All Fine on Friday – Drop, What Drop?
by Phil - September 4th, 2009 8:23 am
We are starting to love our stick!
From our first Alert of the day, at 9:47 we went bullish into the drop, selling the naked DIA $94 puts and covering our longer put plays fully. After picking TZA hedged ($11.15/14.32) and a short on COST (who had jumped 10%) it was all mooing with longs on MCO, ERTS, BSX and VZ but then a bearish play on GLD at $97.50 as, again, we didn’t think gold will hold $1,000. The market started a sell-off at 1:25 but took a bounce but, as you can see from David Fry’s chart, the S&P held 995 at 2:45 and at 3:07 I said to Members:
Volume right at 100M at 3pm. 140M is "stickable." Mr Stick stopped coming after he got hosed on Monday with someone(s) selling like crazy into the attempted closing pump but "they" jacked it up pre-market on Tuesday and got their money back Tues am at which point they les the market slide to (hopefully) get rid of the jokers who had the nerve to sell into the stick. After an almost 72 hour rest period, I think Mr. Stick is tanned and rested and ready to put a positive spin on this week into the holiday weekend. That’s my market story at the moment. I’ll be right if we get a move either into this close or possibly a pre-market pump into a Free Money Day tomorrow that jams us back to 9,500 on very low pre-holiday volume. Those DIA $94 puts are still $2.15 and I still like them as a way to play for a move up (short sale). The $95 calls came down to .69 as the bulls have lost faith and that makes them a fun play to get back into as well.
So far, my market story is looking pretty good and it’s a quick 150--point ride back to 9,500, which will be a tall order if Non-Farm Payrolls disappoint but looking at then Hang Seng this morning, which got the Grand Mother of all stick saves into their close (500 points in 45 minutes), I’d have to say pretty much anything is possible. This morning’s "rally" in the Hang Seng came off an announcement by authorities that China will raise the ceiling on foreign investments AND shorten the "lock-up" period on certain types of investments considerably. This came on the…
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DiggThrill-Ride Thursday, Finally Some Earnings!
by Phil - July 9th, 2009 7:24 am
Wheee, what a day yesterday!
Of course we hit it out of the ballpark with our ICE puts as that stock melted so fast it turned to vapors (or at least the calls did!). Fortunately, we had the puts and the Aug $95 puts I mentioned in the morning post, that we had taken at $6.20 on Tuesday, opened at $8.50 and ran up to $14.35 (up 131%) at the day’s end – all without a significant pullback to stop us out. Since we LOVE to go back to a well that’s paying off, we jumped on the Aug $90 puts for $3 as our first trade of the day at 9:39 and those finished the day at $7.35 (up 145%), not bad for our 3rd play on the same stock in 48 hours!
The best thing about having 100%+ put side winners in a downturn is it gives us free reign to speculate on the upside. Since we had a bottomish view of the downturn yesterday, we were able to use the cushion provided by the gains on ICE (as well as our longer-term DIA and USO short positions) to establish a bunch of speculative upside positions on stocks we thought were bottoming. The key to this strategy is position sizing and virtual portfolio management. If you invest, for example, $2,000 per position and are willing to take 20% losses as a stop-out, then having a 100% winner on ICE (and we had 3!) allows you to take 5 bullish position as the total risk on $10,000 is the $2,000 you gained on the bear side. We don’t just mindlessly flip-flop of course. In fact, it’s been more than a month since we picked up bullish positions for more than a quick trade and we’re not SURE these are going to work but, since we had the winning put plays, it’s a good place to make a stand – dipping our toes in the bullish waters once again.
I mentioned our brand-new $5,000 Virtual Portfolio yesterday and our first play was a net .71 spread on AA where we bought the $7.50 calls for $1.75 and sold the $9 calls for $1.04. On yesterday’s dip, we had the opportunity to take out the $9 calls for .70, which was a .35 profit and left us with the naked $7.50 calls at net $1.40, with a break-even at $8.90. We tried to sell them for…
Costco Puts Busy
by Option Review - June 18th, 2009 6:38 pm
Today’s tickers: COST, HRB, UNH, EEM, EWZ, XLE, DELL & RIMM
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
Ilene is editor and affiliate program
coordinator for PSW. She manages the Favorites backup site
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