Markets are already on Thanksgiving break

Markets have been rising since my last post. The catch is that volume has been moving the opposite direction ... down. We are closing in on the holiday season and it's typical for activity to dry up, so it's hard to get a good reading. We probably won't see any meaningful action until next week.

Speaking of the holidays, I've been working in overdrive this week trying to get my work project far enough along so I can have a nice relaxing Thanksgiving weekend. So, I'm not going to have much more that a quick trade activity update today. I am hoping to have enough free time this weekend to start working on an article I've had rattling around in my head the last few weeks, so keep an eye out for that soon.

Recent Activity

11/21

Bought GS Apr 40P/65C - 1 contract for $22.30

11/24

Sold FDX Jan 60P to leg out - 1 contract for $5.20

- Bought back for $4.30 at the end of the day (lowered cost basis of the strangle $84.10)

Sold AMZN Jan 40P to leg out - 1 contract for $5.85

- Bought back for $4.90 at the end of the day (lowered cost basis of the strangle $89.10)

Sold GS Apr 40p/65C - 1 contract for $24.65, a net profit of $223.20 (9.01%) in 1 trading day!

Opening a long strangle on Goldman Sachs

I'm so used to not opening any new trades I totally forgot to add my new trade for tomorrow to my last post. I've still got ~$2,400 cash in my larger account that I've been hesitant to invest with the markets killing my other plays. But now that stuff is breaking out of patterns and heating up I feel comfortable opening a new trade.

GS Apr 40P/65C - I wish I would have gotten into this one a while back as it's just been steadily marching along. I'm getting in the options on a +/-$0.50 move on the stock.

"New" MacBook Pro!!

So the big news this post (and probably a few more in the future) is my new laptop :-). I'm a big mac fan, and have been using them since I was about 9 years old. That poses a slight problem with the whole saving like, mad so we can live like no one else later. For me a PeeCee is not even an option as I've never bought one, and I don't plan on starting anytime soon! Macs tend to be a bit on the expensive side, though I would argue that comparing oranges to oranges they really aren't as inflated as people think. (I think I just started a flame-war ;-))

I've been getting by on my 4 year old PowerMac G4, but it's starting to get a little outdated. However, as a testament to Macs even after 4 years it's currently been running for 251 days without a reboot. And it's out only computer, so my wife and I both use it all the time. My problem is that the charting software I use is Windows only, so I have to run it emulated with Virtual PC. And my OS (10.3.9) is too old to run my stock trading platform. So I have just been using the limited web-based platform at home, and then I have the desktop version on my work PC.

Seeing other people with brand-new laptops has been tough, but every time I just repeat the phrase "Live like no one else, so you can LIVE like no one else!". But my moment finally came. I had totally forgotten that December was an "extra paycheck" month, so it wasn't figured into our long-term financial plan. Even nerds have to let go sometimes, so I figured it was now or never. Once I convinced my wife it was OK, I figured I better get it before she changed her mind ;-)!

I was actually going to wait until December, but a good deal came by that was just too hard to pass up. I got a 10% off ($100 max) coupon from eBay that expired 11/30, and then I discovered an amazing deal put on my Microsoft Live! search. I found a NIB MacBook Pro 15" (MB134LL/A) on eBay for $1,399 that qualified for the 25% cashback ($200 max), so I took it! It's the previous model, so it's not the latest and greatest ... but a $1999 laptop for $1099 is nothing to laugh at! I do find it very ironic that Microsoft is giving me cashback for an Apple product ;-). I still don't have the cashback in my account yet, but everybody says it can take up to 2 business days. It was posted all over eBay, so it seemed legit. It better be, or my wife will kill me!

Updates
As promised last time, I'm including the current state of all my positions. Which by the way are looking much better than last post so procrastinating paid off ;-).

AMZN Jan 40P/65C (Currently up $19.20 (2.06%)) - Amazon had a failed rally today. In the morning trading it ran up over $4.00, and then closed $0.81 in the red. It's been following the lower bollinger pretty close for a while so a rally could come anytime. But with rallies like today it's hard to trust anything for a legitimate reverse to leg out on.

