Sunday, October 28, 2012
Hi all, I’ve been off line for a nice trip and some off time. Well I opened the GOOG trade and got spanked with lousy earnings. I should pay more attention to my own rules…lol.
The drop in AAPL also wasn’t all that great.. I have closed all previous AAPL and GOOG positions and opened new ones with Jan, 2013 /600 and selling weekly’s against them. Friday I sold the AAPL 620’s for 4+ and back to making money instead of donating to the option gods. At this time AAPL is the only positions that I have open. The drop in AAPL seems to be a great entry point. Time will tell.
Now to the blog to catch up on some of the post.
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A little aside from trading. Us bloggers on the East coast are hunkering down for what they are calling "The Perfect Storm II". I'm in Northern Delaware, about 25 miles SW of Philly. Sandy is coming up the coast and will be making a left hand turn thru central Jersey and into central PA. So we get it coming up the coast and still get it while Sandy heads West thru Jersey and PA.
They are calling for 30-40 mph winds with 60-70 mph gusts and 6-8 inches of rain. Raining now and expected thru Tues evening. Weathermen tend to exagerate these things a bit like Irene last year, but one of these days they are going to be right. Hope its not this time.
So signing of and keeping my fingers crossed. Sort of hoping our governer calls a State of emergency, at least I can watch the markets from home and keep an eye on the ole' hacienda.
tom laenen, as per your post from an earlier blog: Yes, the puts I'm selling on AAPL (weeklys and monthlies) have been expiring worthless. As far as the premiums being too low to make a decent return on capital, well that's a subjective call to be made by each individual trader based on their personal preferences and trading plan. I've stated this before (several times), I do not trade based on ROI. It seems most people do (and that's fine), but I do not. As far as that DEC 370 put is concerned, I received .52/share for a 60-day trade with 3100/contract of margin $$$. That comes out to an annualized rate of 10.2%. I just had a 5 year CD mature @ 5% per year. The bank wanted to roll that CD out to a new 5 year CD @ .84% per year. This trade returns that same rate/month, so it is 12 times better than a CD based on ROI. But again, I do not trade based on ROI, so if that ROI was .2% or 90.2%...I just don't care. I'm just concerned about extracting chunks of cash from the market and depositing them into my "Hip Pocket National Bank" to meet (or beat) my monthly quota. If you feel going long SPY or short OTM SPY puts is a better trade for you...go for it! No pun intended here, but, you have a lot of options with options.
FYI
Been selling NDX Nov1 2575/2550
for .45/.50 all day. Giving 73 points cush or apprx 3% for 1.5 days. I think aapl sells off into the close for Mutual Fund year end and then gets at least an overesold bounce into Nov 1 which is their new year.
@jaydarl-
How are you playing PCLN tomorrow? I just pulled the latest on it.
Put: 490/500
Call:670/680
For a Net Credit of $.75.
I know today is earnings but 14% out of the money (80 pts of cushion on either side)sounds tempting. Although it's probably a death sentence in some fashion. Any thoughts on opening AM?
@Ed K
I have done an earnings play before when I got 90-100 points on the call that turned out well. Usually, I take a look around 0930 - 1030 ct, see how the market is going in general. I do Call Spreads on PCLN when the market is relatively mild up/down or down hard for .25-.35, which is usually around 10-15 points. If the market is wild up or down I try to stay out but sometimes temptation wins and I get in.
The lastest pattern that I have noticed on PCLN is that it jumps up on EXPE's earnings, but is flat or down for their own earnings.
