SLB Jan 75P/80C - It bounced off a trendline and the lower bollinger band today. Bounced a little high, but it's pretty volatile, so I think I'm still safe getting in. I'm going with a +/- 0.50 move. Market order for the put triggered when the stock moves at or below 77.59, market order for the call if the stock is at or above 78.59.
Labels: slb
This is a list of ALL trades I closed during the month of September. I have two accounts to show how this can work with a small account, and a REALLY small account. I'm not splitting these trades up based on which account they were in because that's not really all that important. All the trades are about the same size, so I just do fewer trades at one time in the small account.
No commentary today. Work has been keeping me more than a little busy lately.
Today's Activities
Bought MGM Jan 25P/30C - 1 contract for $8.40
Bought FDX Jan 75P/85C - 1 contract for $11.20
Entered GTC limit sell for MGM 25P/30C for $9.40
Entered GTC limit sell for FDX 75P/85C for $12.45
Updates
AMZN sure took a jump today! Guess I should have put in an order to dump the put last night :-/. Though even looking back at yesterday's chart, I still don't see anything that would have indicated the move we got today. This is exactly why I trade strangles, the stock moved against me BIG time, but I'm still only at a 6% loss overall. And I still have 2-1/2 months for the stock to make a profitable move.
FDX gapped up this morning, and my option orders are market orders, so I ended up paying a bit of a premium for the call. Nothing a little continued volatility can't overcome though.
MGM seems to have bounced nicely, but with these markets who knows. Have to a get a little more confirmation.
FDX Jan 75P/85C Just got out of this today, but it's on the lower bollinger. I'm hoping I can catch some profit on the way back up :-). Buying the call at market if the stock moves above 79.91, and buying the put at market if the stock moves below 79.31 (that's +/- 0.30).
MGM Jan 25P/30C LVS has done pretty well with strangles lately and this one is in the same sector, so hopefully it will do as well. This one isn't quite as volatile, so i'm going with entries +/- 0.25 on the stock. Call entry at or above 26.24, put entry at or below 25.74.
Today's Activities
Sold DRYS Jan 45P/50C - 1 contract for $16.70, a net profit of $1.582 (10.5%)
Sold FDX Jan 85P/100C - 1 contract for $11.25, a net profit of $1.032 (10.1%)
Updates
AMZN took a dive with the markets today. Broke through support and well below the lower bollinger band. It also briefly broke the 52-week low, but closed slightly above it. The bad part is that because of my large stock spread getting in, I am just now barely in the green on the strangle. There's always the option of dumping the put and riding the call when it bounces.
FDX ended up moving lower today. When I checked the markets over lunch my put exit still hadn't executed, so I pulled it and put my limit sell back in for the whole strangle. I got filled not too much after that.
Well the new plays have been a bit scarce lately with all the ruckus in the financial sector. That's one thing that I still have to fight myself on ... patience. I don't have to stay fully invested all the time. It's better to be patient and wait for the good plays to come along, than to get into bad plays because I'm in a hurry. There is one stock that's been showing up in one of my scans for the past week, but it's not quit ripe yet. I'll let you know if/when it's ready to play :-).
As promised though I do want to share and explain the play on FDX. Something new I've been experimenting with is "legging out" of my strangles. I always "leg in" by getting into the call and put separately based on stock movement. But I typically will wait to sell the strangle until the whole trade is 10% profitable. What I run into then are trades like FDX. It is almost profitable on a downward swing of the stock, but then bounces off a support before I get out. Normally I would just have to ride it out, but why? Why not sell the put at a handy profit, and then ride just the call back up?
So here is what I'm going to do this time. Set a sell order on the put if the stock moves above the high of Friday's candlestick (82.23). But then that leaves me one-sided in the play if the stock subsequently drops again. And remember, the whole purpose of this strategy is to put in your orders at night and then let them babysit themselves during the day. So, I set a second order for insurance, that is triggered by the first order. Meaning that with the sell order for the put is executed it will automatically enter an order to by back that same put if the stock price falls below the low of Friday's candle (80.25). This is a complex order type known on my trading platform as "1st Triggers All".
