Bull or Bust

a bull's view

January 21, 2016 – Much Better!

I had a sneaky suspicion yesterday may have been the bottom. Is it possible? Could over a 1,000 stocks hitting 52 week lows trigger a rally? Maybe, just maybe. The rise in oil didn’t hurt that’s for sure, but will it hold is the million (or billion) dollar question. I doubt it, at least not right now. I’m sure, much like everything else, it will continue to bounce around in the weeks to come. More than likely all the “shorters” out there are simply covering their shares thinking everything is pretty damn low and it’s just not worth the risk. Tomorrow and definitely next week will be a very important indicator as to how February will go.

I began buying options yesterday before lunch (thankfully) and pretty much sold them all this morning at significant profits. I indeed sold my Starbucks during early trading and right before the closing bell when the underlying stock price was around $59.22 I bought a bunch of the SBUX MAR 16 55 PUT. I believe this was a good call (or PUT haha) based on what the stock did after closing and after the earnings report came out. Whoa boy! Man…did the stock fall. Last I looked it was hovering around $56.80 again which seems to be its recent support level. Tomorrow morning should be interesting. Will it hold steady? Continue to plunge? Who knows, but my PUT may very well be ITM (In The Money) come 8:30 AM. It was high risk yesterday to buy a CALL the day before earnings, but it goes to show you sometimes the underlying is just too damn cheap to pass up. Implied Volatility becomes your enemy after an earnings report – you may experience a “volatility crush” which I will explain another day.

Some of you have noticed my trading strategy or habits have changed recently. It’s true and I am trying hard to desensitize myself to actually selling something. It goes against everything in my body to sell especially when I’m on a roll or up 83% like I was with SBUX this morning. Something inside me just wants to hold on and let it ride. I suppose it’s the risk taker in me and I imagine those of us who trade options probably all have this problem considering you have to be half crazy to do this. My significant other pointed out many months ago that when I run around the house screaming I just made 83% I’m actually full of s***. You don’t make the profit unless you actually SELL IT and turn it back into cash. It turns out I have a huge problem with this. Submitting a sell order has been hard for me and the inability to execute has cost me a significant amount of profits (cash). In fact, had I always sold when ahead I would have roughly $75,000 more in the bank today just from screw ups in 2015.

Disclaimer: there are times when selling is a horrible mistake. I have an infamous story about selling F, GE and AA on September 28, 2015 at 10:30 AM  and taking a freaking red bath with a $33,000 loss when six (6) business days later those same options were worth over $260,000. Yeah, I stopped trading and stayed in the dark eating pringles for a month after that. As Jim Cramer once said, “panic is not a strategy” and I panicked that day – right before October began a fantastic rally. So my rule about panicking is simple: don’t do it. If you find yourself panicking and you can feel your heart beating through your chest and you are picturing your spouse packing his or her bags and leaving forever do NOT do anything. Walk away and give it a day. No matter what. In my defense, I was sick and had fever on September 28th while attending a continuing education real estate course so I was not in the best position to be trading and should have done what?? Walked away. It was a Monday and by Friday I could have bought a Ferrari.

I let it ride too much and I need to AT LEAST take some off the top when ahead. I should write an entire article about taking some off the top. I have been practicing this week and it has worked out very well. Everyone needs to adhere to this most important rule. So yes, I sold ALL of my SBUX at an 83% gain this morning. Am I sorry? Hell NO! Have you seen the stock price tonight?? This is exactly what I’m talking about. Sure, it was a MAR option so I had plenty of time for it to recover, but why claw your way back to where you were this morning two weeks from now? Sure, it could have shot straight up and never looked back which is what it did last year, but I don’t believe 2016 is the year for taking risks when you’re UP 83%. I could have taken some off the top, but I knew earnings would go South. I just knew it because so far YTD this market hasn’t liked anything anyone has said and I was right.

