I use spreads when I feel that the options are too expensive compared to the expected underlying move and there's a high probability of a 100% loss. Ex. ANET is a +/-10% mover day after earnings. I expected that. I wanted to play a position within the 10% expected move with a risk ratio that was at least 2:1 (at least getting twice as much as I put in). That's where I'll set up trades like the ANET 320/330 call spread. I risk about $3 for a potential return of $10 back, and would have probably received that if the move was to the upside. Lately, there have been a lot earning trades where the expected move is much higher than its recent average, and that's where you want to set up something like a call spread or short iron condor/butterfly. Otherwise, I just put up straight calls or puts like CMG and UPS. I'll take losses at about 50-75% and lock in profits starting at 150%. The CMG position gained +245% and the UPS position was a loss of -76%. As for win/loss, I'll try to stay at 60/40.
Recap, I closed out winners in TWTR and JPM early in the week totaling +1300. The CMG gains came to +2300 and DE went from a loser at the start of Friday into a nice +1000 profit. AMAT was also a nice gain of +400. On the losing side, I took a loss on UPS and the late ANET call spread totaling just under -1600. My net came to about +3500. Not looking good though, I went heavy NFLX and NVDA with 30% of the account on both. I also have a nice BA position with about 11% of the account. All together, these three accounts are much bigger than I anticipated. I'll have to manage these and look to exit smoothly early next week before looking at some of the earning trades that I want. There are quite a few that I like too.
My one mistake at Friday's close was that I was over trading. My positions in NVDA and NFLX were too heavy. So when the market gives you an exit like this morning (down day, but NFLX and NVDA both green), then you have to take it. I sold the NVDA 247.5 calls for a small profit and took a nice gain on the NFLX 280 calls decreasing my positions on both. I'll look to lighten up some more throughout the day depending on how this market moves. I expect the market to break even at some point later today.
I'll take this time to remind myself that timing is everything. Thought about selling into Friday's close. I was looking at a -500 unrealized loss, but at the open NFLX and NVDA are leading the tech sector higher. I watched AAPL turn green and following through along with AMZN. GOOG is also green with FB as the only exception on my streamer in the red. I still have NFLX 275 calls and NVDA 250 calls that expire on Friday. The NFLX calls are close to a 200% return now from my 4.30 average entry and NVDA calls are back in the green after watching them close under 2.00 on Friday. On these trades, I can say my patience won and I will make sure I lock in gains on both. I also a big position on BA calls with BA struggling to hold onto gains today. The DJIA is down -160 points right now, so I expect to see BA turn red soon if not now.
I said I wasn't going to let these winners turn into losers. I closed out all of NFLX. With a gain of +3200 on the entire NFLX position, I will hold NVDA and BA a little longer. It's a disciplined hold with tight stop losses.
OI, normally a topping tail into a declining 20dma indicates at least a pause or minor retracement, but this bullish market just loves to defy the normal.
Thanks for the chart Jeff, I usually stay with the 50/200 day ma. But I should use the 20-day during times like this where I shorten my holding period. It looks like we're not out of the woods yet on your theory. The SP500 still needs to break and close above 2745, and to be sure it needs to at least close above 2760 to confirm that break. I'm comparing the current correction with the Feb-May 2017 correction where the SP500 gapped up at the start of March 2017 and then fell back and just hung around for a couple of months. If things hold true, we should see another test of the lows, or close to it in the next 3-4 weeks before we test the highs. This should push things into late April before we can look for a breakout to new highs. If the market breaks into new highs in the next few weeks, then I'm wrong and we will probably see some more parabolic moves along with wild corrections. So, I'd like to see a nice and tame correction here.
I am out of all positions here. Went into 100% cash at just above 28.6K. I haven't really set up a target this year, so I'm going to do that now. My first target will be 35K by the end of this quarter or March 31st. The target is more modest, but this market isn't exactly smooth sailing anymore too.
----------------------------------------------------------------------------------------------------- Your up to $28,600 from the original $2k account on Nov 14, 2017 and haven't you been drawing some money out now and then? "That is truly amazing! I applaud you."
--------------------------------------------------------------------------------------------------------- That simple kind of charting I do was taught to me in Pristine Trading School Seminar's in the late 1990's to early 2000's, and also their live trading rooms. They were the best in my opinion, but they are no longer around. Their exit leaves an education gap for new traders that can't really be filled.