Trade Updates: GDX and TCK

I panicked on Tuesday when GDX was down again, and bought to close my 2 GDX Jul 35 puts for $1.45. From now on I will clearly be setting exit criteria for trades here on the blog. I realize now that if I had set some even moderate criteria, that these 2 puts would be good money makers for me now as GDX has rallied up to 39.99 at end of close today. The lack of an exit strategy caused me to get emotional when GDX was down and to take the loss. Literally 20 minutes after I closed the trade, GDX began it's rally, brutal.

I thought TCK was lagging it's peer group in losses lately, so I bought to open 2 TCK Aug 12.5 puts for $1.00 on Tuesday as well. TCK has also rallied, putting me in the hole as both Crude and Gold have bounced.

Seems like Gold is now bound for $1,000/oz, and I'll look for a low risk entry with some more puts, and possibly a call.

Trade Entered: Bought 2 Sep 26 SSO Puts

Last Thursday, the 18th, I bought to open 2 Sep 26 SSO Puts for $3.10 and paid $625.90 after commissions. This is my bet that the market is rolling over. After today it sure seems like it. If tomorrow is an up day, I'll probably but another put or two on some energy stocks, as I think they will drop the most. TCK looks pretty good for this as it has had an amazing run up the last few months and is ripe to place the gains back.

My GDX puts aren't looking to great as the miners got hit hard as the USD rises and the market pulls back. I may buy one back soon for a loss and let the other play out longer. I wouldn't mind owning GDX at a cost base of 33.90 for a longer term cycle.

Trade Entered: Sold 2 GDX Jul 35 Puts

What a great day for selling premium if you believe something is bullish! Well, I'm pretty bullish on gold and PMs so today while GDX was dawdling around it's 50% retracement (37.97) I sold to open 2 GDX 35 puts for $1.10 and received $214.10 after commissions. Gold and the miners index has been consolidating lately, but so much money is being printed that Gold should stay strong or flat for a while. I have downside protection all the way to 33.90, which is about 11% OTM.

I've been patient in making trades lately, hopefully it will pay off...

Trade Exited: Sold 20 GLD Stock

Today was an awful day for pretty much everything, and GLD had a particularly rough day. I have been moving my stop up as GLD has risen and today it hit @ 95.10. And since after a stop hits, it becomes a market order, my order actually filled @ 94.95, which shows how fast GLD was dropping when my stop order crossed.

Overall on the trade I made $79.40 before commissions, which was just about 1.5% of my portfolio, by only leveraging about a third of my captial.

Trade Updates

I'm a little behind, but I made two trades lately.

Trade Exited: Bought to close 1 UTX Jun 55 Call
With the market being wild lately, I decided to close my Jun 55 Call for a $35 profit while I could. After selling the call, UTX (and the market) oscillated around for a while, so on Thursday, I sold to close 1 UTX Jun 55 Call for $.35, and paid 37.95 after commissions. I originally sold the call for .70, so it was a decent profit. Writing this a few days later, the 55 Calls are now at 1.75, so I made a good call getting out when I could.

Trade Exited: Sold to close 1 SSO 24 Sep Put
I'm so not on a roll with SSO, it's the bane of my trading lately. This was an out of the ordinary trade for me, and I should of acted differently with it. Today, I closed the position at $2.05, which is a loss of $125.00 since I opened the position by buying it for $330. I opened this position with the hope that the market would continue to pull back. After a few days of being in a range, I should've closed the position, and waited for another entry point. Instead I help on, thinking 'It's a September Put, I've got a while before I have to think about it'. Wrong, I should've set exit criteria from the start, like two closes above 25.50 and I should close the trade.

Trade Exited: Bought 1 SSO Jun 25 Put

I'm pretty sure this was my worst trade to date. Yesterday I bought to close my 1 SSO Jun 25 Put for $1.70, for those keeping score, that was a loss of $75.00 in a day. Somehow, I figured that if the market kept rising I would be a big winner. Unfortunately, I failed to comprehend the delta/gamma risk of the 25 Put, and when the market actually went the way I thought it would, this quickly gained intrinsic value as SSO dropped below 25.

