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Friday, October 7, 2022

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PSW Investment Club – July Update

June was not a good month.

We were under covered on the way down, got more conservative at the bottom and got blown out this week as our callers went deep in the money.

All of that is manageable but the worst trade of the month came on Friday as Google went down much further than expected and wiped our out callers as well as most of our long position.  I decided to play GOOG for the bounce, figuring we’d work into a bear call spread if it kept going down, most of these moves were detailed in Friday’s chat but essentially I built up a spread where I sold the $470s against higher calls and played for the bounce.  By 12:19 I had sold 100 $470 calls for about $160,000 and Google was at about $483, the $480s, $490s and $500s were losing money too so the move was, as GOOG bottomed out, to roll the caller to the $460 with a tight stop (in case we went further down) but with tight stops so we could take advantage of the rebound.

That left us with a spread of 300 sold $460s against a similar amount of $480s and $490s and $500s.  Google did indeed bounce just after I did the roll and I went to buy them back but OXPS wouldn’t let me!  The reason was the computer didn’t count the fact that we were releasing $20 in margin each time we bought back a caller so it wouldn’t put the trade in.  That left us in a very dangerous spread with GOOG coming back as the $460s were going to out gain out higher calls by a wide margin.  I called support at OXPS but while I was waiting for them GOOG was going up fast on us and it was getting prohibitive to take out the caller so I decided to cover by rolling the $480s down to the $470s.

By the time I had explained the whole thing for the second time to a supervisor on the phone (who said "Oh sure, you should have been able to make that trade"), it was after 2 and our premiums were crushed so all I could do was roll the trade into an Aug $470/Aug $480 BULL call spread where our caller now holds the $300,000 in premium.  Our realized loss on this trade was $225K, had we been able to take out the $460 callers at the bottom, it would have been a $150,000 difference there alone and we wouldn’t have had to roll to the $470s to cover but would have, should have, could have is not the way to play the markets

We got burned badly on this one but the trade is not dead, just booked into July as a loss and pending in August.  It was intended to be a relatively low risk/high reward spread but the low risk involved not being locked out of trading when it was time to trigger stops.  As you can see from Friday’s comments, my timing was right but the execution failed.  This does happen with brokers and they are not liable for failure to trade, this is one of the things that makes options very risky at the best of times.

Overall, we are holding $1.5M worth of positions along with $146K in cash and we are covered by $1M worth of calls which have $900K of August expiring premium.  We have $450K of our own August premium in the vertical and our goal is going to be to spend $5 or $6 ($150K) to either roll the caller up or roll ourselves down into a wider spread which, if GOOG closes over $490, will net us another $150K.  Of the other $450K in premium we sold, we have $87K of September premium so we figure we’ll lose half of that, which puts our net premium expectation (not counting improving GOOG) at $363K pretty much back at the $1.1M we had at the beginning of this week.  Selling $1M worth of callers does make our virtual portfolio balance look awful ($684K) but we are 2/3 covered on all our positions and if the market takes off we’re fine and if the market goes down we’re not too bad and if the market flat lines we’re fine.  Our biggest concern would be GOOG falling below $480, which we’ll cover with puts as momentum plays if it does (and, if it does finish the month below $500, I’m going to be very, very surprised)..

The cash was used to push our callers out of the money as we got buried on the run-up.  We’ve been following a more conservative strategy than the main LTP and it hurt us this month, I intend to mix in a little more risk as the market improves but our first priority is catching up.  I promise to have a proper stock club section up by next weekend but, for now, we can make comments here, the forum has been delayed by our problems with getting a new programming team on board but I believe we have the issue resolved.

