Category Archives: OPTION TRADING

WEDNESDAY, MARCH 30, 2016

Welcome to Wednesday!

Today will be a SELL day. Why? The market is flying and in today’s market we take profits when we can. This is rule # 1 people! Let the market settle this morning, but between 8:30-9:30 Central Time you should have a nice rally and I’ll be shaving or downright exiting any profitable positions as the buyer.

As the seller you (and I) can just sit back and smile! You’re doing well and the market is moving in our favor today (unless you sold CALL’s). I’m a cash-secured PUT seller so everything I own today that I am the seller will be more profitable…and decaying!

Don’t you love this sh*t?? Good luck today!

CLOSING BELL REVIEW

The session has ended and had you invested in MetLife after reading my Dividend Stock article back in February you would be doing very well. Did anyone see MetLife [stock_quote symbol=met] today? Up 5.35% or $2.27 per share to $44.73!

Another hot day of trading, but today I was selling profitable trades and shorting more than anything. I did sell the 1000 contracts of DNR CALL option for a $5,000.00 profit (see yesterday’s post).

Restoration Hardware [stock_quote symbol=rh] is kicking my ass. Yes, I was crushed by the dreaded “volatility crush” that happens after earning and went from being profitable $1,000.00 to being DOWN $2,025.00 at the close. However, I did BUY MAY 2016 35 PUT options as well as MAY 2016 45 CALL options which I am currently riding up and down trying to make up my loss on the original APRIL CALL. I do still own the APRIL too!

VIX Volatility Index [stock_quote symbol=vix] was falling most of the day and I did what I said I would do and continued buying it down ALL day. I now have 650 contracts of the JUNE 23 CALL option with an average cost of $1.57 per. I am DOWN $9,625.00, but I believe very strongly it is just a matter of time before it spikes back up. I feel an increase in volatility coming…

Starbucks [stock_quote symbol=sbux] believe it or not is really eating my lunch currently. I purchased 400 contracts (over time) of the MAY 2016 55 PUT and the underlying has done nothing but continue North. I’m currently DOWN $5,000.00, but I’m holding strong.

MARCH ROUNDUP

Maybe, just maybe the VIX will spike tomorrow (Thursday) and I can close out March gaining more than $25,000.00. I’ll be made if I don’t considering I was way over that this morning. Keep in mind this is after the $32,000.00 loss on Ford covered calls. I have to keep mentioning that haha.

Currently I’m up a measly $15,503.54, but I suppose that’s not too bad considering I’m actually up from yesterday and I’m getting killed on several. I’m also up almost double from the March 25 Week Review last week. Ok, maybe I can live with this!

 

 

 

RESTORATION HARDWARE (RH)

RESTORATION HARDWARE ALERT

Disclaimer: this is purely a speculative (gambling) play. This is another I could not resist because I knew RH’s earnings report came out tonight after the closing bell. I also knew it would suck and everyone has been bashing them for days. However, they are on the floor already. They’ve been kicked enough and sometimes, just maybe, sometimes a stock just won’t go any lower.

I have seen stocks take a beating and then gradually go up after people hear all the bad news and begin buying again. All the “sellers” are done selling and those that think the company will make a come back start jumping in again because it’s just too damn cheap.

I purchased 100 contracts of the APRIL 2016 50 CALL @ .25 cents per contract ($2,500.00 worth) at 2:48 PM Tuesday, March 29, 2016 before the closing bell. Before 3:00 PM I was UP $1,000.00.

Did I sell it? No. This is purely for fun so I didn’t care.

WHAT TO DO NOW?

If you’ve been watching the ticker after hours you will know I’m in trouble haha! The underlying closed above $39.00 and it is now somewhere in the $37 range. I’m not too concerned. On Wednesday, I plan on doing two things: buying down my existing APRIL CALL’s – I have an auto order placed already for .10 cents per contract for another 100 contracts. The second thing will be to BUY the MAY or JUNE $43.00-$45.00 strike CALL’s allowing more time for the option to work. Especially while the stock is in the gutter and the CALL premiums are cheap.

