Tuesday, December 30, 2014

Trade summary: boozy new year

A small trade on DEO Diageo LLC. (Purveyors of fine boozy spirits world-wide)

The brick:


2 contracts DEO FEB $110/105
Current stock price $114.50 (at time of trade)
Max profit $146.83
Max loss (1000-146.83) $853.17
Days to expiry: 52
Projections for worthless expiry:
ROC: (return on capital) 17%
ROR: (annualized rate of return) 121%
Approximately 5% downside protection.
In the spirit of new years' celebrations with champagne, this is my festive trade of the season.


Stay hungry my friends!  (And thirsty... buy DEO stuff!!!)


Thursday, December 18, 2014

Trading summary: I'm a blogging slacker

Catching up:

I made my $MCD position a short iron condor by adding a bear call spread on top:

And today I added spreads on YUM and XOM.  YUM has been good to me.  My short strike is lower than it's been in the past 2 years.  Should be easy to hold.

XOM however, I'm hoping oil is near it's bottom.  But it could fall more.  That said, the premiums are rich considering how little XOM has moved in response to a 45% crash in the market price.

Also shown are closing some short puts and a cover call.  Lost a bit on the CC.  I want to keep the shares and I don't want to have to roll it forever.  The premiums on this particular REIT are SUPER thin and very illiquid.  I was hoping to juice my returns, but I'm impatient and didn't want to risk losing more than $20.  ($23 including comms).

The AVO short puts worked out nicely for an annualized ROR of 18%.

Stay HUNGRY my friends.

Monday, December 8, 2014

Trading summary: driving away with the profits

Today I closed 2 bull put spreads on Magna International.

Here's the brick:

With the price of oil crashing, why would I be exiting the auto-sector?  My moves had done well, and faster than I had expected.  And to top it all off, with the energy market doing what it's doing, I need some capital to defend a position I took on 2 weeks ago, and hopefully make some choice picks when the market finds a bottom.

CLOSED: MG - Magna International
5 contracts $MG $100/98 bull-put-spread MAY
Position open: 29-oct
Position closed: 8-dec
Position open:  40 days
Maximum Premium : $245
Maximum loss: $755 (1000-245)  
Closed @ 46% capture ($120)
Yield on risked capital: 16%
Representing an annualized yield of 146%

CLOSED: MG - Magna International
5 contracts $MG $105/100 bull-put-spread  FEB
Position open: 17-sep
Position closed: 8-dec
Position open:  82 days
Maximum Premium : $345
Maximum loss: $2155  (2500-345) 
Closed @ 56% capture ($200)
Yield on risked capital: 9%
Representing an annualized yield of 42%

Stay HUNGRY my friends.

Friday, December 5, 2014

Trading Summary: crappy food, overpriced coffee, and a brokerage

Today: Closed 3 positions.  YUM Brands, Starbucks, and Interactive Brokers.

Here's the brick:

CLOSED: IBRK - Interactive Brokers
1 contract Jan $27 Puts (naked puts)
Position open:20-novPosition closed: 5-dec
Position open:  15 days
Maximum Premium : $89.61
Maximum loss: $2610.39 (2700-89.61)  (if the stock went to ZERO)
Closed @ 49% capture ($44.27)
Yield on risked capital: 1.7%
Representing an annualized yield of 40%

Full disclosure: this is my brokerage: I highly doubt they would be ZERO by January...  Entirely unlikely.  Thus the max loss is theoretical only.  And yes, for those of you who see that "Comm" item of $0.34, that's how much my commission was to trade this.  Sure beats EVERY OTHER brokerage in Canada.  This move would have cost me $11.24 ($9.99+1.25) at my old brokerage.

CLOSED: SBUX - Starbucks Coffee
5 contracts April $70/67.50 Bull put spread
Position open:31-octPosition closed: 5-dec
Position open:  36 days
Maximum Premium : $235
Maximum loss: $1015 (1250-235) 
Closed @ 64% capture ($155.40)
Yield on risked capital: 15%
Representing an annualized yield of 158%

Huge positives for Starbucks. Time to take my money, and buy a coffee.

CLOSED: YUM - Yum Brand Foods
5 contracts April $65/62.50 Bull put spread
Position open:25-aug
Position closed: 5-dec
Position open:  103 days
Maximum Premium : $265
Maximum loss: $985 (1250-265) 
Closed @ 64% capture ($169.59)
Yield on risked capital: 17%
Representing an annualized yield of 62%

Yum has recovered from it's "floor chicken" fiasco.  It's got it's mojo back, so it's time for me to exit my position and re-deploy into something else.

Stay HUNGRY my friends.

Wednesday, December 3, 2014

Trading summary: Cleaning up

Colgate Palmolive - A consumer staples company.

The brick:

5 contracts CL May 2015
Max profit $282.10
Max loss (2.5k-282.10) $2.2k
Days to expiry:165
Max Yield on risked capital: 13% 
Projected annualized gain for worthless expiry: 28%

This is perhaps not the best timed move, but I've had so many positions come off (and come off EARLY) so I wanted to get some more theta decay going in my account.  (Premium erosion over time)

I've been in and out of $CL a few times already in my new account, so it seemed like a good choice to get back in.

