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The $25,000 Virtual Portfolio – Halfway to $100K!

Here we go again!

After a very wild ride tracking our VERY aggressive virtual portfolio, we closed out the first half with $53,942 – up 115% for the first half of the year and, since we put $11,630 back in the bank above $25,000 from last year's $10,000 virtual portfolio, that brings us to a grand total of $65,722 – up 555% from the $10K we started with last year.  Our goal in this small, aggressive virtual portfolio is $100K but forget the extra $15,722 – as I said last week, that's our starting basis with a nice profit so we put that back into nice, safe, conservative investments (like our Income Virtual Portfolio) and that leaves us $50,000 to play with.  

Our first week of trades has already been very interesting.  Make sure you to read the original post and the update if you haven’t already to get an idea of what we are trying to learn by following this "hyper-aggressive" virtual portfolio model – especially last quarter's lesson on taking those profits off the table and working on those losers.  Our "biggest loser" of last quarter was, of course, FAS and those Aug $23 calls hit $5 last week (we are already out), which is $40,000!  Anytime you can roll and DD a position in a $25,000 virtual portfolio that eventually cashes out for $40,000 – you will probably come out well…

The problem is mainly in learning how to stick with a position like that and that requires a lot of conviction because there were dozens of opportunities to panic out with a loss and that's why we practice this kind of trading – you need to get the experience in playing these out over time so that you can learn to BELIEVE in the strategy and, even then, it should only be used in places where you REALLY have a very good reason to believe a stock or ETF will, eventually, come back sharply enough to make all the work pay off – because it's a LOT of work!

Of course, no one makes 100% every six months by taking it easy, right?  Practice, practice, practice with virtual trading until you get comfortable with the strategies and, even then, use them sparingly.  This aggressive virtual portfolio is meant to be a small part (10% or less) of a larger, more conservative virtual portfolio, like our nice, sensible Income Virtual Portfolio – which is making a very nice, virtual 2.2% a month so far – WITHOUT swinging for the fences!

As it's earnings season, we're doing a few ratio backspreads to get warmed up.  Ratio backspreads are a great way to take advantage of high front-month premiums with short sales, which giving yourself a little fall back protection – JUST IN CASE – you are totally wrong.  As we are here to PRACTICE strategies, it does not upset me when trades go badly as it gives us an opportunity to discuss adjustments and we have a great opportunity right off the bat with CMG, which we went short on Tuesday at 10:46 with this trade idea:  

  • 3 CMG Aug $310 calls sold for $18.50 (-$5,550)
  • 2 CMG Dec $340 calls at $18 ($3,600) 

So that was a net credit of $1,950 and CMG was trading at $317 at the time.  Unfortunately, the madness continued and they ran up to $329.80 before pulling back to finish Friday at $325.  Is this a disaster then?  Hardly.  The 3 Aug $310 calls that we are short on ran up to $24 ($7,200, up $1,650) while our 2 Dec $340 calls ended up at $22 ($4,400, up $800) so a net UNREALIZED (big lesson from the first half) of $850 with 4 months to roll and adjust the position before we're even forced to move our longs.  

Options spreads are like chess strategies – you make your opening move and then you see what your opponent does and then you study the board and decide on your next move.  The secret to winning in options trading – like chess, is to think more than one move ahead or, as we like to say – "Plan the trade and then trade the plan."  Avoid making moves that "trap" you in do or die positions.  Always leave yourself some "outs" – places you can shift to IF you decide you don't want to take a loss and are willing to work with the trade.  

Although down $800 at the moment, we don't think CMG will survive earnings on July 19th AND, with the stock at $325 and the $310 calls at $24, there's still $9 of premium baked into the price of those 3 contracts and there's $2,700 of our $850 "loss" right there (in other words, still a nice profit if the premium wears down at this price).  Another thing we need to do is consider what our next move would have to be.  At the moment, the September $320 calls are $21.50 so that is currently our Roll Target.  If we did it now, it would cost us $750 to make that roll and that would cut our net credit on the roll down from $1,650 to $900 – that's not so terrible, is it?  

So we're going to keep an eye on that relationship (the $2.50 cost of the roll).  No matter what price the Aug calls are – as long as they are only $2.50 more than the Sept $320s, we don't care if they are trading at $24 or $34 because it's still "on target" for our rolling plan.  Since we can make that roll (up $10 to the next month for $2.50), we can assume that we can make a roll to the October $330s for $750 more (net credit $150) and the November $340s for $750 more (net debit of $600) and that would wind us up a spread of 2 Dec $340 calls that are at least at the money (or we wouldn't have done the next rolls) covered with 3 Nov $340s which means we are at least even with two of our callers and only stand to lose whatever amount CMG is over $340 by on the 3rd short call.  

