Bull or Bust

a bull's view

Chevron – Goodbye My Love

TGIF! I am taking the weekend off and drinking a bottle of wine and leaving this week behind – fat and happy! Next week will be busy. Not much data coming in on Monday, but Monday will be an important day that will shape the rest of the week. Which way will the market go? I have no idea, but it will be fun to watch.

We do hear from Home Depot [stock_quote symbol=hd] on Tuesday and this will be one to watch for sure. If they report positive earnings I see $125-$130 or a potential 5% bounce ($127 roughly). This stock moves and moves fast. It will also give us a good idea of consumer sentiment which will be important for the market overall.

Now, everyone is probably anxious to hear how I ended the week especially considering I bought a ton of PUTS early in the week when the market was flying high and my risky Chevron  towards the end of the week. One of the hardest things I had to learn in the beginning is how to think in a given moment. You MUST be able to almost think backwards. If the market is up, you have to think about where stocks will be when the market goes back down. This is what I was doing at the first of the week. The market was flying high and I watched a few get too high like Chevron. It’s a fast mover too and I knew $89.00 was, for the short-term, just too damn high.

So, I must say, my Chevron PUT kicked some serious a**. I am VERY glad I didn’t sell it yesterday taking that $3,100.00 profit. That was hard and I would not fault anyone for taking it. Whew!! I’ve been doing this long enough to know when my gut is screaming to wait just a little longer. So how did it end today? Did I sell it? You better believe it…

Chevron [stock_quote symbol=cvx] – as you will recall yesterday I could have sold at $2.13, but decided to wait. This morning before market open I was literally taking a shower and $2.45 hit me in the head. I got out of the shower, grabbed my phone, and placed an auto-sell for all 100 contracts at $2.45. Sure enough within nine (9) minutes of the opening bell they were gone. Realized gain$6,475.00 or 35.92% (before commissions)!! What a great way to start a day! To think I almost took half that yesterday – I would have been very angry today. Do I think Chevron is going lower? Yes, I do. Is it worth risking $6,475.00 in profit and burn time over the weekend? Absolutely not. Experience told me to take the money and run. IF Chevron gets back in the $82-$83 range I’ll start buying April CALLS for sure. Regardless, thanks Chevron…

McDonald’s [stock_quote symbol=mcd] – Per my original plan I continued to add to my APRIL 16 2016 $120 CALL position. Purchased 25 contracts at $1.74 per at market open. Purchased another 25 contracts at $1.55 per a little later. Purchased another 50 contracts at $1.54 after lunch as I noticed it had bottomed for the day. Currently I am down $3,200.00 with an average trade price of $1.76 down from $1.99 yesterday. The $3,200.00 loss looks bad now, but you just wait. What’s the word of the week? Patience

Home Depot [stock_quote symbol=hd] – Per my original plan I continued to add to my APRIL 16 2016 $110 PUT position with 20 contracts at $1.86 bringing my average trade price to $2.18. My next order is for another 40 contracts (up from 20) at $1.24 which could happen if earnings are good. This is very important so read carefully: to offset my current loss with the PUT I purchased 25 contracts of the MAY $130 CALL option at $1.79 during the morning dip. I sold this option at 2:59 PM right before the closing bell for $2.26. Total profit was $1,175.00 or 26.26%. Like I’ve said before 20% is my activation percentage (in my head). Once I hit 20% I must weigh the risk / reward ratio and determine if it’s worth holding. I’m getting killed on my PUT and believe HD is going up from here so I needed a realized gain to offset my losses and I took it. Even more important: by adding to my PUT position I will recover that much faster if HD or the market overall decides to crash short-term. Currently my PUT is also down $3,200.00 (interestingly enough the same amount as my McDonald’s CALL). However, overall my HD is really only down $2,025.00 combined with today’s CALL option offset. See how this works? This is an “offset rescue” (I just made that up) and I should write an article on it. You can also use the buy and sell method which works great. You buy lots of PUTS (or CALLS) wait for it to dip a little and sell most (not all) and wait. When the underlying goes back up you buy more PUTS and wait for another dip and sell off most again. You keep doing this until ultimately your overall percentage is a positive not a negative and you can get out profitable. I worked one of my Ford CALLS this way for months and finally got out profitable by 5% having been down over 90% at one time. It is possible to climb out with patience.

Denbury Resources [stock_quote symbol=dnr] – You will learn I do put my money where my mouth is. I mentioned DNR last week and they recently reported earnings and got hammered today. I noticed the stock was trading around $92.00 this afternoon so I purchased 150 contracts of the JUNE 16 2016 $1 CALL at .25 cents per. Currently I am even with no change.

