These days it’s really hard for me to get the word ‘radical’ out of my mouth, since it seems way over-used. Plus, if your political leaning is conservative, then the term radical has negative connotations – especially these days. But I decided to use it in the title of this post simply because to me, the adjustments I am going to tell you that I did are radical!
S&P 100 Index (OEX)
First let me tell you about OEX. That was my first ‘live’ weekly expiration test. I opened with a double calendar on 2/26 (the expiration of the front short options was 3/6). The details are to the left. Then on 3/3, as OEX started to look bullish to me, I closed the 500 Put side and opened another Call Calendar at 515.
Since this is a weekly expiration, I was watching it very closely and on Friday, 3/5 (expiration day) the index started a very bearish move. I then decided to take the risk and buy back the short Calls and hold the long calls for a while. By the time late afternoon rolled around, I doubled my original profit goal and sold the long Calls.
As a side note, I entered a -MAR2/+MAR 525 Call Calendar on OEX for this Friday’s expiration.
Abercrombie & Fitch (ANF)
On 2/25 I entered a MAR/APR 36 Call Calendar for these reasons: 1) the stock had a little bump from earnings and was trading pretty flat 2) MACD and Stochastics were beginning to weaken 3) I figured being a retailer and with the economy the way it is, this puppy wasn’t going anywhere.
On 3/3 I added a MAR/APR Call Calendar to the trade because the 36 was hanging right at my break even on the high side. I guess the market, looking for any signs of good news, jumped all over the retailers in a bullish fashion after same store sales for February was announced. That day was last Thursday, 3/4/10.
I actually waited until Friday to buy back both the short Calls – yes, again for a loss and a risky move – and hung on to both long Calls. Then on Monday I again doubled my original profit target and sold the long Calls.
Apple Computer (AAPL)
My little profit machine. Can anyone really be bearish on this stock? Sure, it has some pullbacks, but for right now it is HOT HOT HOT, like Crystal Bowersocks! My thinking on this adjustment is almost exactly the same as ANF, so I won’t bore you with all the details – unless you want to look at them at the right.
.
.
.
Conclusion
See what I mean? I have been taught to roll Calendars when they need adjustment. These three plus Goldman (GS), where I have also bought back the short options and still holding the long Calls open, are not according to the book. Did I take risk? Well, sure. I mean, any of these could have totally collapsed and and given me a hefty loss. But again, the market and the charts were telling me my chances were pretty good doing this type of move.
The other paradigm here was my attitude. I was able to dismiss, for the most part, any sort of panic as these moved against me, and tested many different scenarios before I decided what I was going to do. My mantra is R-E-L-A-X and T-H-I-N-K.
◄ Jeff ►