See what I mean by FLEXIBLE?  This is why I sometimes get annoyed when people panic 3 days into a 6-month trade just because a stock spikes.  We don't care if CMG is at $325 or $335, as long as we don't believe it's going to be over $350 in December, we can't lose more than $1,000.  As long as we're confident that CMG won't gain 7.5% ($1Bn in market cap) between now and December expirations (16th) – we're still on track for a profit!   

Even with a p/e of 55, adding $1Bn in market cap would imply another $200M in profits, which would be 10% more than the $200M currently projected for this year.  Even if we do get nervous – let's say if CMG does go over $330 – we can simply add another long call (either the same Dec $340s or something a little higher like the Dec $360s) and suddenly we're bullish on CMG for the long haul!  Heck, we could add 1 more long at $330 and one at $340 and one at $350 and one at $360 and, by the time CMG hit $370, we're have 6 long calls against the 3 short ones.  How's that for a trading plan?  

As we buy each additional long option, we simply set a stop on one offsetting long that we already have profits on so if, for example, we were to cover with an additional Dec $360 call, now $15 ($1,500), we could do that and set a stop on one of the Dec $340s at $20 (now $22, so a 10% pullback) and that would take $200 in profits off the table and put us back with one Dec $340 at $18 ($1,800) and the Dec $360 at $15 ($1,500) for a total outlay of $3,300 less the $200 profit we took off the table against the 3 Aug $310s we sold for $5,550 so now it's a net credit of $2,450 (up $500 from our initial spread) and keep in mind that we only trigger that position AFTER CMG pulls back enough to drop our longs 10%.  

Our Dec $340s were at $20 Tuesday at noon, when CMG was at $318 and it's not going to line up exactly but that means that, down the line, we'd have that $2,450 net credit against 3 CMG $310 calls that have $800 of intrinsic value ($2,400) as they get closer to expiration.  So, when someone asks me in chat whether we should adjust CMG on a spike to $330 and I say "don't worry yet" – that's the background to my answer.  I wish I had time to lay that all out every time someone asks but that's in my head in 30 seconds but takes about 15 minutes to write out so I stick with "don't worry" but this virtual portfolio, on weekends – is a good time to lay out the logic.  

Believe it or not but if you put in your 10,000 hours of practice (see Gladwell) – you'll have all this nonsense rattling around in your head too!  Of course, as Bill Gates points out – there's a little more to it than JUST practice but believe me – you're not going to learn anything if you DON'T practice!  

GLL was our second $25KP play of the week and we picked up 20 of the July $23s for .40 ($800) in Wednesday morning's Member Alert but we took .50 for 10 ($500 – up 25%) and stopped the rest out at .30 ($300 – down 25%) and ended up even as the movement in gold was disappointing.  Not part of the $25KP but we did go back for the Aug $24 calls at .40 in Friday as we thought gold's move up to $1,544 was a bit overdone and having until August to be right makes it a little more fun than those crazy July calls!  

Shortly after I put out the morning Alert, I posted another $25KP trade in Wednesday's Member Chat at 10:57 on another Momo stock, LULU, which had spiked over $120, diving their market cap over $8.5Bn with $900M in sales and less than $200M in profits so a p/e of 42 IF everything goes very well for them in earnings.  

Like CMG, LULU is predominantly a US operation so they do not benefit from a weak dollar and are subject to cost pressures – in LULU's case, from overseas suppliers (and cotton prices went through the roof last Q).  The industry average p/e is 14.5 so things can get ugly if LULU isn't growing profits at the 50% projected clip WITHOUT margin compression so our trade idea was:  

  • 5 LULU July $120 calls sold for $3.40 ($1,700)
  • 3 LULU Sept $135 calls at $4.10 ($1,230)

That one is a net credit of $470 and you can tell from the tight time-frame, shorter spread duration and larger proportion of short calls to long calls that I was more confident in this one than I was in CMG – which seems to get a constant sprinkle of fairy dust to keep it going higher each week.  Nonetheless, LULU did give us a scare on Thursday as it popped to $123.50 but that's just .10 over our intrinsic sale value so nothing to panic over.  Yesterday they fell all the way back to $118 and recovered back to $120 at the close with the 5 July $120 calls falling to $2.65 ($1,325, down $375) as time runs down their premium value while our 3 Sept $135s are still $4.10 so we're already ahead $375 (79%) but very confident that we can do even better, as that $1,325 of remaining value on the short calls is all premium that expires next Friday!  

