earnings, stabilization, and a technical indicator that proved snap-backs prior occurrences (% above/below 10EMA) as shown in blue highlighted boxes:

So I entered into this position with a half position in case further downside occurred into which I would enter into another Call Calendar.  I want to iterate that this is not a volatility/income edge type play but more of a directional play.  $IBM is one of those stocks that does have a volatility index in itself and looking at the volatility chart you can see that we are in mid-range of recent volatility readings:

I believe that this is a trade that can see upside to $195 and this spread is more of a cost reduction type trade that benefits from time decay and upside action.  In the end I look to take around  25-30% overall profit on this trade.

Staying Light and Earnings Trades in $AAPL and $AMZN

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Last night I posted in how I have no plans to go either way with this market as there seems to be a lot of tug and war and direction is not clear.  Today my morning consisted of morning admin catch-up that I usually save for the weekend.  But the morning action was a recording of previous days of where we saw a gap up followed by selling.

Today I did see a nice opportunity in $CRM as it was selling off and placed an order  for the 140/130 Bull Call spread at the mid of 2.65 credit.  This was to take advantage of the expected volatility decrease on a rebound off the 200 SMA and 142.50 support level.  Well this was the bottom and I  never got the fill.

Then obviously we had the news stock of the day of $AAPL that was set to report earnings.  I had no desire to take on an earnings trade but the more I looked at the chart, the more I starting looking at options strategies coupled with the chart.  In the end I placed an order and was filled 2 minutes later on an $AAPL Nov/Oct4 550/580 Diagonal spread.  In this spread I sold Oct4 580 Weekly Calls (expiring tomorrow) and bought the Nov 550 Monthly Calls for a 29.20 debit.  Usually I do not risk this much in an earnings trade but when looking at the chart and what the Risk Profile showed me, I liked the trade.

In this trade I looked at 550 as the max move to the downside.  I thought this was a safe max move and anything further than that and I find it hard to believe that there wouldn’t be buyers.  If $AAPL saw a move to the upside then at a minimum I would have made $80.00.  If we did see an extreme move to the downside, then I had 2 more expirations to roll the short call to reduce loss/cost basis.

More on my downside thesis.  $AAPL is a stock like no other.  This thing is a growth stock with awesome fundamentals.  Into the close it was nearly 14% off the highs with a tape that is not healthy.  So my thoughts going in were that expectations are high but this stock is still putting up numbers to make any company envious and the fundamentals in regards to price to growth, margins, and returns on assets/equity/investments are impressive, also there is no debt and the cash hoard is almost stupid to believe.  Needless to say it is an awesome stock fundamentally that has seen “wanting to get in on selling” even before the earnings.  Also on a technical basis with it coming into the 200 SMA and support levels if we saw more downside, it is just hard to believe that buying would not ensue.  Below is the 4 year chart to show some of the 2008-2009 calamity and how $AAPL has performed since hitting the uptrending 200 SMA (purple line)

So with this I went in wanting to get in if we saw a drop while also taking in some weekly profits if we saw an upside move.  So the Nov/Oct4 550/580 Call Diagonal made sense to me.  It takes advantage of the 580 call volatility crush while the 550 Nov call would not be effected as much on a volatility basis.

The Risk Profile and chart can be seen below with notes:

Also during the day I bought the $AMZN Nov 205/210 Bull Call spread for a debit of 3.75.  The thesis was kind of the same minus the fundamental thoughts.  I liked the chart technically and looking at support levels this made sense with the thought going forward that if we saw selling, I had two more expirations to roll the short calls.  Also this would take advantage of any positive earnings reaction.

After the close both companies released earnings and the price action made volatility sellers look like absolute geniuses.  The price action was gratifying to watch in both as both sold off right away.  $AAPL crossed below that 200 SMA and never looked back.  The hindsight thought now that $AAPL returned to its close after some selling is that the selling since Sept options expiration is priced in.  $AMZN moved up to an important support level and is hanging right there.  Should be an interesting day tomorrow and as of right now the $ES_F is -11.25pts (-0.80%) from the close and the tomfoolery continues.

Thought on Today and New Trades in AAPL and NFLX

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Watching the market today I was in the perspective of “this is good action”.  I take a no news or objective future opinion as this market has proven retarded and that it can move on any news whether good or bad.  At this point any economic data has to be ignored and just watch the market reaction, don’t try to over-think it.  I must say that I liked today’s action.  It seemed like the bears had every opportunity to bring the market lower and they weren’t able to.  With a holiday-like day with the bond markets closed I expected the low volume follow through to the downside, but the market held steady.  Intraday I was watching the 5-minute $TICK chart and it did not have me worried at all as it made higher lows into the afternoon and hitting better highs than lows.

With that I swing traded $AAPL by buying the 645 call on weakness then later selling the 655 call on strength, my net debit/risk is $270 with full profit of $730.00 if AAPL closes above 655 on Friday.  This stock is definitely in the news, especially with its consecutive close below the 50-day SMA, but I am looking for it to make a push to the 50-SMA and then maybe seeing more selling.  I recently wrote a post titled “Similarities in Apple ($AAPL) Before It Last Corrected” on 10/01 about how AAPL was seeing similar price action bearishness to a previous time period, so far it is playing out.  But I am short-term bullish and have no intention to take a long-term position before earnings, I may miss out on a big gap up but I am willing to accept it.

Also today I took a delta-neutral options position in $NFLX.  Another stock that was in the news today.  I have to say from a consumer standpoint that if it was moving on this news, that is not a reason to buy.  I am a Netflix and Amazon Prime customer and I must say that Amazon is far more superior.  I really see them taking away share from Netflix as I am more of a purchaser of convenience rather than minuscule dollars.   I see today’s news more as an euphoria and I am hoping that previous longs took some profits as I see maybe a run to high 70’s then further selling.

