Hi all. Like many of you i also have a ton of the msft's. The good side is that my leap side has closer to even. There is a full year for them to continue to climb if msft goes up. But of course the stock can drop back to 25 or so in the last few days and all that growth will evaporate. The decision.. I can continue to sell weeklies for only pennies or go out a month and get a little more. With the stock around 28 i am 2 behind the curve with the 26's. msft has a history of dropping back towards the 25's but history doesn't help if it continues upward..lol. Looking over the history of my position i am going to evaluate if it might be better to close and break about even or continue with the spread.
Today (Sunday) i am leaning towards closing and moving into different positions that pay as well or probably better without as much stress. Often, even with over 15 years of trading daily options I still find it hard to give up on positions. Many times the answer is obvious but not always.
Seeing some of the post above from SKA and others reminds me of a question i am always asked. 'If this works so well why doesn't everybody do it'. Options are just not for all traders! Nothing wrong with that or with trying it and then finding out it isn't for you. A bad position now and then is to be expected and absorbed into the business. As Hannah and others know, i stress cushion and more cushion. Cutting losses and trying to recognize bad positions before they turn terrible. Just guessing from scanning over my positions from last year I made around 40% for last year. Many losses were included. Losses are part of the deal, they just can't be avoided it you trade much. I have been though melt up's, melt down's, bubble burst and flash crashes. But I have not found a better way to make money. I want to repeat to all of you traders that this is earnings season. Care in stock selection and fund allocation is very important.
As this list is getting long I will post this as a new post also.
ps; the weather has been great and the diving also. I have seen where the east coast of the U.S.has been quite warm? Weird to have the market open at 10:30 am instead of 6:30..
67 comments:
AAPL is interesting this time of the year, with the earnings coming out 1/24 right after January expires. I only sell the monthlies because my weekly plays seem more like gambling to me. The difference on selling the 400.00s between Jan and Feb is about 1.40/8.40 according to Schwab this weekend. So if you believe that AAPL is going to outperform its earnings expectations, like most analysts, given the iPhone sales, this may make an interesting play for 2.3% gain in 6 weeks before considering margin.
Jerry, Thanks for thinking about us, even from Aruba. That's the about options, its seems always to be with you.
All, Interesting comments from and about SKA's post. Good to be reminded that one could always quit this game. Think I'll bail on my MSFT positions at a small gain. Suggestions for other less volatile, more profitable calendars?
ihaveoptions, i am looking at some iron condors. That is where you sell a vert put spread and a vert call spread ..
With TradeKing the maint. is only on one side so the cost is really good to open or to roll if nec.
Some interestiing ones that might need adjusting after the opening tomorrow are...
aapl @ 422
sell puts to open 390 strike.
buy puts to open @ 385 - this is a credit of around .07
on the call side..
s2o (sell to open) 345 strike
b2o 350 also for a credit of .07
If it goes through it will net around .13 and 500 maint for each one is a 2.6% roi for the week
another one is pcln at 480
puts s2o 440
b2o 435
call side s20 515
b2o 520 -- this trade should net around .13 for another gain of 2.6%
Also GOOG @ 650
s2o 605 / b2o 600
s2o 695 / b2o 700
These might change with the opening and even waiting a day or two and then tightning the strikes a little might work.
Good luck
hi jerry,congratulations for a fairly good performance of 40% gain last year.For me everything was going fine last year with average of 4.2% per month gain till SP downgrade hit the market.i also did not open any monthly position in august because of debt ceiling issues.However after congress passage, i opened august monthly trade and the market tanked heavily on monday after SP downgrade.I was wondering did u have any monthly trades opened in august and how did u manage the postion.My return for last year was around 24%.thanks
Jerry, regarding MSFT... I think it's pretty safe to say that it should pullback from here. Today it is doing just that and my calls are declining at a faster rate than the leaps due to limited time left in the Jan's. If it continues to pullback that trend should continue. I guess the risk is if it keeps going up?