As Mick and the boys said the year after I was born: "Tiiiiiiiiiiiiime is on my side" and "yes it is" when you are the SELLER of premium.  If we can only teach you one single thing at PSW it's that you should BE THE HOUSE – not the gambler.  Millions of people may walk into casinos each year but none of those people are as rich as the Billionaires who own them!  What game do the gamblers play?  They buy risk.  What game do the owners play?  They SELL risk – and they sell it consistently, over and over again – letting TIME and STATISTICS take care of the rest…

Unfortunately, on our other Wednesday spread, we chose to go head to head AGAINST a casino, taking a trade on WYNN that could be going better.  Fortunately, I was LESS confident in this one so we did a 5:4 backspread with an October time-frame so, like CMG, plenty of time to adjust:

  • 5 WYNN Aug $155 calls sold for $6.60 ($3,300)
  • 4 WYNN Oct $165 calls at $6.60 ($2,640) 

This spread had a net credit of $660 but WYNN flew up to $161 on Friday and those August $155s are now $11.60 ($5,800, down $2,500) and the October $165s are only $10.40 ($4,160, up $1,520) for a net UNREALIZED loss of $980 so far.  

WHY did WYNN shoot up 2.5% on Friday?  It did that in a poor market so we're pretty concerned and it turns out they are up because Fitch  upgraded the Wynn’s debt closer to investment-grade status (which means they are still junk), citing “robust operating trends, primarily in Macau.”  We knew about Macau, that news came out 2 weeks ago and WYNN went from $130 to $155, where we decided the run was overdone but this Fitch upgrade was unexpected so we're going to be more apt to cover this one with another long if they are holding $160 next week.  We're not going to panic, of course, as we sold $155 calls for $6.60 so, effectively, anything under $161.60 at August expiration (19th) is going to be a victory AND we have 2 more months to roll so we will watch this one carefully at the $160 line.  

At the same time as the WYNN trade, we went short BXP with 10 Aug $105 puts at $2 and they have fallen 10% to $1.80 so far but I don't see how their earnings will justify a 57% run in the stock since last July ($70) that's added $6Bn in market cap to a company with $1.5Bn in revenues and a net profit of $200M IF everything goes well.  Like LULU, that additional $6Bn in cap is coming in at a p/e that is well over 100 so this is a short we'll be happy to roll and add to until the inevitable day of reckoning.  

Another trade that went right was our USO Aug $38 puts.  We took 10 of those on Thursday morning at $1.20 and took the money and ran on Friday at $1.65 for a very nice, quick $450 gain but that was NOTHING compared to the futures call I made in the same paragraph to short oil itself (/CL) at $99 as we hit $96 on Friday for a gain of $3,000 PER CONTRACT – sticking it once again to the pump boyz at the NYMEX!  By the way, I nailed that bottom on Friday with my 11:42 call to get out of gasoline (/RB) and our oil shorts and shorts in general, saying:

 

$3.0785 on Gasoline!  That’s a stop back at $3.08.  

Let’s take the $1.65 and run on the Aug USO $38 puts in the $25KP as $96 is holding.  

12,600 seems to be holding for now as well now that Europe has closed – expect a bounce and we can reload puts later.  Watch the Dollar – now below 75.50, which gives the bulls a chance to come out and play.  

I am in no way bullish – just not willing to give up profits to some silly stick move.  

That concludes our first week's adventures in the $25KP's 2nd half.  We closed one trade even (GLL) and took $450 off the table on USO while the rest are just works in progress.  So far, we're a bit to bearish so we'll be looking for bullish plays next week if things don't turn down.  We can afford to "guess" the market direction when we're coming off 100% cash but, after that, it's all about BALANCE, where we sell premium to bulls AND bears, KNOWING we will collect money from at least half of them no matter what and that we will collect money from both of them when the markets are flat.  As our buddy Steve Wynn says – it's nice work if you can get it

Note from Greg:  The $25,000 Virtual Portfolio is up to $50,000 and we're going for $100,000 by the end of the year.  We just cashed out one week ago and these are our first new trades.  There is not better time than now to join www.philstockworld.com where you can track this and other virtual portfolios as well as participate in our intra-day Member Chat rooms.  Find out more at http://www.philstockworld.com/subscribe/ - Summer is our slow season, it is very doubtful there will be room for new Premium Subscribers in the Fall.  


