Monday, September 21, 2015
Thursday, September 17, 2015
No Rate Hike, What A Surprise ...
I'm not shocked, but I honestly thought it was a 50/50 shot this time around.
Long Live ZIRP!
This non-event should suck vol out of the indexes, however the VIX at this point in time (2:08pm) is not reacting much, just like the markets. I expect the VIX to continue to "take the stairs down" over the next month to within it's normal range.
Yesterday I rolled up the SPY 182/185 (0.50->0.23) to 190/193 (0.70). Looks like it was the right choice.
Those VIX 13p are still around the same value that I originally picked them up at. I might have gone too far out of the money, unfortunately, for this to be a winning trade. But, we will see!
The Fed has cited China as a concern and a big factor on why rates were not raised. What a shock.
At this point a December hike is also off the table. The Fed is in full volatility reduction mode. Can't let the markets go down! Must keep asset bubbles alive! It's all we have to show for out multi-trillion dollar money printing!
Long Live ZIRP!
This non-event should suck vol out of the indexes, however the VIX at this point in time (2:08pm) is not reacting much, just like the markets. I expect the VIX to continue to "take the stairs down" over the next month to within it's normal range.
Yesterday I rolled up the SPY 182/185 (0.50->0.23) to 190/193 (0.70). Looks like it was the right choice.
Those VIX 13p are still around the same value that I originally picked them up at. I might have gone too far out of the money, unfortunately, for this to be a winning trade. But, we will see!
The Fed has cited China as a concern and a big factor on why rates were not raised. What a shock.
At this point a December hike is also off the table. The Fed is in full volatility reduction mode. Can't let the markets go down! Must keep asset bubbles alive! It's all we have to show for out multi-trillion dollar money printing!
LONG LIVE ZIRP
Tuesday, September 15, 2015
One Down One to Go
I bought back the iron condor in BABA today for 0.38 from 0.75, making a profit of 50%, my usual take-off point. Awesome.
Now just the SPY (and VIX) remain. Well, volatility has taken the stairs down so to speak, but because it isn't falling faster than the price of SPY is rising, the position is still down.
I think after the Fed meeting, regardless of what they say, vol will come in. If the markets jump I'll be in for some heat but if not, I should be heading back to even on the position.
The decision is Thursday ... see ya then!
Now just the SPY (and VIX) remain. Well, volatility has taken the stairs down so to speak, but because it isn't falling faster than the price of SPY is rising, the position is still down.
I think after the Fed meeting, regardless of what they say, vol will come in. If the markets jump I'll be in for some heat but if not, I should be heading back to even on the position.
The decision is Thursday ... see ya then!
Thursday, September 3, 2015
Is the Current Volatility Scenario an Opportunity Missed?
Same positions on ... the 167/170 put side of the SPY condor was rolled and now its 182/185/203/206. Overall vol is beginning to come down, but I don't think it will really drop until after the Fed meeting on September 16-17.
I still think a September hike has about a 50/50 chance of occurring. Tomorrow's jobs report won't affect the Fed's decision ... well, at least I hope it doesn't; I hope the Fed isn't THAT short-term focused! My view on Fed hikes have been made very clear.
At this point I have no idea how the markets would react either way. If the Fed hikes, does vol get crushed since that has more or less been priced in? Do the markets mostly do nothing? If they don't hike, does that signal that the Fed is worried about global macro? Does that increase vol?
Who knows, we'll just have to wait and see.
Also short vol in BABA with a big wide iron condor. 55/57.5/75/77.5 @ 0.75
Right now I'm just gonna hang on to my current positions and try to ride it out. I know that a weathered professional would say, "this isn't the time to hold back, rather, bring more chips to the table!" Well, I'm not a weathered professional. The way I see it, if I can hold my own with these positions and produce a profit in these times of high vol, that will be a chip on my shoulder. What doesn't kill you makes you stronger, right?
Is it an opportunity missed? Definitely. But it's only a good opportunity if you know what you are doing. I don't really know how to manage vol spikes at present because not enough of them have occurred since Q4 2012, when I started trading. The more that occur, the better I will become at navigating through them and making the best of the opportunities that they present.
Basically right now I'm trying to make it through the Fed meeting, and September overall. The last time we had this kind of draw-down in the markets was October 2014, which I mostly sidelined. Not this time. While I won't really be stepping up to the plate, I will still be taking risk ... just the best set-ups possible.
I still think a September hike has about a 50/50 chance of occurring. Tomorrow's jobs report won't affect the Fed's decision ... well, at least I hope it doesn't; I hope the Fed isn't THAT short-term focused! My view on Fed hikes have been made very clear.
At this point I have no idea how the markets would react either way. If the Fed hikes, does vol get crushed since that has more or less been priced in? Do the markets mostly do nothing? If they don't hike, does that signal that the Fed is worried about global macro? Does that increase vol?
Who knows, we'll just have to wait and see.
Also short vol in BABA with a big wide iron condor. 55/57.5/75/77.5 @ 0.75
Right now I'm just gonna hang on to my current positions and try to ride it out. I know that a weathered professional would say, "this isn't the time to hold back, rather, bring more chips to the table!" Well, I'm not a weathered professional. The way I see it, if I can hold my own with these positions and produce a profit in these times of high vol, that will be a chip on my shoulder. What doesn't kill you makes you stronger, right?
Is it an opportunity missed? Definitely. But it's only a good opportunity if you know what you are doing. I don't really know how to manage vol spikes at present because not enough of them have occurred since Q4 2012, when I started trading. The more that occur, the better I will become at navigating through them and making the best of the opportunities that they present.
Basically right now I'm trying to make it through the Fed meeting, and September overall. The last time we had this kind of draw-down in the markets was October 2014, which I mostly sidelined. Not this time. While I won't really be stepping up to the plate, I will still be taking risk ... just the best set-ups possible.
Wednesday, August 26, 2015
A Great Set-Up!
So the markets have tanked. Can't say I called it, but I did say that the bull market is over. just a couple weeks ago. That means that vol has gotten jacked.
So I've sold an iron condor on the SPY ... with the short puts down at 170. Damn! 167/170/203/206 iron condor, 50% PoP, and 1.00 credit. Much more room to the downside than the upside, which is better in my opinion. Despite today's rally, I think the markets will slog it out to get back up above 2000, and not have a V-bottom like back in October. During which time, vol oughtta contract, which leads to the second trade.
If the SPY does in fact rocket back up and the all clear signal is given to BTD, I bought some far OTM puts on the VIX. I picked up some 13 NOV puts for 0.20. If the VIX declines back to where it has been all year, the reverse side of the SPY returning to where it has been all year, then those puts will skyrocket in price. That surge should cover losses due to Delta on the SPY position, and I say Delta because if the SPY goes back up to "normal" levels, vol will contract and suck premium out of the options. And, since the short SPY puts are so far away, I have plenty of room to roll them up should things get hairy.
If the markets continue to decline, vol should go even higher, which means rolling down the short calls would be more advantageous. The VIX puts may be a wash, but they only cost 0.20!
Overall I have 5% of my portfolio at risk in these trades ... 4.66% in SPY and 0.33% in VIX. With that, even a full loser on both positions wouldn't hurt too terribly bad (full losers are incredibly rare if you're paying attention ... you can get out!).
So I've sold an iron condor on the SPY ... with the short puts down at 170. Damn! 167/170/203/206 iron condor, 50% PoP, and 1.00 credit. Much more room to the downside than the upside, which is better in my opinion. Despite today's rally, I think the markets will slog it out to get back up above 2000, and not have a V-bottom like back in October. During which time, vol oughtta contract, which leads to the second trade.
If the SPY does in fact rocket back up and the all clear signal is given to BTD, I bought some far OTM puts on the VIX. I picked up some 13 NOV puts for 0.20. If the VIX declines back to where it has been all year, the reverse side of the SPY returning to where it has been all year, then those puts will skyrocket in price. That surge should cover losses due to Delta on the SPY position, and I say Delta because if the SPY goes back up to "normal" levels, vol will contract and suck premium out of the options. And, since the short SPY puts are so far away, I have plenty of room to roll them up should things get hairy.
If the markets continue to decline, vol should go even higher, which means rolling down the short calls would be more advantageous. The VIX puts may be a wash, but they only cost 0.20!
Overall I have 5% of my portfolio at risk in these trades ... 4.66% in SPY and 0.33% in VIX. With that, even a full loser on both positions wouldn't hurt too terribly bad (full losers are incredibly rare if you're paying attention ... you can get out!).
Friday, August 21, 2015
HD Missed Opportunity and The Verge of a Bear Market?
No, I found it. I profited from it. But execution-wise this was an opportunity missed.
Home Depot HD was following a classic Bollinger OB scenario, and the markets started to roll over. So, I got short, with a plan to leg-out of the put spread when it passed 119.
I didn't.
I still made a $360 profit on the position, but I could have made over $1000.
Legging-out is very hard to time, unfortunately. And since you expose yourself to "pure" delta, you have to be damn sure once you take off that short leg that momentum will continue in your favor. If it reverses, your gains could be washed and could turn into losses very, very quickly.
So although it could have been better, I'll take $360 profit any day.
In other news, stocks are really rolling over on China. S&P dipped (and is currently) below 2000, and while that's arbitrary, it's a clean break from the trading range we've been in for about 7 months. Not good. While I am not sure on whether or not to short the market, I stand at the ready to sell VIX calls and SPY/SPX puts or and Iron Condor, cause vol is getting juiced.
With the big leaders in the market selling off visciously over the past couple of weeks, it would not surprise me if a "correction" is on the way and potentially a mini bear market. I say "correction" because this market hasn't gone anywhere all year and looks quite toppy. But, with the Fed still around, I don't think a prolonged bear market is in the making. China will go down into a steep recession probably in the next year or 18 months, and a bear market in most assets will surely accompany that. But, that's not for awhile. I wouldn't step in and buy-the-dip here, though, because ... where has the market gone all year? There's no point in BTD when the market is not trending higher, y'know?
