I have no options contracts expiring today. I didn’t start the month with a bunch on my plate for May. Over the past few weeks, I closed or rolled out the positions I did have for May. Since I don’t have any positions that changed today that I need to cover, I’m taking the opportunity to post what I have in my current portfolio.
Symbol
Shares/ Contracts
Expiry
Strike
Type
TLT
-10
June
$127.00
Calls
TLT
10
June
$129.00
Calls
EEM
-3
June
$43.50
Puts
QCOM
-2
June
$65.00
Calls
SSO
-2
June
$72.00
Puts
UCO
-6
July
$28.00
Calls
UCO
-6
July
$33.00
Calls
T
-3
July
$37.00
Puts
UWM
-2
July
$52.00
Puts
DIS
-1
July
$65.00
Puts
IWM
-3
July
$95.00
Puts
UCO
1200
Stock
QCOM
200
Stock
I have $65,843.12 in cash to cover most of the puts shown above. That leaves me with a little more than $20,000 in margin exposure. It’s not an insane amount, but deserves to be watched and managed. I’ve thought about buying some puts to hedge some, but obviously haven’t. The longer this rally goes on without a decent correction, the more I worry. The technicals haven’t turned yet, so I haven’t panicked early. At a minimum, I might close some more exposure soon to remove the risk of a real sell-off.
I feel better about my IWM naked put trade from yesterday. I was scared the rise in the Japanese yen would kick off more algorithmic selling today as it did yesterday when the yen hit parity (1 to 1) with the US dollar. Instead, IWM is higher and I’m up more than $100 on my three naked puts from yesterday.
Even with the small cap rise of 0.75% so far, large caps are virtually flat and tech is only up a little. I decided I should close the cheap puts on I have SSO and QQQ while I could get out with a good profit on both. They both had very little upside potential from here and with six weeks to go before expiration, my annualized return on what was left for both positions was under 5%. 5% is not enough reason for me to leave the risk in place since I’m over-invested anyway, even after dumping these three option contracts.
While QQQ was trading at $72.85, I bought to close two QQQ June $69 naked puts for $0.38 each and paid $76.78 with commission. When I sold these puts, I wrote QQQ looked like it was due to bounce. I should’ve …
I wasn’t planning for this trade to hit today when I entered it. My plan was to get an order in place to hit on any weakness over the next week. That weakness took about an hour to surface instead of a few days. I was in the process of changing a client’s position to roll IWM puts to July from May and figured I could do well on the July portion of that trade in my account too, if IWM came back to this morning’s lows and the contract’s highs.
While IWM was trading at $95.96, I sold three IWM July $95 naked puts for $2.85 and received $853.82 after paying $1.18 in commission. When I started looking at the trade, the contract was bouncing between $2.60 and $2.65. I checked the high trade of the day and saw it hit $2.85 at some point. That’s not a completely reliable indicator of how high the contract’s bid/ask got during the day, because it’s possible that no trade hit when the contact had a higher bid/ask. The way the market was behaving in the afternoon, I thought the worst was over for the day and figured the tomorrow morning would be …
Disney (DIS) shares started running away from me after I went bullish in February. I’ve sold two sets of naked puts since then and have profited nicely on both, but could’ve done better by buying calls or even buying the shares. I started worrying that the price was getting ahead of itself recently. My thinking changed today when it dipped after their earnings release. I can’t find the negative in the earnings details yet. It looks like they beat estimates and have strong net income growth. These results don’t even include Iron Man III revenue.
The chart looks like it was possibly due for a slight reversion to the mean, maybe down to the 10-day moving average ($63.86) again or even the 20-day moving average ($62.39). Both moving averages are ascending and neither would mark much of a sell-off after such a strong few months. I decided to take a nibble into the stock again and have another order in place to add to my position on further weakness.
While DIS was trading at $65.03, I sold one DIS July $65 naked put for $2.11 and received $210.23 after paying $0.77 in commission. I almost made this trade closer to the open, …
I charted the daily prices for the past six months on the S&P 500 index ($SPX) after the index closed at 1,614.42 on Friday, May 3, 2013.
