March Maintenance

My bullish bias has played out well this week so far. I have had some positions in relative outperformers such as FCX and AMZN. On monday at almost the exact low I sold puts against the FAS( 3x bull financial etf), this was simply good timing but also a good trade from a logic standpoint. Financials were severly oversold, the FAS was trading at $2.50, and I was able to get .60 a contract for a march 2.50 put that is right at the money. Volatility was insane at 340%(not too insane since it is 3x) so I have the likely hood of volatility decay on my side as well as time decay AND the fact that I literally have limited downside at this point. I sold 20 contracts so my risk to reward 3:1, generally the opposite of what you want but in a naked selling scenario you generally have much larger risk. The other appealing thing, and the only real time you should sell naked puts is when you are comfortable owning the stock and having it put to you. I would have been fine having the stock put to me, I would have a cost basis of $1.90 at a likely low and significantly oversold market level. All of these things put the probability of immediate or future success in my favor.

I have tried to lighten my bullish positions and have scaled out of FCX with a target price of $37 in the short term to unload my remaining 2 contracts. I have found that scaling out is a very helpful method to control emotions and let winners run. It allows me to lock in profit and not have as large of account swings to the downside when stocks pull back. Depending on the price action I will wait for a pullback and look to get back in to FCX as I think it's longer term target is likely $45 in the next few months. My target on AMZN in 75 now that it has finally broken out of its 60-65 range, however I am holding shorter dated options so if it has much trouble getting above 70 I may get out and roll into a longer dated option on a pullback.

I took a new position in CHK today, as I think natural gas should be close to a short term bottom and if we start to see an uptick in prices I think CHK could see a significant move upwards. It broke above resistance at 15 so hopefully that will continue. Oil got creamed today after a bearish inventory report but if it can stabilize and start to move up again that should help the energy sector and my position.

Tomorrow is the hearing about mark to market accounting. My guess is that nothing actually happens, or if something does happen the reaction is muted given we have had such a run up into it. Most financials are still in longer term downtrends at resistance after these large moves up. Either way I am not very concerned with my FAS position, it is highly unlikely the stocks re-trace their entire amount in 7 trading days but it is of course possible since they moved up this much in only 3. Like I said I am fine taking delivery if it comes to that. I would almost prefer a pull back so I can get into some of the stronger names, I will likely look at MS if it pulls back.

Even though everytime I say this I immediately get smacked by the market gods but I currently now have a nice positive return for the year after the most recent move, now it is a matter of maintaining it with risk management and patience to wait for the good entry points.