Starbucks [stock_quote symbol=sbux] – Added 25 contracts to the APRIL $55 PUT at $1.35 per. This was risky. I’m betting against a stock I love and know is going higher. The APRIL 60 CALL is doing great and even surpassed $1.30 today and went back down. I have yet to sell and I’m quite profitable with an unrealized gain of $5,104.00 currently. The APRIL 55 PUT is currently in the hole $600.00 so I made the above purchase simply to help break even on the next dip (hopefully make a little money) just like with HD above. I believe Starbucks is headed up from here BIGTIME especially given how it has acted all week. The PUT may very well lose some serious money, but I’m trying hard to claw my way out. A short-term dip would get me out and is the entire reason I own the PUT in the first place. I’m worried now, after this week, that it will not dip as much as I originally believed. Fingers crossed! Overall my PUT and CALL combined total remains up at $4,504.00.

Weight Watchers [stock_quote symbol=wtw] – Don’t laugh! This one, honestly, is pure gambling. I said what the hell. The stock is up 30% this week and they report earnings on the 25th. I’ve done quite well this week so I figured $1,250.00 down for 50 contracts of the MARCH $25.00 CALL at .25 cents per was worth a shot. I’m using the “houses money” anyway what’s it matter! Who knows what will happen, but if it’s good, this stock will fly high. Here’s to being a dreamer!

Volatility Index [stock_quote symbol=vix] – Added 10 contracts at $2.40 per and 10 more contracts at $2.30 per bringing my total to 30 contracts. Still not confident in either direction so I’m reserving cash to buy lower later. Currently down $175.00 at closing. I was actually up $500.00 or so this morning, but chose not to sell.

Ford [stock_quote symbol=f] – Anybody wondering how I’m doing on the 300 contracts I sold as covered calls yesterday?? Well, I’m up $3,000.00 and holding. Time decay is my friend and I’m just letting it ride. This option is the same option I have been buying and selling for months. I know what it’s worth and when it gets back to .16-.18 I’ll buy back the 300 contracts to cover and take the difference in what I sold them for (.36 cents) and what I buy them back at (.16-.18) as my gain. Simple as that and zero risk

At one point this morning I was up over $12,000.00 for the day. I should have sold a few things, but I got distracted by my real job. This happens a lot and can cost big money so time management is most important. If the market turns the wrong direction next week it could hurt and the weekend is burning time which is also costing money. All of this must be calculated with each trade.

I remained up $4,454.89 for the day (yes, down from over 12k ouch!), but still up.

Total gain (some unrealized for now) since February 5th: $29,241.54.

Everyone enjoy their weekend and remember what my father always says…it’s just money!

 

 

February 18, 2016

The best way to describe today – busy. My head is pounding after all the calculations and trading! What a great day! I was a buying machine and made many trades all while holding down my real job. I will be brief today and simply list my trading portfolio trades and positions. I did not purchase any additional Wal-Mart [stock_quote symbol=wmt] stock with my primary portfolio because it just didn’t dip as much as I wanted it to. I’m keeping an eye on it.

Ok now for the good stuff! Below I have listed all trades for today:

Ford [stock_quote symbol=f] – upon market open I added 200 contracts of the APRIL $11.75 PUT @ .35 cents per bringing my total to 400 contracts. Why you ask? Ford hit $12.44 very early and I knew that would be short lived. I used the high underlying price to drive the PUT premium down a little and doubled-down. Later in the session I sold 300 contracts (covered call) of the APRIL 16 2016 $12.75 CALL option @ .36 cents per collecting $10,800.00 in premium. If you have not read my selling covered calls article please do so now. Currently, as of the closing bell, I came up slightly on the PUT, but I’m still in the hole $2,300.00. I am up $750.00 on my covered call bringing my current loss to a total of $1,550.00. Remember, the covered call is increasing in value each day as time decay lessens the value of the option. It is also offsetting my PUT option loss which helps.

Chevron [stock_quote symbol=cvx] – GO CHEVRON!! Make me some money! Whoo Hoo! Luckily, upon market open I added 25 contracts of the APRIL $80.00 PUT option @ $1.80 and then 10 minutes later I added 50 more contracts @ $1.75 as Chevron caught a bounce up briefly dropping the PUT premium. I was nervous about this trade yesterday, but that nervousness soon dissipated when I became profitable! This brought my total to 100 contracts of the APRIL 16 2016 $80.00 PUT option with an average trade price of $1.8025 per. Currently I am up $3,325.00 with the mark hovering at $2.135. Honestly, I did think about selling this and taking a profit in 24 hours, but I decided to hold. No reward without risk! Given how oil was acting today and Chevron stock too, I decided to wait until tomorrow to make a decision. Regardless, profitable for now – unrealized of course.