My position today in NFLX involved me selling volatility via selling the Nov 55/85 Strangle for a 3.80 ($380) credit per spread.  I saw this as a good opportunity as previous moves have shown stalling afterward so I am looking to capitalize from time decay and volatility stall/drop.  The morning didn’t work out as the stock saw further upside movement so for right now I am down approximately -7.5% on the original margin requirement.  I am looking to stay in the trade and buying a put on further upside movement.  The risk graph can be found below with red lines representing -10% move, live, +10% move and light blue representing a 1 StDev by Nov expiration:

Right now most of my positions are bullish bias and really I have no reason from a chart perspective to be bearish.  The $SPX is still trading above its 10/20 EMA’s and under the radar the price action of a market of stocks is still working.

Playing Catch Up and Today’s Bond Trade

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The last week or so has definitely been busy on a personal level leaving little time to monitor the market and look for trades. I must say that I am also in no hurry to get aggressive either way. Today I spent some time at the desk and one thing that I have been paying attention to as of late was the Dollar, Euro, and Bonds. I have been waiting for the bounce in the Dollar and Bonds. Today when looking at the $TLT, I decided to put on a trade to which I think will work and I am looking to pull an initial 20% gain out of the trade and raise stops on the position. Looking at the chart below, I saw the following:

  • trend is now down marked by lower highs and lower lows
  • recent above average selling and below average buying in this bounce
  • relative strength moving average (purple line) is trending down with relative strength line below
  • downward sloping 12/20ema’s, 50sma, and a flat 200sma
  • yellow dotted lines mark Oct Iron Butterfly (113/120/120/127) breakevens

I am not expecting the trend in bonds to reverse any time soon. With that I believe we will see stalling or reversion on any price expansion to the 200sma. The dotted lines represent my breakevens and I believe this will capture a majority of the range as the upside b/e comes in around a resistance level and the downside b/e comes in at an area that should find buyers. Also on extreme moves past these levels I will look to adjust the spreads by closing and rolling the spreads capturing profits.

This is one reason why I like these types of spreads as they are adjustable allowing the trader to stay with the trade. It also doesn’t require a lot of monitoring as the gamma risk is mitigated and it allows an end of day trader to adjust to the trade without a lot of profit/loss volatility versus a naked long call or put position. With my absence as of late and probable less than usual participation for a couple months, I chose to enter this trade versus other swing trades that would require more attention.

The trade is a Oct 113/120/120/127 Iron Butterfly (same as Iron Condor with sold strikes being the same) for a 3.75 credit, risk 3.25 per spread. Below is the current risk graph at the end of today 9/20:

Now it’s time to catch up on emails, reading blog posts, and inputting spreadsheets.

**Updated w/Charts** Yes, I Was Long BIDU Into Today

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Thursday night I blogged about my recent trade in BIDU which can be found here.  I wanted to provide a follow-up post with some visual to the trade as I know when I read blog posts it makes the trade easier to understand when charts or other visual aids are included.  But here is a quick recap:

  • Placed Sep 115/110 Bull Put Spread Wednesday 8/22
  • Thursday 8/23, woke top find BIDU trading down -5% from yesterday close, position was -30%
  • Decided to enter into Aug5 Weekly 110 Call for retracement of selling
  • Exited all positions at end of day for little over +2% return on risk

Below is a trade history of the trades I took in BIDU:

The next chart is a 15min chart of BIDU.  When day trading and looking for opportune entries for swings I focus on the 15min chart as I believe it is a good filter for not too short (as in a 5min chart) or not too long (as in a 60min chart).  I also like the 30min chart for 1-4 day swings but when only planning on a day trade or precision entry I prefer the 15min chart.  Notes can be found on the chart of my entries.  I did front run the swing as on what I believed was a capitulation candle of large range in the afternoon on volume that trumped previous volume bars.  The better entry would have been to wait for a reversal candle (as it did print a doji) with confirmation.

The next chart shows a volatility chart that I look at.  When I am seeing extreme moves in stocks I look at this chart to see how the stock historically performed when similar volatility was displayed.  At the time when I looked at this BIDU was down around 7-8% and this just seemed to be too much given the news in why it was down.  Notes to take from this chart going back the last year of data:

  • It breached the Lower 3rd Standard Deviation Bollinger Band, previous occurrences show high probability of some upside in the following day(s)
  • Augen Standard Deviation Spike reading was at its 2nd highest in the last year reading around -3.80 at the time I added the long trade
  • Closed the gap on where it gapped up from earnings

With all the data that I was looking at I saw this as an extreme move that was ensued by panic and decided to enter a long position.  Did I get lucky with subsequent price movement?  I would say yes but at the same time no one can predict future price.  All we can do is look at current data, implement a plan within our risk parameters, and hope that price follows that plan.  The data that I was looking at had me believe that price was reaching an extreme in selling.  So instead of bailing on my current position that was at an uncomfortable loss, I decided that I may be able to add to this losing trade to mitigate the loss.  To which this plan worked.  I do remember looking at my risk profile grid thinking “wow if this kept going up I could have a nice gain as my dollar cost average was low”.  Needless to say I’ve thought like this before and the losers outnumber the winners.  I remembered this and thought as to why I put on the swing long (to mitigate loss) and exited the position at end of day relieving myself of mental capital strain.

Do I advocate doing this trade?  No, usually if I am in a position and I get unfavorable news I will cut that position immediately as I am not into news-y positions.  If I was around during the open I would have cut this position immediately for what still would have been a better gain.  But in this case, I woke up to find the position down big and saw continued selling.  For the stock to be down the same amount as if it missed big on earnings, was extreme to me and the volatility readings displayed the same.  In the end the added swing position worked and if I saw the same setup, minus having the previous position on, I would take the trade again.

Yes, I Was Long BIDU Into Today

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Working night shift from 6pm-6am at times has me missing the first hour or so of trading. In most cases it is not a big deal as I don’t have over-leveraged positions. I mostly trade options in which the whole position doesn’t compromise more than 5% of my account. Last night I replied in Rhino’s post that I had put on long positions (via credit spreads) in IBM and BIDU. Well you can probably guess where I’m going with this.

