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Posted by Martin July 10, 2014
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New Trade – SELL OCT14 CALLS on CLF

New Trade - SELL OCT14 CALLS on CLF

Another bearish trade I see coming was against Cliffs Natural Resources Inc. (CLF). The stock suffered a severe decline in recent months with a few relieves in March 2014 and end of June 2014.

Review the chart below:

CLF

Take a look at point “A” where the stock had the second last relief from a downtrend. The point “B” shows a relief we are experiencing today, but it seems like that the relief may be over, see “C”.

The squeeze trend is turning negative “D” and the wave is very negative “E” which all together makes 70% chance that this rally will fail.

It can only be a temporary decline, creating the first higher low on its way further up, but this theory is not supported by the indicators.

Therefore I decided to take a trade speculating that from now this stock will continue lower and I sold a few naked calls.

Trade Details

STO -5 OCT14 17 call @ $0.66

With this I collected $330 in premium and now I have to wait until October 17 and hope that my judgement was correct.

 

Max Profit $330 When selling calls, the hope is that they will expire worthless, so the max profit is equal to your execution price. Max profit occurs if CLF is below 17 on expiration day, which is October 17 for this option.
Max Loss Infinity In theory, CLF could keep going up, and since you are giving someone else the right to buy it at 17, your max loss is unlimited. However, remember that this trade has a time limit on it. On expiration day, October 17 for this option, if CLF is above 17 you will either need to buy back (cover) the call or you will be assigned -500 shares of CLF as a short position, with an entry of 17.

 
 

 
 

Since I opened the trade, the stock continued selling off pretty hard. Let’s see how it will act in the next couple of months.

If the trade turns against me, I will either roll the calls higher or take the loss.

Happy Trading!




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Posted by Martin July 09, 2014
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New Trade – BUY SEP14 PUTS on TASR

New Trade - BUY SEP14 PUTS on TASR

Yesterday, I was thinking that if the weakness in TASR stock continues, I might be further taking advantage of it and offset losses on my put contracts.

I decided to buy a put contract against TASR. When looking at the charts it is apparent that the selling took place and will be gaining more strength in a couple of the following days (maybe for the end of this week).
 
 

TASR sell off

TASR showing its weakness. See my added comments (arrows and lines) pointing to areas where I see the weakness.

 
 
If you look at the picture, pay attention to arrows pointing to areas where I see the weakness. The stock continued in a sell off with a renewed strength, mainly the first two hours in the morning while the rest of the day it was mostly flat. Slight selling then renewed in the last two hours of today’s session.

If you look at the squeeze indicator, you can see my reversed arc drawn underneath the indicator where I expect the continuation of negative movement – sell off.

Trade Detail

BTO 1 SEP14 12 puts $1.20

I plan to hold this trade open as long as the stock continues going down and sell the put contract on the bottom of the lower arch of the indicator (which will indicate the end of a sell off.

Of course, if the stock stops falling and investors jump back in on a bandwagon, I will use a mental stop to close the trade as quickly as possible.

Have a great trading/investing day. Happy trading!
 




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Posted by Martin July 08, 2014
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Nervousness in the market? Go over it.


Today I received a newsletter note from Teddi Knight from fullyinformed.com and her notes on the market outlook were so great and expressing my point of view, that I decided to re-post it here for my readers.

Her opinion (as an experienced trader) is what I believe in myself and what I try to stress to my friends when we talk about options and when they immediately tell me after I tell them what I do, that options are risky.

My answer is: “Yes, they are risky, if you have no clue what are you doing and trade them. Otherwise they are safer than stocks.”

My emphasis added:

My outlook for today was for weakness but still a slightly positive close. That obviously is not going to happen…

Meanwhile to help calm some nervousness I wrote this article on Understanding Investing In Stocks. Most investors are trapped by the emotion of stock investing. They have read books, taken courses, joined various websites but still end up with losses or substandard profits. They know they could do better but can’t figure out how. This article is open to all investors. It explains how to understand the small size of the stock markets in general and how to approach everything from stock selection to the role options play in protecting and boosting portfolios. When financial planners and brokers advise investors that “options are too risky”, they truly do not understand the stock market at all. It is not options that are “too risky” but stocks. Stocks in general are “risky” and options are what assists in controlling some of the risk of investing in stocks.

If you want to read the whole article, go to Teddi’s blog and read Understanding Investing In Stocks

It is worth reading.

Once you are done, you will stay calm…

Happy trading & investing.

 




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Posted by Martin July 08, 2014
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New Trade & Rollover – SELL DEC14 CALLS & ROLL SEP14 PUTS on TASR

New Trade & Rollover - SELL DEC14 CALLS & ROLL SEP14 PUTS on TASR

Taser Int. (TASR) started trading day with a renewed sell off. It opened at $12.88, briefly raised to $13.02 a share and then continued sharply lower. Within an hour the stock dropped all the way down to $11.97 a share.

