Wednesday Activity: SOLD: 5 EEM JAN 110/115 @ 3.8 Stock at 137.74, net profits = 14.4 (Reduced position from 10 spreads to 5 spreads. Defensive move in response to less bullishness on overseas investments.) SOLD: 5 UNG OCT 42/47 @ 4.15 ETF at 60.15, net profit on = 357.40 (another reduction in position from 10 to 5 spreads. I still have an over-weighted position in UNG spreads, but this is my most risky spread at 42/47, so I decided to cut back a bit.) Both of the above transactions also freed up cash of course. Now I have 21K available for new spreads. ******* SOLD: 5 MOS DEC 70/75 CALLS @ 4.45 SOLD: 5 MOS DEC 75/70 PUTS @ 0.45 Stock at 146.15, net profit on call spreads = 311.0 Expected gross profit on PUT spreads = 135. So here is my second example of closing a CALL bull spread and replacing it with a PUT bull spread. Total position return is 4.9 out of a possible 5.0. Advantages: capture early profits, and eliminate possibility of early assignment of short calls. I did this because the 70/75 spreads were very DITM for a $146 stock, and risk of early assignment is too high. Under these circumstances I will be looking for an opportunity to change over to puts. The only extra cost to make this conversion is the commission to buy the put spreads, in this case $7. One possibility for an improvement over this tactic, is to sell the call spreads but then replace them with puts from the next further out expiration date. For example on my CNX position where I converted to PUT spreads (post 6/4 & 6/5) suppose I had sold the JAN puts instead of the OCT puts. Instead of selling them for .45, I might have sold them for .8 or .85. Perhaps a better use of the funds freed up from selling the call spreads with the same safety in depth and no assignment risk, but more profit potential. No, Iâm not being converted to prefer put credit spreads over call debit spreads, but I do like them for this circumstance. A new trick for an old dog, but still the same dog. **
Thursdayâs activity: SOLD: 5 GDX SEPT 40/43 @ 2.0 Stock at 45.5, net LOSS 192.6 (while Iâm a gold bull, I have less faith in gold stocks. Used strength today to rid most risky position in GDX.) SOLD: 4 MTW SEPT 25/30 @ 3.9 Stock at 34.5, net LOSS 31.4 (near breakeven to exit weakening position) SOLD: 7 PAAS OCT 25/30 @ 3.5 Stock at 32.7, net LOSS 124.8 (Used strength today to rid most risky position in PAAS. Hope to increase # of Jan spreads at 20/25.) SOLD: 6 WFT AUG 27.5/30 Stock at 46.96, net profit = 204.0 (closed out last AUG position at near full profit 2 months early) So net loss for day was $144.7, but raised about 6500 in new funds available for new spreads. Continuing to raise cash and cull out or reduce what I perceive to be the riskiest positions. Taking small losses in return for safety. Account value still holding near 206K. I now only have 144K invested in spreads as opposed to my last summary with 160K in spreads. As I shed spreads Iâm also reducing potential earnings, which is the other side of the coin. So the pressure builds to re-invest at better levels in a very discouraging market. Did you get that? âperceived riskâ? My âperceptionâ is so notoriously flawed. My history of perception or insight or tuition is what drove me to seek the most bullet-proof strategy I could find. ***** I have to say Iâm surprised (happily) how my portfolio is performing. It is no real surprise that oil and gold are higher. But the falling market indexes really do seem disconnected from the energy stocks. I had hoped that this would be the case, but I have observed the opposite effect also. With the S&P at 1285, I am nervous (like everybody else) that it might be headed to 1000. Who can survive that except shorts?
06-26-08 04:36 AM Wednesday Activity: . ******* SOLD: 5 MOS DEC 70/75 CALLS @ 4.45 SOLD: 5 MOS DEC 75/70 PUTS @ 0.45 Stock at 146.15, net profit on call spreads = 311.0 Expected gross profit on PUT spreads = 135 Nice work ym my question ....Your new mos Dec put pays about 11 % you said it was sold. for .45*500=$250 wich would be about 11% with margin of $2200. this would be low for your goal of 25% over 6 mo. did i miss read ? thanks and cheers john
John - I had the same thought. But read the bottom part of the post where I was proposing increasing yield by going out to the next strike date. What do you think?