Home Depot HD was following a classic Bollinger OB scenario, and the markets started to roll over. So, I got short, with a plan to leg-out of the put spread when it passed 119.
I didn't.
I still made a $360 profit on the position, but I could have made over $1000.
Legging-out is very hard to time, unfortunately. And since you expose yourself to "pure" delta, you have to be damn sure once you take off that short leg that momentum will continue in your favor. If it reverses, your gains could be washed and could turn into losses very, very quickly.
So although it could have been better, I'll take $360 profit any day.
In other news, stocks are really rolling over on China. S&P dipped (and is currently) below 2000, and while that's arbitrary, it's a clean break from the trading range we've been in for about 7 months. Not good. While I am not sure on whether or not to short the market, I stand at the ready to sell VIX calls and SPY/SPX puts or and Iron Condor, cause vol is getting juiced.
With the big leaders in the market selling off visciously over the past couple of weeks, it would not surprise me if a "correction" is on the way and potentially a mini bear market. I say "correction" because this market hasn't gone anywhere all year and looks quite toppy. But, with the Fed still around, I don't think a prolonged bear market is in the making. China will go down into a steep recession probably in the next year or 18 months, and a bear market in most assets will surely accompany that. But, that's not for awhile. I wouldn't step in and buy-the-dip here, though, because ... where has the market gone all year? There's no point in BTD when the market is not trending higher, y'know?
Friday, August 14, 2015
Dude, Where's My Market (Going)?
Ok, so I don't like to make market commentary all that much. But I gotta comment here.
Where the hell is the stock market going?
For all of 2015, the S&P 500 has done nothin' but bounce around 2100. Sometimes a little, sometimes a lot. There are a lot of theories as to why:
- The markets are unsure about the future!
- The markets are awaiting a rate hike!
- China!
So, maybe all of those are true, to a degree. Without full on stimulus (beyond ZIRP) from the Fed, stocks don't march higher. Plain and simple, the stock market has been ushered into an artificial bull market by the Fed's asset purchase programs and their promise to back-stop whatever downturn may come in the markets. Analysts have only been searching the garbage (economic data) to attempt and rationalize/justify that the bull market since 2009 has been a result of economic growth and not Fed stimulus, at least not entirely.
There are a couple of problems with that notion. First, the bottom three quintiles of income earners in America have been in stagnation really since 2007, and you could argue for far longer. Second, what economic growth? Third, corporations are not reinvesting in their companies.
All corporations are doing now are buying back stock, buying other companies, or increasing dividends, all in order to appease the shareholders. Major corporations outside of media have done little in the way of broad based expansion that has been seen in almost all other expansionary times in recent economic history.
Back to the stock market in 2015. We've basically gone nowhere for 10 months, something that has not happened in many years. Bulls will say that it's a "breather," and that after two years and a 45% gain its only natural to take a break. Fair enough, I suppose, but the market doesn't make moves ... investors do. The dog wags the tail.
Investors are afraid of a tightening Fed. Now, everyone knows my thoughts on the Fed's supposed oncoming tightening cycle. Ain't gonna happen. But not everyone is as skeptical as me and believe the shit coming from Yellen's mouth.
If I am proved wrong, I would worry for investors. The stock market has not "survived" a tightening cycle hardly ever.
In 1994 the Fed raised the FFR from 3% to 6%, and the S&P 500 didn't budge the whole year. Hardly a collapse in stock prices, but the economy was also moving along speedily, and it was a result of "real" growth. In the summer of 1998 the S&P fell from 1180 to 980 and the Fed responded by cutting the rate from 5.5% to 4.5%. The market took off as a result ... this was when the "Greenspan put" was coined. From June 1999 to June 2000 the rate was raised from 4.75% to 6.5%, the NASDAQ collapsed and stocks entered the bear market of 2001-2003. The Fed responded by cutting rates from 6.5% to 1% from 2000 to 2003. Starting in 2003, not coincidentally, the market took off.
The Fed then engaged in raising rates from 1% to 5% from summer 2004 to summer 2006. Guess when the housing bubble popped. Yes, that's right, late summer 2006. Stocks lost half their value in the coming years despite the Fed renege of cutting rates to 0%.
In other words, a Fed tightening cycle would spell disaster for the market. If cutting rates from 5% to 0% - ZERO PERCENT - did nothing to save the imploding market, what the hell can? Surely not a cut from 2% back to 0%, because that's probably about how high the Fed's gonna be able to get. The Fed has no firepower left to stem a market sell-off. Even another round of QE won't do the trick, because that will probably scare the hell out of investors since the accepted narrative is "all clear for raising rates, the economy is doing pretty good now."
If China gets worse, which it more than likely will, I smell trouble for US stocks in 2016 and 2017. It took about a year and a half for stocks to catch on to the fact that the credit boom of 03-06 was collapsing, hence their delayed sell-off until 2008. China's crumbling is the catalyst this time, it looks like.
The bull market of 2009-2014 is over.
Wednesday, August 5, 2015
AAPL and DD
standard vol selling here.
AAPL 100/105/125/130 SEP15 @ 1.15 x 3 [61 PoP]
DD 47.5/50/57.5/60 SEP15 @ 0.50 x 5 [65 PoP]
Portfolio at risk, 7.1%
I'm pretty far away from the market on AAPL on both sides but I'm pretty close to DD on the call side, however, that's probably more balanced since DD is in a downtrend but is nearing support and could bottom out soon.
Vol overall is down across the market right now and nothing looks good directionally either. I thought TWTR might break down but I prefer to play reversals at support/resistance rather than breakdowns/breakouts and continuations. I feel they're less reliable, and I'm no good at trading momentum.
I think there will be more volatility towards mid month as people frantically pour over the data to see if a rate hike is coming. IMHO, if this Friday's jobs report is "bad," Granny Yellen will hold off on that 0.25% hike. Which obviously would not surprise me, but I think there's a 50/50 chance for a September hike and a 75% chance that FF rate will be 0.25% by year's end. But remember, I don't count that as a hike because 0.25% is just the top of the current target range!
AAPL 100/105/125/130 SEP15 @ 1.15 x 3 [61 PoP]
DD 47.5/50/57.5/60 SEP15 @ 0.50 x 5 [65 PoP]
Portfolio at risk, 7.1%
I'm pretty far away from the market on AAPL on both sides but I'm pretty close to DD on the call side, however, that's probably more balanced since DD is in a downtrend but is nearing support and could bottom out soon.
Vol overall is down across the market right now and nothing looks good directionally either. I thought TWTR might break down but I prefer to play reversals at support/resistance rather than breakdowns/breakouts and continuations. I feel they're less reliable, and I'm no good at trading momentum.
I think there will be more volatility towards mid month as people frantically pour over the data to see if a rate hike is coming. IMHO, if this Friday's jobs report is "bad," Granny Yellen will hold off on that 0.25% hike. Which obviously would not surprise me, but I think there's a 50/50 chance for a September hike and a 75% chance that FF rate will be 0.25% by year's end. But remember, I don't count that as a hike because 0.25% is just the top of the current target range!
Tuesday, August 4, 2015
AAPL Melting Down??!?!?!!?
AAPL is one of the darling stocks in the American market. This company can do no wrong. They're gonna sell a bazillion of those watch thingies and it will be awesome, right?
WRONG
Who seriously thought the AppleWatch was a good idea? Who? THAT'S Timmy C's big innovative new creation? The thing everyone and their mother speculated Apple was gonna make next, so he said, "Alright, what the hell, y'know?"
And who thought they would actually sell a lot of them? It's an overpriced gimmick! Google Glass, anyone? Fucking dumb!
So investors basically gave AAPL the ol' fuck you and it's selling off. Why? Oh, China is bad! Bitch, Chinese GDP per capita is like $5000. A new iPhone 6 is like a tenth of that. 10%. Fuck China, IT'S NOT A DEVELOPED MARKET. HOLY FUCK. Oh, they didn't sell that many watches! NO FUCKING KIDDING.
Rant over. But seriously, AAPL's sell off is really fucking dumb. However, it has goosed vol, which means I'm about ready to start selling premium. I hate that word too. Fuck premium.
Maybe tomorrow, I don't know. It's on the radar.
Thursday, July 30, 2015
A Successful July
July saw a near perfect record for short term trading. Some good high volatility opportunities and a couple of good directional opportunities. July was a good example of the bread and butter trades that I put on all the time. Nothin' really fancy, and one earnings trade. Actually, that's been a good thing, because this earnings season has been pretty wild. Many stocks had +/- %10 moves on earnings.
In August I plan on continuing the same strategy. So far in 2015, I am up ~18%. Stocks as measured by the S&P 500 are up 2.2%. While I'm not ecstatic about July's 2.5% return, it was a solid month that I hope to repeat.
The only bad things? Well, I can't say that it was impatience. The directional shorts I had on stalled out a little, so I took profits. While they were decent profits, a couple could have been super. Gold continues to sell off, and I'm convinced it's going to $1000 and ounce, I just don't know how long that will take. And Facebook ended up selling off right after I got out for a scratch. So, I got out a little early, but, you know, hindsight is 20/20.
In August I plan on continuing the same strategy. So far in 2015, I am up ~18%. Stocks as measured by the S&P 500 are up 2.2%. While I'm not ecstatic about July's 2.5% return, it was a solid month that I hope to repeat.
The only bad things? Well, I can't say that it was impatience. The directional shorts I had on stalled out a little, so I took profits. While they were decent profits, a couple could have been super. Gold continues to sell off, and I'm convinced it's going to $1000 and ounce, I just don't know how long that will take. And Facebook ended up selling off right after I got out for a scratch. So, I got out a little early, but, you know, hindsight is 20/20.
Saturday, July 25, 2015
A Semi-Solid Week of Trades
This past week saw the closing of all but one of my open positions. DIA, GLD, FB, and an earnings trade I didn't post on in SBUX. DIA and GLD went smoothly, and both were profitable. FB? It ran up and then right back down again, so I decided to get out of that one for a scratch. SBUX reported a great quarter and announced a stock buyback, so that launched it to the top of the expected range, only to be pulled down during the day on the backs of a biotech meltdown in the NASDAQ. So, I got out a little too early, and made about $45. Eh.