I have faith and, again, this is just for fun. Time will tell…

PANDORA TRADE UPDATE

pandoraPANDORA

In today’s post (written around 2 PM Central Time Tuesday, March 29, 2016) I stated that I couldn’t resist buying the Pandora [stock_quote symbol=p] MAY 2016 9 CALL option for $1.32 per contract. WELL…had you done the same you would currently be up 11.74% like me! After I posted today’s post I reviewed my portfolio and sure enough within an hour of buying and the closing bell my 100 contracts were profitable $1,550.00!! I just laughed and I kept them.

My gut told me after the market settles with regard to Pandora’s CEO status and future the stock will head back North. If, this week, I gain 20-30% I will sell and close the transaction. If it goes back down I will buy more of the same option no matter what. What does that mean? If I gain 20-30% I will sell to close and if it dips back down I’ll buy the same option again – I know what’s it’s worth now! If I don’t gain anything and it goes back down I’ll still double-down. I’m that confident.

I have another gut feeling that Pandora will not only move higher in the future, but bounce around quite a bit while those that are scared to death wait and bail, wait and bail, rinse and repeat…

VIX TRADE ALERT!

VIX TRADE ALERT!

VIX [stock_quote symbol=vix]

The JUNE 2016 23 CALL option I made serious money on last week has returned to the level I purchased it originally. I believe this is another good buying opportunity and I have already purchased 100 contracts of the JUNE 2016 23 CALL @ $1.80 per contract. This is actually a nickel cheaper than what I paid last Monday. I have an auto order pending for another 100 contracts at $1.70 per.

If purchased at $1.80 and sold at $2.15 (where I sold it Thursday) this is an easy 20% gain. Buy, buy, buy!

MONDAY, MARCH 28, 2016

GOOD MORNING EVERYBODY!

What a morning it has been! I woke up, rolled over, looked at my phone and wow! Up $8,000.00! Nothing like waking up to that after an extended weekend of nothing. Whoo hoo!

MONDAY TRADES SO FAR

Starbucks [stock_quote symbol=sbux] was heading up and I was profitable on the MAY 2016 60 CALL options purchased last week. Yes, I am the buyer and I’m profitable! Imagine that. Anyway, I noticed the uptrend and considering my gain and positive attitude this morning I purchased 350 additional contracts @ $1.60 per bringing my total to 400 contracts with an average of $1.56 per or $62,400.00 as the buyer – RISKY! But no reward without risk right? Blow 60k and make some fast cash…I have an auto-order to SELL those 350 contracts for $1.70 per. The mark hit $1.70 moments ago, but just couldn’t move higher to execute. Man I was pumped, but it’s now trading at $1.66. I’ll hold it the rest of the day and see if I can execute at $1.70 after lunch.

UPDATE: 11:25 AM – holy cow! While I was typing this it executed! After commissions I profited $3,200.00 on just the 350 contracts I purchased today in less than an hour and a half. Monday – not so bad after all!

JC Penney [stock_quote symbol=jcp] is moving up today as well. This is PERFECT for my 100 contracts of cash-secured PUT’s with a strike of $11.00! Yay! Just 19 more days and counting! The MAY 2016 11 CALL’s @ .74 cents per I purchased (buyer) last Thursday I SOLD for .90 cents per contract moments ago. Total gain of 21.62% or $1600.00Easy money!

MONDAY GAINS

So far I’m up $11,825.00 for the DAY as of this post (11:30 AM) which will definitely bring my March total gain figure up! Everything is performing beautifully and my APRIL cash-secured PUT’s are decaying nicely.

WHAT A HELLOFA MONDAY!

WEEK ENDING MARCH 25, 2016

easterHAPPY EASTER!

I’ve been very busy the past few days so I’ve had little time to post. My apologies. I plan to start reviewing the weeks trading activity every Saturday, but it takes an enormous amount of time to go back and pull transaction history. This is especially true for a busy trading week like the one we just went through. On Monday I stated I would not be doing that much since it was the first week of Spring, but that turned out to be inaccurate considering the massive amount of trades executed on Thursday.

