Quick Update :: Tough month in the making

I'm still overseas, but I wanted to take a minute and update my month.

I booked a nice 30% profit in my TWTR call. I got SUPER lucky and sold the day BEFORE the 9% drop!! I also closed out my KO stock position @ 44.63 for a good gain. Lastly, I collected some WFM dividends.

However all that was CRUSHED by two big MAX LOSSES I took at expiration. AFL and ESV absolutely SMOKED ME! You can read about both losses right here in my YTD loss analysis. They're losses #29 and #30.

As a result I gave back more than HALF my YTD gains. For the year I'm currently up $1,175.28... a 5.88% return on my original $20,000 investment.

You can take a deeper look at my YTD performance AND current positions HERE. You'll also see that I set up some bear call spreads last week in the SPY, IWM and GM. 

Q3 wrap-up

September and Q3 are in the books!

My goal is to make between 1 and 2 percent of my portfolio value each month. I started the year with $20,000.

Here's where I stand YTD - $2,979.28, or an 14.90% return. Not bad considering my targets thru Q3 were between $1,873.89 and $3,901.83

Here's a look at my Q3

Q3 Totals

Q3 Profit Target = $643.31 - $1,378.59

Q3 Portfolio Gain/Loss = $648.72

 

Breakdown of Q3 Gains

Option Gains = ($987)

Directional Option Trades = $424

Stock Gains = $1,199.72

Dividends - $12

 

Final Q3 Option Record

Q2 Record = 21-8 (72% winners, 28% losers)

YTD Record = 68-27-7 (67% winners, 26% losers, 7% assignment)

I was doing really well this quarter until September rolled around. This month absolutely CRUSHED ME! I lost $1,050.70, my worst month of 2014 by far. 

For all you folks out there finding this blog for the time, I'm the Option Rider. I play with a wide open hand, for better or for worse! Please feel free to look through my open positions, my winners, AND my losers. Any advice, thoughts, comments or helpful tips are welcomed at theoptionrider@gmail.com.

Update on latest trades

Alright, so I lied... but just a little bit. A couple posts ago I said I was taking a "pause" - and I have. But there were a few things I wanted to put in place before I left the country, trades that didn't require a whole lot of babysitting.

So let me give you the run down...

TWTR - Back on September 15th, when TWTR dipped WAY down on that Monday before the BABA IPO - I scooped up 50 shares at 48.50. So I'm currently holding those. Also yesterday I bought to open a Jan $50 call. Although I don't trade options directionally very much, I have however found a comfort in deep ITM longer dated calls. When I started out I was buying WAY out of the money options that expired within a month. Yeah, that rarely worked out for me! 

The bottom line is I believe TWTR is poised to break-out over 53.65 at some point. My targets are $56 and $60. 

ESV - OK, so this drilling company is DRILLING ME! Sadly I put this play on right before this MASSIVE drop. I'm definitely losing money here folks. I'm in an October 48/47 put spread, AND a December 46/45 put spread. Very unfortunately for me I played more contracts than I normally do. I'm screwed for October, but I believe December still has a shot. ESV is a best in breed company, but the sector sucks. 

I've hitched myself to the wrong wagon on this play FOR SURE!

AFL - I got in this October 60/57.50 put spread back on the 17th. I'm playing it for a bounce that has yet to come. I put the trade on when AFL was trading around 58.65. My target to close the spread is around $61.

DDD - Man I got lucky here folks. I bought a 100 shares a couple days ago right at 47.74... minutes later it POPPED up to 49.56. I sold and made a nice little gain in literally 7 minutes. DDD jumped that day on the unexpected deal with GM. I got very fortunate and took what the market gave me. 

WFM - I added more shares yesterday around 37.59, which gives me 300 total. This is my long-term swing play. Additionally I bought to open a January $35 call for $418.

GM - Today I put on a December 33/32 put spread, collecting a $420 credit on 10 contracts. The $33 level is a great support, and regardless what happens in the short-term I believe GM will be ABOVE $33 come December.

So there you have it... you are fully updated. For more details on these positions and my YTD performance, click here. Also I get a lot wrong too... you can read up on my losers as well by clicking HERE!

Know when to hold 'em

September expiration has come and gone... and I've been left drifting aimlessly in it's wake.