Lesson Learned: If you're going to hedge a position, make sure the risk/reward profile is in line with the other position.

Trades Entered: GLD and SSO

Yesterday I hopped on the gold bandwagon near the close and bought to open 20 GLD Shares at 90.98. With the USD continuing to drop off, metals and oil are likely to rise. I also think gold will continue to rise, even if the stock market stays neutral or falls south. That's different then my opinion of oil, which I think is having a great run due to the market, and will drop off if the dollar strengthens and the market falls. I've got a stop loss on the GLD shares at 89.90, which may be a little tight, but on the chart looks like a valid place to have one.

To offset my long SSO 24 Sep Put, today I sold to open 1 SSO 25 Jun Put for $.95, and received $92.05 after commissions. If the market continues to head north, I'll hold onto this and possibly close early for a profit. However, if it turns south and vega (volatility) picks up again, I'll close this position and let the Sep Put go. Since this is only a few weeks from expiration, if the market heads sideways, I'll win based on the time value declining.

--After reviewing my Jun 25 put sale, I'm already regretting the decision, I should've at least sold the 24, not the 25 and I really didn't think about what I would really do if the market quickly drops off, like it has at the close. I'm already down $45.00 on the position and unless there is a rally tomorrow, I'll probably have to close the position for a loss.

Trade Entered: Sold 1 UTX June 55 call

With the market looking ready to bowl over, and my preference for writing options instead of buying them, yesterday I sold to open 1 UTX June 55 call at $.70, and received $67.05 after commissions.

With UTX at 51.28 at close on Friday, this is only about 7.25% OTM, so it's closer then I usually write options for. However, with a month before next expiration, time decay will kick in soon and that should lower the cost. Of course, that is if volatility doesn't spike (which it seems like it will). However, a vol spike will only occur if UTX drops, so even that would be a good thing for this call.

This is also my first naked call! I thought about writing a vertical call spread for a credit, but this seemed like a better bet. I've got upside protection to 55.7, and UTX has to break through it's 200 day MA and it's 2009 high of 55.51 to put me at a real loss.

Until the S&P breaks down past 875, I'll hold off on 'shorting' anymore. If it can break past 875, I'll buy some puts and sell some more calls.

Trade Entered: Bought 1 SSO Sep 24 Put

It looks like the market is headed south. The dollar is gaining strength and Treasury Yields are decreasing and investors flee to Treasuries for safety. So today when the market was up a little I bought to open 1 SSO September 14 put for $3.40, and paid $342.95 after commissions.

This is an inital position to try and capatilize on a big move south. I'll add some more 'short' positions in a few different areas after a down trend is confirmed. I'll probably have a call spread or some naked calls in different sectors, or but some long stock in some inverse etfs.

Other than that I've done a little day trading lately and am 3 out of 4 for wins. I'm still working on a strategy that provides consistant returns. I like to buy FAS or FAZ on a consolidation tick, with a stop below a probable reversal point. I do this when the TICK shows higher highs (or lower lows in FAZ's case) and hold it for only a few minutes. I do this leveraging like 1.8x my account, or around $10,000.

Trade Exited: XHB 14/15 May Vertical Call Spread

So the market has done much better than I thought it would, and put my XHB 14/15 a little underwater. So I closed it yesterday at .38, which on the two spreads, was a $22.00 loss to my account.

I should've just waited out the market, oh well, you gotta lose money to learn important lessons I guess.

Monthly Update for April

It's been a rough month for day trading for me. I mean, it started out great, then I lost on like the last 5, and it wiped out most of my gains for the year.

My account's current value is $6085.43. About 3 weeks ago, it was closer to $6500, so you can see why I'm disappointed.

I've sat out of any longer term trades for most of the last 3 weeks, as the market has seemingly peaked for now, and I didn't want to get into any trades when the market was stagnant or reversing (although a stagnant market is good for selling puts).