Today I woke up around 11:30EST, rolled over and looked at my brokerage app on my phone. What was a nice performing position in BIDU yesterday as I went long on that mornings dip, now looked horrendous. My first thoughts as emotions overcame my reasons for entry were “I hate those fucking Chinese stocks, why the hell did I get into this thing?” At the time it was trading down something like -5%, what the hell could have been the news? I went to my desk and then the first thing I saw was that it was seeking legal action against QIHU and it was downgraded by an analyst from Deutsche Bank. If you’ve read my posts/replies in the past you know that I categorize child molesters/rapists/thieves of personal belongings all the same; well analysts are the next people to throw in there. I believe they are some of the biggest manipulating & useless people within finance.

So my position in where I was up around 9% at EOD yesterday is trading around -30% and things did not get better. The stock continued to sell off until around 1pm EST. Did I panic and sell my position? No, although typically I would as it was around a -40% loss on the option spread and represented around a 2% loss on my account alone. Either way BIDU demonstrated that those types of losses can occur but usually I am out way before then as seeing my stock down near 5% is a signal that the trade is not working.

Moving on, my game plan was now to wait and enter into a long position for the swing. To me the news that caused this drop caused seemed extreme and watching the dollar volume, it was hitting panic levels. Also I turned to my volatility chart and we were showing extreme readings. I entered the trade when it was trading down over -8% in which it ended up trading as low as -10%. One of my favorite trades is fading the analyst downgrade and I felt that this was a bit much so when I believed that the stock should retrace the selling I entered into a next week 110 call option with BIDU trading at 112.84.

So what did I do next? I went for a run. Yes this may sound stupid but it was the afternoon, I needed to clear my thoughts now and I would return at 3:15pm EST. Also with the added position I was still okay with the loss if we saw more selling through the day. I have found removing myself from the trade in these situations is best as I often have the tendency to overwatch it and not let it work. I returned and saw that the position was up 5%, not bad considering where it was before. Then I thought that this could be a really nice trade if it kept going….stupid thought, don’t ever think like that. So I remembered how I wanted out of this trade, my adjustment worked, and I cashed out returning a little over 2% on the whole trade, so basically nothing for my account besides mitigating a bigger loss. Either way I will be able to go into tomorrow not caring where BIDU is at.

I plan on making this trade visual via charts and showing my thought process when I get home on my computer as I didn’t have time EOD and have no access right now.

**Side Note**
If you are an outdoors type I suggest the Google MyTracks app as I have found it to be great. Below is the data taken from my run, consisting of interval runs. It downloads the info to their Documents spreadsheet and plots it on a map. I like to use it for running, hiking, and kayaking. Also not a big runner so keep your jokes to yourself….please.

Sometimes This Is Worse Than Booking A Loss – $AAPL

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It pains me to even write about this but it needs to be done.  Sometimes it is easy to study the losses to show what you did wrong or even right in that maybe you cut a loss that when on to create bigger a bigger loss.  One loss that I also like to look is on the opposite side and “how much did I leave on the table?”  This is a case in when you took profits but that stock went on to run even further.  A recent case in point for me was AAPL.  Below you can see my trade history.

My idea going into this trade was that it would trade sideways or down and then take off from there for the much anticipated earnings run, which it has seen so far as of 7/5/2012.  Below you can see a screen shot of an hourly chart with trades.

Below are the trades in order with thought process:

1) Enter 590 Call Calendar

  • Wanted to leg into an upside move for AAPL as it recently dropped from 590.  Did bot want to go in with just a single option but wanted to reduce the price by created a Calendar that would also benefit nicely on a move up and would exit this position if AAPL made a move above 585 by weeks end, creating at minimum +25% gain.

2) Enter 580 Call Calendar

  • Added another calendar and rolled down strike price from 590 to 580, looking to exit the 590 Calendar on a move up.

3) Sold 590 Call Calendar & later added 565 Weekly Put

  • Made the move up I was looking for and exited the 590 Calendar and at close added the 565 Weekly Put to hedge against any drop, creating a nice profit as AAPL is still in downtrend on hourly.  Overall market sentiment is bad and this positive day may be seen as another shorting opportunity much like 2 days ago, last 4 days SPX has dropped near -3.4%.

4) Sold Weekly Put

  • AAPL breaks out of down trending hourly channel so exited the Put to avoid the rapid time decay as seen in the weekly options.  Possible big reversal to the upside could be seen in AAPL if the market turns at all and a bottom is believed to be in.

5) Sold 580 Call Calendar

  • Overnight news out of Europe  created a gap in the morning that has not looked back, AAPL seems to want to the 580 strike created a full profit on this trade.  Late in the day the market did not pull back at all and continued to squeeze.  I decided to exit the position all together.

Last Friday was huge, no doubt about it.  I could have left the AAPL July Call on for a run or hedged by selling another option, either there way are a lot of scenarios that could have taken place and at this point I wanted to keep it simple.  Also with the  market making their best gains of the year on Friday and being the weekend and quarter-end, a pullback on Monday or for the week was reasonable; or maybe the news got sold off of over the weekend and markets got hit on Monday.  Either way there were a lot of unknowns and I decided to shed the position all together for a meager gain of +$30 per unit.  I went  into the weekend and holiday relaxed without this position to think about.

So where is that position today?  With all of the losses from the trades within AAPL my cost basis on the July 580 Call was 14.30, today trading at a mark of 32.475 for a profit of +$1817.50 (+127.10%).  Nice profit if I were in the damn thing.

Today I did add some DO July Calls and a PXD July Puts for quick trades.