Thanks,

– Phil

 

 Our current positions and expectations are:

Symbol Description Stock Qty Cost Basis Price Change Value Change Value Gain/Loss $ Delta
.ZQNANAMZN JAN 2009 70 Call AMZN JAN 2009 70 Call 69.12 10 $11.78 $10.25 -1.50 ($1,750.00) $10,250.00 -1,530.00 0.57

.ZQNHDAMZN AUG 72.5 Call
Hoping recovery here lets us roll up and up
at $3K a month (earnings 7/23 are giving us
$5K this month)

AMZN AUG 72.5 Call   -10 $5.42 $3.70 -1.50 $1,500.00 ($3,700.00) 1,720.00 0.44  
.ANFHLANF AUG 60 Call ANF AUG 60 Call 59.30 -50 $2.65 $3.10 -1.00 $3,500.00 ($15,500.00) -2,250.00 0.50  
.ANFKLANF NOV 60 Call
Earnings on expiration day (8/15) will be tricky
but who can turn down almost 50% for one month?
ANF NOV 60 Call   50 $5.65 $6.30 0.00 ($4,500.00) $31,500.00 3,250.00 0.54  
.BAHNBA AUG 70 Call BA AUG 70 Call 68.14 -70 $1.63 $1.87 0.24 ($1,680.00) ($13,090.00) -1,680.00 0.40  
.BAKMBA NOV 65 Call
Took a chance on selling high calls, on of my favorite
stock plays, moved Jans to lower November calls for
more leverage, less premium.  Earnings 7/23
BA NOV 65 Call   70 $6.62 $7.20 1.00 $7,000.00 $50,400.00 4,060.00 0.62  
.BACHABAC AUG 27.5 Call BAC AUG 27.5 Call 27.49 -160 $2.55 $2.46 0.98 ($15,680.00) ($39,360.00) 1,467.00 0.55  
.BACKABAC NOV 27.5 Call
Big position that buried us in July, spent the money to
roll caller up to max premium ahead of earnings (7/21)
BAC NOV 27.5 Call   160 $3.75 $3.62 1.06 $16,960.00 $57,920.00 -2,027.00 0.55  
.CARC JAN 2009 17.5 Call C JAN 2009 17.5 Call 19.35 100 $3.64 $3.55 0.96 $8,100.00 $35,500.00 -910.00 0.65  
.CHDC AUG 20 Call C AUG 20 Call   -50 $0.81 $0.82 0.24 ($1,200.00) ($4,100.00) -50.00 0.41  
.CHRC AUG 17.5 Call
This is one I wish I would have risked naked! 
C AUG 17.5 Call   -50 $1.47 $2.35 0.76 ($3,800.00) ($11,750.00) -4,400.00 0.70  
.CZLHLCROX AUG 9 Call CROX AUG 9 Call 9.11 -100 $1.22 $1.30 0.05 ($2,000.00) ($13,000.00) -808.00 0.58  
.CZLIFCROX SEP 6 Call
Also finally came back and burned us. I hadn’t covered
for months and as soon as I did decide to sell the $7s,
the darn things jumped $1.
CROX SEP 6 Call   100 $2.85 $3.20 0.25 $2,500.00 $32,000.00 3,550.00 0.89  
.CYAECY JAN 2009 25 Call CY JAN 2009 25 Call 26.43 80 $4.30 $4.50 0.20 $1,600.00 $36,000.00 1,600.00 0.64  
.CYHECY AUG 25 Call
I love this stock but not enough to risk what may happen
to SPWR if oil keeps falling and that will hurt CY..
CY AUG 25 Call   -80 $1.70 $2.20 0.25 ($4,000.00) ($17,600.00) -4,040.00 0.70  
.EDKHGELN AUG 35 Call ELN AUG 35 Call 34.66 -60 $3.10 $3.50 0.45 ($3,900.00) ($21,000.00) -2,400.00 0.54  
.EDKJGELN OCT 35 Call
This stock is nauseating to own but a 56% premium
ahead of 7/24 earnings could not be turned down.