My most recent trade, the Vertical Call Spread on XHB, is going quite well so far. XHB bumped its 200 day MA, and has dropped off since then. Depending on how next week looks, I may close it out early and take the small profit.

Looking ahead, until the market shows its hand, I don't think I'll make any more trades for now. If it heads south, I may sell some call spreads like XHB, and but some atm puts. If it heads higher, I'll sell some puts and maybe buy a call or few.

Now we play the waiting game...

Trade Entered: XHB 14/15 May Vertical Call Spread

Yesterday, it was a fairly week day, and I saw an opportunity to get a May trade in. When XHB was trading around 13.65, I sold 2 XHB 14 calls, and Bought 2 XHB 15 Calls. I entered the spread order for .27 and it instantly filled for a credit of $42.20 to my account after commissions.

XHB has been strong lately, and has run into very heavy resistance at 13.75. Even after the boost today, it could only close at 13.71. Best case scenario for me is XHB stays under 14 for the next 16 days. I've got a little protection into 14, due to the credit, and if the market really rallys hard (the S&P couldn't close above resistance at 875 today) then I may close this trade for a small loss.

Day Trades: 2 losses in two days.

After a great run of day trades, I've hit a wall and can't seem to time the market right. I've entered on what look to be strong trends, and they were both reversed right after I entered. I'm looking into the reasons and am trying to put together a lower risk entry. In both the trades, I was right about the overall direction, but wrong on the timing, so that's something to work on.

I'm on the fence about day trading, since I have less than $25,000, I can only make 3 day trades in 5 days, so I can't really actively trade and monitor reversals with better trades (because when I get stopped out, I'm pretty much out of day trades until a day or two). Talk about keeping the poor man down.

Still looking for options for May Expiration, I can't figure out this market so I'm trying to play it safe (trying).

April Options Expiration and Update

Today both my SSO 20 Apr Put and my POT 60 Apr Put expired worthless. The POT play was a fairly conservative OTM put that was placed after POT had a large drop and bounced off its 50 Fibonacci Retracement. SSO was a fairly aggressive move, betting that the market would either stay flat or move up into the first round of Q1 Earnings reports.

I'm now looking for some new positions for May expiration. I've been putting off selling some puts until we get a decent pullback in the broad market, and raising volatility a little. If I wait too long, or can't come up with an idea soon, the time value will decay too much and no OTM puts will be worth it.

I'm also considering a bullish play on USO, say selling a LEAP that is a little OTM and buying a call with the profits. Oil can't stay this low forever, and if the amazingly positive earnings reports continue, demand will take off as we 'clear' the recession.

Day Trade: FAS In @ 7.79 Out @ 7.9

I made another day trade (and the last one until tomorrow due to NYSE rules) that again involved FAS today. I did not execute this trade well at all. I made money, but everything including hitting 'Buy' was a mistake. The setup wasn't good. FAS made higher highs and higher lows, on a rising TICK, like the other trades, but I noticed that the upward momentum stalled longer then it should have. I decided to jump in anyway and got lucky to make any profit.

The momentum stalled because 7.84 was FAS's close price yesterday, which means other financials were near it's close yesterday. I didn't do the due diligence marking price targets and key areas before trading today, if I had, I wouldn't have made the trade. Open's and Close's are choppy areas and hard to read.

I'm glad I made another gain, but the execution need to be much better (not trading just to trade).

Another Day Trade: FAS in @ 9.22, out at 9.34

Almost the same setup as the FAZ trade last week, only in reverse. Financials gapped lower this morning and began to rally shortly thereafter. TICK was up and FAS made higher highs and higher lows, I bought on a consolidation minute and was out 3 minutes later for a pre commission win of $120.

Day Trade: FAZ In @ 17.86 Out @ 18.00

Yesterday I saw an opportunity arise when we couldn't sustain higher marks in the TICK. I was ready to set an order for FAS (on a pullback) but when I kept looking at the lower highs on the TICK I decided to make a quick play on FAZ instead. Before commissions profit of $70.00, after commsissions profit of $55.00...