How the mighty have fallen...GOOG & AAPL. While one of them (GOOG) appears to have found a bottom, the other (AAPL) looks like the "poster child" for the often referred to stock market cliché "falling knife". I was short the following 11/02 expiration puts in AAPL: 520, 525, 540, 555, and 565. All expired worthless except the 565 strike. For the first time since I started selling puts in AAPL, I had to BTC an AAPL short put position. I sold the AAPL 565 puts for .41 and I BTC them 15 minutes before market close @ .03 (AAPL had broken 575 and I had less than 10 points to my 565 strike). I hated to do it that close to the market closing, but I had to protect against a big whoosh down on the close and those puts ending up in the money. A $60 stock dropping $10 in the last 15 minutes is not likely, but a $575 stock dropping $10 is certainly possible (and that's the first time I have ever had to do that with AAPL). Got to "protect your assets" and although I had the money to buy the stock if put to me, I don't think the selling is done yet in AAPL. I have a small position for next week’s 11/09 puts @ 525 and am short the following puts for the normal NOV monthlies: 430, 445, 460, 465, 470, 505, 515, and 520. Am I worried...in a word "yes". Again, for the first time since I started selling puts in AAPL, I feel a legitimate threat to my bottom-line from puts I have sold in AAPL. I see 3, maybe 4 levels of support between where AAPL is now and $500 ( a level that just a few days ago seemed out of the question that AAPL would drop that low, but now I think it would be foolish to think it could not). I'm hoping AAPL will find a bottom somewhere between 550 and where it closed at today. Time will tell. I'll be drinking, this weekend, to one of these famous AAPL intraday reversals and subsequent "rip your face off rally".
I placed a credit put spread two days ago on AAPL at 550/545 for 9 Nov. I thought that was plenty of cushion. I then sold the short put yesterday when the 200% rule was broken [loss increased to 2*credit]. Should I have held out for later next week? I have also placed a stop order on the long put to protect its profit but now am concerned that we get a positive bounce on the stock on Monday - should I take the stop off?
If anyone is interested...
I wrote this program after first reading Jerry's book. It selects options that satisfy user entered criteria that include OTM probability, Delta, ROI, volume and OI.
www.options-edu.com/freedownload/nstc_option_writer_setup.exe
UserID: freedownload
Pwd: freedownload
It requires Excel 2003. Blocked from running in any other version of Excel.
Hello Jerry and the naked put crew.
I first read Jerry's book awhile ago and got interested in options. I was primarily interested in selling puts and covered calls. This blogg has turned into calendars and vertical spreads since then. I backtested some of the calendar situations and didn't like the scenarios I came up with.. as a favorite of mine and this blogg 'appl' has recently shown us why.
I think selling weekly spreads is very risky. People will say that the downside is limited in a spread, yes that is true, its limited to 100% of your investment and requires one to take on positions with less cushion especially in weeklies.
I think all styles of options have there times in the market. Diversification is also crucial when using options for income. I think having 10-20 different positions helps spread the risk out.
I was wondering if anyone else sells futures options on here? I have started dabbling in that recently. I'm still primarily selling naked puts. I aim very conservative like DAVID G in what I want to collect ROI % wise. If I can make 1% a month or 10-15% a year that is plenty.
Apples recent pullback as well as Crude oil allows one to sell 30-40% out of the money and still make 10% a year on funds. I think a well diversified portfolio like this is a nice way to make long term steady returns with low stress and easy management.
Just a quick question for Jerry and few others trading Calendars and spreads. How many different positions do you have on at one time usually and what percent of your account is sitting in cash usually?
I try to keep 10% of my account in cash, sometimes as high as 20-30% depending on my futures exposure as the margin requirements are more volatile and change a lot faster even for prices way out of the money.
One of the trades I'm looking at is the July $340 put. It offers 42% cushion and a return of over 12% a year. I'm betting against appl retracing to its June 2011 levels.
There is plenty of free money out there and no need to take on excessive risk. We must not forget that making 10-15% a year is a very high return. Greek bonds are offering 17% and many people still think they will eventually leave the Euro. ;)
Nolan, I currently have 15 positions on with about 87% of my account in cash, I'm very light on positions at he moment.
I usually like to have around 30% of my account working so 70% in cash.
Damo.
Holy cow..Cash is king. Long puts slightly out of money hardly gained much with big drop & eroding theta.
Anybody out there dipping into long dated ITM aapl calls????
Little overreaction maybe???
Optionsense,
Congrats on keeping a large % of your account in cash. Todays selloff confirms why this is important.