Current Account:

Cash – 86.0%
Long – 9.6% (PPO 4.7%, DO 4.9%)
Short – 4.4% (PXD 4.4%)

 

Be Quick On The Pullback

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Last week I closed out my positions in AAPL and SPX coming into Monday all cash.  Last week left me a bit frustrated as I was pleased with positions into Friday but the Thursday night news and Globex market action had me believing that this was not normal and Friday was going to be an interesting day.  So that night I decided that if this action held into the open I would immediately close the SPX position leaving the AAPL position on.  Friday morning I closed the SPX position and the AAPL trade was working great until the end, when I was expecting a pullback making the 580 Call Calendar a pin.  AAPL didn’t pullback at the end so I left profits on the table and what would have been a positive week created a overall net loss of -0.40% for the week. 

With Friday’s action I came into Monday looking for more bullish setups than bearish.  One stock that I favored based on relative strength, chart pattern, seasonality, & possible short squeeze was PPO.  More details can be found in this post. 

It is definitely hard to allocate money to the long side here as we are overbought on many metrics to include the McClellan Oscillator reading of 261.  I watch this closely for readings over 200 and hitting 250 is screaming overbought and in need of a pullback.  Despite these overbought conditions I decided to allocate money as I wanted to have some exposure to the long side.  We are in need of a pullback but that doesn’t necessarily mean we have to.  So after seeing PPO pullback some I decided near the close to gain some exposure to the long side via September single calls. 

The most bullish case and the one I favor is a pullback from these levels giving traders a chance to buy.  I do believe one has to be quick on the trigger and I will say that if we see a bad jobs number and selling I would have no problem going long as I think that is your chance to get in.  In these cases I prefer to watch the emini-SP in the pre-market to see where price was accepted based on the numbers. 

Also the way we came back from the poor ISM data shows me that traders are looking buy on weakness and that is what I am preparing for. 

Cash – 95.3%
Long – 4.7% (PPO 4.7%)
Short – 0.0%

http://www.youtube.com/watch?v=hQn35n3Zvjw

redman59

Average person with a full time job and interest of the market. Prefer reading trading blogs over trading books. Grew up near Rochester, MN & now live near Gettysburg, PA. For more information visit http://redman59.com/
Joined Oct 27, 2011
174 Blog Posts

redman59

Joined Oct 27, 2011
174 Blog Posts

$AAPL Adjustment and Today’s Outdoor Adventure (w/Pictures and Video)

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Waking up this morning and looking at the emini-SP500 futures  we could see that the market was set to open higher from a ramp that began at 0245 EST.  But like many other times in recent weeks, this was nothing new and it was later met with selling during the trading hours.  As stated in last night’s blog post, the two positions that I did have on in $AAPL and $IBM both saw news over the  weekend plus 2 days of market closure.  Both positions were short the Weekly options and long the Nov options creating positive theta and benefiting from the extra days the market was closed.

I knew that I had plans to go out for some outdoor adventure today at around 1030 EST as the local river was high and flowing and I wanted to get my money’s worth out of my kayaks.  So I wanted to make sure that these two positions would be setup so that any volatility would not have me wanting to check my phone while trying to dodge debris in the river…overall just wanted peace of mind.

My main concern was in $AAPL and how this would react to their news.  On the open it gapped down -9.78pts (-1.62%) and continued to see selling for the first 15 minutes.  That marked the bottom for the day and remained in an uptrend throughout the day ultimately putting in a doji candle near the 200 SMA, which it did undercut on the selling.  My plan in pre-market was to buy a Weekly put option which would flatten my T+0 line and if we saw the whoosh under the 200 SMA then my position would be just fine and there would not be cause for concern on loss of profits or even worse, making the position a loser.  Below is my Risk Graph from last night’s blog:

Below you can see my order fill for the Weekly 570 put position and how it affected the Risk Profile (screenshot taken about 30 seconds after the fill):

The main difference in the Risk Profiles is the T+0 (white) line.  By buying this put for $105 I protected my downside in case $AAPL saw some furious selling while I was away from the computer.  It essentially created a flat line   that reduced my delta’s but also reduced my theta, so I do not benefit as much from passage of time.  But this is a bullish bias position and not so much an income position so theta was not as much as a concern as direction is.  Also I see the downside protection much more valuable for the $105 cost and have no problem with the fact that it does reduce my upside profits by the cost of $105.  This can be see in the 2 Risk Profiles at the +5%  where the first one before the Weekly put addition was +$280 and now it is +$175 (shown as +$176.78).  I do plan on adjusting this and rolling  the short 580 call tomorrow or Friday when the next Weekly options become available.

As for my other position in $IBM, it saw favorable upside action that also ended up with a doji-type candle and it failed to hold above the 10EMA, which I believed it would get to based on prior analysis shown here.  I’m liking the action here in $IBM and will adjust the position watching it around the +-1.50pts from the 195 price level.  I plan on adding another Calendar in the direction of the move as I feel it is limited to 192 on the downside and the 198-200 area on the upside.


*Today’s Adventure in Swift Water*

I did state earlier that I did leave and do some kayaking down the river.  With adjustable and light positions and all the rain received from Hurricane Sandy; it was hard not to pass up the opportunity to take the kayak down the river with the high water levels and accelerated current.  Smart? Probably not the smartest thing with 40-degree weather and unknowns in the river such as logs and other debris that weren’t there before, but a fun opportunity that doesn’t come often.  It was a skittish at times but luckily I did make it through without dumping the kayak.  I put my phone in a Pelican Case and tracked it via the MyTracks app and the stats are below (including 10 minutes walking & 5 minutes stopped):

Total Distance: 10.84mi
Total Time: 2hr 5min
Avg Speed: 5.27 mph
Max Speed: 9.02 mph

The walking and stopped times would affect the speeds, but overall the current was fast as I did not oar froward but more controlled it.  I didn’t go down a populated area as I live in a farm community but many fields were washed out and many looked liked lakes.  So no devastating pictures like that of the cities that were involved.  But I was able to take a short video shot and some pictures even though it is hard to tell the actual water level on them.  It was hard to control the vessel and take video/pictures so they aren’t the best, damn current.  Needless to say it was deeper than I would have thought even up on the land that was not part of the river as I would venture out and still not be able to touch my oar to the bottom.  Needless to say I am glad I didn’t tip over and have to swim (life jacket was worn).  But below is a short video clip (with audio) and some pictures below for you visual folk:

 

 

 

Theta Burn and Position Update in $AAPL and $IBM

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It looks like everything will be in full-swing on a market level tomorrow Wednesday.  I have nothing new to say that you probably have not read as far as news of Hurricane Sandy or market stats when it has been unexpectedly closed 2 days in a row.  Here in PA near Gettysburg we have flooded areas (only affecting houses near rivers, not towns) but no big damage like that seen in the news.  I wish the best for those with damage.