SPY Weekly Chart

I was looking at the SPY weekly chart today and thought it warranted some thoughts. The blue line is the 20 week MA, on the three attempts before this rally, it failed to cross the 20 MA, after coming very close to it and dropping. The recent rally actually closed above it two weeks ago, but has been unable to continue to rally above it. Today's close actually placed the weekly under the 20 MA, so it will be interesting to see if we continue to hover around this level, or break up or down.

I also noted Williams %R in the picture, recently, breaks into Overbought/Oversold have been choppy, except for recently. We're actually heading into Overbought.

I'm not sure what this market is going to do, earnings are due, but the pricing is low already. We've rallied into a consolidation area as far as I can tell, if we rally off of 800 on the S&P 500, my forward look is very bullish.

Ignore the volume for the most current two weeks on the chart, I'm not sure why it's wrong, but it is.

Trade Entered: Sold 1 Apr 19 SSO Put

Yesterday around 11:15 I sold to open 1 SSO Apr 19 Put for $.70, and received $67.05 after commissions. I couldn't pass up the chance to capitalize on the last two weeks until April Expiration. When SSO (and SPY) were unable to retreat lower than last weeks highs, I took it as a bullish signal. I've marked up an SSO chart to the left, noting my breakeven at just below the 30 MA, and in a consolidation area at the end of February. I was going to sell the Apr 20, but the 19 had a decent premium as well, and had a little more protection. Since the S&P rallied in the afternoon, this put is already at $.5, giving me a $20 profit in one day.

The TOS margin requirement is only $273.10, giving me a ROM (70/273.10) of 25.63%, and an annualized return of 99.61%. I'm currently about 14% OTM, with 14 days until expiration. I'll let this expire, or if chance happens, take the assignment.

EDIT: I sold the Apr 20, not the 19. I thought I sold the 19, so now I'll be triple checking to make sure I sell the right strike (because double checking has failed).

Monthly Update for March

It's been a good month, a lot of activity, and of course some wins.

Beginning Cash: $6,160.09
Current Cash: $6,123.56
Income for month: -$36.44
Although techincally I have less equity then at the start of the month, my positions are solid now, after taking a fairly large loss from ERX. I've recovered that loss and have only two positions open now, one of which is SSO, my protective index put. This month has been good for me and the stock market, and I'm on target for my 10% increase to $6,600 for the year.

PCLN
Sold 1 Apr 55 Put for $.70 on 3/12
Bought 1 Apr 55 Put for $.30 on 3/20
When PCLN crossed below it's 20 MA on close (by dropping 7%) I sold to open this stock. It bounced off its 50% fibonnaci retracement so I didn't hesitate selling an OTM put. I could've sold one that was closer in price, but this was the most comfortable with the best premium.

SSO
Bought 1 Jun 12 Put for $.55 3/16
This is my idea of portfolio protection. If the entire market collapses, this may actually make me money, but not a lot. It's Bid is at about $.30 now, which is a little from the market going up, and a little from the VIX going down. I may sell this for a small loss and look at some other means of securing the portfolio.

FSLR
Sold 1 Apr 70 Put for $.70 3/18
Bought 1 Apr 70 Put for $.05 3/28 (no commissions paid on $.05 and less from TOS)
When I sold this, FSLR had dropped like 8% the previous day and this was 40% OTM. FSLR recovered and surged with the rest of the market. I bought to close to free up the margin, and begin looking at other trades.

QLD
Bought 100 Stock at 27.56 3/24
Sold 100 Stock at at 27.95 3/25
On a fairly weak day, I bought QLD trying to take advantage of a potential upside move the next day. Well the move up was weak, and I actually got stopped out after I moved up my Stop Loss to 27.95 to make sure I locked in some profit. After the stop loss hit, the market continued lower for the day. This was my first pure equity trade. I had a stop the entire time, and am fairly pleased with the result.

POT
Sold 1 Apr 60 Put at $.55 3/25
POT has shown good strength lately and when it dipped I sold on weakness. This was 30% OTM and seemed safe. It still is, this and SSO are now my only open positions.

