Sunday, November 11, 2012
Hi all, I can see I either have to do options full time or other business interest full time. I have broken many of my own rules while trying to ‘out-guess’ the market. I have gone to a lot of cash until I can see if this market is actually ready to go north.
I have opened and closed so many positions lately my account looks more like a refrigerator door. At this time I still have some AAPL spreads. I have the Jan 2014 550 and selling weekly’s against them. This gives around 14 months for AAPL to stay the same and give a good weekly ROI or move up as many seem to think will happen. It is hard to believe that AAPL has dropped around 150 points in a matter of weeks. Hopefully the new products will produce some good news. Now that earnings season is pretty much over for a while, I am tiptoeing back in but I am very cautious.
The coming confrontation between the House and the President regarding the fiscal cliff is spooky. So do be careful and leave lots of cushion in your positions.
Subscribe to:
Post Comments (Atom)
52 comments:
I too have learned the lesson of 'divided attention'. One of my rules is don't trade when you can't watch, which I broke this summer and fall while sailing in Canada. Not sure if I would have seen the AAPL swoon coming but I sure as heck would have cashed out at 2or 3 X premium on credit spreads. Hopefully, the market will bail me out or at least give me another opportunity to manage my current positions.
@Brian, I would love to take credit for this seasonal trading system, but it was developed by Jay Kaeppel of Optionetics. I just put what he described in his book Seasonal Stock Market Trends into a smart spreadsheet so I can generate signals for the next 1,000 years.
The system is using 13 seasonal indicators such as days of the month, summer rally, election cycle, midterm election, 40-week and 212-week cycles, holidays, specific years of a decade, etc.
I have rolled most of my positions down as AAPL has dropped. Mostly I have Jan 600 and 595 calls, though I did add a 550 last week after the last big 20 point drop.
Weekly short calls are not paying much at the 600 level with the stock down around 540. Just sort of biding my time and waiting for some good news to move things up.
I'm optimistic about AAPL in the long run. For now I have to decide if I just hang on with current positions and wait for the stock to rally, move them down so I can sell shorts again, or just flat out close them and look elsewhere.
I am very confident the stock will rally, but by how much and how soon is the question. With right around 60 days left on the longs, the clock is ticking and if I am unable to get much return by selling shorts, then I am basically relying on the whims of the market to raise the stock. Not fun.
Anybody else have thoughts on this?
Just put on my Appl Calendar play.
Downside should be in this region, hoping for a bounce and then selling weeklies until Feb.
KauaiTrader,
I would roll down the position so you can sell weeklies on it. Apple is looking way over due for a rally here. I think there is strong support in the $517-520 range. Hopefully it bottomed out today.
Kauai
I have debit spreads on AAPL set up for months from Dec to Jan '14. I have a bunch of them expiring this Jan - about 20%. Most of them need AAPL above 630 and the others 650.
I haven't moved anything yet, but considering moving them out past earnings to capture that catalyst. It will cost some to move them out, but even at the same strikes I think they would be much safer.
That's what I am considering but haven't done anything yet. I have a couple of calls that I am not selling weeklys against at this point. Not doing that down here.
That is def the bottom for Apple. I've never seen such a huge reversal like that. Its now going positive!! There was some short covering lol
Hopefully everyone can get back to selling weeklies now or soon :)
Gd Luck
That was crazy! AAPL down like 15 when I woke up, then an hour later it is positive...
I have been rolling my 600 calls down to the 550 range. Not doing them all at once, just incrementally. Now I'm selling weeklies again.
Looking at the earnings in Jan for AAPL. Timing-wise, the options expire the week before earnings, but should be able to get some of the typical bounce we see leading into earnings.