Another fun fact: Back in October of 2015 I was up 223% on an SBUX option and foolishly didn’t sell it. I was watching its little life drain away and even when it was back down to a mere 64% gain and falling I still thought it would go back up. I ultimately sold it at a 30% loss. DUMB! As a trader you can get into this toxic mental state of convincing yourself of anything and it will eat you alive. Trust me. Better to SELL, take the profit, reset your bank account and live to fight another day. On rare occasions you will look back and say, “well s***, had I held on to it I would have made 130% instead of 60%” (actually happened), but it is more likely you will look back later and be damn glad you got out.

It is my amateur opinion to BUY SBUX if it gets anywhere near $56.00 or below and hold it forever. This is not a trade…it’s a lifer.

1,000 Stocks Hit 52-Week Lows

Over 1,000 Stocks On The NYSE Just Hit 52-Week Lows

1:53 pm ET January 20, 2016
Market sentiment has officially turned negative. Ok, more doom and gloom. Here we go again, but don’t you see the opportunity?!? Over 1,000 stocks hitting lows they haven’t seen in a year? All those moments in 2015 you kicked yourself for not buying stock. The Starbucks, Ford, Home Depot and Chevron’s you let slip through your fingers all right here waiting. Don’t even get me started about GE (I owned it at $24 and sold it), I’ve been waiting for it to come back down for what seems like an eternity. In a year, maybe two or five we will all be kicking ourselves for not buying everything in site. So what happened after lunch today?

BUY, BUY, BUY – that’s what happened. We saw the first real positive move upwards since the first of the year in my opinion. The upward trajectory of stocks like Alcoa, Ford and Starbucks looked better than they have in weeks and they turned almost straight up around lunch. Maybe January will go down in history as the worst opening on record, but maybe, just maybe February will be when it all turned around.

By the way, if you’re wanting more option action: the HD (Home Depot) Feb 19 115 PUT, had you purchased it yesterday, would have made you 100% gain before lunch as the market crashed. Had you dumped it at lunch and bought the equivalent 120 CALL you would have made another 50% riding it back up until closing. Anybody trading HD today – congrats!

Stocks Hitting 52-Week Lows

Alcoa Inc (NYSE: AA)

Ambarella Inc (NASDAQ: AMBA)

Bank of America Corp (NYSE: BAC)

Bed Bath & Beyond Inc. (NASDAQ: BBBY)

ConocoPhillips (NYSE: COP)

Caterpillar (NYSE: CAT)

Dunkin Brands Group Inc (NASDAQ: DNKN)

3D Systems Corporation (NYSE: DDD)

1-800-Flowers.Com Inc (NASDAQ: FLWS)

DaVita HealthCare Partners Inc (NYSE: DVA)

Garmin Ltd. (NASDAQ: GRMN)

Groupon Inc (NASDAQ: GRPN)

Jazz Pharmaceutical (NASDAQ: JAZZ)

J C Penney Company Inc (NYSE: JCP)

Mobileye NV (NYSE: MBLY)

Oracle Corporation (NYSE: ORCL)

Transocean Ltd (NYSE: RIG)

TASER International, Inc. (NASDAQ: TASR)

 

January 20, 2016 – What a Day!

So today was full of excitement!

Up and down we go, but if you’re trading options this is fantastic! Before lunch, around 11:30 AM I noticed SBUX underlying stock price was hovering around $55.50 and I just couldn’t believe it. What a buying opportunity. I haven’t seen it this low since early last year and I kicked myself for not buying it then (especially when it split and sat at $48). So I purchased 20 of the March 16 60 Strike Call Options for $1 each resulting in a total purchase price of $2000 without the juice (commission). Pretty happy with that purchase I began looking at other options (pun intended) and went ahead and picked up March Alcoa, Chevron and Nike Call options as well. I had an order in for Ford, but cancelled it and doubled down on the SBUX March 16 60, again at $1. You just can’t pass up $55.50 and they report tomorrow! Normally, buying options the day before earnings is a bad idea, but I believe the market is way oversold and their earnings will be on the good side so we might just get a nice bounce upward.