FAS
Bought 200 Stock at 5.8 4/1
Sold 200 Stock at 5.94 4/1
This is the first post on this trade. The market looked poised for a breakout and I bought FAS (the 3x Financial ETF) at 5.8 with a tight stop at 5.7. The market immediately pushed FAS to about 6, then hovered in the 5.8 to 5.95 range. I had a limit sell at about 6.1, but FAS never even got close. I finally sold when it became clear this was a range day for a small (very small) profit of $28 (only $18 after commissions).

Overall, I've won on all the closed positions so far. Although, with the market heading up on a strong rally, I won't take all the credit. Looking for May positions soon, I'll keep you posted.

Active Day, Trade Entered and Trade Exited.

My long 100 QLD was up with the rest of the market this morning and I was stopped out of the trade for a small win. When QLD broke thorough a Resistance Level at 28 today, I waited for it to test the level before setting a stop. It tested and held so I put in a Stop Loss order at 27.90 to lock in a short term profit and keep the possiblity for a potential big run up.

Well the big run up didn't happen. I got stopped out probably 30 minutes later on a turnaround. What's interesting was that my thought was 'Oh Man...', I had thought I didn't set the Stop right and had been stopped out early. Well what I should've noticed is that my Stop hit, QLD rebounded a little, then plummeted with the rest of the market. Regardless, setting the stop was the right move, whether QLD soared or dropped from there. The trade filled at 27.95, giving me a two day profit of a whopping $39.00 before commissions.

Also this morning I sold to open 1 POT 60 put at $.55, receiving $52.05 after commissions. It's currently 28.2% OTM with 23 days until expiration. The Margin Requirment is $665 and the ROM is 8.3% and the Annualized ROM is 70.14%.

Trade Entered: Long 100 QLD

The market opened gap down today and never recovered. I still believe we are in a bullish environment and this is a consolidation day, as most stocks were lighter on volume today than they had been in the past week. Around 11:30 I bought to open 100 shares of QLD at market for an average fill price of 27.56, paying $2,761 dollars after commissions. The Q's (Ticker QQQQ) follows the NASDAQ 100 and is composed of pretty much the largest non financial stocks out there. It didn't make new 52-week lows in February like the S&P and Dow did, so obviously financials were weighing heavily on them. QLD is a 2x ETF that tracks QQQQ.

I set a stop at 26.9 today, which was just under the 27 area of short term resistance. The stop didn't hit today, however QLD closed near its low at 27.09.

If the market continues its weakness tomorrow, I may sell the shares for a loss, or perhaps write a covered call against them. We shall see.

March Options Expiration

So this has been my first full month of options trading, let's look at the details.

ERX
2/20/09 Sell 1 Mar 17.5 Put @ 1.15.
3/2/09 Buy 1 Mar 17.5 Put @ 2.05.
Loss of $90.
This was a rocky road for me. I was anxious to make a trade and the 3x Energy ETF had such high premiums for being so far Out of The Money (OTM). The problem is since its 3x, there are huge swings, and I'm not able (yet) to handle them. I need to be able to set price targets for this ETF over a period of time and stick to a plan about how to handle it. When I bought it to close, I had visions of ERX dropping to 10 and crushing my portfolio. This would've ultimately ended OTM, but I didn't want to take put my portfolio at risk any further.

XSP
2/23/09 Sell 1 Mar 61 Put @ .51.
Expired Worthless.
Gain of $51.
I sold this 18% OTM, "How could the market drop 18% in a month? It's free money!" So maybe I didn't think exactly that, but it was close. The S&P actually hit 666 (putting XSP at 66) at its low for the year. I can't say I was ever worried about this trade, but it certainly was a rocky month for the S&P. I like XSP and will probably continue trading it in the future, as deep OTM puts in this market are fetching high prices do to the high volatitlity of the times.

DIG
3/6/09 Sell 2 Mar 14 Puts @ .2.
Expired Worthless
Gain of $40.
Looking to make up a gain from the ERX loss I target another energy ETF and put this trade on. If I would've looked at a one minute chart before trading this, I would've made a way better decision on the timing of the trade. Also to keep in mind, when you deal with options that are deep OTM and have low prices, it's hard to close them early. In this trade for example, the Mar 14 Puts had an Ask of .1 up until the end.