I do know from an options position standpoint that those that have positive theta positions will benefit.  We have seen an additional 2 days of theta decay that was not built in.  As far as my current positions go in $AAPL and $IBM, they should benefit from this time decay as I was short the weekly options in both and long the November options that expire on November expiration.  In my post on Friday I detailed the positions in $AAPL and $IBM and I wanted to show the Risk Profiles in both to show how the option greeks changed, mainly theta.

In $AAPL on Friday my Risk Profile looked like that below:

Now as of Tuesday night the greeks and Risk Profile look this below:

The main component here is theta.  As you can see with the added days of market closure as of Tuesday night the theta (time decay) has changed from 23.57 per day to 62.47 per day.  In theory and price and all else being equal, I have went from gaining $23.57 per day to gaining $62.47 per day while doing nothing and the markets were closed.  You can also see by the blue highlighted area above the 1 Standard Deviation range into Fridays (11/2) expiration.  This is telling me I have a 68% probability of $AAPL being in that area, making the downside near a max gain.  Now with the recent news of the firings and other patent/iPad-mini reviews who knows where $AAPL will be, but from a probability standpoint that is the expectation.

As for $IBM, it also caught some news during the market closure in that it issued a $5 billion dollar buyback in stock.  This can be seen as favorable news for the stock which should be favorable for the position I have as it is bullish in direction.  As of my last post the Risk Profile is below:

In the last post I stated that this was a 1/2 position as I have no faith in the bullish action of this market but based on prior action and a technical indicator (for analysis click here) I thought that $IBM would see some upside, benefiting this options strategy.  But if we saw some downside my plan was to add another Call Calendar or roll the short strike.  As of Tuesday night you can see this Risk Profile below:

Again focusing on theta as this position benefits from “lost days” or time/theta decay you can see that it went from 30.68 to 50.76 in those unexpected 2 lost days, benefiting the position around $50.  Again this is with all else (price/greeks) being equal.

I am sure that the Risk Profiles will change on Wednesday’s open as there is a lot going on now in the market with end-of-month mutual fund scrambling and news affecting these two stocks specifically.  Either way it should make for an interesting day and these positions should make for a good study on option greeks, specifically theta.

Earnings Update in $AAPL and New $IBM Trade

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Previously I was long the $AAPL earnings trade as I put in my Twitter timeline.  Thankfully this played out after earnings as we are aware of their miss on EPS and downward forward guidance.  The price action from what I could understand is that it was  “baked” in to the recent selling as the volatility sellers looked like geniuses on Friday’s open.  $AAPL closed at 609.54 on Thursday and opened at 609.43 on Friday, so really no movement at all and predicted by just about no one as many expect a volatile move.

So going into the earnings reaction I posted in a blog this trade that was long the $AAPL Nov/Oct4 550/580 Call Diagonal spread, selling the Oct4 580 and buying the Nov 550 for a 29.20 debit or $2920.00.  The Risk Profile can be shown below:

After the earnings release I decided that I would like to roll the short option to the next month that would increase my profit from positive upside action from a $80 gain to a $280 gain at expiration 11/2 .  I then rolled the short call by buying back the Oct4 580 Weekly call and selling the Nov1 580 Weekly call for a 2.00 credit.  I could have received a better credit by $100 if I would have waited as $AAPL sold off shortly thereafter I rolled the short call, but hindsight is 20/20 and my downside expectations still held.  I have included the order entry as well as the new Risk Profile :

So you can see that the position is still positive and upon Thursday I plan on rolling the short call again to the next month on a dip (given that I am still in the trade).  I will be absent Friday (maybe some mobile trading) so my decision will be made Thursday.

On Friday I also entered into a $IBM 195 Call Calendar and the risk profile can be seen below:

My reason for this trade can be seen below on the chart.  I took into account it’s recent hit on earnings, stabilization, and a technical indicator that proved snap-backs prior occurrences (% above/below 10EMA) as shown in blue highlighted boxes:

So I entered into this position with a half position in case further downside occurred into which I would enter into another Call Calendar.  I want to iterate that this is not a volatility/income edge type play but more of a directional play.  $IBM is one of those stocks that does have a volatility index in itself and looking at the volatility chart you can see that we are in mid-range of recent volatility readings:

I believe that this is a trade that can see upside to $195 and this spread is more of a cost reduction type trade that benefits from time decay and upside action.  In the end I look to take around  25-30% overall profit on this trade.

Staying Light and Earnings Trades in $AAPL and $AMZN

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Last night I posted in how I have no plans to go either way with this market as there seems to be a lot of tug and war and direction is not clear.  Today my morning consisted of morning admin catch-up that I usually save for the weekend.  But the morning action was a recording of previous days of where we saw a gap up followed by selling.

Today I did see a nice opportunity in $CRM as it was selling off and placed an order  for the 140/130 Bull Call spread at the mid of 2.65 credit.  This was to take advantage of the expected volatility decrease on a rebound off the 200 SMA and 142.50 support level.  Well this was the bottom and I  never got the fill.

Then obviously we had the news stock of the day of $AAPL that was set to report earnings.  I had no desire to take on an earnings trade but the more I looked at the chart, the more I starting looking at options strategies coupled with the chart.  In the end I placed an order and was filled 2 minutes later on an $AAPL Nov/Oct4 550/580 Diagonal spread.  In this spread I sold Oct4 580 Weekly Calls (expiring tomorrow) and bought the Nov 550 Monthly Calls for a 29.20 debit.  Usually I do not risk this much in an earnings trade but when looking at the chart and what the Risk Profile showed me, I liked the trade.