Here are a list of option spreads that I either lost money in, or took profits WAY too soon. All of these spread expired OUT OF THE MONEY! So it begs the question, would I have been better off holding these plays to the end?

The answer - a RESOUNDING YES!

1) SPY 193/192 put spread ($10 LOSS instead of a $380 profit)

2) IWM 113/111 put spread ($90 gain instead of a $560 profit)

3) GM 33/32 put spread ($220 gain instead of a $390 profit) - Actually played that one well

4) WFM 39/37 put spread ($200 gain instead of a $1,680 profit)

5) WFM 38/37 put spread ($330 LOSS instead of a $130 gain) - This play wouldn't have existed had I held #4

6) DE 82.50/81 put spread ($140 LOSS instead of a $130 profit)

7) XOM 96/95 put spread ($330 LOSS instead of a $120 profit)

8) AAPL 93/90 put spread ($25 gain instead of a $113 profit)

Ouch

You do the math!

 

QQQ loss... time for a pause

This morning I closed out my QQQ Sept 96.63/97.63 credit call spread. This play originally started out as an August 95/96 call spread that I had set up in July. I collected a $500 credit at that time, and a couple weeks later I had the chance to book half of that for a profit. 

But I didn't... and the spread ended up in the money at expiration, so I rolled it in to September. Well, what was once a profitable trade cost me $860 today! 

In addition to that crap, I'm sitting here watching DE, XOM and WFM all reverse and head higher. The last few trading days I closed out all three for a total of $800 in losses. Had I stayed put, not only would I have saved my $800 in losses, but I would have made $400 in profits! So that's a $1,200 swing!

Folks, I'm going to have to take a pause.

I've got WAY too many botched trades dancing in my head pestering the shit out of me. I'm heading overseas in a couple weeks and truthfully it couldn't have come at a better time. I need to step back before I hand over all my 2014 gains!

It's a tough game we play

Why is it that when I try and do the right thing by cutting my losses on an option spread gone wrong, that the underlying stock somehow manages to reverse it's course and land OUT OF THE MONEY? 

WHY!

Then on the flip side, if I decide to stay in the spread while the stock goes against me it ALWAYS expires IN THE MONEY therefore I lose the maximum amount?!?!

What the hell is that all about?! It happens every FREAKING time!!

Folks, this ain't no easy game we play! It'll drive you MAD! It's driving me mad right now.

A few perfect examples... last week I bailed out of DE and XOM. Look, I'm trying so hard to manage my losses, to not take ANY max losses - no matter what! So maybe I'm a little trigger happy, but when the chart is showing lower highs and lower lows on higher than average volume, doesn't it stand to reason we keep going down?! Well that's what I was seeing in the DE and XOM charts. I had a Sept 82.50/81 DE play on... and my stop was a close below $82.50 - which we got... so I sold for $140 loss! DE continued lower and I felt SO SMART! Until today, it came off that $81.50 support and closed back above $82.50. Now it may not close above that number Friday, but if it does I'll have taken that loss for NO REASON!

Same with XOM. I had a Sept 96/95 put spread - I closed it Friday for a $330 loss. Today it climbed back above $96. 

And then today I bailed out of WFM... this time I was in a Sept 38/37 put spread. That cost me $330 as well. So all told, I've lost $800 on option spreads that may end up OUT OF THE MONEY!

But I'll tell you this, had I stayed in all three... I can promise you they would have ALL expired IN THE MONEY costing me about $2,500 bucks! PROMISE!

I'm telling you... this damn game will drive you NUTS! But I will not quit! Won't do it! By some miracle I'm up nearly 20% on the year, but I don't feel like it.

Updating moves... Portfolio review

Boy it's been a tough week for me folks! I took some losses last week (DE, XOM, KO), more today (WFM)... and potentially more to come this week (QQQ). (You can read about all my 2014 losses right here.)

Now I mentioned last week that my other job is taking me out of the country for several weeks. So I'm making a lot of these moves in an effort to reduce risk and cut losers short. I'm just not going to have the time to properly manage a portfolio full of option spreads.

