I was going to get fancy and try to put all these trades in the context of what was going on at the time but, frankly, there is just no enough time in my week for that!
I'm sure you're more interested in getting on with the next year that an elaborate review of the past one and I want to close all these trades out so we can concentrate on our current long-term positions, which already have 23 entries, 8 of which we took this past month. Those positions are already up 92% but, judging from this year's run, they could still have a long way to go!
As I said in November: "Sometimes it’s nice to just buy something and walk away for a while." Other than selling calls against, there was little movement from that post until last week, when I began to cash out at what I thought was a market top. I'll try to give a quick appraisal on each and hopefully we can all learn a little from my successes and mistakes of last year.
Also, let's bear (oops, don't say bear!) in mind that this was a fabulous year – we thought it was a big deal to break 11,000 in January, the extra 1,500 points was just a bonus we took full advantage of!
=============================================================
AAPL Jan $55s seemed expensive at $9.40 on 6/20 but we held through the dip by selling the July $60s and collecting $2.50, lowering our base to $6.90. They went up to $38.40 on 11/24 and I chickened out there and sold the Jan $95s for $6.50, dropping the basis down to $3 and I was able to take that caller out this week for $1, bringing the basis back to $4 – not bad but the $55s had dropped down to $25 and I was lucky to get $29.50 (up 638%) off the table at the close.
We have new Apple plays but I will be a lot more cautious until we get through earnings. The reason these Apple calls worked so well was we picked them up when they dropped from $86 in January to $55 in June (they went all the way to $50), this is nothing like that now!
I got tired of waiting for ADM Jan $35 puts (9/18 – $1.35) as they were the protective side of a spread and I took them off the table, but I should have let them play out, now $3.20 (up 137%).
I love my Boeing Buddies ™ and the AIR Feb $25s (taken for $1.25 on 9/6) picked up another dollar to close out at $3.70 (up 196%).
AMD Jan $27.50s (8/17 – $1.25) peaked at $3.40 and were taken off long ago! Let's keep an eye on who's shipping what as this could be a huge Vista winner, having been as high as $42 this year (now $20).
BA Jan $90s (8/8 – $1.85) were so good we flipped to the ’08s! $4 (up 116%) was enough pre-thanksgiving as we had already rolled to the new play which was well in the money and covered. So this is year 2 of a very productive play.
BBY Dec $50s for $2.80 had a bad start in early September but recovered quickly and peaked out in October at $9.35. Up $6.55 means you have a $1.30 trailing stop which triggered the same week (10/20) at $8.05 (up 188%). I should have left well enough alone but I rolled some of the profits into some very sad (so far) new calls!
BTI Jan $55 puts (8/18 – $2.60) were finally dumped at $1.30 (down 50%) and were very frustrating as they looked so good in October. Had I stuck by my rules I would have gotten out up 30% rather than down 50% (kick, kick).
I always wish BWLD had options! Last time I picked them was 8/1 when I said: “Another chicken stock I’ve been hoping to catch a bottom on is BWLD who reported 30% earnings growth on 27% more sales last week but guided earnings down a penny out of 30 which caused the stock to drop 20% to $32. Silly market! This is not an optionable stock or I would play it all the time but if you like to buy stocks, this one is fairly safe with a stop at $30.50 (-5%) and about 15% to go up before testing resistance at the 200 dma of $36.” I gave them up at Thanksgiving at $54.50 after a scary dip (up 70%). I'm hoping they pull back to $42.50 for another entry.
Rules were followed with the BZH Jan $45s (9/18 – $2) and they dropped 20% from a spike to $4.90 the next day and came off at $4 the next day,
Sometimes selling a call bites you in the ass! On 11/18 I said: "C Jan ‘09 $40s (8/8 – $11.30) had the basis reduced by .60 by selling the Sept $50s and are now a very safe looking $12.50 (up 17%) and we should be selling the Jan $52.50s for .65 as this is supposed to be producing an income." Well I got burned on the takeoff and ended up having to buy out my caller for $3, negating much of my gain on that huge run. Final tally: Basis – $13.65, Exit – $16, up the same 17% even though the stock jumped 10% (kick, kick, kick!).