I also closed PCLN (see previous post) this month for a gain, and am looking for another April option to trade . XME, DIG, USO, and things in Precious Metals/Oil are looking good for a trade.

Trade Exited: Bought PCLN Apr 55 Put

Yesterday I closed my PCLN position for a $40 profit. The whole market is looking weak and I don't want to have too many open positions right now. At around 10 am, PCLN was around 78.3 and my order to Buy 1 PCLN Apr 55 @ $.30 hit.

I originally opened this position March 12th, when I sold it at $.70. The margin requirement was $600. So my actual return on margin was 40/600 or 6.7%. Annualized return was 94.74%. The strike was still almost 30% OTM when I bought to close and probably would've expired worthless, but I'm happy to book some profits in this market.

Trade Entered: Sold FSLR 70 Put

Today around 10:30ish I sold to open 1 FSLR April 70 put for $.70 and received $67.05 after commissions. FSLR has had a rocky road lately, and I decided to capitalize after it took a beating yesterday. When I sold this, FSLR was at 117.05, which means the 70 is 40.2% OTM. The margin requirement is $762.50 and if this expires worthless in April, the ROM is 9.18%, and 64.45% annualized.

Time value will kick in soon, as long as FSLR doesn't tank beyond all reason.

The market is surging lately and I'm actually not sure what to do. Going long on a strong stock is obvious, but I'm not sure what to pick. Oh well, maybe I'll figure something out.

Trade Entered: Bought June 12 SSO Put

Needing some portfolio protection, especially in this market. I bought to open 1 June 12 SSO Put for $.55 and paid $57.95 after commissions. I'm not sure how much protection this will offer me, or how good it will fare against another market downturn, but an imperfect hedge is better than none at all.

I placed the $.55 order around 10 am, and it filled about an hour later. The market was really range bound at this point, and I didn't think this would get filled today. I'm glad it did as the S&P finished down a little on the day and I needed to grab at least a little protection as I look for another April option to trade on.

My XSP 61 and DIG 14 puts are about to expire worthless. Those will be my first profitable trades. Hope I didn't just jinx them...

Trade Entered: Sold Apr 55 PCLN Put

Today around 10 am I sold to open 1 Apr 55 PCLN Put for $.70 and received $67.05 after commisions. I'm actually bullish on Priceline but decided to sell a put 30% OTM for safety in this market as it closed today at 78.10 . PCLN has shown good technical strength lately and bounced off its 50% fibonacci retracement yesterday when it closed down about 7%. If the market continues to rally I may even close this early and take the profits.

For this trade the margin requirement is $600 and the ROM (Return on Margin) (70/600) is 11.7% and there are 37 days til expiration.

Let's hope the bulls don't abandon their positions for the weekend tomorrow, that could get ugly.

Trade Entered: Sold Mar 14 DIG Put

Today around 10:15 I sold to open 2 March 14 DIG puts for $.20. After commisions I received $34.10 after commissions. Oil has been improving lately and motorists are using more gasoline now then this time a year ago. At close DIG closed at 18.18, up with the rest of the market . That puts me 23% Out of the Money. There's 2 weeks til options expiration, and these are decently out of the way.

I'm a little disappointed in myself on this trade though. I got impatient with sitting on the sidelines and decided this would be a good trade. I think this will finish OTM, but if I had waited until later in the day, the premiums had gotten as high as .45, which would've been significantly more then what I received. Lesson Learned.

Trade Exited: Buy ERX 17.5 Put

What a calamitous day in the market, I couldn't take the heat and bailed on my ERX position.

When the S&P was near 71.32, and ERX was at 18.79, I bought to close 1 ERX Mar 17.5 put @ 2.05. I paid $207.95 after commissions. Without commisions that creates a loss of $90, and $95.90 with commissions. I originally sold to open ERX at 1.15.

