Update on Tesoro Call Spread

A few days ago I sold a weekly call spread on $TSRO based on the idea it had run too much and was due to fall back in short order.  I bought a 195 call and sold the 185 for this week.  I netted $2 and if the stock stayed under $185 I would keep the whole spread.

Unfortunately, after I put it on, Tesaro went up a bit more and hovered around the $185 mark.  If it shot up to $195 I would be out $1,000 per option.  Or an $800 loss. 

I prefer to close out early if there is any question but couldn't do it because the option wasn't very liquid.  I decided to wait it out this morning and decided to put in a limit order, buying back the $185 strike for a dollar.  I was on the road and couldn't watch the position closely.

The stock dropped almost immediately this morning and held just under $185 for most of the morning, and around 11 my limit order filled, giving me a good profit of $100 per option less commissions.

As it turned out, the stock closed at $182. If I held all day I would have gotten the entire $2.  OK, a win is a win and l'll take it.  It could have been a loss, so I'm happy.

One thing I re-learned is that it's better to trade options that are more liquid.  There are times you just need to end the trade early.

A Put Spread on Chipotle $CMG

I am a little late posting this, and I feel bad because it has been a winner so far, but well, that's the way it is.  A few days ago I sold a put spread on Chipotle, $CMG.  I sold the $395 and bought the $375, both in May, for a possible $800 gain.  Price when I took out the spread was around $398.


A few keys points:


May is really far out for me.  This has a long time to work.  I got the idea from Jim Cramer, he said he thought Chipotle would come back from the dietary issues they had, but it would take 18 months.  We are now a year past that, so six more months would be around 18.  I figure there is some leeway in that so I chose May. (And honestly, Cramer doesn't know, he may be better at estimating that stuff than some people, or maybe not)


The other thing I was instead of multiple puts at close strike prices, I did one with a wide spread.  This gave me a decent return (40%) and lowered commissions.  Risk is pretty high, but not so much I didn't take the wager.


So, just two days out of 60 or so $CMG is up 20 bucks.  A lucky run.  I am already up $150 or so.  I don't think it's likely I will wait it out if I keep this profit.  Although I haven't yet.


I have a couple more positions I'll get to over the next week.  A teaser is that one involves $LABU.

A short term Option Call Spread on $TSRO

In my last post, I discussed why it's better to use a long time frame when selling option spreads. In this point, I am going to show why I ignored that advice.


I sold a call spread on $TSRO today, selling this week's $185 for $3.47 and buying the $195 for $1.47, a $200 spread per option contract.  As usual when selling the spread, a pretty bad risk/reward ratio, 5 to 1 against.  If the stock goes to $195, I loss the entire amount.  Dumb, maybe.


Well, that's why the call it risk.  Yes, it's a potential loss, but a defined one, pretty much.  Is $TSRO going to $195?  It already jumped $20 today to $182 (it was $183 when I put the trade on.) 


The positive is that it doesn't have much time to go up.  The $20 jump today can be traced to a takeover rumor.  We will see if it has legs.  My play is that it doesn't and drops, or at least holds steady through Friday, two days away.  If I get a drop tomorrow, I'll close it early.


Probably more to discuss on this, but I want to get this posted, and chances are no one will read it anyone. 

Selling a put spread on $AAPL

I've been playing around the last few years on option plays.  I'll admit, I haven't spent a lot of time on terminology, so there are better places to find out what an Iron Condor is, and other lingo.


Still, I think that you can profit from this kind of trading.  I have, although I generate enough losses to make me wonder if it can be worthwhile over time.  I still think the answer is yes, but like any other kind of trading, it's probably better as entertainment than a real moneymaker.


Others may disagree with any part of that statement.


PUT SPREADS ON APPLE $AAPL


I put together a simple put spread on $AAPL.  With the stock price around $130, I sold the $125 May 17 put for $2.90 and bought the $115 put for $0.96.  If the stock is over $125 upon expiration, I keep the entire difference of $1.96 per option, (since options are for blocks of 100 shares, that's $196.)


It seems like a decent trade, a high probability of success.  The problem with this strategy is lousy risk/reward ratio.  If $AAPL price falls to $115, I lose the entire spread of $1,000 (less the $196.)  You can see why some people this isn't smart.  I can agree with that. You need a lot of wins to make up for a few really bad losses. 


I've blown up sometimes using these on short durations.  You can make good returns with weekly put or call spreads but if you are wrong, you can completely blow up your account.  So, I am stretching the time frame by going all the way out to May. 


If I get lucky and get some positive movement, I'll close the position early with a win.


I'll try to let you know how it works out.

Shorting $JNUG the Junior Miners ETF

What a year, huh?  A lot of volatility, crazy happenings around the election and overall a 10% gain in the SPY.  So, what did I do for myself?  Nothing good.  As with every year, I think I can trade my way to profits, and that hasn't worked.  Maybe it works for other people, but never has for me.


So, I am back to trying a sensible long term strategy.  This time, revisiting this strategy of shorting the leveraged ETFs.  I think I spread myself too thin last time, a lot of different ETFs, and trying to guess market direction, instead of using the daily rebalancing of the 3X ETFs in my favor.


So, I am now short $JNUG, the Junior miners 3X ETF.  I am offsetting this with a long position in $GDXJ, the single junior miners ETF.  I am using about a 2.6% ratio rather a flat 3.0 as would be indicated.  I'll let you know how it works. 


From my observation, $JNUG is one of the most volatile of the  #X ETFs, and is also available to short on occasion.  I got some.  We'll see how it works.


Thanks for reading, I'll let you know how it works out.

Leveraging the Home Builders

I shorted up two more leveraged 3X ETFs yesterday the Direxion Bull and Bear ETFs, $NAIL and $CLAW.   Like most of the things I trade, I have no idea if these are going up, down or sideways, I am in the trade for the decaying effects of daily rebalancing.

A word on these ETFs.  They aren't really the best idea from one standpoint, in that they are very illiquid and have pretty big bid and ask spreads.  If you move in out of them a lot, the spread will be very damaging.  Therefore, this really needs to be a long term play.

I hope to pretty much never cover this pair, and have them both decay to practically zero.  But I don't know if that will happen.  Life gets in the way sometimes.

I'm thinking of converting this strategy to a pay service through MarketFy.  Of course, it would be helpful to have some positive history.

Good luck and good trading.  The usual disclaimer applies.

A New Start

A few weeks ago I restarted the concept of the Leveraged ETF shortlist.   This time, instead of randomly picking assorted ETFs, I shorted pairs of opposite ETFs.  Things like $NUGT, which is a bull 3X Gold miners ETF, and it's opposite Bear ETF, $DUST.


I will say I was surprised that one day I was able to short $DUST, I hadn't been able to for a long while.  So when it was available, I grabbed it. 


So, as of today, I have 3 pairs, $DUST and $NUGT, $SQQQ and $TQQQ and $VXX and $XIV.  I don't want to have too many, because of the commission cost, but not too few because this strategy isn't flawless.


How can it fail?  If one of the ETFs in a pair falls too much.  I can explain this more some other time.  For now, just know that the best thing to happen is that the funds are volatile and fall equally over time.  As of now, all these pairs are winners.  We will see if that holds up. 


Happy trading.