AFL Nov 62.50/60 put spread $435 credit - I got in this play back on July 18th. The chart looked great and I was right immediately. My original credit on this play was $510. At one point I was up about $200. Unfortunately I didn't close this play for a gain, instead I held it through earnings. BIG MISTAKE! It got SMOKED and I ended up in the money at expiration. So I rolled this play out to November. The problem is, in order to keep my credit I had to greatly increase my risk. So right now my max loss on this play is $3,315 - which is WAY too high. 

I'm just holding and "hoping" we get over 62.50 by November... not a good place to be AT ALL! The more likely situation is AFL climbing back up to $61.50-$62 range and then me closing out for a loss - albeit a much smaller loss. I just can't have that kind of max loss on one spread.

A quick note about "rolling out" positions to further dated expirations in order to avoid max loss or assignment. This is a good strategy, but I think it's better suited for people selling naked puts. It doesn't seem to fit option spreads very well. Hey, I'm learning as we go!

Lets move on... ESV October 48/47 put spread $1,060 credit - I just got in this spread last week. I set this trade up ITM believing a big bounce was coming. So far I've been wrong. If you look at the chart this stock moves hard and fast. Most big dips are followed by strong rips. The problem here is the whole drilling sector is getting... well, DRILLED! The oversupply of oil is causing problems. These guys can't charge as much for their equipment and that hurts the bottom line. 

So I'm watching this play closely. If we don't get a technical bounce soon... I'll look to cut my losses and move on.

MA Jan 78/83 debit call spread - Nothing to do here but watch and wait.

QQQ Sept 96.63/97.63 credit call spread $20 - I really blew this play. It was a August 95/96 call spread. I had a chance to close it in August for a $220 gain, but I didn't. Instead the QQQ's bottomed and went back up causing this play to get caught ITM. So I rolled it out to this month. Now I'm faced with a $20 credit and an $980 max loss. Again, see folks - rolling out spreads can be downright STUPID! Unless we get a nice dip in the next few days I'm going to lose a big chunk of change!

It all goes back to leaving that profit on the table in August! What was once a winner will now be a BIG loser! This being transparent and all SUCKS! 

Moving on to my TWTR September 47/46 credit put spread. I've got a $30 credit on this play. This position was also rolled from August, hence the small credit. I actually feel like this play will expire OTM come Friday, which will mean that roll out play was actually a success - SHOCKER!

Stock wise, I trimmed down my KO position while adding to WFM, a move I believe I'll be very happy about come late fall, early winter.

Well, there you have it - the good, the bad and the ugly - most just bad and ugly! 

September is kicking my tail people! 

Taking losses in XOM & KO

The drop in oil prices, a stronger dollar and higher interest rates has got the market all shook up... so much so that I can hear AC/DC singing in my head! 

Unfortunately, two of those things (not AC/DC) are directly related to one of my plays. Today I closed out my September XOM 96/95 put spread for a $330 loss. My mental stop on this play was a close below $96. Well we got that today, and it sure doesn't look like the energy sector is going to rebound anytime soon, and by soon I mean next week. 

I also closed out my KO spread... this play got all jacked up. It was part of my "roll 'em out" experiment. I originally set this trade up as an August 42/41 put spread. However, KO tanked after it's ER and it was ITM at expiration. So I rolled it out into a 41/39 November put spread. The move protected the credit, even grew it, but it exponentially grew my risk. The second half of the trade was quite profitable so I went ahead and closed it. Unfortunately it was still not enough to make up for the $800 debit from the original spread.

So all said and done I lost $395 on the trade. Now you may be asking, why didn't I just wait until November? Great question, because there is a decent chance the play would have expired out of the money. But I didn't want to have to go through another ER only to find out a stronger dollar hurt earnings, or deal with higher interest rates making dividend payers less appealing. These factors could have easily brought the stock below $41 by November. Considering my max loss on this play was $2,630 - it wasn't worth it to wait and see.

Besides... my other profession is taking me out of the country for several weeks, and I simply will not have the time or ability to make adjustments when needed. It boils down to this, I really just wanted the KO spread off my plate and out of my portfolio. 

Booked gains in LNKD call spread

This afternoon I closed out my September weekly LNKD call spread for a nice little gain. I captured $87 of the original $104 credit. 

For the month I'm up $607... which is above the high end of my September target range of $240-$480. 

