$5,000 Virtual Portfolio Update – Week 6 – $5,614
by phil - August 15th, 2009 4:04 am
Well we're back to cash…
After getting off to a great start, up 12% in the first 3 weeks, we were lucky this week to get back to 12% after having a run of bad luck (or bad skill actually, as we went bearish too early and got punished for it). 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're learning from our successes and failures – I hope!
Our first play 5 plays that we closed were on AA, DIA, SGR, MCD, and DELL, which had a total gain of $629 in our first 6 days. For details on those trades, go to the Day 6 post. We have been posting all of the moves for the $5KP in member chat, of course, but also on Seeking Alpha's Stock Talk, where we have discovered the added bonus that, like Twitter, you do not have to refresh the page to see new comments! If you want to follow these trades, just click on "Follow" under my picture and you will automatically see any comments made there. A full review of Stock Talk commentary regarding the $5KP is available here and please make sure you click "Follow" on my picture so that you will be able to track further updates.
We closed positions on WFC and AXP, up $258 in our last review on July 25th and we have since closed our YUM position with a $256 loss on the 28th, which was a shame as we gave up on 8 Aug $35 calls at .45 ($360) and they flew up to $2 ($1,600) just a week later. Unfortunately, in a small virtual portfolio, you don't have the luxury of riding out your losses and, at the time, we felt lucky to escape this underperfomer with a relatively small loss.
A VNO put spread we couldn't fill the week of the 21st, was an easy fill the next week…
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$5,000 Virtual Portfolio Update – Week 3 – $5,598
by phil - July 25th, 2009 8:25 am
We're up 12% in 3 weeks – not bad…
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're having a a very exciting first few weeks!
Our first play 4 plays that we closed were on AA, DIA, SGR, MCD and DELL, which had a total gain of $629 in our first 6 days. For details on those trades, go to the Day 6 post. We have been posting all of the moves for the $5KP in member chat, of course, but also on Seeking Alpha's Stock Talk, where we have discovered the added bonus that, like Twitter, you do not have to refresh the page to see new comments! If you want to follow these trades, just click on "Follow" under my picture and you will automatically see any comments made there.
On Wednesday, we also had an open a ratio backspread play on YUM and we sold 6 Aug $37 calls for $1.15 ($690) and bought 4 Aug $35 calls for $2.20 ($880). The idea of a trade like this into earnings is that a large drop will hurt your callers more than it hurts you and, to the upside, you have net $800 in the net $190 spread before you have to pay your 2 open callers a penny. That means they would each have to go up $3 before wiping out your profits. Since YUM was at $36 at the time and we did not feel it would be likely to go to $40, even on great earnings, the play made sense. YUM had very poor earnings and dropped right down to $34, below our strike. We decided to buy back the 6 Aug $37 calls for .40 ($240), so a gain of $450 on that leg. That left us with the 4 naked Aug $35 puts, which we paid $880 for, less the $450 gains so we are in those 4 calls for an average of $1.13 per contract. We have since doubled down that position at…
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$5,000 Virtual Portfolio Update – Day 9 – $5,424
by phil - July 17th, 2009 6:16 pm
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 4 plays that we closed were on AA, DIA, SGR, MCD and DELL, which had a total gain of $629 in our first 6 days. For details on those trades, go to the Day 6 post. We have been posting all of the moves for the $5KP in member chat, of course, but also on Seeking Alpha's Stock Talk, where we have discovered the added bonus that, like Twitter, you do not have to refresh the page to see new comments! If you want to follow these trades, just click on "Follow" under my picture and you will automatically see any comments made there.
On Wednesday, we also had an open a ratio backspread play on YUM and we sold 6 Aug $37 calls for $1.15 ($690) and bought 4 Aug $35 calls for $2.20 ($880). The idea of a trade like this into earnings is that a large drop will hurt your callers more than it hurts you and, to the upside, you have net $800 in the net $190 spread before you have to pay your 2 open callers a penny. That means they would each have to go up $3 before wiping out your profits. Since YUM was at $36 at the time and we did not feel it would be likely to go to $40, even on great earnings, the play made sense. YUM had very poor earnings and dropped right down to $34, below our strike. We decided to buy back the 6 Aug $37 calls for .40 ($240), so a gain of $450 on that leg. That left us with the 4 naked Aug $35 puts, which we paid $880 for, less the $450 gains so we are in those 4 calls for an average of $1.13 per contract. The calls have fallen…
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Will We Hold It Wednesday? Industrial Production Edition
by phil - July 15th, 2009 8:27 am
Whee, this is great!