In this trade I looked at 550 as the max move to the downside.  I thought this was a safe max move and anything further than that and I find it hard to believe that there wouldn’t be buyers.  If $AAPL saw a move to the upside then at a minimum I would have made $80.00.  If we did see an extreme move to the downside, then I had 2 more expirations to roll the short call to reduce loss/cost basis.

More on my downside thesis.  $AAPL is a stock like no other.  This thing is a growth stock with awesome fundamentals.  Into the close it was nearly 14% off the highs with a tape that is not healthy.  So my thoughts going in were that expectations are high but this stock is still putting up numbers to make any company envious and the fundamentals in regards to price to growth, margins, and returns on assets/equity/investments are impressive, also there is no debt and the cash hoard is almost stupid to believe.  Needless to say it is an awesome stock fundamentally that has seen “wanting to get in on selling” even before the earnings.  Also on a technical basis with it coming into the 200 SMA and support levels if we saw more downside, it is just hard to believe that buying would not ensue.  Below is the 4 year chart to show some of the 2008-2009 calamity and how $AAPL has performed since hitting the uptrending 200 SMA (purple line)

So with this I went in wanting to get in if we saw a drop while also taking in some weekly profits if we saw an upside move.  So the Nov/Oct4 550/580 Call Diagonal made sense to me.  It takes advantage of the 580 call volatility crush while the 550 Nov call would not be effected as much on a volatility basis.

The Risk Profile and chart can be seen below with notes:

Also during the day I bought the $AMZN Nov 205/210 Bull Call spread for a debit of 3.75.  The thesis was kind of the same minus the fundamental thoughts.  I liked the chart technically and looking at support levels this made sense with the thought going forward that if we saw selling, I had two more expirations to roll the short calls.  Also this would take advantage of any positive earnings reaction.

After the close both companies released earnings and the price action made volatility sellers look like absolute geniuses.  The price action was gratifying to watch in both as both sold off right away.  $AAPL crossed below that 200 SMA and never looked back.  The hindsight thought now that $AAPL returned to its close after some selling is that the selling since Sept options expiration is priced in.  $AMZN moved up to an important support level and is hanging right there.  Should be an interesting day tomorrow and as of right now the $ES_F is -11.25pts (-0.80%) from the close and the tomfoolery continues.

Thought on Today and New Trades in AAPL and NFLX

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Watching the market today I was in the perspective of “this is good action”.  I take a no news or objective future opinion as this market has proven retarded and that it can move on any news whether good or bad.  At this point any economic data has to be ignored and just watch the market reaction, don’t try to over-think it.  I must say that I liked today’s action.  It seemed like the bears had every opportunity to bring the market lower and they weren’t able to.  With a holiday-like day with the bond markets closed I expected the low volume follow through to the downside, but the market held steady.  Intraday I was watching the 5-minute $TICK chart and it did not have me worried at all as it made higher lows into the afternoon and hitting better highs than lows.

With that I swing traded $AAPL by buying the 645 call on weakness then later selling the 655 call on strength, my net debit/risk is $270 with full profit of $730.00 if AAPL closes above 655 on Friday.  This stock is definitely in the news, especially with its consecutive close below the 50-day SMA, but I am looking for it to make a push to the 50-SMA and then maybe seeing more selling.  I recently wrote a post titled “Similarities in Apple ($AAPL) Before It Last Corrected” on 10/01 about how AAPL was seeing similar price action bearishness to a previous time period, so far it is playing out.  But I am short-term bullish and have no intention to take a long-term position before earnings, I may miss out on a big gap up but I am willing to accept it.

Also today I took a delta-neutral options position in $NFLX.  Another stock that was in the news today.  I have to say from a consumer standpoint that if it was moving on this news, that is not a reason to buy.  I am a Netflix and Amazon Prime customer and I must say that Amazon is far more superior.  I really see them taking away share from Netflix as I am more of a purchaser of convenience rather than minuscule dollars.   I see today’s news more as an euphoria and I am hoping that previous longs took some profits as I see maybe a run to high 70’s then further selling.

My position today in NFLX involved me selling volatility via selling the Nov 55/85 Strangle for a 3.80 ($380) credit per spread.  I saw this as a good opportunity as previous moves have shown stalling afterward so I am looking to capitalize from time decay and volatility stall/drop.  The morning didn’t work out as the stock saw further upside movement so for right now I am down approximately -7.5% on the original margin requirement.  I am looking to stay in the trade and buying a put on further upside movement.  The risk graph can be found below with red lines representing -10% move, live, +10% move and light blue representing a 1 StDev by Nov expiration:

Right now most of my positions are bullish bias and really I have no reason from a chart perspective to be bearish.  The $SPX is still trading above its 10/20 EMA’s and under the radar the price action of a market of stocks is still working.

Playing Catch Up and Today’s Bond Trade

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The last week or so has definitely been busy on a personal level leaving little time to monitor the market and look for trades. I must say that I am also in no hurry to get aggressive either way. Today I spent some time at the desk and one thing that I have been paying attention to as of late was the Dollar, Euro, and Bonds. I have been waiting for the bounce in the Dollar and Bonds. Today when looking at the $TLT, I decided to put on a trade to which I think will work and I am looking to pull an initial 20% gain out of the trade and raise stops on the position. Looking at the chart below, I saw the following:

  • trend is now down marked by lower highs and lower lows
  • recent above average selling and below average buying in this bounce
  • relative strength moving average (purple line) is trending down with relative strength line below
  • downward sloping 12/20ema’s, 50sma, and a flat 200sma
  • yellow dotted lines mark Oct Iron Butterfly (113/120/120/127) breakevens

I am not expecting the trend in bonds to reverse any time soon. With that I believe we will see stalling or reversion on any price expansion to the 200sma. The dotted lines represent my breakevens and I believe this will capture a majority of the range as the upside b/e comes in around a resistance level and the downside b/e comes in at an area that should find buyers. Also on extreme moves past these levels I will look to adjust the spreads by closing and rolling the spreads capturing profits.

