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The Beerish Bull's Great Chronicle of Alcohol and Poor Decisions

  1. This is a place for me to post live trade calls, musings, opinions, and the lessons I learn in real time. I've branched out a little bit from my go-to instrument (options), so it seemed like a good time to start a new one. I want this journal to be more approachable; and inclusive place where all are welcome.

    You'll notice my trading is more about risk management than anything else, and I'll try to highlight some of the specific risk concerns I have and how to hedge against them. I'll also do my best to give the rationale behind a given trade or sentiment.

    Currently, I have a small account to perform live testing of strategies. My former journal (Beer & Options) is me working out the kinks in one strategy (credit spreads)--and that one is ready to go live when market conditions favor it. Three consecutive weeks of short weeks for me (because of a vacation and the 4th) provided a break in my trading activity with that strategy. That strategy was also based on an unclear market outlook. Having a clearer view of where we're headed, I'll be moving to more profitable diagonals--I'll try to give a solid run down of that strategy in the coming days.

    Today's positions, Diagonal (all previously opened):
    JPM - Long $95 Oct Call, Short 8/4 $92.50 call. I paid 0.98 debit
    MSFT - Long $75 Oct Call, Short 8/4 $74 call. Paid 1.23--more than I should have, trying to leg-in.
    PM - Long $120 Sept Calls, Short 8/4 $118 calls for .60
    VIX - Ratio spread. Short 1x 9 call, long 2x 10 call as a hedge positions for .45 debit

    I also have a debit spread open on AAPL on 145-150 for the 8/18 calls. I may or may not run this one through their earnings.

    I got a good early read on PM today, and bought $115 8/4 calls for $1.10, then dumped the short side of my diagonal spread, then sold the $115s for 1.80, and then dumped the long call on the high volatility for an awesome day there (real time calls on this one preserved in @Max E.'s STHH). For some fun, look at the self doubt on full display as I went from thinking I'd blown my whole trading account to having a amazing day in the span of just 23 mins.

    At the moment, both JPM and MSFT are pretty close to even, so I won't hesitate on Monday to close them out for a small loss if we see a big jump on the VIX. Oddly, in spite of being bullish (which I almost always am), a jump in volatility will serve me better than a good day of earnings.

    I'll lay out the diagonal strategy soon when I have more time to devote to it--I'll also make a post fairly shortly about how I do position sizing and certain risk management techniques that aren't specific to one strategy. I hope others can learn here from my mistakes. But it's always been my style to learn the hard way.

    ======================================================
    My background (This isn't that relevant to trading, so feel free to stop reading here):
    I definitely take an investor's view of the market. But I work in insurance, and because of the specific type of insurance I write, the knowledge translates very naturally to options. My dad pushed me into investing when I was young and I bought a mutual fund in 1999, and then opened my retirement account in 2006 while I was working and going to school. Needless to say, I don't care for mutual funds or ETFs. I started managing my own portfolio in 2008, and trading in options in 2010 (and I have my retirement account still).

    My degree is International Relations. I intended to go further into grad school or law school with it, but I graduated in 2008, and I was pretty good at my job in insurance, so they offered me a job. By the time I could give consideration to taking my education further, I was making too much in insurance to give it up. That's how insurance murders your dreams. Now my goal is to get to the point where I can retire from insurance, and trade and invest for income while I do stuff I enjoy, like travel and learning.

    I've always been really good in math (as in, finished calc 3 as a junior in high school). I'm conceptually proficient with just about anything I've come across. I'll never forget the day I was sitting in calc 3 and realized if I ever needed to use this stuff, I'd have to learn it again anyway and just gave up on trying--but followed along conceptually (and proceeded to get my first and only D in high school). That was the moment I moved from pursuing an engineering degree to something I enjoyed more.

    I have a tough time explaining the way I look at numbers, but it's less rigid than most traders. Working insurance has kept the basic arrhythmic sharp; but I visualize number more than handle them 'digitally'. I'm not sure how else to say that. It manifests itself in a number of ways. For example, I don't use the greeks because I can see these with the raw prices (this is the part that I brought over from insurance). I don't really try to quantify my strategy in rigid terms either--I firmly believe that increasing a model's precision can decrease it's accuracy.

    No prizes for figuring out I like beer. Mostly IPAs and Pale Ales are my go to. I also enjoy wine (bold reds and pinot noirs) and cocktails (not sweet). I usually don't drink while trading (as my name might suggest), but that has more to do with trading overlapping with my day job.

    I'll leave there for now--and bring other stuff up as it becomes relevant.
     
  2. LEAPs and Taxes

    I was discussing this tangentially in a PM with someone, and thought I'd post it here. This is more an investment strategy than trading, but it's very powerful, and traders might like it too. The idea is to utilize US income tax policy (specifically marginal rates for LT vs ST gains). It's the only strategy I know of where you can tip the scale definitively in your favor with a random sampling of options.

    It's painfully simple. In early January, you buy options that expire the following January, file them away and forget about them until Christmas. The close strategically at the end of the year or beginning of the next. By the end of the year, you're sitting on a number of winners and losers.

    If your trading year was good, you close the losers before Dec. 31 to take the losses to offset your ST taxable gains. You then hold the winners until you've had them at least a year and a day and take them as long term gains. Depending on your state and tax bracket, this means uncle Sam is paying nearly 30% of your losses (net, vs. capital gains).

    How you select these isn't terribly important. I'm inclined to believe strangles corresponding to your investment portfolio provide the most value. You want more calls than puts (I think 60-40 is the mark here...but I can say definitively it's between 55-45 and 68-32). The worst down years have been worse than the best up years, but more years have been up. Here's where this is broken down: http://basehitinvesting.com/the-stock-market-a-look-at-the-last-200-years/

    Statistically speaking, a long option should be a winner on the bid, and a loser on the ask. So, we would expect the strategy to have a net $0 return over many years (less commissions), and it makes money purely based on how it's taxed. The key to this strategy is properly sizing positions, diversifying, and keeping the account the right size relative to the accounts it works with. You're also under no obligation to sell, you could exercise as well (and likely early if it made sense).

    There's some draw backs here, mostly that you have to project your position size based on your expected account value at expiration. It also ties up capital you could otherwise trade with.

    But there's no set way to do this one--just an interesting thought to seed in your mind. I'll get into more detail on this one come January (or even in December) when I start in on it myself.
     
  3. It may work for the first year, but it won't work for the following, and they will be on you like white-on-rice.

    Seriously, do you really think you have found something that nobody else has ever thought of, to try to cheat the IRS? It ain't happening. Welcome to USA Taxation.
     
  4. Can you tell me why? I've had doubts on this one too for exactly that reason, but everything I've read doesn't suggest this is disallowed.

    There's pitfalls of wash sales, and the risks of holding the winners longer than the losers, but there's nothing wrong with tax advantage trading...if there were, LIFO and FIFO wouldn't exist, not world tax efficient mutual funds. Also, one of the key tests for disallowed positions is if there's risk or not, zero risk positions are not legal tax devices (I.e. Going long a stock in one account and short in another to lock profits)

    And thanks for the input, that exactly why I post publicly...suss out what I overlook in a strategy.
     
  5. I closed out the short side of that spread today for .37 debit. So I effectively hold just the long side of that for a 1.35 debit. This was based on the short term bullishness showing in JPM--I'll open another short as it makes sense to do so.
     
  6. I dumped the short side of MSFT today for a .07 debit. Just long the $75 October calls now with an effective entry of 1.30. Hoping for one hell of a bull tomorrow. (Also dumping the short side of a debit spread on AAPL calls I've been holding).

    And I also made a live call on DAL in another thread here. Long the 8/4 $50 call, and debit spread for 8/18 on 50-52. Entries were .23 and .45 respectively.

    This was a musing I posted in a PM--thought it might be an interesting read for some. Regarding how robust the bull market is:

    I don't think this is historically high valuations. On an exponential chart, we're right on target for the long term trend, while clear bubbles can be seen preceding each prior crash. The historic P/E ratio of the S&P might look high at the moment, but not in consideration of forward P/E. As long as the earnings party continues, the valuations will continue upwards. I don't think F and GM carry the weight they once did on the market. They're getting hit from all sides (disruptive competition, ride share, fewer shopping trips to be made, demographics, longer lasting cars, lessening air fares...). On the other side, it's disruptive companies that are propping up the high P/E ratios--think that AMZN alone makes up 2.5% of the S&P and contributes no earnings.

    The last time humans saw this kind of change of habit over a single generation was after the civil war through 1929 (when railroads, automobiles, radios, refrigeration / A/C, telegraph, electric lights...). The run that ended that was a 16-year bull market, with two 12-year bulls immediately preceding it. Today's AMZN and NFLX naysayers sound quite similar to the railroad naysayers of the 19th century. And they were right in the early days when everyone with a hat to hold out to beg could find financing for a railroad (or a tech start-up). It wasn't until they consolidated that they really took off and ran. You notice how people complain about the decreasing number of IPOs today?

    To my mind, we're in a mature bull market, and this is just the beginning. When the bubble forms on this one, it's going to look even less sane, and even more frantic. It's going to burst in spectacular fashion, but anything left on the table until then is just that much less cushion for the fall.
     
  7. Got the short in. I missed the peak at 157.97--looks like 159.20 is the real one.

    Locked in $13 on each of my $145 calls though. Up 280% on that position. :D
     
  8. Back short on the MSFT position with the 71 call for 1.13 credit.


    Needless to say, my account balance looks pretty today.

