$4.75 Stock Trades. Visit OptionsHouse.com Today!



Posted by Martin November 17, 2014
No Comments



 
Get up to $150 when you start trading with Motif

What’s stalling the Wall Street rally?


With U.S. stocks nearly 2 percent overvalued, investors are worried that markets will see another correction, says Hugh Jackson, Chairman of Hugh Johnson Advisors.




All Dividend Investing,  Options Trading,  Personal Finance

Last Friday expiration of Netflix (NFLX) Iron Condor for 19.51% profit

Last Friday expiration of Netflix (NFLX) Iron Condor for 19.51% profit

On November 10 2014 I opened an Iron Condor trade against Netflix (NFLX). I opened a call side at 405/407.50 and a put side at 365/363.5 shifted a bit towards bullish trend – meaning that I set the call wing of a Condor higher to protect the trade against stock’s uptrend which I have expected. This made the put side higher too, but as I said, I expected a steady uptrend rather than downtrend.

At the end, the whole week the stock moved completely sideways, an ideal move for Iron Condor. See the chart below:

Netflix (NFLX) expiration

Ideal move for Iron Condor and the stock price stayed safely between my two short options of 365 and 405 strikes. The entire trade looked like this:

BTO 2 NFLX Nov2 14 407.5 call
STO 2 NFLX Nov2 14 405 call
 
In order to trade this Iron Condor, the price must have stayed in between these two legs which it did!
 
STO 2 NFLX Nov2 14 365 put
BTO 2 NFLX Nov2 14 362.5 put
 
@ 0.40 LIMIT DAY

This Friday, our Iron Condor expired worthless and we kept a profit of $80 premium or 19.51% in one week!

Will we be opening a new trade against Netflix to take advantage of its sideways trading? Probably not as we can see a squeeze and Bollinger Bands are getting narrow again, which is a sign of “something is cooking under the hood” event. The stock may shoot up or down rapidly now and we do not want to be on the wrong side. So we need to wait for a sign which direction the stock would move before we engage our money. There are signs of an uptrend move, but we need confirmation.

If you want to be informed about such trade at the same time we take this trade ourselves, you need to subscribe to our free newsletter.

Happy trading!
 
 




All Dividend Investing,  Options Trading,  Personal Finance

October 2014 investing and trading results


My GoalOctober 2014 was a consolidation month for me and I am finally back on track making money trading options. Nevertheless this year 2014 would be a bad year for me, but that is a part of the entire game.

If you want to trade with your money, you can make great returns. Yes, you can make 100% or 500% or even 1000% return. But such returns have a great risk involved. You must be willing to accept it and you must learn how to tame it. If you do not know what you are doing and how to manage risk do not trade otherwise you lose money.

Some time ago I decided to take that risk. It fulfils my dream and makes me happy trading options. Although it is sometimes frustrating, over all I am like a fish in the water. And I can see a huge potential of trading options and making a lot more money than I have ever dreamed of.

The only thing I need to do, besides learning how to trade options successfully, is have rules and patiently follow them.

The reason I lost money in September was that I broke my rules and was greedy. I had a hard time to take smaller profit. I could make $15,000 in a small account, but I was greedy to take only $8,000 even though I knew the trade was extremely risky. Instead of a sure $8,000 gain I ended up with a huge loss.

Time to change it.

Below are the results of my investing and trading. This time I would like to add my other accounts, although not detailed.

Dividend Growth Investing

Investing into dividend stocks is a security to me. Many times I repeated that I trade options and take gains and invest them into dividend growth stocks. I know traders who do something similar. For example John Carter, an option trader with 30 years of experience in trading options and an owner of Smpleroptions.com has a rule to take profits up to 50% and invest in properties. He buys land in Texas.

John buys land, I buy dividend stocks.

