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!