Only open position now is short the Q's QQQ. With the biotech selloff and the AMZN jump, albeit less so than at the open, QQQ sold off about 1% on Friday. It closed near the lows of the day but failed to break soft support on the close. There is definitely some negative momentum, so I plan to leg out if we clear that 111 soft support. I decided not to leg out in GLD because the broader market began to sell off, and the negative momentum was taking a break, So I just closed it for a $150 gain. I'm still thinking gold will head to $1000/oz but if everyone else thinks that, why hasn't it gotten there yet? Volume decreased as gold sunk lower, never a sign of continuing downside momentum.
All told July is looking to be a pretty profitable month, clocking in at around +2.XX% as of right now. If things go smoothly with QQQ than that could turn into 3-4% for the month.
Only open position now is short the Q's QQQ. With the biotech selloff and the AMZN jump, albeit less so than at the open, QQQ sold off about 1% on Friday. It closed near the lows of the day but failed to break soft support on the close. There is definitely some negative momentum, so I plan to leg out if we clear that 111 soft support. I decided not to leg out in GLD because the broader market began to sell off, and the negative momentum was taking a break, So I just closed it for a $150 gain. I'm still thinking gold will head to $1000/oz but if everyone else thinks that, why hasn't it gotten there yet? Volume decreased as gold sunk lower, never a sign of continuing downside momentum.
All told July is looking to be a pretty profitable month, clocking in at around +2.XX% as of right now. If things go smoothly with QQQ than that could turn into 3-4% for the month.
Monday, July 20, 2015
D'oh!
FB
Don't try to short earnings run ups, or breakouts from rangebound trading.
Don't make a trade just cause you think you might miss out on the morning move the next day
Don't get "double short" with a positively correlated name (QQQ)
Don't make a trade if the option strikes end 5 points away from the current price.
I will most likely dearly pay for these rookie mistakes with this FB position.
I put it on, and then shortly after the close decided ... eh ... I don't feel so great about that one. And wham! 2.5% up move the next day.
Will probably be experiencing some drawdowns from these trades
But the short gold trade is working nicely today
Don't try to short earnings run ups, or breakouts from rangebound trading.
Don't make a trade just cause you think you might miss out on the morning move the next day
Don't get "double short" with a positively correlated name (QQQ)
Don't make a trade if the option strikes end 5 points away from the current price.
I will most likely dearly pay for these rookie mistakes with this FB position.
I put it on, and then shortly after the close decided ... eh ... I don't feel so great about that one. And wham! 2.5% up move the next day.
Will probably be experiencing some drawdowns from these trades
But the short gold trade is working nicely today
Friday, July 17, 2015
New Directional Positions!
Had the chance to find some good directional opportunities today.
First, The Q's ... QQQ
Typical bollinger band short here. This week the markets got way overextended, look how gappy that run is! So everytime the Qs get to the 70ish area on RSI, there are some declines. However, the Qs also managed to break out to new highs on "increasing" volume, so QQQ may go higher!
+5 SEP 113/114p @ 0.45. Not risking a lot here because the momentum monkeys may chase this thing higher.
Next up, Facebook FB
Same deal as with QQQ. FB was up on no real news, just kind of following suit with GOOGL's earnings surge of 15%. FB earnings are in two weeks, so the IV is very high. I sold 5 98/100 call spreads (that's the highest available) for the 7/31 expiration, planning on closing this before earnings. Could run up some more into earnings, but it has to run fast to beat the time decay. 0.65, 70% PoP.
Last, the GLD. Gold.
Gold broke down below its strong support line and has quickly fallen out of favor as the dollar has risen in value and a rate hike is supposedly on the way in September. I think gold will finally trade down to $1000 an ounce over the period, because the "safe haven" value of gold has diminished in favor for the safe haven of the US dollar. Sorry, gold, it was a great run.
+5 SEP 108/109p @ 0.48.
For DIA, things lightened up a bit today. Although the Dow only declined by a few basis points, the position closed the day @ 0.67, 0.12 lower than Thursday. As it stands, it has a 64% PoP and expires in 35 days. Volatility was sucked out of the indices incredibly quickly!
Total Portfolio Capital at risk: 6.54%
First, The Q's ... QQQ
Typical bollinger band short here. This week the markets got way overextended, look how gappy that run is! So everytime the Qs get to the 70ish area on RSI, there are some declines. However, the Qs also managed to break out to new highs on "increasing" volume, so QQQ may go higher!
+5 SEP 113/114p @ 0.45. Not risking a lot here because the momentum monkeys may chase this thing higher.
Next up, Facebook FB
Same deal as with QQQ. FB was up on no real news, just kind of following suit with GOOGL's earnings surge of 15%. FB earnings are in two weeks, so the IV is very high. I sold 5 98/100 call spreads (that's the highest available) for the 7/31 expiration, planning on closing this before earnings. Could run up some more into earnings, but it has to run fast to beat the time decay. 0.65, 70% PoP.
Last, the GLD. Gold.
Gold broke down below its strong support line and has quickly fallen out of favor as the dollar has risen in value and a rate hike is supposedly on the way in September. I think gold will finally trade down to $1000 an ounce over the period, because the "safe haven" value of gold has diminished in favor for the safe haven of the US dollar. Sorry, gold, it was a great run.
+5 SEP 108/109p @ 0.48.
For DIA, things lightened up a bit today. Although the Dow only declined by a few basis points, the position closed the day @ 0.67, 0.12 lower than Thursday. As it stands, it has a 64% PoP and expires in 35 days. Volatility was sucked out of the indices incredibly quickly!
Total Portfolio Capital at risk: 6.54%
Thursday, July 16, 2015
Why You Should Sell High Volatility
So I sold some US market volatility by the way of the VIX and the Dow ETF, DIA. The VIX plummeted immediately, as I figured it would. That means volatility across the indices also dropped precipitously.
When I sold the DIA iron condor, IV rank was in the 99th percentile on a 52 week basis, indicating that IV pretty much was the highest it had been in a year.
US stocks had a couple day decline, and then once the Chinese government came out and said they would imprison short sellers, it was off to the mother fucking races.
LOOK AT THAT GAP N FLY. Totally irrational in my opinion, but so was the sell off so, I guess net-net nothing really happened. This pretty much happens after every couple day downturn. The Buy the Dip algorithms come swooping in and bid up the market once the all clear signal is given.
Here's the crazy part. A 6 point move higher in DIA has only resulted in the price of the 166/168/183/185 condor moving from 0.75 to 0.79! Only 0.04 against me!
IV rank dropped from the 99th percentile to the 14th percentile. That's why selling high volatility is so important. Now though, IV is probably the lowest it will get, so if DIA continues higher, it's going to start hurting more. There's some soft resistance just under 182, we'll see what happens. I've got that VIX victory money to hold me over for awhile if things get hairy.
When I sold the DIA iron condor, IV rank was in the 99th percentile on a 52 week basis, indicating that IV pretty much was the highest it had been in a year.
US stocks had a couple day decline, and then once the Chinese government came out and said they would imprison short sellers, it was off to the mother fucking races.
LOOK AT THAT GAP N FLY. Totally irrational in my opinion, but so was the sell off so, I guess net-net nothing really happened. This pretty much happens after every couple day downturn. The Buy the Dip algorithms come swooping in and bid up the market once the all clear signal is given.
Here's the crazy part. A 6 point move higher in DIA has only resulted in the price of the 166/168/183/185 condor moving from 0.75 to 0.79! Only 0.04 against me!
IV rank dropped from the 99th percentile to the 14th percentile. That's why selling high volatility is so important. Now though, IV is probably the lowest it will get, so if DIA continues higher, it's going to start hurting more. There's some soft resistance just under 182, we'll see what happens. I've got that VIX victory money to hold me over for awhile if things get hairy.
Wednesday, July 8, 2015
Let's Sell some US MARKET Volatility ...
The Chinses Connection fell through ... big time. China's stock market is collapsing. Down, down, down! I lost a good chunka change on the ASHR iron condor.
I don't think that the same thing will happen in the US. Right now volatility has spiked because stocks have broken slightly out of their year to date trading ranges. Investors appear to be worried about Greece (I really don't know why) and the Chinese stock slump.
I won't give market commentary. I hate that. So instead I'm just gonna sell an iron condor on the Dow Jones average ETF DIA.
It looks wider than it really is. Only a 53% PoP on this one ... however, my short strikes are at significant support and resistance areas. I think therefore that it has a higher PoP, but not statistically if you assume random walk.
-6 DIA 8/21 166/168/183/185 @ 0.75
On the same note, the VIX is spiking for the same reasons. Ordinarily, I would sell a bear call spread in the lows 20's (its at 18-19) on the front month, but because those expire next week, the VIX might go fairly high before coming back down to earth. Instead I sold naked calls farther out and away from the market. They have a 93% PoP.
-2 VIX AUG 28c @ 0.80
Here's a new thing,
Summary:
Max Profit: $598
Capital at Risk: 5.8% (floating)
I don't think that the same thing will happen in the US. Right now volatility has spiked because stocks have broken slightly out of their year to date trading ranges. Investors appear to be worried about Greece (I really don't know why) and the Chinese stock slump.
I won't give market commentary. I hate that. So instead I'm just gonna sell an iron condor on the Dow Jones average ETF DIA.
It looks wider than it really is. Only a 53% PoP on this one ... however, my short strikes are at significant support and resistance areas. I think therefore that it has a higher PoP, but not statistically if you assume random walk.
-6 DIA 8/21 166/168/183/185 @ 0.75
On the same note, the VIX is spiking for the same reasons. Ordinarily, I would sell a bear call spread in the lows 20's (its at 18-19) on the front month, but because those expire next week, the VIX might go fairly high before coming back down to earth. Instead I sold naked calls farther out and away from the market. They have a 93% PoP.