TD Account

I primarily trade options in this account, then take proceeds and buy dividend stocks. However, this time I didn’t purchase any of the dividend stocks in this account. My only recent purchase was Alibaba (BABA) which is now 34.16% up. This is not a dividend stock but my growth stock play. I do not have a plan for this stock and thinking to use stop loss to get out of the stock. Not sure if I want to hold it as a long term investment.

What would you with an investment you consider an exception to your strategy and you took it as a “play”? Would you hold it, or sell it after you reach gains and then reinvest proceeds to your primary investment vehicles (in this case dividend stocks)?

For detailed results of this account, see below.

ROTH IRA

This account is a pure dividend growth account. It’s current Net-Liq (net liquidation) value is $17,225.23 up 6.13% from previous month. I only reinvest dividends at this point. I plan to add a full allowed investment at the end of the year from a bonus if I get any.

I reinvest dividends by investing them into a non-transaction fee ETF (RWX). Since I pay no commission to buy this ETF I can invest as little as 1 share. With this approach I could save money in this fund and once I safe enough, I sell a portion of the fund to release money for my next dividend stock purchase.

For example my goal is to save $1,200 in this ETF. Once I reach this goal, I sell shares to release $1,000 and then take that money and buy a dividend growth stock, while I continue saving the new goal. And of course, while waiting I collect dividends from this fund.

As of this writing, I saved $1,112.80 and collected $16.29 (1.46%) in dividends from this fund while waiting (since February 2014). Not bad. Try to put this money into a savings account and hold them there for 10 months and compare the results.

Now I have to wait 30 days to sell the shares from RWX to release $1000. It is a part of the rule to keep all transactions commission free. After 30 days, I will be purchasing a dividend growth stocks.

In this account I received $149.34 dividends this month.

Motif Investing

My Motif account is a great way how to create a mutual fund. It works similar to 401k plans. The account allows you to invest into fractions of the stocks, so you can create a portfolio of your best stocks and start accumulating in it.

I created a few portfolios myself. I have a monthly dividend paying stocks portfolio and regular dividend growth stocks portfolio. Once you create those portfolios you can start buying them all as one piece and you will be buying fractions of the stocks. Great way to stay diversified with 30 or 60 stocks which you wouldn’t be able to purchase all in a regular account.

If you are small or starting investing, Motif is a great wealth builder. And what’s more, if you start investing now, you will get rewarded many times and you will support this blog too. You can get up to $150 when you start trading at Motif Investing! What a great deal!

My current Net-Liq value is $1,333.27, down -1.07% from the last month and I collected $6.31 (0.47%) dividends.

Scottrade

This is my compounding experiment account. I use this strategy since I do not have any. I do not add money to the account as of now. At some point I purchased (PSEC) and I use FRIP program to accumulate this account and stock. I started with 700 dollars and in 2018 I should have $4,631.82 and collecting $386.04 monthly dividends (of course if nothing bad happens with the stock.

401k account

There is nothing much to say about my 401k account. I continue saving 6%, my employer matches up to 3% and the account has a steady growing trend. Today there is $50,757.68, up 5.87% from previous month.

Options Trading

I only trade options in my TD account. As I mentioned above, this month was a consolidation month and I hope November 2014 will show profits again. During October 2014 I got rid of some risky trades (and realized loss) and also changed my strategy a bit shifting into weekly options trading.

I give away my options trade via a newsletter, so if you want you can follow them or copy them in your own account. You can follow my trades at My Trades & Income page. But if you want to receive a trade alert in your email box at the time I enter it with my broker myself, you need to subscribe to my free newsletter.

My newsletter will be free for the next three years (until beginning of 2018) then I will start collecting a fee.