    And opened up a DAL Dec $55 call for 1.18. This is the top side of a diagonal play. I'll open the shorts against this when it looks more bearish.
     
  9. Great Days Lower My Trading IQ

    This is a pattern of mine I've known about for some time, and I've noticed it holds true. Whenever I have a really good day/week trading, the following day/week is a bomb. I suspect this is me moving from risk-centric trading to reward-centric. I even know about this pattern, and I still fall into the trap every time. I'm trying to figure this one out so I can just stop the bleeding.

    My trading style is typically to limit my risk and expose myself to market gains. This means I tend to grind along with small winners and small loser until the big one hits and I cash in on that. This week was AAPL's earnings release. Without fail, the day after a play like that, I screw it up and have a big losing day. One thing is, I have a tendency to roll a percentage of my big winners into highly speculative plays--and this is foolish. I think that is the easiest problem to address and I need to work on that.

    The other thing I suspect is the problem is trying to look for other big winners when I'm riding high after the last. It starts out innocent enough, I'm looking to expose capital to the market on strategies I know well and know work. But, as I'm looking, I see other opportunities for big wins, but also big risk. And, even knowing better, I get into the mindset of "at least I won't be worse off than yesterday, so what the hell..." That's the killer right there.

    I did have an amazing run while I was on vacation with a CMG short position while I was on the beach. And kept most of the gains and didn't do anything dumb like try to let it ride. It was disciplined entries and exits. I think that since I was on a phone and couldn't see the broader market, I didn't have a clear picture of what was good opportunity and what wasn't. And the travel provided enough discontinuity that when I returned I accepted my new account balance as the baseline, vs. looking back before the run.

    That gives me a pretty clear path forward with some new rules for big winners:
    1. Move the cash out of my trading account immediately. This can be introduced back in, but taking it out hopefully makes me think of it as cash going in, rather than winnings.
    2. Rigidly adhere to my known profitable strategies the day after. Symbols I know and like, strategies that are very risk-limited, high percentage / low return...
    3. Flatten out anything that needs attention to limit risk and just take the day off, not even looking at the market.

    No. 3 is very difficult for me because I compulsively look at charts whenever I get bored at work. If I traded full time, I'd be up in the mountains hiking on some of the many trails I know I don't get phone service. I'd come back clear headed and without the baggage of having just won the big one.

    ======================================

    Here's one symptom of that mindset:
    [​IMG]
    There's the entry on the arrow, and the stop on the horizontal. The trade was pretty straight forward, the chart is yesterday for SQ. Bullish on SQ, clear stop at 25.75 (based on the 3-day). The trade was clear. Entry at 25.84 on a market order. Immediately placed a contingent order to place a market order if the ask got below 25.73 (on the risk that price action bounced around the support level).

    Good trade, stopped out. This is a perfect example of how a good read on the market doesn't necessarily translate to a good trade. The stop was also a clear entry signal that I should have jumped right back on--I didn't, thinking I'd already lost enough. Usually I forget about trades I passed up and move on--cash in my pocket is still cash--but on the stupid days like yesterday, these start to eat at me and that evil "what if?" creeps into my mind.

    ===========================================

    Ultimately, in the last month alone, I've left more than 80% of my account's starting value on the table pissing away good winners after a good day (pretty close to flat, since that was just losing the big winner's gains). Cutting this one source of stupidity out of my trading would do wonders for my account balance. The problem is, I know the problem but I still fall right back into that same trap of stupidity.

    I call these my Blair Witch days, because I just circle right back around to where I started in spite of recognizing all the landmarks along the way. Also, those days are about as satisfying as that movie was.
     
  10. The absolute hardest part of trading, at least for me is managing those losing days and actually stepping away and doing something else instead of subjecting your account to additional risk on a day when you're not "on" anyway. I've found that when the losses start mounting, the day usually gets worse not better. Every once in awhile I can salvage a losing day but most of the time when I try, I end up just pissing more money down the drain. This is my biggest downfall and always has been. To be a successful trader you have to know when to call it and move along for the day in my opinion. I just looked at my numbers for the past month. 6 losing days and 13 winning days but I'm net down on my account, % wise fairly sizable. 4 of those losing days were minor, 1 more than I'd like and 1 extreme. I need to get this part of my game in check and it sounds like you do as well, best of luck, following your journal.
     
  11. Thanks.

    I do a lot of options, and spreads, so my max gain and max loss are limited and tend to be approximately equal. So the best days and worst days are about the same in magnitude. The strategy is to get out opportunistically from the winners, strategically from the losers, and make money as it grinds in your favor either through decay or price bias. My problem is sticking to the risk limitation when I know better...

    I find that writing this stuff down publicly helps, because it plants that seed in the back of my mind, "how stupid will you look if this one goes south?"
     
  12. You got be thinking about this, and I did come up with one flaw in the LEAPs strategy. You can't use straddles, and you can't trade the underlying during December (or January if taking losses). The reason is wash sales. Also, don't do this on ETFs for the same reason. You could, however, do this with similar stocks...i.e. puts on VZ, calls on T; or PEP / KO; BAT / MO + PM...
     

  13. Ahh, k, I recall this now (as you refreshed my memory from that other thread). I think what I was on about was the following...

    I believe, when I read that initially a few days ago, I started thinking to myself...

    "Look at all the finagling we're doing to try to get the lowest tax penalty, and look at how far we will go to try to squeeze the "tax system"". All this to avoid paying a bit more than we would like, to Mr.TaxMan.

    So I then started thinking about how it is just like having an open position. We try to "avoid the tax man" in a sense by cutting our losses short. Let the runners run.

    I have said this over and over again in my head, and have mentioned it on forums like this...I WILL GLADLY PAY $3000 GROSS TO MAKE $1000 NET PROFIT. This means that I made $3000 profit, but lost $2000 during the run. So I net $1000.

    I give a flying fish about how much I spent in gross to make my $1000 net after expenses and taxes. I just don't CARE! The final net per day is the important bit. The rest is just ego, and footies in the sandbox kicking grains of grit into the eyes of the other kids..
     
  14. Oh, yeah, I'm talking about gains over the course of 12 months minus a few days, or gains over 12 months plus a few. Not about day trading gains.

    I'm actually worried because I could certainly see a specific rule against this being a real thing...but I also think that a LT/ST threshold of 11 months or 13 would render the strategy irrelevant, thus it's by design. I mean the whole concept of LEAPs (vs any other option) is that you benefit from the LT tax regime...it's not a LEAP if you dump a loser early.
     
  15. When all is said and done, after fees and taxes are taken out, you're at, say, $50,000 in your pocket. To mull over how one COULD have been $150,000 in the pocket is the serious detriment to all traders, everywhere.

    Be happy with what you HAVE done, not sad about what you COULD have done.

    Plug that into the formula. Like today. I could have made just over $1,000 in trading, if only I had just done this or that. But I did not do "this or that", and so I made about $400. THAT is what I must be content with. To do otherwise is mental implosion.
     
  16. You know this, but for the naysayers, AMZN puts everything into dominating new markets (pantry, now auto parts) then they raise prices once we are hooked on the convenience (prime). Wall St. has always paid up for growth in bull markets.

    Mature for sure, but not exhausted. I think 16 or 17 years is the average.
     
  17. I'm with you 100% on that. Opportunity cost is not a thing. I have enough existential doubt in my trading without adding in imaginary "costs".

    (Although, I do fret about missed trades on my stupid days--see the post from earlier today)
     
  18. Bingo...just like the railroads. ;)
     
  19. Went long Dec $33 calls on CSCO for a .71 debit. Another diagonal play when it turns back to bearish.

    I'm would guess this is going to approach $33 before Oct earnings. Let's say +/- 0.15.
     
  20. Just went short JPM 8/11 $94 call for .78.

    Edit:
    Now the whole position is .57 debit. The spread on this is down to $1, making absolute risk .43. :D

    And just for some perspective, I'm getting slaughtered on MSFT (but holding tight there)
     
  21. Just went long Oct $31 call on MU for 1.28. Early entry diagonal on here.

    This is one that hit my radar Friday for bouncing off it's bollingers on the daily candles. That and I'm fairly confident of this one moving towards $31 before earnings (actually, $32 wouldn't surprise me). I fully plan to close this one before we see the earnings on 10/6, but it should give up some good premium on the way up. I'll be a bit skittish on this below $28, but I think we've seen the last of 27s for the time being.

    Also, I realized today that the $4 spread on MSFT (short 8/11 71, long Oct 75) is presenting way too much exposure for me. I'll be halving the short position today to cut down on absolute exposure--though I'm confident in the bearish reading on that, especially after MA-20 held so strongly today (which was the point where I cry uncle and bail 100% on the short).
     
  22. I also opened up a trade on FB for a Sept 180-190 call spread for .74 earlier. Purely speculative cash, but it's based on bullishness being repeated in all my charts: Today, 3-day, Week, Month, 3-Month, 1-Year, and 3-Year. This is that combination of bullishness that shows up as frequently as unicorns--so I'll take the better than 10:1 potential payoff on this and be fine with it if it's a loser. But the call volume activity on this suggests it's likely to be a good winner on volatility early, and perhaps on intrinsic as early September nears.