Also, I CLOSED my short puts on IPL (Inter Pipelines).  It had moved to nearly 50% max profit since YESTERDAY.  While not realistic, that represents an annualized yield of 1373%.  I was hoping for an assignment.  So I'll take my profit and try again the next down-day for oil.

In review, some readers have tweeted that my risk/reward seems crazy low for these moves.  And by the numbers, it does look that way.  However, I'm doing "defined risk" trades so I have an absolute maximum loss.  If you buy a stock or sell short puts, your losses can be potentially MUCH larger than mine.  Additionally, if I were selling short calls, or short strangles, then the losses are theoretically INFINITE.

Stay HUNGRY my friends.

Tuesday, December 2, 2014

Trading summary: going Looooooooooonnnng

To further account transparency for all of my 3 readers, I will start updating all of my moves to my trading account, and perhaps talk vaguely about the moves I'll do in my TFSA, RRSP, and sons' RESP.  (Think tax free, tax deferred, and education accounts for you non-kanuckistan residents)

Here's the brick:

The move: STO (sold to open) a $32 Put on IPL (Inter pipelines - An oil pipeline company).
Credit $1.15  ($115-$1.50 commission)  $113.50

NB: This put is ITM (in the money).  I am hoping to take assignment of IPL @ $32/s.

With the premiums collected that would give me a cost base on IPL of $30.88.  As the stock closed today @ $31.32, that's not too bad.  The stock was trading at $31.26 when I made my move.

If IPL goes up above $32 by December 19th, I'll walk away with my $113.50.   If this is the case, that would represent a 13% annualized yield.

Stay hungry my friends.

Monday, December 1, 2014

Trading Summary: Apples and no oranges

I added a new position of Apple today.  I was thinking of adding another because I often get the feeling I don't trade enough (don't make enough attempts), but I had second thoughts and decided to leave it at that.

The brick:

5 contracts AAPL (Apple Computers) April 2015
Max profit $393.09
Max loss (2.5k-393.09) $2.1k
Days to expiry: 135
Max Yield on risked capital: 19% 
Projected annualized gain for worthless expiry: 50% 
Why did I make this move?  I watched the algos initiate HUGE selling on apple.  It dropped very quickly so after the dust started settling I found a reasonable trade (for me) on AAPL.  The premiums jumped up a bit as a result of the bot-selling.
For this trade to be in danger, Apple will have to fall MORE than 16%.

I had recently closed an April Apple spread, but it's strikes were MUCH lower.  April is still a long way away so I have time to wait out any current market instabilities.

Stay HUNGRY my friends.

Friday, November 28, 2014

Trade summary: chips chips chips, and bailing out.

Today's trades:  Closing a winner & exiting a position as I had grown bored of waiting for.

Here's the brick:

This morning I decided to exit my position of GM - General Motors.  It had bobbled up and down since I had opened the position.  The market crash (and recovery) made both strikes go completely in-the-money and then back out again.  I've lost interest waiting for it, as typically my moves come to fruition in a little less than 1/2 of the time from open to expiry.

CLOSED: GM - General Motors
5 contracts DEC $32/30 bull put spread 
Position open: 18-aug
Position closed: 28-nov
Position open: 102 days
Maximum Premium : $206.11
Maximum loss: $793.88 (1000-206.11)
Closed @ 24% capture ($56.11)
Yield on risked capital: 2%
Representing an annualized yield of 9%

As for Qualcomm (QCOM) It worked much faster than anticipated.  The stock had cratered on some lawsuit type news.  But as they sell chips to EVERYBODY EVERYWHERE, (and that this type of suit is frequent, and easily dismissed) I made my move.

CLOSED: QCOM - Qualcomm
5 contracts DEC $65/60 bull put spread 
Position open: 11-nov
Position closed: 28-nov
Position open: 17 days
Maximum Premium : $318.01
Maximum loss: $2181.99 (2500-318.01)
Closed @ 77% capture ($243.01)
Yield on risked capital: 11%
Representing an annualized yield of 229%

Now THAT's more like it!

Stay HUNGRY my friends!

Tuesday, November 25, 2014

Trade Summary: It's THE PHONE COPS MAN!!!

No, I'm not Dr. Johnny Fever, but I did decide to take a snoozer position in T - AT&T.

The brick:

5 contracts T April 2015
Max profit $172.10
Max loss (1000-172.10) $827.90
Days to expiry: 145
Projected annualized gain for worthless expiry: 19%  
Yeah, it's going to be boring.  T hasn't touched $32 for over 9 months.  Will probably take it's sweet time to hit my target.
Stay HUNGRY my friends.

Monday, November 24, 2014

Trade report: seaching complete!

Today one of my GTC (good till cancelled) orders closed my Google spread for December. 

Here's the brick:

5 contracts DEC $500/495 bull put spread 
Position open: Oct 24
Position closed: nov-24
Position open: 31 days
Maximum Premium : $284.06
Maximum loss: $2215.94 (2500-284.06)
Closed @ 71% capture ($209.06)
Representing an annualized yield of 107%

I'll be looking to re-enter new spreads in the future on any upcoming days of market retreat.

