Since we finished right at 930 resistance Friday I held my puts, which ended up being smart as the market pulled back nicely yesterday and let me profit as my puts and short call positions outpaced my long calls. I was actually hoping for more short term downside and liked that we were trading lower overnight but it is hard to keep this market down, China news is sending futures a bit higher today, financials aren't participating at the moment which is good for my positions and could help keep a lid on any rally attempt today if it continues. I partially feel like the move friday was a fake out and the old me likely would have been shaken out of position which seems to happen around expiration week. We seem to get moves that test your resolve, prices will move just beyond support or resistance making you get out or in before they reverse course and you get screwed. I am hoping to avoid that this week. As of right now all my short option positions will expire worthless and I'd like to keep it easy and clear cut.
I still have yet to determine a good way to profit from expiration week. Although I assume the best way is to sell premium because market makers want options to expire worthless and overall they can't keep the market pinned but in the short run it seems to be possible to manipulate it. I am no conspiracy theorist, I am just trying to exploit realities for gain if possible. I may look into the which options have the most open interest on stocks and see where they finish friday and if there is a correlation. Options expiration is almost like a mini earnings event in that we see volatility generally contract(again benefiting sellers).
Oil is higher today which I hope helps my CHK position, however it is near 60 a barrel which is likely going to produce some resistance in the short term for energy stocks. I doubt the overall market will make any dramatic moves in either direction until after options expiration. I could be wrong but that is how I see things going and hope that they do but am willing to react if necessary.
Total Return for 2009: 153%
Tuesday, May 12, 2009
Friday, May 8, 2009
Blink, You Lose
I am at the point of annoyance with this rally now. Obviously part of the reason is because I have not participated as much as I want as of late, but the other reason is because I feel like there is optimism to the point of stupidity now propping up stocks. We pulled back from 930 as one may "expect" to happen and I had nice paper profits because of it, however I literally had to make those moves in the morning and sell in the afternoon because by the end of today they were right back where they were yesterday. It's ridiculous, a 20% range in the XLF in 2 days. My nearly perfect entry points were undone today. I only lost about a third of my gains from yesterday which is fine in general but had I just exited again at the close yesterday I would have given back nothing and gained a lot more.
Of course I am frustrated being on the wrong side of constant optimism, if I were totally long I would love if I had bought at the bottom yesterday. I know the market operates on psychology of humans which are at times irrational which in my opinion is partially why it can be exploited for gain. However, I feel like people are going over board. We have had signs of recovery, not even positive growth again at all and stocks most notably some financials are near old highs.
The S&P did finish below 930, barely but wasn't as weak as I had hoped, in fact it ifinished on its highs but did not break out. I am only sitting on a small loss now on my puts but it is so frustrating to see a large gain turn into a loss. I feel like we will rally the beginning of next week so I get sucked out of my positions, and people get pulled into calls, then pull back so those calls become worthless.
Alright enough bitching, in terms of my positions CHK was the big winner today but was more than canceled out by my put positions...but limited my losses. Going into next week if we rally I will lighten up my longs because they are getting closer to my targets. That reversal day failed to follow through if we finish above 930 I feel like 950 is the next logical level and it could happen in a day if it does. Overall I am making steady progress higher even if it isn't as fast as before I still am taking low risk entries, there were a couple I looked at today but didn't take ahead of the weekend. If financials continue higher into next week I'll have to buy back my short calls as no bearish position seems safe in this market environment.
Total Return for 2009: 148%
Of course I am frustrated being on the wrong side of constant optimism, if I were totally long I would love if I had bought at the bottom yesterday. I know the market operates on psychology of humans which are at times irrational which in my opinion is partially why it can be exploited for gain. However, I feel like people are going over board. We have had signs of recovery, not even positive growth again at all and stocks most notably some financials are near old highs.
The S&P did finish below 930, barely but wasn't as weak as I had hoped, in fact it ifinished on its highs but did not break out. I am only sitting on a small loss now on my puts but it is so frustrating to see a large gain turn into a loss. I feel like we will rally the beginning of next week so I get sucked out of my positions, and people get pulled into calls, then pull back so those calls become worthless.