    I also have a similar eye to GS after @vanzandt pointed out the unusual call activity on this one Friday. There's a 10k contract move on the 9/15 calls, and the price activity suggests this was purchased on the (increasing) ask--which is to say it's a buy. My meager skills of perception didn't find the hedge side of this (I do wonder if it's part of a bond spread, which would be beyond my know-how), but all I can see on this is that it's speculative. I'm now looking for a good entry to the $240-250 call spread on this one if it shows an attractive price. This would have a similar potential payout to the FB position above.
     
  23. Closed half this position lest it moves against me with that $4 spread of absolute risk. Not that I don't think this one isn't going down tomorrow, just got unbalanced from a risk standpoint.

    closed for 1.50 debit...I'll be back in a min to figure out effective cost basis on this one now... :confused:

    Edit: Effective cost basis for the whole position (Long $75 Oct call, short 1/2 $71 8/11 call) is 0.55...I think...after the first round of profit taking and today's sale.
     
  24. I just entered into a call credit spread on TSLA, Long 365, short 355. 6.47 credit.
     
  25. I have an order sitting right now hoping for a fill on GS 9/15 calls for a 240-250 debit spread at 1.00. The reason on this is pretty straight forward. On Friday at 11:30, there was an order for 10k contracts on increasing price for around 0.35 (there was another 3k+ buy an hour later for a bit more). I wasn't able to see a spread in the options chains (across other expiries, other banks, or against a shares position)--I don't know if you could hedge certain bonds with this position--this looks to be an actual long speculation. Nothing closed during the interim. That means that someone thought it was worth $350k on a speculative position that GS nears $250 before 9/15. I don't know what they know, but following the money is not necessarily a bad thing. So, a highly speculative position, I'll see if I can't get a good fill with a potential 8:1 payoff.
     
  26. Time to cry uncle here. Out at 7.6 for a 35% loss.
     
  27. Just bought those back for .16...update in a moment for the vitals

    Edit: 76% gain on that short position. Cost basis for the long Oct 95 call is now 0.73. Will be watching for another entry into the $94 or $95 shorts in the coming days / weeks.

    Eyes now to the MSFT, looking to get out of my current short for a small loser.
     
  28. Closed the rest of the MSFT short for 1.42 debit. This was a small loss. Effective cost basis for the Oct $75 call long position that I have now is 1.62 (currently trading 1.13)
     
  29. I'm going to look foolish tomorrow for not having come up to 1.10 or 1.15 and just taken the fill...that ship has sailed.
     
  30. Today was an important lesson. This position was an effective hedge against my strategy--had I kept it open. :banghead:

    Should I come out of this blood bath with a trading account left, I'll know that this will work to protect against this exact situation in the future, and I know I had the position sizing right.

    I did get my GS fill today though.
     

  31. "... come out of this ... with a trading account left?"

    Hyperbole?
     
  32. A little, but not completely. I have my trading capital fully exposed, un-hedged...and pretty bullish. At this point it's pretty much just live testing of a strategy to find potential weaknesses before I lose it all for real. So, we're not talking about ruin-the-month losses even if I do realize them.

    Realistically I have until October or December for the market to come around and it will all have been a tempest in a teapot...but by that time, I'll have more cash to put in.

    Honestly, the lesson learned was worth today's (unrealized) losses...but it's really f'ing annoying that I in fact had this properly hedged, it was appropriate in size and cost, and I just dumped it thinking I'd get an opportunity to open a longer term one while limiting my losses on the shorter term one.
     
  33. Short 8/18 $38 call for .32 credit.
     
  34. I f'ing nailed it!
    Unfortunately, I closed this on Tuesday for reasons that make me sick to my stomach to think about in retrospect and I won't repeat here.

    Lesson learned. Time to be happy this was a test size account, and not live (excuse the contrivance). I will never again leave this strategy without a hedge.

    But the story here is the VIX ratio spread is exactly the exposure I need to protect against the black swan event. And my position size was actually larger than it needed to be (so much so, it would have covered my investment losses of the last two days too). So this is a very cost effective method of protecting against surprise downward gaps. My open position here were equal to 120 units (this is just my position sizing tool)--relatively equally weighted, and the cost to hedge this is around 6-10 units, with some expected recovery on close.

    Going forward, the way to play this one for a 100 unit account is to have the ratio spread open in the amount of 2.5 units for 45-day expiry, and 2.5 units for 75-day. Close them 15 days prior to expiry, and rolled out to the 75-day. This would be the mid-month expiration, purchased and sold on the first day of the month. And, in the event that we're high on the VIX when it comes time to roll, it would need some short term coverage while we get back down under 10 or 11. The total cost of this should be somewhere in the neighborhood of 3-4% for the 90-day life of the diagonal strategy.

    The close orders on that are clear, the rest an order to recover 12.5% and 17.5% of account value on the near-term VIX ratio, and 22.5% and 27.5% on the far-term, and we're 80% recovered. (I need to double check these numbers). Beyond that, hold and hope is the goal for the remaining 20% outstanding, which shouldn't be a problem on options that go out past the next earnings date.

    No, we move on to the slightly more difficult hedge on this, the move upward that closes the absolute spread of the diagonal (i.e. if I have a 90-day $55 long, and a 10-day $50 short, the absolute spread is $5 x number of contracts less the credit). This can actually get pretty large if the early move is against the long side of the diagonal.

    Credit spreads are not an option here because what I pay for the long side tips the scales against me for the diagonal overall. I can pick up some of the exposure by doing basically a reverse ratio spread, where I long half-size, but that brings that tips the scales even. I've considered leaving these open too, presuming the extrinsic gain on the top side will help some, but the problem is, the volatility loss if it goes up. Systemic hedging (i.e. using the SPX / SPY) doesn't work either because I'm more concerned with individual moves on position I hold.

    Stops do provide substantial protection on these positions, but only for intra-day moves--which the up sides tend to be. But that still leaves me exposed to good news pushing the stock up sooner than I intended.

    So, it's that absolute spread that I need to figure out the best way to hedge before this one is ready to go live...the answer may in fact just be to hedge with the spread itself, and only short a fraction of the long-side's contracts to keep the absolute exposure to about 120% of my target exposure (the assumption being that the increased extrinsic value on the long side will offset the additional exposure in a move)...

    So, stuff to think about.

    Also eyeing the 8/18 MSFT 72.50 and 73 calls to short against my position....I'll wait and see on this by the end of day here because there's more noise than I'm comfortable with. But my charts are showing continued bearishness likely for the 1-2 week time frame. Not sure how much of that is noise from the North Korea news--I wouldn't want to be left holding the bag when this is resolved and this flips to a full-on bull.
     
  35. And short the MSFT 8/18 $72.50 call for .53 credit (this is only a 75% position relative to long for reasons outlined above).
     
  36. I was actually going to short same until I noticed a local peak at $72.5 on around 6-6-17?
     
  37. Yup...that's why I'm playing this one so tight, 1/4 fewer contracts for a bit about 25% more premium (vs. $73 strike)--and only about .20 difference on break even. But we had a downtrend going into this with a solid cross of it and it held today. So, it was obvious to pick up as much extrinsic as possible while volatility is still high.

    I agree with you assessment though--this is a neutral entry, not something you could short against very well.
     
  38. Hey Beern, im curious cause ive made the same statement in my journal before, "You look at the market in a totally different language than me" But im trying to up my options knowledge, any reccomendations in terms of reading material?

    Great journal btw.
     
  39. Honestly, focus on the inferences you can make about call volume for where a price might settle...beyond that, your read in price action is good enough that options will just muddy the waters. Really when you have the capital to play, and the ability to read price, options don't offer much beyond higher (probabilistic) risk and reduced reward (and reduced risk in absolute terms).

    One of the things I've learned here at ET is that options are a lot more complex than I take for granted...I get them sorta because of my insurance job, and sorta because I accidentally had a so badly losing strategy with them that all I had to do was flip to the other side of the market...

    Let me get to this in the morning when I'm soberer and can give a better answer. I need to read through my replies to other threads to find a good link that can be helpful for how to read options (and Zany's max pain link is the end result of that theory...sort of)
     
  40. Frankly I don't understand your comments.

    To me if you go long on options, it is higher risk (low probability) but higher reward (unlimited gains) because of the leverage. Lower risk (high probability) but lower reward (limited gains) if you go short and do buy-write.

    In my opinion, options are zero sum games, if you win someone has to lose. And the net sum is in the long run we all lose because of commissions and slippages?

    But just like day trading, though a small mom and pop, I still hope I can take money from all you elite option traders.:D

    Regards,
     
  41. What I mean is you have a much higher exposure as a percentage of your outlay in options trading. I follow Max's journal regularly and I was just saying that when you already make money playing price moves, options don't offer a lot more for price exposure. And when they do, you're taking on a higher risk of loss, but a lower absolute risk. But in the aggregate, your losses on a long options portfolio would be slightly higher than if you traded the shares directly, or your gains would be slightly lower.
    Read this: https://seekingalpha.com/article/4025862-flat-using-options-data-predict-future-prices

    That's about the most useful discussion of using options to price the underlying that I know of. Whenever I make one of those calls with a ridiculous range of +/- 0.02 for a Friday close, it's looking at options to see the underlying's likely movement. ( SQ 26.50 before earnings was an exception to that--that was fairly straight forward fundamentals / outlook with a little luck)

    Beyond that, there's certain patterns I look for when I trade options. It takes some getting used to and scrolling back and forth between expiry, but you get to the point where you can spot the spreads and the calendars.