October 2014 TD account results

 

January 2014 premiums: $156.10 (1.55%)
February 2014 premiums: $139.26 (1.38%)
March 2014 premiums: $746.62 (7.41%)
April 2014 premiums: $421.63 (4.19%)
May 2014 premiums: $803.32 (7.98%)
June 2014 premiums: $230.21 (2.29%)
July 2014 premiums: $4,602.44 (45.69%)
August 2014 premiums: -$172.58 (-1.71%)
September 2014 premiums: -$14,399.60 (-142.96%)
October 2014 premiums: -$100.49 (-1.00%)
   
January 2014 dividends: $25.87 (0.26%)
February 2014 dividends: $167.02 (1.66%)
March 2014 dividends: $68.77 (0.68%)
April 2014 dividends: $25.91 (0.26%)
May 2014 dividends: $168.51 (1.67%)
June 2014 dividends: $68.81 (0.68%)
July 2014 dividends: $25.96 (0.26%)
August 2014 dividends: $150.49 (1.49%)
September 2014 dividends: $68.86 (0.68%)
October 2014 dividends: $26.00 (0.26%)
   
Total 2014 income: -$4,996.67 (-49.60%)
2014 unrealized premiums: 2,065.49 (20.51%)
   
Account Equity: $18,703.84 (7.93%)
Account Net-Liq: $14,143.82 (-9.08%)
December 2013 balance: $10,072.25

You can see my dividend and options income on My Trades & Income page.

What about you? How was your October 2014 and the entire year so far? I hope better than mine! Post a link to your website or write down your results to encourage other investors!

Have a great November 2014!!
 
 




All Dividend Investing,  Options Trading,  Personal Finance
Posted by Martin November 12, 2014
No Comments



 
Get up to $150 when you start trading with Motif

Learning options – debit spreads with AAPL

Learning options - debit spreads with AAPL

As I continue learning options as a tool to make more money than just with dividend investing I moved into reviewing debit spreads.

If you follow my blog, you know that I do not prefer debit trades much. With debit trades, you pay up front for the trade and then you have to hope for the stock to move your direction and enough magnitude to overcome time decay in order to make money.

If that doesn’t happen, you lose.

For example, if you buy calls, the stock must move up in your direction. It also must move fast and strong enough. If it doesn’t move up and it goes sideways, you lose money. If it moves up, but slowly, you lose money. Why? The time decay will destroy the option.

The same goes with put options.

With credit trades, time is on your side. Unlike debit trades, your profit is limited, but your loss is unlimited. The debit trade limits your loss and makes your profit unlimited, but the probability of profit is very low.

Credit spreads can help you with limiting your loss. But when I heard about debit spreads I originally rejected them, because I wasn’t in favor of paying up front for a trade. Unlike debit spreads, with credit spread you receive premium right away, but then the stock must stay below (for calls) or above (for puts) your strike in order to keep that premium. But the trade is not directional. As long as the price stays below or above your strikes, it doesn’t matter, what the stock does. It can go sideways, up, or down. As long as it stays below or above your strike, you will make money at expiration.

So what is the difference between a credit spread and debit spread?

Besides I didn’t like paying the premium I realized an interesting and huge difference between the trades.

Here is an example.

I will use AAPL to demonstrate the difference.

A debit spread against AAPL which at this writing is trading at $111.25 a share

Debit Spread

If I decide to buy a debit spread, it would look like this:

BTO 1 AAPL Dec 2014 120 Call
STO 1 AAPL Dec 2014 125 Call

@ 0.24 LIMIT GTC (debit)

Max loss: $24
Max. Gain: $476
Margin requirements: $33.50

This will be a bullish trade and I will start making money anytime the stock moves above the current price. Whenever the stock moves above $111.39 a share I will make 0.05 a contract. Of course, in order to make some real money, the stock would have to move up more than that, but theoretically the trade will become positive even if the stock goes slowly up. If you buy calls out right, you will be losing money.

With this trade, you make a full profit of $476 (1983.33%) per contract when the stock goes above $140 a share. If the stock goes above 125 strike, you will make $256 profit (1066.67%).

Looks cool so far, right?