Alright enough bitching, in terms of my positions CHK was the big winner today but was more than canceled out by my put positions...but limited my losses. Going into next week if we rally I will lighten up my longs because they are getting closer to my targets. That reversal day failed to follow through if we finish above 930 I feel like 950 is the next logical level and it could happen in a day if it does. Overall I am making steady progress higher even if it isn't as fast as before I still am taking low risk entries, there were a couple I looked at today but didn't take ahead of the weekend. If financials continue higher into next week I'll have to buy back my short calls as no bearish position seems safe in this market environment.
Total Return for 2009: 148%
Thursday, May 7, 2009
Prepared for Pullback
So after I got done saying not to trade in the first hour I did it again today, however it worked out perfectly this time. We gapped up to 930 on the S&P which was where I planned to take a short and apparently so did others. I Sold calls on the XLF then bought puts on the SPY. This ended up being a good play as stocks and financials staged a major reversal today ahead of the stress test results. I now have a good cushion on my short call position for expiration next week I can collect some theta over the weekend.
Natural gas ripped higher today on apparently bullish inventory numbers right back to its bearish trend line. If it gets above this level we could see it really accelerate to the upside which should benefit my CHK position even more than it did today.
The frustrating thing was that my DECK and IYR positions would all have recovered their losses and AAPL calls would have been woth much less giving me more money. Oh well, I had the plan and ability to execute these new positions and they are working so far. Gaps can work in your favor or go against you but either way can pay off big if they work. After hours when the official stress tests results were released we saw the futures trade back up and financials rip higher again. The concern is that we essentially came down and tested 900, although not exactly but close and that could end up being the opportunity people were looking for to buy back in. So the tough decision comes of when to decide to exit my puts. Obviously I am sitting on a nice profit so it is easier to manage but I don't want to give it all back if we are going to keep rallying. I still feel there is more downside but maybe the market doesn't and those on the sidelines will get in and push stocks higher. I will feel better after options expiration where I will then be perfectly balanced with my 10 long calls and 10 long puts.
For my bearish thesis to remain in tact I would like to see us finish below 930 and ideally 920 tomorrow. Options expiration week is always interesting as there is posturing ahead of time that can cause some interesting volatility. Once we have a larger pullback I still feel materials and energy will be where the best risk adjusted gains will come from as long as the economic outlook remains solid.
Total Return for 2009: 152%
Natural gas ripped higher today on apparently bullish inventory numbers right back to its bearish trend line. If it gets above this level we could see it really accelerate to the upside which should benefit my CHK position even more than it did today.
The frustrating thing was that my DECK and IYR positions would all have recovered their losses and AAPL calls would have been woth much less giving me more money. Oh well, I had the plan and ability to execute these new positions and they are working so far. Gaps can work in your favor or go against you but either way can pay off big if they work. After hours when the official stress tests results were released we saw the futures trade back up and financials rip higher again. The concern is that we essentially came down and tested 900, although not exactly but close and that could end up being the opportunity people were looking for to buy back in. So the tough decision comes of when to decide to exit my puts. Obviously I am sitting on a nice profit so it is easier to manage but I don't want to give it all back if we are going to keep rallying. I still feel there is more downside but maybe the market doesn't and those on the sidelines will get in and push stocks higher. I will feel better after options expiration where I will then be perfectly balanced with my 10 long calls and 10 long puts.
For my bearish thesis to remain in tact I would like to see us finish below 930 and ideally 920 tomorrow. Options expiration week is always interesting as there is posturing ahead of time that can cause some interesting volatility. Once we have a larger pullback I still feel materials and energy will be where the best risk adjusted gains will come from as long as the economic outlook remains solid.