    At the moment, there's not a ton of good examples of this because earnings season is going to cloud the numbers for the Aug monthly expiry, and there was a lot of Thursday / Friday volume on these with the NK mess.

    One I noticed today is the DAL Sept $55 call (I'm long the Dec $55 call at the moment). This is most likely a bearish position (covered calls) because the volume was high when the price was decreasing (with the biggest day at the DAL peak). So, retail is short on this, which means market makers are long. Unfortunately, this won't generate the same buying and selling pressure that it would if the market makers were short. But the imbalance here is probably enough to suggest a little buying pressure towards $55.

    But look at the Aug $50 call. Most of the volume here was on 7/27--if you recall, that coincides with my bullish call on your thread (7/31 - 2 trading days later). Presumably, this is a speculative bullish position, which means market makers are short, which means as they hedge, the price will tend towards $50. There's a pretty good chance we'll finish the week out at $50 +/- 0.10. There's a pretty good chance that I'll be shorting the 50.50 call tomorrow as the short half of a diagonal.

    So, price expectancy on this is neutral for the week, and quite bullish from next Monday. Looking to the 8/25 chains gives a tacit confirmation here. The open interest on that looks like put spreads covering 50-50.50, and call spreads over (oddly) 51-56--this could be a broken-wing condor too. So the market is looking for a 1-2% upside next week from a presumed Friday close around $50...though, I'd discount the next weekly on this one because open interest (~1,100 on any one leg) represents only 110k shares or about 2% of daily volume....not enough to move the market. But Friday has 1.3 million shares in play, about 1/4 daily volume--that's enough to move the market and center it on one price.

    We'll wait till the week ending 9/8--that will give us a very strong indicator of price movement because we'll have a weekly expiring 1 week before a quarterly--those give some of the strongest indications because you have market moving volume in both.

    I'll try and point some of these out as I see them. Zany pointed out the GS call volume ($250 Sept calls) representing nearly 1.8 million shares. I actually opened a speculative $240-250 call debit spread following along on this one because these appeared to be unsupported speculative buys--meaning as the price approaches $250, market makers will have to pick up a TON of shares to cover their obligations should this one go ITM.
     
  42. Vendor alert! I am not accusing you of being a vendor. But, if you had any inclination to put out a paid newsletter this would be it. This would be great for stock traders. With a litle added info , float, etc. this is information that traders want, a watchlist of stocks that are subject to short covering rallies! Way better than a scanner.
     
  43. That only touches obliquely on the short squeeze stuff--this is more market maker centric view of the market. It's actually quite accurate for figuring out what Friday closes are likely to do--and less accurately, Monday's openings.
     
  44. Then, that is a gold mine. I have tried to "pin" contracts before and could never do it. Maybe I should look that over and see if there was a way to consistently do that in oil or the indices.
     
  45. I'm no expert, but if you don't intend to model and trade volatility, stick with the outright. If you just want to trade direction (Delta), stick with outright.
     
  46. It's unlikely to work on over diversified assets (ETF, indices...) because it presumes someone is making a decision on the specific asset at a specific price and volume...this is always a problem of mine, in fact. When you decentralized decision making to each constituent part, the index isn't going to move because some market maker is going to have a bad day.

    There's also the question of liquidity...I suspect the more liquid, the less accurate this would be. On something like the SPX, I doubt the short / long imbalance is so great to reliably influence the price, and the risk market makers retain is just a whisper in ES volume.
     
  47. Bingo.

    The big exception to this is shorting hard to borrow, when a long, deep ITM put will do the same job while limiting absolute risk at reduced costs
     
  48. Thanks
     
  49. Actually, I liked the $50 call better. Short at .47 (should have gotten a better fill, but was testing my eclipse glasses and left the order...doh!)
     
  50. Thanks for the explanation. I agree with what you said here. Long options do carry a much higher beta (calculable using B-S) than the underlying.

    Thank you for posting your journal. I enjoyed reading them.

    Regards,
     
  51. Thanks for following! :)
     
  52. Shorted MU calls a min before FOMC...back in a few to explain...I gots stuff to watch!
     
  53. Out of MU and CSCO shorts...good profits on both. I'll pay the figures when I get to work.
     
  54. Out of the DAL short at .06 (was opened for .47).

    MU was .05 (opened for .25)
    CSCO was .03 (opened at .32)

    So, good day today (for realized gains, at least). I did overlook CSCO's earnings release, but this actually wasn't that bad of a deal for me. Had it gone the other way, I could have closed the whole position and still made money.
     
  55. Out MSFT short at .06 (opened for .53).

    100% winners this week's expiry (though, did take a beating in the longs).
     
  56. Ok, I know all these live calls get a little messy, so I'll just rehash the whole strategy here. The strategy is a bullish diagonal strategy on CSCO, DAL, JPM, MSFT, and MU.

    The positions I have now are all long. Based on the calls here, the shorts I've sold have been winners pretty much across the board (one MSFT was a loser, but still net profit there). The profits shown are a percentage of the long side of the position only. Some of them actually had higher absolute risk (i.e. the net spread), but that's more than I want to explain or you want to read.

    The gains on this are lower than if you calculate the spreads I've called on a 1:1 basis because when I have a larger spread, I need to take smaller positions to keep risk level. Meaning, I will only have 60% as many short contracts as long, for example (as was the case with MSFT). MU, conversely since it was a straight calendar this week I could do 1:1, as I did (in error) with CSCO because of only a $1 spread. Basically, when the spread minus short premium is equal to the initial cost of the long, I can do 1:1. If not, I reduce risk so it equal to that in absolute dollar terms.

    Positions are (all long currently):
    CSCO $33 Dec Call (30.37 currently). 38% realized gain, 58% unrealized loss in the long.
    DAL $55 Dec Call (47.53). 72% realized gains, 52% unrealized loss.
    JPM $95 Oct Call (90.74). 54% realized gains, 44% unrealized loss.
    MSFT $75 Oct Call (72.49). 28% realized gains, 41% unrealized loss.
    MU $31 Oct Call (30.38). 15% realized gain, 52% unrealized gains.

    Overall, against my initial outlay, I've taken 39% gains on this, and I'm sitting on 26% unrealized losses.

    This isn't an uncommon place to be in a diagonals portfolio this early in the play (this will wrap up mid-October, before earnings season and when they will retain much of their earnings volatility value). Usually it takes about 3-6 weeks of shorts to pay off the long side. DAL and JPM have had two rounds on the short side; MSFT has had 3. Just one for CSCO and MU (CSCO is showing high realized gains because I forgot earnings and got lucky). The volatility early in the play wasn't good for me, and it's pushed up realized gains and unrealized losses. Had I held my VIX hedge positions (like I knew better!!! :mad:), the realized gains on this would be somewhere in the neighborhood of 75-90%. Unrealized would be unchanged. But lesson learned and I'm still ahead (I'll just go ahead and say it, I'm a fucking idiot!)

    I want to make a note of MSFT. For those playing along at home, I shorted the 72.50 call on 8/11 while it was ATM. That's outside the norm for me, usually I short NTM (slight OTM) or OTM. But see how this one closed exactly ATM today? And see how steep the chart is during the last 10 mins of today? This is a common pattern I see when settlement will likely fall exactly ATM (+/- 0.02-ish); MSFT made a great showing on this front. The charts confirmed it after I was eyeing it the day before I opened it. Obviously, I wasn't confident enough to hold when I could dump it for .06 earlier in the day, but this is a pretty reliable pattern. I actually was doubting myself on MSFT because the chop the last few days, I'm quite pleased to see this came to fruition in such a clear way. SNAP did it today too (and I called it live on @Max E.'s STHH thread). I also thought DAL was going to settle at $50 today, which is why I sold an ITM call at $50--obviously missed that one, but profitable nevertheless.

    Here's the MSFT post, and the purchase is the post that follows it.
     
  57. Oops, missed a live call here--sold MU $30 Friday calls today. I got .37 on my fill, but if you want, you can hold me to the close of 0.30--still a trade I would have taken.
     
  58. Look at the FAANG and draw lines on your charts at:
    FB 170
    AAPL 160
    AMZN 975
    NFLX 170
    GOOG 925

    And while we're at it, NASDAQ 6300

    Do you see it? The price loves to approach these levels, but hates to stay there. AMZN is the biggest outlier here, but tacitly showing the same pattern.

    FB and NFLX show it best, but AAPL gets a good mention here. Look at the 150 price action on all three. And 160 on NFLX (and to a lesser extent on FB). See the same patterns?

    So, do we gap up, stall down, or open at S/R and drive up on a nice long green candle? If I was in a position on one of these (actually I am...and more than one, long), I'd be looking at the broader market for evidence of either bullish or bearish sentiment. I'll let you wander the forums in search of that sentiment, but enjoy the show tomorrow.
     
  59. This was a cool trade. Obviously not for me, I'm getting slaughtered in it. But for what it demonstrates about the value of mid-term (2.5-3 month) diagonal play.

    So, let's take the context out. Shorted a call for .37 (or .30, I hope you trust me on .37 after how this one went). It's now .68 and a massive loser by any tally. Stand alone, a spec short like that is stupid anyway, so it was a bad trade from jump, and a bad trade in hind sight.