Anybody make any moves with regard to MSFT today?
Hi DMK, doc and all,
I get the question all the time of 'did you have positions in the flash crash' etc. I always have positions. i have learned that for me, trying to guess when to open positions or be out of the mkt etc is futile. Sure enough if i am out i should have been in, and vice versa. I just pick what seems to be as safe as possible positions and adapt if necessary. Other than my 'rules' etc there is only so much you can do.
I still have the msft positions but i am sure hoping for msft to drop a little. Not much... lol but a little.
Jerry
Jerry
Unless its raining in Aruba, and it NEVER rains in Aruba, why aren't you on the beach??
My MSFT is a 1/21 short 26 call, so I have two more weeks of hoping it drops some.
Still in the MSFT, about 50 contracts deep but am encouraged by todays action. AAPL taking a well deserved breather.
Jerry is just kind enough to share his Aruba adventure with us as I sit here on a typical NM winter's afternoon. Enjoy it for us, J!
Taxman, Did ya roll them AAPL420's?
Does anyone buy out of the money puts on say SPY, SPX, IWM etc whilst volatility is low as a hedge against a big downturn?
This could possibly help in situations like the flash crash.
If you were to do this, how would you calculate how much protection to buy, would it be a percentage of your current exposure?
Damo
I think you're correct to question MSFT short options. I've shorted the stock because it bounced lower off of the July highs.
First support is at the mid Sept and mid Oct highs ~ $27.40. If it falls significantly through that level I look for price to fall to 26ish where there's support and a 200 day moving average. The trend line for bottom support by 1/19 earnings could be$24.50 and we should all be out by then even if it doesn't reach that low.
On a side note, anyone coming to AZ for the auto auctions? If you are, I'm around and would enjoy grabbing coffee and talking options.
Dave
Ihaveoptions.
No I just closed the spread on Fri and took a hit. With AAPL possibly rallying into earnings, I didn't want to just keep rolling up and out. Besides, I didn't want to take a bearish position and possibly ruin your bull debit spread. As my Iron Condor newletter says, "cost of doing business". AAPL hit all time highs yesterday then sold off. With futures up this AM, you might want to look at locking in some profit. I take my profits when I can, left to many on the table. Never lost money taking a profit. Love counting those dead presidents. Just wait for the next bus.
Optionsense
I own TZA (covered call program)and have some SDS Mar calls. Nothing big. Use lots of cushion on my weeklies as a "hedge". I guess a flashcrash would do lots of damage, especially if it didn't rally back before weeks end. Wouldn't begin to know how much hedge I would need. Guess I'm flyin blind. One of the bloggers said they researched back 50 yrs and the market has been down +10% only four or five times in a week.
In a worst case senario, you keep rolling out your bull put spreads, or just sell your assigned naked calls.
Jerry,
How is Aruba treating you there? Kind of enjoying the variety here: from 60F to snow covered ground in 24 hours and back to 54F in another 20 hours.
Wow market is up & up, lulu up more than $8..Out of msft on Friday.
Good Day
Thanks Taxman for your sage advise. Haven't had nearly enough experience counting those dead presidents. Sorry about the 420's.
Great blog. Been lurking for a while. I had been selling puts for years before I bought Jerry's ebook. This book simply puts it all together and gives you rules that no one else has bothered to aggregate. Recently I have been playing with calendar spreads but I don't like them when the short call runs up hard and faster than the delta on the LEAP. My strategy for dealing with this is to also sell a naked put on the position using Jerry's ebook rules. I call this trade the Iron butterfly Condor Spread - LOL. Overall I still prefer selling naked puts on stocks I want to own. When I do get assigned (< 10% of the time) I
just write a covered call which can never lose money when the position rises. Then close out the position and sell the naked put again. I do use charts to improve
my entry timings. FYI, Jerry's stock list is excellent IMO. Anyone wishing for a little more risk might look at IOC. I have been selling calls and puts on this for years with excellent returns. YMMV.
