Greetings fellow Stockaholics! My inability to plan ahead caused me to miss the boat on archiving my old journal -- so here we are starting anew! Probably for the best, as my HSM journal experienced several face lifts & adaptations along the way. Having learned my formatting and general 'flow' lessons there, my hope is that this journal will be much 'cleaner.' A basic premise to what this journal is all about... Primarily, I trade/sell monthly credit spreads which are deeply OTM. This strategy accounts for 67% of my portfolio, with the remaining 33% dedicated to what I consider to be value-based investments...well, for the most part...some sheer gambles reside in that section of my portfolio, but do not amount to a significant %. Those value investments are exactly that, investments...think buy-n-hold. Surrounding these core holdings, I place short term vanilla option plays (when conditions are right) in an effort to reduce my basis (or risk). That about sums up what I am all about as a trader & investor. Along the way, I post my trades as near to real time as I can...though admittedly most of the time I'm off by a day or two (or ten). I post my original logic / thought process for each trade or investment, and then any subsequent updates to that trade are posted exactly as that...updates to the original post. Point being that if you find a trade or investment you're interested in, check the original thread from time to time for updates...if you like! After each month's Expiration Day, I post my monthly roll-up which covers how I did (or as of late, how I didn't do!), along with some rambling reflection. Anyway, thanks for stopping by, hope to see ya around! I really am excited about this new chapter -- so thanks for the opportunity! V
SNAPSHOT: Stock Symbol: CHK Type of Holding: Gamble Position Size: 0.68% of Portfolio HOLDING HISTORY: Nov15: Entry @ 6.30 // Cost Basis = 6.30 Dec15: Sold Puts // Cost Basis = 5.46 Dec15: Rolled Puts // Cost Basis = 4.82 Jan16: Rolled Puts // Cost Basis = 3.54 Feb16: Rolled Puts // Cost Basis = 2.83 Mar16: Rolled Puts // Cost Basis = 2.06 Mar16: Sold Calls // Cost Basis = 1.92 Currently Held: $3.50 15Apr16 Puts + $8 20May16 Calls TRADE PLAN: Strategy: Reduce Basis Method: Rolling Covered Calls to further Expiration Target: TBD Duration: TBD Today's CHK rocket ship cemented my $3.5 puts deeply OTM with 3x trading days left to expiration date. If CHK can get follow through tomorrow to the upside, I should be able to roll my $8 20May Calls to a further expiration, further reducing basis & increasing returns. However, today's spike stopped exactly at the 200 MA on the Daily, which coincides perfectly with CHK's floor from Fall 2015...so anything can happen. As it stands, if my shares are called away @ $8 on May 20th, it equates to a total return of 316.67% // 543% annualized..not a bad gamble. Still, with 1.92 per share in risk still on the table, if I can further reduce that, I'd be more than happy to. Here are how the expiration date scenarios flesh out: Call Value // New Basis // Total Return // Annualized Return 17 June 2016: $8 Calls // 1.84 // 334% // 498% 15 July 2016: $8 Calls // 1.72 // 365% // 486% $9 Calls // 1.89 // 376% // 501% 21 October 2016: $8 Calls // 1.40 // 471% // 565% $9 Calls // 1.60 // 462% // 555% $10 Calls // 1.75 // 471% // 565% $11 Calls // 1.85 // 494% // 593% Looking at the breakdown here, I am liking the October numbers, but given how volatile CHK has been, it's too far out. I feel as if the summer expiration dates are lagging in anticipation of whether or not CHK shows any kind of follow through. If it does, I suspect the July numbers will look a heck of a lot better than they do now...as they aren't giving me the kind of basis reduction I'd expect/want from a date that far out. I still see $8 as a significant obstacle for CHK to break through, as its the ceiling from Fall 2015 (as previously mentioned, today's action ran CHK right up to, but no where near through, the Fall 2015 floor). So I'd be comfortable putting my strike @ $8 on the calls, even out to October, because I see CHK having a lot of work to do in order to get up to, and then through, that level. It is nice to see CHK get above it's previous spike point, which occurred March 7th @ 5.76...but that level needs to hold if CHK wants to have any hope of continuing its upward mobility. Obviously today it did, but will it tomorrow? I'm going to sit on my hands here and see. If it does, I'll look @ July first, and if I'm still not seeing any worthwhile basis reduction, I'll snag the October CCs. We'll see... ----- UPDATE ----- Well, I ultimately decided to do nothing, a decision helped by the fact that I got super busy with work & travel so I couldn't do anything! I'll re-investigate my options (nice pun, eh?) when I find the time, but as for now, I'm sitting at a cost basis of $1.92/shr after all my puts & calls expired OTM -- not too shabby!