CAKE Jan $25s (8/1 – $1.20) were a nice bottom call at the time but stopped out at $3.60 (up 200%) as I made the mistake of thinking nothing could go wrong with these over the holiday! I think this is just growing pains but so far, so wrong as I got crushed by short calls this month. Hopefully we'll get another whack at them in the low $20s!
CEPH Jan $65s were just $4.40 on 6/15 made $5 on the first dip and were reentered in late August at $3. The stopped us out before Thanksgiving at $11.20 (up 273%). They are firming up nicely here but I'm worried about them testing the $72 mark on the way up.
COST Jan $52.50s (9/12 – $1.55) were wisely exited, in early November at $2.95 (up 90%).
CSX Jan $32.50s (8/24 – $1.35) were a nice play on my predicted transport rally (we took BNI October $70s for $1.50 too) but turned ugly (with the group) and stopped out at $4.10 (up 200%).
On 9/6 I said: “DCO is another beaten down company that just got the nod to get a small NASA contract to simulate a launch vehicle. These contracts tend to snowball over time so I like the stock at $17.77.” That was pretty good timing – now $22.88 (up 30%) and gearing up for another run. I'm waiting for a pullback to reenter.
DELL Jan ‘08 $27.50s (9/6 – $1.60) were meant to be an income producer but they are slow going at $2.55 (up 60%). These I'm keeping open but I should have taken them off as a double at Thanksgiving. Again, rules make you money!!!
DT Jan $15s (8/17 – .60) finished out a nice run at $3.10 (up 417%).
ELNK never got it together and the Jan ‘09 $10s stopped 30% down at $1.10 from the 7/5 pick. I no longer have any interest in this stock as they are in a very long building cycle with a dubious outcome.
Back on 11/18 I said: "EXP Jan $40s (9/5 – $2.75) seemed oversold but are running out of gas at $4.10 (up 49%)." This is a great example of how time kills an option trade as the stock is up $3.50 since then but the option is still $4!
Woo-hoo on the GE Jan ‘08 $35s (8/3 – $2.25) which we rolled for $4.75 (up 111%) into the June $37.50s ($1.75) right at the top on 12/18. Those calls, as they are a roll, should have stops at $1.30.
GLW Feb $25s (9/6 – $1.45) were in the money for 3 days in October and then fell off a cliff! Smart money stopped out 20% of the profits off the $2.75 peak at $2.45 (up 69%) – good thing too as the disaster continued! We just got back in with May $20s and I hope this is finally a bottom…
Back on 11/18 I said: "HET Jan $70s (8/31 – $1.80) are now $7.60 (up 322%) but that trade is long over due to the buyout. These were added as a pre-roll to the Jan $65s (8/29 – $2.20), now $12.10 (up 450%)." I picked up a little more selling the December $80s and we rolled out of that and into the Jan '08s on the 18th, also a good top call! The Jan $70s finished at $12.60, up a Billion percent since the basis was lower than 0 after that second sale, while the Jan $65s were done at $17.50, up a Trillion percent for the same reason!
On 8/15 I said: “OK, pop quiz hotshot: If Dell (25% share) laptops are exploding because their Sony (6%) batteries are defective, what are people going to be buying at CompUSA? Toshiba (14%)? No, too Japanese. IBM (10%)? No, too Lenovo. Fujitsu (2%)? Do they make laptops? Gateway? Are they still in business??? Use your phone a friend if you need to but I think we should be buying HPQ!!! They have 22% of the US laptop market already and the majority of the shelf space at retail locations. Sept $35s are .65 which I think is a really good deal and I will also be taking the Jan $37.50s for $1.40 as a preemptive roll.”