Taxman
I mainly trade naked puts and always have stops in the market so in a big sell off would be stopped out, but probably with quite a bit of slippage (stop set at 0.50 end up getting out at 1.00) so just thinking that holding some puts would cover this slippage.
No idea how much would be needed, I was thinking that if on average every month I have 40 contracts of naked puts open I could buy 40 puts?
At the moment you can buy SPY March 90 for 0.13 – $520 for 40 contracts which works out to $173 per month. Seems reasonable?
Damo
Optionsense
Man, that is one heck of a black swan event your trying to guard against. If my calcs are right SPY at 90 is SPX at 900. With SPX at 1290 - 900 = 390 SPX points or 3900
DOW points ( In my calcs, I equate 1 SPX point to 10 DOW points). I see the risk in what we do, but I guess I'm the ostrich with his head in the sand. I try to hedge with cushion, stops and leveraged bearish ETF's. No real insurance plan. Besides, how much would those Mar 90 SPY puts help anyway.
Would be an interesting discussion amongst this group.
I'm looking to roll MSFT Jan 27.50s up to Feb $28 looks like I can get .60 for the roll, it seems like a no lose situation if done before earnings on the 19th, if MSFT goes up it will be easier to roll, if it goes down, they will lose value quick, I should have gotten it done today.
Nicky
Looks like you are in the sweet spot while the rest of us are stuck at 26 or worse. Go for it.
Giants did well on Sun, BUT can the handle the PACK
Went down there in 2007 and won, it was like 10 below 0, this time it will be 20 degrees, everything is clicking for the Giants, their only true weak spot is the secondary, I believe I heard the Packers have given up the most yards from scrimmage, in Eli we trust.
I made some adjustments ont MSFT diag trade.
I am long 22.5 calls and short the 26 calls.
I closed some but not all the shorts today. I would have to roll way too far out to roll up for a credit. Maybe I'll roll some of these shorts out in the next few days and keep them at 26. We'll see about that.
Maybe today wasn't a good day to this, but I see a continued run up until earnings.
I still have some covered leaps if there is a downturn to lessen the losses. But I should gain deltas by closing some shorts to capitalize on the run up.
Also, anyone ever move the long up to higher strikes? Either to take money out of position as profit or to add to positions--such as buying more calls as you roll up?
Any thoughts?
Looks like MSFT may report weak sales on Thailand flood. It's not taking a huge hit yet but may weigh tomorrow, if it breakdown I'll hold my shorts. I also bought a put spread today to get some more profit once it starts pulling back. If my plan works I'll quickly close that spread out and roll the short calls as I think this MSFT rally was overdone and earnings already priced in.
As to the insurance discussion, puts are really cheap right now with vow so low. I have some IWM March puts as protection that I can sell against later.
You all can thank me for buying back my MSFT shorts today so the stock can now drop like a rock. Timing is everything? Did take some AAPL profits off the table today for a free ride into earnings, as per Taxman's advice. Kinda regrouping and reassessing. Have really done best this last 6 mos.on put and call spreads staying around 1% ROI, and sometimes ICing 'em later in the week.
Taxman
I'm not expecting a crash to that level, I just figured to go out 20-25% because that's where I sell my puts so the deltas would be similar. I'm just guessing with this so could be way off base.
Also as DMK says - you can sell puts agains them later.
DMK
What strike IWM do you have, I was looking at the 55. Also how do you determine how many? Do you just buy say 2% of your portfolio?
Damo
Keeping an eye on NYX, dividend is at 4.4%, might be a good stock to sell puts on.
Nicky
Being a Green Bay boy and one who attended the ICE BOWL, I'm thinking it will be a very good contest!! Remember the Packers have 31 picks--tops in the league for this season. Catch you on the other side.