Weakness I could see on my indicators along with the price action convinced me that it would be a good idea to roll my put positions lower and further in time.

Although yesterday it looked like my put contracts are still safe – have enough time and the selloff wasn’t large and strong, this morning the situation changed.

 

TASR
TASR under a sell off today morning convinced me to roll down my puts to protect my trade.

 

Investors are pessimistic about this company, so I expect more rollovers of my put trades.

This price action convinced me about the weakness in the stock so I decided scale into more naked calls against this stock to generate cash available for protection of my puts.

Trade Detail

Trade 1

STO -10 DEC14 14 calls $0.90

Trade 2

BTC 15 SEP14 13 puts @ 1.45 & STO -17 DEC14 12 puts $1.20 for CREDIT 1.00

Now the stock needs to stay in the range 12 – 14 a share. If that happens I will realize full profit as both sides of this trade expire worthless and I will keep premiums from puts as well as from calls.

If any of the side gets breached, I will roll that leg again down (or up in case of calls) and further away in time.

I will keep you posted on this trade.

Happy trading and investing!
 




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Posted by Martin July 07, 2014
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New Trade – SELL DEC14 CALLS on TASR

New Trade - SELL DEC14 CALLS on TASR

I have a few naked puts against Taser Inc. (TASR) which fell from $20 a share all the way down to $13. I had a few puts at 18 strike and was forced to roll the puts down all the way to 13 strike.

Recently, the stock seemed to stop at $13 a share, but today the stock seems to renew its fall and continued below 13 strike price.

I have plenty of time in my put contracts, so there is no need to roll the options right now. But the stock created a downward setup and it may continue down.

I decided to open a naked call trade against this stock speculating that it will not move higher and also offsetting my put options a bit. In other words I plan on collecting premiums selling calls (see a video about Karen the Supertrader’s strategy of selling naked puts and calls against indexes) on this depressed stock.

I just hope that my indicators are good and that I can rely on what I see. If so and the stock stays below $14 a share this trade will expire worthless and I will keep the premium.

If the stock continues higher, I may pursue rolling this trade higher the same way as rolling puts lower.

Trade Details

STO -5 DEC14 14 $1.10

 

Max Profit $550 When selling calls, the hope is that they will expire worthless, so the max profit is equal to your execution price. Max profit occurs if TASR is below 14 on expiration day, which is December 19 for this option.
Max Loss Infinity In theory, TASR could keep going up, and since you are giving someone else the right to buy it at 14, your max loss is unlimited. However, remember that this trade has a time limit on it. On expiration day, December 19 for this option, if TASR is above 14 you will either need to buy back (cover) the call or you will be assigned -500 shares of TASR as a short position, with an entry of 14.

 
 

 
 

Have a great day and happy trading and investing!
 




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Posted by Martin July 06, 2014
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How To Sell Puts For Max Profits In Shorter Time


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Posted by Martin July 05, 2014
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All time high trading and investing results in June 2014

All time high trading and investing results in June 2014

My trading and investing in 2014 was the best and all time high I have ever reached in the entire history of trading and investing. Mr. Market was helping a lot to reach these results and I understand that falling markets will be the biggest test of my trading abilities. But I will worry about it when that happens.

To say that I have to be prepared for that case when markets start falling. The best way to get ready is to hold enough cash reserves.

If you are a pure dividend investor, you do not have to worry. You can invest all your cash when the markets fall and ride the waves.

If you use margin and buy dividend stocks on margin (which I do) you want to hold some cash.

If you trade options on margin (which in case of selling naked puts is a must) you definitely want to hold cash in reserves. If the market falls dramatically, this cash will protect you against your positions losing value (and in case of short naked options gaining value) so you avoid margin calls.

Some traders recommend 30% cash, some even 50%. My goal is to have 30% in cash, although I feel uncomfortable having so much cash sitting idle in my account. The point is to change my investor’s mind to see such cash as working as insurance. Even though it makes no cash, it will protect my already made cash.

That’s the way you can help protecting your portfolio against involuntary liquidation.

June 2014 was the best month so far I ever had. My account doubled for the year, see my new goal here. My overall growth in this month (adjusted for contributions) was staggering 15.91%. The best growth so far in 2014. My second best month was February when the account grew 10.88%

June 2014
(Our trading account growth since mid-2011. It continues outpacing S&P 500. The chart is adjusted for contributions – contributions are removed from the growth.)

Next week, I will be starting my business – Investment Company. The ultimate goal is to start a hedge fund. But I will start small, with Investment Company first, then working on all licensing and once done, start a hedge fund.