Also, I wrote a great article on what to do if you think you’re going to be assigned (exercised) on expiration day. You can find it here.

Trading Like a Mad Man

Thursday I had twenty-seven (27) orders filled (executed) as well as many, many cancelled or modified orders throughout the day. The first was selling the JUNE 23 CALL options on the VIX [stock_quote symbol=vix] for a massive gain of 16.22% and $24,000.00. That set the mood for what would be a romantic courting of the market for the entire single session.

Next came McDonald’s [stock_quote symbol=mcd] and boy was it a good day for this one! I was riding the APRIL 115 PUT as well as the APRIL 125 CALL up and down most of the day ultimately ending $4,282.00 ahead and completely out of everything at the closing bell. This could not have been more perfect. How did I do it? As I have said before I would buy 100 contracts of the PUT, ride it down to 10-20% gain and sell all but 1 contract. I would then buy 100 contracts of the CALL and ride it back up to the same 10-20% gain and sell all but 1 and buy 99 of the PUT’s again. Back and forth to a total of over 4k profit…

Other Thursday Trades

Nordic American Tanker [stock_quote symbol=nat] – This is a PRIME example as why I love a good dip in the market. Wow! I originally SOLD 100 contracts of the APRIL 13 PUT @ .20 cents per contract on March 21st. I SOLD 100 additional contracts of the same APRIL 13 PUT @ .30 cents per contract Thursday. This increased my total premium from $2,000.00 to $5,000.00 with just three (3) weeks until expiration!! NAT then turned around and started back up which is perfect. I should have no problems expiring above the strike and I shall keep the entire $5,000.00! This does require $260,000.00 in cash as collateral against the trade. Yes, you can do it with less, but how many times do I have to tell you – never trade NAKED!

Even if I’m exercised, with NAT’s dividend I would gladly accept the 20,000 shares at $13.00 per share. The dividend yield is $1.72 per share or 13.2% at the $13.00 strike. For 20,000 shares @ $13.00 per share that would equal an astounding $2,800.00 per month in dividend income ($34,400.00 annually for you math challenged folks). I can live with that…

Chevron [stock_quote symbol=cvx] – I purchased (buyer) 50 contracts of the APRIL 2016 95 CALL at 9:52 AM for $1.55 per contract. I sold them all 11 minutes later for $1.71 per contract. Total profit was $800.00 or 10.32%.

I was sitting at my parents kitchen table watching CNBC with my dad when I made this trade and I looked at him and said, “well, I just made 10% in 11 minutes I suppose I should sell it”. We laughed and I sold them. Just a few hours later that same option was worth $2.10 per contract or $2,750.00 profit or 35.48% gain. I sold it just a little too quick…but damn, 10% in 11 minutes? Who could resist!  

Ford [stock_quote symbol=f] – Too much to list. I purchased (buyer) APRIL 11.75 CALL’s and APRIL 12.75 CALL’s as well as SELLING (seller) 100 contracts of the APRIL 12.75 PUT. So far so good.

Denbury Resources [stock_quote symbol=dnr] – this one was just funny. I bought 5,000 shares during early session for $2.05 per share and sold all 5,000 shares for $2.30 in afterhours trading right after the closing bell. PERFEEEECCT!! This resulted in a 12.5% gain and $1,250.00 profit on this trade alone and it was STOCK not options! I also SOLD 200 additional contracts of the APRIL 2016 2 PUT (cash-secured put) for .25 cents per contract – total premium $5,000.00 with just three (3) weeks remaining until expiration! I also doubled-down on the APRIL 2016 2.5 PUT @ .60 cents per contract. I now have 200 contracts on both the APRIL 2 and 2.5 strike PUT options.

Conclusion

The week was long after all. I should have known it would be wild given the short trading schedule. I realize I am somewhat all over the place with my posts this week and I’m trying to keep a standardized approach (or find one). I’m finding it difficult to get everything in my head on paper quickly and efficiently so I may sound like I’m rambling sometimes and for that I apologize.