On the 18th I said "I still like them on the pullback at $3.20 (up 129%)." and they finished Friday at $3.90 (up 179%). We also have the HPQ Jan $40s, which are up 60% but I was kind of hoping for a pullback to go for another leap (we're getting it from Dell!).
IBM Jan $80s (8/8 – $2.20) was another tech winner on a perfect bottom call, it was hard to let go at $17.50 (up 695%) as I'm not sure we'll ever get a pullback but there was no way I wanted to let that ride over a 4-day break.
INTC Jan $17.50s (Aug 8 – $1.50) have been chugging along nicely to $4.90 (up 227%). On 9/1 we added the Jan $22.50s for .45 and finished before Thanksgiving at .75 (up 67%). Our new INTC plays have not fared so well!
LNG Jan $30 puts (9/16 – $2.95) stopped out with a double and were back to $2.60 on 11/18 and are $2.10 now so I'm hoping to get another crack at this stock (not those puts) back at $32ish again!
LOW Jan $31.25 (9/20 – $1.20) worked better than our shorter play, stopping us out at $1.75 (up 46%). Another fine example of time killing your play as they have run down to .65 this close to expiration! Let's remember that for our new plays, I really hate to keep my leaps once they get within 3 months, this has been an unusually good market!
LVS Jan $60 puts from 7/24 peaked at $7.90 and stopped out at just a week later at $7.30 (up 45%). This is what I mean by taking profits in a day as holding these would have been a disaster! We are having no luck so far with the Mar $85 puts.
Way back on 6/28 I said: “I like the MGM Jan $37.50s for $5, selling the Aug $40s for $1.60 as I expect MGM to go lower but I would hate to miss the recovery.” That was a great plan! We lowered our basis to $3.40, doubled down at $2.50 on the dip (see 8/3 comments) and never had to look back as we finally got out at $23.90 (up 710%+) after selling more calls dropping our basis below zero.
MSFT Oct $25s for .40 were a nice play on 6/29 as they closed at $3.40 (up 750%). We are back in that game with April and July calls and hoping for some Vista magic!
MU Jan $20s (8/29 – .45) seemed like a bargain and zoomed up to $1.30 2 weeks later but we were fed up with it the week after that at $1.10 (up 144%). At $14 the stock is very high on my list if the SOX get it in gear.
I did not have the stomach to ride the OSG Jan $60 puts (9/4 – $1.50), even though they were a roll, and I gave up on the Dec recovery at now $3 (up 100%).
When I said on 11/18 that there was "no harm in holding" the PD Jan $72.50s ($11.50 – 6/29) as we had run the basis all the way down to $5.30 with various sales, I had no clue they were going to $50 (up 843%) the next day! As usual, following the rules maximizes profits and they have done no better than the inital excitement and we, in fact, did very well (up 11,000% so far) by turning around and picking up the Jan '08 puts as income producers.
PWAV Jan ‘08 $7.50s (8/7 – $1.20) is still open as I wait for the Jan $7.50s sold for .70 to burn out. My basis is just .50 and the $7.50s are a nickel so why give it to them? Also,I still like this stock for a leap and may put it on our list for '07.
SHLD Jan ‘08 $135s ended up with a basis of $25.40. They finally chased me out after a nasty drop in mid-November made me lose my appetite for a holiday hold at $50.50 (up 99%). We pre-rolled into the Jan '09 $190s which are flat so far and we need to sell something soon as that's how we made our money on the '08s.
SIRI Jan ‘08 $5s stopped us out at .45 (down 50%) but I never learn and lost some more before I finally quit. I really don't get this stock…
I got my wish on 9/12 when I said: “I would have liked to see SNE come down a bit more but I need to take a small entry position if it holds $42. Jan $45s are $1.75 but I fully expect to buy my next round for $1, this is just a protective play in case it pops early.” Turns out I had so much time the whole thing stopped out at .80 for a 42% loss and I wish I would have doubled down instead as we got a great pop in December!