POSITION CLOSED Stock Symbol: GDX Type of Holding: Investment Position Size: 15.15% of Portfolio Investment ROI: + 15.43% Annualized ROI: + 6.62% HOLDING HISTORY: Jan14: Entry @ 22.15 // Cost Basis = 22.15 Oct14: Sold Nov14 + Dec14 Puts // Cost Basis = 7.44 Nov14: Assigned Nov14 Puts @ 20 // Cost Basis = 19.27 Dec14: Assigned Dec14 Puts @ 20 + Dividend // Cost Basis = 19.47 May15: Sold Puts Expire OTM // Cost Basis = 19.41 Jun15: Successful Puts Trade // Cost Basis = 19.23 Jul15: Unsuccessful Puts Trade // Cost Basis = 20.17 Dec15: Sold Puts Expire OTM + Dividend // Cost Basis = 19.99 Sold in April 2016 w Trailing Stop @ 23.08 SUMMARY: I wanted to continue to hold this investment, but I am in the process of buying a home and the capital from this investment is required for that now. We are about a month out from closing, so in an effort to let gold's surge play out as long as it could, I set up a trailing stop of 3% following GDX's most recent surge on Tuesday. The next-day-pullback on Wednesday triggered the stop and resulted in the sale. I hope to get back into GDX and/or Gold as soon as the dust settles from this home purchase -- I think there is still huge potential here...way more upside to come IMHO. LESSONS LEARNED: 1. WAY Too Early Entry -- this is a systemic problem of mine which I hope I'm slowly walking away from and leaving in the past, but only time will tell. Most, if not all, of my investment positions are from 2014 or earlier...and back then I definitely was not being as analytical as I am now with how I do things, so I feel like my Lessons Learned section is going to contact "Early Entry" for a long time coming. Definitely hurts to see my Entry @ 22 vs GDX's spiral down into the 12s...ugh...learn from it. 2. Separate Put Sales -- I sold 2x rounds of puts in a single month...why? My intent was good, a phased/systematic build up of my position, but my execution was terrible. I nibbled at GDX initially, but then piled in with those 2x put sales as they were assigned. That significantly restricted by ability to react to GDX's fall into the low teens. Had I NOT piled in by selling back-to-back put expirations, I would have been able to sell a round of puts, or just flat out bought shares, of GDX this past fall. Obviously my ROI/AROI would be significantly different had I done that. Overall, I realized a nice gain on a significant portion of my portfolio (for me, anyway)...so I can't beat myself up too bad. But there is definitely room for improvement and I am confident my trading is/will improve, as I'm being much more diligent & thoughtful now than I used to be!
POSITION CLOSED Stock Symbol: SLV Type of Holding: Investment Position Size: 7.8% of Portfolio Investment ROI: + 4.95% Annualized ROI: + 2.2% HOLDING HISTORY: Dec13: Entry @ 19.25 // Cost Basis = 19.25 Nov14: Add @ 15.02 // Cost Basis = 16.08 Dec14: Unsuccessful Puts Trade // Cost Basis = 16.76 Jan15: Successful Puts Trade // Cost Basis = 16.57 Mar15: Successful Puts Trade // Cost Basis = 16.56 May15: Successful Calls Trade // Cost Basis = 16.55 Jul15: Assigned Jul15 Puts @ 14 // Cost Basis = 15.45 Aug15: Successful Puts Trade // Cost Basis = 15.33 Dec15: Successful Puts Trade // Cost Basis = 15.28 Jan16: Successful Puts Trade // Cost Basis = 15.18 Apr16: Unsuccessful Calls Trade // Cost Basis = 15.35 Sold in April 2016 @ 16.12 SUMMARY: Another investment that I really wanted to continue to hold onto, but isn't in the cards for me right now. To make matters worse, I "fat fingered" things while setting up my trailing stop, which auto-triggered the sale when SLV certainly had a little more room to run before it pulled back. Similar to GDX, I hope to get back into SLV once I re-build capital. LESSONS LEARNED: 1. Yet ANOTHER Way Too Early Entry -- If nothing else, I've written this in my "Lessons Learned" section so many times that I'm drilling it into my psyche...HaHa! 2. Juice Worth the Squeeze -- Or rather, is a Puts / Calls play that nets only a couple-cents reduction in basis worth it? In an attempt to continue to actively monitor & work on my investments, I got into some option plays that resulted in 1-cent, 2-cent etc reductions...but was it really worth it? A couple OTHER times, my plays didnt work out, which resulted in either getting put the shares or I had to Debit-to-Close, hurting my basis substantially more than those times when I pulled in a couple cents gain. Lackluster return, but not a loss...and given why I closed the position...it'll do!