Wow...what a week, hell, what a two weeks! For those of you who have mastered the art of trading without emotion, I tip my hat to a better trader than I. My AAPL NOV 430, 445, 460, 465, 470, and 475 puts all expired without any problems (i.e. no heat!). My NOV 505, 515, and 520 strikes were a different story. On Thursday, I rolled the 520 strike puts to DEC 450 strike puts (this is the first time I have ever had to roll AAPL puts). In so doing, I recovered the premium from the original trade plus 50% more premium. But now, I have to wait till DEC expiration for that trade to play out (and hope AAPL doesn't drop to 450 between now and then). I stayed in the 515 and 505 trades expecting they would expire worthless. One of the hardest things I have ever had to do was to stay in those trades and when AAPL dropped to 505 and it looked like a sure thing that AAPL was going to break 500, I was 10 points ITM on the 515's and looking like the 505's were moments away from going ITM and then along came the government to the rescue. Verbage out of Washington D.C. saved the day for me...AAPL sprinted to 530. I was sinking fast on those trades, but I looked at the premiums required to BTC them and I would of had to pay $250-$300/contract over the intrinsic value of the puts to close them out. So, I decided they would be WOF trades and I would just take possession of the stock and sell calls against them Monday morning (hell, AAPL is due for some "seller exhaustion" bounce or a "dead-cat" bounce). I'm tired of trying to pick support levels in AAPL because it keeps falling through every one of them. So far I have survived this massive drop in AAPL stock without losing any money on any of my AAPL trades (and there have been many of them)...and that is mostly due to luck (thank you Federal government law makers for them timely chosen words about the fiscal cliff). So now, the only puts carried over from NOV to DEC were the 520's (rolled to DEC 450's). I’m currently short the AAPL DEC 370, 375, 405, 410, 415, and 450 puts. I'm also short the 11/23 440 puts that expire next week. Now I have some more cushion in my positions and it feels damn good! Even after today's nice turn-around (what a beautiful looking hammer that is), I still think AAPL is extremely vulnerable to further downside selling pressure until this damn "fiscal cliff" issue is resolved.
Not liking the look of almost anything out there i've used lately for ICs or weeklys. Doing monthlys only i think until this "cliff" is behind us. Positions i've opened have cushions of 42%, 40%, 40%, 36%, 23%, 22%. All naked puts. Going old school this month ! Good luck all, interested in hearing if people are back in with NDX, RUT, AAPL on the weeklys.
badata
Been placing my usual NDX weeklies.
Placed some Mon & today. Mon was 2475/2450 and today was 2525/2500.
Most were placed for .35/.40.
RUT was too close to the strikes for any decent premium with 15 point spreads.
As for aapl, I have some Jan 600 and Apr 575. The Apr should be OK but Jan I'm just selling whatever I can and hope for a rally into eps. Wish I was around on Fri to pick up some calls when aapl was at 505. Was attending year end tax seminars. 2013 will be lots of fun.
Happy Thanksgiving to all. And especially Jerry, wherever you are!
What a difference a week makes. Last week, my short put positions in AAPL 515 and 520 gave me so much trader angst, this week, they were kittens. All my short put positions in AAPL 440, 475, 480, 515, and 520 for week ending 11/23 expired worthless. For next week, 11/30, I'm currently short puts @ 430, 475, and 490 strikes. Will definitely be adding to that next week...whether AAPL goes up or down. Anyone notice that weeklys for AAPL and SPY (maybe others to...I've only noticed it for these two for now) have been published all the way through the end of the year. I hope that the CBOE continues to do this...publishing weeklys options for 1-2 months out rather than just the current week.
Just wondering what everyone is doing with AAPL. It has run up so fast! I've got some weekly 560 shorts that are DITM. Wondering if I should just close them out and let the long position ride.
I am thinking this run will continue up to about the 620s or so, and holding the shorts limits the ROI when it moves up so fast.
Any thoughts?
Kauai
Real bummer. You could lose both ways. The short 560 is mostly intrinsic value. If you close now and aapl corrects, you are losing on your long. I might try rolling up and out to a Dec monthly and pay a little to move the strike up. A lot depends on the expirey of your long call. Of course it is either Jan or Feb. Citi just upgraded aapl with a target of 670 or so.
I don't know what else to do.
So I closed out some of my positions and bought new calls at around the current stock price. I think this run still has something left in it, so I'll just hold the calls for a bit, then when it seems to be leveling out I'll sell some shorts against my longs.
Tax What symbol do you use (ie ETF) for your NDX trades? Fri AM close? Sorry, know this is a repeat but I am now ready to get off the apple cart and find something a little more stable. I suppose that means AAPL will take off now. Thanks in advance.
Have Ops
The symbol is NDX and spreads are 25 points on weeklies. You can get 5 point increments on monthlies.
Been placing some 2550/2525 spreads for .30. With market starting to sell off, I;m waiting to see what happens before placing more in other accounts that I trade. Settlement is Fri AM, so be comfortable with your position at Thurs close.