Fridayâs activity: No Trades today. I forgot to mention yesterday that a lot of EWZ SEP 55 and 60 calls were assigned early. Several of my accounts were affected, however there was sufficient funds to handle the short positions, and I exercised the long calls without incident. It was dividend related, according to news. Another thought. From my post on May 20, I mentioned that my account was at an all time high liquidation value, around 209K. At that time the S&P was near 1420, nasdaq at 2500. Today S&P near 1275, nasdaq near 2300, and my account just hit the 209K mark again. I know there are a lot of factors involved, so the meaning is not crystal clear, but there it is. ***** P&L SUMMMARY (from start of journal) PROFITABLE TRANSACTIONs: 25 FOR 9300.8 LOSING TRANSACTIONS: 14 FOR 2731.8 Total profits: 6569.0 ***** Spread Distribution (number of spreads expiring for month): Sept â 18 Oct â 104 Nov â 35 Dec â 56 Jan09 â 174 ,total - 387 ***** Current Spread List: AEM NOV2008 45 C [AEMKI 100] 4 AEM NOV2008 55 C [AEMKK 100] -4 AEM JAN2009 40 C [AEMAH 100] 5 AEM JAN2009 45 C [AEMAI 100] -5 AGU JAN2009 60 C [AGUAL 100] 5 AGU JAN2009 65 C [AGUAM 100] -5 APA OCT2008 110 C [APAJB 100] 4 APA OCT2008 115 C [APAJC 100] -4 BHI OCT2008 50 C [BHIJJ 100] 3 BHI OCT2008 55 C [BHIJK 100] -3 BTU JAN2009 50 C [ZZTAJ 100] 5 BTU JAN2009 55 C [ZZTAK 100] -5 CAM JAN2009 30 C [CAMAF 100] 3 CAM JAN2009 35 C [CAMAG 100] -3 CF NOV2008 85 C [CF KQ 100] 8 CF NOV2008 90 C [CF KR 100] -8 CNX OCT2008 55 P [CNXVK 100] 8 CNX OCT2008 60 P [CNXVL 100] -8 CNX JAN2009 65 C [CNXAM 100] 10 CNX JAN2009 70 C [CNXAN 100] -10 COP NOV2008 55 C [COPKK 100] 3 COP NOV2008 60 C [COPKL 100] -3 COP JAN2009 60 C [COPAL 100] 4 COP JAN2009 65 C [COPAM 100] -4 CVX SEP2008 70 C [CVXIN 100] 3 CVX SEP2008 75 C [CVXIO 100] -3 DBA OCT2008 30 C [DBAJD 100] 5 DBA OCT2008 35 C [DBAJI 100] -5 DBA JAN2009 25 C [DBAAY 100] 7 DBA JAN2009 30 C [DBAAD 100] -4 DBA JAN2009 35 C [DBAAI 100] -3 DO SEP2008 95 C [DO IS 100] 4 DO SEP2008 100 C [DO IT 100] -4 DVN OCT2008 75 C [DVNJO 100] 5 DVN OCT2008 80 C [DVNJP 100] -5 DVN JAN2009 90 C [DVNAR 100] 5 DVN JAN2009 95 C [DVNAS 100] -5 ECA OCT2008 60 C [ECAJL 100] 4 ECA OCT2008 65 C [ECAJM 100] -4 ECA OCT2008 70 C [ECAJN 100] 4 ECA OCT2008 75 C [ECAJO 100] -4 EEM DEC2008 105 C [EEMLA 100] 5 EEM DEC2008 110 C [EEMLB 100] -5 EEM JAN2009 110 C [ZYXAB 100] 5 EEM JAN2009 115 C [ZYXAC 100] -5 EOG OCT2008 85 C [EOGJQ 100] 4 EOG OCT2008 90 C [EOGJR 100] -4 ESV JAN2009 60 C [VKSAL 100] 5 ESV JAN2009 65 C [VKSAM 100] -5 EWZ DEC2008 65 C [EWZLM 100] 6 EWZ DEC2008 70 C [EWZLN 100] -6 EWZ JAN2009 75 C [ZYLAO 100] 8 EWZ JAN2009 80 C [ZYLAP 100] -8 FCX NOV2008 80 C [FCXKP 100] 4 FCX NOV2008 85 C [FCXKQ 100] -4 FWLT JAN2009 50 C [UFBAJ 100] 5 FWLT JAN2009 52.5 C [UFBAX 100] -5 GDX DEC2008 35 C [GDXLI 100] 10 GDX DEC2008 40 C [GDXLN 100] -10 GG OCT2008 27.5 C [GG JY 100] 12 GG OCT2008 30 C [GG JF 100] 