So it would look like this ...
Order #1 - Sell FDX Jan 85P @ market if stock >82.23
Order #2 - After Order #1 executes, buy FDX Jan 85P @ market if stock <80.25
Still no final word on a bailout plan. I guess the only thing that's encouraging to me right now is that it means somebody isn't willing to just blindly pass legistation. I haven't had time to keep up with the news like I would like, as I've been keeping pretty busy with my real job. My concern is that all this will come out before Monday and the markets will jump. This is a distinct advantage of a long strangle though. The markets can shift directions and I will still make a profit. It's just that I'm really close to my 10% profit goal to the downside on a couple of the plays. So it will take some time to reverse the downward move and build a move to the upside. But again this shows another advantage of how I execute strangles. All my options are out at Janurary expiration right now, so I don't have to have a profitable move in the stock for a couple months yet. But obviously the sooner the better, so I can get my profit and put it back into another trade.
Today's Activities
Sold LVS Jan 25P/40C - 1 contract for $9.95, a net profit of $0.932 (10.3% in 2 days :-) )
Updates
AMZN seems to be trying to build a base for a leg to the upside. I placed a horizontal line at today's open and there actually is some historical justification here that I had missed before.
DRYS is still moving down, but it's getting close to that lower bollinger band. For some reason this strangle isn't responding very well to the move. The stock has dropped almost 25% since I got into the trade, and the put is now $5 in-the-money. However, I'm still at a 4% loss overall. This might be a good stock to demonstrate a way to get out of strangles like this that aren't performing. I'm still experimenting with this part, so we can all learn together. Once it proves a reverse in direction I will "leg out" of the put side. This will allowing me to capture the profits on the put (currently ~65%), and then ride the call back up to a profit.
FDX gapped down at the open, but then recovered most of the loss by close. Like DRYS it is getting very close to the lower bollinger band, so my downward ride might be about over. Especially since the bounce today was off of a horizontal support trend. Since it has bounced off of a defined trendline and I am profitable on the put I am going to allow it to confirm and then "let out" of the put. I will post again before Monday to explain how the play will look.
I just realized today was 4 months since I started actively trading strangles in my first account. So I went back and checked how far I've come in those 4 months. I was pleasantly surprised! My goal is to get to where I'm making 10%+ per month trading strangles, but I've learned some hard lessons along the way. So overall I'm happy with the progress I've made.
Labels: profits
The markets reacted positively to news that a bailout was making good progress. However, the news turned less enthusiastic tonight as talks turned sour at the White House. Personally, I think this is all a VERY bad idea! They talk on and on about the housing market being the "root" issue ... no it is the root symptom! The root cause is people buying houses they can't afford (which in turn has other root causes that I won't go into right now). Pouring endless billions of dollars, that the government doesn't even have, into the finance sector is not going to do the least bit of good. Oh sure, it will in the short run. My guess is that the markets react positively for a short time (weeks, maybe months), but it will just come back.
We saw a sample of this last year when the "credit scare" first surfaced. Markets started dropping, and then it all got swept under the rug. Markets took back off, but that stench came right back out again. And look where we are now. It's a fundamental problem with American thinking. Sure give the screaming kid a sucker, but one guess what that kid will be doing when the sucker is gone ...
Today's Activity
None
Updates
AMZN appeared to have found support today on the lower bollinger band. But with bailout talks not going well tonight I'm not feeling overly confident about pulling out of the put. I think in this market it's better to just hold on.
DRYS looks like the downward momentum is dying, but some of that could be due to the markets being up strongly today.
FDX recurring theme here ... weakening momentum, but this has less indication of a reversal than the previous two stocks. We're getting closer to that 80 mark...
LVS looks to be coming off support nicely.