Man did I get fried today on 18 NDX
2675/2700 call spreads. Yesterday with the market tanking and NDX at 2614, I placed the spreads for
.45/.50 with 60 points of cushion.
I no sooner placed the order and Boehner had to come out and say resolution of the cliff was at hand and the shorts began to panic and cover.
For the life of me, I do not understand why I cannot stay away from call spreads. 90% of my losses come from call spreads. I need to get back to basics. Nov has been a terrible month for me.
kauai im short a dec 22 555 call and long a oct '13 480 call and opened the position with aapl at 528. i was thinking about closing out both sides right before dec expiration but im going to wait to close my long until after year end to not realize a gain on it. Overall i should make between 1500-2000 on this spread if apple stays about where it is now, but my realized loss for the short side will be like $3000 so a nice tax saver. not sure where your long expiration is so this may not apply to you.
Given aapl miss last quarter and recent "plunge", is anyone positioning themselves for an eps run??? Or are we all recovering from 1000 cuts with our Jan/Feb calls underwater. Even tho they gave low projected estimates for this quarter, everyone knows they always have a blowout holiday quarter.
Taxman
I know the falling knife is a bad thing to catch, I just can't help myself. I have a Feb 640 AAPL call and the Feb 650/700 spread. I bought them in sept. I have done okay selling the weekly against the Feb 640 but I have stopped with all this fiscal cliff stuff. I am going to hold on.
Well, another week has come and gone and that means, fortunately (for me), another batch of weeklys AAPL puts have safely expired worthless. I was short the AAPL 430, 475, 490, 500, 510, 525, and 550 puts for week ending 11/30. Those are now history and it's on to next week. For next week (12/07), I'm short the AAPL 450, 460, and 495 puts (I will definitely be adding to that list next week). This may be the last week I sell the AAPL weeklys until an agreement on the fiscal cliff is reached. Last week on CNBC they said Wall Street was expecting an agreement on or before DEC 10. Today, they said Wall Street was expecting an agreement on or before DEC 21. It's getting more and more difficult selling AAPL weeklys as we get closer to 12/31 w/o an agreement.
Dave G. Apple 12/7 puts for 450, 460 have bid of 0 cents right now. 495 has a bid/ask for 5 and 11 cents.
I know you have written in the past that you dont care about ROI. However unless you sold these puts 2 weeks ago, it does not make any sense to sell these puts right now as their is no reward at all, all you take is risk. You can sell the $495, 12/7 expiry for 6-7 cents, why not sell MSFT puts or General Mills or Walmart puts.
I would be interested to see what puts you would be adding next week.
btw Jerry has not renewed his thread for a long time. I wonder where he is vacationing now?
Hospitalist, those 450's and 460's for P/E 12/07 were entered before they went to a 0 bid ("early bird gets the worm"). BTW, I have been filled many times on a 0 bid option price. As long as your offer is the lowest one posted, you stand a chance of getting filled. Most of the time, it does not get filled, but some of the time it does. A 0 bid will not stop me from entering an offer price (I just make sure my offer is lower than the currently best posted offer). Risk is like a "beautiful woman"...it's in the eyes of the beholder or in this case...in the eyes of the trader. If you look at the strikes that I pick vs. the amount of time that I'm in those trades, I think they, from a risk aspect, are fairly safe trades. Look, anyone that trades AAPL takes on lots of risk. AAPL is like no other stock out there. They say "stocks take the stairs up and the elevator down", well you can make a case (a good one) that AAPL takes an elevator up as well as an elevator down. Again, it has no equal in how fast it can move up or down. So yes, the risk is always going to be there. But, I'm making thousands and thousands of $$$ off AAPL every year. My feeling is "don't try to fix what ain't broke". Yes, I'm so tempted to sell puts in MSFT and INTC now that they have pulled back to levels that I like (and they both pay a dividend), but, I remember 2011 (I had 12 losing trades in 2011) and half of them were in CSCO (another "OLD TECH" stock like MSFT and INTC), so I'm very hesitant to do so based on my previous experience with CSCO...but, I am very, very tempted to sell puts in MSFT and INTC (just haven't done it yet). I currently have no positions for week ending 12/14 (that's because of the fiscal cliff). I don't want to be short a bunch of puts and then something happen with the fiscal cliff that tanks the market. I'm short AAPL puts for the normal DEC monthlies @ 370, 375, 405, 410, 415, 435, and 450 strikes and the JAN monthlies @ 395. BTW, you make good and valid points.