So I doubled down on SBUX and when all was said and done I had “spent” or actually risked around $14,000 total. Several people laughed at my purchase of Chevron Call Options given the price and status of oil, but Chevron was hovering around $75 and I just saw it at $84 not a day or two ago. It’s moving around quite a bit – just what I like to see! Sure it could go back to $66, but not before a bounce! You must have large ones to play this game, so if you’re scared go read a book. After my purchases I went to lunch, enjoyed Newk’s as usual and really forgot about the market. Part of being successful at this is learning when (and how) to shut it off. Discipline my friends…easy to say…excruciatingly difficult to execute.

Around 2 PM I logged back into my trusty TD Ameritrade mobile app and wouldn’t you know it…I was up $4,500.00! Now that’s a good lunch! My Chevron was up over $600 due to the underlying stock price reaching damn near $80 before trailing off a bit. Starbucks was kicking ass and taking names making it back to $57.50 a $2 increase of the underlying in 2 hours roughly. Ford was up (I did purchase 500 shares of regular stock at $11.55 – excellent). My Nike option was up over a $1,000 alone so I sold that puppy. This goes to show you how quickly you can make money in the option world in just a matter of a few hours. Yes, you can lose it just as fast – disclaimer.

The discipline becomes increasingly important at this moment. Sure, we all love to see things going up. Your initial reaction is to hold it because you think it’s going to keep going. It’s human nature and there’s nothing wrong with you. Sometimes it does! Especially in a bull market which we are NOT in. Experience, however, tells me this is a bounce and not a trend so what do you do??? You sell the strength and buy the weakness. Plain and simple. Sounds easy, looks easy, everything is easy looking back, but when you’re in the moment it will be one of the hardest things you’ll ever do. Regardless, I sold the AA (Alcoa) and NKE (Nike) taking my profits – over $1200 combined in 2.5 hours. I kept the Starbucks, Ford and Chevron to fight another day. I will probably sell F and CVX tomorrow and keep SBUX until Friday. That’s the plan for now.

Today was up and down for sure. There were good times and bad, tears of fear and tears of joy, but that’s trading…

Ford Sollers Opens New Plant

Ford Sollers opened a new $275 million engine manufacturing plant in Russia. The purpose is to cut down on the number of imported components for Russian built automobiles. Ford is trying to spend 60 % of the total cost per vehicle within the country by 2020 to qualify for discounts on certain import duties on parts. The new plant, in the republic of Tatarstan, has the capacity to produce up to 105,000 engines a year, with the possibility of expansion to up to 200,000.

Ford (long hold): Unfortunately, we could not get stock quote f this time.

Position Acquired – Amazon (AMZN)

Right before I decided to call it a day I noticed Amazon had fallen throughout the afternoon. It was hovering around $504.39 and, adhering to the rules of the game, I wanted to get in before the job report just in case the overall market jumped. Therefore, I purchased a small amount (25 shares @ $504.39) afterhours. Based on the current trading worksheet this purchase was above the 3% column and should not have been made, but Amazon (and the rest of the market) is actually down significantly this week already so I took the risk. My strategy is to purchase more if it continues to fall and I agree with the current 12 month target of $640.00. Love (and long) Amazon!

I currently hold positions in the following:

Amazon (long hold): Unfortunately, we could not get stock quote amzn this time.

Netflix (short hold): Unfortunately, we could not get stock quote nflx this time.

Ford (long hold): Unfortunately, we could not get stock quote f this time.

Denbury Resources (not sure yet): Unfortunately, we could not get stock quote dnr this time.

Avalon Rare Metals (until the end of time): Unfortunately, we could not get stock quote nyse:avl this time.

US Jobs Report Released Friday!

The US Jobs Report will be released Friday, September 4, 2015. This has been highly anticipated by most and especially those who are active in the market. If the total number of new jobs for the month of August exceeds 200,000 it is likely the Fed’s will raise interest rates on September 17 from record lows. For any person trading or investing it is my opinion that no sizeable position in anything be acquired until this report is made public. After which buy on the dip…

Stock and Option Trading