-2 VIX AUG 28c @ 0.80
Here's a new thing,
Summary:
Max Profit: $598
Capital at Risk: 5.8% (floating)
Thursday, June 25, 2015
Summer Markets: Where's the Volatility?
Not just talking about stocks here. Everything that is usually moving is not and everything that usually doesn't move has been moving.
Bonds: have been volatile, but will decline through the Summer, most likely. Will be highly dependent on "big economic data" because this market is being pseudo-driven by the Fed.
Oil: Has been doing nothing for the past 2 months, staying steady around $60 a barrel. Expect that to continue.
Stocks: nothing has happened ALL YEAR. Only things moving are Biotech and Healthcare. Momo's are gone for now, techs are doing mostly nothing, industrials and consumer stocks also have been flat.
Currencies:
Bonds: have been volatile, but will decline through the Summer, most likely. Will be highly dependent on "big economic data" because this market is being pseudo-driven by the Fed.
Oil: Has been doing nothing for the past 2 months, staying steady around $60 a barrel. Expect that to continue.
Stocks: nothing has happened ALL YEAR. Only things moving are Biotech and Healthcare. Momo's are gone for now, techs are doing mostly nothing, industrials and consumer stocks also have been flat.
Currencies:
- USD ... has been movement and volatility but it's leaving, just like in US bonds.
- EUR ... won't be any volatility after the Greek 11th hour bailout. We're in a world of bailouts.
- JPY ... recent movement appears like a blip
- GBP ... nothing. of course, why would there be? Why is GBP a "big 4" currency?
Chinese stocks are currently experiencing volatility but they're in the middle of a massive run up so some sharp pull backs are definitely warranted. The PBOC is full-steam-ahead on that front. Cut rates and keep Shangahi airborne.
Earnings season is coming in July, so obviously some individual names will have vol there
Probably won't be much movement anywhere through the summer until September when we wait for another "Fed rate hike." Only potential volatility will come from a Grexit / Chinses crash ... both I think are pretty unlikely. BAILOUT NATION(S) REMAINS SUPREME.
update 7/8/2015
well how about all that. China is trying to pull out all the stops on the declining Shanghai shares and it is not working. Greece had a surprise "oxi" on the bailout referendum, and an 11th our deal seems unlikely. I guess when Bflakaz comes out saying "where's the vol?" it's right around the corner, LOL
update 7/8/2015
well how about all that. China is trying to pull out all the stops on the declining Shanghai shares and it is not working. Greece had a surprise "oxi" on the bailout referendum, and an 11th our deal seems unlikely. I guess when Bflakaz comes out saying "where's the vol?" it's right around the corner, LOL
Wednesday, June 24, 2015
Greece and the Fed provide nice profits
The Greece "deal" and the Fed "decision" managed to suck a lot of volatility out of the Euro, causing my FXE iron condor to profit immensely, in addition to time running out. Managed to close an initial credit 0.90 with a 0.52 debit today! Clutch!
Made a trade Monday in a Chinese stock ETF, the Deutcshe Bank db-X (currency hedged) Chinese ETF. Because of the recent 13% drop on the Shanghai composite, IV has skyrocketed. I think the PBOC won't let that fall continue much longer but I don't think Chinese stocks will quickly resume their huge run-up. I'm expecting a consolidation before a move higher, which would slurp all that volatility out of Chinese stocks. At the time of placing the trade, both strikes of the iron condor were ~10% away from the market, and I still got a hefty 0.66 credit on a 2-wide strike, because IV rank was in the 99th percentile. Should be interesting because the liquidity of the options in ASHR is ... awful at best. Sometimes 0.40 wide bid-ask spreads!
Rolled that ORCL earnings trade to July opex. Has literally no chance of making money but hey, my total risk didn't increase from rolling it, so it was worth it to take a lotto chance of this becoming a scratch or a winner.
Really starting to like being delta neutral in this go-nowhere stock market. It's strange how there is more volatility in bonds and currencies than in stocks! Well, where the vol is, that's where the opportunities are right now. The support/resistance overbought/oversold directional swing trading just doesn't work in a non-trending market. I'll stick to delta neutral positions for awhile since they're working pretty well!
Made a trade Monday in a Chinese stock ETF, the Deutcshe Bank db-X (currency hedged) Chinese ETF. Because of the recent 13% drop on the Shanghai composite, IV has skyrocketed. I think the PBOC won't let that fall continue much longer but I don't think Chinese stocks will quickly resume their huge run-up. I'm expecting a consolidation before a move higher, which would slurp all that volatility out of Chinese stocks. At the time of placing the trade, both strikes of the iron condor were ~10% away from the market, and I still got a hefty 0.66 credit on a 2-wide strike, because IV rank was in the 99th percentile. Should be interesting because the liquidity of the options in ASHR is ... awful at best. Sometimes 0.40 wide bid-ask spreads!
Rolled that ORCL earnings trade to July opex. Has literally no chance of making money but hey, my total risk didn't increase from rolling it, so it was worth it to take a lotto chance of this becoming a scratch or a winner.
Really starting to like being delta neutral in this go-nowhere stock market. It's strange how there is more volatility in bonds and currencies than in stocks! Well, where the vol is, that's where the opportunities are right now. The support/resistance overbought/oversold directional swing trading just doesn't work in a non-trending market. I'll stick to delta neutral positions for awhile since they're working pretty well!
Wednesday, June 17, 2015
Earnings Trades
Not going with the standard 2SD strangle. Instead putting wings on a strangle making it a iron condor
Sell ATM call / put, buy OTM call / put. Credit is higher looking to engage in pure vol arbitrage.
Most I can lose is 1% of account. Should be interesting.
KR 67.5/72.5/77.5 @ 2.65
ORCL 43/45/47 @ 1.40
both have ~28% POP. This is mostly a learning experience.
Got out of TLT today @ 0.18
FXE looking ok despite total break down of Greek talks. No rate hike probably took some vol out.
Sell ATM call / put, buy OTM call / put. Credit is higher looking to engage in pure vol arbitrage.
Most I can lose is 1% of account. Should be interesting.
KR 67.5/72.5/77.5 @ 2.65
ORCL 43/45/47 @ 1.40
both have ~28% POP. This is mostly a learning experience.
Got out of TLT today @ 0.18
FXE looking ok despite total break down of Greek talks. No rate hike probably took some vol out.
Tuesday, June 16, 2015
June Holds No Rate Hike
No surprise.
The TLT bull put (111/113p) is lookin' good. Vol should really come down tomorrow and I'll probably take that trade off. It's @ 0.20 now, originally sold for 0.40. Closed at the highs of the day, usually signalling continuation to the upside tomorrow.
Greece continues to be an unknown. It looks more and more like no bailout deal will be reached, but a Grexit is still up in the air. Although vol has remained elevated, obviously, the time decay effect has helped the FXE position. now trading at 0.80, originally sold for 0.90.
Markets generally don't break out in the Summer, so I'd expect more of the same choppiness until September, when the rate hike decision will again be a no. I expect bonds to stabilize through the Summer as well now that a surprise June hike is off the table.
GL HF DD
The TLT bull put (111/113p) is lookin' good. Vol should really come down tomorrow and I'll probably take that trade off. It's @ 0.20 now, originally sold for 0.40. Closed at the highs of the day, usually signalling continuation to the upside tomorrow.
Greece continues to be an unknown. It looks more and more like no bailout deal will be reached, but a Grexit is still up in the air. Although vol has remained elevated, obviously, the time decay effect has helped the FXE position. now trading at 0.80, originally sold for 0.90.
Markets generally don't break out in the Summer, so I'd expect more of the same choppiness until September, when the rate hike decision will again be a no. I expect bonds to stabilize through the Summer as well now that a surprise June hike is off the table.
GL HF DD
Thursday, June 4, 2015
Greece Provides a Rare Opportunity
The turbulence in Greece is now coming to a heed; Greece has to make a payment to its creditors very soon and it looks unlikely that they will do so. I'll spare the details, but it means that anything exposed to the Euro has high implied volatility (IV).
FXE, an ETF that attempts to mirror EUR/USD movements, has an IV rank of 93. That means that IV is pretty much at the highest levels it has been in the past 52 weeks, which is to be expected given the situation.
When IV rank gets that high, its is likely that IV will contract back to the mean at some point in the near future because the IV is pricing in an event ... most of the time. Greece making or not making that payment can determine their future in the Euro area, and that's weighing heavily on the Euro.
One of the biggest influences on my trading is a YouTube channel called tastytrade. In this video, the old pros go over why when IV rank us super high you should bring more chips to the table:
So instead of taking in 1/3 the width of the strikes in an iron condor, I'm going to try and take in 45% of the width. This reduces the PoP, but it also means I take in a much higher credit. The goal is to take advantage of not only Theta decay but also IV reverting to its mean, theoretically.
Here's the trade: -8 FXE JUL 106/108/113/115 iron condor @ 0.90. That's a max profit of $720 and a max loss of $880 with a 48% PoP. Here it is visually:
It's going to be hard to watch this one because of how tight that range is! But, I trust the tastytrade guys ... and even if the Greece announcement really moves FXE, IV should drop, meaning that drawdowns will be more limited. Plus, a higher credit helps defend against drawdowns.
The TLT trade worked perfectly, and now I wish that I was more aggressive on that one. But, always remember:
FXE, an ETF that attempts to mirror EUR/USD movements, has an IV rank of 93. That means that IV is pretty much at the highest levels it has been in the past 52 weeks, which is to be expected given the situation.
When IV rank gets that high, its is likely that IV will contract back to the mean at some point in the near future because the IV is pricing in an event ... most of the time. Greece making or not making that payment can determine their future in the Euro area, and that's weighing heavily on the Euro.
One of the biggest influences on my trading is a YouTube channel called tastytrade. In this video, the old pros go over why when IV rank us super high you should bring more chips to the table:
So instead of taking in 1/3 the width of the strikes in an iron condor, I'm going to try and take in 45% of the width. This reduces the PoP, but it also means I take in a much higher credit. The goal is to take advantage of not only Theta decay but also IV reverting to its mean, theoretically.