ELN OCT 35 Call   60 $5.50 $4.60 0.90 $5,400.00 $27,600.00 -5,400.00 0.56  
.FDXAOFDX JAN 2009 75 Call FDX JAN 2009 75 Call 79.52 40 $8.74 $11.10 -0.20 $1,200.00 $44,400.00 9,440.00 0.65  
.FDXHOFDX AUG 75 Call
This one ran up on us and we had to roll up both
ends of the trade.  If oil stays down we’ll have to do
it again most likely.
FDX AUG 75 Call   -40 $5.65 $6.06 0.41 ($1,640.00) ($24,240.00) -1,640.00 0.73  
.GOPGKGOOG JUL 490 Call GOOG JUL 490 Call 481.32 300 $1.31 $0.00 -47.65 $0.00 $0.00 -39,249.00 0.00  
.GOPGOGOOG JUL 500 Call GOOG JUL 500 Call   200 $0.40 $0.00 -39.15 $0.00 $0.00 -8,000.00 0.00  
.GOPHGGOOG AUG 470 Call GOOG AUG 470 Call   300 $26.11 $25.50 -45.00 ($1,350,000.00) $765,000.00 -18,232.00 0.62  
.GOPHIGOOG AUG 480 Call
The aftermath of the mess described above. 
GOOG AUG 480 Call   -300 $20.80 $20.00 -42.44 $1,273,200.00 ($600,000.00) 24,000.00 0.54  
.IYTHQIYT AUG 85 Call IYT AUG 85 Call 89.61 -10 $5.00 $6.30 1.30 ($1,300.00) ($6,300.00) -1,300.00 0.74  
.IYTLOIYT DEC 75 Call
Same as FDX, very oil dependent.
IYT DEC 75 Call   10 $14.60 $16.40 0.00 $2,300.00 $16,400.00 1,800.00 0.82  
.JPMHHJPM AUG 40 Call JPM AUG 40 Call 40.02 -50 $2.68 $2.10 -0.16 $850.00 ($10,500.00) 2,903.00 0.53  
.WJPAHJPM JAN 2010 40 Call
This one is an exceptional return, especially now
that we are past earnings.
JPM JAN 2010 40 Call   50 $4.21 $7.10 -0.40 ($2,000.00) $35,500.00 14,450.00 0.58  
.LYHHWLEH AUG 17.5 Call LEH AUG 17.5 Call 19.11 -10 $3.72 $3.80 0.20 ($150.00) ($3,800.00) -80.00 0.66  
.WHEAVLEH JAN 2010 12.5 Call
Another very nice premium return.
LEH JAN 2010 12.5 Call   10 $7.70 $10.30 0.71 $710.00 $10,300.00 2,600.00 0.83  
.MSQAXMSFT JAN 2009 22.5 Call MSFT JAN 2009 22.5 Call 25.86 40 $7.28 $4.45 -1.55 ($6,200.00) $17,800.00 -11,300.00 0.75  
.MSQHRMSFT AUG 26 Call
Earnings hurt us on this one but I’m pretty sure they
will drift back to $27 over time.
MSFT AUG 26 Call   -40 $0.74 $0.86 -1.36 $5,360.00 ($3,440.00) -480.00 0.50  
.KTQHOSHLD AUG 75 Call SHLD AUG 75 Call 75.04 -40 $4.08 $3.90 -0.30 $1,200.00 ($15,600.00) 712.00 0.53  
.KTQINSHLD SEP 70 Call
Hopefully earnings will be after expiration, which
should hold our Sept value while Aug expires.
SHLD SEP 70 Call   40 $6.85 $8.40 -0.51 ($1,600.00) $33,600.00 6,200.00 0.68  
.SNEAISNE JAN 2009 45 Call SNE JAN 2009 45 Call 41.47 40 $3.73 $2.95 0.02 $80.00 $11,800.00 -3,120.00 0.44  
.SNEHHSNE AUG 40 Call
This is a dollar bounce play, we’ll have to watch the
callers carefully next week as they are lower than us
(but a 1/2 sell)
SNE AUG 40 Call   -20 $3.25 $2.80 -0.45 $900.00 ($5,600.00) 900.00 0.64  
.QURAUTASR JAN 2009 7.5 Call TASR JAN 2009 7.5 Call 5.65 500 $0.75 $0.55 -0.05 ($2,500.00) $27,500.00 -10,106.00 0.39  
