nfamous option spread journal

Discussion in 'Journals' started by nfamousyoungest, Aug 26, 2010.

  1. Bullish day so far, adjustment:

    +7 114 Calls @ 1.98.


    If we hit 115 tomorrow on positive housing or FOMC reaction, will be more comfortable on upside. Downside obviously has some more risk now, reevaluating around 111.50.

    unrealized p/l: $0



    U.S. Stocks Advance on Lennar, IBM; Irish, Portugal Yields Jump


    U.S. stocks advanced, adding to a three-week rally, as homebuilder Lennar Corp. beat profit forecasts and International Business Machines Corp. announced a $1.7 billion takeover. The extra yield investors demand to own Ireland and Portugal’s government debt jumped to records.

    The Standard & Poor’s 500 Index rose 1 percent to 1,137.28 at 1:48 p.m. in New York. The yield premium on Irish bonds versus German bunds exceeded 400 basis points for the first time, and Portugal’s gap increased to 393 basis points. Oil climbed 2.2 percent to $75.30 while cotton exceeded $1 per pound in New York for the first time since 1995.

    Consumer companies such as cruise operator Carnival Corp. that rely on discretionary spending helped led the S&P 500’s rise to a four-month high as investors speculated the recovery from the U.S. recession that ended in June 2009 will continue. While Moody’s Investors Service and Fitch Ratings affirmed their debt ratings on the U.K. and Germany, respectively, Ireland and Portugal’s funding costs jumped. Irish central bank governor Patrick Honohan said his nation must cut its deficit faster.

    “Better news out of the U.S. has offset bad news out of Europe,” said John Praveen, the Newark, New Jersey-based chief investment strategist at Prudential International Investments Advisers LLC, which oversees $690 billion. “We’ve been watching U.S. economic data stabilize. There’s also positive news on the M&A front as companies are sitting on a lot of cash. There’s concern about Europe, but they will probably make sure there will be no major defaults. People are more convinced that we’ll not have a double-dip recession.”

    Erasing Loss

    The S&P 500 erased its year-to-date slump last week and increased 5.7 percent during its three-week gain. The benchmark measure of U.S. equities had plunged as much as 16 percent from its April 23 high amid concern American unemployment near the highest since the 1980s and less spending from indebted European nations would stall the global economic recovery.

    The longest U.S. recession since the Great Depression ended in June 2009, lasting 18 months, the National Bureau of Economic Research said today. The Cambridge, Massachusetts-based bureau’s business cycle dating committee is the accepted arbiter of when recessions start and end.

    Lennar gained 8.4 percent after the third-largest U.S. homebuilder by revenue topped projections as margins widened. Netezza Corp. surged 13 percent following IBM’s bid for the analytics-technology company. IBM advanced 1 percent. Freeport- McMoRan Copper & Gold Inc. increased 1.9 percent after Goldman Sachs Group Inc. advised buying the shares.

    ‘Manageable’ Costs

    The yield on Irish 10-year notes climbed to 6.48 percent from 6.29 percent, compared with 2.47 percent for German bunds that mature the same year, amid concern that nation will need more financial aid.

    Irish Central Bank Governor Patrick Honohan said today that costs related to the country’s banking system remain “manageable.” Ireland will auction as much as 1.5 billion euros ($2 billion) of 2014 and 2018 notes tomorrow.

    Portuguese 10-year bond yields jumped to 6.39 percent from 6.09 percent.

    “The European situation is still a concern,” said Peter Jankovskis, who helps manage about $2.2 billion as co-chief investment officer at Oakbrook Investments in Lisle, Illinois. “Anything that affects the region will weigh on investors’ expectations in the U.S.”

    Dollar Falls

    The dollar fell against most of its major trading partners as stocks and commodities gained, boosting investor appetite for higher-yielding currencies. The U.S. currency touched a five- week low against the euro last week as traders speculated the Federal Open Market Committee will say after a meeting tomorrow that it’s considering more measures to keep borrowing costs low.

    The dollar traded for $1.3064 per euro, compared with $1.3050 on Sept. 17, when it slid to $1.3159, the weakest level since Aug. 11. The U.S. currency fell 0.1 percent to 85.77 yen, from 85.86.

    Australia’s dollar climbed against its U.S. counterpart after Reserve Bank Governor Glenn Stevens signaled policy makers may need to resume raising interest rates as a mining boom stokes the economy. Australia’s dollar, this quarter’s best- performing major currency against the dollar, is the most overvalued, according to data compiled by Bloomberg. Purchasing power parity, a measure of the cost of goods relative to other countries, shows the Aussie is 27 percent too expensive.

    Aussie, Cotton

    The Aussie appreciated 1.2 percent to 94.76 U.S. cents after reaching 94.94 cents, the strongest level since July 2008.

    Cotton for December delivery jumped 1.7 percent to 99.88 cents a pound in New York as supplies plunged and demand increased from textile mills. It climbed to $1.0198 earlier, the highest price for a most-active contract since June 19, 1995.

    Cotton inventories monitored by ICE Futures U.S. plummeted 98 percent since June 2 to 16,569 bales on Sept. 17. China, the world’s biggest grower and buyer, may boost imports after rain hurt crop quality and output, according to five China-based analysts surveyed by Bloomberg News this month.

    Gold futures rose to a record for the third straight session on speculation that government programs to stimulate the economy will erode the value of the dollar and boost demand for the precious metal as an alternative investment. The price increased to $1,285.20 an ounce.

    Corn rose to $5.2375 a bushel, the highest price in almost two years, and soybeans jumped to a 15-month of $10.995 a bushel as a cold snap threatens cops in China, the biggest consumer of grain and oilseeds.
     
    #21     Sep 20, 2010
  2. We got to 114.84 on FOMC, near the 115 area I thought was possible, and now we retreated some. Don't think 115 is breached until/unless a good NFP #.

    That said, the spread sits -$225. I've been reviewing a diff version using only three strikes (short stradd + otm put) and the underlying as a hedge instead of other options. Certainly reduces execution risks. It's been working good, but just like the first spread, I'm sure it has its own quirks that I'll find once I watch it for an extended period of time.
     
    #22     Sep 24, 2010