POSITION CLOSED Stock Symbol: JCP Type of Holding: Investment Position Size: 4.8% of Portfolio Investment ROI: + 102.1% Annualized ROI: + 43.8% HOLDING HISTORY: Jan14: Entry @ 8.92 // Cost Basis = 8.92 Jan14: Add @ 6.50 // Cost Basis = 6.99 Mar14: Successful Puts Trade // Cost Basis = 6.61 May14: Successful Puts Trade // Cost Basis = 5.73 Jan15: Successful Put Spread // Cost Basis = 5.62 May15: Successful Call Trade // Cost Basis = 5.53 Nov15: Successful Call Trade // Cost Basis = 5.24 Apr16: Successful Call Trade // Cost Basis = 3.39 Apr16: Unsuccessful Call Trade // Cost Basis = 4.67 Sold in April 2016 @ 9.45 SUMMARY: JCP proved to be quite the ride -- another one that I would've held on to if I could have. The main success story here, IMHO, was my ability to reduce basis thanks to the company's volatility. Initially, I did so through selling Puts, which I would've been happy to get assigned, as I would have averaged down...but the fact I never got put the shares let me erode that basis little by little. When JCP popped above my entry point, I was able to sell Covered Calls -- a win / win for me -- if the shares had been called away, I would've taken a profit, albeit not to the final ROI, but a profit nonetheless. Again, by not getting called away, my basis eroded more and more to it's final @ 4.67. My final "unsuccessful call trade" was a result of JCP having popped a little too high, inflating the call spread, which I had to shut down in order to realize the gains prior to closing on the house. Had I been able to sit that one out to expiration, my basis most likely wouldn't been sub $3/shr...ah well. LESSONS LEARNED: 1. Yet ANOTHER Way Too Early Entry -- Dead. Horse. Beaten. 2. Juice Worth the Squeeze -- Compared to my plays with SLV options, where I was chipping away only a couple cents at a time, I was much more successful here. Why? Mainly due to the volatility that JCP has vs SLV options. Admittedly, with the Covered Calls I could be more aggressive, because I had nothing to lose really...but in general, I saw much better spreads in JCP than I did with SLV, even though from a liquidity standpoint, I'd argue SLV see's more contracts traded than JCP. Overall, this is what I'd like more of my investments to look like (duh...HaHa!). I believe GDX and SLV could have (dare I say, would have?) gotten there had I been able to hold on to them. Gold & Silver are just no where near 'recovery.' Neither is JCP, IMHO, but through options plays I was able to chip away at my basis to below the low water mark on JCP, whereas I never really got close to the GDX and/or SLV lows. Admittedly, JCP is going to putter around it's current trading range for a while now -- but the Value investor is a patient investor if nothing else. Anyway, when I think about my 'strategy,' this is the trade set up I envision: one where I get in, hold tight, and successful use option plays in the meanwhile to chip away @ that basis (for more than a couple cents each time!).
Hi Value at last I found you.... didn't know you started here.... I was wondering how you were..... keep up the good work don't make too many $$$ only get a headache how-where to spend them take care
Hey @Ciao what's going on, man? Indeed, I took a bit of a hiatus from the boards...bogged down with work & travel. Also, my investing capacity really took a 'hit' (not in a bad way!) when I bought a house...but more on that in a subsequent post! Anyway, thanks for stopping by! See ya 'round the boards!
POSITION CLOSED Stock Symbol: AGCO Type of Holding: Investment Position Size: 6.5% of Portfolio Investment ROI: + 29.41% Annualized ROI: + 22.11% HOLDING HISTORY: Jan15: Entry @ 42.55 // Cost Basis = 42.55 Jan15: Successful BPS // Cost Basis = 42.31 Feb15: Successful Bull Put Spread // Cost Basis = 42.03 Mar15: Successful Puts Trade + Dividend // Cost Basis = 41.17 Jun15: Successful Calls Trade // Cost Basis = 41.03 Aug15: Successful Calls Trade // Cost Basis = 40.88 Jan16: Successful Calls Trade + 2x Dividend // Cost Basis = 39.59 Feb16: Successful Call Trade // Cost Basis = 39.40 Apr16: Unsuccessful Call Trade + Dividend // Cost Basis = 40.86 Sold in April 2016 w/ Trailing Stop @ 52.72 SUMMARY: AGCO proved to be another solid performer, and one which I was able to consistently lower basis. The unsuccessful call trade was a result of me having to close covered calls in order to realize gains prior to making our downpayment...so in actuality these wouldn't have resulted in an increase in basis had I let them play out. I most likely would've been called on the shares, though! The math checked out to debit-to-close the covered calls and set in a trailing stop. AGCO rose above 52.72 before pulling back within my trigger, which resulted in the execution @ 52.72. Overall, I'm really happy with how AGCO worked out. I identified a solid company experiencing a crappy event (in this case, weather) and was able to pick up shares at a discount. My entry @ 42.55 turned out to be near the low -- not perfect -- but from my point of view it doesn't have to be...it wasn't TOO early, so I'll take it. There is still a lot of upside here, and if I can get back into AGCO in the lower 40s, I'd be happy to do so.