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  1.  Hello Phil,
    In the paragraph next to the protesters carrying the Chipolte signs, you refer to the current value of the Short $310 Calls.I think you may be referring to the July Calls when your original trade sold the Aug $310 Calls.  If so, there is a lot more than $3.50 time value left in the Aug Short $310 Calls.  If correct, does this change your short term strategy?
    Thanks


  2.  Hello Phil,
    No doubt you’re aware but LULU trades post 2-1 split on Tuesday, July 12th.  The whole stock split nonsense may be in part responsible for the recent stock action.
    Cheers


  3. Good catch CS, thanks!  So you can see from the fix that our numbers are tighter so we are more apt to cover over that $330 mark than risk them going higher.  Since they could easily move $20 on earnings, unless they have come down below $310 ahead of the report, it would be safer to add one more long, just in case.  

    Yes on LULU but that is just nutty.  We took good advantage of that move and it’s working so far – essentially $240 a share at the old price is not something people would pay if they thought about it.  



  4. Phil
    I was thinking i could not participate in this portfolio because I have a restrictrion at work that requires me to hold anything I buy for at least 30 days.   Now I’m thinking perhaps I could do this with offsetting trades when I get trapped within the 30 day period and it seems like some of the trades may just go the 30 days anyway (now that I’m learning a little more).  Was hoping you could offer an opinion and/or insight. 
    Regarding Wynn, I haven’t anlyzed it, but the crossover from junk to investment grade could make a material difference depending upon how the covenants are structured.  Many junk covenants fall away upon crossover thereby eliminating restrictions on the company that would allow for more shareholder friendly actions and lattitude in manging operations and finances.  Hard to imagine anyone would make any gaming company investment grade (Harrah’s was once and we see how that turned out), but stranger things have happened (and seem to every day now!). 


  5. Offsetting/Seer – I think it’s possible but how about you paper trade it for a month or two and practice asking me when you think things are in trouble and we’ll see how it goes?  WYNN, meanwhile, is drifting along without too much damage so far.  


  6. $25,000 Portfolio – Week 23 

    Last update we put $3,942 in the virtual bank to leave us with an even $50,000 for the 2nd half of the year.  It’s only week 23 because we didn’t start until the end of January.   This week, we closed the following:

    • 10 USO Aug $38 puts at $1,20, sold for $1.65 – up $450 
    • 10 USO July $37/38 bull call spread at .50, sold for .75 – up $250
    • 10 TNA July $86 calls at net $1, out at $1.20 – up $200 
    • 20 QQQ July $58 calls at .60, out at .55 – down $100
    • 10 QQQ July $57 calls at $1.06, out at $1.01 – Down $50
    • 20 QQQ July $57 calls at .95, out at $1.25 – up $600
    • 20 USO July $39 puts at avg .59, out at $1.70 – up $2,220
    • 10 DIA July $126 puts at .85, out at $1.15 – up $300
    • 10 DIA July $126 puts at .85, out at $1.60 – up $750
    • 20 QQQ July $57 puts at .07, out at .22 – up $300

    A very busy (and very profitable) first week back!  We closed net $4,920 worth of positions this week.  That becomes our realized gains while the positions that are working are unrealized gains or losses.  As always, our goal is to take winners off the table and do our best to work out the losers but, as you can see above, we took 3 stabs at the QQQ longs with stops before the 3rd time was a charm and then we had an even bigger winner going the other way.  

    The following are our remaining open (unrealized) positions:   

    • 2 CMG Dec $340 calls at $18 ($3,600), now $23.60 – up $1,120
    • 3 CMG Aug $310 calls sold for $18 (-$5,500), now $24.10 – down $1,830
    • 6 LULU Sept $60 calls at $2.05 ($1,230), now $4.70 – up $2,830
    • 10 LULU July $60 calls sold for $1.70 (-$1,700), now .50 – up $1,200
    • 4 WYNN Oct $165 calls at $6.60 ($2,640), now $9.85 – up $1,300
    • 5 WYNN Aug $155 calls sold for $6.60 ($3,300), now $9.80 – down $1,600
    • 10 BXP Aug $105 puts at $2 ($2,000), now $2.25 – up $250 
    • 10 DIA July $125/126 bull call spread at .50 ($500), now .15 – down $350
    • 10 GLL Aug $22/23 bull call spread at .50 ($1,000), now .25 – down $250 
    • 10 TBT Aug $32 puts sold for $1.10 (-$1,100), now .80 – up $300
    • 10 TNA July $88 calls sold for net $0 ($0), now .05 – down $50 
    • 20 QQQ July $57 puts at .07 ($140), now .14 – up $140
    • 2 GMCR Sept $85 puts at $5 ($1,000), now $5.85 – up $170 
    • 5 GOOG July 22 $550 calls at $7.20 ($3,600), now $7.70 – up $250 
    • 5 GOOG July 15 $545 calls sold for $6.90 (-$3,450), now $5.50 – up $550

    We have $4,030 of unrealized gains but it’s going to be very tricky making that GOOG play work tomorrow.  If we could get those to stick, we’d be at net $58,950 and, had I noticed that this afternoon, I would have been all for getting back to cash, because that’s a pretty good week!    