Here are new results for TD account only:

 

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%)
   
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%)
   
Total 2014 income: $3,549.69 (35.50%)
2014 unrealized premiums: $2,364.00 (23.64%)
   
Account balance: $21,331.68 (+15.91%)
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 June 2014 and the entire year so far? Post a link to your website or write down your results to encourage other investors!

Have a great July 2014 at the markets and a Happy 4th of July!!
 
 




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Posted by Martin July 01, 2014
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New Trade – SELL DEC14 PUTS on TEVA

New Trade - SELL DEC14 PUTS on TEVA

Teva Pharmaceutical Industries Limited (TEVA) recently offers interesting premiums and 60% chance that it will expire OTM. The trade setup is positive too. I decided to take this trade and sell one December contract to collect nice premium.

I would love to trade shorter time frame, but with a small account as mine I need to take longer terms to collect higher premiums and use options time ladder to spread my options trades among more months.

Also there is a good chance that the option becomes worthless earlier than in December.

Trade Detail

STO 1 TEVA DEC14 50 PUT @ $2.39

 

Max Profit $239 When selling puts, the hope is that they will expire worthless, so the max profit is equal to your execution price. Max profit occurs if TEVA is above 50 on expiration day, which is December 19 for this option.
Max Loss $4750 In theory, TEVA could keep going down all the way to zero, and since you are giving someone else the right to sell it at 50, your max loss is very high. However, remember that this trade has a time limit on it. On expiration day, December 19 for this option, if TEVA is below 50 you will either need to buy back (cover), roll the put, or you will be assigned -100 shares of TEVA as a long position, with an entry of 50.

 
 

 
 

At this point this will be a waiting game. Waiting for expiration, or action in case rolling of the put will be needed.

In case you are not familiar how rolling the put option works, here is a quick explanation. Rolling the put basically means that if the underlying stock (TEVA) price falls below strike price of the option (50) then at expiration day or earlier you want to buy this contract back and sell a new contract with lower strike (45 for example) and longer expiration time (January 2015, for example). When rolling a put, you want to sell a new contract so that you again receive a credit. If it is not possible, you may want to sell two or more contracts to offset the buyback of the original contract.

Have agreat day and happy trading and investing!
 




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Posted by Martin June 30, 2014
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Trade close – Franklin Resources Inc. (BEN) put selling for profit 2.15% and GameStop Corp. (GME) put selling for profit 5.69%

Trade close - Franklin Resources Inc. (BEN) put selling for profit 2.15% and GameStop Corp. (GME) put selling for profit 5.69%

As I mentioned in my post on Friday, I was expecting two more trades to close soon as they would get closer to becoming worthless. It happened today!

On Friday last week, my put selling trade against LINE lost value to $0.05 per contract, so I could buy it back (for free) and keep the entire profit. Today my last two trades with July expiration became worthless and I could buy them back (again for free) and release my margin cash for next trading.

There is no reason, or value waiting until July 18th to let those options expire (which may not happen if the stocks suddenly fall), so why leaving money on the table and risk three more weeks that I may lose them.

A few days ago I read in a book “Mastering the Trade” by John F Carter about a trader who did just that. Her option contract was already worthless and she refused to take the trade off the table. She thought that when a trade is already worth only 0.05 then there is no way the trade may turn bad. Well, it did. Not only the trader lost the entire premium she received, but the trade turned into a much larger loss.

I do not want to be such a sucker and I took those trades off the table as soon as they reached 0.05 value.

That allowed me to keep the entire profit (minus original entry commission and a buyback price). For Franklin Resources Inc. (BEN) options trade that turned to be $96.18 premium (2.15%) in two months and for GameStop Corp. (GME) the trade delivered $174.18 (5.69%) in little less than two months.

I will use the released margin for another trade, which I will report tomorrow. You can follow my twitter account for details.

Happy Trading!
 
 




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Posted by Martin June 27, 2014
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Trade close – Line Energy (LINE) put selling for profit 3.68%

Trade close - Line Energy (LINE) put selling for profit 3.68%

Today, I closed a trade against Line Energy (LINE) which I opened at the beginning of May (05/07/2014) with expiration in July – next month. I sold 1 put contract with 28 strike and July expiration for 1 dollar (or $100 collected in premiums).

Today, this trade was worthless (it actually cost 0.05) and I could buy it back for $5 and close it and keep $95 in premiums. Thanks to TD Ameritrade 5 cent feature I paid zero commission.

Great trade. I could close it three weeks before expiration, keep almost entire profit and release my margin for next trading.

I have two more trades which may lose value next week. It will be GME 34 strike July contract and BEN 50 strike July contract. Then I might be able to open another trade. But that will depend on my available cash as I am raising cash to stay small and have enough reserves for trade adjustments.

Happy Trading and investing!




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