Stay HUNGRY my friends!

Thursday, November 20, 2014

Trade Summary: anticipated success and re-entry, plus a new position

My $14 short puts in AVO - Avigilion Inc (security cameras n' stuff) are looking like they will expire worthless tomorrow, as the stock is trading today at $17.80.

So I added a new position of short puts on them with a January expiry.  I hope this position will again expire worthless, although the number of puts is small enough that I would begrudgingly take assignment.

Additionally I added 1 measly short put on IBRK - Interactive Brokers.  It's my brokerage.  Why not own some?  Plus, with their "take no prisoners" approach to dealing with customer margin-calls, they will no doubt generate MORE income during market corrections and market crashes.  So its earnings should be pretty crash-resistant.  This is why I sold an ATM (at-the-money) call in the hopes I would get assigned.

Using an ATM short put with Interactive Brokers is CHEAPER than just buying the stock outright.  Here's the breakdown:

Sell the short put and collect the premium.  Take the assignment (a $0 cost at IBKR) and hold the stock.  I plan on holding this one forever.  Hopefully one day I'll have enough shares of IBKR so the dividends will pay for all the trading fees I spend each month.  (Looks like I'll need about 2000 shares)  But right now, that would be "considerably" overweight to have a 54k position.  (Current share price $27)

Here's the brick:

Stay HUNGRY my friends.

Wednesday, November 19, 2014

recap: why do I trade spreads?

I've had a few comments go by questioning my methodology when deciding on a decent risk/reward for my positions.  In my usual spirit of brow-beating, all of you naysayers are woefully uninformed. (Read: WRONG).

So for those of you who just buy stock: what do you need to make money?
1. you need the stock to go up and then you need to SELL it.
2. you need the stock to pay a dividend if it doesn't go up.
3. if the stock goes down, you're boned.

How much can you lose?  ALL OF YOUR MONEY!!!

So what happens if I do one of my spreads on the same stock?
1. if the stock goes up, I make money
2. if the stock goes nowhere I make money
3. if the stock goes down 10-15% I MAKE MONEY
4. If the stock goes down MORE than 20% I can "kick the can down the road" if I expect the stock to recover.
5. if the stock goes to ZERO, I only lose a maximum of $100-500 per contract. (Depending on the "width" of the spread.

Additionally, I do NOT have to sell the position to make money.  It will EXPIRE on it's own (if I choose not to close it) if the stock has not fallen more than 15%

So my risk/reward is VASTLY superior to the buy and hold only.

Stay HUNGRY my friends.

Trade summary: Apple

I forgot to blog this on Monday.  Anyway, it was time for me to close my last Apple spread.  It had done it's magic.

Here's the brick: (No commission shown it cost $7.89)

CLOSED: AAPL - Apple Computers
5 contracts APRIL 2015 $85/80 bull put spread 
Position open: sep-4
Position closed: nov-17
Position open: 74
Maximum Premium : $512.19
Maximum loss: $1987.81 (2500-512.19)
Closed @ 78% capture ($412.19)
Representing an annualized yield of 97%

I'm still bullish on Apple, so I'll be looking to add a new position 3-6 months out with higher strikes.

 In other news, it looks like I'm running an average annualized yield of 40-45%.  I'm unable to give you an exact number so far because my account wasn't even fully funded until last month.  Once I get more than 6 months of data in the new account (look for it 5 months from now) then I'll be able to give you the reports that show my rate of return.

Stay HUNGRY my friends.

Friday, November 14, 2014

Trading summary: greasy computers

The last couple days have not presented me with any opportunities except perhaps for today's trade.  I chose to be super conservative so my strikes are low and my risk/reward is right on the bottom of my acceptable limit.

Today's moves: XOP - SPDR S&P Oil & Gas Explore & Prod. (ETF)
It's oil, and it's liquid. (Both the product, and the trading).

MSFT - Microsoft.  85% chance you're using it's products right now.

Here's the brick:
So here's the breakdown:
5 contracts XOP JAN 16, 2015
Max profit $156.49
Max loss (1000-156.49) $843.51
Days to expiry:63
Projected annualized gain for worthless expiry: 39%

5 contracts MSFT FEB 20, 2015
Max profit $222.10
Max loss (2500-222.10) $2277.90
Days to expiry:98
Projected annualized gain for worthless expiry: 36%

In other news, since I'm not using all my money all the time, I don't get annualized returns like my past few trades all the time.  That said, so far so good.  I've been averaging 35% annualized returns for the past 3.5 months my new account has been open with Interactive Brokers.  Most of my moves are 3-6months out though, so this number should increase a little over time.

I'll post more charts in the future as right now, a 3 month chart with only 3 data points isn't all that useful for hammering home my point: You most certainly CAN beat the index!  And with hardly any time, or huge amounts of money to push around.

Stay HUNGRY my friends!

Thursday, November 13, 2014

Trading Summary: closing more winners

As it's getting harder and harder to come up with entertaining, yet brow-beating, denigrating, and insulting commentary to attempt to shame convince you to trade options through humiliating encouraging you.  So in lieu of any of that, here's the daily round up.

I didn't trade yesterday, hence no post.  But today I closed 2 winners.