    Add in a little more context, my position was a diagonal with the long side being the Oct 20 $31 call. This too would be a foolish trade to open on 8/21 when I opened the short. When the trade was opened, the long side of this would have been about 1.50. That would have given a debit of 1.13. If we look at the upside of these, they have stayed in lock-step (more or less) on about a $1 advance on the underlying. So, there was no upside to this position between about 29.70 and 31 on the underlying. There was a downside under 29.70 because the long would have lost value quite a bit quicker than the short.

    Now, full context, and why this was in fact a good trade (in spite of hindsight evidence that directly contradicts that). I opened the long side of the trade on 8/7 when MU was hovering around 28.30 and paid a debit of 1.28. That went pretty quickly in my favor, and if you scroll up the page, you'll see I pulled another .20 out on a quick overnight play. So effective cost basis is 1.08. Then the short when underlying was at around 29.80. Price opens Tuesday, slaughters my short and moves against me. But compare the price of the Oct 20 and 8/25 positions I have open. They moved in lock-step with each other, so I lost nothing in unrealized gains. I still had the full .37 upside, and this would have been good for anything down to about 28.80 (which would have kept my long call equal to it's opening price with the two shorts intervening for a good profit). But, the downside on the other side doesn't really start to kick in until around 30.90 when the short gets near a 1:1 delta, while the long is about half that, plus that's offset by the premium (which is factored into the 30.90 point just mentioned). So, no change in account balance, the only difference is I'll have to realize this loss.

    Now, the worst that can happen is the price stays propped up and I need to close the whole position because the increased value of the long means I have a lot of potential to lose in that, while the shorts have pushed down the whole position's realized gain. So, no real downside between 29.80 and 30.90. If we go much above 31, I stop out, and still win on the position. If we go much below 29.30, I consider stopping out, and take a win on the position. If we're under between 29.63 and 30.37, the short turns out to be a winner because the long lost less value than the short did (or the long even gained). So in reality, the full position has no downside between 29.50-ish and 31-ish, but a .37 upside. The downside to me is that I have to close the position early because the imbalance in realized vs. unrealized.

    That is to say, the worst I can do on this is having to realize my long term gains (that I could otherwise continue shorting against through September). The upside is .37 plus the still unrealized gains.

    I was totally wrong on MU's price movement (maybe, we still have two days), but the short was still a good trade. And that's why I like diagonals. That said, this brief bear is beating the hell out of my other positions. I think I'm sitting about even if you add back in realized gains to the unrealized positions overall.
     
  60. Missed the MU closing call (again!!!)...still profitable though--even if just a few pennies.
     
  61. Short Friday's $31 MU calls for .34.

    Walked this strike up, it's a straight calendar now.
     

  62. Great thread. Brand new (day 1 on ET) fellow CO guy here from south Denver metro. You helped me see how much I have to learn and what diversity in strategies are out there. Keep up the great posts!
     
  63. Welcome to the thread! Feel free to ask or comment on anything.


    And sorry folks, had to take a week to step back from the market. I only let the MU calendar spread run last week, which obviously was not a great position, but I closed the whole thing with both sides ITM after it moved a lot against me. I'll be slow to get back into this.

    As far as the diagonal strategy as a whole, it's sitting about even right now between realized and unrealized gains. The market generally did not materialize with the direction I was thinking, and the spreads are now too wide to play the strategy effectively. I'll be closing out what's left open over the next few days / weeks.

    And I'll be back to a credit spread strategy until I see another good diagonal entry point (realistically, this strategy only works well enough between earnings releases).
     
  64. So, closed out the long side of DAL (.53), MSFT (1.36), and CSCO (.57) today. As called on here, the profits were as follows (total gains across all positions as a percentage of the opening long position):

    CSCO - 19% gain
    DAL - 7% gain
    MSFT - Flat
    MU - 36% gain

    And the JPM long is still open at 55% realized gain and 82% unrealized loss.

    Using JPM's current value, the strategy is sitting at 7% gain across all 5 positions. If I closed the JPM at a total loss I'd be at about 3.5% gain. Those figures also take into consideration the VIX hedges.

    A little bit of perspective here. I fucked up royally with the VIX on two separate occasions. The first was explained on here, and the last week I took the week off, and so when another VIX ratio spread expired, I was bare again for yesterday...FML :banghead: Had I handled those positions correctly with standing orders to sell to recover previously determined percentages of the strategy's total at risk, I would have had around 142% recovery from those two positions (we'll call it NK1, and NK2/Harvey)...which would have put the positions on course for 150%--which is about what I would have expected had the nuclear thread and hurricaine not intervened in the market. Even with screwing up royally and having an awful two weeks (to the point I'm actually surprised this was profitable overall), this was still actually profitable. Having been well stress tested during the last month, I'm confident to put this strategy live the next time I have an opportune entry--which I don't foresee until at least the January earnings season is over.

    So, I'll call this one a win. Even grossly mismanaged hedges, and in pretty bad circumstances in the market for these positions, the thing was still profitable. And I'm feeling a lot better about the awful last two weeks.
     
  65. Closed out the JPM $95 Oct calls today for 1.20. Recovered quite a bit in the last 12 days. This brought the JPM to flat, at the whole strategy to a close with a 14% gain.
     
  66. And I'm back to life after weathering my annual cash crunch. Going live as of today with my credit spread strategy. One risk I've found with this strategy is if it's compounded fully, the draw downs will eventually catch up to you and wipe out the account. The answer to this is to step up the amount exposed each week by about 4%. However, on weeks with a loss, the 4% will go towards offsetting that loss. Any loss greater than 4% will be filled in with the non-exposed account cash. That amount in excess of 4% will be held in my account reserve balance until it hits 80% of the exposed capital (a moving target), to then be distributed to my investing account (40% of gains), a tax liability account (40%), and put back into this account to compound as above (20%). Based on my experience with this strategy, I anticipate we'll

    These are straight bullish put spreads with a 10/6 expiry. The exception here is the SPX hedge that is a (bearish) put debit spread (normalized for a $10k account w/ commissions and rounded to even dollar so you can see how these work together):

    8x SPX 2500-2510 for 1.10 debit. -$893
    12x AAPL 150-152.50 for .63 credit. $739
    12x GS 235-237.50 for .59 credit. $727
    24x PM 110-111 for .29 credit. $667
    28x JNJ 130-131 for .30 credit. $806

    Total credits: $2,046
    Maximum potential loss: $9,154
    Maximum expected loss: $2,746*
    Target gain: $1,200

    *Maximum expected loss presumes high correlation on a systemic downward move where the SPX hedge goes up in value while all others go down. Maximum potential loss is an event that would occur approximately 1.15% of the time if prices were random; but due to high correlation with S&P the actual likelihood of this situation is substantially less. Target gain is the the 50/50 chance if random; in practice, this is nearer the 56 percentile event.
     
  67. @beerntrading I am a little rusty on my premium selling (mostly buying prem in this low vol environ) but on a CS if you have a SL if your short strike is violated and stick with proper trade management where is the "wipe out account" fear coming from. Note..when I do trade CS it is OTM 20 delta stuff.
     
  68. Years of working insurance. I say that both a little tongue-in-cheek, and very seriously. I know from experience being on the hook for the rare event is more a function of the number of times you test fate than the likelihood of it's occurrence in any one round of trading.

    Working so close to price action, I routinely blow through my soft and hard stops on a gap down day. Certain events (North Korea, health care bill collapse...for example) can cause everything to gap past it. That's where the SPX and VIX hedges come from--the VIX is a new addition because it provides very inexpensive relief when it kicks in.

    But it's possible for the SPX to go up or stay flat while AAPL, JNJ, GS, and PM go down 1-2%. Not likely obviously due to correlation among those. That's somewhere less than a 1 in 500 event. It's basically the 'news risk' of an individual stock hitting on each of my positions while not effecting a larger market-wide reaction.

    It's not that I'm worried about that specifically, but it factors in as a consideration to how much I can compound the account for when that once in 10 years (or less frequent) event does in fact come along.
     
  69. Ok, I see how being closer to ATM the risk profile is different. (I had edited my original to mention my usual 20 delta range.)
     
  70. I didn't see the update...but yeah, I'm a little bit closer.

    But, I don't see the logic being any different. Even if I did the same strategy further OTM the same logic applies (that eventually an uncorrelated move will hit you adversely to an intolerable degree if you fully compound).

    Also, if I get one more strike OTM; between BxA spreads, liquidity, and commissions, I'm looking at exposure of around 93-94%-ish of the total spread (vs. around 80-84% that I aim for now).

    That really gets at the crux of my strategy--I'm looking at probable maximum losses vs. possible maximum. I calculate my expectations based on probable losses, but I always keep possible losses in mind. Which circles us back around to your question and why I think my logic still applies even if you're further out on the strike.
     
  71. Closed a few positions today after the market moved in my favor (for the most part):
    AAPL for .24. $306 debit. 16% gain
    GS for .15. $198 debit. 18% gain

    PM is getting most of my attention today. I gave very serious consideration to sitting that out for the yesterday and waiting to sell a 109-110 spread; that or find another symbol. But didn't. Now we're sitting at tomorrow morning's soft stop price on the underlying, and at the very strong $110 resistance. I'll let this keep testing the resistance for today and decide how to proceed within the next hour or so. These are the really frustrating ones where your strategy says one thing, the chart says another, and the week's profit hinges on the decision. Beyond that, the tobacco stocks and PM look very much ready for a reversal with clear patterns showing on MO and BTI. PM isn't mirroring the pattern, but is bouncing off the resistance.

