Save 15% on H&R Block At Home Products Deluxe



New Trade – BULL PUT SPREAD JUL14 (AMZN) and SHORT CALL (AAPL)

Today I opened two new trades for income.

The first trade was against Amazon (AMZN) – a bullish trade – bull put spread. In the morning the trade looked very good, later the stock collapsed (intraday) and then slightly recovered. I think it was Yellen and her testimony sending tech stocks down.

When she finally left off the TV the stock recovered a bit and it is flat since (until this writing).

The overall AMZN trend is very bullish. It broke up recently (I wish I could pick this breakout earlier), and now marching upwards. Originally I wanted to take just a simple call trade, but it exceeded cash on my account. So I decided to go with a spread which is cheaper.

If the stock is so bullish then why I am looking at intraday behavior of the stock?

The reason is, that the trade I opened this morning is just a two day trade. It will expire this Friday and I want it to expire and not roll it. As the momentum is bullish, I have 70% chance that it will expire, but you never know. Yellen may say something investors will not appreciate and all is gone.

It amazes me anyway. She (Yellen) was talking about tech stocks mentioning how overvalued they seem to be and that brought a question to my mind. How many stocks has she ever bought that she dares to analyze the stocks? And the second, if she stops pouring cheap money to the economy, the stock will fall down to their intrinsic value as the artificial buy backs by the companies using cheap cash will end.

Here is the chart of AMZN and the trade I took:

AMZN

Trade Detail

STO 1 Jul14 350/355 put @ $1.48

This trade consists from the following legs:

SELL 1 Jul14 355 put
BUY 1 Jul14 350 put

The trade expires this Friday. If that happens I will keep $148 premium. If any of the leg gets ITM I will either close that leg with a loss or roll it down and in time (that would depend on available cash reserves in my account.

The second trade was a short call against Apple (AAPL).

Three days ago I bought a call option against AAPL which was supposed to be my first purely directional trade. I was also expecting this trade to be short, one or maybe two days.

Thanks to Yellen, tech stocks struggle moving up. Although from a long term perspective, AAPL is very bullish, but it struggles moving higher in a pace I was expecting.

AAPL

As you can see above, overall outlook is positive, but intraday trading yesterday and today was a struggle. That makes my long call trade stagnating and making me no money. That means that I might end up in this trade longer than I expected. But I want to take a benefit of it. I decided to start selling short term (weeklys) calls to generate income while waiting for this trade to move on.

Trade Detail

STO 1 Jul14 4 100 put @ $1.05

This trade will expire next Friday (next week). I hope the stock will not march that high (to $100 a share) by the next Friday, otherwise I will have to roll this trade or close it with a loss.

If it expires, I will bank $105 (minus commissions).

As of now, as AAPL struggles moving higher, this trade is protecting me against losses.

Let’s see this and next week how the market evolves.

Happy Trading!
 
 





Leave a Reply

Your email address will not be published. Required fields are marked *