FDX Jan 60P/80C (Currently down $94.30 (8.80%)) - This one finally made a move. It broke through support yesterday, and strongly continued that move today. I almost reached break-even at the low today, so this one is starting to look fairly hopeful. The temptation will be too just dump it when I reach break-even, but I'll see how it looks then.

MS Apr 15P/20C (Currently up $60.70 (7.21%)) - Another stock that's just following the lower bollinger. It's still got a lot of time and it's almost to 10%, so not much to worry about here :-).

SLB Jan 55P/65C (Currently down $126.80 (6.56%)) - Oil dropped today again, and SLB exaggerated that move. Down over 16% today, which gained me $1,085 on my strangle! It's now below all my indicators, so who knows.

Three strangles have 31 days left, will they make a profit?

I keep trying to leg out of some of these long strangles with no success :-/. I haven't really lost much either, so that's good I guess. The stocks ride up a little ways and then whiplash back down so I have to buy back the puts to cover myself. Good thing I get cheap commissions :-)! I wouldn't be so aggressive about legging out of these trades if they weren't looking so sorry. My January expiration plays now have 31 days to turn a profit before I have to pull the cord. I think a little look back in history is in order ...
Back in July - September the markets flattened, which just killed my open strangle trades! So what happened? Well I got scared and sold off my real money trades at a hefty loss :-(. But I was curious, so I held a few of my paper trades to see what would happen. I tried legging out and in on one of them at that time, and didn't have any better luck than I am now. But I held on. The longest one I held for exactly 2 months, and I did not lose on any that I held.

• SLB: I held the Nov 85/110 from Aug-6 to Sep-9, and sold it for 10.2% profit, 73 days before expiration.
• MER: I held the Jan 14/35 from Jul-29 to Sep-12, and sold it for a 9.1% profit, 126 days before expiration.
• COF: I held the Dec 40/45 from Jul-18 to Sep-18, and sold it for a 9.8% profit, 92 days before expiration.

The discouraging data I see is that none of those were held as close to expiration as the ones I have now. January expiration is only 59 days out. The good thing is that I've only held the 3 stragglers I have now for about 5 weeks. Oh wow, I just realized I bought all 3 on the same day too ... scary!

The lesson here is time value is your friend! It's costly, but it can save your hide. I always buy at least 4 expiration months out, but in this case I bought them right before Oct expiration, so really I only got 3 months of actual time :-/. Might need to change that rule a bit. A lot can happen in a month though, so lets see what happens! I may still try and leg out again, so keep an eye on my twitter feed.

Recent Activity
11/14
Sold MS Apr 15P to leg out - 2 contracts for $11.80
- Bought back for $11.80
Bought back AMZN Jan 40P - 1 contract for $4.95 (Legged out 11/13 for $4.95)

11/18
Sold FDX Jan 60P to leg out - 1 contract for $4.80
- Bought back for $5.40

Updates
I was going to post an update on exactly where I'm at on each of my open trades, but I keep my trade notes in my trading platform. The problem is that the only computer I have is a 4 year old Mac laptop that won't run the desktop version, so I use the web platform at home. The notes are only stored on the desktop version which is currently on my work PC. I forgot to start drafting a post while still at work so I could share. I could VPN into my work computer, but it's late and I need to get to bed. So maybe next time ...

Operation Christmas Child by Samaritan's Purse

It's amazing how fast Christmas has slipped up this year! Local radio stations have already started playing Christmas music, and the stores are stocked up on Christmas wares. That also means it's time for what has become a tradition in our new family ... shoe boxes for orphans :-).

Ever since we started dating, Laura and I have taken the opportunity to go shopping together and fill up some shoeboxes for orphans. Once we have kids we plan on involving them by letting them shop for an orphan their age each year as well. It's something that doesn't take a lot of time or money, but can help chilren who have almost nothing. Most years we try and do at least 4 boxes, but this year the budget is a little tighter so we chose to only do one.

I would encourage each of you to reach out to someone less fortunate this Christmas season, and make a difference. This is something that only takes a few minutes. My wife and did our shoebox this afternoon after church. Took 30min to drop by the dollar store, and we filled our box for only $25. If you would like to participate in filling a shoebox for an orphan they need to be dropped off to a local collection center by November 24th.