Total gain for the week: $30,828.86

Total gain for March to-date: $8,536.78

Why is March so low given the amazing week? Well, some of you may remember the 400 contracts of the Ford APRIL 12.75 PUT I sold several weeks ago. I got nervous when Ford was hovering around $13.80 and I did not really want to lose 40,000 shares so I bought them back at a significant $32,000 loss (plus commissions).

This hurt badly – more my ego than my wallet. It goes to show you that emotion can still get the best of even the most experienced traders. However, it really worked out great because I almost made it all back this week. Thank you VIX! I’m actually glad I did sell them because even in the market dip this week Ford did not dip below the $12.75 strike. I was sure to get exercised in a few weeks unless Ford takes a nose dive shortly which I don’t really see happening.

Now, yes, I should have or could have waited just a hair longer and bought them back yesterday saving a significant amount of money, but I cannot predict the future no matter how hard I try. I did what I had to do with the information I had at the time even though it cost me big. Never get mad at yourself for doing what you think is right in the heat of the moment. Do the best you can and let the chips fall…

In the end…I’m still up for the month! February saw a $54,000 gain and so far March will see an $8,500.00 gain. Not too shabby…even with a $32,000 loss!!

 

 

VIX TRADE UPDATE

UPDATE – Thursday, March 24, 2016

Ok I did it! I SOLD the 800 contracts of the JUNE 23 CALL options I purchased for $1.85 on Monday for $2.15 this morning. Yes, I could have gotten $2.20 around the opening, but I waited too long and when the VIX started going down I wanted to hold my gains so I let them go. How did I come out? Pretty damn sweet…gain of 16.22% or $24,000.00 (before commissions) in roughly three (3) trading days. Not a bad way to make a living…and not bad for my riskiest trade ever. If I was desensitized to this size and risk trade I would probably have held them for at least another couple of weeks, but when you’re up you’re up and you get out. 24k in three (3) days is enough for me.

Remember this quote: Bulls make money, bears make money, pigs get slaughtered. This is absolutely the truth…

Trading The VIX (Volatility Index)

Whoa Boy! This morning (Wednesday, March 23, 2016) I posted I had made the riskiest trade of my trading career by purchasing (buyer) 800 contracts of the JUNE 23 CALL option on the VIX [stock_quote symbol=vix] Monday. The total cost of the option was $148,800.00 and some change (with commissions). Yesterday (Tuesday) I was down more than $14,000.00! I ended today up $8,000.00! What a swing!

Very exciting!! I probably should have sold and been happy I was right – at least a little. Instead I held. I truly believe the VIX is going higher and it’s a June expiration. The problem is: the more the VIX goes up, the more my other trades go down (more than likely). The VIX going up usually means the market is going down because overall fear is increasing. So I realized this afternoon I’m really playing both sides of the equation which always make me nervous. If the VIX continues up on Thursday I might bail…

 

WEDNESDAY, MARCH 23, 2016

Happy Wednesday!

wednesdayYesterday I did not post because I was forced to attend a CE course for my Real Estate license. What a joke. I wish I could go into that, but I will not. I just know it cost me money because I was away from my real job and I couldn’t concentrate on trading.

With the terrorist attacks, oil, the dollar, and what I consider an over-bought market I’m just not sure what the next few weeks will hold. I truly do not see us moving back to 18,000 on the DOW [stock_quote symbol=.dji]. I have been shocked to see 17,500 hold for as long as it has.

I strongly believe, for the remainder of 2016, we are going to see a sideways market more than anything else. We will have ups and downs of course, but for the most part we’re going to sit. For those of us who love volatility it’s going to be pretty damn boring. For those who want to know how to trade a sideways market it’s simple: be the seller of options and let time decay make you money. That’s my plan…

Trading Portfolio Update

On Monday I posted plans to SELL (write) option contracts for APRIL PUT’s for Denbury Resources, JC Penney, and Home Depot. Let’s review where I am currently:

Denbury Resources

[stock_quote symbol=dnr] – On Monday, I SOLD 100 contracts of the APRIL 2016 2.5 PUT for .35 cents per contract with 25 days remaining. There are now 23 days remaining (I actually said 26 on Monday when it was 25 days sorry!) and the option is trading at .45 cents per contract due to DNR losing value this week with oil slipping. I am down $1,000.00 currently, and feel I will be down more today and the rest of the week.