    JNJ, PM, and SPX (hedge) still open.
     
  72. Quick note here, I should get into what I mean by "soft" vs "hard" stops. My hard stop is based on the option price and is just the point at which I scream uncle (generally around 2.5x the credit); but if I blow way past it on a gap, I'll often hold because the position gets very near maximum loss anyway. Soft stops are based on the price of the underlying, it's a range, and it's subjective to be informed by chart patterns. The soft stop will move up towards the top (short) strike less 2x the opening credit (for PM, $111 is top strike on a .29 credit means the Friday afternoon stop would be $110.42). And it's based on the spread moving entirely through that level--when the market maker's side of the BxA spread moves under the stop.

    Well, feeling mixed on my PM decision. It's just above today's closing soft stop, and just below tomorrow's (theoretical) opening soft stop. The volatility today favored the long side, and actually pushed the stop range to straddle the long strike. Because this coincided with the strong $110 resistance, the subjective read says hold. On the close (110.19) the soft stop range was about 110.05-110.15. So, if we looks at this from the 'is this a good trade?' point of view, the answer is yes; from the 'is this good risk management?' point of view, the answer is not really, but mitigated by strong patterns on tobacco generally, PM specifically (in particular, the 15 min chart looks very much to have rounded the bottom). So, I'll pretty much be looking for a gap up (or a quick move in the first 15 mins while liquidity narrows the spread). I suspect the soft stop will move quickly towards 110.30 early tomorrow and likely overtake the price.

    Given JNJ's chart pattern, I cannot imagine holding it past tomorrow, and I suspect I'll close before 10am. A 0.10 closing debit would give handsome profits here, and I'd be happy with that even in the illiquid opening minutes.

    SPX is killing me, but that's the point. I'm on the fence about letting this one ride or recovering a few pennies from it. If PM turns the corner, I'll probably ride it out...if I dump PM in a hurry tomorrow, I'll suspect I'll recover whatever little value is left on SPX.
     
  73. Out of JNJ at 0.10. And happy with my PM decision. :D
     
  74. So, JNJ was closed for $313 debit which gives a 25% gain (now that I'm actually at my computer rather than phone).

    PM is looking good, and after it's volatility increased, it has a lot left to give up in premium (it's now flat even though it's half way through its life).

    And for my reference on the new page:
     
  75. And out of PM for .12 debit. $318 for a 20% gain.

    The SPX is all but certain to be a total loss and just isn't worth enough to close (and who knows, maybe we'll tank 2% tomorrow), so I'll go ahead and zero that out as a loss today for the purposes of here so I can recap the week.

    $10,000 account starting balance with $9,154 at risk.
    8x SPX 2500-2510 for 1.10 debit - open -$893 ($893 at risk) - close $0 ($893 loss - 100%)
    12x AAPL 150-152.50 for .63 credit - open $739 ($2,261 at rusk) - close $306 ($433 gain - 19%)
    12x GS 235-237.50 for .59 credit - Open $727 ($2,273 at risk) - close $198 ($529 gain - 23%)
    28x JNJ 130-131 for .30 credit - Open $806 ($1,994 at risk) - close $313 ($493 gain - 25%)
    24x PM $110-111 for .29 credit - Open $667 ($1,733 at risk) - close $313 ($354 gain - 20% gain)

    In total:
    At risk - $9,154
    Gains - $1,809
    Losses - $893
    Net - $916 - 10% gain

    New A/C balance $10,916. But, next week's positions not to exceed $10,000 at risk because the strategy is a loser if aggressively compounded--risk needs to be kept level from one week to the next. I'll see if I can't do a full post detailing this process because it's a huge risk and one that certainly merits it's own post.

    Also, previously I gave bad figures for the AAPL and GS realized gains--I calculated the percentage based on the whole spread (instead of spread minus credit). Numbers above are accurate, these weren't:
     
  76. New positions for the 10/13 expiry:
    8x SPX 2510-2525 (hedge) for 1.10 debit - $894
    28x JPM 95.50-96.50 for .29 credit - $779 credit ($2,021 at risk)
    12x AMZN 970-972.50 for .90 credit - $1,063 credit ($1,937 at risk)
    28x DAL 50-51 for .29 credit - $779 credit ($2,021 at risk)


    ...still looking for one more fill. Having quite a bit of difficulty finding it. (Looking at PM, BUD, IBM, CAT...)
     
  77. And 10x BA 252.50-255 for .60 credit - $585 ($1,900 at risk)
    28x BUD 121-122 for .30 credit - $806 ($1,994 at risk)

    All positions (all put spreads, all 10/13 expiry):
    8x SPX 2510-2525 (hedge) for 1.10 debit - $894
    12x AMZN 970-972.50 for .90 credit - $1,063 credit ($1,937 at risk)
    10x BA 252.50-255 for .60 credit - $585 ($1,900 at risk)
    28x BUD 121-122 for .30 credit - $806 ($1,994 at risk)
    28x DAL 50-51 for .29 credit - $779 credit ($2,021 at risk)
    28x JPM 95.50-96.50 for .29 credit - $779 credit ($2,021 at risk)

    Totals:
    Total Credits: $4,012
    Total At Risk: $9,891
    Max expected loss: $2,967
    Target profit: $1,800

    Playing it a bit closer to the money this week with fully 29% of the spreads recovered in premiums (vs. just over 18% last week). Also getting a little more time premium in there. Picked up some VIX calls on a ratio spread (11/15 expiry - 4x 9.50 short, 8x 11 long. $1 net debit). They just provide a bit of systemic news risk protection.
     
  78. FML...wrong week on my calendar! Both JPM and DAL have earnings releases next week. :banghead:

    No wonder those premiums looked so good. I'll see if I can't pick a few pennies off of them before the release.
     
  79. Out of AMZN for .21 debit.
     
  80. And out DAL for .12 debit (not bad for missing the earnings release tomorrow)
     
  81. Out of BUD (.17), BA (.27), and JPM (.43) to flatten out for the week.

    Back in a moment with the damage report.
     
  82. Well, it was another good (and quick) week.

    AMZN was a closing debit of $270 for a gain of $793 (41% gain)
    BA closed at $270 for gain of $315 (17% gain)
    BUD closed at $510 for gain of $296 (15% gain)
    DAL was closed at $370 for a gain of $409 (20% gain)
    JPM closed for $1,238 for a loss of -$459 (22% loss)

    I'll go ahead and total this as though the hedge was a total loss, but I'm either going to close that position today, or use it to hedge additional positions for this week--I'll see after I look at the charts:

    Total gain: $460 (including $894 loss). If SPX sold for .75 now, that would be $1,047.
    At risk: $9,891
    4.6% gain for the week or 10.6% gain if I dump the hedge now.

    Off to the charts to see if there's other good options for the week, or if I'm just going to close it out and sit out till Friday-ish.

    For reference, the original positions:
     
  83. And back from the charts. This week looks a lot like the week ending June 9 (I remember this week quite well because I made a mistake--a profitable one--where I ended up getting out of the way of the tech correction just in time and even picked some of it up on my still open hedge for a monster week) , tech stocks at the top of their Bollinger Bands showing early bearish charts, sector rotation to consumer defensive. Nasdaq leading downwards and S&P following tacitly behind. Time to dig around the threads and see what the ES bears are saying (at least the ones I find credible on the subject).
     
  84. So, time for me to sit out a week this week. I don't have a clear overall view on my market sentiment, and I feel like I'm just waiting for bad news to drop. Also, historically after two up weeks I don't do well on the third week. There's some psychological component to this I believe (confirmation bias and overconfidence would be the obvious ones). But couple that with a lack of entry signals (top of Bollingers and possible reversal signals on MA20s), combined with all time SPX highs, and lots of potential for political or global news fallout. It just doesn't feel right.

    Hopefully this is me learning my lessons and not sitting a profitable week. But I always do better after letting my mind clear of the previous week's charts and starting anew the following week.

    Anyway, I should (in hindsight) have close the SPX hedge when I had the chance. Would have been a 10% gain vs. 4% last week. But I'm not one to complain about picking up 4% in one week.
     
  85. Today gave a nice jump in volatility and a great time to open 10/27 positions (and not to mention vindicate my decision to sit aside for this week).

    Positions are:
    AAPL - 10x 152.50-155 for .84 credit - $824 credit ($1,644 at risk)
    CSX - 25x 52-53 for .26 credit - $619 credit ($1,881 at risk)
    IBM - 10x 157.50-160 for .71 credit - $703 credit ($1,797 at risk)
    NKE - 25x 51-52 for .29 credit - $699 credit ($1,801 at risk)
    NVDA - 10x 192.50-195 for .85 credit - $834 credit ($1,666 at risk)

    SPX - 5x 2520-2535 for 1.20 debit - $611 at risk
    QQQ - 14x 145-147 for .36 debit - $524 at risk.

    Total Credits: $3,679
    Total at risk: $9,924
    Max Expected loss: $2,978
    Target profit: $1,500
     
  86. Out of IBM on the dead cat bounce today - 0.44 debit. This one looks to be headed lower.

    $248 profit for 13%
     
  87. Just flattened out everything but the QQQ hedge on this one (I'll close tomorrow regardless of it's disposition). Back in a moment with the damage report.
     