Total Return for 2009: 152%
Wednesday, May 6, 2009
Follow the Rules
So today we gapped up and both my put positions were in losing positions. DECK ran up to nearly 63 dollars, and my line was 60 and it was pushing past my loss limit. I didn't completely panic out of it, I let it come back as I saw the market pulling back then exited at what I thought was a better price. DECK reversed completely and ended up down on the day. I also exited IYR as it was breaking to new highs and I assumed it would continue. I bought back my AAPL calls as the market started to recover too. I did all of this in the first half an hour. I was basically "right" on 1/3, DECK would have still been at a loss but not at my limit and still protect me to the downside, AAPL went down as much as two dollars and ended up down slightly but the calls decayed more in my favor which would have recouped more premium.
Overall I prob lost 1% on making those moves, IYR ended up finishing higher than where I sold making the move right for the time being but it was still below resistance and my loss limit so I could have held. I was too eager to cut those positions because I saw the market start to rebound and I thought it could be the huge up day I was looking for but for the most part my positions did what they should. I need to remember trading rule #6: Do NOT trade in the first hour unless absolutely necessary. The hard thing is acting early on pull backs has worked this whole time generally going long. My new position in CHK is starting to work out nicely and I think should continue. One thing I have noticed and plan to analyze is holding long term vs. short term trading. FCX, which I originally had July options on at 26, is now at 52 and I exited at 42, thats significant money left on the table. Of course I did get out before it traded in a range for a while so time in market should be considered but it is still something to think about.
The stress test "leaks" sent financials ripping higher today. I really just want a large up day so I can get some low risk put positions. The 930 target is in sight and that will be the place I initiate some short positions. We will be overbought in most of the major sectors and the McClellan oscillator is near extreme overbought conditions as well. Financials seem like a good place to short except that they keep going up. There are some predictions of a 50% retracement of the rally, I highly doubt that, although it is possible, I'd look for a pull back to 875 still. I will still try to pick relative strength and weakness candidates but likely position a bit more bearish in the short term if we hit 930. My hope is that the retail sales numbers are good tomorrow and the jobless claims are close to ADP and we could see that rally continue and then I will look to take some bearish positions. Overall on the day I only had a small profit.
Overall Return for 2009: 143%
Overall I prob lost 1% on making those moves, IYR ended up finishing higher than where I sold making the move right for the time being but it was still below resistance and my loss limit so I could have held. I was too eager to cut those positions because I saw the market start to rebound and I thought it could be the huge up day I was looking for but for the most part my positions did what they should. I need to remember trading rule #6: Do NOT trade in the first hour unless absolutely necessary. The hard thing is acting early on pull backs has worked this whole time generally going long. My new position in CHK is starting to work out nicely and I think should continue. One thing I have noticed and plan to analyze is holding long term vs. short term trading. FCX, which I originally had July options on at 26, is now at 52 and I exited at 42, thats significant money left on the table. Of course I did get out before it traded in a range for a while so time in market should be considered but it is still something to think about.
The stress test "leaks" sent financials ripping higher today. I really just want a large up day so I can get some low risk put positions. The 930 target is in sight and that will be the place I initiate some short positions. We will be overbought in most of the major sectors and the McClellan oscillator is near extreme overbought conditions as well. Financials seem like a good place to short except that they keep going up. There are some predictions of a 50% retracement of the rally, I highly doubt that, although it is possible, I'd look for a pull back to 875 still. I will still try to pick relative strength and weakness candidates but likely position a bit more bearish in the short term if we hit 930. My hope is that the retail sales numbers are good tomorrow and the jobless claims are close to ADP and we could see that rally continue and then I will look to take some bearish positions. Overall on the day I only had a small profit.
Overall Return for 2009: 143%
Tuesday, May 5, 2009
Will Stress Tests Spoil Rally?
Today was pretty much a flat day in the market. I had a fairly decent day with a majority of my positions working the way they should. This was a nice change of pace. The new risk I took has paid off so far with my calls outpacing my puts. I had a dilemma today because DECK broke back above 60 which is where I planned to exit however I felt there was still more downside risk and didn't want to only have one true put position since I added a new call position today. So I decided to hold due to the fact that it is still not at my loss limit and the extra protection is worth it to me.