I've learned a lot from this trade(see image below). For Example, I absolutely fought the overall trend of the market and of the ETF. I should've waited for ERX to hold at an obvious support line, before making this decision. Although I may have been fooled by about a week (it held over 22 for about a week) I would have at least had a reason for entering the position. Lately Energy and the S&P have been hand in hand, that should've alerted me that for the short term this would hold true and it has for the length of the trade.



I honestly though of bailing on Friday because the swings on ERX are so high, but though I could handle them. I can't, and this new trader won't be trying any 3x leveraged ETFs anymore.

We'll see what happens with my XSP trade, it seemed so safe a few days ago, of course, that was before the whole market fell apart. Let's hope there are enough pieces to keep it over 610.

Monthly Update for February

I plan to do a monthly update of my account and trades, so here's the first one.

Beginning Cash: $6,000
Current Cash: $6,160.09
Income for month: $160.09
Commissions Paid during month: (2.95 x 2) = $5.90
Open Positions: 2, ERX 17.5 and XSP 61
Reserve Requirement (75% of strikes): 5887.5

- ERX -
Current Price: 22.43
Strike: 17.5
OTM: 22%
Days til Expiriation: 19
Notes: It's a highly volatile 3x leveraged ETF. I'm only 22% out of the money, which isn't much considering the one week I've held this stock, it's moved up or down 10% on three days. I'll be watching the position on Monday, if the market as a whole looks week, I'll be dumping it. At the current Ask, I'd make about $9 for the month.

- XSP -
Current Price: 73.73
Strike: 61
OTM: 17.3%
Days til Expiriation: 18
Notes: This is a mini of SPX, which is the option that follows the S&P 500. It's also European so trading stops on the Thursday before expiration. The S&P would have to drop 17.3% in 18 days for me to lose on this trade. That would be about 1% a day. I'm not worried about this trade (at this time) and will probably let it expire. I am however disappointed in how much of my reserves its taking up. Since its a 61 strike, that's requiring a lot of reserve capital. I may trade this in the future for the relative safety of it, but the reserves are high so I may try some other options.

I'll just be watching the markets for the next few days before determining what to do for next month. It's been so volatile lately that no position seems secure. I'm glad I get to be trading at this point in time. I'll get to learn the hard way.

Looking for new trades

I'm looking ahead to April expiration for some trade ideas. DIG and QLD are looking like good opportunities.

DIG

Strikes - Ask Price - % OTM

14 - .50 - 37%

15 - .70 - 32%

16 - .85 - 27.5%

17 - 1.10 - 23%

QLD
Strikes - Ask Price - % OTM
16 - .35 - 34.3%

17 - .50 - 30%

18 - .65 - 26%


I won't be trading these for a few more weeks though, I'll be waiting to close out my ERX 17.5 and XSP 61 before moving onto the Aprils.

As long as the S&P stays over 740, these don't have much chance of being put to me, anything is possible in this market though.

Trade Entered: Sold Mar 61 XSP Put

When the S&P 500 was down only 1.2% for the day (it finished down about 3.5% at 743.33) I sold to open 1 XSP put with a $.51 premium and a strike price of 61 for a $48.05 credit to my account after commisions. That is currently 18% OTM. I'm giving myself a Maintenance Requirement of 75% of the strike for all sold puts. This is kind of high, but since I'm new to this whole trading thing, I think it will keep my margin leverage to a minimal.

So the Maint Requirement is $4,536, and the ROI is .79% or roughly 10.5% annual (48.05/4536). Since 10% is my goal for the year, this trade is in line with my overall strategy.

On another note, ERX closed -12.56% on the day to 22.06. I'm not sure how long I will hold this trade, as it now seems much to risky for my goals for the year.

XSP is my newest friend.

So i had recently posted that I will seek protection with buying SSO puts (mainly because its within my price range). That would be until I read about XSP. Its a mini that trades at 1/100th of the S&P 500. That means its the little brother of SPX. I like this because the price is well within my range, and the options are European. I consider European to benefit the seller, but since this is for protecting my principal, I think buying puts on it will suffice, especially if I insure my whole portfolio at once by buying a December put. This will hold up time value for a while.

