1) It looks like Intel will be testing my ability to profitably roll options. I've sold the October 22's, 23's and 24's. Intel is at ~23.35 as of this writing. I am determined to eventually win this battle. :) Step 1 is to drain most if not all of the time value out of these trades. There are 39 more days to go. Fortunately I have plenty of unused margin available so I will not be pressured by a margin call. For those not yet trading Intel I ask the question: Can sentiment for this issue be much lower than it is now? I have found that temporary bearish sentiment for blue chips provide great opportunities to write out of the money puts. Intel's yield at present price: 3.85%.
Note: a) I refuse to be a weak hand and get flushed out of this trade; b) I don't stop loss out of trades that go against me. I take advantage of the increased volatility to roll out and down for a net credit; c) I'm comfortable doing this because I only invest in quality issues that I would be happy to hold long term.
2) Central bank easing around the globe is alive and well. I'm looking for pullbacks in precious metals to enter trades in GDX, GLD, SLV, GDXJ or FCX.
3) I would trade either Microsoft or Intel but not both for now. They are temporarily kissing cousins due to the perception that their short term futures are tied to the success or failure of Microsoft 8.
4) Where is the next bit of fear going to come from? Right now the markets seem to be propped up by governmental and central bank intervention. I think that we will have to wait for fear on a stock by stock basis.
5) I'm watching Coca-Cola closely as it has been showing weakness as of late. Is there a bluer blue chip out there?
6) What are you trading? Please share here if you feel so inclined. I would love to hear your thought processes in placing the trades. Also, please feel free to comment on my trades/thoughts. Community is a wonderful thing.
7) Have a great day! Enjoy every minute!
I have a trade I am doing with BP. Purchased a Jan 2013 36 Call and am selling weekly calls against it. I am anticipating BP to shake off the well disaster and catch up to its peers. Right now its got a lower PE and higher div yield. Also see upside to oil prices. With the stock trading in a channel I will try to sell calls close to the money and capture more premium when its at the top. Last week it was towards the bottom/middle of the channel so I sold the 43 a little ahead of it and it is on its way up. I should be staying with the same strike this week but getting more premium since it'll be close to the money. Each week I'll collect a premium and in January have a spread expire with a nice profit. Got this strategy from Jerry Lee who is doing something similar with AAPL. So far it is much easier with BP because it seems more predictable short term.
ReplyDeleteNot a bad idea
DeleteI am interested in learning more about this BP trade and it's possible upside/downside potential. Thanks for sharing.
ReplyDeletegbarbs, good luck with that diagonal spread. What kind of returns have you had so far?
ReplyDeleteThis is my first time managing a trade like this. I am doing it with AAPL and BP. I jumped into it probably too quick and made mistakes the first few weeks. BP has worked out much better. AAPL has shown me some of the risk - if the stock runs away the short call will gain value faster than your long call. AAPL went so high so fast that I have increased my basis each week I pay to move up and stay close to the money.
ReplyDeleteWhen I set up BP it cost me $5812 for 20 contracts. I bought the Jan 36 and sold the weekly 38. If I just kept rolling out the 38 every week I would collect $4000 in January plus all the premiums along the way. The early mistake I made was being too far from the money and not getting much premium on the weekly- in fact I was so far ITM that half of it got exercised on me. I needed to be closer to the money so I paid to move up the short call. I had recently read a book on candlestick charting so I started looking for reversal signals near support and resistance to sell the short calls. It is behaving so the last few weeks I took in good premiums. My basis is now $12,190 (from paying to move up the short call). If I closed it out today it is worth $12,460. I am short the 43 call for this Friday. If it is right at 43 I could sell the next week for about .50. x20 contracts is $1000 for the week. If it stays above 43 in January my spread is 43-36 = 7 pts x 20 contracts = $14,000. I'd like to try and get my basis down to zero by January and the spread I have set up would be all profit. This week I collected $120 for the week. About $600 the two before that. I'll see if I can post all the trades. This is definitely not a proven system I've got a lot of experience with but I am hopeful.
Lets see how the formatting works....
ReplyDeleteDate Activity Quantity Symbol Description Amount
Sep 7, 2012 Sold -20 BP Call BP Sep 14 2012 43.00 Call $141.46
Sep 6, 2012 Bought 20 BP Call BP Sep 07 2012 42.00 Call -$20.59
Aug 31, 2012 Sold -20 BP Call BP Sep 07 2012 42.00 Call $1,006.39
Aug 31, 2012 Bought 20 BP Call BP Aug 31 2012 42.00 Call -$358.53
Aug 24, 2012 Sold -20 BP Call BP Aug 31 2012 42.00 Call $1,066.39
Aug 24, 2012 Bought 20 BP Call BP Aug 24 2012 42.00 Call -$418.53
Aug 17, 2012 Sold -20 BP Call BP Aug 24 2012 42.00 Call $1,906.37
Aug 17, 2012 Bought 20 BP Call BP Aug 18 2012 41.00 Call -$3,518.53
Aug 8, 2012 Sold -20 BP Call BP Aug 18 2012 41.00 Call $2,821.39
Aug 7, 2012 Bought 20 BP Call BP Aug 18 2012 39.00 Call -$7,018.53
Aug 3, 2012 Sold -20 BP Call BP Aug 18 2012 39.00 Call $4,046.32
Aug 3, 2012 Bought 10 BP Call BP Aug 03 2012 38.00 Call -$3,021.74
Aug 3, 2012 Bought 1,000 BP BP P L C SPONSORED ADR -$41,004.85
Aug 2, 2012 Assigned -1,000 BP BP P L C SPONSORED ADR $37,994.19
Aug 2, 2012 Assigned 10 BP Call BP Aug 03 2012 38.00 Call
Jul 31, 2012 Bought 20 BP Call BP Jan 19 2013 36.00 Call -$9,938.46
Jul 31, 2012 Sold -20 BP Call BP Aug 03 2012 38.00 Call $4,126.39