POSITION CLOSED Stock Symbol: X Type of Holding: Gamble Position Size: 1.25% of Portfolio Investment ROI: + 20.73% Annualized ROI: + 49.75% SUMMARY: Went into X as it drifted into all time lows. I didn't want to over-commit to this play, as X was entering new territory following its breakdown through 2003 lows. What interested me most about this trade was the ability to couple it with an immediate options play. I bought shares outright, but then sold deep OTM puts to reduce my basis pretty heavily. When those works, I continued to roll said puts, reducing my basis further each time. As X started to climb, I switched over to selling Covered Calls...but X's parabolic rise in March put my Covered Calls deep ITM, so I wasn't able to roll them any further. When the house purchase came about, I decided to debit-to-close the Covered Calls in order to capture even more realized gains (a higher total amount of profit, but at a lower ROI / AROI)...the math worked, so I pulled the trigger. I set up a trailing stop, which triggered as X ran out of gas in late April. Overall, this gamble worked out really well. If I had bigger balls, I would have added to my position in mid-Jan and early Feb, as X pivoted at it's Dec 2015 low. But, mine aren't that big
HOME PURCHASE As I've eluded to in just about every post north of here, I finally pulled the ultimate trigger & bought a house..and in doing so I've turned my house into an 'investment' of sorts. Maybe no one will find this interesting or worthwhile -- maybe someone else in a similar situation will -- either way, I wanted to outline it all so I could come back here in a few years & see how it turned out! Of course, this assumed Cy & Gil don't uproot us again but I digress... To make a long story (you're welcome!), I gave myself a loan from one of my retirement accounts to drop my mortgage...viewing the loan as an investment and the money retained via the reduce mortgage as a return. Maybe that is an entirely jacked up way of looking at it -- but that's me. I ran my down payment numbers, finding what my mortgage (+ escrow stuff) would be, and while the number was definitely do-able, I wondered if I could get it even lower. I contacted one of my retirement accounts & found I could give myself a tax & penalty-free residential loan, with a ridiculously low interest rate of 1.75% (paid back into my own account...they only charged a flat servicing fee). Additionally, I could set the repayment schedule...and with no pre/early payment penalties, I set the schedule for as long as possible (15 years)...thus reducing the monthly requirement to as low as possible...I full intend to (and will) pay this back much sooner than 15 years! Here is a breakdown of the new numbers I got, factoring in my self-loan. I rounded to make them easier: Original Mortgage: $2,000 / month Self-Loan from IRA: $50,000 New Mortgage: $1,600 / month Mortgage Reduction: $400 / month -- $4,800 / year The biggest risk, IMHO, is that I've just robed $50,000 out of my retirement account! If the stock market takes off before I can pay it back, then I lose out on all those returns, PLUS I'm entering the game with my $50,000 at a much high share price. At the same time, I have 'locked in' a $400/month return...what the % ends up being, I suppose will depend on how long it takes me to pay it back. Simplistically, I'm gaining $4800 per year on my $50,0000 -- or 9.6% -- but we'll have to see what Mr Market does in the meantime. Speaking of Mr Market, here are the numbers from the day I cashed out vs now, with a for better or worse % change thrown in for good measure: FUND: CASH OUT on April 28, 2016 // AS OF Sept 25, 2016 // % CHANGE Fund 1: 15.0079 // 15.1076 // + 0.66% Fund 2: 28.1919 // 29.6716 // + 5.25% Fund 3: 35.1802 // 38.7766 // + 10.22% Fund 4: 24.1319 // 24.9332 // + 3.32% TOTAL: 102.5119 // 108.489 // + 5.83% So far, not off to a great start! But we'll see...nothing quite like gambling with the nest egg!