Here's the trade: -8 FXE JUL 106/108/113/115 iron condor @ 0.90. That's a max profit of $720 and a max loss of $880 with a 48% PoP. Here it is visually:
It's going to be hard to watch this one because of how tight that range is! But, I trust the tastytrade guys ... and even if the Greece announcement really moves FXE, IV should drop, meaning that drawdowns will be more limited. Plus, a higher credit helps defend against drawdowns.
The TLT trade worked perfectly, and now I wish that I was more aggressive on that one. But, always remember:
Bulls make money, Bears make money, Pigs get slaughtered
If anything, regardless of results, this will be a good learning opportunity. Hopefully a profitable one!
In other news, the NFLX position is still sitting around. NFLX refuses to go up much past 625 and below 615 ... so it's a wait and see kind of thing.
Wednesday, May 20, 2015
Update on Positions
Current Positions
- +2 IWM JUL 121c @ 3.50 (leg out), now 5.50 +$400 (-$160 from short call = +$240)
- -7 TLT JUN-26 112/114/125/127 iron condor @ 0.66, now 0.56 +$70
- +1 NFLX JUL 615/620p @ 2.25, now 2.38 +$13
IWM (Russel 2000 ETF)
Current delta on the 121p = ~0.70, meaning that every 1 point move in the stock results in a 0.70 change in the option price. So, if IWM heads up to resistance around 126, the price of the 121p should be around 6.00 and then I will take profits.
NFLX (Netflix)
Text book bollinger short here... rumor has it that Netflix is going to expand into China. Remember, anything "China" sends stocks moving up or down, almost always. I think the stock has gotten a little ahead of itself, practically doubling since the start of the year. Because NFLX is such a high priced stock, so are its options. The ATM puts trade around 35.00 a pop. Because of this, I only bought 1 spread; legging out with a naked put price that large can net serious losses, and gains.
The delta on the 620p is around 0.50... every 1 point decrease in NFLX will result in a 0.50 change in the put price. However, NFLX moves many dollars in a day. 1% of 620 = 6.20, so a 1% day in either direction will make me gain or lose roughly $300. That means I need to be extremely careful when I leg out of the spread. But, a move from 600 to 586, 14 points, nets $700, which is plenty when the original risk of the spread is $225. No need to be greedy, especially since euphoria can drive NFLX much higher.
TLT (20+ Year Treasury ETF)
No need for charts here, the trade is simple. The recent bond rout has caused bond volatility (and hence TLT volatility) to increase. When volatility increases, it is more advantageous to sell premium. TLT's IV rank is 83, or very high. So, the iron condor has a good POP of 62%, a good credit, and should make a decent profit once volatility decreases and some more time passes.
Thursday, May 14, 2015
Bond Traders Have Been Calling the Fed's Rate Hike Bluff
I read an interesting Bloomberg article on the way into class this afternoon. From Bloomberg:
The market is essentially calling the Fed’s bluff. Traders are betting that policy makers won’t be able to raise rates this year without disrupting stocks and bonds, something that they’d really rather not do. So either U.S. policy makers will have to risk another market-wide tantrum, or they’ll give in to traders who embrace the idea of these historically low borrowing costs sticking around for longer.
“In the end, the Fed is more likely to ‘cave’ to the market as opposed to ‘fight it’ by hiking when the market does not have it priced in,” Jim Bianco, president of Bianco Research LLC, said in an e-mail. The Fed still sees low rates “as beneficial and does not want to undermine all the work they have done over the past several years.”
I've been saying this and saying this and saying this and saying this through all of 2014 and 2015 so far. The Fed can't actually raise interest rates... forget the 25 bps that they are so afraid of charging to the carry-traders.
Everyone that is leveraged up cannot afford higher interest rates. Ok, probably 25 bps higher, sure. But not a "normal" rates, for sure. That includes the US government, big banks, hedge funds, and even your non-finance corporations can't afford higher rates!
The market is essentially calling the Fed’s bluff. Traders are betting that policy makers won’t be able to raise rates this year without disrupting stocks and bonds, something that they’d really rather not do. So either U.S. policy makers will have to risk another market-wide tantrum, or they’ll give in to traders who embrace the idea of these historically low borrowing costs sticking around for longer.
“In the end, the Fed is more likely to ‘cave’ to the market as opposed to ‘fight it’ by hiking when the market does not have it priced in,” Jim Bianco, president of Bianco Research LLC, said in an e-mail. The Fed still sees low rates “as beneficial and does not want to undermine all the work they have done over the past several years.”
I've been saying this and saying this and saying this and saying this through all of 2014 and 2015 so far. The Fed can't actually raise interest rates... forget the 25 bps that they are so afraid of charging to the carry-traders.
Everyone that is leveraged up cannot afford higher interest rates. Ok, probably 25 bps higher, sure. But not a "normal" rates, for sure. That includes the US government, big banks, hedge funds, and even your non-finance corporations can't afford higher rates!
Thursday, April 30, 2015
The Great Strategy of Legging Out!
I have been trading options for about 3 years now, starting in the late Summer of 2012. I have made a ton of mistakes, missteps, and bad decisions over that time frame. Most traders when they are novices will scour far and wide to find the "best methodology/strategy." Well, I can tell you, I think I'm on to something here.
The concept of legging out of a spread is great. When you use a spread, you limit your risk and keep the capital requirement small. This way if the stock goes against you, you can get out without taking much of a hit.
But, if the stock does go your way, all you have to do is take off that profit capping short side of the spread. This allows you to pick up "pure Delta/Gamma" as the stock moves, because you don't have negative Deltas from the short side offsetting the positive Deltas from the long side.
Ordinarily, on a dollar wide spread, say 45/46p for 0.50, the most you can make is $50. But once the stock declines past 45, you can buy back that 45p for a loss and ride the move lower on just the naked long put. This allows you to capture much more profit than was originally available in the spread, and you took on very little risk to put the trade on.
Legging out can be an immensely profitable strategy while utilizing little capital.
Today, TLT filled the gap and hit my profit target. I legged out soon after the open after it opened below 125.50, meaning I bought back the 128p for 4.10 after originally selling it for 2.00. So, I lost $440 on the short side. Then, TLT proceeded to fill the gap, and I sold the 129p for 5.76, buying it originally for 2.50. That's a profit of $1304.
So take the losses from the short side (-$440) and the profit from the long side ($1304) and BOOM
Total profit of $864 on an original $200 max risk spread! A 332% return on capital!
So without legging out, I could have sold the spread for around 0.77 for a modest $108 and 54% return. Still not bad and very acceptable for the risk taken. By why settle for that?
The concept of legging out of a spread is great. When you use a spread, you limit your risk and keep the capital requirement small. This way if the stock goes against you, you can get out without taking much of a hit.
But, if the stock does go your way, all you have to do is take off that profit capping short side of the spread. This allows you to pick up "pure Delta/Gamma" as the stock moves, because you don't have negative Deltas from the short side offsetting the positive Deltas from the long side.
Ordinarily, on a dollar wide spread, say 45/46p for 0.50, the most you can make is $50. But once the stock declines past 45, you can buy back that 45p for a loss and ride the move lower on just the naked long put. This allows you to capture much more profit than was originally available in the spread, and you took on very little risk to put the trade on.
Legging out can be an immensely profitable strategy while utilizing little capital.
Today, TLT filled the gap and hit my profit target. I legged out soon after the open after it opened below 125.50, meaning I bought back the 128p for 4.10 after originally selling it for 2.00. So, I lost $440 on the short side. Then, TLT proceeded to fill the gap, and I sold the 129p for 5.76, buying it originally for 2.50. That's a profit of $1304.
So take the losses from the short side (-$440) and the profit from the long side ($1304) and BOOM
Total profit of $864 on an original $200 max risk spread! A 332% return on capital!
So without legging out, I could have sold the spread for around 0.77 for a modest $108 and 54% return. Still not bad and very acceptable for the risk taken. By why settle for that?
Wednesday, April 29, 2015
Update on Current Positions and the Twitter Earnings Debacle: A Lesson in Tail Risk
Current Positions:
- +75 USO shares @ 19.00, now 20.11 = +$83.25
- +4 TLT JUN 128/129p @ 0.50, now 0.75 +$100
Back on the 15th I bought some USO shares when it got above 19, which at the time was a short strike in an iron condor I had. I was expecting that it would run up to 20 and might break out, but it was going to be a tough fight and I didn't know how long it might take to get above 20. It's been two weeks, so I wasn't wrong.
Instead of buying a call spread, which could have worked easily, I went with shares because of USO's tight range and the Delta/Gamma of a spread. If USO breaks out of its current 19-20 range, it will move swiftly higher or lower, but as mentioned, it could take some time. If I bought options too far out, the move wouldn't produce enough of a Delta/Gamma move, and too far in, you have the Theta decay, and it could move swiftly downward. I saw this as a prime example of when to use shares over options... low risk, medium reward. Plenty of time to get out for a scratch yet enough time to ride it higher.
What does USO look like now? Well, we got a close above 20, but it still doesn't look like it's gotten above that line in the sand...
If USO can break out of that zone, then I think it will quickly run to the next point of resistance, stopping just above 21 or 22. Upon a break out, I will double up and ride to those red lines.
On the 22, TLT broke down below some short term support, then fought to get back above it, and now today it gapped down pretty hard. What's annoying is that I wasn't able to leg out of my spread at the level I wanted to, because it was passed by the gap down! Who complains when they get short that the thing went down too far?? Either way, I will now leg out if we get a move that hold below the blue line, then look to take profits at either the 1st red or 2nd red line, depending on the "velocity" of the move, ya dig?
The biggest reason I didn't leg out today, however, was because the entirety of today's move was outside of the bollinger bands. Therefore, a snap back up is likely tomorrow, although I think it is likely that we will at least see the 1st red line before too long.