Starbucks [stock_quote symbol=sbux] – Starbucks was weird today. It didn’t do much of anything and just hung out and moved with the indexes. I purchased 25 contracts for the APRIL 16 2016 $55.00 PUT option upon market open for $1.35 per. I wasn’t totally confident it would go down so I didn’t buy many. I figured if the underlying went up I would just double down on this PUT. Currently the PUT is up $350.00 and trading at $1.59. I must admit I should have sold the APRIL 16 2016 $60.00 CALL yesterday when I was up a good bit. I lost $3,750.00 in value today, but I’m still up $2,629.00 with that option. Goes to show you how far up I was yesterday! So I’m not losing money, but I could have made more as of now. Maybe it will go back up. I’m holding for now. Total gain for both the PUT and CALL currently is $2,979.00. I still think Starbucks is going up. It’s just a matter of time, but I’m riding the PUT right now to make a little extra on the side.

McDonald’s [stock_quote symbol=mcd] – later in the afternoon I noticed McDonald’s was down more than 2% and getting close to $117 again. I couldn’t resist and started buying the APRIL 16 2016 $120 CALL option. Initial order was 25 contracts at $2.08 per. Next order was for 25 additional contracts at $2.00 per and then yet another order for 25 more contracts at $1.90. I have another auto-buy order pending for 25 more contracts at $1.75 per. Currently I own 75 contracts with an average trade price of $1.99 per and it is currently trading at $1.94. I am down $375.00 or 2.51% roughly. Patience…

Volatility Index [stock_quote symbol=vix] – Also while researching deals later in the day I noticed the VIX was trading around $21.50. I purchased 10 contracts of the APRIL(4) 16 2016 $25.00 CALL option at $2.45 per. Currently I am up $125.00 or 5.10%. If the VIX continues down, especially if it gets back in the 16 range, I’m buying all the way down.

I still own the following in my trading portfolio:

Alcoa [stock_quote symbol=aa] Options

General Electric [stock_quote symbol=ge] Stock

Total gain for the day: $2,919.50 (even after losing more than 3k in value on SBUX call option). Total gain since opening current positions: $4,081.00

Today – What to Watch

imagesN4GGXCNTIs it just me or is the market rally slowing? These days when the DOW [stock_quote symbol=.dji] hits the 16,500 range I start getting nervous. It’s a 50/50 shot from here – will it continue to rally towards 17,000 or take another hit back to 15,900? That’s the million dollar (literally) question. I know this, my antennas are up and I’m getting anxious. Part of me thinks we’re continuing up (even though I’m buying PUTS), but I can’t tell if that’s just my internal Bull again. Time will tell…

Today we are awaiting energy data. The US Energy Information Administration will release updated information on crude inventories at 10 AM Central. Depending on the outcome of this we could definitely see increased volatility today. Crude oil futures are currently hovering around $31 a barrel after seeing a significant jump at the end of last week and over the past few days. Will it hold and stabilize around $35? Everyone would like to think so, but I do not believe we have seen the repercussions of Iran’s increase in exports as of yet. This will take time and I see another dip coming.

Natural Gas inventories will be released a little earlier at 9:30 AM Central.

Wal-Mart [stock_quote symbol=wmt] reported earning this morning before the open with an adjusted EPS of $1.49 and sales of $129.7 billion vs. street estimates of $131 billion. Wal-Mart lowers FY2017 sales outlook from 3-4% growth to pretty much nothing. Wow. In other words, we thought we might grow, but now we’re just going to stay the same. Fantastic! In an attempt to keep investors from fleeing they did increase the dividend to $2.00 per share which is the 43rd consecutive year of dividend increases. Ok, maybe they didn’t do it to keep people from fleeing, but it certainly doesn’t hurt. Before the 4% drop in pre-market trading the increase in dividend would equate to a 3% yield vs. the current 2.96%. If Wal-Mart continues to get punished over the next few days the dividend could bump up into AHY territory. Is this enough? I’m not sure, but I will be adding to my primary position as it drops. For the short-term at least

Of the thirteen (13) holdings in my primary portfolio Wal-Mart is the only one that makes me nervous. I personally cannot stand Wal-Mart, but my personal opinion is irrelevant with regard to investing in this particular company. Don’t get me wrong, I use my personal opinion or “gut” everyday when investing, but how I feel about Wal-Mart is irrelevant because they serve a particular demographic and purpose in this world. I believe that demographic will do nothing but grow in the future as the gap between classes continues to grow. This is a topic for another day.

