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.