Now, on to Twitter. TWTR was scheduled to release earnings yesterday after the close. However, some company got a leak of the numbers and ironically tweeted them out at 3pm. The stock tanked and trading was halted for around 45 minutes before resuming, tanking even further. Today, it was also down more than 9%.
Often times I will sell what I call a 2SD strangle on earnings announcement days, meaning that my short strikes are 2 standard deviations away from the current price. Well, I was too busy studying for finals to bother with TWTR, although I did want to put on a strangle.
An earnings leak is an extremely rare occurrence, probably 3 or 4 standard deviations out on the probability curve! I would have been HAMMERED. This was a real wake up! Just because there's only about a ~5% chance of losing a bunch of money.... it's still there!
Wednesday, April 22, 2015
Why is Spoofing Illegal, Again?
In the news today, the CFTC and SEC have allegedly caught the person solely responsible for causing the flash crash of 2010:
Apparently, some random guy in his house caused the flash crash. As highlighted in this article, the chances of that being true are probably slim; he may have had something to do with a coalescence of other factors. But, he caused it apparently by what is known as "spoofing."
Spoofing is when you input a bunch of large block sell orders above the current market price so that they are not filled. Then, trading algorithms and robots pick up that information and decide to sell in anticipation of those orders crossing the tape and causing the price to drop. But, the large block orders are cancelled before they can be filled. The price drops, and the spoofer buys the asset at a lower price before it goes back to pretty much where it was.
Sometimes, spoofing is done by other robots. Cool, algo-wars. The great thing though is that a lot of the time it is done just be shear speed of pressing hot keys. Imagine, a human being can actually outsmart a (potentially) multi-billion dollar algorithmic trading robot army and make a profit.
In my opinion, more power to them. For some reason, it is legal to outsmart human beings with advanced technology, but to outsmart computers with... old technology? That's something!
Instead of questioning the practice of spoofing, we should probably question the stability of a bunch of computers zipping orders around based on extensive codes. Humans don't fall for spoofing!
If one guy in a basement in London can crash the entire U.S. stock market, the system is not stable.
We need a re-emergence of human traders, even if they are "less efficient." That system worked (pretty much) fine for decades. Besides, the over-automation of everything can end badly...
Apparently, some random guy in his house caused the flash crash. As highlighted in this article, the chances of that being true are probably slim; he may have had something to do with a coalescence of other factors. But, he caused it apparently by what is known as "spoofing."
Spoofing is when you input a bunch of large block sell orders above the current market price so that they are not filled. Then, trading algorithms and robots pick up that information and decide to sell in anticipation of those orders crossing the tape and causing the price to drop. But, the large block orders are cancelled before they can be filled. The price drops, and the spoofer buys the asset at a lower price before it goes back to pretty much where it was.
Sometimes, spoofing is done by other robots. Cool, algo-wars. The great thing though is that a lot of the time it is done just be shear speed of pressing hot keys. Imagine, a human being can actually outsmart a (potentially) multi-billion dollar algorithmic trading robot army and make a profit.
In my opinion, more power to them. For some reason, it is legal to outsmart human beings with advanced technology, but to outsmart computers with... old technology? That's something!
Instead of questioning the practice of spoofing, we should probably question the stability of a bunch of computers zipping orders around based on extensive codes. Humans don't fall for spoofing!
If one guy in a basement in London can crash the entire U.S. stock market, the system is not stable.
We need a re-emergence of human traders, even if they are "less efficient." That system worked (pretty much) fine for decades. Besides, the over-automation of everything can end badly...
Thursday, April 16, 2015
Let Me Clarify Something on Rates...
If there are any readers of this blog - highly unlikely - than you know that I do not think the Fed will "raise rates" in 2015.
What I mean by "rates" is the Federal Funds Target Rate, currently at ~0%.
I believe that the Fed is trying to persuade markets to act as if a rate hike was coming rather than actually raising the rate itself. I don't think the economy can afford higher rates, and I don't think the Fed has the balls to raise them in the face of worsening economic data.
What I mean by a rate hike: The Fed, in 2015, will NOT raise rates beyond a "ceremonial" 25, 50, or 75bps at anytime in the near future. The Fed may in fact raise the Federal Funds Rate to 0.25%, 0.5%, or 0.75% in the next year, but nothing beyond that.
What's the difference between 0 and 0.25? A rounding error. This "hike" is therefore ceremonial; its an attempt to show the markets that the Fed has credibility. The Fed knows full well that anything much higher than 75bps will break down the system; they aren't stupid.
What I mean by "rates" is the Federal Funds Target Rate, currently at ~0%.
I believe that the Fed is trying to persuade markets to act as if a rate hike was coming rather than actually raising the rate itself. I don't think the economy can afford higher rates, and I don't think the Fed has the balls to raise them in the face of worsening economic data.
What I mean by a rate hike: The Fed, in 2015, will NOT raise rates beyond a "ceremonial" 25, 50, or 75bps at anytime in the near future. The Fed may in fact raise the Federal Funds Rate to 0.25%, 0.5%, or 0.75% in the next year, but nothing beyond that.
What's the difference between 0 and 0.25? A rounding error. This "hike" is therefore ceremonial; its an attempt to show the markets that the Fed has credibility. The Fed knows full well that anything much higher than 75bps will break down the system; they aren't stupid.
Tuesday, April 14, 2015
TLT Thriller Brings Home the Bacon
I have a rough time when trading TLT options. The setups always look good, the prices are too. So I jump in, and TLT goes where I want it briefly. Then it turns on a dime after giving me a taste and pounds against me until I get out for a loss.
This time, I sold some puts just underneath some strong support at 129.50, the 4/17 127/129p spread for 0.53. TLT has been hanging out right around that support point for about a week, and since the options I'm in expire this Friday, sudden movements cause wild swings in option prices.
Today TLT jumped up 1.35% and the option values tanked 75%. My spread was valued at 0.37 as of yesterday's close and today I closed it at 0.10 for a 75% gain.
Thank you TLT!
In other news, USO is also hanging out just underneath 19, where the call side of my 5/1 iron condor is. Volatility is dropping in USO and time is passing, which is offsetting its slow rise towards 19. Hopefully USO dips a little before the end of the week and then I can hop put of this position alive.
**I have decided to get out of USO at a scratch. If she breaks above that resistance, she's screaming higher. With only weeks to expiration, better take what I can get and move over. I will instead get ready to trade a breakout. A scratch is acceptable because the PoP was only 52% to begin with.
Out @ 0.38 +$20.
This time, I sold some puts just underneath some strong support at 129.50, the 4/17 127/129p spread for 0.53. TLT has been hanging out right around that support point for about a week, and since the options I'm in expire this Friday, sudden movements cause wild swings in option prices.
Today TLT jumped up 1.35% and the option values tanked 75%. My spread was valued at 0.37 as of yesterday's close and today I closed it at 0.10 for a 75% gain.
Thank you TLT!
In other news, USO is also hanging out just underneath 19, where the call side of my 5/1 iron condor is. Volatility is dropping in USO and time is passing, which is offsetting its slow rise towards 19. Hopefully USO dips a little before the end of the week and then I can hop put of this position alive.
**I have decided to get out of USO at a scratch. If she breaks above that resistance, she's screaming higher. With only weeks to expiration, better take what I can get and move over. I will instead get ready to trade a breakout. A scratch is acceptable because the PoP was only 52% to begin with.
Out @ 0.38 +$20.
Wednesday, April 1, 2015
Relative Success with TLT (knock on wood) and USO trade
My TLT vertical is up a decently, initial credit was 0.53 and now its at 0.35, so not bad. Today's big up move may continue into the end of the week and IV may drop as well, both good for my position.
I also traded an iron condor in USO, an oil company. It's up better than 4% today and it's IV has remained elevated due to the fluctuations in crude oil. I'm getting a little bit closer to the market than I normally would, but the credit for further OTM options just doesn't justify the risk.
I'm taking a little less risk with the USO trade than with TLT because it has a much lower PoP. TLT had a 71% at inception, and the USO position, a May 1st 15/16/19/20 iron condor has a 52% PoP.
Why so close to the market? USO has resistance at 19ish and support at 16ish, so it's likely to turn around once it gets close to those strikes.
I've sold 10 of them, risking a max $600 and gaining a max of $400. (cr = 0.40)
I also traded an iron condor in USO, an oil company. It's up better than 4% today and it's IV has remained elevated due to the fluctuations in crude oil. I'm getting a little bit closer to the market than I normally would, but the credit for further OTM options just doesn't justify the risk.
I'm taking a little less risk with the USO trade than with TLT because it has a much lower PoP. TLT had a 71% at inception, and the USO position, a May 1st 15/16/19/20 iron condor has a 52% PoP.
Why so close to the market? USO has resistance at 19ish and support at 16ish, so it's likely to turn around once it gets close to those strikes.
I've sold 10 of them, risking a max $600 and gaining a max of $400. (cr = 0.40)
Wednesday, March 25, 2015
Dipping My Toes with TLT
I've taken a nice break to clear my head from all my impatience and now I'm back with a new position in TLT.
This one is a standard Bull Put with the APR15 126/129 for 0.53 x 5 for a credit of $265 and a max risk of $735, making the R/R = 0.36 (good!) with a 71% probability of profit (POP).
I haven't had the best luck with TLT in the past, but hopefully this can break the streak. IV Rank for TLT is at 62%, so it makes sense to sell rather than buy.
This one is a standard Bull Put with the APR15 126/129 for 0.53 x 5 for a credit of $265 and a max risk of $735, making the R/R = 0.36 (good!) with a 71% probability of profit (POP).
I haven't had the best luck with TLT in the past, but hopefully this can break the streak. IV Rank for TLT is at 62%, so it makes sense to sell rather than buy.
Thursday, March 12, 2015
I've Been Trading Poorly, So It's Time For a Small Break...
I've been very impatient with my trades recently. If I had held the original spread, realized losses would have become big... BIG gains.