This could be a good move as a report is coming out about BAC needing 34 billion more in capital which is way more than anyone ever guessed. Who knows what they will say about it when they are officially announced but as of now the futures are down by over 1%. This could cause the sell off I'd like to have happen before being comfortable getting long again. My new call position could be in danger now however a lot of the selling likely occured today after earnings were announced so I am hoping that has alleviated a lot of the pressure.
JBLU had a huge move up today giving me a 20% cushion going into expiration. If it holds up decently well tomorrow I think i'll be fine. AAPL is still my only concern right now because new news could come out ahead of June and send the stock over my strike price but if we have a pull back tomorrow and get back below 130 I should be ok.
Overall I have 2 long call positions and 2 long put positions so I am decently balanced there. I hope in a pull back my puts outpace my longs and at least limit my losses if not help me profit in the pullback. If we have a good pullback going into the stress test announcements it could create a pop if things aren't as bad as feared. I want to test 875 and hold it before getting long in any size.
Total Return for 2009: 143%
This could be a good move as a report is coming out about BAC needing 34 billion more in capital which is way more than anyone ever guessed. Who knows what they will say about it when they are officially announced but as of now the futures are down by over 1%. This could cause the sell off I'd like to have happen before being comfortable getting long again. My new call position could be in danger now however a lot of the selling likely occured today after earnings were announced so I am hoping that has alleviated a lot of the pressure.
JBLU had a huge move up today giving me a 20% cushion going into expiration. If it holds up decently well tomorrow I think i'll be fine. AAPL is still my only concern right now because new news could come out ahead of June and send the stock over my strike price but if we have a pull back tomorrow and get back below 130 I should be ok.
Overall I have 2 long call positions and 2 long put positions so I am decently balanced there. I hope in a pull back my puts outpace my longs and at least limit my losses if not help me profit in the pullback. If we have a good pullback going into the stress test announcements it could create a pop if things aren't as bad as feared. I want to test 875 and hold it before getting long in any size.
Total Return for 2009: 143%
Monday, May 4, 2009
Short At Your Own Risk
This rally seems to be unstoppable. The more frustrating thing is the fact that the largest moves have happened in the materials stocks I wanted to get back into. ANR could have been another FCX or more if I would have pulled the trigger. The tough thing now is a lot of longs are very far away from reference points, so you either have to be very patient and wait for a large retracement or take a long position off a smaller retracement and hope it doesn't go lower where you get stopped out then it goes up without you.
AAPL ripped higher today and took away most of the gains I had on my short call position. I was afraid this may happen but its still below the strike so I may as well wait and see what happens this week and cut it loose. The incredible thing is that it has moved over six dollars to even get back to where it was before earnings. Those market makers have it made. AMZN is still fine and will likely expire worthless. JBLU moved up nicely giving me more cushion for those to also expire worthless.
I still run into dilemmas of when to get into trades. Do I wait for the end of the day or get in intraday? I guess it depends on your viewpoint. I try to use 1 min charts to get a good entry. The averages were at 900 which is where I thought we would hold and it did hold for a long time until the close. I bought puts on IYR and DECK which both were working until they ripped higher into the close. In this instance had I waited till the end of the day I would have gotten them at much better entry points. I bought VMW calls as well, which also moved up into the close so that is an instance where it worked in my favor. It's annoying because I ended up flat on the day due to those new positions but we do have much more risk to the downside now I just got in a little early. I will have to get back out if my puts keep going against me which sucks, it's almost like always trying to buy in a bear market and getting stopped out thinking that if you go short you're goint to get whipped by a huge reversal. Oh well, I'll keep following the rules and taking risk, the good thing is I waited for good entries, apparently not the best, but good and you have to take risk for it to give a reward.
Housing was unexpectedly strong and China announced better manufacturing numbers so things do seem to be pointing to a recovery. The critical thing will be to see the S&P hold 875, which will now be the entry point I look for to get into my stocks unless they show entries ahead of time. If we hit 930 before we hit 875 I'll look to take more shorts before getting long again.