3 GG OCT2008 32.5 C [GG JZ 100] -12 GG OCT2008 35 C [GG JG 100] -3 GG JAN2009 25 C [GG AE 100] 12 GG JAN2009 30 C [GG AF 100] -12 GLD DEC2008 75 C [GVDLW 100] 5 GLD DEC2008 80 C [GLDLB 100] -5 GLD JAN2009 75 C [GVDAW 100] 5 GLD JAN2009 80 C [GLDAB 100] -5 GRMN OCT2008 35 C [GQRJG 100] 3 GRMN OCT2008 40 C [GQRJH 100] -3 MDR NOV2008 40 C [MDRKH 100] 5 MDR NOV2008 45 C [MDRKI 100] -5 MLM OCT2008 75 C [MLMJO 100] 4 MLM OCT2008 80 C [MLMJP 100] -4 MOS SEP2008 70 C [MOSIN 100] 5 MOS SEP2008 75 C [MOSIO 100] -5 MOS DEC2008 70 P [MOSXN 100] 5 MOS DEC2008 75 P [MOSXO 100] -5 MRO JAN2009 35 C [MROAG 100] 10 MRO JAN2009 40 C [MROAH 100] -10 MTW JAN2009 25 C [VMTAE 100] 5 MTW JAN2009 30 C [VMTAF 100] -5 NOV JAN2009 55 C [NOVAK 100] 5 NOV JAN2009 60 C [NOVAL 100] -5 OXY JAN2009 55 C [OXYAK 100] 5 OXY JAN2009 60 C [OXYAL 100] -5 PAAS JAN2009 20 C [USPAD 100] 4 PAAS JAN2009 25 C [USPAE 100] -4 PBR JAN2009 50 C [PMJAJ 100] 5 PBR JAN2009 55 C [PMJAK 100] -5 PCU DEC2008 75 C [PCULO 100] 10 PCU DEC2008 80 C [PCULP 100] -10 PKX NOV2008 80 C [PKXKP 100] 6 PKX NOV2008 85 C [PKXKQ 100] -6 SII OCT2008 60 C [SIKJL 100] 5 SII OCT2008 65 C [SIKJM 100] -5 SLB NOV2008 65 C [SLBKM 100] 5 SLB NOV2008 70 C [SLBKN 100] -5 SU SEP2008 35 C [SU IG 100] 6 SU SEP2008 37.5 C [SU IU 100] -6 SWN JAN2009 27.5 C [ZFKAY 100] 5 SWN JAN2009 32.5 C [ZFKAZ 100] -5 TDW OCT2008 45 C [TDWJI 100] 5 TDW OCT2008 50 C [TDWJJ 100] -5 TEX JAN2009 45 C [TEXAI 100] 4 TEX JAN2009 50 C [TEXAJ 100] -4 TIE JAN2009 10 C [XJXAB 100] 12 TIE JAN2009 12.5 C [XJXAV 100] -12 TRA DEC2008 25 C [TRALE 100] 5 TRA DEC2008 30 C [TRALF 100] -5 UNG OCT2008 35 C [UNEJI 100] 8 UNG OCT2008 40 C [UNGJN 100] -8 UNG OCT2008 42 C [UNGJP 100] 5 UNG OCT2008 47 C [UNGJU 100] -5 UNG JAN2009 40 C [UNGAN 100] 10 UNG JAN2009 45 C [UNGAS 100] -10 USO OCT2008 75 C [UNAJW 100] 5 USO OCT2008 80 C [UNAJB 100] -5 USO JAN2009 70 C [UNAAR 100] 10 USO JAN2009 75 C [UNAAW 100] -10 VIP OCT2008 20 C [VIQJD 100] 8 VIP OCT2008 22.5 C [VIQJJ 100] -8 WFT JAN2009 32.5 C [WFTAZ 100] 10 WFT JAN2009 35 C [WFTAG 100] -10 X OCT2008 135 C [X JG 100] 5 X OCT2008 140 C [X JZ 100] -5 XLE DEC2008 65 C [XBTLM 100] 10 XLE DEC2008 70 C [XBTLR 100] -10 XOM JAN2009 75 C [XOMAO 100] 5 XOM JAN2009 80 C [XOMAP 100] -5
HI YM looking at the jan mos puts are no better .Prem for 70/75 put is .+/_ .57 cents thats a 12% margin for 7 months.(1.86% mo,) cheers john
John - I calculate 12.8% for 7 months for 21.9% annual yield on the Jan puts. But consider the safety of this position and how extra deep it is. It beats a CD rate of 3% at little added risk. I can always close the spread when I can use the money better, but right now I'm sitting on other cash I can't spend. So I'm OK with this now. Why close a beautifully DITM spread for only 4.45 when it is so safely deep and I can capture an extra .45 ( or.57 in Jan) with the same capital at low risk, without the risk of early execution?