SNAPSHOT: Stock Symbol: RUT Type of Trade: Monthly Credit Spread -- Iron Condor Trade Size: 1x Tranche (100%) Trade's RORC: + 2.75% Annualized RORC: + 41.8% TRADE DATA: BPS Leg: STO @ 1070 / BTO @ 1060 BCS Leg: STO @ 1290 / BTO @ 1300 Combined Probability OTM: 93.67% Current OTM: BPS @ 12% / BCS @ 6% Delta: 0.035 Theta: $0.07 Risk-Reward Formula: 17 TRADE CHART: TRADE DISCUSSION: Haven't been able to do much trading following the home purchase; haven't had the capital & work has kept me extremely busy (hence my absence here for the better part of 2016). Over the weekend, however, I was able to do a little digging and found this trade. I thought easing back into my system via my usual Monthly RUT made the most sense, so I pulled the trigger on Tuesday. The RUT is on quite the rally, so I wanted as much downside protection as I could. Regarding my BPS leg, I wanted to stay over 10% OTM (my idea threshold), with plenty of braking points along the way. Currently, I'm seeing the 20 DMA and the 50 DMA as those first two areas, followed by a small floor @ 1140s (June thru early July). Of course, the 200 DMA is also there, but I see a major pivot point @ 1085-1086, which is where the RUT saw major reversals in mid-May & end of June. My urge wanted me to place my short strike @ 1080, but in an effort to learn from lesson's past, I resisted & dropped down to 1070 in an event there is a "panic pierce" of 1085. Regarding my BCS leg, I couldn't find much volume above 1290, so unfortunately that is as high as I could go. This level brings me outside my TA's RLT and (more importantly IMHO) right at the RUT's ATH. Psychologically, even if the RUT does continue this rally, hitting the ATH mark would come with some trepidation from MM, and most likely a pullback would occur before doing so. Moving +6% and hitting the ATH, in 23 (now 21) days time, seems fairly unlikely -- but with the RUT, anything can happen. Additionally, from a TA standpoint I am seeing a weakening in the RUT's rally, evidenced by the March thru June RTL slowing to form the new May thru Current RTL. While presently the difference between said TL's is minimal, in 3x weeks the difference will be in excess of 20 points. Finally, based on the RUT's sideways movement since its last pivot low, I believe the index will test the 20 DMA @ 1190s before resuming its upward march -- but if it follows a similar pattern as it did in April, the move would be to the 50 DMA @ 1160s -- either one should take anywhere from 15 - 30 days top lay out. As far as the other data is concerned, this trade is slightly less than ideal for me. For starters, the Risk-Reward is only positive (i.e. 17) on a 1/3 loss scenario. When viewed @ a 50% loss, its negative. Ideally, I'd like both the 33% and 50% loss scenarios to show a positive number, even though I am on a 33% loss threshold. The Prob OTM & Delta are excellent, better than my thresholds, but they come at the 'cost' of a weaker-than-ideal ARORC -- though it's only off by 4%. Finally, the Theta -- I'm still trying to figure out if this value is of any use...I don't find that the Theta really has much (if any) affect on the debit-to-close value, since it's on the individual options vs. the IC as a whole. But, admittedly, I'm not savvy enough with the Greeks to figure it out (yet!). More to come... We'll see...but first, I'm hoping I can be around more! TRADE RESULT: TBD -- Will be updated on/around August 19th!
MONTHLY OPTIONS ROLL UP AUGUST 2016: + 2.75% YTD 2016: + 4.43% TRADE LIST RUT ~~ Iron Condor ~~ + 2.75% (Historical IC Average RORC @ 6.06%) CHK ~~ Covered Call ~~ Basis Reduced @ $0.0964 // 5% (unrealized) MARKET SCORE CARD: RUT 2000: + 8.99% // Trailing - 4.56% S&P 500: + 6.12% // Trailing - 1.69% Highest CD: 2.05% Highest Savings: 2.02% SUMMARY: Nice "re-entry" month for getting myself back into trading after a nearly five month long hiatus due to the home buying & crazy work schedule. With things finally 'settling down' on both those fronts, I expect to return to my monthly iron condor strategy on the RUT, plus continuing to reduce basis where I can -- most recently that seems to be focused entirely on CHK. Thus far, I've reduced my basis in CHK by 71%, from an entry @ 6.30 to my current @ 1.82. I'll continue to sell covered calls on this position, typically $2ish above the current stock price, which typically nets me a 5% reduction in basis per play. When/If CHK ever does catch up to my short strike, I'll roll forward (as I did from Dec 2015 to April 2016), or just let the position close, realizing the very healthy gain. Regarding my RUT trade, the play worked nicely, with the RUT continuing to cling onto it's RTL & respect the 20 DMA on those day(s) it did pullback. Neither the BPS nor BCS legs were ever in jeopardy, especially the BPS since the RUT continued to climb higher. Looking forward to September, I'll continue to stick with a 10% (or higher) buffer on the BPS-leg -- since MM continues to give it to me. On the BCS-leg, the RUT is 5% from it's ATH made last year, and while that isn't very much room, there doesn't seem to be much volume or appetite for my BCS-leg to go much higher. My goal will be to at least get above the ATH, since IMHO this will be a sticking point / psychological barrier, if nothing else, containing the RUT's rise and investor attention. Overall, I am very satisfied with how this month played out, and I'm looking forward to getting back into the swing of things both with these monthly options trades & the boards here overall!