This also creates an interesting strategy (much like Option Seller's) of selling near term way out of the money puts for decent returns each month. I considered MNX like him, but the maintenance requirement made me uncomfortable. With the S&P beat down so much lately, this is a good candidate for me to try this.

Seeking protection

Since my ACH cleared just this morning I was anxious to make a trade (probably not the best mentality for trading but I couldn't resist). I figured if the market rallied up, I would buy to open some protective puts on SSO (the S&P 2x ETF) or the market continued to decline, I would sell my first put and pocket some nice premium (see previous post).

So now I've got a decently priced put on ERX, in a market that is clearly in a downtrend. What I would really like is a nice rally on Monday to lower the premium on those SSO puts and have some protection for a decent price while I continue to search out some new opportunities for selling puts.

My next trade will proably not be on a 3x ETF, as I will be working on trying to diversify my holdings with some stronger stocks.

Trade Entered: Sold Mar 17.5 ERX Puts

Today, for my first trade ever, I sold to open 1 Mar 17.5 ERX Put for 1.15. I received $112.05 after commisions. ERX and the other triple leveraged ETFs have amazing premiums, and right now, amazing volatility.

The trade gives me downside protection to 16.35, which is 35% below the current close price of 25.23. The odds are good that it will stay above this, and with 28 days before close, time decay is at its finest.

The only issue I have is that ERX made a new low today at 23.51, and ended up 7% down for the day (which is why I sold the put because the premium was up from yesterday).

The S&P 500 closed at 770.05 which is only 3.9% above its November low of 741.02. If next week is like this week, then it'll break that level early in the week and probably become a point of resistance. Let's hope some bulls rally.

Goals for 2009

My ACH with ToS has cleared so I can finally make my transfer to begin trading. I also want to clearly define my goals for this year.

2009 Goals.
1. Turn $6,000 into $6,600; an increase of 10% (pre tax).
2. Learn from both wins and losses.
3. Keep a journal (other than just this blog) for all trades. Noting the reason for entering the trade, specifying an exit plan, and marking worst case scenarios.
4. Don't trade emotionally.

I think goal 1 is entirely possible. It would involve at minimum 6 contracts at a $1 premium each, or 12 contracts at $.50. I hope to do the former. This would of course, be trading without hedging, which I don't think I'll be doing. I have a feeling it will be more like 8 or 9 contracts and 1 or 2 hedges (buying a put on SSO).
For 2, I think 3 will help with this. Since I have no experience, I want to make the most of every trade (both profit and knowledge).
I hope 4 won't be a problem. I'll pretty much be setting my targets at night after work, and not worrying to much during the day.

So that's it. Hopefully by next week the markets will have recovered from todays sell off.

Thinking of a BAC Covered Call

Yeah, financials are getting beat down with Bank of America leading the pack but it still looks like a good covered call to me.

It's currently at 5.57, with a March 6 stike selling at .9. This would give downside protection to 4.67, and a max profit of $109 for 1 contract (for the sale and if the contract is assigned). It if tanks my maximum loss would still be on the shares themselves. I think most financials are going to continue to oscillate around their current prices until the government bailout starts moving into effect.

I'm still waiting until I can deposit into my TOS account, so by the time that happens this trade will probably be gone.

The Beginning!

Like every bloggers' epic first post, I'll describe the reasons for this blog.

I'm young, have a great job, and after the recent market armageddon (think October 2008) I decided that I can't simply trust investing in a 401(k) with a random Mutual Fund to acheive my financial goals. I've decided to venture out into the vast (and quite confusing) world of the stock market.

After reading quite a few other trader's blogs, I've been inspired to track my trades and thoughts from the very beginning. On some advice, I've created a thinkorswim account and will fund it with $6,000. It is a taxable account, and if I do well enough I will probably open an IRA as well down the road.

My primary focus will be on selling naked puts, covered calls, and positions that are generally short term. I won't be overextending my account and going on margin just yet. So feel free to learn as I do, and leave any comment you may.