One other point I should make. In this strategy there is a temptation to take early profits and put he money into new spreads with higher yield. It doesn't work. You would be constantly taking funds from your best safest spreads and replacing the spreads with higher risk positions. At some point you will necessarily get bit right on the butt. Spreaking from experience! I think keeping your successful spreads in place, till you have milked as much of the profit as is reasonable, is the wiser course. It takes a little patience and an awareness of your inability to know the future, to do this.
Mondayâs activity: BUY: 5 UNG JAN 40/45 @ 4.0 Stock (ETF) at 62.34, comm.= 8, (cost = 4X100X5+8.8= 2008.8) expected gross profit 500 (increase position from 10 to 15 spreads) BUY: 5 GLD JAN 75/80 @ 3.90 Stock (ETF) at 90.9, comm. = 7, (cost=3.9X100X5+7=1957) expected gross profit 550 (increase position from 5 to 10 spreads) ****** Tuesdayâs activity: BUY: 8 SU JAN 40/45 @ 3.95 Stock at 58.3, comm. 11.2, (cost 3.95X100X8 + 11.2 = 3171.2) Expected gross profit 840 (I noticed the chart looks terrible (steadily declining) since mid-may. Looks like a facility shutdown for maintenance may16. Stock is still rated highly, so I think itâs a temporary problem. If I'm right I'm getting in a a lower price.) NOTE: NEXT TRANSACTION IS A BULL PUT CREDIT SPREAD SOLD: 5 CF FEB PUTS 90/85 @ .95 Stock at 149.07, comm. =7, (âinvestentâ = 4.05X100X5 + 7 = 2032) Expected gross profit = .95 X 100 X 5 = 475 The reason I did a credit put spread here is because the spread is so very deep, about $60 DITM (59/149=40% deep). I could have gotten a little more profit on call credit spread, but I was willing to accept a reduced profit so I wouldnât have to worry about early assignment at a later date. At the time of the transaction (data has already changed now), I could have bought a CALL spread for 3.95, giving me a profit of 1.05 instead of the .95 profit on the PUT spread. But the lack of assignment risk made the put spreads more attractive for this very deep spread. Funny that CF with a P/E of 18 has option spread pricing like a stock with two or three times that P/E. (Some of you option traders will have to supply your own gammas, vegas, and thetas, to understand what I just said, lol) ****** What about my mantra: âDo I need this spread?â? Well on the UNG and GLD I think I do need them. Natural gas has gone up alongside oil, but not at such a frantic pace. And I hear that the fundamentals for natgas are just as valid as oil. And remember Iâm âinvestingâ in natgas at $45, not the spot price of 62.34. Thatâs a $17.34 discount, like a Macyâs 4th of July sale. And if Iâm right Iâll make a 25% profit in about 6 or 7 months (or less). Same story with GLD. Iâmâinvestingâ in gold at $800 per ounce, not $940 like the rest of the world. Iâm very happy with the CF spreads also, but a little less confident of the SU position. **** Iâm leaving for a two week vacation tomorrow, and Iâll be monitoring my accounts, but only trading when and if I have to. Iâll keep records of course, and post as I get a chance. Happy 4th to all who love the USA.