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Archive for July, 2007
Posted on July 26th, 2007 by
Mojo
After opening up WYNN for a short term scalp trade as a bullish diagonal, we was stopped out today for a credit of +17.20. Our cost basis in the trade was -16.55 so all together we pocketed a total of +.65 on a risk of -16.55 for a total two week ROI of .65 / 16.55 = +3.9%.
We’re disappointed in this trade because in hindsight we should have sold the ATM Aug 100 for deeper downside protection by selling more time. Ah, well… we will update our trading rules and move forward. Here’s the chart from WYNN today:
Considering that WYNN itself was down 3.5% today along with DOW dropping 311 pts we shouldn’t be too upset.
Mojo
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Posted on July 25th, 2007 by
Mojo
As Google continued to slowly grind down throughout the day, we decided to BCC (buy call to close) the Aug 830s we sold a couple two days ago at a debit of -5.10. Since we sold them for a credit of +8.30 we pocketed a profit of +3.20 (8.30 - 5.10 = +3.20) per share.
Looking at the chart, we’re seeing some support to expect the market to move higher in the morning.
If GOOG does move higher, we will ride it up on our long Sept 470s and look to sell the 820s for protection.
If GOOG doesn’t move higher or turns down, then we will SCC (sell call to close) our Sept 470s for a credit of 47.70 or better. The reason we picked 47.70 as our stop loss is that 47.70 is our current cost basis in the long calls. So if we do close down the trade, we will close it down for breakeven or there abouts.
Mojo
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Posted on July 24th, 2007 by
Mojo
OK, we legged into a bullish diagonal on GOOG this morning. We BCO the Sept 470s for a debit of -50.90 and just SCO the Aug 530s for a credit of +8.30. This gives us a cost basis (CB) of -42.60.
If we’re called out (ie. GOOG is above 530 on Aug 17th) then we would +60.00 (the distance between my long strike Sept 470 and my short strike Aug 530) - 42.60 (my adjusted cost basis) would net us a profit of +17.40 on a risk of 42.60 for an ROI of 17.40 / 42.60 = +40.8%.
If we’re not called out (ie. GOOG is below 530 on Aug 17th) then we would just get to keep our original credit from selling the Aug 530s which was +8.30 on a risk of 50.90 for an ROI of 8.30 / 50.90 = +16.3%.
NOTE: We probably should have waited until after 2pm to sell the Aug 530s short. However, we put in a GTC order prior to attending a meeting this morning that triggered while we were gone.
WARNING: This trade is more speculative than what we usually trade so unless you are used to doing profitable bullish diagonals, we would suggest reducing your position size or not take this trade.
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Posted on July 24th, 2007 by
Mojo
*** SEE UPDATE BELOW ***
OK, call us crazy. Google (GOOG) is looking pretty tempting. Notice how its been sitting on the support at 510 from the past resistance and highs at 11/22 and 1/16? Here’s the chart:
We’re thinking about putting on a bullish trade. Maybe even Bullish Diagonal. We will watch the bars looking for a breakout to a daily high and probably take down the Sept 470 Calls for around a debit of $51.00. More to come….
Mojo
UPDATE - OK, we’re in on GOOG. BCO Sept 470 for a debit of -51.00. We believe this market open will fade and GOOG will start to retrace north to cover the gap down. We will look SCO Aug 530 for a credit of $8.00 or better soon.
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Posted on July 23rd, 2007 by
Mojo
*** SEE UPDATE BELOW ***
July 23rd, 2007 - On July 13th we open a short term scalp bullish diagonal on WYNN. See post here: http://insanemoney.typepad.com/blog/2007/07/open—scalp-di.html
Well, we made it through expiration and the stock price closed below 100 so we weren’t called out. Here’s the chart:
Remember in putting on this trade we BCO (bought call to open) the Sept 80 Calls for a debit of -19.50 and SCO (sold call to open) the Jul 100 Calls for a credit of +.95. Since we weren’t called out we get to keep the entire profit of .95 over a risk of 19.50. .95 profit / 19.50 risk = +4.9% in one week.
What do we do from here? Well, the market futures look reasonably bullish for Monday’s open so we will hold the long Sept 80 Calls for some possible appreciation and sell the Aug 100 or Aug 105 once we see a downturn / stall in the stock.
If we were to sell the Aug 100s right now we would get about +4.00 credit. So we would be earning 4.00 on a cost adjusted basis of 18.55 (original 19.50 - .95) for an ROI of 4.00 / 18.55 = +21.6% for the month of Aug.
If you want, go ahead and sell your Aug 100 now. It will provide you with a good return and about 50% downside protection until the short call reaches $2.40 in value. After the protection drops quickly.
More to follow,
Mojo
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UPDATE - We spent the whole day watching our long Sept 80 Calls ride up (adding +$4,600 to our wallet in a day) and then went ahead and sold the Aug 105 for +2.40 credit. So our cost basis is now a debit of -16.15 (-19.50 for the original Sept 80 Call + .95 credit for the Jul 100 + 2.40 credit for the Aug 105).
If we’re called out (ie. WYNN closes above 105 on Aug 17th) we will make $25 per contract - 16.55 (our cost basis) for a profit of +8.85. Our ROI would be 8.85 profit / 16.55 risk = +53.4% for the month.
