DIA – as I don’t have a lot of faith in the upside I’m going with Sept calls, maybe 300 against my 400 Sept puts, which I am starting to roll to October.\
CFC – I think it holds $20, no sense in being greedy.
Dow strangle – risky if you aren’t playing it out of an existing hedge but effectively I try to pick up the two strikes closest on each side which, at the moment, are the DIA $132 puts (already have) and the $133 calls, both $2.50. To make this work you need to stop out of the losing side and let the winning side run and we are hoping for a BIG day, like we had last week.
Of course it’s best to work our way into these by buying low and selling high so, if I were going in fresh I’d start out light and just hope to get a chance to buy cheaper if the Dow channels for a day or so. Don’t forget there is no economic data on Monday and we do have the possibility of some M&A news (as well as a sub-prime disaster). If it’s a normal Monday, we’ll open higher – possibly a good time to buy puts.
Meanwhile new home sales are suddenly up 2.8% so it’s a good thing I did cover that upside! Watch those puts people, kill CFC for sure! XXX
Not a very impressive move on that housing report. I think people are fed up.
Gold over $670, not good.
Market rally – sadly it’s oil that stands the most to gain.
GOOG calls – I’m thinking of selling some – how much are you offering? I am going to cover into the weekend, I picked up some quick bucks yesterday but stopped out, hoping for another crack at $515 so I can sell the $520s for about $13, I feel safe(ish) with that one as a short-term cover.
FXI – we have to have another weekend discussing scaling in. First of all, these were a counterbalance to the $145s I rolled my existing calls into yesterday. Second of all, it should be great that we get to buy our second round at $4.10, that cuts our basis down .75 but I’d rather spend that money to roll to the $138 puts, gianing $5 in position for $1.85. XXX If it goes up again, THEN we can double down. Juliet’s joy is our pain right now…
OIH – very dangerous short. XLE might be worth a shot if they fail at $70. This month should end very badly at the NYMEX, especially if there are no hurricanes.
XOM – I just did a DD so I’m standing pat for a bit. If they break $85 I may sell some $85 puts as a mo play.
Ideally we will make $2 on the upside and lose less than $1 on the downside. Sometimes you can win on both ends (like yesterday we could have cashed out in the AM on the calls and then cashed the puts on the 150-point drop, but we don’t count on that.
What we do count on is selling into excitement and not being greedy. As with any spread, once you make 20% you should be looking to get out.
AAPL – Why not sell the $145s for $1.60? Because you can sell the $140s for $2.67 and the stock has to finish up $10 before you even have to give your caller back his money. I’m going to take some Jan $140s for $10.50 and sell the $130s for at least $7 today. XXX We’ll see if Apple can break up to $135 but I doubt it.
Gold – still like AUY very long (they have to work through this buyout) and the GDX. ABX is a good income producer as you can get a $1 premium on close calls but I’d take the ‘10 $35s at $6.35 and let it run a bit – you can always roll down for $2 more and start selling the first of your 28 $1 premiums. XXX
GME – too high I think. Oct $45 puts were $7.50 last week, now $1.50, too tempting not to play. XXX
XLE – roll before you DD. The logic is that I have (for example) the $66 puts which I bought for $2, now $1 with XLE at $68.52. If I roll to the $68 puts for $1.68 my basis is now $2.68 but a $1 pullback will get me back to even. If it goes up $1 on me, I should then be able to DD at $1.30, putting me in with a $2 basis and a $1 move my way will still put me back in the money.
AAPL $140s – oops, that was the Jan $145s! I forgot they go in $5s way out there. I’d spend the extra $2 of that’s all it is though… Selling puts – as long as you don’t mind owning them down there (I wouldn’t) it’s a great play.
WYNN – if the market turns down, the $115 puts will be fun again.
I have to go out this afternoon but keep an eye on FAF/FNF/LFG, if there’s a real turn up in real estate, they will show it but I’m not expecting much (other than maybe a fake pump) ahead of the weekend.
COST or GME – my favorite would be whichever one goes the wrong way. If COST goes up to retest $64 or GME attacks $60 (but is rejected) then the puts are pretty cheap. I was just saying to draz yesterday, the key to trading with less money is more waiting. Find a play you love, wait until it does the opposite you think, then check your premise and, if still sound, make the invesment. You may track 20 stocks a week and only get lucky on one but that strategy will double your winning percentage, which is the most important thing with smaller virtual portfolios.
Also, don’t forget (and this goes for many plays I make) that this is in the context of finding puts to offset a very bullish virtual portfolio. Balance is the other most important thing in a small virtual portfolio. Also most important is position management…
Gold $673, Oil $70.50, I’d have to guess dollar is diving, can’t get a chart… So we are rallying because the dollar is collapsing and our equity commodities are becoming more valuable – for now. Still waiting to hit our levels on S&P and Nasdaq…
VIX – LOL! How about selling the Oct $30s for $1.45 agaonts the Feb $27.50s at $1.80? XXX 10 in $10KP!!!
SNDK – $55s at $1.68 XXX
SNDK – I did write calls and they are down .70 from yesterday so I like them for an upside move in a rally, especially as the SOX are being dragged down by MRVL, whose problems seem unique to them.
Speaking of DIA puts earlier – now is a good time to add some $133 puts at $2.40, down .60 (25%) on the day if you are going for a strangle or mattress plays to protect gains. I’m moving into the $134 calls, now $2.10 and I will be taking the $133s off the table at $2.75, just a quarter profit that lowers the basis of my $134s by .20 (after fees) as the calls (3/4 of puts) are there for protection so, like the LVS play, the less risk exposure the better.
CCJ – I still love them but I’m trapped in an abusive relationship!
FXI/COST/GME – of course if we keep rolling stopping out is the best way to go. Again, scaling in I have low commitments to initial entries so I’m more inclined to take my second round on the run-up. We are breaking out on all indices – you have to respect the Big Chart. Europe and the Nikkei are way behind, if they get the impression they panicked for no reason, we could get some fun gains over there.
Please note that I do not believe there is no reason…
This is a very low volume rallly and does not change my plan to hedge APPL and GOOG and I’m spending the .30 to roll up to the DIA $134s so I will be right there with my 300/400 strangle!
As to calendar spreads – my attitude in taking the covers was that I was more concerned about protection that if my callers go in the money. If I make no money this month because the markets are stronger than I thought, then my ‘09 leaps are in fine shape with 15 sales to go – I can really live with that…
DIA – I’m strangling Sept but also starting to build Oct 132 puts at $3.
Being covered with index puts lets me buy back callers and leave my leaps naked with near impunity. It also lets me leave calls ride much longer than I would if they were naked. I negated the puts with DIA calls when I saw the Meatball attitude creeping back into the market but I am taking 100% of the profits from my DIA calls and putting it into rolling my puts up the ladder so that’s the purpose they serve. Obviously I will stop out of the calls pretty quickly on the way back down since I already spent the profits.
VIX getting close to 20 where I think it will bounce. Since the VIX only goes up when the Dow goes down, this will be a good chicken and egg observation.