     

    Of course it takes time for our spread plays to work out but GOOG hit $595 after hours and that will likely squash the premiums on both our calls and the callers we sold so quick adjustments will be needed tomorrow morning but there’s no way to call it until we see how the options price out.  

    It will certainly make for an exciting expiration day!   


  7. Son of a bitch!  GOOG is totally flying.  $8.74 is a huge beat, above the highest estimate on the street ($8.24).  Foreign revenues were huge on the exchange rates.  $585 is going to be a bitch on that $25KP play but we’ll sell the next weeks into the excitement and let the others pull back (hopefully).   

    GOOG July $545 calls are $52.50 so no premium left and the Next week $550s are $48 and the move was to kill the $550s at the open ($50) and as soon as the $545s drop to $50 you can kill the trade and be done with it in the $25KP.  If you need a cover for margin, you can roll the next week $550s (now $48) to the Aug $620s (now $9.25) and roll the callers to the next week $600s (now $8.50) and play for that premium to expire instead.  

    Meanwhile,  the GOOG TODAY $580 puts at .50 are the way to go for fun speculation.  10 in the $25KP!  

    SQQQ TODAY $23 calls have no premium at .90 – 10 of those in the $25KP with a stop at .75.

    Double dip/Tusca – Rosie is bearish?!?  No way!  You are right on oil, may as well grab the 10 USO Aug $37 puts for .95 in the $25KP and we’re happy to roll it or DD if oil goes back up.  

    $25KP Update:  

    • LULU pinning $60 – we’ll let it run down as they still want .40 for the $60 calls but offering .10 is a good idea.  We’re out of the longs too (now $4.60) – that trade went great! 
    • DIA bull call spread is dead.  
    • GLL Aug $22 calls (1/2 of spread), now .70, can be rolled down to $20 calls for $1.10 ($1,100 for 10).  
    • QQQ July $57 calls hopefully were out at a dime as GOOG went the wrong way on us (that was our premise).  
    • TNA short $88 calls will expire worthless
    • GOOG gone this morning.  

    And Wheeeeeee!  

    Submitted on 2011/07/19 at 10:26 am

    DIA is at $125 and I like the Aug $124 puts at $2.02 as a downside play with a stop at $1.90 – 10 in the $25KP.  

    Submitted on 2011/07/19 at 10:40 am

    USO/Celest – See above trade idea.  I like USO puts too but Aug expiration is the 19th so cutting it close on the next NYMEX cycle.  We have inventories tomorrow so I’d look for a really stupid run up to short into, maybe with the Aug $38 puts, which are now $1.17.  At $1 I would want 20 for the $25KP.  

    Let’s take the money and run at $2.22 on the DIA $124 puts in the $25KP.  A quick 10% is fine. The USO trade is still on if we get our price.  

    KO/Rain – Their growth is actually through water and Vitamin Water (sports drinks).

    OK, we’re good to go on USO shorts and a fine time to reload but this time it’s 10 SPY weekly $133 puts at $1.15 in the $25KP with a stop at .95.  

    Submitted on 2011/07/19 at 2:32 pm

    USO/Jerconn – That was the $25KP play above (10:40) "Aug $38 puts, which are now $1.17.  At $1 I would want 20 for the $25KP."   My mistake as they hit $1.06 at about 1 and I was sure that last spike would have triggered but they didn’t fall below $1.05 for some reason so no trade so far…  No, I meant the SPY weekly puts – wasn’t about moving in tandem, was about calling a top in SPY.

    CMG/Etrad – Still have to be patient as we have $310 callers.  Our later trade (not $25KP) on the 18th was 3 Jan $340s for $26 ($7,800) and 5 short Sept $330s sold for $16 ($8,000) and that one’s looking very good.  Now that we KNOW CMG was not so hot, the aggressive move would be to take the longs off the table while they still have value and ride out the premium on the naked shorts. 

    More oil to be released!  They haven’t even released the first batch yet….

    USO Aug $38 puts are $1.12 but let’s get 10 in the $25KP and plan on a DD if they go higher at about .88.  

    SPY/$25KP, Gsank – We’re just lucky to get out even on those.  If they were Augs, I’d keep them as the EU may not make a move and we go down or they may make a move which is considered a bailout and the Euro goes down and the Dollar goes up and our markets go down so several ways to win with the puts but  not worth the risk. 

