Posted on October 30th, 2007 by
Mojo
DRYS took a huge dive today before we could put in to sell our covered call (Nov 140s). We are sitting at a pretty stiff loss (down almost $6) as we write this and right above support at 120. I’m going to hold for now and put in my stop loss at 118.50.
In light of this trade we’ve added a new rule to the Options Trading Rules - Diagonals. ” If you are holding long calls looking for appreciation you must put in a 10% stop loss.” This will protect us in the future from taken such large hits.
Mojo
ps - We got triggered on our stop loss dropping -9.70 on 38.20 for a -25.3%. Bummer!
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Posted on October 29th, 2007 by
Mojo
The energy stocks continue to rock. Dry Ships (DRYS) reached a new high today on high volume at around 2:30pm.
We’re buying long Jan 100 calls for a debit of -38.20. We will hold this call looking for some straight line appreciation. If we feel the stock is stalling we’ll go ahead and sell the Nov 140 call for a credit of +5.60.
We will keep you up-to-date!
Mojo
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Posted on October 25th, 2007 by
Mojo
OK, we originally bought a long Dec 50 call on McDonalds for a debit of -7.00 because of a very nice bull flag price pattern setup. On Oct 16th we sold the Oct 57.50 call for a credit of +.45 giving us a new cost basis of -6.55.
Today, McDonalds (MCD) broke out heading higher (albeit not on strong volume) closing at 58.07. Take a look at the chart:
We think you have two choices here:
1) You could go ahead and sell your Dec 50 long call for +8.20. Giving you a realized profit of +1.65 on a risk basis of 6.55 for an ROI of +25.2% in three weeks.
or
2) You could keep your Dec 50 call and sell the Nov 57.50 call for a credit of +1.40 and a new cost basis of -5.15 and creating a new call diagonal.
If you’re not called out you will make a profit of +1.40 on -6.55 for a potential ROI of +21.3% in a month.
If you are called out you will make +7.50 (the distance of the strikes) on cost basis of -5.15 generating a profit of +2.35 for a potential ROI of +45.6% in a month.
Who’s a good trader!?! 8)
Mojo
PS - Since we have this trade in several accounts we’re going to take half and sell the Dec 50 calls for +25.2% and take the other half into a call diagonal for November.
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Posted on October 24th, 2007 by
Mojo
You won’t believe this! We were day trading along, making good money and doing a good job staying focused, but we had mistakenly scheduled an appointment a couple of weeks ago for 10:30.
So, we had to adjust our positions, exit out and go to cash. The market is heating up (or should we say, down) and we want to stay, but have to leave for our appointment. Guess what we come back to?? The PERFECT Futures Day Trade!
Based on our trading rules we would have gotten in around 1502 and out around 1505. That would have been perfect!
Is wasn’t curiosity that killed the cat, it was carelessness.
Mojo
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Posted on October 21st, 2007 by
Mojo
Friday Oct 19th, 2007 was a horrible day in the market with huge losses and acceleration into the close. In the face of this we would like to build our case for my long term bullish beliefs. Here goes:
Baby boomers have done a terrible job of saving for their retirements. We heard a statistic the other day that 40% of boomers have $25,000 or less saved for retirement! We can’t even begin to believe that’s true, but we do believe it points to the larger problem.
The first boomers recently turned 60 and one boomer has even begun to receive social security. We feel like most of the boomers (and their not so bright financial planners) have greatly underestimated the rising cost of housing, medical care, and fuel. Now in the wane of their careers these folks are beginning to panic.
For the smart one, they will begin to sock away cash into their retirement funds like never before. And what stocks will those funds be chasing? You guessed it, Fortune 500 companies and the occasional speculative trade like biotech.
This force combined with the movement away from overweighting in bonds to more stocks will create a demand curve for those ‘named stocks’ that will push them higher and higher. In the speculative trades, we think you will see a return to huge volatility (as emotion chases those stocks hoping to recover from their years of not investing) and quickly pulling out, turning even a minor downturn into a major move.
What to do? We’re going to buy OEX (S&P 100) long calls with lots of time (maybe LEAPS?) and write covered calls against them for income. And in the future, don’t be surprised as these huge numbers of boomers (and all of their voting power) move to have the tax payers pick up the tab for those that didn’t prepare.
Mojo
PS - Please don’t interpret this to mean that we believe the market will take off on Monday. We don’t. At best we will get a little ‘dead cat bounce’ that we’ll be able to short again.
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Posted on October 19th, 2007 by
Mojo
OK, our vulture trade worked out perfectly. BIDU maintained its stance even advancing a little on Google news leaving our Oct 290/280 BLPS to expire out of the money.
We got filled at +1.30 on a risk 8.70 for an ROI of 15% in one week!
Long live the VULTURE! 
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Posted on October 18th, 2007 by
Mojo
We just got crushed in trading futures yesterday with the huge and violent movements. Even in the pre-market the volume was up and the candle size was huge. In going over our trades, we discovered that we’re placing our trades too early in the candle. Let me explain:
We trade with an intraday chart of 15 min candles, 20 & 50 period moving averages and bollinger bands. Several times we initiated trades that were outside of the bollinger bands but where the candle hadn’t completely formed. Meaning, the 15 min candle was only 5 mins into its formation giving us a misleading form. Had we waited until the last 3 minutes of the candle we would have made better trades.
So we’re going to add the following trading rule to our futures day trading:
We can only place entries on candles that are at least 70% formed. Example: 15 min candles must be at least 10 mins into their formation before we can enter.
Well, we paid a little more tuition. Onward and upward!
Mojo
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