  88. Positions closed as follows
    10x AAPL closed for .52 debit - $535 for profit of $289 or 17%
    25x CSX closed for .15 debit - $406 for a profit of $213 or 11%
    25x NKE closed for .18 debit - $481 for a profit of $218 or 12%
    10x NVDA closed for .77 debit - $785 for a profit of $49 or 3%

    SPX hedges were closed for .75 credits - $365 or a loss of $246 or 40%

    As it stands the QQQ hedge is back to even (!) since I started this post (and I'm quite happy I got the previous post in given what's happened in the intervening minutes. If QQQ closed at even, the strategy will have worked up a $523 gain or 5% gain. Not bad for 3 days. We'll see what QQQ has in store for me tomorrow.

    And for quick reference:
     
  89. I have a few musings I'd like to put here for posterity if nothing else.

    First off, I read IBM like a book (and I'm really pleased by this because I went against the opinion of another user here whom I well respect when he suggested it was a short--and not without considerable second guessing). And granted the ending of that book was obvious from just after 10:00 when the price pinged off 162.50 on heavy volume delivering a pretty clear double top reversal and I didn't pick up on it until just after 11:00. I did, however, have the good sense to hold for a bit more while we tracked back up to 161 and pretty much nailed the top of the dead cat bounce. So, I'm really pleased with that exit. I don't have an opinion on tomorrow's direction (I'd guess it's going to be slightly up and stagnate around 160 for the foreseeable future), and that's not a strong enough conviction to hold.

    Today, I was up across the board (and actually on every single position for a brief moment while I was flattening out). Initially I considered this an uncorrelated move (but a favorable one)--but in hindsight, I just happened to have a few positions that were lagging behind, or leading, in the case of AAPL, the pullback. I adopted a wait and see approach to this, but the writing was on the wall as my positions started following the QQQ and SPX down. I'll remember to be on the lookout for this in the future. I had considered flattening the account when I sold IBM, but opted against it. I probably could have taken another $100 or so, if only on not having to pay spreads to get out of the way of the falling market.

    I would like to give a shout-out to @sab1234. A new user who asked about what makes candles and why they're important. https://www.elitetrader.com/et/thre...stick-graph-that-makes-traders-use-it.314239/ While I didn't have a great answer, it did really get me thinking about what's important--and specifically why the open component of the candle is important. And this caused a lot of reflection for me personally, and it basically came down to, on its own, the opening price is unimportant to me. In the context of the prior and subsequent close however, its definitive. I guess I'd known this, but it took the question for me to think it through and really understand why instead of just that. Which brings us to the recently closed positions. This was fresh in my mind this morning when I was looking at the market. If Thursday was a gap down and rally back to flat (and that was no small reason for me selling volatility on that day specifically), today was the opposite of that--and hence my decision to flatten out.

    And finally, I have decided to get the ball rolling on a PHP-based tracker for my symbols and my positions. I got the tracks laid for the architecture on it, so it's just content in this going forward. The biggest thing I'm going to include in that is a place to get EVERYTHING I look at together--and specifically get the estimated earnings and ex-div dates on it.

    So, all in all, this has been a really good week. Typically, when I learn a lesson, it's the hard way, it's expensive, and it hurts. I think I had a pretty good lesson today--and ended up making money...and hence the fact I want to memorialize that here. I don't need to relearn this lesson the hard way if I forget it.
     
  90. Out QQQ at .26
     
  91. Ok, full week numbers after the QQQ close:

    QQQ was closed for a credit of .26 - $345 for a loss of $179 or 34%.

    That puts the whole week at a gain of $344 or a mediocre 3%. Hopefully we'll get some volatility in here before Monday to kick off next week.

    That will also bring an end to the first 'month' of the live strategy with a $1,720 gain on $10,000--and just shy of my target to cover half the potential draw down each month (which is about 40%). Can't say I'm unhappy with that--nearly to the poverty line with just $10k capital at risk :D (though, no delusions here--this will come down when I get hit with a bad week).
     
  92. Ugh...not easy getting positions open today. And nothing feels right this week. A few price moves against my opening positions kind of locked me in for the weekend. The only saving grace is I was able to get really cheap SPX hedges that will cover nearly 100% of losses if it goes south on me (quickly).

    Positions were (all 10/3 expiry, all put credit spreads except SPX with is debit):
    25x DAL 49-50 for .30 - $719 credit ($1,781 at risk)
    25x CSX 52-53 for .33 - $794 credit ($1,706 at risk)
    20x CAT 136-137 for .31 - $594 credit ($1,406 at risk)
    10x BABA 172.50-175 for 1.05 - $1,034 credit ($1,466 at risk)

    7x SPX 2545-2555 for 1.00 - $713 debit

    I was really slow on the post today--but I'm obviously not lying on those (not quite live) trades. I'm getting slaughtered on them already.
     
  93. Out of CSX at .78...that was a bloodbath.
     
  94. Out of CAT at .48...grrr.....
     
  95. Out BABA at .39. I'll be flattening out today.
     
  96. Out of DAL for .34.
     
  97. Out the short side of SPX hedge at .55
     
  98. Ok, last week was rough...so, let's go over the losses:

    20x CSX was closed for a debit of $1585 for a loss of $991 or 70% (ouch!)
    20x CAT closed for $1,230 for a loss of $636 or 45%
    25x DAL closed for $880 for a loss of $161 or 9%
    10x BABA closed for $405 for a gain of $629 or 43%

    SPX was a total loss.

    So, $7,072 at risk last week, $1,914 lost, 27% lost. You'll note that I left $3k uncommitted last week because I wasn't happy with what I saw. Lesson learned (again).
    Should have just flattened out rather than trying to force it.

    But a good time to look back at totals since the beginning of October:
    10/6 expiry was a $919 gain
    10/13 expiry was a $460 gain
    10/20 I sat out
    10/27 was a $523 gain
    11/2 was pretty brutal with a $1,914 loss.

    Sum Total: $12 loss...so account would sit at $9,988. Depends how much you paid in commissions...

    The last two weeks I've spent doing some (actually very good) directional trades without live postings. But I expect to be back to the spreads for the monthly expiry next week. But I will sit this one out. No reason to hold the bag this weekend with Tweets coming out of China, and disagreement on tax coming out of Washington. Monday should provide some good entries (which I actually thought about this week...but we'll see).
     
  99. Another week, another round of put credit spreads. All 11/17 expiry:

    25x MSFT 82-83 for .30. $719 credit ($1,781 at risk)
    25x MU 44-45 for .29. $694 credit ($1,806 at risk)
    10x NFLX 195.50-195 for .92. $904 credit ($1,596 at risk)
    25x UPS 113-114 for .30. $719 credit ($1,781 at risk)
    25x WMT 90-91 for .36. $869 credit ($1,631 at risk)

    5x SPX hedge 2555-2565 debit spread for 1.25. $661 debit.
    15x QQQ hedge 150.50-152.50 debit spread for .27. $426 debit.

    $2,818 total credits.
    $9,687 total at risk.
    $2,907 max expected loss.
    $1,400 Target profit.
     
  100. I realized WMT earnings were this week (doh!), so I closed that position (took a 11% hit on that one). I opened one on JNJ to replace it on the 139-140 spread for .36 (figures are identical to above. It's ATM right now, but I really like this chart pattern.

    $199 loss on WMT mistake.

    Revised numbers this week with JNJ substituted for WMT:
    25x MSFT 82-83 for .30. $719 credit ($1,781 at risk)
    25x MU 44-45 for .29. $694 credit ($1,806 at risk)
    10x NFLX 195.50-195 for .92. $904 credit ($1,596 at risk)
    25x UPS 113-114 for .30. $719 credit ($1,781 at risk)
    25x JNJ 90-91 for .36. $869 credit ($1,631 at risk)

    5x SPX hedge 2555-2565 debit spread for 1.25. $661 debit.
    15x QQQ hedge 150.50-152.50 debit spread for .27. $426 debit.

    $2,818 total credits.
    $9,687 total at risk.
    $2,907 max expected loss.
    $1,400 Target profit.

    With a $199 realized loss in from here.
     
  101. Who remembers this little guy?

    After 40 days, almost none of which in the green, it expired today. Yesterday on market close it was showing that it would be a .45 debit to close. Today it settles for 1.29 credit. That's about $700 overnight, and just over $100 gain on the position. Better than a stick in the eye (and made my account look WAY better this morning).
     
  102. Oops, someone pointed out this error.

    Should be NFLX 192.50-195, and JNJ 139-140.
     
  103. Out of MU at .04
     
  104. Out of JNJ at .81. :banghead:
     
  105. Just picked up another Dec 20 4x 9.50 - 8x 11 VIX ratio spread for .95 debit...closing orders already entered.
     
  106. Ouch.

    NFLX closed at 1.65.
    MSFT closed at .64
    UPS closed at .93

    Hedges are a total loss. This was the worst week I've ever had with this strategy and I know why. Needless to say, not much in the mood to talk about it right now. I'm going to tuck my tail between my legs and go cry for a bit. See you guys in a few weeks when I can talk about this debacle.

    I have been doing quite well on directional trades recently, so I'm actually not doing nearly as bad as this thread would suggest (I'm still above last Friday's close, which itself was an all time high)...but still, not a happy camper today.
     
  107. Well, time to kick this thread back to life because I've never had such conviction of market direction. Today (maybe into next week), we have a bit more down move to go from SPX at 2580, but this is the end of the correction. It's time to get bullish. I'll be slowly buying stuff up as we round the bottom (with tight stops in case I'm wrong).