Credit spread

In order to create a same bullish credit spread (a synthetic trade), you would have to sell put spread (bull put spread). But for the sake of this example, we will use a call credit spread which will be bearish:

STO 1 AAPL Dec 2014 120 Call
BTO 1 AAPL Dec 2014 125 Call

@ 0.24 LIMIT GTC (credit)

Max loss: $476
Max. Gain: $24 (5.04%)
Margin requirements: $486.50

Can you see the difference? If not, let me put both trades next to each other. See the table below:

  Debit Spread Credit Spread
Max. Loss $24.00 $476.00
Max. Gain $476.00 (1983.33%) $24.00 (5.05%)
Margin $33.50 $486.50

I hope now the difference is visible very well, isn’t it?

For this reason I decided to give it a try and open a debit spread against AAPL. I will risk $24 to make $256 if the stock gets above 125 strike. Literally my risk to reward ratio is 1:10 (I risk 1 to make 10) while with credit spread I would risk 10 to make 1.

As I am not sure yet how this trade would proceed in different situations, the best way to learn for me is on a live trade. And since I will only risk $24 I think I can afford this learning on the go trade.

I placed the order right now and I will watch this trade carefully and report how that trade goes.

Happy trading!
 
 




All Dividend Investing,  Options Trading,  Personal Finance

Closing bull put spread against SPX for 11.29% a week early

Closing bull put spread against SPX for 11.29% a week early

We had a bull put spread against SPX which today became worthless and we could close it early. The trade was originally remnants of an Iron Condor we put our on October 21, 2014. The trade didn’t go well originally as our call side 1955/1960 call spread was breached when markets continued their incredible recovery from October lows.

We originally put the Iron Condor 1955/1960/1820/1815 that day and collected 0.40 premium per contract (since we sold 2 contracts we collected $80 premium total). Later the put side expired worthless, but the call side ended in the money (ITM).

When adding this trade on, the market was at 1944 and at 61.8% of Fibonacci retracement level where everybody expected the trend pull back. Although we put the Condor way out of the 1 standard deviation, the market relentlessly marched up and broke thru our call side without hesitation.

We had a dilemma whether to roll the call spread further away in time and keep it a call spread or convert to a put spread. There were no signs of the market to stop so we decided to convert the trade into a bull put spread.

On October 23, 2014 we reversed the 1955/1960 call spread into 1960/1955 put spread and collected another $40 premium. The total premium now reached $120 per the entire trade.

Today, the markets are at 2038 level. I am so glad we reversed the trade.

The SPX is now showing some weakness. It may be a temporary consolidation before the next move or bears exhaustion and we may see trend reversal or pull back. I would say the latter would happen as we are terribly overbought. Look at the chart below and the Fibonacci levels. The market moved up without a stop by more than 100% of the previous fall. I do not think this is a typical behavior.

SPX uptrend

I believe this trend is not sustainable. I cannot say how long this would continue (and don’t take me wrong, it may continue for a long time in this crazy manner). It may also crush soon or even this week.

Therefore I deemed it wise to take the sure profits off of the table and buy the put spread back for a few cents.

Last week we placed the order to buy this spread back for 0.05 per contract. Today the order got executed. We paid $15 total and our total premium received ended at $105 or 11.29% gain. Taking this trade off also released our margin now available for next trading (week early) and secured our profits.

Happy trading and have a great week!
 
 




All Dividend Investing,  Options Trading,  Personal Finance

Closing Bear Call Spread against WYNN one week earlier for 13.79% profit

Closing Bear Call Spread against WYNN one week earlier for 13.79% profit

Today I was able to close my Bear Call Spread against WYNN for a profit. I put this trade on via newsletters on October 16, 2014 with expiration next week.

It was a bumpy road during last couple of weeks. I sold a 205/200 call spread and at some point when WYNN reported earnings, the stock jumped up almost to 200 level endangering the spread.

The jump was very quick however and as quick it was going up, it fell even faster down. Today, the stock continued further down making the spread worthless.

Although, I typically hold my trades until expiration, with this trade I decided to close it earlier. The reason for early closing is simple.

