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!

Getting over the past

I read this quote today on Facebook.

"When we don't release our past the only thing in captivity is our future."

Sometimes I can be such a headcase. I let mistakes stick with me much longer than I need to. I'm haunted by them. They are my greatest enemy, not the market, not the market makers, or the "manipulators" or ISIS or Russia or whatever. 

I give these mistakes power, because I refuse to let them go. I stew over them again and again and again. I walk throughout my house muttering to my wife how stupid I am because I let so and so run against me too long, OR I cut this winner WAY too short. 

I'm harassed by them.

Obviously, this behavior has a terribly negative effect on my returns.

Here's a perfect example...

Going into the most recent market downturn I was in a SPY bear call spread and a QQQ bear call spread. I was PERFECTLY positioned for once. As you remember the SPY started turning over the last couple days of July. My SPY call spread was doing great... however, for fear that the drop wouldn't last I closed the position booking a $180 profit. Now keep in mind I had a $500 credit on this play so I booked less than 40% of it. Turns out the drop would continue.

Man this bothered the HELL out of me. I stewed on this big time as I watched the SPY drop all the way to 191. I left about $275 on the table! I HATE leaving money on the table!! HATE IT!

Now remember I was also in a QQQ bear call spread. I had a $500 credit on this play as well. At one point I was up $250, but since I was so PISSED about the SPY play I told myself there was NO WAY I was closing the QQQ position. I would NOT leave anymore money on the table. Well guess what, the QQQ's bottomed around 93.80 and started working back up. I missed my chance to book a profit. So instead I was faced with an ITM spread come expiration. I ended up rolling the QQQ spread to September, but it just delayed AND compounded the inevitable loss coming my way. So I let a $200 winner turn into a potential $1,000 loser. 


Because I was so angry about cutting that SPY winner short! I didn't release myself from that misstep and it seriously hurt my future returns. 

Any of you folks do this stupid crap? 

(Note :: As I re-read this I'm seeing the words "angry", "pissed", and "hate". Emotions people! I've got to keep my emotions in CHECK!)

Going long a call

Today I did something I rarely do... I BOUGHT an option looking for a directional move!

Quick back story, I got my start buying and trading options... WAY OUT OF THE MONEY options. You can imagine how that went! I made some big money FAST, but unfortunately I lost MORE even FASTER! It didn't take me long to realize I was on the wrong side of the trade. Plus buying way out of the money options was just plain STUPID!

However I never gave up on the idea that buying options to trade directionally could work for me. One strategy I've been looking at lately is buying further dated, deep in the money calls.

Today I bought one November $40 TWTR call. The trade cost me $725 (commissions included). I feel like this stock has been consolidating around the $43 to $45 level since the ER pop a few weeks back. Here in the past few days It's range has been especially tight. This means the implied volatility (IV) has dropped to an all-time low. (I can't take credit for the volatility information. I picked that up today thanks to OphirGottlieb.)

So, with the IV low and what I feel like is an impending move up, this was the perfect time to put my deep in the money call strategy to work.

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.

August expiration roll-out

So if you've been keeping up with my portfolio you'll know that I came into August expiration week with four option spreads in the money (ITM). You see I'm trying out this new approach in which I roll-out (simultaneously close out the losing the spread while opening a new longer dated option spread) positions that land ITM. The key to making this work is for the credit you receive on the new spread to offset the loss on the recently closed ITM spread. Basically you're putting off the loss by extending the trade. This literally buys you some time for the trade to work out in your favor.

Seems great right?!

Well here's what I learned about that last week. Most of the time when you roll these positions out you DRASTICALLY reduce your overall credit and at the same time DRAMATICALLY increase your downside risk. Let me show you.

Lets start with AFL... I was originally in an August 62.50/60 put spread with a $510 on 10 contracts. Friday AFL was trading right around $60, so this play was a goner! Here's the deal, I was facing about an $1800 loss on this play. So I needed a new spread that would AT LEAST bring in that amount in credit. Even in that case though I would only break even. That right there was eye-opening. I mean I would have tied up $2500 bucks for 5 months just to break even??  

First I looked to roll it down to a 60/57.50 put spread. I checked November and even January. There was no way those plays would bring in the $1800 credit I needed. I moved up to the 62.50/60 spreads. Those were a bit better, but I was still coming up short about $200. There was NO WAY I was going to roll my strikes higher, the only way to get more credit would be to play more contracts. So instead of 10 like I always do, I played 15. This combination worked. Let me give you the specifics.

