Tip Toppy Tuesday – Markets Make Record Highs on Record Low Volume

Another day, another new high.  

Yawn.  We'd be a lot more impressed if all the gains for the day didn't come pre-market – in the even thinner-traded futures, followed by a day of choppy trading on anemic volume.  

Still, it is what it is and what it is is another new high and another record monthly gain and we don't know why but we made $10,000 yesterday in our Short-Term Portfolio as our bullish positions (because we thought we were too bearish last week) came through for us in spades.  

$10,000 is, of course, a ridiculous amount of money to make in a single day in a $100,000 porfolio.  In part, it's a reflection of the extreme volatility in the options chains, as those prices fluctuate wildly.  Since we sell a lot of premium when the VIX is high, we benefit when it gets low again.  Also, we're getting closer to January and we have a lot of January plays where time is on our side – it's not really an accident, this is how we set up our trades – they are simply working out better than we expected them to.  

Now we're up 70% for the year again and we have to consider whether or not we should take the money and run or just let them ride.  To some extent, we're protecting the much larger gains in our $500,000 Long-Term Portfolio, which is up 26% for the year ($130,000), which puts our $70,000 gain in the STP into the proper perspective.  

If we cash the STP, then the LTP is unprotected (as it's all bullish) and that's not acceptable but we COULD decide to cash out our longs and that would leave us VERY BEARISH in the STP, probably over-protecting the LTP but that might be a good thing into January.  

So, let's consider our STP longs and what we should do with them:

20 USO Jan $29 calls at $1.05, now $1.30 – up 23.8%

We just bought these last Thursday and our premise remains (success at the OPEC meeting this weekend – I guess we'll keep them.  

10 FAS short Jan $95 puts at $4, now 0.96 – up 75%.

Since FAS is at $121.55, I don't see these being a problem but let's put a stop at $1.25 – just in case $120 doesn't hold.  

FAS Money Spread:

It's interesting how FAS is at $121.55 but our 2017 $102/117 bull call spread shows a loss of $3,360 despite being 100% in the money for a potential $7,790 gain.  This is the kind of silliness I often warn Members to watch out for when looking at their portfolios, the balances can be very deceiving.  

The short calls, on the other hand, are big trouble but, on the bright side, we sold the short puts above for $4,000, which offsets the loss of the calls this month so we'll just keep rolling and selling more short calls until we realize that $10,000+ swing in the value of our 2017 bull call spread.  So we have that to look forward to!  

KBH April $16/19 bull call spread at $1.11, now $1.37 – up 24% 

We only picked these up last week as well (and we sold 10 2017 $15 puts for $2.45 in the LTP to more than pay for it) and I'm pretty comfortable with the target and time-frame, even if we do have a little dip in between.  Another one I don't want to let go of…

20 SLW 2016 $18/27 bull call spread at $3.28, selling 2016 $18 puts for $2.41 for net 0.87, now net 0.89 – up 2.2% 

You KNOW I don't want to give up a silver long!  I'm looking at this chart:

Hard to walk away from a long position like this that pays up to $18,000 on our $1,740 investment if all goes well.  If not, we own 2,000 shares of SLW for $18.87, which is still 10% below the current price.  Nothing we'd kick out of the LTP, so no reason to close this one.  

Oh dear, this is really hard to do…

2 TSLA short 2016 $140 puts at $22, now $7.60 – up 65%

$140 does seem very low but 2016 is a long way off.  Still, we have 7 short Jan $275 calls (now $3.75 – up 65.5%) and, to some extent, those are being protected by the short puts but this position is mostly done and I wouldn't mind clearing the decks on this one ahead of schedule.  It's our best candidate so far!  

30 YHOO April $32/39 bull call spreads at $3.95, sold April $37 puts for $3.10 for net 0.85, now $4.15 (up 388%).  

Well, 388% sure sounds nice but the potential on this spread is $9, so it still has another $4.85 left to gain, which is another 570% between now and April if YHOO simply holds $39 (very likely) and, even if you took this trade from scratch, it still pays $9 back on $4.15, which is 116% in less than 6 months.   

Actually, TOS says it's closer to $6 going by last sales, it's only our portfolio which gives us the worst-case scenario for unwinding the position (something you always need to be aware of if trading options) but still, $6 with a $3 upside (50%) in 6 months as long as YHOO doesn't fall more than 25% seems like a really good place to keep our money.

Damn it!  There's nothing to sell.  Oh well, it's a good excercise and we KNOW we have plenty of shorts (DXD, TZA, BIDU, GMCR, EWJ, XRT, SQQQ and even FAS is technically a short at the moment) so we certainly don't need any more on that side so I guess we leave it alone over the weekend.  

So we'll just sit back and watch the silly markets do their silly market things and we won't worry about all the news that keeps telling us the Global Economy is heading off a cliff since, frankly, we're over 80% in cash and the Dollar is strong so we'd love to see a nice correction and, if we don't, we still have our LTP to grind out another year of steady gains as all that lovely premium we sold ticks away day by day.