I don't think the markets have been this flat in two weeks or more. The markets are in no hurry to commit in one direction or the other until the details of the bailout are finalized. I'm guessing the markets will continue to leak downward, unless something big comes out to push it up.
Today's Activity
Bought LVS Jan 25P/40C - 1 contract @ 8.90
Entered limit sell for LVS 25P/40C @ 9.95 (~10% net profit)
Updates
AMZN continued to push below the lower bollinger band, and is well below all the moving averages. It's hard to tell where it will find support. The only line I'm seeing is a horizontal line just above 65. The put leg of my strangle is up 22.7% so if it does start to show that it's found a solid support I can sell it for a good profit and ride the call back up.
DRYS nothing much new on this one.
FDX broke through not only the support, but also the 50 and 100 day moving averages, on rising volume. Looks like the next chance for support would be the lower bollinger band and a horizontal support right about 80. At the low today I was at over 3% net profit, so I shouldn't have any trouble getting out with 10% profit before the 80 mark.
LVS much like the general markets, didn't really do much of anything today. By the time markets actually opened the stock had settled back in right around yesterday's close. So I got in both legs right where I wanted to.
So right about the time I was going to post this my internet connection died :-(. This is an advantage to having a strategy that can babysit itself for the most part. So here it is ...
LVS Jan 25P/40C Looks like LVS is ready to dance again. I pulled 10% out of a long strangle on it in 1 day last week :-). It's sitting on my lower bollinger band as well as a support line right now. The play will be to get into the call if the stock moves up 0.50, and get into the put if the stock moves down 0.50. Both legs will be market orders triggered by stock price. Now, this morning I'm looking and LVS is up ~1.50 pre-market, so I'll end up paying more for the call than I would like. But it's still between the 30 and 35 strike prices so there's no reason to change the play. And the whole idea of this trading is to put your orders in at night and leave it until the next day.
Todays Activity
Bought AMZN Jan 70P/80C - 1 contract @ 15.30
Entered limit sell for AMZN 70P/80C @ 17.00 (~10% profit after commissions)
Updates
AMZN continued lower today on slightly higher volume. It even closed slightly below my lower bollinger band. It did however move up high enough in opening trading to get me into the call option, so I now have a full long strangle on it. I'm not sure my 0.70 +/- move was a good choice though. That's 1.40 stock price delta between getting into the call and put, which puts me at higher cost and higher risk than I like. It was late last night when I put in my orders and I wasn't thinking too clearly :-/. Normally I allow a move ~10% of the 5-day Average Trading Range, but AMZN has been so volatile the last week, that the number was inflated. I'm not too worried about making a profit yet, but it might have been smarter to go with more like a 0.50 +/- move.
DRYS changed direction yesterday and strongly continued that move today on higher volume. Right now it's sitting roughly between the 10 day moving avg and my lower bollinger band, so it has some more room to move to the downside.
FDX continued to move lower today on lighter volume. It is now on sitting on a support line, so we will have to see if it will break through or bounce. At this point I am profitable enough on the put I could sell it and ride the call back up. However with the markets being so news driven back and forth lately I'm not sure I'm comfortable with that idea. I think I'll take the safe route and keep both legs of the strangle for now.
(The quality of this chart is lacking. I will try and find a better way for showing charts in the future)
The play I'm seeing for tomorrow is a strangle on AMZN. I hope sometime in the next week to lay out more details on how a strangle works, my chart settings, etc. But for now I'm going to lay out the plays I'm looking at so you can get a taste of what it's all about. Do NOT try these as funded trades! But feel free to track them in a virtual account or on paper. That is the BEST way to learn how to trade. So back to the play ...
AMZN Jan 70P/80C (thats the January 70 put and the January 80 call)
This has been a volatile stock lately and is sitting on a support line, and is close to the lower bollinger band.