SRZ Jan $30s (8/11 – $2.20 ) topped out and stopped out right after our last update at $4.30 (up 68%).
STX Mar $22.50s were taken for the 3rd and last time of the year on 9/12 for $1.70 with a stop below $20 which it never did hit. I will very likely put these on again as I cried to lose them at $4.50 (up 165%). I think STX was my stock of the year for '06 with 3 doubles (at least) on the same position!
TARO Apr $12.50s (9/6 – $2.65) were a quick disaster and stopped at $1.90 (down 28%). Back in Nov I said "I like them again at .95 but I’ll wait." You can see what I like (and don't) about this stock!
THQI were in an out and in again in the summer but they finally hit their stride had a rough quarter and our original 5/5 pick of the Jan $25s for $3 peaked in October at $8 and stopped at 7 (up 133%). I love these guys on a pullback but I'm not sure this is it yet…
On 11/18 I said "TIF Nov $35s from 7/24 finished at $1.50 (up 30%) but we made much more on the short trades in between. The Jan $35s (8/08 – $1) are well in the money at $2.80 (up 180%) but should come off at 150%." That was a great call as it only went below it on the 28th but bounced quickly enough to leave us in but I took $4 (up 300%) and ran the next day!
TINY Mar $10s (8/29 – $1.15) is my favorite fund – it has all the volatility of a nano stock but without the total wipeout that 3 out of 4 of them tend to have! My favorite holdings of theirs are Chlorogen, D-Wave, Nanomix (see article) and Nextreme, who recently got CIA funding. We stopped out at $3.45 (up 200%) but I'm liking them again at $2.55 – soon I think!
TM Jan $115s (9/20 – $2.50) finished the year at $20.20 (up 708%).
TRMP Jan $20 puts (7/3) peaked at $3.80 in October and I let Cramer chase me out at $3.40 (up 70%) which is WAYYYY too bad as I knew they would crash!
TXN Jan ‘09 $30s (8/6 – $7.70) were picked up as an income producer and we sold the Sept $32.50s for .40 and the Oct $32.50s for $1.10 and the Nov $32.50s for .35, and the Dec $30s for .70 but then I flipped and went for the Jan $30s myself –I should have stuck to selling!!! The current basis of $5.15 against the $5.20 strike is very sad for me but good for you if you want to join in the fun…
TWX Oct $17s (7/29) finished at $2.75 (up 588%), is 3 months a real leap? I should have rolled them…
UPS Jan $75s (9/12 – $2) were wisely removed at $5.20 (up 160%) on holiday transport weakness. Those truckers are going to lead the market to ruin!
VIA Nov $35s for $1.30 were a hell of a call but I lost mine on the September dip. These guys are now like Apple to me, I can't bring myself to buy them even though I think they'll go higher…
On 11/18 I said "VOD Jan $22.50s (8/17 – .80) is going to test a stop at $26, currently $3.30 (up 313%)." They passed that test and finished the year at $5.40 (up 575%). As with many of these plays, you could have done quite well picking them up on the November post!
WM Jan $45s (9/18 – $1) started out well but died at .75 (down 25%). We rolled these into the Jan '08 $45s, which are already up 75% as I tend not to give up on fundamentally good plays just because I have bad timing once. This is a great example of cash management as it would have been much harder for me to get back in and come back had I rode that initial play down further (although holding it would have worked out in the end too).
Let's not forget that these are the survivors.
We took a lot of 1 month losses off the table before this group materialized but that's why we are starting this year with 24 long-term trades. If we can pull 40 survivors like this group out of the pack over the next few months, those inital 20% losses can be laughed off with ease!
Over the next few months we will spend a lot of time analyzing our new long-term plays, which are the bread and butter of any good virtual portfolio. With these finally off my plate, I can devote 100% of my fanatacism to our group picks!
Wishing you and yours a very happy new year,
– Phil