Total Return for 2009: 136%
AAPL ripped higher today and took away most of the gains I had on my short call position. I was afraid this may happen but its still below the strike so I may as well wait and see what happens this week and cut it loose. The incredible thing is that it has moved over six dollars to even get back to where it was before earnings. Those market makers have it made. AMZN is still fine and will likely expire worthless. JBLU moved up nicely giving me more cushion for those to also expire worthless.
I still run into dilemmas of when to get into trades. Do I wait for the end of the day or get in intraday? I guess it depends on your viewpoint. I try to use 1 min charts to get a good entry. The averages were at 900 which is where I thought we would hold and it did hold for a long time until the close. I bought puts on IYR and DECK which both were working until they ripped higher into the close. In this instance had I waited till the end of the day I would have gotten them at much better entry points. I bought VMW calls as well, which also moved up into the close so that is an instance where it worked in my favor. It's annoying because I ended up flat on the day due to those new positions but we do have much more risk to the downside now I just got in a little early. I will have to get back out if my puts keep going against me which sucks, it's almost like always trying to buy in a bear market and getting stopped out thinking that if you go short you're goint to get whipped by a huge reversal. Oh well, I'll keep following the rules and taking risk, the good thing is I waited for good entries, apparently not the best, but good and you have to take risk for it to give a reward.
Housing was unexpectedly strong and China announced better manufacturing numbers so things do seem to be pointing to a recovery. The critical thing will be to see the S&P hold 875, which will now be the entry point I look for to get into my stocks unless they show entries ahead of time. If we hit 930 before we hit 875 I'll look to take more shorts before getting long again.
Total Return for 2009: 136%
Friday, May 1, 2009
Buyers Emerge Again
What do you know, at around the 860 level buyers showed up again to buy the dip and finish above 875. This is bullish on the surface even if we only finished slightly above resistance. Financials did move back into bull confirmed which is supportive of more upside in stocks, things could just move into an even more overbought condition.
This move is very aggravating because all the positions I wanted to get in have moved by on average 20%. That is not to say I haven't profited from my short options, however there is no comparison to the risk reward that is provided by long directional option plays. I will have to remain patient and look for pullbacks again or look at better lower risk plays.
JBLU managed to finish above the five dollar level so I did not cut it loose but it has been acting very weak. If everything works out the way I hope I could sit and do nothing for 2 weeks and make another 10% if the options expire worthless. One thing I will be looking to do on the next pull back is look to pay for my long positions with some short puts and see how that works out. my only concern is the cost of transactions and having to unwind more positions if they go against me but if I can get paid some premium while profiting that is even better. The other problem is that it will require more margin so that may cause me to not do it if I want to take on a decent amount of positions.
I'll take my slow and steady gains but I'd rather have steady and explosive gains like before, but I don't want to be greedy. If I stay patient and calculated I can have good gains with low risk as I have before.
Total Return for 2009: 136%
This move is very aggravating because all the positions I wanted to get in have moved by on average 20%. That is not to say I haven't profited from my short options, however there is no comparison to the risk reward that is provided by long directional option plays. I will have to remain patient and look for pullbacks again or look at better lower risk plays.
JBLU managed to finish above the five dollar level so I did not cut it loose but it has been acting very weak. If everything works out the way I hope I could sit and do nothing for 2 weeks and make another 10% if the options expire worthless. One thing I will be looking to do on the next pull back is look to pay for my long positions with some short puts and see how that works out. my only concern is the cost of transactions and having to unwind more positions if they go against me but if I can get paid some premium while profiting that is even better. The other problem is that it will require more margin so that may cause me to not do it if I want to take on a decent amount of positions.
I'll take my slow and steady gains but I'd rather have steady and explosive gains like before, but I don't want to be greedy. If I stay patient and calculated I can have good gains with low risk as I have before.
Total Return for 2009: 136%
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