Dave G
I, like hospitalist, was wodering the same thing concerning your aapl puts. I just checked the premiums on the Dec/Jan monthlies and only Jan seems to have any real premium.
How many contracts do you traade to make a position worthwhile after commissions.
@DaveG, Yeah, I don't quite get this either. You can enter any price and see if you'll get filled. But, for example the AAPL monthly Dec370p is .02/.03. I can't imagine your getting above ask on the STO. Also, why sell the Dec375p when the bid, at .01, is *less* than the 370. Why not just sell more of the 370s? Similar for the 410s vs. 415s. Then, getting up to the 435 the ask (.18) is 2.25x the bid (.08). You may get filled above the bid, but it is still a lot of spread to overcome if things go south, especially since theta on .08 over 18 days is pretty minimal.
OK Dave G. You are making thousands of dollars and thats good but what is the capital invested.
If I have a portfolio of $250,000, I only make $10,000 in one year, I would be pretty disappointed.
btw whatever makes you money, its better than losing money. If you read Jerry's book on "selling put options my way", we try to target a return of 1% per month by selling out of the money puts.
btw look at STX for selling puts, got a good dividend cushion.
Taxman, you can't do that (well you can, but remember, option premiums have a time element to them...as well as price and volatility elements) and thus you're looking at option premiums that have probably changed quite a bit from when I originally entered my trades. My commissions are $1/contract for the first 50 contracts/month and then .80/contract thereafter. I pay NO ticket price on my trades...and that's a biggie. I try to fill up the first 50 contracts/month selling puts in VZ and T. Thereafter I'm just charged .80/contract (again, no ticket price) for the remainder of the month. With that said, I do a lot of 1's and 2's as I leg into my positions (since I don't have to worry about paying a ticket). I try (I don't always succeed at this) to limit my weeklys to no more than 15-20 contracts/week (talking about AAPL here). For the monthlies and bi-monthlies, I try to limit myself to no more than 10/contracts month (10 for Jan, 10 for Feb etc.) for the longer dated trades. My .07/cent overnight/intra-day trade is not included in those limits.
Mgmc, the lowest I will offer for a trade is .07/contract for a short-term trade and .52/contract for the monthlies. With that said, if a strike price has a posted bid/ask spread of .02/.03 (as you cited), I would never offer my .07 minimum price as it is not lower than the posted offer. But, if the posted bid/ask is 00/.10 and I like the strike, I may post my .07 offer because then it is lower than the posted offer of .10...that's the kind of thing I'm talking about. As far as your example about the DEC 370/375 and DEC 410/415, I totally agree with what you're saying, in principle. But remember, and I made the same reference to this point with Taxman, I entered those trades you made reference to a long time ago (370 on 10/23 and 375 on 11/08). You're looking at the option chain (probably yesterday)...a lot has changed since then. What I do is go as far out of the money as I can go and still get .52/contract fill. I then look at the charts and make a determination as to whether I want to take the trade or not based on how much time the contract has left in it. If I like it, I'll take it, if not, I won't. It's not totally credible to judge a trade based on current option chain premiums for a trade that was entered weeks or even days earlier. The premiums have changed so much (99% of the time the premiums are lower...usually much lower). Again, agree with what you're saying about the 435 reference, but consider this: 1) I have got some of my best fills when the spreads were wide (just wanting to run out in the street and scream fills) and 2) only one time so far (recently I rolled 520 weeklys to 450 DEC monthlies) have I had to roll AAPL trades. Now, nothing is guaranteed, but as long as I show proper respect (meaning plenty of cushion) to this monster of a stock, I hope to minimize those trades where I have to make an adjustment (roll or close).
Hospitalist, as I have stated many times before, I do not care about ROI. I just want to make enough $$$/month to pay all my bills (minus rent). That's food, gas, medical, car insurance and vehicle registration, discretionary spending...you name it (everything except rent). If I can do that (and so far I have), I'm happy. I don't care ROI-wise how I do it; I just want to do it. If you're targeting a 1%/month and are able to achieve it, that's great! I have no problem with that. I (at this time) do not factor ROI into anything I do (trading-wise). I just want to make enough $$$ trading to pay my bills (minus rent). I feel the same way about ROI as I do about the price/lb. of tea in Timbuktu...I just don't care. It's all about paying my bills...baby! ROI...don't need it. Those that want to factor in ROI, I'm fine with that. I listen to what they have to say and are doing and maybe sometime down the road I will do the same, but just not at this time. I will check out STX. It's not something I'm familiar with at this time.