Here's the brick:
NB: bear spread is the INVERSE of the bull spread. (buying the bear spread closes the bull spread)

CLOSED: DIS - Disney
5 contracts Dec $82.50/80 bull put spread 
Position open: Oct-8
Position closed: Nov 13
Position open: 36 days
Maximum Premium : $232.69
Maximum loss: $1017.31  (1250-232.69)
 Closed @ 69% capture ($162.69)
Representing an annualized yield of 150%

CLOSED: MA - MasterCard
5 contracts Dec $65/60 bull put spread 
Position open: Sep 11
Position closed: Nov 13
Position open: 62 days
Maximum Premium : $326.71
Maximum loss: $923.21  (1250-326.79)
 Closed @ 74% capture ($251.79)
Representing an annualized yield of 65%

Stay Hungry my friends!

Tuesday, November 11, 2014

Trading report: Trying to close some winners, and a NEW position - chips chips and chips

Currently on the board are orders to close spreads on Mastercard, Apple, and Google.  This page will be updated if the orders fill.

After a few days of "digestion" on the news that QCOM is facing some lawsuits I made another move.  Same strikes as my current position, but with a shorter duration.

Here's the brick:

So here are the opening numbers:
5 contracts
Max profit $317.70
Max loss (2500-317.70) $2182.30
Days to expiry: 66

So there you go!  This is on the low side of my target for risk/reward, but the duration is shorter than I normally do.  If this expires worthless in 66 days, it will represent a 81% annualized return.

Stay HUNGRY my friends!

Monday, November 10, 2014

Trading summary: Drugs and burgers

Today's trades: closing 2 spreads.  I didn't stick to my target goals.  But with the amount of time left on the contracts, it wasn't worth holding them for the last few pennies.

So, here's the brick to see the closing times, commissions and prices!

NB: (as always) buying a BEAR put spread closes the corresponding BULL put spread.

PFE - Pfizer
5 contracts Jan 2015 $28/26 bull put spread 
Position open: Aug 27
Position closed: Nov 10
Position open: 75 days
Maximum Premium : $175.28
Maximum loss: $824.72  (1000-175.28)
 Closed @ 67% capture ($121.28)
Representing an annualized yield of 67%

MCD - MacDonalds
5 contracts Dec $87.50/85 bull put spread 
Position open: Aug 19
Position closed: Nov 10
Position open: 83 days
Maximum Premium : $141.01
Maximum loss: $1108.99  (1250-141.01)
 Closed @ 59% capture ($91.01)
Representing an annualized yield of 34%

Stay HUNGRY my friends!

Thursday, November 6, 2014

Trading update: Banking on America

I closed a short-put position.  (Buying them back)

BAC - Bank of America
$17 Nov 21 expiry.

Opened @ $0.70 (opened Oct 15th)
Closing @ $0.13 (closed Nov 6th)

81% capture

My apologies to my readers who are option-novices. This might seem a little cryptic.  I won't be trading tomorrow...  3 day weekend!

Stay hungry my friends!

Wednesday, November 5, 2014

Back to basics: a crash course in options

In a decidedly uncharacteristic post, here is (hopefully) a helpful post for option novices.

What are these option things that you keep talking about?

Options are contracts (traded electronically like stock) for buying or selling of 100 shares (or 10 for mini options) of a specified stock at a fixed price for a fixed time.

The specified stock is generally referred to as "the underlying"
The specified price is generally referred to as "the strike price"
The specified time is generally referred to as "days to expiry" (on the "expiration date")
The amount of money that exchanges hands is "The premium" 

But since these are all contracts, the terms of the contract must be met before the option expires. Otherwise, the value of the option plummets to zero.

Now lets take a little aside: in the stock market, when something plummets to zero, that's a bad thing. (Unless you're a short-seller, which I'm not.)  But with options for any given expiry date, 1/2 of them on the board will have no residual value because the terms were not met.

Back to business: how do the terms get met?  The stock price has to be "in-the-money" (ITM). If your option position is "out-of-the-money" (OTM) at expiry, then it will expire worthless.

If your position IS ITM at expiry (and sometimes before) , you will get assigned.  (This could be the forced buying or forced selling of the underlying shares depending on which type of option you have).

Now that doesn't sound all that hard does it?

Unfortunately for the novice, this is where the mind-job begins!

The options that traders trade come in two types: puts and calls.

If you BUY a call, you want to BUY shares if (and only if) the share price climbs up to your strike price.  eg: you like company ABC, but they have been having trouble lately. You're only interested in buying the shares once they have fixed their issues and are climbing in value.  Thus you would buy a call for ABC with an expiry as long as you would like.  (Longer terms cost more though)

If you BUY a put, you want to SELL shares if (and only if) the share price FALLS below your strike. eg: You own shares of ABC. You like them, but are worried that their new drunken CEO might spoil the party.  You BUY a put to insure your position and your profits.  If the drunken CEO bankrupts the company your put will deliver you your desired price thus saving your money from yet another CEO scandal.