@optionsense, how much do you make with 40 naked put contracts per month on average? You have to see how much of that you spend buying protection puts.
ska
Last couple of months has been $1000 - $1200
What sort of % of this would you use to buy protective puts?
Bill
Saw you post recently and checked out IOC. Nice stock. Just did some Feb 40 naked puts for a nice premium with a $20 (33%) cushion. Also placed a 40/37.5 credit spread for Feb. Nice ROI. Thanks for the tip.
Jerry,
I recall you were not interested in the high Volatility stocks like NFLX, SINA, WLT, GMCR, MCP. However one can get some 15 to 20% safety factor for some of them expiring next Friday with high enough returns which is only 5 and 1/2 trading days left. Would you consider those cushions OK to consider or are they just too risky in your thinking.
Thanks..Jim
Taxman,
FYI
Earningswhisper.com shows IOC with a not confirmed earnings release date of 2/13/12.
One of the 1st things I check before selling a put.
Regarding IOC, it is not about their earnings. It is about a yet to be monetized huge NG asset. Of course those high premiums are due to incredible Volatility. The float is low so the shorts can move this stock at will. However, the few times that I have been assigned on a naked put, I just write at the money calls to get my shares called for the next month. CHA CHING!
Bill & Ed
Thanks for the heads up. Just getting my toes wet. Did 3 Feb 40 nakeds at 1.10 and a 8 contract Feb 40/37.50 bull put spread. I have my eye on this one and checked its highs and lows over the last three months.
@IOC, This stock moved 30 points in 15 days back in august. Be careful.
With this game, I've found that you may take the 1-5% here and there but since you have to play it with "size" to make up for the small return, one hit will wipe out all your previous earnings and some. I've taken some heat before and avoided some disasters. I think it's better to keep it small but get a higher return. I would be more inclined to do a call spread with the stock already this high (70/75 spread gives you 25% return.). With a return like that you can afford to keep the size smaller and if it doesn't work it doesn't wipe you out. Just some thoughts...
Also, with the VIX so low here the premiums are very low and it forces you to get closer to the market which is dangerous. If the VIX spikes, you are toast.
Good luck with IOC, you're all gamer then me :)
Hi all, in Curacao for the next week or so. Wow is it nice..
--options;
Jim you asked about hi volatile stocks and my interest in them. I do use them on occasion but only for positions that expire with-in a few days. Maybe open on a wednesday or even Thursday as mentioned by others in different post. Care must be taken as a really ugly turn of events can devastate an account. That is what my book is about. How to make money and lower risk. The idea isn't to only find the best ROI but find the best, with the lowest risk factor.
I agree with 'optionsense' above regarding IOC. A mideast war, Israel bombing Iran -you name the cause, stocks like these can go either up or down at a moments notice. Same as Pharma stocks & FDA. If i play a stock like IOC i would probably do naked calls or a vert cal spread. It is all to easy to get caught up in stocks that offer great returns. There is always a reason for those returns. As mentioned in the book, the trader on the other side of your position is probably a better, more experienced trader and also better looking. If you are a trader, you must trade.. but be aware of caution flags (hi prems) etc.
Taxman & other, again my suggestioon is to never go out into Feb with these.
1. they have no PE ( they lose money everyday they open the doors)
2. to volatile for month long positions.
3. each previous earn report for the coming qtr has been a diaster, missing horribly.
--Enough preaching for now. But search for good trades, not scary ones.
Jerry
I agree with everything you say above Jerry except the 'better looking' part.
Put my order in to roll from MSFT Jan $27.5 to Feb $27, my ask is high, no urgency, let them come to me, an hour to go, little by little the bid is going up.
Oh oh..France downgraded to AA from AAA by S&P. Next week will be interesting.
RHM, are you still selling spx weeklies?
DMK. No i have been on the sidelines there in january..vix is too low so i cant get premiums. I did do some naked puts on fcx and mos this week.
