We had a pretty good week with our new virtual portfolio.
The goal of the $5,000 virtual portfolio is to play around the volatility of earnings and make no mistake, it's a high-risk way to trade $5,000 and is meant to be a small portion of a large virtual portfolio – not something you would want to do with your only $5,000. Of course the usual disclaimer is, this is a virtual portfolio, don't try this at home, trading is dangerous, always consult a professional financial adviser, etc, etc. The idea is to practice different option strategies and we had a very exciting first week!
Our first play was a spread on AA into earnings, initiated Monday at 1:10 with a buy of 3 $7.50 calls for $1.75 ($525), which we later covered with 3 $9 calls at $1.04 ($312). That put us in the $1.50 spread for net .71 and we needed AA to finish next week at $9 to collect our full profit. We bought back the $9 calls on Tuesday, ahead of earnings as they fell to .70 (up 33%), which lowered the basis on the remaining $7.50 calls to $1.42 and we got out of that one the next day as they spiked up to $2.50 in the morning after earnings. Net profit $324.
The second trade we entered was a DIA call play, the $84s, which we entered Tuesday at 10:30 at .70 (5 contracts) and subsequently doubled down at .50 (average basis .60) and again at .42 (average basis .51), sold 10, leaving us with 10 contracts at .51 and got out at .60 on Wednesday's "stick save" close. Net profit $90.
The third play of the week was SGR and we initiated that one Thursday at 11:12 with a straight spread of 4 $22.50 calls for $3.30, selling the $25 calls for $1.45 for a net entry of $1.85 on the $2.50 spread. Earnings were a miss on SGR but we felt that the sell-off was an overreaction so we took out the $25 calls for .25 (82% profit), leaving us in the $22.50s for net $2.10 ($3.30 entry less the $1.10 profit on the $25 calls). That trade is still in progress and may have to be rolled to August if SGR doesn't pick up next week (now $23.69). This play is tying up $840 and is currently down $260.
Our final play of the week was a quickie on MCD on Thursday at 12:27, where we entered 5 July $55 calls for $1.65 and quickly hit our target of $2 for a $175 profit.
So not a bad start for 4 trades, we have a net profit in week one of $329 with our $260 loss still unrealized. That's up 6.5% on $5,000 in 5 days and we'll take that as a reasonable start, especially in a week when the market tanks!
Earnings begin in earnest next week and we are now using Seeking Alpha's "Stock Talk" feature (like Twitter) to post all $5KP trades so that non-members can follow along as well. You can follow along by using THIS LINK to follow my trades. This will also serve as a back-up to our site should we ever have trouble with our own chat room so members please sign up and bookmark the site as well.
