Hi traders. As I mentioned in one of the comments sections, I advise all to use caution with the coming January positions. Not to scare you or say the sky is falling etc. Just a note of caution as the mkt has come a lone way with the NASDAQ at or near highs not seen in a long time. The DOW has also had a good run. The VIX (volatility index) is low and that usually means traders are comfortable and complacent. That is usually when Ca Ca hits the fan. The Santa Claus rally might be over soon. Also mutual funds adjust their positions for tax reasons and normal adjustments to their portfolio.
So the advice I offer is for you to take lots of cushion and settle for smaller returns until we get a better picture of the market.
I am not opening any positions where I get more than 3% ROI on maintenance.
There Is 5 weeks for this options period so plenty of time to roll up as the month progresses. Don't rush things.
Good trading all and prosperous and hapy year ahead.
10 comments:
Jerry,
Great advice and on target with your Crumbs Rule # 1 - Don't Get Greedy.
Cheers,
John
Jerry,
A "stop loss" strategy question.
Thinking about the Crumb Rule of closing a position if the option premium doubles -- do you ever roll this stop loss down as the premium dwindles?
For example, let's say I sell XYZ Put at .50 and set my stop at 1.00; but then a week later XYZ Put is now .40 market. Should I then drop my stop to .80? And then say a week later, XYZ Put is .30 market. Should I then drop my stop to .60, etc ? Or should I just keep my stop at 1.00 through expiration?
My instincts suggest rolling my stop down as the XYZ Put premium drops for capital preservation, but perhaps this is too conservative (and perhaps get stopped out too early on a quick price swing). I would be interested in your thoughts on a "rolling stop loss strategy." Thanks!
I sold some puts today on the following:
TCK - Trading At 56.5
Strike - 45
Premium 0.22 - 10 Contracts
Return is 4.4%
I did some research after John posted this on last week
TCK 57.66 JAN 44 0.20 4.3% 99.4% -23.7% $13.66 $51
Thanks John I will let you know how they work out.
I see CMG is down some today :(
Sold 3 AMZN 160 JAN PUTS......about a 5 percent return.
John, yes I do roll my stop down. It is not written in stone but I usually do. If I am not feeling really good about the stock I might, as in your example of the prem dropping to 40 from 50, even roll down to the .45. In that case I get out with some $$ or close to even.
Jerry
John & Jerry,
When rolling a stock down that does incurr comissions I'm assuming?
My concern with doing this is that my commissions will eat to much of my profit. This is due to my low amount of maintenance i am currently working with.
One more trade.....just sold the AAPL Jan 280s.....3 contracts at 0.85 I think about a 2.9 percent return.
Just starting to take some direction from your strategy.....please feel free to comment on today's trades if you don't mind so I can get some feedback. Thanks in advance.
FFIV 105 for 50 cents. Earning on Jan 19.
Fulgore, yes it is a constant mind game to figure if rolling is worth it. That is a sort of a trap you can fall into. When you look at rolling and the next one or two strikes offer hardly any gain you find yourself rolling to an all to high of a strike. Also I try to keep in mind that when i opened the position i was happy with the results. So why endanger those gains for just a small amount you might make when rolling. As I have said, nearly all my losses come from rolling to soon and to high! I have the problem of an angel on one shoulder saying wow, you made 3 or 4 % this month...The devil on the other shoulder saying wow, you can roll this up and make 6 or 7%... A constant battle for me.
Hannah and Wire---
I like both of these trades. No earnings and good stocks with a decent return. Mind the advice above...lol.
My Jan AMZN are already a rolling candidate and we still have 5 weeks to go.
Jerry, how true of what you said.
100% of my loss came from rolling because the strikes got too close to the underlying assets that made me uncomfortable. So far, every initial position was grreeat. Though the rolled up positions never came close to being assigned, yet they chipped away my hard earned crumbs.
So I conclude that I would just be happy.....not to do anything extra.
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