January 2010 Results

by Jeff on February 5, 2010

It wasn’t as bad as I had previously thought. I am still learning how to download and correlate data from TOS so I ended up counting some losing trades from December into my January summary that I posted a few weeks ago (You can find all the details on my Closed 2010 page.) Overall, The Option Guru beat the S&P 500 for January in both the Spread Account and the Conservative Account:

S&P 500: -3.7%

Spread Account: -3.21%

Conservative Account: -2.14%

Don’t get me wrong, I am not bragging! Let’s look at a few things here…

Double Down Danger

Back in December I opened a Bull Call spread on GOOG because it was in a well-defined upward trend. In January I opened a Bear Call on BIDU because of its down trend. On 1/12 (the very day I entered the BIDU Bear spread), GOOG announced their change of policy regarding the censorship in China after the market close. BAM! GOOG drops and BIDU shoots up – burning me in both trades! Usually I like to keep more diversified and I let this one slip through – mostly for greed! So it cost me almost $2,500, where if I had stayed diversified it would only have been $930.

Conservative Account

Not much activity in this account – it was intended to be that way. I was assigned T last month and I should have purchased some insurance in the form of a protective Put, but I didn’t. Now I am waiting for a price recovery in order to start writing Calls.

I bought another 200 shares of TZA when the price was down at 9.32. TZA is a Direxion 3X Bear on the Russell 2000  that I am using as a hedge for a possible bad stretch. Turns out to have been a good idea so far. If that gets above $13 and starts to pull back, I will sell some Calls.

The Option Guru also closed KFT and LTD for a profit and used the money to do a Naked Put on DUK. There is still a nice chunk of cash sitting on the sideline waiting for a Bull move on something – anything!

Outlook for February Expiration

Right now it’s looking good! The Guru is in mostly Bearish trades and he hopes to have the opportunity to close some early.

The PCLN Double Calendar and its associated adjustment is working out quite well right now. In the Risk Analysis below, this is what it will look like next Friday (2/12) all things remaining the same. I have until earnings on the 16th to hang on to this – and if it stays in the fat part of the profit tent the Guru would be very pleased!

CLF is a FEB/MAR Put Calendar that I entered on 1/28 with the intent of entering another Calendar spread to increase the profit tent. Right now it’s in the profit tee pee and I will wait a few more days to optimize the next trade for the price direction.

I did enter ISRG on 2/1 with a 310/320/330 FEB Butterfly. I will do the same thing as CLF as soon as I have a good trade for a high probability double Butterfly.

Thanks for your time, and the Option Guru welcomes any comment or questions.

- Jeff

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Amazon Trade Idea

by Jeff on January 29, 2010

tog_logo_bw_new_iconThis is going to be a very quick post with a trade idea for Amazon.com (AMZN). They had their earning yesterday and they beat and raised guidance. However, the stock as of this writing is at 128.61 in pre-market. I would not do this trade until the price settled down after the open and indicated what direction it might move, if it’s any direction at all.

Below is a risk analysis and my chart showing the green profit zone for the trade. If the stock moves either up or down, all you have to do is move the Put and Call prices to keep the current price around the middle. The play as I have indicated is to buy a Double Calendar -FEB/+MAR 125 Put/140 Call. The trade’s debit is currently at$308 with a profit potential of over $480 for the maximum (between the two tent poles).

In my mind this is a high probability trade, but I won’t be doing anything until I get a firm confirmation this morning on what the price is going to do. If this trade works out, I will exit the week of expiration.

- Jeff

20100129-amzn-risk-analysis

20100129-amzn-chart

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Adjusting Priceline

January 25, 2010

Some of you may have noticed that I did a different kind of trade on PCLN last week – it was a FEB/MAR double calendar with my short strikes at 200 and 230. This is a Debit and not a Credit trade and the returns, if the prices end up in the right areas, can [...]

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Oh, What a Joy

January 24, 2010

In my last post I mentioned how much I like it when a stock makes a big move, especially for a good reason and one that can be counted on to hold the stock long enough to capitalize on the move with a high probability, high return spread. Intuitive Surgical is on my watch list [...]

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Right Out of Star Trek

January 23, 2010

I’m an avid Science Fiction reader from way back in my teens (and I do mean way back). I’ve read hundreds of SF books. Some of my favorite authors are Clark, Asimov, Heinlein, Niven, Pohl and the like. I’m a more hard-core fiction than fantasy – probably because I’m a techno-geek of sorts and love [...]

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TOS Does it Again

January 20, 2010

Have you seen the orange “On Demand” in the upper right of the TOS platform? I noticed it around the 1st of the year. I pressed it a few times but didn’t understand what was going on – I thought it was movies like I have to pay for with my cable. Then I watched [...]

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This Is So Difficult

January 17, 2010

This expiration was devastating to me. In the spirit of honest reporting, I must admit that I lost some money this expiration in my Spread Account. The total loss was $2,772 and although only about 5% of my account, still a number that is going to be difficult to recover from. You can go through [...]

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2009 In Review

January 9, 2010

Pretty fascinating year, wouldn’t you say? For anyone who was just getting into the market, it was a very good year even if it was a bit scary the first 2 months. Using the S&P 500 Index as my benchmark, the index enjoyed a sweet 25.49% gain for the year. Fortunately I was able to [...]

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Conservative Account Adjustments

January 5, 2010

OK, so Kraft (KFT) wants to buy Cadbury – who is playing hard to get. To show how serious they are they sold their pizzas business to Nestles (N-e-s-t-l-e-s Nestle makes the very best – chooocolate!). Was that a smart move? Today the market thought so. Because of that, the JAN 26 Puts that I [...]

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Watch Lists Advantage

December 29, 2009

Many of you know that I have a watch list of about 50 stocks/indices/ETFs (I call this bunch equities) that I constantly monitor for potential trades. Yes, I can do scans or look for price/volume gainers/losers, movers, hot lists, etc., but why? The list that I have has been developed over many years of trading [...]

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