That was a strange day.
We ended up with a very bullish looking LTP as more and more of our callers fell below the critical 50% mark and were bought back. As the market got stronger all day (especially the NYSE, which was our leading indicator for the week) we never had reason to re-cover, despite oil heading all the way up to $121.
It was a great chance to roll our long positions down and further out in time as the lower VIX gave us a lot of bargains. I posted an extensive list of LTP plays I like in Wednesday’s post and, now that the 2010 calls are way down in price, it’s a good time to consider spending a little more to buy a year. AAPL 2010 $160s, for example, dropped from $51 last week to $46 yesterday, almost right in line with the $7 drop in the stock. It cost me $12.20 to roll my Jan $150s up $10 and out 12 months. Since I’m still in the money and I think AAPL will go up more than $10 given an extra 12 months and since I KNOW that I can sell more than $22.20 in premium (the cost of my roll in premium and position) over 12 months, there is absolutely no reason not to do this. My downside delta is reduced and I’m still in good position to the upside to sell callers (but I’m naked at the moment).
I love BA 2010 $60s at $11.40 (bear with me as I’m going over my LTP now), BAC Feb $22.50s were up 219% so I rolled them to the Feb $27.50s, taking about 1/2 off the table and moving to a safer spot with plenty of time left to head higher (and we already did). This is a good move since I didn’t want to cover them so the higher calls lowered my downside and I took almost 1/2 off the table, letting the profits ride. C 2010 $17.50s are $4.15 and I was happy to buy them at $5.33. CCJ is still cheap at $7.50 but way up from Wed already. GOOG March $510s came down again at $46.80 (was $59.50 on Monday). IBM got the pullback we were looking for and we should watch them for a turn signal (HPQ needs to break $47 too).
MCD may come down to our target but if they hold here ($62) they are bullish. I think $62 is fair value on these guys and I would love them at $57 (we’re back to the 2010 $60s now). MDT went crazy and I took it off the table but I really love those guys and hope to get back in. NYX we’re waiting for our ship to come in (2010 $40s) and we need the markets in general to perk up for this trade to work. I should have covered the QQQQ Jan $44s, they lost 20% this week but now I like them again at $5. SHLD continues to be a fantastic trading vehicle – if they test $80, the 2010 $85s for $15ish are great, I was considering adding there before they pulled back as the callers were getting away (now gone). SNE either dies here or recovers here, I just did a DD on the Jan $40s at $2.50. TIE broke up yesterday, I may get even on those Jan $12.50s, still 18% down at $1.95 and a great gamble. TM I love but they don’t love me. Still, they are good to sell calls against and will probably remain so and the 2010 $90s are just $11.45 and you can 1/2 cover with $90s for $1 a month and get $7.50 back by expiration.
UTX is also back to naked on the 2010 $60s as it’s a small position and I’m happy to buy more or roll down if they drop. VZ 2010 $35s at $3.75 are just a buy and hold with 10x leverage on the common. 15 more months for their fiber to roll out – they already spent the money building it, now comes the good part! WFMI has also turned into a trading vehicle. WMT is nice and rangy, callers gone and if they head higher I’m ready to roll up to 2x the 2010 $60s (from the $45s), I’ll probably start layering in next week (buy the $60s and put tight stops on the $45s, which are up 35%). I still can’t believe you can buy 2010 XLF 17s for $4.90 – if you really think the country is that screwed for that long, you should be selling your home and all your assets while you can and shifting to gold because we’re talking about a total collapse of the US financial system, probable global depression, mass starvation, disease, collapsing infrastructure, hyper-inflation… Meanwhile, that doesn’t stop me from covering into the rallies!
Those are all naked. Fully covered are AMZN because the last callers buried me so it was a horizontal roll, INTC because $24 is a long way away still, PEP which was also horizontal and WFR, also horizontal. The DIA puts are covered but I may add more for the weekend, we’re up 50% on the Oct $116 puts so if I DD and leave 1/2 naked, I’m still up 25% on the new total (400) and well covered with 1/2 Sept $115 puts – see how easy that is! USO is still covered with $97 puts and boy is that guy pissed (another horizontal roll from last month)!
All the partial covers are from horizontal rolls and all are, coincidentally 3/4 covers: BSX, CY (stuck with those), SBUX, SHLD, SIGM. These SHLDs are a bull call spread that is the last move of multiple rolls, not the same as the long calls that are open.
So still bullish, not buying the financial meltdown and not believing in the oil rally – that’s my story and I’m sticking to it!