I'm not really seeing any good potential plays out there for tomorrow. The one stock (ETR) I did look at did not have near high enough open interest for me. Part of my problem is that my scans are getting plugged up with all these volatile financial stocks, so I'm missing some of the others. I may decide to play a financial stock soon, but it would be a different play than normal as they aren't following technicals at all. 100% news driven moves ... which played right could probably be highly profitable using strangles. But it's different enough from my normal routine I'm just not going to pursue it at the moment.
Here's a quick look at my current plays:
DRYS - Jan 45P/50C - Bought @ 15.00 - Limit GTC to sell @ 16.65 (~10% profit)
FDX - Jan 85P/100C - Bought @ 10.11 - Limit GTC to sell @ 11.25 (~10% profit)
If this is your first visit to The Night Trader, you are in the right place :-)! I want to thank you for taking the time to stop by my blog. I think you will find a lot of useful information to help improve or jump-start your options trading. This blog is designed to serve traders that actively trade, or those desiring to learn how to trade.
This blog has several purposes:
- Help educate fellow traders, and create a place where we can share trades and ideas.
- Motivate me to stick to my strategy, and be accountable to fellow traders.
- Encourage those who are thinking of trading options, and give them specific examples of how it can work for them effectively.
- Earn passive income via a few choice advertisements and reviews.
All trading posts assume that you understand how I trade options, and specifically how I trade long strangles. For more information read through the following two posts:
- (Long) Strangle Basics
- (Long) Strangle Details
Currently 99% of all my trades follow the long strangle strategy. I try and post at least twice a week with updates, lessons learned, new trades, etc. If you want live updates on any trades be sure an follow me on Twitter! Please leave your comments, questions, arguments, dissertations, etc. Again, welcome and happy reading!
Hey, I'm Justin Bergen, the creator and author of The Night Trader blog. I am 24, and married to the love of my life, Laura :-). I am a Christian, and firmly believe in the Bible, and on Christ my Savior. This is not a blog about religion by any means, but I do follow biblical principles in all areas of my life, including finances. This will come up from time to time, and I just want to make it clear where I am coming from :-). I am the oldest of 11 children, and grew up in a family with an income below the poverty level, which taught me a lot about hard work, and wise use of finances.
When I was about six years old, my father had a serious work accident, which left him unable to continue his job as a pipe-fitter. In 1993 my parents used what was left of a small worker's comp settlement to purchase a small flourmill as a way to work around my dad’s health, and make money to support their growing family. The Wheat Bin became a family business, and every member of our family was involved with the business in some way. I started out doing packaging and cleaning, but quickly grew into sales and delivery. I remember filling out my first invoice at the ripe old age of 9 :-). Getting up at 4am to help make flour deliveries to grocery stores was less than pleasant, but my outgoing personality loved the interaction with customers.
As time went on and the business grew I was given more and more responsibilities that spanned all aspects of the business. By 2001 when the business was sold I was doing almost all of the sales and marketing, as well as most of the production. All the while trying to keep up with my high-school education. I would be lying if I didn't admit that I hated the work most of the time. But looking back, I realize my dad taught me many invaluable lessons that will serve me well the rest of my life.
I still remember my first introduction to the stock market. I was sitting in our basement watching a news story about an elderly woman who had purchased Coke stock when it first went public, and how much those shares had increased in value. That was the spark that would later grow into a hobby and passion, and someday hopefully a good source of cash flow :-).
In late 1999 my uncle offered to take me with him to Minneapolis for a two-day "Wall Street Workshop" stock market training class, and that lit the fire. I attended another advanced "Next Step" two-day workshop in Kansas City a few months later. My biggest problem at the time was that I didn’t have enough money to trade with, and I wasn't old enough to start my own stock account. So my ambitions for active trading had to take a back seat for a time. Meanwhile I continued to focus on my education. After completing high-school in 2003, I started college which launched me into the “broke student” category.
My formal K-12 education was received at home from my parents. I learned many valuable lessons from homeschooling, including self-motivation. I graduated from high-school in 2003, and immediately started pursuing a college degree. To save money I spent the first year attending a junior college fulfilling all my general education requirements. The next two years were spent at Wichita State University, where I graduated in 2006 with a BBA in Management Information Systems and a minor in Computer Science.