    Submitted on 2011/07/21 at 2:08 pm

    20 SPY Weekly (tomorrow) $135 puts at .79 with a stop at .59 in the $25KP.  

    $25KP, selling 15 SPY today $136 puts for $1.50 to cover our $135 puts.

    GLD/Topher – You can see from today’s action, we’re trading for a US default.  Once that is off the table, we should get a proper drop.  Meanwhile, we’re back to $1,605 and that’s a re-enter on the (/YG) futures below that line with tight stops and those GLL Aug $22 calls are .40 so 20 of those in the $25KP

    Submitted on 2011/07/25 at 2:35 pm

    Oh no – more political nonsense on the way.  Time to get out of futures longs and get ready to go short.  QQQ Aug $58 puts at .63 are a fun way to play – 20 in the $25KP with a stop at .50

     

    That might be a playable bottom as 12,505 on the Dow held nicely.  Watch that 1,333 line on the S&P but, over that, I like2x IWM WEEKLY $82/83 bull call spread at .54, selling 1x the RIMM Aug $26 puts for .93 for net .15 on the $2 spread so 10 of those in the $25KP as RIMM is rolling out their new stuff this week and might get a very nice pop and, if not, rolling won’t be terrible.  


  8. $25,000 Virtual Portfolio – Week 25 

    Last update we put closed a virtual $4,920 worth of profitable positions in our first update after cashing in at the end of June so that took us up to $54,920 and we had another unrealized set of gains totaling $4,030.  At the time I said "Had I noticed that this afternoon, I would have been all for getting back to cash!"  That was good advice as we’re ONLY trying to make $50,000 more by 12/31 and making $8,950 in two weeks is not normal.  When you get an unusual win – it is a very good idea to cash it out and avoid any unpleasant surprises.  Then you can use your cash to make nice, new, SENSIBLE bets.  

    We had a pretty good mix so let’s see how it performed.  The following positions closed:  

    • 5 GOOG July 22 $550 calls at $7.20, out at $50 – up $21,400
    • 5 GOOG July 15 $545 calls sold for $6.90, out at $50 – down $21,550
    • 10 GOOG July 15 $580 puts at .50, expired worthless – down $500
    • 10 SQQQ July 15 $23 calls at .90, out at .75 – down $150
    • 10 USO Aug $37 puts at .95, out at $1.25 – up $300
    • 10 LULU July $60 calls sold for $1.70, out at  .10 – up $1,600
    • 6 LULU Sept $60 calls at $2.05, out at $4.60 – up $1,530
    • 10 DIA July $125/126 bull call spread at .50, expired worthless – down $500
    • 20 QQQ July $57 puts at .07 ($140), out at .20  – up $60
    • 10 TNA July $88 calls sold for net $0, expired worthless – even
    • 10 DIA Aug $124 puts at $2.02, out at 2.22 – up $200
    • 20  USO Aug $38 puts at $1, out at $1.25 – up $250
    • 10 SPY July 22 $133 puts at $1.15, out at $1.15 – even  
    • 20 IWM July 29 $81 calls at net .79, out at .79 – even 

    So we squeezed another $2,840 out of the closed positions and those give us a total realized gain of $57,760 so not bad but now it comes down to those unrealized positions to see if we would have been better off quitting while we were ahead.  We need at least net $1,190 on our open positions to make the week’s trading worthwhile – let’s see how we did:.  

    The following are our remaining open (unrealized) positions:   

    • 2 CMG Dec $340 calls at $18 ($3,600), now $21.85 – up $770
    • 3 CMG Aug $310 calls sold for $18 (-$5,500), now $17.45 – up $165
    • 4 WYNN Oct $165 calls at $6.60 ($2,640), now $7.20 – up $240
    • 5 WYNN Aug $155 calls sold for $6.60 ($3,300), now $5.85 – up $375
    • 10 BXP Aug $105 puts at $2 ($2,000), now $1.95 – down $50 
    • 10 GLL Aug $20/23 bull call spread at net $1.60 ($1,600), now .90 – down $700
    • 10 TBT Aug $32 puts sold for $1.10 (-$1,100), now .69 – up $410
    • 4 GMCR Sept $97.50 puts at net $5.50 ($1,000), now $4 – down $600 
    • 20 GLL Aug $22 calls at .40 ($800), now .30 – down $200 
    • 20 QQQ Aug $58 puts at .63 ($1,260), now $1.22 – up $1,180
    • 10 RIMM Aug $26 puts sold for .93 ($930), now $1.56 – down $630

    Damn!  We have $960 of unrealized gains!  $230 worse off than had we just cashed out on the 14th.  That is so annoying, isn’t it?  Well, it happens and it’s been a rough couple of weeks so let’s just be glad we are well-balanced and PRESERVING our virtual $57K.  All in all, not bad for our first month and CMG and WYNN both look to be on track.  