Key reversal day, and some good and bad with the strangles

Wow! Today would fully classify as a key reversal day in my mind. Now some people are saying this is just like a couple other key reversal days we've had in the last month. I would argue that this has a much better chance of not being a "dead cat bounce", and that the others didn't really qualify as a key reversal.

Let's take the S&P 500 as an example. If you notice first of all that today set a new low for the downtrend. Not only the latest downtrend, but the greater long-term downtrend. It closed above yesterday's close, and almost as the very top of the today's range. All this on significantly higher volume. For example the bounce on Oct 28th was a good bounce that came after a downtrend. However it did not set a new low, and it advanced under only slightly higher volume. It still managed to pull off a rally just past the 1000 mark.

Does this mean we're out of the woods and on to a bull market. LOL! No! It's possible yes, but most likely wishful thinking. Don't forget the looming credit card crisis on tap for next year. Though with Obama's bent for rewarding stupid people, maybe I should rack up some CC debit over Christmas so I can get bailed out ;-). Anyways, I think a rally to 1000 on the SPX would be reasonable. At that point it will depend if it can break resistance there or not. It's going to have the resistance line from the last two "rallys", and the 20-day moving average to fight.

Recent Activity

Sold SLB Jan 55 put to leg out - 2 contracts for $22.00

- Bought SLB Jan 55 put to cover - 2 contracts for $24.20

Sold AMZN Jan 40P to leg out - 1 contract for $4.95

- Entered OCO to buy back Jan40P if stock drops below 41.35, or sell Jan 65C @ $4.80

Updates
AMZN play went OK for me today. I legged out of the put after the markets turned around and headed sharply upward. Once AMZN moved above the open I sold the put, and then set an alert at the 100bar moving average on a 5 minute real-time chart. Thankfully it cooperated better than SLB and I never had to re-cover. I thought about going ahead and buying back the put so I wouldn't be single-sided in the play overnight. But AMZN closed ~$3.00 above where I legged out of the put and it very rarely ever gaps that much. So I put in an OCO to either re-cover by buying back the put if the stock falls, or to sell the call once the whole trade reaches 10% profit.

FDX is still sitting there channeling between ~62 and ~69. Hopefully this thing will break out of this channel soon, so I can get my money back. Expiration is 64 days out, so I've still got over 30 days.

MS was my total miss for the day today. I was watching it as the other stock and markets were turning around, but it was running flat. When it finally decided to move it blew above the open while I was busy actually working ;-). I'm still profitable on the put and looking at the chart now it bounced off the lower bollinger band quite nicely. I'm going to watch it closely at the open tomorrow and hopefully successfully pull off legging out. Watch my twitter feed tomorrow for updates.

SLB didn't do so well for me today. It started up in early trading so I sold the put in order to ride the call up. I set a market buy order to re-cover the position by buying back the put if the stock dropped below $45.50. As luck would have it the stock tanked to $44.00 shortly thereafter and I bought the put back for $1.20 more than I had sold it for. To pour salt on a wound the stock closed at $51.70 >:-(. Oh well, even looking back I don't know what I could have done differently. I set my entry and exit points and stuck with them, without letting emotions getting involved. And I waited until 15 minutes after market open to sell the put to let the markets pick a direction.

Does anybody trade iron condors?

The markets are consolidating right now, and as mentioned before, my strangle plays are really starting to feel it. Three of my four open trades have just over a month of time left before I have to bail on them. Which is still enough time if the markets make a decisive move soon. This is the second time this year, that I've had this problem. The one weakness of strangles is stocks that run flat.

I've been trying to figure out a good way to hedge against that weakness, and the only strategy I know of would be iron condors. I took a 4hr class on trading iron condors, but it covered one specific type of iron condor that the instructor call a "siamese condor". Both options that were sold-to-open were at the same strike, so your spreads were joined at the hip. This allows for very little movement (VIX <20), style="font-weight: bold;">

Do any of you all trade iron condors (IC)? I know you can trade them with a larger spread, I just don't have the training or the experience yet. For example the SPX has been channeling between ~850 and ~1000, so I'm wondering if there is a way to setup an IC to work with that. If anybody is actively trading ICs, I'd like to hear how they are working for you right now. And if you are a fellow blogger I'd welcome a guest post, if you are interested.