SNAPSHOT: Stock Symbol: RUT Type of Trade: Monthly Credit Spread -- Iron Condor Trade Size: 10% of 1x Tranche (See Discussion) Trade's RORC: + 2.44% Annualized RORC: + 55.6% TRADE DATA: BPS Leg: STO @ 1120 / BTO @ 1110 BCS Leg: STO @ 1300 / BTO @ 1310 Combined Probability OTM: 93.6% Current OTM: BPS @ 10% / BCS @ 4.4% Delta: 0.035 Theta: $0.07 33% Risk-Reward Formula: 20 TRADE CHART: TRADE DISCUSSION: Tough week from a order standpoint. As noted in the 'Trade Size' above, I only managed to get 10% of my order filled -- which is a microscopic position for this month's RUT play. To be honest, I am a little perplexed, since volume was there. Daily volume averages at each of the 4x strike prices were 10x or more of my order size, so I'm not exactly sure why I wasn't getting filled. To further puzzle me, my order went in under the Bid/Ask. Each day the Bid/Ask floated around 0.28 - 030 per spread. Naturally, I started trying to fetch 0.30, then reduced to 0.28 after a day of not getting filled. When I wasn't filled @ 0.28, I dropped even further, to 0.25 -- to no avail. I played this game all week, until Friday AM when I was filled @ 0.25...but only 10% of my order. Part of me is wondering if I fat-fingered by order, sadly I'll never know. About the only good news coming out of this ordeal is that by EOD Friday, debit-to-close dropped to 0.17 -- so already this play is working out -- which I find surprising IMHO given the RUT crept higher to a 1251 close. I'm telling myself that I'll have another opportunity to get in here with the remaining 90% of my capital -- but with less than 10 days to expiration, I'm finding that harder and harder for even my optimistic-self to believe. We'll see...
MONTHLY OPTIONS ROLL UP SEPTEMBER 2016: + 2.3% RORC YTD 2016: + 6.72% TRADE LIST RUT ~~ Iron Condor ~~ + 2.3% (Historical IC Average RORC @ 6.04%) CHK ~~ Covered Call ~~ Basis Reduced @ $0.36 // 20% (unrealized) MARKET SCORE CARD: RUT 2000: + 8.5% // Trailing - 1.78% S&P 500: + 4.66% // Beating + 2.06% Highest CD: 2.05% Highest Savings: 2.02% SUMMARY: The RUT worked well again this month, though admittedly that pullback took longer than expected to materialize! Still bummed that I could only get 10% of my order filled, resulting in this month's realized gain to not be too significant -- but a win is better than a loss every time -- so I won't complain. In addition to my RUT play still chugging along, so too is my CHK basis reduction plan. Thanks to CHK's spike over $8, I was able to roll the trade out for a 20% reduction in basis -- I'm down to less than $1.50 per share now. As I poked through several of the other trading journals, it reminded me how viable credit spreads can be even for folks who do not want to throw large amounts of capital into trades...as often is a critique of credit spreads, or so I've found. In this month's example, my risk capital was less than $3000 -- certainly not an insignificant amount of money by any stretch -- but a decently sized trade when viewed from what a smaller investor might put against 1-2x stock picks in a given month. While the 2.3% is nothing to write home about -- especially when compared to what 1-2x stock picks in a given month could do -- my trade this month represented a less-than-15-day long trade. So for 15-days, I tied up $3000 and gained a little less than $70. Again, nothing to write home about, but on a monthly basis that is an $840-ish return off of that same $3000 -- a 28% return for the year...built on seemingly insignificant returns along the way. I write all this not to cheerlead or recruit for the credit spread concept -- but only to point out how important it is to look at your trades...routine or otherwise, IMHO...from an annualized perspective from time to time. So often I see and hear people anguishing over whether they should take profits, or sell a stock that just seems to have run out of steam...mainly due to a concern that 1%, 2%, 3% isn't "enough." Perhaps it isn't -- but I'd offer that most people would be better traders if they "settled" for meager returns vs. chasing the home runs. Home runs may come, but the game can also be won off of singles. Just my 2-cent -- and based on how long I've been going on, it's probably not worth that much anymore!
SNAPSHOT: Symbol: RUT Type: Monthly Credit Spread -- Iron Condor Size: 100% Filled / Complete RORC: + 4.4% Annualized: + 49.9% TRADE DATA: BPS Leg: STO @ 1080 / BTO @ 1090 BCS Leg: STO @ 1330 / BTO @ 1340 % Credit by Leg: BPS @ 79% / BCS @ 21% TOS Probability OTM: 91.7% TK Probability OTM: 91.7% -- based on Historical IV of 17% - 19% Current OTM: BPS @ 11% / BCS @ 8% Delta: 0.05 Theta: 0.02 burn off per day 33% Risk-Reward Formula: 31 TRADE CHART: TRADE DISCUSSION: Took advantage of a lighter than normal workday yesterday & today, allowing me to focus on this next monthly credit spread. Last week's pullback most likely would've been ideal to enter the BPS-leg, but I wasn't positioned well enough to take advantage of it. Still, residual risk is still high, causing an 79% bias to the downside from a credit standpoint, even at at 11% OTM short strike. Doesn't seem like many people are expecting the RUT to turn around -- but I still managed to get 8% OTM and slightly above the RUT's uppermost resistance TL. Typically I try to get further above/below the TLs...but I couldn't manage that this time around. I also went a little further out, 32 days, compared to the less than 20 string I've been on recently. Obviously doing so allowed me to capture more credit, but it also resulted in my annualized RORC being slightly lower, too. Other than the over weighted credit on the BPS-leg, this is a fairly standard set up for me. No issues this month volume-wise, order filled easily with my "tightest" order still 4x less than total volume traded. We'll see...