Any excuse to take the markets higher and INTC was a good one last night. We're thrilled because my 2:43 Trade Idea for members was "INTC Jan $17.50s for $1.28, speculative naked call with earnings tonight." We don't do those very often but we looked primed for a pop and not much was expected from Intel, who were still expected to earn just 8 cents this quarter by the 44 analysts who are paid to follow them, despite the fact that they earned .11 last quarter (an 8-cent upside surprise) and had earned .28 last year in Q2. That made the long call an excellent play since we were also willing to stick with them and add to the position if INTC had missed. As it is, that should give us a nice 50%+ pop this morning!
Other trades ideas from yesterday's Member chat were a GS put spread, AIG puts (and we can't wait for "earnings" on them!), DIA puts and calls as momentum plays, a YUM ratio backspread for the $5,000 Virtual Portfolio and a JPM bear put spread. So we weren't overly enthusiastic in the run-up, mainly because we loaded up the truck in last week's dip with 18 bullish plays that I reviewed in the weekend wrap-up. So we are looking for short plays to defend ourselves until we are sure what we have here is more than the proverbial "dead cat bounce" off our 33% retrace (which I discussed in Monday's post). As I mentioned in yesterday's post, our upper targets to break the dreaded head and shoulders pattern are: Dow 8,500, S&P 930, Nasdaq 1,825, NYSE 6,000 and Russell 510. We're making good progress but nothing would be worse than failing this breakout and confirming the downward pattern so it will still be a tough week to get through, especially with todays manufacturing data, which we are concerned about.
I think David Fry summed it up for the skeptic's camp yesterday saying:
The AP headline today read: “Goldman Sachs’ $2.7B profit shows the firm’s prowess.” Good Grief! You have to hand it to Da Boyz, they know how to bedazzle Main Street. Anyone with a HAL 9000, their bad debts taken off their books, billions in public money to trade and most of their competitors (Bear Stearns and Lehman Bros.) eliminated
…
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$5,000 Virtual Portfolio Update – Day 6 – $5,629!
by phil - July 15th, 2009 7:26 am
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). We hit our goal of $2.50 yesterday (7/14) and stopped out with a .40 gain although some hung on as the $22.50s flew all the way to…
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Stop the Week, We Want to Get Off!
by phil - July 10th, 2009 7:25 am
TGIF for sure, it seems like ending the week is the only way to stop the markets from dropping!
We failed to take back our weak bounce levels I laid out in yesterday's morning post as the Dow failed to hold 8,250 on a very brief spike past it, the S&P failed right at 888 in the morning and again in the afternoon (where we were able to use it as a "go short" indicator), the Nasdaq flirted with 1,750 all day and barely held it, the NYSE also failed 5,700 in the afternoon and gave us a good, bearish indicator while the Russell never came close to 488 and failed our critical 480 mark at the close. As I've been saying all week, we really don't have to watch anything but the NYSE, which will test the critical 5,600 mark this morning and failing that level would be, in technical terms: BAD!
Oil ($62) and gold ($920) also failed our levels so there was nothing to be bullish about in yesterday's action. We were in and out of DIA puts and calls, using S&P 880 as our inflection point and we took the money and ran on our AA calls (up $330, 78%) and DIA calls (up $45, 20%) as our first two completed plays in our $5,000 Virtual Portfolio, which will now be tracked under Seeking Alpha's "Stock Talk" feature as an experiment for non-members. We did a day-trade as well in the $5KP on MCD, picking up the $55 calls at $1.65 for a quick ride to $2, adding another $175 (21%) to the kitty for the week. Our only open trade in this hit and run virtual portfolio is SGR, where we are in the $22.50 calls for $3.30, selling the $25 calls for $1.45 for a net $1.85 entry on this bullish $2.50 vertical spread (4 contracts). Earnings were a slight miss but we're not worried as the order backlog is fantastic and we'll be buying more if the after-hours sell-off holds into the morning. If this play comes through for us we'll be up about $800 in our first week and well on-track of our goal to double up over earnings season.
It will be a shame to have to play the dark side but we're back to neutral now after covering our bullish plays with DIA puts as…
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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 site