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...