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.