Wal-Mart is currently up 8% YTD 2016 and I intend on buying more during this dip and holding until at least the end of this year or until it bounces back over the next month – if that happens. My primary portfolio strategy is typically not this short-term. This is for Wal-Mart only.

Also, you might have noticed the comment about having thirteen (13) companies in my primary portfolio. That’s an odd number, really odd if you’re superstitious (which most traders are). Considering Wal-Mart makes me nervous, I could cut it and bring my total down to a more comfortable twelve (12). What I really should have done was add Viacom [stock_quote symbol=viab] last week at $31.75 bringing my total up to fourteen (14). Again, at least for the short-term

 

 

February 17, 2016

Today is a tale of the good, the bad and the downright ugly. Keeping with the “real” aspect of this blog I must admit I completely screwed up. How you ask? You’re probably thinking it’s all the PUTS I bought yesterday, but you’d be wrong. Today’s rally was somewhat expected. I didn’t anticipate my PUTS being profitable immediately, this is not how this works. You must have faith!

My screw up was Disney[stock_quote symbol=dis]   – again. Man, I just need to back away slowly from Disney and leave it alone for a while (like several months). It just continues to kick me while I’m down. However, it didn’t really kick me as much as it made me angry. I owned 115 contracts on the MARCH 100 CALL with a trade price of .55 cents. If you recall I purchased this on February 12, 2016, just five (5) days ago and I was in the hole a $1,000.00 at the closing bell that day. I did not buy down or really watch it that close because I knew Disney would recover. I knew it was a matter of time and we would be back in the $95-$98 range so I let it sort itself out.

Here we are a week later and the stock is performing quite nicely. What is so ugly about it?? The mark was .475 cents at close yesterday so this morning before the open I placed an auto-sell order for all 115 contracts at .65 cents per. My thought was: Disney hasn’t been moving that fast and considering it’s a March expiration I was willing to accept a $1,150.00 or 18.8% profit (before commissions) IF the underlying just happen to bounce quickly. Well, hell, it did just that. Within the first 15 minutes of trading all 115 contracts were sold. I wasn’t paying attention and heard the ding. I turned my head and yelled, “what was that” and done. All gone. So you’re wondering why ugly? I made $1,150.00 in five (5) days! It’s the unrealized gain the rest of today’s session that set me on fire. I had to sit back and watch. Helpless and feeling like an idiot. At one point this option was trading at $1.06!!! That’s $5,865.00 or 92.73% profit!! It’s ok, I’m over it…let’s never discuss it again.

So that was the ugly. The bad were the PUTS. Wow, I’m losing money like water going down a drain! By the closing bell my PUTS were down a little over five (5) grand, but this is trading. Must hold strong. Must believe.  Whew…knowing my luck (after the Fed meeting today and oil stabilizing) the market will continue up. Thankfully, all PUT options owned are April expirations so I have time. Tick, Tick…

I made the following trades today:

Alcoa [stock_quote symbol=aa] – doubled down on the APRIL $7 PUT at .20 cents per. Total is now 200 contracts for an average of .245 cents per. Currently in the hole $900.00.

Chevron [stock_quote symbol=cvx] – purchased 25 contracts for the APRIL $80 PUT for $1.97 per. This is a HUGE risk in my opinion. If oil continues to stabilize Chevron will continue to go up. However, I’ll continue to buy down until the underlying is around $92. I’ll stop at that point and hope for a dip or lose my ass one or the other!

Disney [stock_quote symbol=DIS] – sold all 115 contracts for .65 cents per as stated above. Damn it. Total profit $1,150.00. Just ugly.

Ford [stock_quote symbol=f] – Wow! Ford bounced hard and moved more than 3% in a single session. Way to go! It hasn’t moved this much in a single session in months. Of course, I bought PUTS so I’m buying down as the underlying goes up. Doubled down with another 100 contracts for the APRIL $11.75 for .45 per. Total is now 200 contracts for an average of .50 cents per. Currently in the hole $2,650.00. OUCH!

Home Depot [stock_quote symbol=hd] – doubled down on the APRIL $110 PUT at $2.20 per. Total is now 40 contracts for an average of $2.34 per. Currently in the hole $1,610.00 with auto-buy limit orders pending for $1.86 and $1.24 for 20 contracts each.

Starbucks [stock_quote symbol=sbux] – Wow! Way to go Starbucks! The APRIL $60 CALL I held performed great today! I am currently up $6,379.00 on 150 contracts. I did not sell today, but have an auto-sell limit order placed at $1.50 per. Currently trading at $1.29. I also purchased 25 contracts of the APRIL $55 PUT for $1.45 per with auto-buy limit orders placed for $1.30 and $1.15 for 25 contracts each. Currently in the hole $100.00.