.QURLUTASR DEC 7.5 Call
Well we got some encouraging action this week,
hopefully something wakes them up.  7/24 earnings
have an expectation of a penny, a beat would be great
but the lawsuit accounting could go either way.
TASR DEC 7.5 Call   234 $1.22 $0.50 0.00 $0.00 $11,700.00 -16,740.00 0.35  
.IYSTCUSO AUG 107 Put USO AUG 107 Put 104.44 -10 $6.60 $7.70 0.60 ($600.00) ($7,700.00) -1,100.00 -0.53  
.QSOMMUSO JAN 2009 117 Put
Of all the things that could get away from us, it’s USO
to the downside!  As you can see, the premiums are
nice and high and this was a roll from July $112s even.
USO JAN 2009 117 Put   10 $17.96 $22.60 2.50 $2,500.00 $22,600.00 4,640.00 -0.53  
.VHVV AUG 72.5 Call V AUG 72.5 Call 73.40 -40 $5.18 $5.20 -0.90 $3,600.00 ($20,800.00) -80.00 0.56  
.VINV SEP 70 Call
Nice 7/30 earnings premium but we’re well covered on
the diagonal here for either way.  If good, we roll up into
a Sept vertical.
V SEP 70 Call   40 $8.05 $7.90 -0.90 ($4,400.00) $31,600.00 -600.00 0.63  
.VLOHTVLO AUG 32.5 Call VLO AUG 32.5 Call 33.11 -320 $2.93 $2.71 -0.49 $15,680.00 ($86,720.00) 6,947.00 0.57  
.VLOITVLO SEP 32.5 Call
7/29 earnings will be interesting but we’re playing for the
volatility crush on this one.
VLO SEP 32.5 Call   320 $3.90 $3.55 -0.55 ($16,000.00) $113,600.00 -11,176.00 0.58  
.VZHGVZ AUG 35 Call VZ AUG 35 Call 35.45 -40 $1.31 $1.45 -0.05 $200.00 ($5,800.00) -560.00 0.58  
.WLEAGVZ JAN 2010 35 Call
July 28th earnings.  Playing for a flatline.
VZ JAN 2010 35 Call   40 $5.80 $4.60 0.00 $0.00 $18,400.00 -4,800.00 0.54  
.FMQHJWFMI AUG 21 Call WFMI AUG 21 Call 21.38 -40 $2.10 $1.87 -0.68 $2,440.00 ($7,480.00) 920.00 0.58  
.FMQKMWFMI NOV 23 Call
8/5 earnings.  Just picking up the premium and expecting
to roll to 2x the Aug $23s.
WFMI NOV 23 Call   80 $2.86 $1.87 -0.26 ($3,920.00) $14,960.00 -7,891.00 0.46  
.WFRAKWFR JAN 2009 55 Call WFR JAN 2009 55 Call 52.66 40 $9.79 $7.40 -1.10 ($3,600.00) $29,600.00 -9,560.00 0.55  
.WFRHKWFR AUG 55 Call
7/23 earnings, playing them for a beat of $1.01 which is
25% over last year and I’m still worried they will take off
on us.
WFR AUG 55 Call   -40 $3.00 $2.90 -0.80 $3,200.00 ($11,600.00) 400.00 0.45  
.XLFHSXLF AUG 19 Call XLF AUG 19 Call 20.67 -300 $2.30 $2.49 0.53 ($15,900.00) ($74,700.00) -5,700.00 0.72  
.XLFISXLF SEP 19 Call
This one really got away and is going to end up being a
vertical most likely next month.  Still more banks to hear
from so not worth a big risk, just playing for the premium.
XLF SEP 19 Call   300 $1.71 $2.53 0.30 $900.00 $75,900.00 24,555.00 0.70  
Total:             $538,450.00 -61,095.00  

 

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