MONTHLY OPTIONS ROLL UP OCTOBER 2016: + 4.37% RORC YTD 2016: +11.1% TRADE LIST RUT ~~ Iron Condor ~~ + 4.37% (Historical IC Average RORC @ 5.98%) MARKET SCORE CARD: RUT 2000: + 7.39% // Beating + 3.71% S&P 500: + 4.76% // Beating + 6.34% Highest CD: 2.05% Highest Savings: 2.02% SUMMARY: My monthly RUT trade continues to chug right along -- finally broke above the RUT Index as a benchmark, and continued to grow my lead over the S&P. I backdated each index to our last expiration day on Oct 21st -- so my numbers are actually better than they are here give the 9-straight down days the S&P ticked off over the past two weeks. On this month's trade, I got in 32 days from expiration, which is considerably longer than I have been. Thus far for 2016, I've been averaging 25 days out from the expiration day. Conditions were simply met, so I pulled the trigger, and the RUT has been behaving very well (albeit until recently). On that note, I have not gotten into a Nov IC yet. I intentionally held back given all the uncertainty that is in the market. I missed the boat big time on Thursday -- I could've gotten into an IC @ 25-cents per, but with the green day on Friday, that same spread plunged to less than 10-cents per -- D'oh -- really sad to have missed it. Fortunately, the RUT could turn back south an that spread might be viable again, we'll have to wait and see. This Election is crazy, so I am very hesitant to get into a monthly IC unless I can do so outside 10% on either side. The RUT has made moves of over 10% during election months...easily...so that itself isn't my only criteria, needless to say. I might sit Nov out entirely...I really am not sure. Guess a lot will depend on Monday. We'l see...
MONTHLY OPTIONS ROLL UP NOVEMBER 2016: + 1.05% RORC YTD 2016: +12.14% TRADE LIST RUT ~~ Bear Call Spread ~~ + 1.05% (Historical BCS Average RORC @ -1.98%) NE ~~ Sold Covered Calls Expired OTM ~~ Basis Reduced @ $1.21 // 6.73% (unrealized) MARKET SCORE CARD: RUT 2000: + 15.82% // Trailing - 3.68% S&P 500: + 6.75% // Beating + 5.39% Highest CD: 2.05% Highest Savings: 2.02% SUMMARY: First, before I even get into anything I did, can I just say WOWZERS what a RRRIIIIPPP on the RUT this past month. Holy crap! I am so so so thankful I did not jump into anything, as I wrote last month "I intentionally held back given all the uncertainty that is in the market....This Election is crazy, so I am very hesitant to get into a monthly IC unless I can do so outside 10% on either side. The RUT has made moves of over 10% during election months...easily...so that itself isn't my only criteria, needless to say. I might sit Nov out entirely...I really am not sure. Guess a lot will depend on Monday..." On that note, I looked several times throughout the month as the RUT just tore it up -- I almost went into a 1300 / 1310 BCS which would've been a sheer disaster! What I ended up doing was a 2-day trade. That's right, a 2-day BCS...not exactly my typical move as anyone who reads this thread or knows my trading style can attest to! But as the RUT reversed, almost unbelievably, following the Election, I jumped into a 1330 / 1340 BCS at the closing bell on Tuesday, November 15th. I got in @ 0.35...which is crazy given at the time the short strike sat just slightly over 2% OTM. Wednesday, Novermber 16th was a beautiful day, the RUT pulled back and my debit-to-close dropped to 5-cents. Then the RUT popped on Thursday, up to almost 1315 on the opening bell. And while it pulled back almost immediately, it turns around and re-touched almost to 1315 just as immediately. Upon doing so, the stress wasn't worth it, and I got out @ 0.20 -- giving me about a 40% retention of credit. Of course, the rest of the day the RUT stayed mellow & I could've just ridden it out. But know me, had I not gotten out, the RUT would've run to 1330 for sure...and I'll take 40% retention for peace of mind. So in a matter of two days, thanks to volatility, I was actually able to trade this month. Wild...a first for me...thanks Election 2016!