Updates
AMZN (Jan 40P/65C) touched the lower bollinger band today, but then rose back up at the end. I'm almost profitable on the put, which is good because the stock is still $6 above my put strike. That means the delta (rate of option value increase relative to stock movement) will be increasing quite a bit if the stock drops farther. A few days of downward movement and I should be able to get out with my profit.

FDX (Jan 60P/80C) has been pretty frustrating. It has had a big rally the last couple of weeks, but now I'm sitting at a loss on both the put and the call. I'm almost wishing that I had sold the put back on 10/29 when it bounced like I mentioned in my update. But looking back at it, even with this nice rally I think I'd still be in the hole a little bit. Overall I did the right thing with the market uncertainty and all. It's just frustrating to watch a stock make big moves and not gain anything. We shall see what happens, but I suspect a test of resistance in the $70 area.

MS (Apr 15P/20C) has been channeling between ~15 and ~20 for a while now. I have the April options, so I have tons of time left on this one.

SLB (Jan 55P/65C) has been forming a flag pattern, which is usually a continuation pattern. It's sitting on the lower limit of the flag now, so if we see a drop on increased volume tomorrow it would be a confirmation. I'm finally profitable on the put as of today, but the call has a loss of 87%. The good news is that the call can't lose much more, so any drop from here on out should be good profits.

Strangles are requiring some patience

I haven't made a regular post in a while, but it's not just because I've been slacking off. For one thing I haven't made any trades since my last post. The markets have been pretty indecisive the last month, and my strangles are feeling it. I still have over a month of time left on the nearest expiration (have to bail on the play 1 month before the actual expiration), so I've still got some time. I've come close to a profit on most of them, but about that time the markets reversed and my strangles got dragged with them :-/.

It hasn't been all bad though as my wife is 9 weeks pregnant with our first child, and it's been pretty rough the last few weeks. Not having a lot of activity in my trades has given me more time to spend with her and help her out some. She's trying to finish her last semester of college including a part in the last musical of her college career.

I've also been taking some time to do more research on blogging so I can be better equipped to make this blog fun and helpful for all of you. I am going to stop doing a post every day so I'm not flooding all your inboxes and feed readers :-). I will still post if there is big news to share, but otherwise I am going to try just doing updates on Tuesday and Thursday. If I make trades in between I still want you all to know, so I will move those updates to my new Twitter account. If you want the updates you can subscribe to my twitter feed, or just check the feed in my sidebar.

Election is over ... now what?

I spent most of the evening watching election coverage, so I'm not going to have a normal post tonight. I did not have any trading activity today. It will be interesting to see how the markets react to the news in the morning. At this point the outcome seems pretty obvious which will make it easier for the markets to make their move. My guess would be that the markets will continue the upward tread at least for a little while. If for no other reason than the uncertainty has been cleared and a final decision has been made in who will be president. Only time will tell what that really means.

Markets were extremely flat today, and I wouldn't expect much more from them tomorrow. Once the election is decided I'm guessing we'll see some renewed volatility.

Today's Activity
Sold RIMM Mar 35P/60C - 2 contracts for $10.70ea, a total net profit of $196.40 (9.80%)
Bought MS Apr 15P/20C - 2 contracts for $8.30ea
- Entered GTC limit sell for $9.30

Updates
AMZN and FDX both look like they're thinking about heading back down. The temptation is to dump the calls and ride the puts back down so I can pull a profit. The problem is I'm at a loss on both the calls and the puts in both stock, and I don't think it's a good idea to sell them for a loss. So I guess I'll just keep holding and hopefully they'll break their previous lows so I can get the profit I need on the puts.

TGI Monday!

Never thought I'd say that until I started trading stocks. I look forward to Mondays now a lot more than I used to. Once a get a nice funded account built up I'll look forward to it even more :-).

New Play
MS Apr 15P/20C It's sitting right around the 10-day moving average, so this could be a good reversal point. Or, it will break though and shoot on up. Either way makes me happy :-). Entering for 2 contracts at +/- $0.30 on the stock.