After graduation I was hired as a full-time Product Test Engineer at a large data-storage company, where I had been working as a student for 2 years. As one of the benefits, the company offered an employee stock purchase plan (ESPP), and that blew on the coals piquing an interest in trading again. I maxed out my stock purchases as I was now making "big money" and still single. I also opened a small Roth IRA account, but I was also starting to realize that simple stock investing was not where I wanted to be.
One more milestone was coming though that would delay my stock market dreams. This event included a beautiful young lady and a custom diamond ring ;-). I was married to my wife Laura on July 7, 2007 in the beautiful state of Colorado. Our wedding was followed by a seven-day, beachfront honeymoon in sunny Barbados! We returned home as newlyweds, with a whole $200 to our name. But we were beyond happy because we were completely debt free, thanks to the wisdom of our parents, and the teachings of personal finance expert Dave Ramsey. We had incurred no debt during our dating and engagement, and our wedding and honeymoon were paid in cash.
After quickly getting our combined finances in order, I started seriously pursuing trading in the stock market. I started reading, researching, and reviewing the material from the seminars I took nine years ago. Opening a virtual trading account allowed me to start playing with specific trading tactics without risking my hard-earned money. It quickly became clear that I needed a plan that could work around my normal IT day job.
After fiddling around with a couple trading methods I found long strangles. I was fascinated right away by the simplicity and comparative safety. It took about a year of reading, online classes, and practice before I started feeling confident in my abilities. One of the big struggles I faced was finding quality, hands-on information that didn't cost an arm and a leg. I started this blog in September 2008 to share my knowledge, and hopefully glean many further insights from my readers.
If you have any questions or comments please feel free to contact me:
justin {at} thenighttrader.com (remove spaces)
All these numbers are based on the current account value at the end of each month, so they include realized and unrealized gains. Both accounts are doing the same types of trades, they were just started at different times with different amounts of money.
Account 1 - Started with $4,325.75 on May 27, 2008
| May 2008 (4 trading days only) | + $160.00 (3.7%) |
| June 2008 | + $129.20 (2.9%) |
| July 2008 | + $189.90 (4.1%) |
| August 2008 | - $210.80 (-4.4%) |
| September 2008 | + $1,219.05 (26.5%) |
| October 2008 | + $633.15 (10.89%) |
| November 2008 | - $594.00 (-9.21%) |
| December 2008 | + $269.80 (4.61%) |
| January 2009 | + $725.30 (11.85%) |
| July 2008 (5 trading days only) | - $4.00 (-0.1%) |
| August 2008 | - $306.40 (-11.2%) |
| September 2008 | - $19.45 (-0.8%) |
| October 2008 | - $582.43 (-24.1%) |
| November 2008 | - $329.59 (-18.00%) |
| December 2008 | - $580.17 (-38.5%) |
Labels: profits
Welcome to the The Night Trader blog! With the rise of dozens of online brokerage firms such as Thinkorswim, E*Trade, OptionsXpress, TradeKing and many others, it has made the stock market a reality for millions of small traders like you and me. The other reality however is that it takes more than a brokerage account and a few thousand dollars to make money! Learning HOW to trade in the stock market is a skill that takes time and effort to develop. And education isn't cheap! You can take classes and seminars costing thousands of dollars, or you can lose as much or more at the infamous "School of Hard Knocks". I have done both unfortunately ...
Which is where the The Night Trader blog comes in. I want this to be a place were small traders can come regularly to learn from what I've done right and wrong, and what I'm currently doing. To start out I will be posting as often as possible (hopefully daily) what my current and upcoming plays are. As I have time I will also post lessons I've learned, and more details of the strategies I use to make trades in any market. But as always suggestions and comments are welcome. Let me know what YOU want to see on here :-).
