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Friday, May 17, 2024

$101,674 Virtual Portfolio Update – Week 3

Slow and steady wins the race! 

We had a big run and capped our gains a little early for the week by doubling up on our PSQ (short Nasdaq) calls on Thursday's mad run.  This did the job of locking in our profits but that hedge is now making up $450 of losses, which is 1/3 of all our losses for the month.  Still we managed to gain $396 for the week with still just $28,537 in positions so that's another 1% for the week, a pretty good clip

I am happy to say that our $100K Virtual Portfolio is now live and available on WallStreetSurvivor.com at:

We're actually well ahead of our cash goal as we also have $86,101 in cash along with our $28,537 in positions with $13,768 in margin devoted to some of the longer hedges we've sold.  That leaves us with $147,935 in margin buying power and we're going to use it to do a few "stupid option tricks" into expirations that should pick us up a little extra cash over the next 5 days and Wednesday or Friday we must expect to make our rolling moves for the current month and I'll be sending out Alerts to Members later in the week.  For now, we are very happy with all of our current positions as we have 16 winners and just 7 losers – that's very good for a well-hedged virtual portfolio
There are only 6 September contracts for us to worry about and Wednesday would be the earliest day we need to make adjustments on those so we'll concentrate today on things we can make money on tomorrow.  The easiest was to start is to look at some stocks we may want to own for October and take a stab at selling some naked puts on them as we won't be too upset if they get put to us or we'll be happy to pocket the cash if they aren't.  We already sold the MHP October puts from last week's Watch List but we haven't filled the others.  As with those plays, we're not interested if we don't get our prices:
  • AMZN has a great premium and selling 5 $85 calls for $1.25 and 5 $85 puts for $1.75 (any net $3 combo) will either put $1,500 in our pockets or become a trade we will roll out to October. 
  • BAC is one we already have in the virtual portfolio and we can double up on the Sept $17 puts sold to add 5 naked sales at .50 as they are already offset by Oct $17 calls we sold and we have no problem owning more BAC for net $16.50.
  • ERY really hasn't moved much since the drop in oil and we're not expecting it to come back too much next week so selling 5 Sept $15 puts for .60 is another $300 in the bank against $3,750 in margin.  While selling against and ultra is a bit risky – we're being paid 8% a week to take that risk (416% annualized) and, should energy fly up again, we can turn this into a hedge against a long like VLO or SUN that we wouldn't mind owning long-term. 
  • FITB came down sharply last week on rumors they are close to failing.  These rumors don't seem to be true and, with the stock at $9.75 the Sept $9 puts are .15, if we can sell 5 naked for .25 ($125) then it's worth the $2,250 margin requirement for the week.
  • GE has a fun opportunity to sell 10 $14 calls for .80 and sell 10 $15 puts for .60 as that's collecting $1.40. which means GE has to move lower than $13.60 or higher than $15.40 (now $14.70) before the trade hits trouble.  This short strangle trade generates $1,400 in cash and requires $2,900 in net margin.  Of course, we only aim to make $400 on the trade.  On the put side, we really don't mind owning GE at $13.60 net but it will be annoying if they take off.   
  • HIG $24 puts are a good naked sale at .75 (5 contracts), which brings in $375 on $6,000 in margin. 
  • RF is another bank we have our eye on and if we can sell 5 naked Sept $5 puts for .25 on a move down that's another $125 in the bank against a possible cheap entry. 
  • TWM Sept $29 puts are a good naked sell (5) at .60, that's $300 on $7,250 in margin.  I like these because you can roll them down to the Oct $26 puts and it would take another 5% move in the Russell to get there and, at 595, they are having enough problems getting over 600 at the moment.
  • XLF is another one we don't expect to zoom one way or the other so another short strangle is in order.  Selling 10 of the Sept $14 calls for .65 and 10 of the Sept $15 puts for .65 gives us a profit target between $13.70 and $15.30.   
Those are the simple naked put sales.  If we get one or two, that will be great.  A few more complex trades also can make us some good money next week but these are NOT for the $100KP as we have yet to get the spread entry system working properly at Wall Street Survivor so I won't be able to track them but they are fairly low-risk trades:
BBY makes a nice offset to our PSQ calls and earnings are Tuesday so the premiums are high.  We can do a double diagonal spread on the hopes that $40 is about the right price, buying 5 Oct $41 calls for $1.60 and buying 5 Oct $38 puts for $1.60, Selling 4 Sept $39 calls for $1.90 and 4 Sept $40 puts for $1.65 for a net cost of .36 but anything better than .60 per contract ($300 debit) or better would be great on the spread.  Ideally, we want BBY to finish between $38.75 and $40.25 where we would owe net $1 back and we can assume our puts and calls would hold more than $2 in value.  
RIMM is like AMZN with a very nice payoff on the short straddle, selling the Sept $80 puts and calls for $3.30 total.  Those can be offset with the purchase of the Sept $75 puts for .35 and the Sept $85 calls for .20 for a net credit of $2.85.  Again, we plan on rolling out losses but having this buffer lowers our margin requirement considerably and that allows us to buy 10 of these spreads for a credit of $2,850 and net margin (after collecting the cash) is just $2,150, which is the max loss on the trade. 


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