In the end, with all the gains and losses I remained up $629.00 for the day. I still own GE [stock_quote symbol=ge] as well. The good was definitely Starbucks. I have made more money on Starbucks than anyone could imagine. It is a great stock to trade regularly and I love me some latte’s.

Until tomorrow….

The Mark

Many rookie traders fall into the bid / ask trap. It’s normal and I fault no one for doing it. I did it myself in the beginning. You think the bid / ask is the end all price and there are rules with trading. First rule: there are NO rules!

Consider the bid / ask price a “guideline” to what a particular stock or option is worth at that moment in time. You must understand – everything changes constantly. The bid / ask is fluctuating and you, as an active trader, should NEVER accept the stated price without question. What’s the first rule of litigation? Never accept the first offer. Same applies with trading…

Therefore, as an active trader you should become familiar with the “mark” or current market price. This is very important and can save (and make) you a great deal of money depending on the spread.

For example: a few months ago I purchased a Ford CALL option that was trading at a bid of $1.23 and an ask of $1.48. A rookie may have paid $1.48 because, well, that was the ask and that’s what you’re supposed to pay! WRONG! I paid $1.28 because when I placed my order I set a limit at where the current “mark” was trading. You can see with this example, depending on the spread and the number of contracts you’re buying this could mean the different between immediately being in the hole $500.00 instead of $2500.00 (if purchasing 100 contracts). This also makes it much easier to buy down your cost basis and be profitable on the next bounce. I did just that with this option buying more at $1.15 and selling everything at $1.43 a week later as the underlying fluctuated. Profitable. Would it had been profitable had I paid the original $1.48 ask? Maybe. Depending on how many contracts I purchased at $1.15 and how low my cost basis became. The point is: the lower your initial cost basis the better – always.

Sometimes (there is always a sometimes) it is ok to pay the asking price. If you’re dying to catch a rally for example and you’re behind. Chasing a stock or option is not something I recommend, but there are rare cases when it can be profitable – Netflix comes to mind. If the underlying stock price or the option prices are moving too quickly and you want out (or in) immediately. I have selected “market” many times when an option is going higher very quickly and I want to sell. This way I get the best price possible upon execution and I’m not leaving money on the table because it took me three (3) minutes to execute.

In the end, I have seen rookie traders throw away money too many times by simply paying too much or thinking they must pay the ask. Again, prices fluctuate constantly and I will often enter an unreasonable price (at the time) and let it ride ultimately seeing it executed later in the day or week. These trades are often my most profitable…when I chose a price I was comfortable paying, stuck to my guns and waited.

It pays to be patient and know the mark…

 

Brokerage Firms

I have had accounts with Fidelity, E*TRADE, Scotttrade and TD Ameritrade over the years. My first account was wayyy back in the late 90’s with E*TRADE and I honestly cannot remember what that was even like. I’m sure it was miserable given the bandwidth and status of the Internet back then.

I started with TD Ameritrade personally a couple of years ago. I wanted to play around and figure out whether or not I liked it. After a year I was in love with the mobile app and decided to open a business margin account to store funds for my primary company on a temporary and long-term basis and allow the ability to trade stocks and options regularly. The desktop and mobile applications offered by TD Ameritrade, in my opinion, are truly second to none. I use the iPhone app primarily and constantly. It’s easy to use, easy to understand and offers just about everything possible with the desktop / web based portal, but in the palm of your hand. I did upgrade to the iPhone 6 Plus just to trade and the larger screen makes the TD mobile app truly shine. I would not attempt this any other way.

I also utilize the thinkorswim platform daily for both trading with live (real) money and playing with the paper money accounts. This application, really more a tool than application, is the only way to learn how to trade without risk. At first it may look intimidating, but that’s good. You want to be intimidated because later when you actually understand what is going on you will feel that much better. I use it for research, analyzing, watching options and volume, news, real time data in general. There is an enormous amount of information within thinkorswim and I strongly recommend leveraging it.

With all that said, I do still use the TD Ameritrade iPhone app to execute transactions. Sometimes I will use thinkorswim, but I have found it easier and faster to use the regular iPhone app. I do watch the “mark” or market price on thinkorswim while using the iPhone app to execute. The mark is a little easier to see and understand on the thinkorswim platform and is crucial for getting the best price. In other words, while actively trading I am using both in real-time.

TD Ameritrade is not the cheapest. However, I believe the user interface and mobile apps are far superior and worth the additional fees. Download and install thinkorswim today. Learn how to use it. Get comfortable with it. It really helped me in the beginning and a paper money account will get your heart pumping just as much as the real money account. Trust me. I sometimes laugh that I still get nervous when buying and selling with paper money because I treat it very seriously. I trade paper money just as I would real money, if you don’t, you will never learn why you do stupid things and where your weaknesses reside.