Now how do you use this to your advantage?  There are many many ways to do this. But that's well beyond the scope of this brief, introductory post.  Because you can use calls (by selling them) to SELL your shares and you can use puts (by selling them) to BUY shares.  (Yes I know, that's completely the opposite of the above)

Now I can hear your heads shaking and eyes rolling.  Take a break!  Read this again later.  Ask me questions.  Look up the terms, and the strategies online.  Covered call, short-put (naked put).  Once you understand a naked put (or cash-covered put) then we're ready to talk about my go-to moneymaker: the bull-put-spread.

Stay HUNGRY my friends!

Trade update: Closing some winners, and closing a roll

Today I opened a new position on GOOGL (Google) a $500/495 bull put spread expriing in March 2015.  Collecting $0.926 (per share).

I closed my position on $WMT (Wallmart) for $0.09 giving me a 76% capture representing an annualized gain of 34%.

The meat of this post: a ROLL:

Last month, I didn't know if I would be home on the last trading day of my $YUM spread which was expiring October 17th.  So I ROLLED. 

What does that mean?  I closed the position for a loss, and opened a NEW position further out which completely covered the losses of the close and then some, thus giving YUM a chance to recover form the disasterous market pot-hole that we hit in mid-october.

As it turns out, the roll was unnecessary as the value of YUM moved back above my strikes, but by then it was too late as I had rolled 2 days prior.  So the roll extended my time-frame and got me an extra $16.49 in the process. (There was more to collect, but it's time to move on from that position)

So for simplicity's sake, I'll fudge the numbers together to aggregate the 2 positions.
5 contracts of YUM Oct rolled to NOV $67.50/65 bull put spread 
Position open: August 21
Position closed: Nov 5 (and rolled October 15th)
Position open: 76 days
Maximum Premium : $157.16+56.39 = 213.55  (max premium from each position)
Maximum loss: $1036.45
Closed @ 81% capture ($157.15+16.49 = $173.64)
Representing an annualized yield of 80%

Stay Hungry my friends!

Tuesday, November 4, 2014

Daily trade report: Coffee, Chocolate, and Princesses.

New positions!!!

I closed my Starbucks November put spread this morning, and later this afternoon entered 2 new positions.  One on Disney, and one of Hershey.

Here's the screen-cap:

Opened NEW positions of: 
Hershey: May 2015 $85/80 Bull put spread $0.70 credit per share ($70 per contract)
Disney: April 2015 $82.50/80 Bull put spread $0.55 credit per share ($55 per contract)

I CLOSED the following:
5 contracts of Starbucks (SBUX) NOV $70/65 bull put spread 
Position open: August 19
Position closed: Nov 4
Position open: 77 days
Maximum Premium : $177.71
Maximum loss: $2322.29
Closed @ 77% capture ($142.71)
Representing an annualized yield of 29%

In hindsight, this trade wasn't worth the risk as my risk/reward was more than I typically want. But really though, it did make money and a 29% annualized yield is nothing to sneeze at.

Stay hungry my friends!

Monday, November 3, 2014

Daily trade report: Coffee and computers

Today I tried to close a position Starbucks, but as it's quite far OTM (out of the money) the contracts are rather illiquid (no buyers and sellers) and my order didn't get filled.  I was however, able to close my position of Microsoft. 

Here's the closing screen-cap for your viewing pleasure:  Remember the "bear put" is the OPPOSITE of the "bull put" so BUYING the bear spread CLOSES the bull spread.

5 contracts of Microsoft (MSFT) DEC $42/40 bull put spread 
Position open: Sep 3
Position closed: Nov 3
Position open: 61 days
Maximum Premium : $155.51
Maximum loss: $844.49
Closed @ 78% capture ($115.51)
Representing an annualized yield of 78%

Does that sounds a little bit better than holding an index ETF?

Am I getting through to you "can't-beat-the-index-naysayers" yet?

Stay hungry my friends.

Sunday, November 2, 2014

Transparency - putting my money where my mouth is

This post will contain some super scary looking graphs. What are they?  They are the account reports of my new trading account with Interactive Brokers.  I'm hesitant to post them because while they do show the day-to-day ups and downs of my account, the huge v-shaped notch in the graph, while accurately representing the "panic-now-cash-value" of my holdings, however the panic now choice of exiting positions is just not something I do.

I'm also leery of posting them because I'm sure the bulk of my new readers do NOT understand what a "roll" is, nor how well it mitigates risk, and lets the market get over it self.  Heck: It's even a cash-positive move most of the time.

Additionally, the roll trade I did perform near the bottom of this ugly graph as it turns out was NOT necessary, and has stymied my account balance as the market and my account recover from last months' correction.  (More of a pot-hole really)

My trade didn't lose me any money, but it did slow down the exit of the position until this month.

So I suppose in the name of accountability, I'll cut to the chase and post them.

Graph 1: The last 30 days.  So the entire calendar month of October.  PURPLE line:

 Graph 2: My account since I started trading and live-tweeting every bull-put spread: GREEN line

Yes, I do realize that dip is a horrible horrible number and no doubt I've scared off many of you "can't-beat-the-index-naysayers" but as you can see from these charts, a AM still beating the various indexes. The hard part? The experience required to not panic and run for the hills arms flailing.