Taxman,
I'm looking at a Feb $520-$530 call and then selling agressive near the money weekly calls on appl. I'm waiting for a long tail and consolidation. Apple keeps bottoms only to gap down further. I don't want to be early on such a large stock. Currently still a falling knife.
I also like the company AGU, which missed earnings yesterday and got punished. I'm going to wait for consolidation and then sell some puts on that as well.
I've removed restriction on the version of Excel.
www.options-edu.com/freedownload/nstc_option_writer_setup.exe
UserID: freedownload
Pwd: freedownload
i added AAPL jan 500/550 and feb 475/525 BCS today and bought some shares in accts that don't allow spreads.
the jan cost 31.70 for 58% (298% annualized) and the feb cost 34.85 for 43% (159% annualized)
Some tough going. My problem, I have a Feb 640 call that I bought (down about $6,000) that I used to sell the weeklies. I also have a 650/700 feb call spread. Should I just get out (falling Knife) , close all out and buy a lower feb call?
NDX dropped like a rock the past few days. Closed the 2575/2550 put spread for a loss yesterday. Zeroed out my profits for the week. Oh well, was about the 4-5th time this year. Cost of doing business. Everything OK as long as you know when to close them.
Taking heat on AAPL as I'm sure everyone is.
Here is a lottery play for anyone who wants to take it. FB lockup on 733 million shares expires on 11/14
I'm pretty sure some of those holders are going to want to sell. Might want to take a put postion on FB for Nov or Dec. I'm holding about 70 spread out over Nov/Dec & Jan. Been selling weeklies against the longer ones and making some good money. Closed all the weekly shorts, holding only longs right now anticipating a nice selloff in FB next week.
FB is learning fropm AAPL how to tank big time. Just wait for next week when 733 M shares hit the market.
@ALEX - interesting about that seasonal trading system. The software seems like it would do what most options trading platforms do ? or at least ThinkOrswim does.(I use Thinkscripts to run custom scans). Would be interested what the criteria is for that Seasonal Trend system
From a bullish AAPL trader's perspective, what a week this has been. I was taking some serious heat on my 525 short put position (options that expire today). I woke up this morning thinking I would have to roll those contracts out and down to a lower strike. In premarket trading, AAPL dropped to ~533 and then rallied up to ~542. On the opening bell, AAPL again dropped to ~533 and then rallied to over 550. Thank you Mr. Market for that rally. It enabled me to take a losing trade and exit it with a profit (a small profit, but none-the-less, a profit). You gotta love a strategy like this one (selling OTM puts) where you can have a pullback like the one we are experiencing in AAPL, right now, and throughout this entire pullback, I have had no losing trades and only twice (once last week and again this week) did I BTC a position rather than just letting them expire worthless. I look forward to better times in AAPL where I can just let them higher strike puts expire worthless rather than BTC them because of bearish AAPL price action. With them 525's for this week safely closed out (and what a relief that is) my current shorts that expire next Friday are: 430, 445, 460, 465, 470, 475, 505, 515, and 520. So, I'm taking some serious heat (again) on the 520, 515, and 505 strikes. I expect further downside pressure in AAPL next week, and if that proves to be the case, I will roll the 520 and 515 strikes out and down (probably to the DEC monthlies, as the 11/23 weeklys won't be published till next Thursday). I will roll them is such a way as to keep my original profit in tact (I'll just have to wait a little longer to lock-in that cash). I do want to buy some AAPL, so if AAPL drops to 505, I'll just let the stock be put to me and take possession of the stock @ 505. Nothing, IMHO, except maybe Gold, can drop like AAPL. When that stock wants to go down, get out of the way baby...wow, what a week! And next week could be more of the same...somebody say it isn’t so.
It ain't so...lol. Actually, think the bottom is at hand tho I've thot that several other times on the way down. GLTA.
AAPL is down 23.06% on a close basis since its high in Sept., which is the biggest drawdown since the bull market began in early 2009. But AAPL went down 60.87% from its peak in late 2007 to its low point in Jan. 2009. I am not saying it is going down 60% this time but just that there is a potential for some more downside without exceeding the previous precedent. Might be time for caution.
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