I mentioned Monday that I believed I would be assigned (exercised) on this trade and the probability of DNR remaining above $2.50 by the third Friday of April is slim. So far I was correct and anticipated this. Be prepared and be realistic when trading and you’ll be ok!

JC Penney

[stock_quote symbol=jcp] – On Monday, I placed an auto-order to SELL 100 contracts of the APRIL 11 PUT for .40 cents per contract. I stated I didn’t really care if it executed or not, but I believed JCP was headed lower this week. I was right and my order was executed moments ago for .40 cents per contract (perfect) and the option is trading at .37 cents per contract. I am up $300.00. Updated 11:24 AM

Home Depot

[stock_quote symbol=hd] – On Monday, I placed an auto-order to SELL 10 contracts of the APRIL 125 PUT for $2.25 per contract. The order executed yesterday and the option is currently trading at $2.08 per contract. I am up $170.00.

Freeport-McMoran

[stock_quote symbol=fcx] – You may have forgotten about FCX. I still have the MARCH(4) WEEKLY 8 PUT option having SOLD 100 contracts a couple of weeks ago. I am profitable $1,200.00 and the option will expire this Friday (Saturday actually). I do not see FCX going below $8.00 in the next 48 hours do you? Yay! Another cash-secured PUT success story…

McDonald’s

[stock_quote symbol=mcd] – What can I say. I screwed up. I really thought MCD would dip a few dollars as it has over and over for the past few months. I purchased 100 contracts of the APRIL 115 PUT a week or two ago and was losing my ass. Monday I doubled-down and purchased another 100 contracts of the APRIL 115 PUT on an upward bounce. My cost basis is currently .345 cents per contract and the option is trading at .185 cents. I am down $3,200.00, but not out! I refuse to give up. I will begin buying the MAY PUT options next week and try to pull out of my APRIL’s. What a mess…but this is a great example of trading. It’s just how it goes sometimes.

Nordic American Tanker

[stock_quote symbol=nat] – On Monday, I SOLD 100 contracts of the APRIL 13 PUT for NAT. I don’t think I mentioned this because I trade sometimes after I post and don’t go back and update. I apologize. I SOLD these contracts for .20 cents per contract and I am currently down $250.00. I do not see NAT moving below $13.00 in 23 days. We shall see…

VIX (Volatility Index)

[stock_quote symbol=vix] – On Monday, I made one of the riskiest trades of my trading career, but I just knew I was right. I didn’t mention it because I did not want anyone to follow my lead. This is pure speculation, but I purchased (BUYER) 800 contracts of the JUNE 2016 23 CALL option on the VIX for $1.85 cents per contract. That’s right…I sank $148,800.00 on the VIX believing it will go back up in the next month. If I’m right, I stand to make a substantial amount of money. If I’m wrong, I cannot retire until I’m 70. I am currently down $4,000.00. If you think that’s bad, I was down $14,000.00 yesterday! haha! Here’s to having balls of steal…

Update! As of right now (11:18 AM March 23, 2016) I am even with the option trading at $1.85 per contract. I still find it funny that you can recover a substantial amount of money in just a few hours. I’ve been doing this a long time and I still get giddy when things like this happen. That’s how I know that trading is what I was always destined to do. It never gets old and I’m having fun watching this trade. It’s a lot of money to “play” with…but that’s why we play this game right? If you look at the chart for the VIX over the last 3, 6 and 12 months you will see that it is hovering around the bottom. Just a 30-40 cent bounce up would profit $24,000-$32,000. Tick tock…