There is still a whole one week left until expiration. During that time many things may happen and the stock may sky rocket. A winning trade may quickly turn into a losing one.

The entire trade was worth 0.07 per contract when I was placing a closing order. I placed a closing order for 0.05 per contract. TD Ameritrade doesn’t charge commissions for such trades, so why not to take advantage of it and close it early.

And my last comment would be to my reasons for holding my trades until expiration while you may have heard many traders saying otherwise.

With a small account as mine I have no choice but to aim for a full premium. Many times my account allows me to take only one or two contracts with premiums around $30 – $150 per trade. Opening and closing a trade early would cause the commissions eating up all profits.

Once my account grows larger and I will be able to open a trade collecting a couple of thousands of dollars, for example $1,000 or $2,000 per trade, it will be OK for me to close a trade leaving me with $300 – $600 profit in the first case or $1,000 in the second case in order to protect profits more efficiently.

Today morning, I placed a closing order this morning to close the trade

BTC 1 WYNN Nov 2014 199 call
STC 1 WYNN Nov 2014 204 call

@ limit 0.05 GTC

The trade executed a few minutes ago. Originally, I collected $65 premium. Today, I paid $5 to close the trade (commissions excluded). That leaves me with a 13.79% profit (or $60 gain per contract).

I also had a few bear call spreads against SPX set to expire today, but those trades were in the money (ITM) and thus couldn’t expire worthless. I had to roll those trades farther away in time and to higher strikes. I will report those trades when they close, or you can subscribe to my newsletter to follow those trades with me.
 
 




All Dividend Investing,  Options Trading,  Personal Finance

Trading the markets in phony environment

Trading the markets in phony environment

Many times again and again investors seek the way how to protect their portfolios and avoid losses when markets tumble.

Many investors try to balance their investing strategy between safety and returns. An old battle going on again and again.

I decided to combine two strategies for this purpose. One aggressive strategy – trading options and the second conservative strategy – dividend growth investing.

The first one is supposed to make me money – a lot of money, the second should provide protection. Thus my plan is to make money and invest them into dividend growth stocks and sometimes to a growth stocks as a power play, such as my recent purchase of Alibaba (BABA).

But what to do when you know that the markets are rigged by the government and its involvement? The crush of the markets is imminent, but no one knows when that actually happen. We know, that the US debt is unsustainable and that interest rates must stay low in order for the US to pay it back, otherwise the US would collapse.

Do you want to believe all modern economists playing the numbers to make the US economy look better than it really is?

According to Paul Singer an Elliott Management Corp. hedge fund manager:

“Nobody can predict how long governments can get away with fake growth, fake money, fake jobs, fake financial stability, fake inflation numbers and fake income growth… When confidence is lost, that loss can be severe, sudden and simultaneous across a number of markets and sectors.”

John Crudele writes in his post “US economic growth is all an illusion”:

  • Fake growth: The US economy is growing moderately. That’s pretty much certain — but it’s not growing as fast as the government would have you believe. The Commerce Department recently pegged third-quarter growth at a 3.5 percent annual rate — but earlier this week, some real numbers came out. Our exports declined in the third quarter and construction spending was weak. So that 3.5 percent guess will probably be revised down to a 2.9 percent annual rate on those numbers alone. But Singer is probably also referring to the artificially low inflation number that Commerce uses in its GDP calculations. If inflation were measured correctly, GDP growth for all years might be 30 percent lower than reported.
  • Fake money: Singer is referring to the $4 trillion in dough the Federal Reserve printed under quantitative easing that has resulted in millions of regular folks not getting much interest income and, therefore, they’re cutting back spending. That’s why the economy is weak.
  • Fake jobs: The Labor Department adds hundreds of thousands of jobs a year to its count for positions it thinks, but can’t prove, are being created by new companies. This practice, which has gone on for decades, needs to be investigated. On Friday, Labor is expected to report job growth of 230,000 for October. That figure will be boosted by another heaping serving of job guesstimates.
  • Fake financial stability: The artificially low interest rates are not only propping up banks and Wall Street profits but also making the US government’s financial position look better than reality. If Washington had to pay market rates for the money it borrows, the US budget deficit and debt levels — already excessive — would be worse.
  • Fake inflation numbers: Commerce doesn’t only play tricks with the inflation number used to calculate the GDP. It also tamps down the consumer price index — and cheats Social Security recipients and others — through academically approved methods like geometric weighting and hedonics.