DaveG, Based on these comments from your previous post: " currently have no positions for week ending 12/14 (that's because of the fiscal cliff). I'm short AAPL puts for the normal DEC monthlies @ 370, 375, 405, 410, 415, 435, and 450 strikes" I had assumed that you had only recently entered those positions for DEC.
Appreciate the response. Thanks.
Hey guys, just wanted to ask your opinion.
A while ago, I bought AAPL Jan 2013 Put spread 550/540 for $2 and change.
Now since apple is trading below 540, I should theoretically be able to close this spread for $10. However, when I look at the close price on my brokerage, I am only getting $7.45 and that is the ask, bid is considerably lower.
Will the spread price increase as apple tanks or should I take my profit and run away. I put in an order of $8.20 earlier in the day but it didnt get filled.
Anyone has experience with this situation??
Hospital
Yes your put spread should have a value of 10 as long as aapl stays below 540, but since they are Jan options, time value is coming into play. As you approach expirey AND aapl stays below 540, you will see the credit approach 10. Theoretically the sprad will be 10 on expirey day as long as aapl stays below 540. You might want to take your profits and run. Especially if you think aapl might TRY(?) to rally into earnings.
After being burned last week on an NDX call spread, I promised myself I would never sell a call spread again. My put spreads are working to perfection, placing postions on Tues PM & Wed AM. I even placed an SPX 1400/1380 put spread today and picked up .20 with SPX at 1415.
AAPL is killing me. I'm trying to sell as many weekly 600's to offset the cost of my Feb 600 long calls. I also have Apr 570 long calls but they should be OK. My only hope is a nice eps beat come Jan. If I get thru this aapl carnage, I may never want to do that again either. Stay with what works.
"Winner, winner, chicken dinner" - that pretty well sums up trading the "Forbidden Fruit" this week. All my weeklys positions (450, 460, 480, 490, and 495) for w/e 12/07 expired worthless. Another tough week (stress and more stress). But, this trading week is now over, all $$$ is safely deposited in my "hip pocket national bank", and all 12/07 obligations are rendered null-and-void (many expiring contracts). My current positions for next week (12/14) are: 440, 450, and 460. My positions for the traditional DEC monthlies are: 370, 375, 405, 410, 415, 435, 445, and 450. I also have JAN 2013 positions: 370, 380, 385, 390, 395, 400, and 405. The JAN 2013 options expire JAN 19 and currently the "Forbidden Fruit" is scheduled to report earnings on JAN 22. So, as long as the "Forbidden Fruit" sticks to the schedule, those JAN options will expire before earnings on the 22cd. On the next whoosh down in the "Forbidden Fruit" (and I'm sure there will be another one or two or more...unless there is a fiscal cliff resolution), I'm going to establish some FEB 2013 positions (those will be well below 300 though..."gots to have plenty of cushion"). I like my positions thus far. I gained 35 more points of cushion for this week (dropping from the expiring 495's to the 460's for 12/14). I also sold 133 puts in SPY last week that expired worthless today to. On to next week and I’m sure more stress from the "Forbidden Fruit".
@ Dave G - Is this the way you normally invest; selling multiple contracts on one side (puts) and on one name (AAPL)?
I'm just curious, sounds like a lot of risk to me. But is it working well, if so, all the power to you. I'm just asking...
Thanks,
@DazeTrader from twitter.
Dave G
Been reading your posts the last few weeks. Ineresting trade plan, but with the number of naked puts you have open, your margin requirements must be huge. Therefore you must have a pretty large trading account. I like the amount of cushion you are using.
@ Dave G
Do you do spreads or only naked puts?