Looking more at naked puts again on stocks i would like to own.
Cheers
Hey Nicky,
You said you were rolling your short down from 27.5 to 27 for FEB. Just wondering why you decided on 27 and not on 28?
Aloha,
Mike
I was looking at the wrong quote when I thought I could get a credit of .60 for rolling up to $28, it was in fact .60 for rolling down to $27, my order did not go through today, I might just wait to after earnings to roll, everybody seems bullish on MSFT, even the activity on the buying side of calls is bullish, with Windows 8 due out later this year, nobody wants to short this thing, also look for positive Xbox sales figures from December.
Anyone got any good naked plays they're looking at for Feb expiry?
Anybody still have their 26 MSFT shorts? If so, what is your stratey?
I've still got mine, they expire on Friday. I plan to roll out on Friday after earnings. Depending on where we are at that time, I will either roll up to 27 or 28, depending on where the stock is.
Currently I can roll to the July 27 with no loss, or the Oct. 28 for about the same.
Damo, looks like your puts for JAN worked out well, but all of them have earnings for FEB. Where are you headed for next month?
MSFT earnings should be interesting. Several analysts have lowered estimates recently. The stock has come down a bit, but not much. I'm wondering what will happen if they meet the lowered earnings estimates. We'll see...
For Feb, I'm looking at NYX, and I will continue selling TTWO puts, wrote $14 Jan put when it was trading @ 13.41, closed today @ $15.21, I will most likely write the $15 if it pulls back I'll go with $14.
KauaiTrader, I got out of HANS, SPG, NOV and PCP about 2 weeks ago, they all hit my 80% profit exit.
I rolled into EQIX 80, FLS 85, & OXY 75.50 – OXY closed at 80% profit and the other 2 should expire friday without issues.
I've also got CAT 85 which I opened last friday that's looking safe to expire.
Has been a good month, I've had small weekly spreads on AAPL and SPX every week that have also worked well. Keeping these small though.
The market has behaved so it's been easy, I'm sure everyone has made money this month.
Febuary is hard with all the earnings, I've had a quick look and haven't found much. I'll have a close look over the next couple of days and post anything that looks good.
Damo
Kauai
Closed my MSFT Jan 26's earlier this week fearing an assignment, cause there was very little time value left on so ITM calls. Gave back ALL my profits from Oct thru today. My LEAPS are profitable. Waitng for the earnings reaction to determine if I close the LEAPS for a profit and get out or start selling 27 or 28 calls again.
I usually trade SPX weekly spreads, but with the VIX so low there is very little premium to be had and still have a safe cushion.
I'm interested in reading what others are doing for Feb
Jerry, Its snowing in Seattle. Stay put.
Hello everyone. I've been selling puts and credit spreads since oct 2010 with pretty good success. However, given the low vol environment, I'm really finding it difficult to find trades with adequate cushion. Typically I use etfs and indices as my instruments of choice. How are other put writers planning to navigate the low vol environment going forward. As for me, I might transition to individual stocks.
Looks like Mr Softee must have hit it big on EPS. Pushing 29 after hours. Now what does everyone do!!!
Well, I bailed out a couple of weeks ago, both long and short with a small gain. Not sure about these calendars, still have INTC and SDNK which are chugging along, with ever decreasing basis. Think maybe non tech sector equities might work better...KO MCD . Rethinking this strategy.
Mr Softee (rocket man) is headed for the moon.
Should have waited before selling those Jan week 4 29 calls.
Taxman
I rolled out my 26s yesterday to OCT 28s. I wanted to wait until today, but after talking to my broker decided to pull the trigger rather than risk being assigned. Since I'm in Hawaii, I don't usually look at the market until around noon EST.
I'm in a holding pattern for now on this one. I noticed that the stock has jumped about 1.50 as of right now. My JAN 13 25 LEAP has gained about $1, while my short OCT 28 has only risen about .75. I guess this is due to the deep ITM nature of the long position, but it has helped to bring me less deep in the red.