I wouldn’t express better what I feel about our government economic tools and the reality. And it appears that I am not alone who feels the same way.

So what is ahead of us? I am afraid, it would be more manipulation and more economic experiments which burst at some point in the future.

It is today’s reality and markets react to it. Manipulated by artificial economic measures when our government is trying to push the pendulum of equilibrium to one side just to look better.

I am not only a citizen of this country, but also try to be a responsible investor. I do not want and never had relied on any governmental support and it is the way I want it in the future.

Unlike 47% of my fellow citizens who chose an easier way of dependency on government and stay on welfare, I decided to fight. I know I am well behind the standard savings curve and that’s why I chose the aggressive part of investing (or better say trading) as well.

I am learning the hard way to become a successful trader to make up the difference between my savings and needs in my retirement.

I believe, trading is my only chance to make enough money now rather than waiting 20 more years for my dividend portfolio to kick in.

I am no longer in my 20s or 30s where you have enough time to wait and if you really started early, you have a great chance to be retired by 40. I am way behind this level and already tired. Yes, I am tired. Tired of work, chores, and dependency. Is it a middle age crisis I am experiencing? Maybe.

But I know many traders who went the same journey, learned trading stocks and options, and today they enjoy their life, travel, and are no longer dependent – dependent on work, their boss, their salary, and bills coming in every month.

Everyday, I imagine a situation where I wake up in the morning, spend a few hours in front of the computer reviewing my trades and then go to enjoy my life traveling or just staying home and reading a book.

It sounds easy, but in this market environment, it is a difficult task.

How do you protect your investments to make sure they always bring you the most desired cash?

As a dividend investor it is a very easy task. Pick a high quality blue chip stocks paying 3% or more in dividends, rising them regularly by about a same rate (or more) and stick to them forever. You do not have to worry about their current market value.

As a trader the answer is not that easy. I only have one advice. Stay small if you have a small account and keep a lot of free cash available for adjustments. When the markets turn against you, you will need it to reverse the trade or adjust it.

It was the case of my two recent bear call spreads I has against SPX. Originally, I had an Iron Condor against SPX 2020/2015 calls and 1890/1885 puts. Although I sold the Condor way beyond the 1st standard deviation, thanks to manipulation the call side of the Condor got breached. While the put side expired, I had to roll my calls up and away in time.

I had a same situation with my second bear call spread 2010/2015 which also got breached and I had to roll it away.

Both rolls needed additional margin. Without enough cash in my account, this wouldn’t be possible whatsoever and I would be closing with a loss due to lack of cash.

Keeping enough cash in reserves allows me to respond to the market’s moves and strive to be on the right side of the market.

How do you manage your portfolio against sudden plummets?
 
 




All Dividend Investing,  Options Trading,  Personal Finance

Friday Weeklys Expiration SPX, GOOGL, NFLX

Friday Weeklys Expiration SPX, GOOGL, NFLX

Tomorrow is an expiration day for weekly options. We have a few trades which are set to expire tomorrow and most of them will do so.

We had an Iron Condor against SPX, but our call side of the Condor got breached and we decided to move it away in time and converted it into a bull put spread. Now that side is a bullish trade and we have a new full month to deal with it.

The put side of the Condor will expire worthless tomorrow for a full profit of that spread.

We also had a bear call spread against SPX, which may expire worthless if the market stays below 1965 strike price. During this week the market moved rapidly against us and we need to watch this trade carefully tomorrow to see if it expires or we need to adjust it.

