Back in the Game

So after selling out Friday somewhat prematurely, I was lucky enough to get pull backs today in many of the current stocks of interest which ended up working in my favor this time, mostly AAPL, GOOG, POT, DRYS, ISRG, FCX, BIDU, FSLR. These are stocks that have been discussed over on Option Addicts. Those are all currently bullish plays and patterns and I need to put on some bearish plays, I think possibly now more than ever.

After today I am slightly concerned, although looking at a 3 month chart the S&P and Nasdaq are sitting at what appears to be diagonal support, so I'll have to watch that closely, I may buy a few puts on the S&P as insurance. Jeff discussed hedging with gold and oil which I am looking into as well.


I took long calls in AAPL, GOOG, and FCX

If I get a close significantly below 165 on AAPL I will exit, I got in with the stock at 165.8, looking for it to get back up to 170, if it doesn't break 170 and close above the next time it gets to it I will likely exit since it hasn't been able to a couple times now however if it does I will stay in till 175. So my risk/reward ratio is approximately 1:5 at worst, very good. In general I will try and stay above a 1:4 ratio, lowest is 1:3. 165 in apple has been recent short term support, I think more significant support would be found at 150. In this case I am partially playing the run up into earnings which happens on Oct 22nd. If my options get into the money(Nov 170's) then I will sell part of the position and hold part over earnings. I am currently up slightly on these calls(+275) on 5 contracts. The stock was bought fairly heavily going into close, which is encouraging, I am hoping it was institutional buying and not short covering.

GOOG, I bought 1 contract of 640 november call, again a play on likely run up into earnings and increased Implied Volatility(IV). I like the pull back today because it gives head room for a run back to new highs before the report. My line is 620, I got in at 626, with a projection of 650. I took it at 626, because during the day it was holding there but fell some, 620 is my line, if it closes below I will exit. It did fall below during the day but going into close rallied back above, it wasn't as strong as I'd like closing basically right at my line but it did rally, and I feel like it shouldn't have too much downside before earnings. Currently, I am down slightly(-220). Again if I am significantly in the money going into earnings I will hold. I feel if they have a good report with good guidance we see a gap up, since last report people sold so heavily, however it has ran up almost 100 points in a short time so we could see selling on the release. GOOG reports on thursday the 18th. risk reward is about 6:24, or 1:4, fits my criteria.

I bought 5 calls on FCX around 115.10, target of 120, earnings report on the 22nd as well. 110 is more significant support, 115 has been recent. I bought these in the middle of the day, I likely should have waited on all of these to the end of the day, however they were close to my entry points so it shouldn't matter. FCX was rallying into the close with the others so I stopped paying attention, but somewhat stalled and fell back below 114 so I am somewhat concerned. I should haved paid closer attention, so now I will have to watch it tomorrow, I am only down .75%(-275), so it is within my risk tolerance of 2%, normally I would want to only have to lose that much to determine an exit, in this case I am somewhat playing momentum and slightly looser. However, if I get down my 2% I will exit.

So overall on the day, I am down less than 1% in my portfolio overall, which I like on a day where the nasdaq was down 1%.

I can use that to illustrate the importance of position sizing, and minimizing risk. I waited and took positions at points close to where I would need to exit. Positions are small since that is needed to keep risk in check. I would like to be more diversified with some put plays, if earnings aren't as strong as people think the market may turn over again, it will likley be volatile for now.

I'll try and find some bearish plays tomorrow, Jeff Kohler releases his weekly watchlists on Tuesdays which are extremely helpful, if I see some bearish setups I like I will likely take some.

I'll post on my rules so they are more clear, a little later but wanted to get those out there with some thoughts on what I did and why I did it.