Even as my account liquidation value made this precipitous fall, the positions I held were mostly still all within reason.  (The market values for most of the underlying stocks had not crossed the upper strike price on my positions).  A couple had flirted with being completely in the wrong, but at the same time, most of them are not due to expire for 2-6 months, so as always there was time to wait and see.

Now that the markets have recovered, they are all mostly back where they should be.

You have to know when to hold 'em and know when to fold 'em.  Mostly with this strategy, you sometimes roll your way out of trouble, but if you've done your homework you almost never have to fold.

Stay hungry my friends!

P.S. Please don't let the scary charts scare you.  It's not nearly as bad as it looks.

Trade Summary: catching up

As per the live-tweeted trades on twitter, here are the resulting numbers from trades I closed a while back, but hadn't blogged about until good ol' Steve at http://www.kapitalust.com gave me the kick I needed to brag keep updating you folks on my trades.  So here they are in order of CLOSING:

5 contracts of Microsoft (MSFT) September 26 $42/40 bull put spread 
Position open: August 7
Position closed: August 21
Position open: 14 days
Maximum Premium : $199.81
Maximum loss: $800.19
Closed @ 78% capture ($159.81)
Representing an annualized yield of 475%

5 contracts of YUM Foods (YUM) September 19, $67.50/65.00 bull put spread
Position open: August 12
Position closed August 21
Position open : 9 days
Maximum premium: $174.45
Maximum loss: $1074.55
Closed @ 61% capture ($109.45)
Representing an annualized yield of 416%

1 contract of Tesla Motors (TSLA) August 29th $257.50/255.00 bull put spread
Position open: August 26
Position closed: August 29
Position open: 3 days
Maximum premium: $43.42
Maximum loss: $1206.58
Closed @ 100% capture (expired worthless)
Representing an annualized yield of 2557%

5 contracts of Macdonald Dettwiler & Associates (MDA) October $76/74 bull put spread
Position open: August 14
Position closed: September 9
Position open 26 days
Maximum premium: $220
Maximum loss: $780
Closed @ 55% capture ($130)
Representing an annualized yield of 191%

2 contracts of Apple computers (AAPL) January 2015 $80/75 Bull put spread
Position open: August 11
Position closed: September 25
Position open: 45 days
Maximum premium: $126.49
Maximum Loss: $873.51
Closed @ 49% capture ($64.49)
Representing an annualized yield of 55%

There are a few other trades that went by in my twitter feed: Some naked puts on MasterCard, an option assignment, then a covered call to sell it.  But the most striking returns generated from my account are from bull put spreads.  So that's what I'll keep blogging about.

On October 15th, I "rolled" a position to give it more time, so it's still open in my book and not ready to report.  Although you will have seen the tweet go by reporting the trade.

Am I getting through to you "cant-beat-the-index-naysayers" yet?

Stay HUNGRY my friends!

Friday, October 31, 2014

Today's trade report: Starbucks and Colgate

No, I'm not talking about a lousy minty coffee beverage...

Today's trading had 2 moves.  I opened a NEW bull put spread on SBUX thanks to the earnings report bringing the stock down 2%.  They are doing better but didn't quite meet all the expectations.

I already have another spread on Starbucks that I opened in August and will be closing soon as it expires in November.

My new position is a $70/67.50 bull put spread which got me a credit of $0.504 per contract.

In other news, I CLOSED a spread on CL (Colgate Palmolive).  Cost me a whopping $0.09 to close.  It was open for 78 days when it hit my target capture of 75%.

The numbers on the CL spread aren't all that exciting.  I only made 6% on the risked capital.  But since it was only open for 78 days, it's theoretically a 28% annualized return.

No big numbers here, just small incremental gains month after month after month.  And not just paper gains.  These positions expire and leave you with nothing buy cash rather than just a bigger paper-value.

Here's the trade window for the day so you can see my costs.

NB: the "bear put" as listed above is the opposite of the bull put.  So It's what I have to do to CLOSE the position.  So I BUY a bear-put to CLOSE the bull-put. (Each portion of the spread can be closed separately if desired)

Stay HUNGRY my friends!

Thursday, October 30, 2014

My ship came in!

Yes, I am a sailor, and have had aspirations to be the media-crew-member (and submitted an application to be) the on-board reporter for a Volvo Ocean Race boat.   (9 months at sea, 30 days at a time, on a carbon-fibre sailing yacht with 8 smelly, unwashed crew-mates, no showers, freeze-dried food, open oceans, Atlantic, Pacific, Indian, and southern ocean crossings, pirates, fishing-nets, hurricanes, squalls, 100kph winds... what could go wrong?)

But that bloated intro completely digressed from my analogy:  My ship came in: as in, I closed a spread today (9:58am EDT) on $MA.  I opened the position on August 22 and closed it today on Oct 30.  Which is a grand total of 69 days.

Mastercard (and Visa) reported excellent earnings for the past quarter and the stocks surged 6-7% at open.  My position blew right past my target of 75% capture (75% of the available premiums stay in my pocket), so I decided to close the position.