This is one reason why I like these types of spreads as they are adjustable allowing the trader to stay with the trade. It also doesn’t require a lot of monitoring as the gamma risk is mitigated and it allows an end of day trader to adjust to the trade without a lot of profit/loss volatility versus a naked long call or put position. With my absence as of late and probable less than usual participation for a couple months, I chose to enter this trade versus other swing trades that would require more attention.

The trade is a Oct 113/120/120/127 Iron Butterfly (same as Iron Condor with sold strikes being the same) for a 3.75 credit, risk 3.25 per spread. Below is the current risk graph at the end of today 9/20:

Now it’s time to catch up on emails, reading blog posts, and inputting spreadsheets.

**Updated w/Charts** Yes, I Was Long BIDU Into Today

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Thursday night I blogged about my recent trade in BIDU which can be found here.  I wanted to provide a follow-up post with some visual to the trade as I know when I read blog posts it makes the trade easier to understand when charts or other visual aids are included.  But here is a quick recap:

  • Placed Sep 115/110 Bull Put Spread Wednesday 8/22
  • Thursday 8/23, woke top find BIDU trading down -5% from yesterday close, position was -30%
  • Decided to enter into Aug5 Weekly 110 Call for retracement of selling
  • Exited all positions at end of day for little over +2% return on risk

Below is a trade history of the trades I took in BIDU:

The next chart is a 15min chart of BIDU.  When day trading and looking for opportune entries for swings I focus on the 15min chart as I believe it is a good filter for not too short (as in a 5min chart) or not too long (as in a 60min chart).  I also like the 30min chart for 1-4 day swings but when only planning on a day trade or precision entry I prefer the 15min chart.  Notes can be found on the chart of my entries.  I did front run the swing as on what I believed was a capitulation candle of large range in the afternoon on volume that trumped previous volume bars.  The better entry would have been to wait for a reversal candle (as it did print a doji) with confirmation.

The next chart shows a volatility chart that I look at.  When I am seeing extreme moves in stocks I look at this chart to see how the stock historically performed when similar volatility was displayed.  At the time when I looked at this BIDU was down around 7-8% and this just seemed to be too much given the news in why it was down.  Notes to take from this chart going back the last year of data:

  • It breached the Lower 3rd Standard Deviation Bollinger Band, previous occurrences show high probability of some upside in the following day(s)
  • Augen Standard Deviation Spike reading was at its 2nd highest in the last year reading around -3.80 at the time I added the long trade
  • Closed the gap on where it gapped up from earnings

With all the data that I was looking at I saw this as an extreme move that was ensued by panic and decided to enter a long position.  Did I get lucky with subsequent price movement?  I would say yes but at the same time no one can predict future price.  All we can do is look at current data, implement a plan within our risk parameters, and hope that price follows that plan.  The data that I was looking at had me believe that price was reaching an extreme in selling.  So instead of bailing on my current position that was at an uncomfortable loss, I decided that I may be able to add to this losing trade to mitigate the loss.  To which this plan worked.  I do remember looking at my risk profile grid thinking “wow if this kept going up I could have a nice gain as my dollar cost average was low”.  Needless to say I’ve thought like this before and the losers outnumber the winners.  I remembered this and thought as to why I put on the swing long (to mitigate loss) and exited the position at end of day relieving myself of mental capital strain.

Do I advocate doing this trade?  No, usually if I am in a position and I get unfavorable news I will cut that position immediately as I am not into news-y positions.  If I was around during the open I would have cut this position immediately for what still would have been a better gain.  But in this case, I woke up to find the position down big and saw continued selling.  For the stock to be down the same amount as if it missed big on earnings, was extreme to me and the volatility readings displayed the same.  In the end the added swing position worked and if I saw the same setup, minus having the previous position on, I would take the trade again.

Yes, I Was Long BIDU Into Today

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Working night shift from 6pm-6am at times has me missing the first hour or so of trading. In most cases it is not a big deal as I don’t have over-leveraged positions. I mostly trade options in which the whole position doesn’t compromise more than 5% of my account. Last night I replied in Rhino’s post that I had put on long positions (via credit spreads) in IBM and BIDU. Well you can probably guess where I’m going with this.

Today I woke up around 11:30EST, rolled over and looked at my brokerage app on my phone. What was a nice performing position in BIDU yesterday as I went long on that mornings dip, now looked horrendous. My first thoughts as emotions overcame my reasons for entry were “I hate those fucking Chinese stocks, why the hell did I get into this thing?” At the time it was trading down something like -5%, what the hell could have been the news? I went to my desk and then the first thing I saw was that it was seeking legal action against QIHU and it was downgraded by an analyst from Deutsche Bank. If you’ve read my posts/replies in the past you know that I categorize child molesters/rapists/thieves of personal belongings all the same; well analysts are the next people to throw in there. I believe they are some of the biggest manipulating & useless people within finance.

So my position in where I was up around 9% at EOD yesterday is trading around -30% and things did not get better. The stock continued to sell off until around 1pm EST. Did I panic and sell my position? No, although typically I would as it was around a -40% loss on the option spread and represented around a 2% loss on my account alone. Either way BIDU demonstrated that those types of losses can occur but usually I am out way before then as seeing my stock down near 5% is a signal that the trade is not working.

Moving on, my game plan was now to wait and enter into a long position for the swing. To me the news that caused this drop caused seemed extreme and watching the dollar volume, it was hitting panic levels. Also I turned to my volatility chart and we were showing extreme readings. I entered the trade when it was trading down over -8% in which it ended up trading as low as -10%. One of my favorite trades is fading the analyst downgrade and I felt that this was a bit much so when I believed that the stock should retrace the selling I entered into a next week 110 call option with BIDU trading at 112.84.