So I'm taking a couple of weeks off from trading. Clear my head, get back to what works. Most importantly, get refocused and my mojo back.
I can afford to that, too. Even though February, and thus far March, sucked, I'm still clocking the stock market. Yeah yeah it's not a good benchmark since I trade options but whatever it's the only one I got that makes sense.
S&P 500 YTD: +0.33%
Dow YTD: +0.40%
NASDAQ: +3.31%
Russel 2000: +2.65%
Bflakaz Trading Log: +7.44%
Here's all the trades. Unfortunately, many were not posted on the blog because they were either quick adjustments or I simply forgot...
| 2015 | Capital Limit upped to $30000 or max $1500 per position | |||||||||||||
| Ticker | Date Open | Asset Class | Spread | Strikes | Expiration | Lots | Opening Price | Closing Price | Date Close | P/L | Commission | Risk | % of Capital | ROC |
| Z | 01/06/15 | Option | Bull Put | 85/90 | FEB 2015 | 4 | 1.40 | 0.70 | 01/08/15 | 280 | 20 | 1440 | 4.800% | 19.44% |
| TLT | 01/06/15 | Option | Bear Put | 130/131 | MAR 2015 | 12 | 0.50 | 0.65 | 02/10/15 | 180 | 20 | 600 | 2.000% | 30.00% |
| VIX | 01/06/15 | Option | Bear Call | 24/26 | FEB 2015 | 9 | 0.40 | 0.10 | 01/08/15 | 270 | 20 | 1440 | 4.800% | 18.75% |
| XLE | 01/14/15 | Option | Bull Put | 68/70 | FEB 2015 | 5 | 0.52 | 0.22 | 01/21/15 | 150 | 20 | 592 | 1.973% | 25.34% |
| SPY | 01/14/15 | Option | Bull Put | 193/195 | FEB 2015 | 6 | 0.41 | 0.15 | 01/22/15 | 156 | 20 | 954 | 3.180% | 16.35% |
| VIX | 01/14/15 | Option | Bear Call | 24/26 | FEB 2015 | 6 | 0.35 | 0.15 | 01/22/15 | 120 | 20 | 990 | 3.300% | 12.12% |
| GLD | 01/21/15 | Option | Naked Put | 123 | MAR 2015 | 5 | 2.95 | 3.35 | 01/29/15 | -200 | 20 | 1475 | 4.917% | -13.56% |
| GLD | 01/21/15 | Option | Leg Out | 125 | MAR 2015 | 5 | 3.95 | 6.00 | 01/29/15 | 1025 | 20 | 1975 | 6.583% | 51.90% |
| TLT | 01/26/15 | Option | Naked Put | 125 | MAR 2015 | 12 | 0.55 | 0.75 | 02/10/15 | -240 | 20 | 1200 | 4.000% | -20.00% |
| TSLA | 01/27/15 | Option | Bear Call | 220/225 | FEB 2015 | 3 | 1.30 | 2.60 | 02/05/15 | -390 | 20 | 1110 | 3.700% | -35.14% |
| FB | 01/28/15 | Option | Strangle | 66/86 | Jan-30 2015 | 5 | 0.32 | 0.00 (expired) | 01/30/15 | 160 | 10 | 2000 | 6.667% | 8.00% |
| TSLA | 02/03/15 | Option | Bull Put | 185/190 | FEB 2015 | 3 | 1.05 | 0.40 | 02/05/15 | 195 | 20 | 1185 | 3.950% | 16.46% |
| AAPL | 02/03/15 | Option | Call Butterfly | 118/120/122 | FEB 2015 | 8 | 0.24 | 0.35 | 02/10/15 | 88 | 20 | 192 | 0.640% | 45.83% |
| GMCR | 02/04/15 | Option | Strangle | 98/148 | Feb-6-2015 | 4 | 0.50 | 0.00 (expired) | 02/06/15 | 200 | 10 | 3000 | 10.000% | 6.67% |
| STX | 02/06/15 | Option | Bear Put | 57.5/60 | APR 2015 | 4 | 1.00 | 0.80 | 03/02/15 | -80 | 20 | 400 | 1.333% | -20.00% |
| TSLA | 02/11/15 | Option | Strangle | 175/250 | Feb-13 2015 | 3 | 1 | 0.00 (expired) | 02/13/15 | 300 | 10 | 2500 | 8.333% | 12.00% |
| FEYE | 02/11/15 | Option | Strangle | 30/43 | Feb-13 2015 | 4 | 0.5 | 0.00 (expired) | 02/13/15 | 200 | 10 | 3000 | 10.000% | 6.67% |
| INTC | 02/13/15 | Option | Bull Call | 34/35 | APR 2015 | 8 | 0.5 | 0.5 | 03/05/15 | 0 | 20 | 400 | 1.333% | 0.00% |
| XLU | 02/18/15 | Option | Bear Put | 45/46 | MAR 2015 | 6 | 0.5 | 0.41 | 03/02/15 | -54 | 20 | 300 | 1.000% | -18.00% |
| MCD | 02/26/15 | Option | Bull Put | 92/94 | MAR 2015 | 5 | 0.35 | 0.12 | 02/27/15 | 115 | 20 | 875 | 2.917% | 13.14% |
| MBLY | 02/27/15 | Option | Bull Put | 30.5/31.5 | MAR 2015 | 8 | 0.15 | 0.05 | 03/05/15 | 80 | 20 | 680 | 2.267% | 11.76% |
| MBLY | 02/27/15 | Option | Bear Call | 39/41 | MAR 2015 | 8 | 0.2 | 0.05 | 03/02/15 | 120 | 20 | 1440 | 4.800% | 8.33% |
| YUM | 02/27/15 | Option | Bear Call | 84/85 | MAR 2015 | 14 | 0.25 | 0.1 | 03/03/15 | 210 | 20 | 1050 | 3.500% | 20.00% |
| MBLY | 03/02/15 | Option | Bear Call (roll) | 36/38 | MAR 2015 | 8 | 0.25 | 0.9 | 03/09/15 | -520 | 20 | 1400 | 4.667% | -37.14% |
| MBLY | 03/05/15 | Option | Bull Put (roll) | 32/34 | MAR 2015 | 8 | 0.25 | 0.05 | 03/09/15 | 160 | 20 | 1400 | 4.667% | 11.43% |
| MBLY | 03/09/15 | Equity | Long | 100 | 38.55 | 40.32 | 03/12/15 | 177 | 10 | 3855 | 12.850% | 4.59% | ||
| Profits | Commission | Net Profit | ROC | |||||||||||
| 2702 | 470 | 2232 | 7.44% |
IT'S TIME FOR SPRING BREAK YEAAAAAAAAAH!!!!!!!
Friday, February 27, 2015
A Frustrating February
February 2015 was the month of coulda-shoulda-woulda...
I SHOULDA stayed short TLT, it would have been big profits. I SHOULDA gone long AAPL after the ATH breakout, it would have been huge profits. I SHOULDA liquidated my positions at the beginning of the week, I WOULDA been up $160, and now I'm down $230.
The TLT and AAPL trades were good set-ups, everything else, not so much. XLU looked like a good setup, and yeah, at one point I was up 50% on that position. But I got greedy: I wanted to leg out and make big $$$ but should have taken what Mr. Market had to offer. I've been punished and am now down $18 on it.
I made a couple good earnings trades, but I should have been more "awake" to place more of those. February was still profitable, and I didn't do too bad in the first week. Marking to market (since I haven't closed a few positions), I've made $868 gross, and $688 after commissions, or +2.29% ROC. The S&P and the DOW beat me this month, my worst since November.
What have I learned from Fuck-You February? Swing trading doesn't always work; you need a directional market to trade directionally. When the market just chops around, nothing gets overbought/oversold and nothing quite hits support/resistance. There's no momentum to drive anything anywhere, and volatility comes down too.
While I will still stick to my directional trades, going forward I'm going to focus more on smaller profit, better probability trading, because being directional and using debit spreads just isn't working right now.
January was a superb month, February was disappointing. It's my goal to get back on my horse in March. Historically, Q1 of any year has the most "jitters." I guess the cold not only makes people apathetic to venture outside, but also to venture out in the markets. Let's hope the Spring gets us moving again - up or down!
I SHOULDA stayed short TLT, it would have been big profits. I SHOULDA gone long AAPL after the ATH breakout, it would have been huge profits. I SHOULDA liquidated my positions at the beginning of the week, I WOULDA been up $160, and now I'm down $230.
The TLT and AAPL trades were good set-ups, everything else, not so much. XLU looked like a good setup, and yeah, at one point I was up 50% on that position. But I got greedy: I wanted to leg out and make big $$$ but should have taken what Mr. Market had to offer. I've been punished and am now down $18 on it.
I made a couple good earnings trades, but I should have been more "awake" to place more of those. February was still profitable, and I didn't do too bad in the first week. Marking to market (since I haven't closed a few positions), I've made $868 gross, and $688 after commissions, or +2.29% ROC. The S&P and the DOW beat me this month, my worst since November.
What have I learned from Fuck-You February? Swing trading doesn't always work; you need a directional market to trade directionally. When the market just chops around, nothing gets overbought/oversold and nothing quite hits support/resistance. There's no momentum to drive anything anywhere, and volatility comes down too.
While I will still stick to my directional trades, going forward I'm going to focus more on smaller profit, better probability trading, because being directional and using debit spreads just isn't working right now.
January was a superb month, February was disappointing. It's my goal to get back on my horse in March. Historically, Q1 of any year has the most "jitters." I guess the cold not only makes people apathetic to venture outside, but also to venture out in the markets. Let's hope the Spring gets us moving again - up or down!
Sunday, February 22, 2015
Update on Positions
Current Positions:
- +4 STX 57.5/60 Apr puts @ 1.00, now 0.64 -$144 (entered 2/6)
- +8 INTC 34/35 Apr calls @ 0.50, now 0.52 +$16 (entered 2/13)
- +6 XLU 45/46 Mar calls @ 0.50, now 0.60 +$60 (entered 2/18)
STX has been breaking my balls, and now its time to get serious. Down $144 is not what I want, and the modifications I made to cut losses in TLT certainly did not work. I ended up closing that one down $60. Although STX has not broken out of the gap resistance, I'm losing a chunk of cash. If it breaks out, I will just close it and take the hit.