The numbers:
August 22 I opened the following:
bought 5 contracts of $MA 65 puts expiring Jan 2015 for $0.8020.  $3.98 commission  = -$404.98
sold 5 contracts of $MA 70 puts expiring Jan 2015 for $0.1.672. $4.02 commission. = $831.98

So the difference = $427 (my max gain)
Max loss = 5 contracts * $5 spread = $2500 - (premiums collected) = $2073.

My close cost me
$65 puts (sold to close $0.18) for $85.55  ($2.45 commission)
$70 puts (bought to close $0.34) for -$172.45 ($2.44 commission)
For a difference of $86.90.

Thus I kept $342.10 of the maximum of $427.  An 80% capture.

So the gain of $342.10 over the maxim loss of $2073 = 16.5% gain.  Which doesn't sound like all that much, but as the position was only open for 69 days, theoretically that's a 86.6% annualized yield.

Even still: all of you buy and hold, can't beat the index nay-sayers: I made a 16.5% return in 69 days.  Think about that for a while!

Final notes: my explanations in the future will not be so verbose.  I'll post trade summaries including position, closing price, percentage capture, and how long it was open.

Finally, I still have a $MA position open.  It expires in April of 2015 and hasn't yet hit my target.  Will continue to hold.

Wednesday, October 29, 2014

Today's trade: Auto-parts

In an attempt to possibly help either one of the 2 readers I have mostly abandon, I'm going to start posting trading summaries on this blog and the reasons why I'm entering the trade.  Also, if you're not following my blog, (which I don't blame you) I'll re-hash a little bit of what and how I'm doing what I do.

So without much further adieu, I entered a Bull Put spread on Magna International.  They sell auto parts to all the major players on earth.  They are a Canadian company (Spoiler alert: I'm Canadian), and have been beaten black and blue this past month because of the "correction" which was more of a pot-hole than a genuine market correction.

I currently already had a position on Magna which I opened in late September (live-tweeted @short_put) but since options all work on expiry dates and strike prices, this is ANOTHER position on the same company.

So today at about 10:24 this morning, I initiated a Bull Put Spread on Magna which expires in MAY of 2015.

The "short" strike is $100 and the "long" strike is $98.  So there's the spread.  This means the worst case for me is a $200 loss (minus the premium I collect).

So I sold the $100s and got a credit of $4.75 (per share) each and purchased the $98s which cost me $4.20 (per share) each.

5 contracts represent 500 shares (100 shares per contract) and my account was credited with $260 Canadian dollars.  My commissions are $1.50 per contract on the Canadian options exchange.  (5 100s and 5 98s is 10 contracts * $1.50 = $15 commission)

So my MAXIMUM loss is $1000-$260 = $740.  And of course my maximum gain is $260.

Now to you risk/reward folks, this may not seem all that great, but seriously, on $740 of risked money, my maximum profitability is $260 which is 35%.  As this position will expire in May, that's 7 months from now.  So a 35% return in 7 months?  That's nothing to sneeze at.

Now what do I need for this to work?

Magna can go up.  (Which I expect it to do)  But if it doesn't, I'll still make this money if Magna goes sideways (Stays at it's current market price of $109 or so).  But if it doesn't, that's ok.  If magna goes down nearly 10% I'm still good for the full profit. 

Now if Magna falls more than 10% then I might have to do stuff. (A roll) But there's PLENTY of time between now and April for Magna to recover if the markets are rocky.
Stay hungry my friends!

Tuesday, October 7, 2014

Life n' stuff

I haven't posted much lately... It's because I have little time and/or passion for documenting my growth as a trader.  In a moment of brilliance earlier today, I had an idea for a post.  Thanks to the sleep-deprived nature of being a parent, that well-formed idea has now vanished.

Suffice it to say, the world-domination I had hoped to achieve through blogging has not yet been realized, nor do I ever expect it to be.

For the near term, if you want to know more about me or what I do, catch me on twitter @blerghhh.  Or if you want to follow my trades which I live-tweet then follow @short_put.

Stay hungry my friends.

Monday, August 11, 2014

win and lose at the same time to win!

Spread 'em!

If you don't know about options then I have to say I feel bad for you.  I'm trading on the options market to support my family on a paltry capital pool and I'm managing to survive.  Not completely unscathed, but I'm holding my own most of the time.

My previous post was about the short-put.  Which is awesome until the markets explode and you're tired of waiting rolling rolling rolling waiting for it to recover.

How do you fix that?  The spread, more specifically for me, the bull-put-spread.  It costs a bit but it completely controls your maximum loss.  (Yes yes, I know, you can avoid losses by rolling, but rolling will only work if you expect the company or index to resume an upward trajectory.  Indexes will of course but companies not always.)

So you do the same with the short put, but then have a LONG put a dollar or five below it, both with the same expiry.  It costs you to buy the long put, but it saves your posterior if things go south.

Being that this is the stock market, things WILL go south and FAST.  Every 3-14 years there's a big implosion.

How to swing it?  If you don't want to be up and down thousands of dollars every day chowing down on a steady diet of cigarettes and antacid tablets,  then find some big companies that you like and expect to go up.

Here's what I did with an Apple trade last week:

BUY Jan 16, 2015 PUTs $80 strike. (Cost me $150 per contract)
SELL Jan 16, 2015 PUTs $85 strike. (Netted me $258 per contract)

This got me $108 per contract in my pocket up front.