The SPX has been on the tipping point recently, but didn’t go off the edge. The large cap index rode along its 50-day moving average (dma) for a few days in April and then moved back above its 10 and 20 dma to close out the last few days of the month. 1,600 looked like it would continue as resistance when May rolled around, but after a few days of butting against the ceiling, the SPX gapped higher on Friday to reach new highs.
The SPX has been in its current ascending trading channel for nearly six months and is still showing strength. The 10 dma moved above the 20 dma again and the Williams %R indicator has returned to overbought to show sentiment is clearly favoring the bulls again.
The best the bears can hope for in the near-term is a retest of the round 1,600 line as the index fills in …
This morning’s positive jobs data caught most investors off guard. Not only did it beat forecasts by 10,000, the previous month’s number was revised 50,000 higher. Much of my concern for the market’s direction came from my view that if the jobs data is weakening, the economy will follow. Based on today’s employment data and the recent positive housing data, I’m more bullish than I was last week. I’m still somewhat cautious due to the run we’ve already seen in stocks, but I’m back to thinking any dip will be relatively shallow, maybe 5-6%, not 10% or greater as I was starting to fear.
Based on my outlook, I added more exposure and to get more bang for the buck, I sold naked puts on leveraged ETFs. While UWM was trading at $57.49, I sold two UWM July $52 naked puts for $1.80 each and received $359.26 after paying $0.74 in commission. As expected, the market gapped higher at the open and premiums on puts tanked. I tried to get in a quick order on this leveraged small-cap ETF at $0.30 below yesterday’s last trade, but it didn’t hit. Every minute I didn’t get the order in, UWM climbed higher. I …
A lot of traders like to add to positions as markets move higher. I’m usually in that camp too, but the S&P 500 has had a hard time getting up to the 1,600 level on prior attempts and after bouncing around it this week. I figured I should remove some risk and either be ready to buy in again on a dip or add in higher strike options if/when higher highs are reached and maintained.
While SSO was trading at $75.87, I bought to close two SSO May $66 naked puts for $0.11 each and paid $23.54 including $1.54 in commission. This didn’t take a lot of debate. If I left these puts in place, I only had $22 to gain over the next two weeks and a day. That left me with little reason to keep the position alive. After markets closed yesterday, I planned to roll these contracts into June. July isn’t available yet. However, the premiums aren’t too good right now for the risks accepted on a leveraged ETF. That leaves me on the hunt for something different to work with.
My other cheap option remaining was on Disney (DIS). While DIS was trading at $63.59, I bought to close two DIS …
April was somewhat of a “blah” month for my account since I finished very close to my March closing balance. I did well with most of my positions, but my oil holdings and QCOM cost me all of my gains on paper. Oil limited my realized gains too since I played my UCO ratio spread incorrectly. I’m still a long-term bull on oil and can handle some dips along the way as I continue to collect premiums from my options.
I read an article yesterday that highlighted some reasons that oil’s downside should be limited to not much below $90/barrel for West Texas Intermediate (WTI closed at $90.91 today). In short, the Saudi’s will slow production as prices fall, which will decrease supply and increase prices. In addition, a lot of the smaller wells have high costs to operate and the oil from fracking in the US isn’t cheap to get to either. Both of these will cut production below the mid-$80s. A fall into the lower $80s could cut output by more than 15%, which will push prices higher as supply falls. The biggest risk I see, aside from demand decreasing (which isn’t likely in my view), is a strong …
I charted the weekly prices for the year-to-date on the Dow Jones Industrial Average ($DJIA, $INDU, $DJI, the Dow) after the index closed for the week at 14,712.55 on Friday, April 26, 2013.
Chart technicians have to be careful not to draw trend lines that fit the story they want. Being objective isn’t always as easy as it seems, but it’s possible. The two trend lines of higher lows in the chart below tell two different stories. Which story will be true is still unknown. What is known is that the picture isn’t as clear going into the “spring selling season” and anyone using charts to help make investment decisions needs to understand the risks.
The market has had an extended rally this year without much of a breather. We all know that’s going to change eventually, but none of us knows when. The longer trend line of higher lows below shows support held on the recent dip. If that was the only indicator available, it’d be a clear buy signal. Since we have other indicators available, the bullish case …