There is a thinkorswim mobile app, however, if you think it’s complicated as a desktop application you do not need to try it on a mobile platform! It’s pretty insane. Again, I do watch the thinkorswim mobile app for certain data while using the standard TD Ameritrade mobile app to execute. Warning: the thinkorswim mobile app uses a significant amount of data and can cause overage fees to be applied. We kept getting hit with data usage fees and I finally realized it was the thinkorswim app being left open in the background on my iPhone all the time.

February 16, 2016

Great day on the market! I hope everyone made money today!This is what I like to call a “sell day”. However, I held my long-term stocks and didn’t do much but watch and enjoy being up in my primary portfolio. Sometimes it’s good to take a break and enjoy the fact you’re up more in a week than most money managers are in a year (with what I purchased last week).

On the contrary: my trading portfolio has been liquidated as of 2:30 PM Central. I sold almost everything: Ford [stock_quote symbol=F], Home Depot [stock_quote symbol=HD], McDonald’s [stock_quote symbol=MCD], Starbucks (stock) [stock_quote symbol=SBUX] and even my beloved Nordic American Tanker [stock_quote symbol=NAT]. I kept GE (stock) [stock_quote symbol=GE] and Starbucks (option) because I feel both can go higher sooner rather than later. If they don’t and they dip I’ll just buy more.

Clarification: I sold the Starbucks stock because it was acting weird and I got one of my “tingles” up the back of my neck. It attempted $57.00 this morning and even when the market was going up it did not find support at this level and floundered all day ultimately going back down to near $56. This could have been nothing more than consolidation before continuing upward, but considering where I purchased the stock I was up a significant amount and decided to take my profit. Simple as that. This is why you have a trading portfolio and a primary.

If you’re keeping up…I have held my Starbucks APRIL 60 CALL option for a while now. It is getting old and if the underlying doesn’t move soon I’ll be forced to sell. The option was up $3,200.00 this morning, about 10 minutes into the session, but I held and looking back that was probably a mistake. The implied volatility went through the roof at the opening bell because the market in general was headed up after a long weekend. Once the IV settled the prices came down and I should have captured that IV spike.  Again, this is my trading portfolio…I still hold all the above in my primary long-term portfolio.

So, what am I buying here at the close of a great session you ask?  PUTS! I’m going out on a limb and taking the downside exit. We just don’t know what tomorrow will bring so I’m betting we have another down day soon. Therefore, I made the following trades:

Alcoa [stock_quote symbol=AA] – purchased 100 contracts for the APRIL 16 $7 PUT at .29 cents per. So far, I’m in the hole $200.00.

Ford [stock_quote symbol=F] – purchased 100 contracts for the APRIL 16 $11.75 PUT at .55 cents per. So far, I’m positive by $50.00.

Home Depot [stock_quote symbol=HD] – purchased 20 contracts for the APRIL 16 $110 PUT at $2.49 per. This one, in my opinion, is the real risk. HD will either continue going back to $125-$130 as I predicted weeks ago, or it will head back to $117-$116 on the next down day. That’s my strategy…catch a dip, get out with a profit and buy the $125-$130 CALL and ride it back up. So far, I’m negative by $70.00.

Buying PUTS today might not be the best idea, but in the end if everything keeps going up I’ll just keep buying down my cost basis. This is the risk of option trading – hold them too long, keep buying down and the market goes against you. There comes a time you could end up really screwed…so be careful!

Deal of the Month

Nordic American Tanker [stock_quote symbol=nat]

I have mentioned this stock many times in recent posts, but I am just shocked at what a deal this has really been. Yes, some of the gain today is obvious short covering due to 18% of the float (as of Jan 31st) being short. I have no doubt with the talks of oil production levels, oil stabilization and other rumors flying around that those negative bear bastards are getting nervous and taking some profits.

Finally!

Regardless, since the stock was trading at $10.90 last week and after hitting my radar while watching the CEO interview on CNBC it has performed quite well hitting $13.23 this morning. My acceptable profit margin with stocks and options is 20%. Once I hit 20% gain I start weighing many factors to determine how long I ride and how much additional risk I am willing to accept. Too often have I been  up 50, 60, 70 and even 200% (yes, happens a lot actually) and refuse to sell watching my profits dwindle to nothing. Greed (and panic) is not a strategy. Remember that. Always have a plan and stick to it. When my position in Nordic surpasses a 20% gain, I will start trimming and taking profits. The idea is always to buy more later on a dip, but unrealized gains are just that…unrealized.