For all you folks out there finding this blog for the time, I'm the Option Rider. I play with a wide open hand, for better or for worse! Please feel free to look through my open positions, my winners, AND my losers. Any advice, thoughts, comments or helpful tips are welcomed at theoptionrider@gmail.com.

I'm just a regular guy who has had a little success as an option trader looking to get better!

It sure didn't run like a DE

This afternoon I closed out my September DE put spread for a $140 loss. I said over the weekend that if the stock closed below $82.50 I would cut and run. Unfortunately that's what happened. Today about an hour before the bell I exited the trade right as DE broke below 82.50. Now, I know I said a CLOSE below 82.50, but I wasn't going to be near my computer at the end of the day. So I went ahead and pulled the trigger.

It was my 23rd loss of the year - I keep a detailed record, have a look! So far in 2014 I've got 65 winners, 23 losers and 7 plays were I got put shares or had my shares called. 

A bounce is coming in ESV

ESV is a wonderfully volatile stock. It's dramatic dips are usually followed by fantastic rips! And lately, it's been getting CRUSHED!

So this morning - in anticipation for another great rip - I set up an October 48/47 put spread. I picked up a $1,060 credit on 20 contracts played.

A few reasons I like this play...

1) The $46.50 area has been solid support a few times this year - and it seems to be holding this time.

2) The company is paying a great dividend in which the CEO just confirmed their commitment to said dividend. ($3 per share annually for a 6.3% yield as of yesterday's close)

and 3) Yesterday call buying in ESV outnumbered puts 3 to 1. Additionally a HUGE number of October 52.50 calls were purchased. This means someone thinks we are due for a bounce.

Playing this pullback in WFM

Today I jumped in a WFM Sept 38/37 put spread. I picked up a $130 credit on 10 contracts. 

This stock has been STUCK in the mud for weeks now. It can't seem to break and sustain anything over $39.70, but it's also built a solid base. The 20 day EMA is right at $38.78, also $38.50 looks like good support. Of course anything can happen, but I think all the bad news has washed out of this stock and we head higher from this area.

Keeping a close eye on DE & LNKD

I HATE taking losses! HATE IT!!!

I have done everything in my power to find ANY excuse not to take them. I've searched high and low for a "full-proof" way to avoid them. My most recent experiment... "rollin' 'em out" ain't working worth a flip - just take a look at my current positions. Personally, rolling out option spreads just increases your risk while lowering your reward. Who wants that?!?!

The bottom line is this... the only way to avoid compounding your losses and letting 'em turn into an absolute shit storm - is by CUTTING THEM and MOVING ON!

Honestly though... there's something strangely satisfying and therapeutic when you cut your losses. It's like deep down you know it's the right thing to do... you know it's a discipline you must learn to survive in this trading world. I actually feel liberated when I cut that dead cancerous weight out of my portfolio.

OK OK... maybe that's a bit of a stretch, but you get what I'm saying - don't let you losers run and run and run.

So... I say ALL that to say this - I've got my eye on DE and LNKD! Two plays that are not moving in my direction.

Lets start with DE (September 82.50/81 credit put spread)... I put this play on Friday the 29th of August. That day the stock was trading around $84 and it looked like it may have found a temporary bottom the day before at 83.19. Well the trade went my way for about A DAY! It's been downhill since. What concerns me is that the last three days it's been lower highs and lower lows, plus each close has been lower than the day before. Volume has also picked up. Today (Friday) DE closed at 82.79 - it's lowest close of 2014. $83 had been great support, but today it broke. The next level of support I see is $80. 

So here's what I'm going to do... I'm holding for now, BUT I'm keeping this trade on a VERY short leash. Currently I'm down $85 or so - not bad, but the max loss on this play is $630! And if it trades down to $80, or anything below $81, I'll take the full max loss - that I WILL NOT LET HAPPEN! So, if this thing closes BELOW today's close of $82.79, I'm taking notice. If it closes BELOW $82.50 anytime between now and September expiration - I'm OUT!

I cannot risk this trade running against me and costing me $630. I'm fully aware DE could run down to $82, or even $81.50 and bounce back up and close above $82.50 by September expiration, but I can't worry with that. I've let too many trades CRUSH me with my "hopeful" thinking.