    On the whole, we’re pretty short so we’ll be either adding longs or cashing in shorts tomorrow to get a little more even into the weekend but still bearish if there’s no debt deal.  

     


  9. Although, speaking of Forex – how about UUP Dec $21 calls at .53, 20 in the $25KP.  

    Submitted on 2011/07/28 at 12:42 pm 

    That’s keeping XOM down 2% but OIH is mindlessly positive (up 1.2%) and in denial.  XLE has sold off so the OIH is wrong and that means the Aug $164/158 bear put spread at $3, selling the $164 calls for $2.60 is net .40 on the $6 spread that’s $4.30 in the money looks good.  Margin is $27 or I’d do it in the $25KP as I really like this one.  

    Submitted on 2011/07/29 at 9:40 am

    USO Next week $36 calls are $1.45 so 10 of those in the $25KP with a stop at $1.20.  

    Volume is not very high – this is a retail panic so far.  If you have short positions, strongly consider put tight stops on them (this includes the $25KP and Income Portfolio) as they put plenty of cash in your pocket and we can always find another layer of shorts if the RUT can’t hold 775.

     Wow, F’ing Momos are getting scooped up already.  QQQ TODAY $57s are .72, worth risking a stop out at .50 for so 20 in the $25KP.  

    Submitted on 2011/08/01 at 9:41 am

    USO Weekly $38 puts are .44, 20 of those in the $25KP for $880!  (longs are, of course off).

    Submitted on 2011/08/01 at 11:36 am

    Gotta take a poke at oil here with the Aug $37 calls at .97 – 10 in the $25KP (done with the shorts, of course).  

    UUP/$25KP, Cwan – Tempting but I think we should take the BOJ at their word and keep the upside play on the Dollar. 

     USO/Jercon – When in doubt, sell half!   Officially, in the $25KP, I’m willing to go for it with just 10 as we’re up 20% so far so we’d have to drop 40% just to lose $200 and there is a chance that we get back to the morning high of $1.90 tomorrow morning so it’s risk losing $200 to make $800 more is a worthwhile risk/reward since we think the Debt Deal will pass and there will be another relief rally (which we’ll sell into!).  

     

    PCLN/Sank – I’d sell 4 weekly $570 calls for $11 against 3 Sept $605s at $11 for net $1,100 credit on the assumption they don’t go all the way up to $581 and, even if they do, you should be able to roll to the Aug $585s at least and then 5 more weekly rolls before you hit trouble and you can DD on the long calls and do a 1.5X roll if they gain more than 10% but I super doubt it so let’s do one set in the $25KP.  


  10. $25,000 Virtual Portfolio – Week 26 

    This is temporary so I don’t get stuck making all my changes at once. .  

    We had a pretty good mix so let’s see how it performed.  The following positions closed:  

    • 10 USO 8/5 $36 calls at $1.35, out at $2.35 – up $1,000
    • 3 CMG Aug $310 calls sold for $18, out at $16 – up $600
    • 2 CMG Dec $340 calls at $18, out at $20.40 – up $480
    • 5 WYNN Aug $155 calls sold for $6.60, out at $4 – up $800
    • 4 WYNN Oct $165 calls at $6.60, out at $7 – up $160
    • 10 BXP Aug $105 puts at $2, out at $2.75 – up $750
    • 4 GMCR Sept $97.50 puts at net $5.50, out at $4.30 – down $480
    • 20 QQQ Aug $58 puts at .63 out at $1.55 – up $1,840
    • 20 QQQ 7/29 $37 calls at .72, out at $1.45 – up $1,460
    • 20 USO 8/5 $38 puts at .44, out at $1.35 – up $1,820

    :.  

    The following are our remaining open (unrealized) positions:   

    •  10 GLL Aug $20/23 bull call spread at net $1.60 ($1,600), now .90 – down $700
    • 10 TBT Aug $32 puts sold for $1.10 (-$1,100), now .69 – up $410
    • 20 GLL Aug $22 calls at .40 ($800), now .30 – down $200
    • 10 RIMM Aug $26 puts sold for .93 ($930), now $1.56 – down $630
    • 20 UUP Dec $21 calls at .53 ($1,060), now .65 – up $260
    • 10 USO Aug $37 calls at .97 ($970), now $1.17 – up $200

       


  11.  Submitted on 2011/08/01 at 4:34 pm

    PCLN/Sank – I’d sell 4 weekly $570 calls for $11 against 3 Sept $605s at $11 for net $1,100 credit on the assumption they don’t go all the way up to $581 and, even if they do, you should be able to roll to the Aug $585s at least and then 5 more weekly rolls before you hit trouble and you can DD on the long calls and do a 1.5X roll if they gain more than 10% but I super doubt it so let’s do one set in the $25KP.  