DazeTrader, yes that's the way I trade AAPL. As the price goes down (and it has done a lot of that lately), I will enter new trades at lower and lower strikes as it continues to fall. Rarely do I add to current positions...I just make new trades at lower strikes if price is going down or higher strikes if going up. I only sell naked puts and AAPL is by far my main income generator. I also sell puts in VZ and T on a regular basis. I have been selling puts in VZ and T for several years and have yet to be put the stock. I want to own some of each, but until they come down to my price, I will just keep collecting the monthly income from the put selling in those stocks. I also trade GOOG, SPY, GLD, and SLV...intermittently. I want to trade MSFT and INTC, but it just seems to me that they have declining fundamentals and someday are destined to be single-digit stocks. A small list, but it’s been working for me. It is risky to put all your eggs in one basket and trading too much in one stock is taking on more unnecessary risk than trading in and of itself already is, but like I said, it's working for me and I'm going to stay with what's working until it doesn't anymore. As to whether or not it's "working well", well that's a subjective question. I'm not getting rich doing it...and I'm not trying to (my greed, for the most part, is under control). I'm just trying to make enough $$$ to pay my bills. I have well over 400 winning AAPL trades in a row without a loss. In fact, I have never had a losing trade in AAPL. I'm not bragging, just stating the facts. I could get my face ripped off on any given day and what I'm doing anybody could do. I have been blessed to be lucky several times in AAPL trading. I have said this before, AAPL is, IMHO, the most dangerous stock to trade, but it can also be the most rewarding...if you get it right.
Taxman, my broker requires about 1/10 the value of the put for margin. So, for example, if I sell an AAPL 400 strike put, the margin would be 4,000. In a qualified account, it would be 40,000. That's the power of leverage that a margin account gives you when trading options. Account size is subjective. I do not trade from a large account and I rarely use more than 30% of my available capital when trading. I currently am using only 23% of my available capital for all my open positions...most of which are in AAPL. But yes, when you sell naked puts vs. spread trading, your margin requirements are probably going to be higher (depending on number of contracts traded in each). Also, as has been pointed out before (many times), the ROI on spread trading is much more appealing than selling naked puts.
SunilK, I only sell naked puts. I am, though, very, very interested in Taxman's "beat the bank" BPS trade on AAPL. I'm waiting for another whoosh down in AAPL to do that and if I can get the amount of premium that I want combined with the amount of cushion, I will pull the trigger on that trade. But that "whoosh down" looks like it is not going to happen today (AAPL up 12 as I write this).
@Dave G, thanks for the update. Who is your broker? I have tradeking.. their margins are not that great
SunilK, I use TradeStation for my non-qualified account trading and TOS/TD Ameritrade for my qualified account trading. The TOS platform, in my opinion, is simply the best options trading platform anywhere. Nobody can even come close to it for features, enhancements, and capabilities with regards to options trading. Where they can be beat though is on commissions. I pay a $7 ticket price on all my TOS trades (and that sucks). I was going to move my qualified account over to TS rather than continue to pay that ticket price on every trade, but I simply do not want to lose access to the TOS platform. Besides, I don't do that much trading from my qualified account, so I will continue to pay the $7 ticket/trade at TOS to continue to have access to their platform.
“Jobs was dead: to begin with, there is no doubt whatever about that.”
Not trying to be Scrooge (or the Grinch), but does anyone else see AAPL in a negative light going forward? I’ve been on blogs where group think becomes systemic when everyone falls in love with a stock.
1. General global macro economic environment. Probably doesn’t need much explanation. In a bear market, few stocks will rally. Seems to generally be hard asset or commodity related issues.
2. While AAPL is sitting on a pile ‘o cash, I’m not sure they can deploy it in a manner to add value at the historical growth rate they’ve seen. Thus, I can’t see much in the way of P/E expansion.
3. I question the success of future product offerings. The iPad Mini will certainly cannibalize sales of the iPad. Samsung (and others) continue to gain on the iPhone. The Galaxy s3 is a very competitive offering and Android will continue to erode AAPL’s market position.
4. Cook is no Jobs. Good on the operations side, so perhaps better margins (at least for a while), but we’ll see where the innovation goes.
5. But for me it is the technical side of the equation. Anyone look at the 3- to 5-year chart? The downtrend is obvious, but what is the worse is the classic head-and-shoulders top that has been forming since 10-Apr. And I do mean classic! Left shoulder higher than right shoulder. Slower, protracted rise to head. Right shoulder forming more quickly. And volume patterns support the downside. The last high volume day to the upside on 19-Nov had no follow through and the climb back up to what appears to be the right shoulder at 594.59 on 3-Dec was made on decreasing volume, followed buy increasing volume during the quick implosion to ~518 on 6-Dec.
If support cannot hold in the 505-520 area and volume picks up in that area, I’ll be on the opposite side of those who are selling puts.