I closed my original AFL spread for an $1,860 debit. Then at the same time, on the same order, I opened a November 62.50/60 put spread collecting a $2,295 credit. I'm left with a $435 CREDIT! Good news, right?! I avoided the loss and kept the majority of my $510 credit.

Technically, yes. But lets drill down on this play and talk about the downsides. First off, I wasn't able to lower my strikes AT ALL. Second, my downside exposure went WAY up! On the original play my max loss was $1,970, now it's $3,315. This means if I'm not right come November - I'm gonna get HURT! Lastly I lost some of my original credit. I went from $510 to $435.

So in short, when you roll out you lessen your credit and increase your risk exposure. Here's a few more examples. I won't go into as much detail with each play as I did with AFL, but you'll see the pattern of lesser credits and increased risk.

My TWTR play is a prime example... I rolled my August 47/46 put spread into a September 47/46. I went from a $440 credit to a $30 credit, and a $560 max loss to a $970 max loss.

Next up is my KO spread. I rolled an August 42/41 put spread into a November 41/39 spread. As you can see I opened my spread an additional strike. I also had to play 15 contracts instead of 10. So even though I increased my credit from $270 to $370, my downside risk went WAY up from $730 to $2,630.  

My fourth and final ITM spread was HSY. I was in an August 95/90 put spread, only 1 contract though. When HSY opened above $92 on Friday I simply bought back in my short strike and left it at that. In total I took a $207 loss. You can read more about it here in my 2014 Loss Analysis. 

Well folks there you have it - a full, transparent disclosure of how I slipped through last week. Yes, I avoided some losses and lived to fight another day, but the question is - did I create a bigger mess for myself?

Only time will tell.  

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.

Big day

Today's the day people! 

The big question for me is, will I be able to navigate my portfolio through this land mine of ITM option spreads? 

My ITM plays are KO, AFL, HSY and TWTR.

As for my other two ITM trades, QQQ and KO, yesterday I rolled out my August KO $39 covered call into a $41 November. I started with a $90 credit, after this move I'm left with a NET credit of $35. 

I also rolled out my QQQ August 95/96 credit call spread into a September 96.63/97.63 call spread. This move cost me $480, which ate up damn near all of my $500 original credit. So now I'm only left with a $20 credit.

Navigating thru a world of hurt

And that's EXACTLY what I'm looking at this week if I don't make some adjustments...

Below are my CODE RED positions... Not only are they DEEP IN THE MONEY, but they all expire this Friday!


AFL Aug 62.50/60 put spread - $510 credit, $1,970 max loss :: $59.19 (5.6%)

HSY August 95/90 put spread - $103 credit, $387 max loss :: $90.40 (5.1%)

KO August 42/41 put spread - $270 credit, $710 max loss :: $39.45 (6.5%)

TWTR Aug 47/46 put spread - $440 credit, $540 max loss :: $43.13 (9%)


As you can see I've got 4 positions in need of managing. Listed are the option spreads played, the amount of credit collected on each play, the max loss, the current stock price, and the amount I need each underlying stock to move to get me OUT OF THE MONEY.

Here's the deal, ever since I rolled out my TWTR put and worked my way out of a loss and into a profit I've been fearless in my plays. I'm setting things up with the mindset that if they don't go my way I can just roll them out. Theoretically that should work, but I've got FOUR positions to deal with, not just one. Also the TWTR play was a naked put, not a spread. So we'll see this week if it's actually possible to roll these plays and STILL keep even a small amount of the original credit. 

Hey, it's all an experiment... I'm learning and you guys get to watch this whole process unfold. Now, I sure would love a little help from Mr. Market, but I HIGHLY doubt AFL, HSY or KO are going to make the big moves I need. TWTR on the other hand could absolutely move 9% in a week. However, just like a college football team needing help to play for a BCS title, I need help to avoid these losses. And you never want to be in that spot. You want to control your own destiny, and I'm far from controlling anything to do with these positions.

I'll keep you all posted this week. My first goal is to roll out that AFL position. I've got the most to lose here and I need to get this one handled before dealing with the others.

Anyway, 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!