We had a bull put spread against GOOGL, which will expire worthless tomorrow.

Our last trade set to expire tomorrow was a bull put spread against NFLX. That trade will also expire worthless for a full profit.

If those trades expire tomorrow, we will realize a full profit of $292.00 (2.04%) in 5 days.

It is nice to have such gain every week!

Do you want to see our open trades we publish in our newsletter?

You can watch all our trades on our website. All trades sent out via this newsletter are recorded at My Trades & Income page.

Next week, we will continue selling weekly options for weekly income. If you want to receive free trade alerts of every trade we put on, you can subscribe to our newsletter.

After you subscribe, make sure you place our email capital@zzcapitalmanagement.com on your white list or check your spam box so you receive the email alert whenever we are about to open a new trade. Note that all trades we publish via a newsletter a real trades we open ourselves.

Many services out there will charge you hefty fees for information what to trade and how to trade it. With our newsletter, you can get it for free. But not always. We plan to have this service free for the next three years (October 2017) and then we also will charge a fee for this newsletter.

Have a great and Happy Friday and good luck trading stocks and options.




All Dividend Investing,  Options Trading,  Personal Finance

Last week call spread against SPX and put spread TWTR ended for a profit

Last week call spread against SPX and put spread TWTR ended for a profit

After losses I suffered a few weeks ago due to mistakes and greed overtrading my account it looks like I was able to stop the madness and turn the tables around once again. Sometimes it happens to traders that they wipe out their accounts. Of course, this wouldn’t happen to a dividend investor as that is a strategy which avoids risk of trading. That’s why I apply this strategy even in my trading account and it has saved my account from a total disaster.

But if you trade, you must be ready for potential losses. In the past three years I was able to make 45% gains in average. For this great income you have to take a greater risk. This time I mishandled the risk and was forced to give back all my gains.

 

 

Last week my newsletter subscribers received my trade alert for a call spread against S&P 500 (SPX) and we also had a put spread trade out there against Twitter (TWTR) which was placed in September. Both trades ended for a profit.

We had the following spreads last week:

1 SPX 1930/1935 bear call spread – collected $35 premium (since Tuesday, October 14th) – trade expired worthless for the full profit 7.53%

A Twitter trade was a different baby. The stock performed very well during the sell off of the market. While the entire market was panicking TWTR was actually growing. I couldn’t believe this persistence and stock’s resistance to fall.

Unfortunately, this luck didn’t endure to the end. A few days before expiration Twitter investors gave up and started selling. Twitter fell and breached the strike price $49. Although on Friday the stock rallied along with the entire market, it wasn’t enough to stay above the strike to expire worthless.

1 TWTR 49/44 bull put spread – collected $60 premium (since Thursday, September 25th) – the trade had to be closed before expiration for a partial profit of 6.83%

Although the trade was already in the money, or better say at the money, it lost value and we were able to buy it back for $32 a contract (newsletter subscribers could get a better execution price). We received $60 premium and bought the spread back for $32 a contract and that left us with a 6.83% profit.

New trades next week

A few weeks ago I decided to play my options trading a bit safer than before and shift from naked puts and calls to safer spreads. It is not because I no longer like naked puts. I do love them. But my account is small to trade them. They are expensive to trade in order of margin requirements and potential risk.

So I laid down a new plan to trade weekly spreads against S&P 500 (SPX) and stocks which show strength. For example, at this point those stocks are Google, Twitter, Netflix, Wynn, AAPL, Facebook, and some others. I will trade against those stocks as long as they show strength, good premiums and sort of a predictability in their moves.

I will trade weekly options (or strive to trade weekly options) to collect minimum of $30 premium per trade every week. Select options beyond the 1st standard deviation and compound results every week.

As of this writing, I am able to generate 1.5% gain in average. Imagine how well this would compound in 5 years! Well, of course, the key here will be not to make mistakes and defend the trades.