My $0.02.
mgmc i agree if that support doesn't hold watch out. but i am not sure the volume supports a classic head and shoulders. i don't see it forming the head. looks declining no? even without that, the support to me looks technically critical.
but if you are looking at the chart the downside price projection is in the 300's and i can't believe it could go that low with the fundamentals as strong as they are.
i have some call spreads that have drawn down my acct pretty substantially but am holding my ground unless that support fails.
Again all my weekly NDX 2600/2575 & 2625/2600 put spreads placed Wed after FOMC & Thurs AM expired worthless. This AM I placed SPX 1405/1390 for .30 & 1400/1385 for
.15
Why am I hanging onto aapl. Hoping for that rally into eps that may never com???!!!!!
Taxman--I was interested in your beat the bank appl trade of October. Are you still holding or adjusting? I'm a newbie and trying to follow what seem to be good ideas. thanks. Jerry K
JerryK
The idea was that aapl was always going to go up and never correct.
The theory is to beat CD rates with a put credit spread that is AS SAFE as a bank CD. You would look at a credit spread starting about six & nine months out and place a put credit spread about 150-200 below aapl current price. Of course aapl would NEVER correct that much.
So with aapl at 510, looking at a June 2013 310/300 put spread gets you .40 or 4% for 6 months. If you do it again in June for another 4%
that's 8% annualized. A June 350/340 spread gets you .75 or 15% annual. Do the same for Sept and as each spread expires, roll out another three months. You pick your cushion and roi.
I currently have Jan & Apr spreads in place. Haven't placed June yet.
Get a little crazy with it and on aapl pops place a call credit spread and turn it into an IC. The call side was supposed to be more risky with aapl constantly rallying. With these spreads you can pick your poison.
One of the reasons I love selling puts so much, is of the five directions a stock can move (up big, up some, little or no movement, down some, or down big), the only one that can cause me some financial heartache is down big. So, on another weeklys expiration Friday, a day when AAPL is down over $22 (in after hours), it was not enough of a drop to call into play my highest short strike of 490. All of my short puts expiring today 440, 450, 460, 485, and 490 expired "worthless" (my favorite word when talking about selling premium). Today's close in AAPL (a new lower low) means the current downtrend is still intact. This week is not the biggie for me, next week is. My current AAPL short put positions set to expire next week are: 370, 375, 405, 410, 415, 435, 445, and 450. Other than options that expired today, I established no new positions in AAPL this week (a first for this year). All my new positions (will probably) be very short-term ones or strikes below 300 (do not expect AAPL to drop below 300). I really would like to see AAPL hold 450 by expiration of the traditional DEC monthlies options next Friday. Now, there is no guarantee of that happening...with today's lower low, AAPL is still a falling knife. I have 55+ points of cushion, 5 trading days, and a rapidly approaching fiscal cliff deadline. As they say at the Olympics "let the games begin". As a side note, my weeklys SPY 139.5 short puts also expired "worthless".
Taxman--Thanks for the explanation. My remaining question is: should Appl go down (however unlikely that is!) what are your exit strategies should the unthinkable happen--do you roll, just take your lumps or adjust the trade in some way? It's great to be as safe as a bank, but even they get robbed! Thanks. Jerry K
Hi Dave G,
I am quite intrigued by your way of managing your account. If I understood you correctly, you do not think of %ROI while placing trades but you look for $ROI which will cover your bills.
I hypothetically consider a paper account of $100k and target to make $2k per month to pay my bills (minus rent). If I think only of %ROI, I am not going for certain trades and so not able to put all my money to work. Thus, my trade level ROI may look excellent (3% per month) but account level ROI is <2% per month. So, it makes sense to me what you are trying to do by not worrying about ROI (%). You are perhaps making the same money as those that worry about trade level %ROI. Because, it is not the trade level ROI but the account level ROI that matters.
Whether, I understood your style or not, that is immaterial to the question I have in mind. How do you decide your strikes? For example, while selling AAPL puts, do you try to stay 20% away or do you look for certain Delta or just a dollar amount that will pay your utilities bill?
While I am trying to keep my trade decisions (selling puts) simple, I am torn in deciding which of the following to use for my strikes:
- % distance from current price
- %ROI
- $ROI
- strike delta (say, -0.10)
- OTM probability (1.5 sigma, 2 sigma, or 3 sigma)
Anyone wants to share thoughts?
Thanks,
SK
Post a Comment