So what happens next?

If apple goes up I win.
If apple goes sideways I win
If apple goes down to $85.01 I win
If apple goes down to $84 I break even
If apple falls more than that I'll lose to a maximum of $500-108 = $392 per contract.

Loss = maximum risk - premiums received on the trade.

If apple falls in between 80-84, I could sell off the $80 put and reclaim a bit of cash and then take the assignment of shares @ $85.  So I would be down, and would need apple to go back above $84 to break even.

Since I like apple I'd be happy with this.  As always, I live tweet my trades on twitter.  (Ask for the account name)  Questions and comments, ask away @blerghhh on twitter.

Stay hungry my friends!

Tuesday, March 4, 2014

The short put

I'm not a golfer...  So lets just get that out there right now.

If you want to follow my trades, go to twitter and follow @short_put

Back to the 411:

What am I talking about?  It's going to make your heads spin...  So just sit back, relax, and try to ignore everything I'm about to tell you.

Am I preaching a get-rich-quick scheme?  No.  But I have sussed out an almost fool-proof and risk-free way to extract weekly income on a almost completely consistent basis from the stock market.

Unfortunately, the old adage "you need to have money to make money" is absolutely true in this case because without some money to "cover" the trades, you won't be able to do it.

Now I could get bogged down with the details but that would no doubt lose ALL of the 3 readers I have...  So I'm AM going to dumb it down.  For a variety of reasons.

Nitty gritty explained in trader lingo:
Rolling ATM (at-the-money) SHORT PUTs (naked puts) on 3X Leveraged BULL Market ETFs.  Rolling forward the same strike the last day of the contract, or chasing up the strike price on very bullish market runs.  The short duration, short puts can be 100% covered by long duration long puts but this will cost you 25% of your profits.  However, it completely removes 100% of the risk associated with this strategy.

Premise explained in non-trader lingo:


My trading activities essentially make me an insurance salesman.  The term of the insurance determines how much premium you can collect from your "customer".  The longer the term, the more money you get.  Do you ever have to honour the terms of the insurance?  NO.  The market provides you with buyers and sellers ALL THE TIME.  So if you want to get out of your deal, you can buy it out.

The fundamental premise is that this "insurance" ALWAYS ALWAYS ALWAYS costs MORE for a longer term.  So no matter how much your position is worth and no matter how much your position netted you, you will ALWAYS be able to find a LONGER term one to fill it's place which will get you MORE money in your pocket then getting rid of the shorter one cost you

Yes, you're on the hook for a longer period of time, but if the same thing happens again, you just roll forward again and again and again.

For the same amount of insurance, the shorter terms are worth less.

Heads spinning or rolling?

Stay HUNGRY my friends!

Sunday, January 5, 2014

FOOD: leftover chicken

If you're like me, then you'll never have any leftovers...  I call it my "eating disorder" (not trying to be disrespectful to those who actually have issues, but I simply can NOT stop myself from eating ALL OF THE FOODS.  My full-response does kick-in eventually, but generally requires eating more then enough food than any normal, active adult should eat in a week.

So you could make this from leftovers...  I can't.  There are never any leftovers.

roasted chicken (breast, thighs, whatever you've got from the shop-bought BBQ chicken you purchased).  I confess I buy them all the time.  Our shop has lovely free-range, hormone and antibiotic free birds that actually get to run around and live a long-ish (for a food-chicken) life.  The shop even seasons and roasts the bird for $12.99.  If I bought such a bird (in uncooked form) I would require 3 hours of kitchen labour and the organic, free-range birds cost $20+!

So back to the ingredients:

Leftover chicken
fresh bread (I like egg-bread with poppy-seed crust)
swiss or jarlesberg cheese
oregano (a few sprigs of fresh or a few tsp of dried)
2-6 strips of bacon cut into lardons and browned in a skillet (cooled)
mayonnaise (fresh if possible... shop-bought is fine in a pinch)
coarsely ground black-pepper
some finely chopped celery
some finely chopped red bell pepper
cherry tomatoes (in 1/2s or 1/4s)
a small portion of dried cranberries

(again apologies for the lack of specific quantities, but it all depends on how much chicken you have and how many sandwiches you're trying to make)

1. coarsely chop your chicken leftovers.  A bit of skin is fine
2. put your chopped chicken in a large mixing bowl
3. add bacon, oregano, pepper, celery, bell pepper, cranberries, and toss with your hands
4. add mayo to taste.  Err on the too-little side.  You're not making mayonnaise salad.
5. serve on fresh (or toasted) bread with thin slices of cheese and lettuce.

No picture available...  the food got eaten before cameras came out.

Unless you salt everything to death, there should be no need for added salt.  The BBQ chicken should be seasoned as well as the bacon.  (Plus there's already plenty of salt in cheese, and shop-bought mayo.)

If you use a freshly roasted chicken that's still warm you don't need to cool it...  It's even more awesome when it's warm.  However this will DRAMATICALLY reduce any shelf-life if you can't eat all you make.  As in, don't even bother putting the extras in the fridge.  Just put it in the bin if you can't eat it within an hour.