Going long INTC is the opposite of STX; both charts look very similar. I chose to go long INTC because it is in a multi-year uptrend, and after gapping down has had some upward momentum, as shown by the MACD/CCI crosses. In the past two days, however, INTC lost some of that momentum, so we'll see what happens. With my luck, STX will break out and INTC will break down. What a crapshoot month it has been. My plan is to leg out once it passes gap resistance.
XLU hit a good support level and took off on Wednesday, helped by the Fed comments on remaining patient with a rate hike (ya'll know what I think of that...) This is a utility stock ETF, and utilities are kind of used like "stock bonds," meaning that investors usually buy them for their yield, not capital gains. It too lost some upward momentum off that support bounce, but I liked the price action on Friday, where it recovered from being down 1.5% to lose green 0.05%. Because there were no April calendar options available, I had to go into March, giving me a short time for this to play out. My plan is to have this position closed by mid next week, regardless of where XLU is at, due to theta decay.
Tuesday, February 10, 2015
TLT You Frustrate Me...
Back on January 28th I posted about my hedging adjustment in TLT. TLT has since come down, just as I had suspected it would:
So, one would think that my spread would now be making some money, right?
INCORRECT. I sold the March 125p for 0.55, its now ~1.00. My original put spread, the 130/131, stands at 0.65, meaning I'm actually losing more money than I should be.
The chart on the left shows the original debit put spread, bought @ 0.50. On a $1 wide spread, this means that I can either make a maximum of 0.50 or lose a maximum of 0.50.
The chart on the right shows the current spread, with the short 125p. The red line shows how it would play out upon expiration. As long as TLT stays above 125 on March 20, then that 125p would expire worthless, netting a 0.55 return. Additionally, if TLT remains below 130 on March 20, then the 130p would expire worthless too. The original spread would net 0.50 and the expired 125p would net 0.55, rendering a total possible 1.05 profit.
The orange lines suggest where the spread should be trading currently. Even though I wouldn't be making 1.05, I should still be in the green, above the gray zero line. But, it isn't. I'm down 0.30, which doesn't make any sense.
So, is there a price anomaly in TLT options? This is the last time I will probably ever trade them, because I'm in 12 contracts. -0.30 x 12 x 100 = -$360, so I'm down a good chunk of change!
This is beyond me... I don't know what to do. Sit and wait and let the loss get potentially massive, or exit the trade soon and write this one down as some mo bullshit?
So, one would think that my spread would now be making some money, right?
INCORRECT. I sold the March 125p for 0.55, its now ~1.00. My original put spread, the 130/131, stands at 0.65, meaning I'm actually losing more money than I should be.
The chart on the left shows the original debit put spread, bought @ 0.50. On a $1 wide spread, this means that I can either make a maximum of 0.50 or lose a maximum of 0.50.
The chart on the right shows the current spread, with the short 125p. The red line shows how it would play out upon expiration. As long as TLT stays above 125 on March 20, then that 125p would expire worthless, netting a 0.55 return. Additionally, if TLT remains below 130 on March 20, then the 130p would expire worthless too. The original spread would net 0.50 and the expired 125p would net 0.55, rendering a total possible 1.05 profit.
The orange lines suggest where the spread should be trading currently. Even though I wouldn't be making 1.05, I should still be in the green, above the gray zero line. But, it isn't. I'm down 0.30, which doesn't make any sense.
So, is there a price anomaly in TLT options? This is the last time I will probably ever trade them, because I'm in 12 contracts. -0.30 x 12 x 100 = -$360, so I'm down a good chunk of change!
This is beyond me... I don't know what to do. Sit and wait and let the loss get potentially massive, or exit the trade soon and write this one down as some mo bullshit?
Friday, February 6, 2015
Watchlist and STX short
What I'm watching:
- YHOO / BABA - approaching support. looking to go long debit call spreads
- BIIB - becoming overbought, waiting for capitulation. short debit puts
- LEN - approaching double-ish top resistance. looking to short debit puts.
I got into a short bear put spread with STX after seeing it fail at resistance today.
In 4 Apr 57.5/60p @ 1.00. Not looking to leg out, will instead exit if it trades down to that support level. Not enough "room" to leg out... should pick up enough delta on the spread to make $
Wednesday, February 4, 2015
TSLA woes and other news
TSLA had a big two day rally after oil finally rocketed off the bottom and Obama said he wants to extend the solar energy subsidy. Why does that matter? SCTY, Musk's other company, makes solar panels, and the robo-traders correlate the two stocks. Plus, it broke out of that down trend resistance, with volume.
But what does Bflakaz do? Just take the hit and close? No! Now I have an iron condor instead of just a bear call, hedging my losses. If TSLA can move back down to 205 before earnings on the 11th, I'll exit then.
I've also opened a small butterfly position on AAPL, hoping to pin it around 120 for a few days. Seeing as that WFM butterfly I traded a few months back was a great success, I decided to take another crack at it.
And GMCR reports earnings tonight - you know what that means. 2 SD strandle! This one's for the 98/148, ~20% away from the market and 4x the expected move. Three for $0.50.
TLT is still on, and it's showing some weakness - finally. I need TLT to move down between 126ish and 128ish to exit my trade for a profit, its around 134 now.
But what does Bflakaz do? Just take the hit and close? No! Now I have an iron condor instead of just a bear call, hedging my losses. If TSLA can move back down to 205 before earnings on the 11th, I'll exit then.
I've also opened a small butterfly position on AAPL, hoping to pin it around 120 for a few days. Seeing as that WFM butterfly I traded a few months back was a great success, I decided to take another crack at it.
And GMCR reports earnings tonight - you know what that means. 2 SD strandle! This one's for the 98/148, ~20% away from the market and 4x the expected move. Three for $0.50.
TLT is still on, and it's showing some weakness - finally. I need TLT to move down between 126ish and 128ish to exit my trade for a profit, its around 134 now.
Thursday, January 29, 2015
Another Leg Out Home Run
Legging out is when you take off the profit cap (and delta hedge) on your vertical spread to pick up pure delta when there is short term momentum in the direction of your position.
So when GLD passed 122, I took off the short 123 puts on my spread, leaving the now naked 125 puts to pick up pure $$$
This makes it so that instead of making a max profit of $500 on the spread, I made $825. The short 123p lost $200 but the long 125p made $1025, which makes $825.
What a day to get me back in the saddle!
So when GLD passed 122, I took off the short 123 puts on my spread, leaving the now naked 125 puts to pick up pure $$$
This makes it so that instead of making a max profit of $500 on the spread, I made $825. The short 123p lost $200 but the long 125p made $1025, which makes $825.
What a day to get me back in the saddle!
Wednesday, January 28, 2015
It's Been Awhile
My trades haven't been doing much. I had a couple of good trades shorting the VIX and selling SPY puts, as well as a support play on XLE. I'm up about 3%. Other than that, I'm still in the TLT short, but have made an adjustment:
By selling another put underneath the spread, my risk profile makes a transformation...
By selling another put for a credit, I have made it so that even if TLT keeps chugging higher, I now cannot lose money. I make a small $5 profit (per spread, so 5 x 12 = $60). However, if TLT does in fact decline, I will still make as much money as I would have before, so long as it does not decrease past 125. Nifty, right?
TLT has gone somewhat gangbusters because of the USD rally and the deflation fears. Plus, because its really the only thing performing in the past 8 months, fund managers are really piling into it. It looks like it could go full parabolic, just as treasuries did back in 2012.
I'm also tentatively short gold via GLD, as it has seen an explosive overbought move to the upside. Just a usual bollinger band short here, nothing different. +5 Mar 123/125p @ 1.00
And finally, I went short TSLA yesterday by selling calls. It tagged channel resistance and will probably head lower. Earnings are the week of February 17, so this has to move down quickly. But since I'm in Feb 20 calls, I may see some theta decay in my favor even if TSLA sits around 200. -3 Feb 220/225c @ 1.30
I'm going through another period of losing my mojo. The market isn't really trendy right now, so finding overbought/oversold stocks is hard to do. Most stocks are listing up and down, not really tagging any support or resistance levels... except one. I was looking at AAPL last week, ready to sell some high IV puts. I decided against it, however, because AAPL had earnings yesterday, not giving me enough time to profit beforehand. I regret taking it, because it would have been a killer trade!
By selling another put underneath the spread, my risk profile makes a transformation...
By selling another put for a credit, I have made it so that even if TLT keeps chugging higher, I now cannot lose money. I make a small $5 profit (per spread, so 5 x 12 = $60). However, if TLT does in fact decline, I will still make as much money as I would have before, so long as it does not decrease past 125. Nifty, right?
TLT has gone somewhat gangbusters because of the USD rally and the deflation fears. Plus, because its really the only thing performing in the past 8 months, fund managers are really piling into it. It looks like it could go full parabolic, just as treasuries did back in 2012.
I'm also tentatively short gold via GLD, as it has seen an explosive overbought move to the upside. Just a usual bollinger band short here, nothing different. +5 Mar 123/125p @ 1.00
And finally, I went short TSLA yesterday by selling calls. It tagged channel resistance and will probably head lower. Earnings are the week of February 17, so this has to move down quickly. But since I'm in Feb 20 calls, I may see some theta decay in my favor even if TSLA sits around 200. -3 Feb 220/225c @ 1.30
I'm going through another period of losing my mojo. The market isn't really trendy right now, so finding overbought/oversold stocks is hard to do. Most stocks are listing up and down, not really tagging any support or resistance levels... except one. I was looking at AAPL last week, ready to sell some high IV puts. I decided against it, however, because AAPL had earnings yesterday, not giving me enough time to profit beforehand. I regret taking it, because it would have been a killer trade!
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