Nordic American Tanker definitely takes the prize as the deal of the month. Hands down. If you are a recent, long-term investor you are killing it on the stock and will soon reap the benefit of the handsome dividend.

February 12, 2016 – UPDATED

I’m in somewhat of a hurry this morning, so I’ll keep this brief. Wow! What a ride this week! I sure hope everyone took my advice and purchased Nordic American Tanker [stock_quote symbol=nat]. I have learned it takes the market a day or two to react to certain things. Nordic was one of them this week. It was trading at $10.90 just a couple of days ago. I mentioned the CEO interview on CNBC the other day and how they have paid their dividend for 74 quarters with an average return of 11%. Today, two or three days later that same information came across the newswire and up goes the stock. It takes time…

Denbury Resources [stock_quote symbol=dnr] was just trading at $1.28 per share moments ago. This is a realized gain of 28% (if you sold it) from yesterday (before commissions) when I issued my email alert advising everyone to buy at $1.00. Hopefully, some of you actually read it and made a move.

Other trades I made yesterday right before the closing bell:

Bank of America [stock_quote symbol=bac] – doubled down on the APRIL 13 CALL option bringing the total to 200 contracts. Currently up $3,800 today.

Chevron [stock_quote symbol=cvx] – doubled down on the MARCH 92.5 CALL option bringing the total to 200 contracts. Sold moments ago at $1.06 profiting $4,600 today.

Ford [stock_quote symbol=f] – tripled down on the stock bringing the total back to 10,000 shares. Currently up $2,225.00 today. Update: Closed up $3,600.00 total. Go Ford!

I strongly recommend reading my latest article on Selling Covered Calls. I finished it early this morning, but I may revise it some over the weekend. Enjoy!

CLOSING BELL UPDATE!

Today was a great example of what active trading is all about. Yesterday, before the market closed, a few gut feelings run through you sending chills up your neck and you make some trades quickly. Trades that, within 24 hours, pay handsomely! As I’ve stated before I’m keeping this site as real as possible so I did lose money on Disney – again. I suppose I haven’t lost it yet because it’s still going back up…I just remain in the negative. So below are the trades of the day:

Bank of America [stock_quote symbol=bac] Update: Ultimately sold all 200 contracts at 2:22 PM for a $3,700.00 profit. I was hoping it would continue moving higher today, but it did not. I thought about holding it through next week, but in this market what do we do when we’re up? Sell it and take the profit.

Disney [stock_quote symbol=dis] – I don’t believe I mentioned this trade yesterday, but I purchased 115 contracts of the MARCH 100 CALL option at .55 cents. It’s currently trading at .39 cents (.40 market) and I’m in the hole almost a grand. Why did I buy more Disney you ask? Look at the chart. It has been steady climbing since Wednesday. I figured then that all the sellers would exit, eventually it would stop going down and the buyers would come back. That is happening, it’s just taking some time. If it dips next week, I’ll double down and lower my cost basis.

Starbucks [stock_quote symbol=sbux] – I cannot remember if I mentioned I added 50 more contracts to the APRIL 60 CALL option yesterday right before closing bringing my total to 150 contracts. With that option and the 1500 shares I purchased at $53 earlier in the week I am currently profitable $6,244.00 and decided to hold. I believe it will hit $60 a share again soon. There may be another dip coming, but it was worth the risk in case it jumps up to $59. I highly recommend buying the APRIL 60 CALL option and if we do see another dip, buy it down.

WEEK SUMMARY

I sold Chevron early during today’s session for a $4,600.00 profit, sold Bank of America later in today’s session for a $3,700.00 profit, lost over $2,000.00 on Disney, but still holding a March position. I am holding my Starbucks option with a profit of $1,945.00. I’m profitable on my Ford, GE, Home Depot, McDonald’s, Starbucks and Nordic Tanker stocks after buying more during the mid-week dip. My entire active trading portfolio jumped almost 10% today with the help from the CVX and BAC options BOTH of which I SOLD. Good week…can’t wait for next week!

Briefly, I want to mention the Nordic American Tanker trades from this week. They are a good example of how I operate: when I watched the CNBC interview and my gut screamed “BUY” I bought immediately and at a price that was higher than I wanted. Over the next few days the stock went down and I continued to buy it down in medium-sized increments until I owned a significant stake. My thought was if it keeps going down I’ll live on the dividend. By buying it down I lowered my cost basis with each trade and when it jumped yesterday and today I immediately became profitable. Therefore, the original trade(s) on February 8th and the price I paid at that time, really, became irrelevant in my mind. Profit is profit and buying down helps you take advantage of jumps like today.

I hope everyone enjoys their weekend…my brain needs a break!

