Bull or Bust

a bull's view

February 3, 2016 – What a day!

Today was simply fantastic for an options trader. It was literally what dreams are made of and I could only pray the rest of the year behaves the same way. As the market opened the day seemed like any other, but then things turned red…really red. The DJI dropped nearly 200 points reaching 15,900 and some change and the bears were out in force yet again. In days gone by this might have caused panic or a selling frenzy, but not today! All I saw was opportunity and when 16,000 came around I started buying everything I could get my hands on that didn’t scare me to death (NFLX) [stock_quote symbol=”NFLX”] or remain too high in my opinion.

I bought March and April CALLS on Home Depot, Starbucks, Alcoa, Ford, Facebook, Chevron…all my market darlings. The best trade I have made this week was the Alcoa [stock_quote symbol=”AA”] FEB 19 2016 7 CALL for .43 cents on yesterday. I dropped almost 10k down for 200 options and sold them at .80 cents around 2 pm. Yes children, that’s an 85.66% gain and $7,377.00 profit in 24 hours (without the juice). Now that’s trading…

Luckily I had also purchased PUTS on Chevron [stock_quote symbol=”CVX”] and Starbucks [stock_quote symbol=”SBUX”] on Tuesday anticipating more carnage and sold them at modest gains early in the day. Chevron made a good comeback in the afternoon so I missed that bullet too. How? By selling the PUT early while I was ahead and accepting the modest gain in a volatile market and buying a CALL. That’s managing volatility with two different methods during a single session. The stock went down the PUT made money – get out and buy the CALL. The stock goes up the CALL makes money – get out. The PUT cleared several hundred, the CALL was up a grand at the closing bell so I let it ride until tomorrow. That’s a gamble, but one I was willing to take today (not every day).

Seriously, getting out while you’re ahead is difficult and greed is a strong emotion. The most difficult thing you, as a trader, will ever do is overcome the impulse to let it ride and keep making money. It is strongest when you’re ahead so be very careful. Set a percentage gain that will satisfy your greed and when you reach it – EJECT! Always – no questions asked – no excuses. If there is one “secret” to trading that I can share it is to always get out while you’re ahead. Below is the best quote I ever heard a money manager say (I still laugh when I hear it):

“The best way to make money…is not to lose money”

This is so true. When you’re up get out. Regardless, this was my trading day and it was quite successful. Why you ask? Because of volatility plain and simple. The DJI [stock_quote symbol=”.DJI”] actually closed UP almost 200 points. I couldn’t believe it. A swing of nearly 400 points in a single day!! Fantastic I tell you, fantastic.

Daily Trades – Most Important

The most important and strategic trading I did today was related to Ford [stock_quote symbol=”F”]. Ford opened around $11.64 and quickly fell all the way to $11.02 before rebounding (thankfully) to $11.47 by the closing bell. This is actually typical for Ford and has happened many times while I’ve been actively trading it. I continued to add to my existing position in the APR 12.75 CALL all the way down starting at .15 and ending at .12. The option closed at .16, but I could have sold at .17 so I ended the day profitable (on paper) with the options I purchased this morning. Hopefully, tomorrow we will see $11.70 again. Fingers crossed

Stock and Option Trading