SNAPSHOT: Symbol: RUT Type: Monthly Credit Spread -- Bear Call Size: 50% Filled / Complete (Still Looking for the Bull Put Leg!) RORC: + 3.92% Annualized: + 59.69% TRADE DATA: BPS Leg: Pending a pullback BCS Leg: STO @ 1410 / BTO @ 1420 % Credit by Leg: BPS @ 0% / BCS @ 100% TOS Probability OTM: 92.59% TK Probability OTM: 88.43% -- based on Historical IV of 17% Current OTM: BPS @ 0% / BCS @ 5% Delta: 0.08 Theta: 0.04 burn off per day 33% Risk-Reward Formula: 30 TRADE CHART: TRADE DISCUSSION: Despite the RUT's continued move to the upside, this BCS took me several days to actually set up. Originally, the issue was volume -- I couldn't get filled on any of my orders. Then yesterday, for whatever reason, I couldn't get figure how I was getting filled! On the opening bell, as the RUT waffled and showed signs of beginning its pullback, my 1st tranche got filled 6-cents ABOVE my order. I can only think of a couple times when that's EVERY happened. I set my 2nd tranche 10-20% higher, and as soon as the RUT's pullback clearly was not materializing, that order filled too. I set my 3rd tranche 20% higher, and as the RUT popped a little at the end of the day, that order filled too! Pretty unreal, honestly, especially given all the upside the RUT has seen -- and that's an understatement! It's equally remarkable how, despite all the upside and the apparent willingness of people to fill my orders, there is still a lot of resistance towards the upside continuing into the 1400s. The Probability OTMs above 1400 have changed, obviously, amidst all this upside....but the change does not seem to be commensurate with just HOW much upside we've seen. I'm still seeing Prob OTM's well over 90%...which feels odd seeing how easily the RUT has cleared some MAJOR hurdles...makes me wonder what I'm not seeing or considering... Anyway, I'm not even considering a BPS-leg with how lopsided the RUT is right now. I'd have to be deep into the 1200s to find anything remotely feasible, and that is WAY too high of a short strike for my taste. This house of cards could come crashing down, and the 1200s won't be the support / brake area. If the RUT gives me a pullback into the 20 or 50 DMA, then I think we'll see some BPS opportunities open up. We'll see...
MONTHLY OPTIONS ROLL UP DECEMBER 2016: + 4.11% RORC YTD 2016: + 16.25% TRADE LIST RUT ~~ Bear Call Spread ~~ + 4.11% (Historical BCS RORC @ -1.29%) MARKET SCORE CARD: RUT 2000: + 20.1% // Trailing - 3.85% S&P 500: + 10.48% // Beating + 5.77% Highest CD: 2.05% Highest Savings: 2.02% SUMMARY: A week ago, I began preparing myself emotionally to write an entirely different post this month...much more of a nail biter than I anticipated! My initial entry played out almost perfectly, with the RUT rising for another day or two (maybe) after I got received my credit, before turning down with a few 15+ down days in a row. My debit-to-close fell to only 2 or 3 cents per spread, a +90% retention of credit. Not too shabby for a week. Of course, I held on expecting more downside. In fact, I held off entering into the BPS-leg of this month's trade fully expecting the downside to continue. It did not -- not in the slightest -- as the RUT roared to within 15-points (1%) of my short strike...hence my opening comment. The RUT pulled back, but not enough for the debit-to-close to provide me with a profitable alternative. Needless to say, at this point I was cursing myself for not setting up a automatic trade to retain credit...oh how quickly we forget the past & the mistake we've made. It wasn't until Wednesday of this week that the debit-to-close kept me profitable, but by that point I was outside the 55-60 points (3%) threshold of my risk tolerance on my short strike, so I held on until expiration. Looking at the volume numbers for Thursday, I could have gotten out if I wanted too - something I never really paid attention to, to be honest. Ultimately, despite being a nail biter, patience paid (thank you, God!!!) This is one of those tough months where my analysis proved correct...albeit barely!...but my trading techniques could have (no...SHOULD have) been much more solid. For starters, I am embarrassed to admit I did not set up an automatic close to trigger as my credit retention fell from 90% to 75% or 66%. That is a rule I learned over several tough sessions last year, and even earlier this year, yet here I am still making that error. Second, I had an opportunity to enter into a BPS-leg. I thought the RUT had more downside to go, but that should not have stopped me from getting in an initial tranche. I attempted to correct this, on Wednesday of all days, as the RUT began to dip following the Fed release. I was able to get about 20% of my BPS-leg set up...but had I done this when I was supposed to, I would've had an even better month. By not getting the BPS-leg in, I basically left profit on the table and assumed more risk than I otherwise would have with an IC vs. BCS...since the BPS-leg in this instance is risk free (mathematically speaking). This closes out my 2016 -- I'll write a year in review post later -- thanks to all here at HSM...errr...Stockaholic...for your continued support!