SELLER vs. BUYER

I want to start doing this so I (and you the reader) can see the percentage of trades that are profitable and those that end in losses based on being the SELLER vs. BUYER. I did this yesterday (while in my class) and listed all trades over the past month and ALL of the trades as the SELLER made money and ALL of the trades as the BUYER lost money. I don’t think it could be any clearer…

DNR – SELLER – LOSS (new trade – should end profitable)
JCP – SELLER – PROFIT (updated 11:24 AM)
HD – SELLER – PROFIT
FCX – SELLER – PROFIT
MCD – BUYER – LOSS
NAT – SELLER – LOSS (new trade – should end profitable)
VIX – BUYER – EVEN (God help me!)

MONDAY, MARCH, 21, 2016

IT’S MONDAY!

MONDAYAnother week of trading and mak’n that dolla! Honestly, I do not plan on doing much this week. It’s the first real week of Spring and I’m doing pretty good for the first quarter. I’m probably going to take some time off and watch the market from the bench. If I see something incredible happen or a good “deal” I will pounce, but I’m just going to relax. Sometimes you MUST take a mental break and just watch and listen…

With that said, I am and will be continuing to acquire shares of certain stocks / companies that I like and want to hold for the longer-term. I will create and submit auto-orders (set and forget) and let it all ride while I do things such as tan and mow the yard. The stocks I’m wanting to acquire include the following:

Denbury Resources

[stock_quote symbol=dnr] – I mentioned several weeks ago that I wanted to acquire somewhere between 20,000 and 50,000 shares and hold for many years. I am gradually attempting this by selling cash-secured PUT’s within a 30 day expiration as monthly income as well. This morning I SOLD 100 contracts of the APRIL 2016 2.5 PUT ($2.50 strike) with 26 days to expiration for .35 cents per contract. The total premium is $3,500.00 or $134.62 per day! DNR is an Oil & Gas speculative play – be careful.

I believe I will be assigned (exercised) on the above trade. The likelihood that DNR will be above or stay above $2.50 per share by the third Friday of April is slim. Knowing this, I chose the higher premium of the $2.50 strike and expect to acquire the 10,000 shares at expiration. After the premium my total per share cost will be $2.15. I can live with that…

JC Penney

[stock_quote symbol=jcp] – I was proud of last weeks trade and did indeed end the week profitable $3,200.00 as predicted and did not get exercised given the fact my strike was $11.00 and JCP closed higher than that on Friday. Good job and I’m feeling good about JCP overall. Therefore, I have an auto-order to SELL 100 contracts of the APRIL 2016 11 PUT (same strike as last weeks MARCH trade) for .40 cents per contract (thinking JCP will dip more over the next week or so). The total premium will be (if executed) $4,000.00 as well and required $110,000.00 in cash collateral (cash-secured PUT). Maybe it will execute, if it doesn’t no big deal. JCP is a retail sales play (and CEO restructure).

temptationNever, ever, ever SELL an option without having the CASH (PUT) or STOCK (CALL) to cover the trade position. Otherwise, you are trading NAKED and this is very, very dangerous to your financial future. Follow Peter…ignore the temptation…

Home Depot

[stock_quote symbol=hd] – It’s Spring! It just wouldn’t be right NOT to buy or attempt to buy Home Depot! Love Home Depot – both the stock and the business. Therefore, in my trading portfolio, I have an auto-order to SELL 10 contracts of the MAY 2016 125 PUT for $2.25 per contract (thinking it will dip more today or this week). The total premium will be (if executed) $2,250.00 and required $125,000.00 in cash collateral (cash-secured PUT). Maybe it will execute, maybe it won’t. I’m not concerned. I would be fine with entering at $125 per share and I will be fine simply collecting a premium for trying. I doubt it will go that low during April, so it’s really just easy money if executed. HD is a housing market play and time of year.

Notice – I am not pressured or trying too hard. I don’t really care one way or the other if some of these execute. This is the joy of being UP for the quarter or month. I’m fine, I’m making money and I’m not trying to “force” a trade. That’s when you can get into serious trouble.