If we are not called out (ie. WYNN closes below 105 on Aug 17th) we will make +2.40 (the credit for selling the Aug 105) on a risk of 18.55 (our cost basis before we sold the Aug 105s). Our ROI would be 2.40 profit / 18.55 risk = +12.9% for the month.
If the stock price falls and pushes the price of the Sept 80 Callls below $20 we will BCC our Aug 105s and SCC our Sept 80s.
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Posted on July 23rd, 2007 by
Mojo
Mojo’s Laws
The following are the laws that I hold true. These laws were won from hard fought and often expensive lessons from the field of battle in both business and investing.
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Always have an unfair advantage. Never compete on a level playing field in business because the other guy may be more willing to sacrifice his health, wealth, and family to beat you.
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Play into your strengths. Each of us has many strengths and many weaknesses, recognize yours and focus on your strengths. Hire others to compensate for your weaknesses and let them do their job.
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Don’t try to teach a pig to sing. It only upsets the pig and irritates the neighbors. This is about accepting people for who they are and also for who they aren’t. Keep yourself and your people focused in their strengths and make room for them to be themselves.
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As an investor your primary job is to not lose money. Always be managing your risk and working to preserve your capital. Investing isn’t just about risk vs. reward. It’s about risk vs. reward plus probability of success. If you only focus on risk vs. reward you would never invest in anything other than a lottery ticket, where you would risk $1 to make $83,000,000.
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As an investor your secondary job is to make money. No investment is completely safe. Once you have done all you can to conduct your diligence, follow your investing rules, mitigate your risk and then pull the trigger. Speed is of the essence.
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Pigs get fed and hogs get slaughtered. Don’t be greedy. This is a good southernism that cautions you to not be too greedy in setting a deal or a contract. Even if the other side accepts the terms, they’ll feel taken advantage of and it’s unlikely they’ll be doing deals with you again in the future.
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If you find yourself ‘hoping’ with an investment, get out. Hope is for suckers.
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Bad news does not get better with age.
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Control what you can and mitigate everything else. We often operate under a much larger illusion of control than what really exists. Understand this, appreciate it, and use it in business.
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Rich or Right. By rich, I mean rich in joy, laughter, health, relationships, time, and money. Life gives us many opportunities to be rich or right. Say for instance choosing between continuing an argument with your best friend so that you can be “right” instead of giving way and allowing the other person to be “right” so that you can maintain the richness of the relationship. This is HUGE!
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Don’t confuse motion with progress. A lot of us get caught up in this one. Just because you are moving and making effort doesn’t mean you are getting anything done. Set specific and measurable goals each year, each quarter, each month, each week, and each day. At the end ask yourself “Did I finish this?”
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There’s a huge gap between knowing and doing. I’ve known how to lose weight for most of my life but just knowing it didn’t help until I started doing it. Don’t confuse knowing and doing, they are miles apart.
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You know that you’ve completed your past when your past and your future are completely incongruent. Most people spend the majority of their lives simply repeating their past. For instance, if you were born into a poor, under educated and dysfunctional family you will likely create that same situation for yourself and your family. Once you’ve completed your past (that is, recognized that your past is your past and that it no longer has to define who you are) then you are free to construct whatever future you chose.
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Always be learning. Have an insatiable quest for lifetime learning.
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Presumption of success. Have an irrational certainty of success.
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Live into your expectations. Life, people, and places tend to live into your expectations. If you think that going to your in-laws for the holidays will be horrible, it probably will. If you think going out with your buddies will be great it probably will. Neither your in-laws nor buddies generate these results. Your expectations do.
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Everyday become a little faster, a little smarter, a little better.
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It’s better to fail quickly than to succeed slowly.
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Anytime you can learn and earn, you are doing very well.
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Half results mean nothing. Real life gives you no credit for trying. This is not grade school, stop looking for gold stars for trying to get something done. Either do or don’t. There is no try.
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Hope for the best and plan for the worst.
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30% getting in and 70% getting out. Most traders spend 90% of their time trying to perfect the entry. Don’t. The magic isn’t in the entry, it’s in the management and exit. Spend no more than 30% of your time looking for trades and no less than 70% of your time defending / exiting your trades.
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Posted on July 22nd, 2007 by
Mojo
Sorry for the lack of posts and slow email responses. I just returned from spending a week camping with my son at the Goshen Scout Reseravation in Goshen, VA. Goshen is a 4,000 acre reservation with a 450 acre lake set aside just for the scouts by the Merriweather family of the Washington Post fame in the 1960s.
WOW! What a great week! Filled with lots of camp songs, hiking, swimming, camp fires, canoeing, archery, shooting, and bad camp food. It’s truly a camp in the old style of the 1950s with platform tents, bath houses, and latrines. All of this made enjoyable through the efforts of a collection of truly remarkable staff and adult leaders. My son is 10 and growing up so fast I can feel the time slipping away. “Dad” is still cool and we love spending time together. I am very proud of the young man he is becoming and really took the time this week to be with him and give him my full love and attention. It was a good reminder that we must be careful to balance our lives between work and play.
Since it was expiration week, I did close out a couple of trades early and also managed to hike / drive to a nearby internet access point each day. In the end, things turned out very well for the week and I was excited that i could be spending the week in the forest with my son and still making INSANE MONEY all week.
Man, I love option trading!
More details to follow. I have to do my post July monthly analysis and I will post the results and update you on my trades.
Have a great day!
Mojo
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