So what did I do next? I went for a run. Yes this may sound stupid but it was the afternoon, I needed to clear my thoughts now and I would return at 3:15pm EST. Also with the added position I was still okay with the loss if we saw more selling through the day. I have found removing myself from the trade in these situations is best as I often have the tendency to overwatch it and not let it work. I returned and saw that the position was up 5%, not bad considering where it was before. Then I thought that this could be a really nice trade if it kept going….stupid thought, don’t ever think like that. So I remembered how I wanted out of this trade, my adjustment worked, and I cashed out returning a little over 2% on the whole trade, so basically nothing for my account besides mitigating a bigger loss. Either way I will be able to go into tomorrow not caring where BIDU is at.

I plan on making this trade visual via charts and showing my thought process when I get home on my computer as I didn’t have time EOD and have no access right now.

**Side Note**
If you are an outdoors type I suggest the Google MyTracks app as I have found it to be great. Below is the data taken from my run, consisting of interval runs. It downloads the info to their Documents spreadsheet and plots it on a map. I like to use it for running, hiking, and kayaking. Also not a big runner so keep your jokes to yourself….please.

Sometimes This Is Worse Than Booking A Loss – $AAPL

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It pains me to even write about this but it needs to be done.  Sometimes it is easy to study the losses to show what you did wrong or even right in that maybe you cut a loss that when on to create bigger a bigger loss.  One loss that I also like to look is on the opposite side and “how much did I leave on the table?”  This is a case in when you took profits but that stock went on to run even further.  A recent case in point for me was AAPL.  Below you can see my trade history.

My idea going into this trade was that it would trade sideways or down and then take off from there for the much anticipated earnings run, which it has seen so far as of 7/5/2012.  Below you can see a screen shot of an hourly chart with trades.

Below are the trades in order with thought process:

1) Enter 590 Call Calendar

  • Wanted to leg into an upside move for AAPL as it recently dropped from 590.  Did bot want to go in with just a single option but wanted to reduce the price by created a Calendar that would also benefit nicely on a move up and would exit this position if AAPL made a move above 585 by weeks end, creating at minimum +25% gain.

2) Enter 580 Call Calendar

  • Added another calendar and rolled down strike price from 590 to 580, looking to exit the 590 Calendar on a move up.

3) Sold 590 Call Calendar & later added 565 Weekly Put

  • Made the move up I was looking for and exited the 590 Calendar and at close added the 565 Weekly Put to hedge against any drop, creating a nice profit as AAPL is still in downtrend on hourly.  Overall market sentiment is bad and this positive day may be seen as another shorting opportunity much like 2 days ago, last 4 days SPX has dropped near -3.4%.

4) Sold Weekly Put

  • AAPL breaks out of down trending hourly channel so exited the Put to avoid the rapid time decay as seen in the weekly options.  Possible big reversal to the upside could be seen in AAPL if the market turns at all and a bottom is believed to be in.

5) Sold 580 Call Calendar

  • Overnight news out of Europe  created a gap in the morning that has not looked back, AAPL seems to want to the 580 strike created a full profit on this trade.  Late in the day the market did not pull back at all and continued to squeeze.  I decided to exit the position all together.

Last Friday was huge, no doubt about it.  I could have left the AAPL July Call on for a run or hedged by selling another option, either there way are a lot of scenarios that could have taken place and at this point I wanted to keep it simple.  Also with the  market making their best gains of the year on Friday and being the weekend and quarter-end, a pullback on Monday or for the week was reasonable; or maybe the news got sold off of over the weekend and markets got hit on Monday.  Either way there were a lot of unknowns and I decided to shed the position all together for a meager gain of +$30 per unit.  I went  into the weekend and holiday relaxed without this position to think about.

So where is that position today?  With all of the losses from the trades within AAPL my cost basis on the July 580 Call was 14.30, today trading at a mark of 32.475 for a profit of +$1817.50 (+127.10%).  Nice profit if I were in the damn thing.

Today I did add some DO July Calls and a PXD July Puts for quick trades.

Current Account:

Cash – 86.0%
Long – 9.6% (PPO 4.7%, DO 4.9%)
Short – 4.4% (PXD 4.4%)

 

Be Quick On The Pullback

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Last week I closed out my positions in AAPL and SPX coming into Monday all cash.  Last week left me a bit frustrated as I was pleased with positions into Friday but the Thursday night news and Globex market action had me believing that this was not normal and Friday was going to be an interesting day.  So that night I decided that if this action held into the open I would immediately close the SPX position leaving the AAPL position on.  Friday morning I closed the SPX position and the AAPL trade was working great until the end, when I was expecting a pullback making the 580 Call Calendar a pin.  AAPL didn’t pullback at the end so I left profits on the table and what would have been a positive week created a overall net loss of -0.40% for the week. 

With Friday’s action I came into Monday looking for more bullish setups than bearish.  One stock that I favored based on relative strength, chart pattern, seasonality, & possible short squeeze was PPO.  More details can be found in this post. 

It is definitely hard to allocate money to the long side here as we are overbought on many metrics to include the McClellan Oscillator reading of 261.  I watch this closely for readings over 200 and hitting 250 is screaming overbought and in need of a pullback.  Despite these overbought conditions I decided to allocate money as I wanted to have some exposure to the long side.  We are in need of a pullback but that doesn’t necessarily mean we have to.  So after seeing PPO pullback some I decided near the close to gain some exposure to the long side via September single calls. 

The most bullish case and the one I favor is a pullback from these levels giving traders a chance to buy.  I do believe one has to be quick on the trigger and I will say that if we see a bad jobs number and selling I would have no problem going long as I think that is your chance to get in.  In these cases I prefer to watch the emini-SP in the pre-market to see where price was accepted based on the numbers. 

Also the way we came back from the poor ISM data shows me that traders are looking buy on weakness and that is what I am preparing for. 

Cash – 95.3%
Long – 4.7% (PPO 4.7%)
Short – 0.0%

http://www.youtube.com/watch?v=hQn35n3Zvjw

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