The Bottom – Watch For It

birthdayHappy Birthday Jim Cramer! I am dedicating this post to Mr. Cramer because he inspires me every night and has made me a significant amount of money. Thank you!

I was just inspired by a comment he made on tonight’s show and I must admit it proves I am not crazy. This is something I have been thinking for several weeks as I watch the market fluctuate daily. It’s important and if you have a group of companies / stocks that you watch constantly like I do then what I’m about to tell you becomes easy.

In fact, having a group that you monitor daily is a requirement, but don’t have more than ten (10). You cannot monitor, research and track more than ten (10) and feel comfortable. Trust me.

Having a group and watching them daily forms a bond between you, the company, the stock and the price of said stock. It’s important you become familiar, almost one with the stock price. At any moment if that company is mentioned by anyone you should know what the current stock price is. This bond, this knowledge allows you to do the most important thing in trading…

Find the bottom.

Everyone complains about the market today. The violent fluctuations, the “flash crashes” and how the algorithms, God and even Santa Clause is at fault (we all waited for the Christmas rally that never came – thanks Santa). BUT, this volatility makes finding the bottom almost easy IF you’re paying attention.

Take McDonald’s [stock_quote symbol=mcd] for example. During Mad Money tonight someone called in regarding McDonald’s and everything he said was exactly right. The caller noticed McDonald’s was doing well, had a good dividend and while everything was crashing around it McDonald’s found a bottom and held. It not only happened with McDonald’s, but with many other stocks as well.

This week the market has been hammered and many stocks have dropped dramatically in value – have you seen Tesla? McDonald’s traded at $124 just a week or so ago and I purchased it at $115 Monday. The novice trader or investor would be scared to enter at this time or this price, but did you watch the stock? Did you notice the bottom? Again, watch any stock long enough and you can see it happen. Once McDonald’s landed around the $114-115 mark it stopped going down. It stopped going down when everything else continued to drop. Regardless of what the market did McDonald’s hovered and started going sideways and then back up and that’s when I pounced. Now, again, McDonald’s is not the only stock that did this. Home Depot landed at $110 and hovered. Ford at $11.02 last week and I knew if Ford broke $11 we were in serious trouble, but it held.

The great thing about extreme fear, volatility, a high VIX and overall bearish sentiment is when the market and individual stocks crash there is ALWAYS a price they stop going down. This sounds stupid, of course there is a price they stop going down, but it’s more than that. It’s a feeling. I’ve personally witnessed many, many stocks simply crash right before my eyes. I mean crash. I owned Disney at $112 and watched it crash to $103 within a matter of days. It just wouldn’t stop falling. Your stomach turns, your heart races, you get light-headed and think about bankruptcy and how all your friends and family will make fun of you and say things like, “this is why the middle class shouldn’t play the market” (thanks mom). You begin to realize you’re about to throw up at the very moment panic takes over. Then, it stops. You regain control of yourself, take a deep breathe and accept you’ve just lost more money than most make in a year, but it’s ok. You’re ok. You’re alive and the stock has stopped falling. This is what I’m talking about – the moment it stops going down. You just watched it happen. You felt it when your heartbeat dropped from 190 back to a reasonable 110 (ha). Now what?

There comes a moment when you realize the worst is over. Just like with SolarCity [stock_quote symbol=scty] at some point the stock becomes so cheap the buyers come back and the remaining sellers just can’t take the pain of walking away. Do not buy SolarCity you would have to be insane. I am using them only as an example.

When the sellers stop and the buyers come back in – this is the support level and what the market considers the stock to be truly worth after the carnage. That moment, that price will always be your point of entry if you want in. If you’re scared (which you will be) buy in slowly and watch it for a few days to make sure. If it bounces right back and you “lose” your chance so what. You’ve made money and there are worse things.  Viacom [stock_quote symbol=viab] is an example of why it is important to wait. If you thought $36 was a good price, you’re loving $31!

For me some of this trading “stuff” comes naturally and I don’t realize it. When McDonald’s hovered around $115 on Monday my antennas went up. When it dipped into the 114’s I said to myself, “you better buy it” and when it bounced back to 115 I bought it and it promptly fell back into the 114’s for a short period. I didn’t panic I just figured if it kept going down I would buy more around the 110-111 mark. You must have a plan and remain calm. I knew I wanted in, I knew it would go back up so really anything 115 or below was fine with me.

As your skill level and experience grow you will be able to find the bottom. I’m just glad to know I wasn’t crazy in thinking when a stock holds strong when everything else is crashing it’s a good time to buy and my boy Jim Cramer reaffirmed that tonight.

Thanks pal…Happy Birthday

Stock and Option Trading