Posted on February 14th, 2008 by
Mojo
Well we’ve been in a fight with Target for the last three weeks. On January 10 we got filled on a bear call spread for Feb 55/60 for a credit of +.75. Shortly after getting filled the stock reverse against us and moved north. Here’s the chart:
It’s been flirting with our short side for the past week and making me nervous. We are 2 days to expiration and I have zero faith in the markets. This morning Target moved sharply down giving us the opportunity to close our bear call spread for a debit of -.15.
We originally brought in a credit of +.75 minus our debit to close of -.15 nets us +.60. +.60 over a risk of 4.25 gives us an actual ROI of +14% in a month!
We were wrong about the price movement, put time decay and probabilities on our side and still made $$$. SWEET!
Mojo
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Posted on February 13th, 2008 by
Mojo
I’m closing my Google bear call spread for Valentine’s. BIDU earnings are coming up this afternoon and Google may jump on whatever news BIDU presents. The overall market is racing up and Google has been rising over the past 5 days.
I’m closing down my trade for -2.10 debit. I originally brought in +.80 so I’ve lost -1.30 over a risk of 9.20 for an actual ROI of -14% in a week!
Of course this only adding evidence to my dislike for verticals. I entered this trade on a GTC for a morning fill. That wasn’t smart. We were sitting above support at 500. That wasn’t smart. I didn’t know that BIDU was reporting earnings this week. That wasn’t smart. I felt like the market would rally for a few days this week and didn’t take that into consideration. That wasn’t smart.
Overall, I can’t blame verticals for this. It was all my fault. Oh well, $270 down the drain. I guess I’d better tell my wife we are eating at home for Valentines!
Mojo
PS - I should have listened to Vulture Boy. When I ran this trade by him he said ‘I never do Vultures on Google, Apple, or Rimm. Too volatile.’ Very wise indeed.
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Posted on February 8th, 2008 by
Mojo
Today, I closed down our bull put spread on Potash (POT) for a debit of .25. We originally put on this spread by legging in and achieving a credit of +2.80. With this debit we earned +2.55 over a risk of 2.20 for an actual ROI of +116% in three weeks!!
That’s a SWEET BOWL OF CHICKEN!! 
Mojo
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Posted on February 8th, 2008 by
Mojo
Today was decision day for our bull put spread on RIG. We either needed to roll it, adjust it, or close the trade to avoid the Gamma risk going into options expiration week.
I couldn’t find anything that was a nice fit so roll or adjust into so I decided to close it. With this morning’s run up RIG is at 125. $5 below where we need it to be. We could close right now for a debit of -3.30. Because of Gamma this is equivalent to closing the trade on expiry with the stock price at 26.70. We may or may not be at or above this price at expiry and I’m not willing to risk losing 100% to find out. I think we should take it and close the trade. We got filled for a debit of -3.10.
Since we had originally received a credit of +1.15 minus our 3.10 debit this gives us a loss of -1.95. 1.95 loss over a risk of 3.85 gives us an actual ROI of -51% in a month.
Now, no one is excited about losing 51% on a trade. For a vertical going against us this is actually pretty good for a loss since we were sized and willing to lose 100%. Maximizing your winners and minimizing your losers is a key element in trading and we’ve done well here.
Mojo
PS - Just for fun and to see the effects of gamma…. If RIG is out of the money at expiry what would it cost us to close this trade?
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Posted on February 7th, 2008 by
Mojo
We finally got filled on our GTC order to close our BRCS on NILE. We originally put on this spread for a credit of +.85 over a risk of 4.15. Today, we closed for a .10 debit locking in our profit of +.75 over a risk of 4.15 for an actual ROI of +18% in 2 weeks.
Mojo
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Posted on January 31st, 2008 by
Mojo
I closed out AAPL today for a debit of -3.30. We had originally put this iron condor for a credit of +1.47 here. This was supposed to be a vega crush trade on earnings. Unfortunately it gapped down huge after earnings and we lowered our BRCS down to 160s and picked up another +.79 for a total credit of +2.26. Even with today’s huge up move AAPL was not rising strongly above our short strike. We are going to take this opportunity to close out the IC. We closed for a debit of -3.30 on a credit of +2.26 for a total loss of -1.04. That loss of -1.04 was on an original risk of 8.53 for an actual ROI of -12% two weeks.
Pre-market AMZN was trading down $9 and gapped down on the open with poor futures. Using a GTC order I purchased a put diag (long Apr 80, short Feb 60) for a debit of -12.34. I got a horrible fill and the stock price reversed and headed up $9 on high volume. I exited the trade with a stop loss and got another horrible fill and a credit of +8.43. That gave me a loss of -3.91 over 12.34 for an actual ROI of -32% in one day! Now that takes some talent!!
I will not use GTC orders to enter trades early in the morning especially post earnings. Had I put a time entry on this for after 2pm I could have save myself considerable pain. What’s worse is I already had a rule that “I won’t use GTC order for entry.”
Mojo
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Posted on December 24th, 2007 by
Mojo
On November 30th we opened a bear call spread on SPY. We weren’t sold on the rally and felt like we were getting a good credit with good probabilities. We received a credit of +.37 a share on a risk of -1.43 with a probability of 79% success.
On December 10th, with the market rally threatening our position we received an email looking for us to exit (which is always good to check). Using our Think or Swim software, we rechecked our probabilities (still at 66%) and decided to hold. The market turned down again and our position gained in strength.
On Friday (Dec expiry), our spread expired out-of-the-money achieving our maximum potential profit of +26% in three weeks.
Mojo
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