My plan is to wait for a dip and try to buy back my short and roll higher at that point. If it does go much over 30 though, I will consider getting out of the short altogether and letting the LEAP ride up to (hopefully) cover the cost of getting out of the short position.
I've got time, so I'll just see how this plays out. Unfortunately I haven't covered much of my long position costs, so I am down about $3500 on 55 contracts.
If anyone has some insight on this strategy, I'd love to hear your thoughts...
WOW someone seems to be betting BIG on an AAPL miss. Look at the Jan week 4 385/390 puts. Either that or someone is selling one heck of a lot of 385/390 credit spreads.
Hope they're wrong!
Regarding covered calls, if one sells a covered call for $14 and the stock is now @ $16 one can keep rolling, pushing a month ahead staying @ the $14 strike and receive a credit month after month, instead of simply letting the stock get called away, any downside to this?
Nicky
Yes you can continue to roll the 14call out each month but the deeper ITM the call gets, the less premium you get. No different than with the MSFT calendar spreads. I used to do "buy/writes" with the call ITM knowing the stock would get called away and make 3-4% a month on it. The problem you get into is if the stock starts to tank BELOW the call strike. Then you are writing calls ATM or OTM hoping the stock recovers.
Rolled MSFT to FEB $27 for .53, nice premium received, more time to decide what to do from here.
Hi,
Have found myself selling more and more puts during the last year until it became my dominant strategy, and found Jerry's book and this blog. Spent 3500 in commissions at Fidelity last year and figure its time for a change. Is there any consensus as to the best online broker(s) for put sellers?
With earnings and low volatility there isn't many options for February, here's what at I'm looking at – Most of them I won't be able to decide on until Wednesday after earnings and there's a good chance the volatility will be gone so they won't be an option.
COH Feb 50 0.15 2.6% Earnings 24 Jan Before open
FFIV Feb 97.5 0.34 3.3%
FLS Feb 85 0.20 2.2%
OXY Feb 77.5 3.1% Earnings 25 Jan Before Open
PII Feb 50 0.30 5.5% Earnings 25 Jan before open get more cushion if more open interest is available
ULTA Feb 60 0.15 2%
WLP Feb 57.50 0.15 2.2% Earnings 25 Jan before open will be lucky to get this premium
Some of these I looked at yesterday so they might have changed today, I've not checked. I might enter some of these next week or none, will see what happens. Anyone got any other nakeds worth looking at?
Damo
Hi all, I am now on Bonaire. Looking forward to some diving soon.
Had lousy wifi for the last week. sometimes ok and then in the middle of writing.. zip..
So now that Friday has come and gone and money made and loss, here is my take on the market and different strategies.
These dang calendar spreads have made some good money but have put me behind the curve with MSFT. I had 250 of them at one time and i see Nicky roller those. I closed the last of mine yesterday. Just got tired of trying to squeak out a few pennies. One problem with rolling them out and up is that when you bite the bullet with the loss thinking you will/can make it on the new amount with the in-the-money long ones..the stock after a while drops back and all the rolling was for naught/. Sometimes it works and some not..
Geo, I have no special connection or association with this broker but I use them and am pretty happy. Especially with the commission rates. I use TradeKing. I am not sure if they are the fastest as I seem to fill faster with some other accounts at Ameritrade but they beat the pants off of Ameritrade with commissions. The ameritrade accounts I trade are for other people that I trade for. If they are happy I have no worry? I have traded with TK for over a year now and have no complaints.
I am also going to use this for a new post as this one is getting long..
Still earning season so use caution and leave extra cushion.
Geo - dump FIDO. I used to use Scottrade but they don't allow you to sell puts. I now use OptionsHouse and love it. $5 for 5 options. My trading buddies use TradeKing and Interactive Brokers and are very happy.
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