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!