There was one step to this goal I just learned a week ago – take partial gains wherever the trade is turning against me.

In my September results post I laid out a new plan:

 

  1. Trade weekly options against SPX – spreads and condors (later maybe touch butterflies).
  2. Risk no more than $500 per trade (I would rather take two different trades than multiple contracts of one trade) – 3% per account.
  3. Increase risk per trade (number of contracts) once the account starts growing again – keep it at 3% however.
  4. Collect minimum $30 per trade. This would equal to 6% gain weekly per trade.
  5. Reach 2% weekly gain of the account (as of this report I have 1.6% weekly gains.
  6. All trades shall be set up to be out of 1 standard deviation as close as possible to the 2 SD.

 

Today, I am adding:

 

  1. Use mental stop for each trade. If it turns against me, buy the spread back for max. 50% of the received premium, keeping min. 50% gain.

 

Let’s see how this new plan would work next week against new trades I will be opening tomorrow against (GOOGL), (SPX), and (TSLA).

If you want to follow my trades and get an alert into your email before I open, adjust or close a trade, subscribe to my newsletter.

Have a successful next week in your pursue to your financial freedom.

Good luck!
 




All Dividend Investing,  Options Trading,  Personal Finance
Posted by Martin October 19, 2014
4 Comments



 
Get up to $150 when you start trading with Motif

I do not trade stocks but couldn’t help trading BABA


BABAIf you follow my blog, you know that I use two strategies –

1) I invest into dividend growth stocks
and
2) I trade options.
 

When speaking about stocks, I invest into stocks. I do not trade them. In the past I chose dividend stocks for two reasons:

  1. Dividend income
  2. Long term investment

In the past I tried to trade stocks and apply a buy low sell high strategy. I always ended up with buy high and sell low result. I must admit I sucked in trading stocks. I remember once I wanted to get a better price of Johnson & Johnson (JNJ) stock. So I sold it at a lower price than I originally bought it hoping the stock would fall lower and I buy it back at a much lower price. The exact opposite happened. I sold it cheaper than I bought it originally and bought it back higher than I bought if in the first place. Bummer.

After I successfully repeated this silly strategy adding to my losses I realized that I act like an idiot and put a halt to it. It was a time to change strategy.

Dividend stocks strategy

When thinking about a buy and hold strategy I wasn’t comfortable with it. I wanted action, but safety at the same time. I wanted safety and income at the same time. A dividend growth strategy was the answer.

So, where is the action in dividend growth strategy? It is considered a boring investing. I saw action in building a portfolio adding to positions, little by little and see my income growing. Picking stocks, evaluating them and most importantly looking for the best buy point.

I substituted trading stocks with trying to get the best entry point into a stock. It provided me with the desired action.

Some investors take a certain amount of cash every month and invest it in a regular manner without a regards to a current price of a stock. They cost average their positions. Although it is a legit strategy, it wasn’t for me.

In my heart I am a trader, not investor. Analyzing charts, looking for supports and resistances to find the price I wanted to buy a stock. This satisfied my trader’s desire.

Getting a better price of BABA

Two weeks ago I saw an opportunity to repeat that silly strategy I tried so many times in the past and failed. I saw an opportunity to sell my position in Alibaba (BABA), wait a bit and buy it back cheaper.

In my post about a new trade against BABA I described my reasons why I bought this stock. Now I saw the stock falling. It is not a dividend growth stock at all. It is a speculative, growth play.

I originally bought the stock for $89.9 a share. I could sell it for $88 a share and immediately I placed a limit order to buy it back for $86 a share. A few days later, the trade executed and I bought BABA back for cheaper.

This is not to say that I am going to do this on a regular basis, not at all. I still do not trade stocks. It is just a humble report to my readers about my swap trade, which ended successful.

I hope you had a great last week and be able to spot good stock opportunities.

Good luck!
 




All Dividend Investing,  Options Trading,  Personal Finance


This site has been fine-tuned by 14 WordPress Tweaks