  12. PCLN/Sank – My strategies don’t have names from books a lot of the time.  That one is my version of a ratio backspread, which is my general term for selling more front-months than you buy longs as a credit spread (although not always a credit) and the plan is to take advantage of a premium crush on earnings or some other big news.  In theory, people are using the Wiki to make topics like this but I don’t think anyone did with backspreads.  As to buying power, if you read the $25KP entries back to the beginning, these are NOT meant to be trades for someone who ONLY has $25,000 – that would be crazy.  This was meant to be a $25,000 risk allocation (and actually began with $10K last year) from a larger portfolio.  If you are running a large portfolio using our buy/write strategy or the Income Portfolio strategy – you should never have a shortage of margin.   

    As to the PCLN spread.  It was an earnings play with a pretty delicate balance.  The Aug $500 puts are still $12, so no profits to take – you have to let these kind of trades play out through earnings when all the premium disappears but, if you are working with a small portfolio – this is not a trade you should be in at all because it can slam you on margin and force you to liquidate at terrible prices on an earnings spike.  With this trade, we’re playing for them not to go up past $575 and not much below $500 so they are kind of in a perfect spot right now and we’re rooting for a flat-line.  

    Submitted on 2011/08/02 at 10:14 am

    We are back to mostly cash in the $25KP after taking the money and running on those crazy top and bottom moves.  As usual, the remaining open positions are killing us but I’m not going to worry about it until next week.  

    Submitted on 2011/08/03 at 9:59 am

    I expect some panic selling into ISM and then either we are over 52 and a huge relief rally or we’re under 51 and we test those -5% levels on our holdouts.  No reason to make a major commitment until we get the facts but oil is already testing $92.50, where we do want to take a long flyer so let’s say USO weekly $36 calls at .55, 20 in the $25KP with a stop at .39.  

    Submitted on 2011/08/04 at 1:34 pm

    Gold/Savi – Sure because we shorted them at $1,650 so I’d still short them here.  I was way too aggressive in $25KP and we got our asses handed to us with GLL but I’m going to go for a roll next week and try again.  The GLL Oct $19/21 bull call spread is just .60 so I like that along with shorting ABX Sept $40 puts for .40 for .20 on the $2 spread.  Another offset would be HMY Jan $11 puts sold for .60 as that’s a nice miner to pick up cheap. 

    DIA Aug $119 calls back to .80, were $1 at 12:30 so 20 in the $25KP as a poke on 11,500 holding again.

    USO Tomorrow $33 calls at .88, 10 in the $25KP.

    Submitted on 2011/08/05 at 10:20 am

    The key to rolling is to find a position in which you REASONABLY expect a bounce will help you get out even – that’s all we ever want to do is erase the loss (see first half $25KP) and  the winners will take care of themselves. 

    USO TODAY $34 puts at .45, 10 in the $25KP, stop if they cross back over $86.50, looking for .60+

    Submitted on 2011/08/05 at 11:06 am

    Speaking of oil – after 11:30 our premise for shorting USO (EU selling pressure) is shot if it’s not working so best to get out by then on $25KP as premium decay is a bitch on expiration day!  

    Submitted on 2011/08/05 at 11:18 am

    USO Today $34 puts done at .75. in $25KP 

    Submitted on 2011/08/05 at 11:31 am

    USO NEXT WEEKLY $32 puts at .35 – 10 in the $25KP (pressing our profits).  

    Submitted on 2011/08/05 at 11:55 am

    I think take the dime and run on the Next week USO calls in the $25KP – that was a nice bonus – why risk it?

    Submitted on 2011/08/05 at 11:56 am

    Oh, that was a stop on the $25KP, not an exit!!!  

    Submitted on 2011/08/05 at 12:17 pm

    Out of USO Next week puts of course in $25KP. 

    Submitted on 2011/08/05 at 1:13 pm

    UYG Aug $49/50 bull call spread at .55, 20 in $25KP. 


  13. Submitted on 2011/08/05 at 5:40 am 

    GLL Aug $20s are .60 and you can roll those to the Oct $22s at .95 for .35 and the caller will expire and then you can sell something else for .35 or more.  You can roll the $22s as well and sell something to cover them as well.