    First up. XOM. Long from $75 and picked up some 77.50 Mar calls for 1.31. It led us into this mess, it can lead us out.

    I'll be back with more later today (update on recovery from the last post, the last couple months, and a few more)...but for now, it's time to go bear huntin'!
     
  108. Stopped and reversed on XOM at 74.60

    Edit: and out half the 77.50 calls
     
  109. Just picked up Mar $160 call on AAPL for 3.65...will add to this as the day goes on. Expecting one more down move, and then another up move...hopefully get better fills on both scaling in.
     
  110. Welcome back to the world of "Why did I do that ???" :->)

    I did some diagonals on XOM yesterday, trying to capture some fat one day until expiration premium. I did just that and I'll be buying the shares tonight :-( At least I have the long leg for next week to roll down and lower cost basis.

    I booked the gains in my long IWM puts that was hedging the annuity that we spoke about. Nice gains but had to move on to the SPY because the IWM B/A spreads were Holland Tunnel wide and prohibited rolling. Too much of a haircut. With this AM's drop, I'm trying to convert some of the long SPY puts into a no cost 10 pt wide vertical. Almost there...

    I've been hedging some long gold stock positions with long puts on the stock GOLD. Caught an 18 point drop on GOLD (rolled the puts down multiple times) and that offset the losses on the others. It's kind of frustrating but I shouldn't complain given what is happening to most everyone else.

    BOOM, just filled. I own some SPY 245/235 bearish put spreads for a debit of 44 cents. LOL. That's the actual cost! OK, now we need a reversal so I can add some more long puts :->)

    Cheers
     
  111. Long JPM Mar $110 calls for 2.75
    Added to AAPL calls at $3

    Hey spindr! I'll be back after market close for some commentary and replies....this market is just too juicy!
     
  112. SQ $40 Mar calls for 2.36
    CSX Mar $50c for 2.05
     
  113. Added AAPL at 3.35
    Added JPM at 3.35
    Added SQ at 2.60

    Bought FDX Mar $220 put for $6
     
  114. Added more CSX at 2.35
    Looking for some more SQ....if it gets filled, I'll be done for the day and back for the report.
     
  115. Nice timing BNT! Hopefully by this time next week you are busy working on a maximum profit plan for all these call options you picked up today.
     
  116. Ok, first things first, the November debacle was because I moved my hedge up a strike, so when the positions went against me, so volatility went up on my bulls, but the hedge spread went ITM. It kept my account pretty flat mid-week. The right answer was to close there for a loss because the hedge went ITM and the positions were moving against me. Because I was pretty close to even, I thought I could wait and see. Well, SPX recovered, positions didn't. Very expensive lesson learned.

    Since then though, I was getting in on the super cheap volatility going into December and got long all kinds of Calls. No need to explain how that did.

    Thanks for the update. If I had to guess, I'd say today was the end of bearishness (I'll wait till this comes to fruition before I explain all my reasoning there)

    I am! All are March dated specifically so I'm not leaving volatility on the table. I'll let these stretch their legs and run.

    As for today's positions here's the average fills on them and where they stand right now (all are march expiry):
    AAPL $160c - bought for 3.34, now 3.98 (U/L is $156.37).
    CSX $50c - $2.21, now $2.75 ($50.92--went ITM)
    FDX $220p - $6, now 4.25 ($235.31)
    JPM $110c - $3.06, now 3.95 ($110.05 - ATM)
    SQ $40c - $2.74, now 3.30 ($39)
    XOM short shares from 74.59 - it's now at 75.77
    XOM $77.50c, for 1.32, now 1.73. I own these 2-to-1 as compared with the short shares, so overall, I'm pretty close to flat.

    I expected FDX and XOM to lose, but I'm hanging on to them just in case I'm wrong. The volatility on a continued down move should mitigate the damage to the calls, while getting the short positions pretty good. Additionally, I'm holding some WYNN Feb $160s from an earlier position that will do the same thing in the short term while I figure out if this is the real thing or not.

    Today was not my biggest day, but it is without doubt my best trading day. I was in my "Zen zone". I was so disciplined, and followed my plan perfectly to a 'T'--scaled in at the right times, didn't over expose myself. Closed some outstanding bears when they should have been--just perfect. Closed out my best trade ever today and I have high hopes of one of these new positions exceeding even that. I spent a lot of time last night charting this one out, and was pretty confident in 2525 holding in SPX--but I was ready for a glancing blow at this level and had my radar on high alert below 2535. Hit the bottom within seconds on an AAPL buy and got a great price on XOM calls too. When we put the volume move in away from the day lows I had the confirmation I was looking for and got into the last positions while we were coming down of the first higher high.

    The market was way to scared and fundamentals way too good for this slide to continue. The market punished the bears who walked into the traps, and tried to stop out the bulls. I held firm and let this one win.

    What am I going to do with all these bear pelts? :D
     

  117. Congrats dude, was happy i got to share this one with you!
     
  118. I think I might puke...Bozo and Krusty the Clown in circle jerk mode.. please get back to us next week when the X wears off. Bear Pelts? Pssssplease!
     
  119. 12 pages in, and this is the first post trolling for a reply. Why here and why now? And why you? Why not stick to constructive posts? You've got plenty to offer that's better than this.

    Edit: that said, my alerts that you show up in aren't reflecting that tonight. If it's a bad week in the market that's fine, we all have them (and lots of us this week); if it's a personal issue, I'm sorry, but can I ask that you check it at the door? If you're here to be a jerk, please don't...I genuinely enjoy when people question my trades and my view of the market; it makes me a better trader. I do not like personal attacks on anyone who posts on my thread (or me).
     
  120. Euphoria will kill you, tone it down. I’m happy you made some loot. Longs got trapped also. Stay humble. Keep away from the Canadian Mafia.
     

  121. LOL captain drive by hes just a douche man dont waste your time, it just irks him that we all crushed it today in whaT he claims is my "Paid chatroom" that hes not invited too. :D
     
  122. Thanks. I keep euphoria in check with the realisation that it's usually overconfidence. Today was a day I was confident the market move and played my hand likewise...but more important, I had a clear plan to limit risk, and a clear plan to exit if I was wrong. I'm still watching my positions so I don't miss an exit if it goes sideways (or worse) on me...
     
  123. Just picked up more AAPL calls. This time Apr $170s for 3.85. Also fearing I may have just top-ticked that one....

    Getting savaged by the volatility crush today--but that's to be expected. The big moves on CSX and AAPL are propping me up nicely. The modest move on XOM is not helping me, but the small move down on WYNN is.
     
  124. And just sold 1/3 of the Mar AAPL calls for 6.70, that's +100% and make the original position 100% profit now.
     
  125. Shorted some AAPL Mar $170 calls for 2.10 to limit some of the looming volatility crush.

    Over all this position is guaranteed to make that $2.10 (which incidentally just more than offsets the Apr $170's cost. So basically, if it goes to $160 or less by March, I'm even. If it goes up, I get exposure to the full $10 spread, plus the Apr leg.

    Also been working on legging into a put credit spread on NVDA today to offset some of the theta expectation of this portfolio.
     
  126. Picked up Mar $240 calls on NVDA for $7.50. Let the bullishness continue.
     
  127. Taking some pretty hefty losses on my hedge positions as I close them (closing FDX puts, already out of XOM shares...holding the XOM calls). Lightening up on SQ and CSX to take some profits to offset the losses.

    So far, so good. Sitting on well over 100% gains overall on the Friday buys.
     
  128. Shorted some JPM Friday $115 calls against my March $110s for .53 to juice a little more out of that one. Will buy these back and stomach any loss if the price of JPM goes above 115.50-ish...if I get a bad gap, I'll sell off some of the March position to lock in some gains there. The question here is very simple--how happy would I be with 5.53 of intrinsic value on those March calls by Friday?--answer, very.
     
  129. And short some Friday NVDA $245s at 1.50
     
  130. I just closed out the AAPL March call spread (160-170) for 7.80. That trade worked out like this:
    Long AAPL 160c for 3.34
    Short AAPL 170c for 2.20
    Close spread for 7.80.

    That's 9.90 in credits against 3.34 risked. Just shy of 200%

    Added in some March $175 calls for 3.60 here because I think this one still has some go in it.

    I lightened up on SQ today at 5.50 (bought for 2.74, so 100% there)...letting the rest ride and trying to short tomorrow's 45c if I get a good price on it. But the price just dropped on me and I don't think I'll see a fill unless we run in the afternoon (which we very well may).

    Picked up some AMAT and NFLX today too since I think they're gonna run some more, but didn't get those posted live. I still think they run tomorrow and into next week.

    Everything is looking fine with the market at the moment, and I expect we'll see continued buying for the next few trading days.
     
  131. And also got out of JPM here. Sold the March 110 for 6.30 (bought at 3.06) and covered the March 115c short for .68 (sold at .53)

    That's 6.83 in credits against 3.74 in debits. +83%

    Also, I bet this drops into close to the 115 area.
     
  132. Lightening up on all my positions in preparation for a likely softening into close. Just bringing risk back into line with original amounts risked...which means selling off the majority of the positions. Needless to say, it's been a stellar week.
     
  133. I picked up some Mar $155 puts on CAT for 3.35. I doubt we'll see many big buyers today, and the bears should be done licking their wounds for the week and back to search for more. Translation: selloff into close and likely to hold early Monday before buyers step in mid to late afternoon.