Th Bull Put Spread on Ford

Hello All,
Here goes a Bull Put Spread on Ford.  I am using the March 2010 BTO $12 puts and selling the $13 Puts.  I like the way this company has been showing bullish signs.  Lately I have wanted to spread trade more to mitigate my losses.  With the current breakout on Monday, surpassing the $12 resistance, I think we are in line to a great run up.

As we can see, I think we have a wedge pattern erupting.  The last few days have increased in volume.  Our secondary indicators are also bullish, such as the MACD.

Overall, I think this is a good trade, with the stock keeping above $13 before the expiration of our March options.

(Charts courtesy of MachTrader)

A hopefull revival of the postings!

Hello everyone,


It's been a while since I've written anything. Truth is I have had a lot going on. From moving and my day job, I've neglected the blog a lot. Well here we go. Recently I have been playing a Bear Put Spread on SLV. This fund has been showing bearish signs on the daily chart. I also have a Bear Call Spread on TM. This stock has been extremely bearish, as expected with any recall. Not to mention the bearish signals being scene too.



I will drop in later.

It's Been A While

Long time no see.

I moved from San Diego, got a new job, and moved again.  No matter what, I learned some leasons.  STAY FOCUSED ON YOUR RULES.  I was playing GOOG and caught a nice $25 gain.  Nice.  What sucked on the extra $50 profit I lost because I didn't stick to the rules.

Point being:  STAY FOCUSED

Busy busy July

Hey everyone,
Things have been moving fast in July. I cashed out of Big Lots finally a few weeks ago. Because of the way it moved, there was minimal gain. In the next few days we went into Nike Inc., and didn't do too well.

Nonetheless, we are now into a LEAPS covered write on Dean Foods (DF). For those who are curious what this is, let me explain. A typical covered call involves buying the stock, then selling (AKA writing) the front month call option.

Example:
XYZ stock sells for $10/share. You buy 100 shares, totaling $1000.

Next, you find the front month call option, first one OTM (Out The Money), which in this case would be $12.50 strike. Lets say you are only a couple weeks out from expiration, and therefore the cost of this option is $0.50/contract.

Therefore, selling 100 contracts would yield a profit of $50. $50/$1000=5% ROI/Month.

Not bad. But remember this play is designed for flat or mildly bullish stock. It should be obvious that if the stock value decreases, your core value in stock goes down. And if we see a very bullish move, you lose on profit.

The LEAPS covered write is similar, replacing the stock with the LEAPS (Long Term Equity Anticipation Securities). The benefit here is you spend about 25% of what you would spend buying stock outright. Given our example, lets look how this pans out.

Stock is $10. Therefor, 25% of this is $2.50. 100 contracts=$250.

Selling front month options (per our previous example): $12.50 strike @ $0.50/contract=$50

$50/$250=20% ROI/Month.

The downfall to this play, is our risk graph curves down from profit to losses if the stock price rises too high. This occurs due to a number of reasons, such as delta values, time decays, ect.

The point here is seeing how powerful some plays are. Right now our play is in action. Assuming things swing our way, we will see a $0.80 return per contract.

Until next time.

Trade Adjustment - Big Lots Inc

Hello,
We saw a nice move to the bear side in our Big Lots Inc. (BIG) put play. We opened at a nice low $20.24, dove down to $19.60, only to rise to close at $20.00. Because of our initial target of $19.89 intraday, I have decided it is time to adjust to start locking in profits.

The first goal hear is to define our next, intermediate office. After plotting average price movements & Fibonacci levels, I've made a decision to set the next target at $18.27.

Taking a look at volatility, we can see that 30 day HV is on the rise, which is expected of a falling stock. This is confirmed by bearish volume, which is rising. The best thing I can see is the stock price breaking the 200 MA.

So far, I'm feeling confident we will end up profitable. Only time will tell.

This Week Was Frustrating

Hello all,

This week has been an interesting one. After a few days, we finally are in a long put position on Big Lots Inc. (BIG). I saw this play develop earlier this week as I scanned them market.

As we can see from the chart above, this is a classic down trending stock, gaining momentum. We have the 20 day MA below the 50 day MA. Our stock is riding the 200 day MA. We can see a retracement , followed by a red dark cloud cover candle stick. After reviewing volume, and secondary indicators, I decided to place a trade, using a buy trigger order contingent on this stock going below $20.78 ($0.05 below Mondays low)

This stock has been frustrating. The next two days have seemed to be consolidating. We've seen down days, but no significant movement to our trigger. Then, finally after three days on Thursday, we saw some action.

We finally got in. And after some nice movement, Big Lots closed at $20.32. We anticipate a nice movement down, and if Fibonacci works out, may see a new low at $18.27.

USO Update

The market opening today provided a bittersweet condition. The good news is that USO opened above our stop, lowering our exposure to assignment. However, we had been stopped out, buying to close the June 38 puts at $0.65. This produced a loss of $0.25.

Lessons learned, many! First, dropping down to the next lower strike price may have kept us in this position, and lowered our risk of assignment. Although we would have received a lower premium, we would have more likely made a profit.

Second, when we opened this position, intraday trading appeared to be pivotal, in that our intraday trending was on the verge of changing. Although the rise in volatility at the time may have contributed to higher premiums, I feel we should have taken a more conservative approach.

Lastly, and I think this should be a new rule for me, DON'T TRADE WHILE TRAVELING! I did not have access to all my tools, and this is a severe mistake.

I would like to explore more cash flow plays for USO, provided it finishes it's current retracement and continues its up trend.

I am on my way to Hawaii for my honeymoon. I will write again next week.

John
Sent from my Verizon Wireless BlackBerry