On to LNKD (September (W) 235/240 credit call spread)... I set this trade up a couple days ago when LNKD was trading around $225. Today is crossed $230 for a bit in the last hour of trading before settling at $229.63. My mental stop on this play is the first close over $235. I'm currently down $72 in the trade, but the max loss is right at $900. 

Folks I hate taking losses, but it's a discipline I've got to master. 

Short lived AAPL love affair

Well that didn't last long folks! Yesterday I set up a weekly put spread in AAPL

Today I closed it for a small $25 gain. Why?

To be honest, I got a little shaky in my conviction. The company's got a HUGE announcement concerning the new iPhone next week, and I just didn't want to hold through that event. Obviously I knew about this information when I put on the trade, but what can I say... I changed my mind.

Opened a LNKD call spread

This afternoon I set up a LNKD 235/240 call spread, collecting a $104 credit on 2 contracts. This play expires next Friday. 

LNKD has gone damn near straight up since early July, but now it looks like it's running into resistance around $230. Also the RSI is over 70 which suggests it's overbought. Additionally, the MACD is beginning to rollover. The bottom line is this, LNKD has taken a pause the last week or so and it looks to be losing steam. I believe a slight pullback is in the making.

Either way, I just need it to stay BELOW $235 for another 7 trading days, which I think it'll do.

Jumping in an AAPL spread

Boy AAPL is getting SMOKED! 

So I'm taking advantage of this 4% down move today by setting up a weekly credit put spread. This morning I set up a 93/90 put spread expiring next Friday. I collected a $113 credit on 3 contracts. Looking at the chart there's good support above $93. The 50 day moving average is right around $96, and the last pivot point back in early August was right at $93.   

Closed TWTR call

This morning I sold my TWTR November $40 call. I opened this position while the stock was trading around $45. I closed it today with TWTR right at $51.20.

I booked a $485 profit... a 67% return on my original $725 investment.

Alright folks, so let me give y'all a little insight into my thinking when I originally opened this play back on August 21st.... or maybe a comparison. Lets look at using deep ITM calls vs. common stock. You see, I was seriously considering going long the stock at $45, but I just didn't want to tie up that much cash - instead I bought one deep in the money call.

Let's compare the two approaches...

1) Long 100 shares of TWTR @ $45 - This play would have made more money assuming I sold at $51.20 ($620), but it would have tied up more capital. So my percentage return would have been much lower... 13.78%

2) Long Nov $40 call, 1 contract for $725 - I made less profit, $485, but I used WAY less capital and returned a MUCH better percentage... 67%. 

Which strategy is better? I guess that depends on your investment/trading objectives. In this case the deep ITM call worked out great. My only issue is if the trade goes against you - with stock you can wait it out, with options not so much since they have an expiration date. 

What about you guys? How do y'all like to play it?

August wrap-up

My goals are simple. I want to grow my $20,000 account by 1 to 2 percent each month! Which means basically I'm looking to make $200 to $400 per month. Here's how my year has gone so far.

January :: $1,681.55

February :: $620.10

March :: $202.20

April :: $1

May :: $510.05

June :: ($684.34)

July :: $1,374.42

and here's my breakdown of August...

Options - $325

Directional Option Trades - $0

Stocks - $0

Dividends - $0

Total gain in August = $325

Total YTD Realized Gains - $4,029.98 (Up 20.15% on the original $20,000 principal)

My August profit target was somewhere between $237 and $475. I came in the mid-range of that goal. For the month, I increased my current account value by 1.37%. Finally, YTD I'm tracking 17% ABOVE the upper range of my 1 to 2 percent target. At this point in the year my goal was to be up anywhere from $1,657.32 to $3,433.17. I'm sitting at $4,029.98!

I'm very encouraged by my returns this year, BUT September is going to be tricky as I have a potential $950 loss staring me in the face with my QQQ bear call spread. I've also got some outsized risk/reward spreads that I rolled out this month in to November. The bottom line is I've got some potentially dangerous positions that could seriously threaten my YTD returns. Click here to see all my open positions. 

For all you folks out there finding this blog for the time, I'm the Option Rider. I play with a wide open hand, for better or for worse! Please feel free to look through my open positions, my winners, AND my losers. Any advice, thoughts, comments or helpful tips are welcomed at theoptionrider@gmail.com.

I'm just a regular guy who has had a little success as an option trader looking to get better!