Newbie - Credit Spreads and Covered Calls

Discussion in 'Journals' started by uptickk, Oct 21, 2009.

  1. uptickk

    uptickk

    I decided to start trading, if you can call it that, credit spreads as well as covered calls a few months ago and thought I would post my progress. To give you some background I paper traded this strategy for 3 months and just finished up my 2nd month of live trading.

    Credit Spreads Strategy
    I write OTM credit spreads with less than 4 or 5 weeks until expiration to keep things on the more conservative side and to keep time decay in my favor. I only enter trades where there is approximately a 75%+ change of obtaining the maximum profit (usually look for 80%+). I incorporate technical analysis as well as steer clear or any company announcements. I look for a return of about 8% a month but am completely happy with 5%. My risk/reward ratio isn’t probably what most would get excited about but since my position are so far OTM I feel that I can close out a trade before I get anywhere near my max loss and thus upping my expected return. My goal is to let the options expire worthless but I am toying with the idea of locking in a lesser profit during the week of expiration.

    Note: Trading is done in a margin account so returns may vary, however, calculations assume cash only.

    Just to forewarn readers, I tend to only make a few trades a month and usually within a day or two so there will not be a ton of posting here. I will try to answer any questions and all suggestions are welcome.

    I have included a few of my past trades
    (Please note commissions are ignored)
    (Will add Covered Call Strategy at a later date)

    9/03/09
    Long - PALM @ 13.92
    Short - Sept ‘09 13 Call @ 1.46

    9/21/09
    Called @ 13 = 0.54 (4.33%)

    9/04/09
    Long – DTG @ 21.30
    Short – Sept ’09 20 Call @ 1.96

    9/21/09
    Called @ 20 = 0.66 (3.41%)


    9/17/09
    Long – RMBS @ 18.05
    Short – Oct ’09 17 Call @ 1.93

    10/19/09
    Called @ 17 = 0.88 (5.46%)

    9/28/09
    POT
    Long – Oct ’09 105 Call @ 0.40
    Short – Oct ’09 100 Call @ 0.80

    10/16/09 Both Expired = 0.40 (8.70%)

    9/29/09
    POT
    Long – Oct ’09 105 Call @ 0.35
    Short – Oct ’09 100 Call @ 0.75

    10/16/09 Both Expired = 0.40 (8.70%)
     
  2. uptickk

    uptickk

    Oct 27

    Bear Call Spread on V

    4 - 80/85 Calls @ 0.55

    Max gain 0.55
    Max loss 4.45

    Delta .12
    Return at expiration 12.36%
    Days to expiration 25
     
  3. uptickk

    uptickk

    Thought I would try to get another fill . . .

    Oct 27

    Bear Call Spread on V

    4 - 80/85 Calls @ 0.60

    Max gain 0.60
    Max loss 4.40

    Delta .13
    Return at expiration 13.64%
    Days to expiration 25
     
  4. uptickk

    uptickk

    While looking at the company events page on yahoo it showed nothing for the up coming month. Of course after further inspection and after placing my trades I noticed under RECENT EVENTS that their earnings announcement is this evening . . . wonderful . . I normally make it a point not to trade around earnings, however, since V is hitting resistance around 75 I will cross my fingers on this one and be ready to close out the position if it goes to far against me.