My CSCO position started with a mistake.  While getting used to the platform after switching my account to IB I mistakenly sold calls instead of a put, as if I hadn’t made hundreds of trades for years and didn’t know what I was doing.  I didn’t panic.  Instead of closing out the short calls on a stock would go higher I sold in the money puts at a strike $2 higher than the calls.  This gave me a cushion to make a $200 profit if CSCO stayed between $23.00-25.00 through expiration. 

CSCO made a steady climb since I added my second leg, but in a reasonable enough fashion that I knew I could manage my position easily enough.  I thought about closing it last week to pocket $100 profit and move on, but thought I had a good chance to make it to expiration without having to close it early.  That’s about the time CSCO started a strong rally.  Today it went up more than $1.00 and I decided that I missed my chance for a profit and had to cut my losses while they were small.  While CSCO was trading at $26.02 I bought to close three CSCO March 25 naked …

I charted the Dow Jones Industrial Average ($DJIA) after the markets closed on Friday, March 3, 2010 when the Dow finished the week at 10,566.20.
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In my S&P 500 chart last weekend I wrote that Monday would be a great indicator for how the markets would likely follow through.  Monday was a big day and I proved to be correct in my prediction with how the markets behaved for the rest of the week.  I have a hard time not liking this Dow Jones chart below too.  It has a lot of bullish indicators working in its favor.  The first is that it broke out above its recent trend line of higher lows.  I’d like to see a test on this same trend line I drew with it now acting as support.  If we can get that on Monday or Tuesday I’ll be more confident that it will hold for longer.  Before going too far to the bullish side I want to see that this line holds and Friday wasn’t …

Yesterday afternoon I place a few limit orders late in the trading day for new naked puts on three different underlying stocks and ETFs - UWM, ITRI and JPM.  All of them were sitting at levels that I would have been comfortable selling the options, but I wanted to try for a little extra.  I don’t know if it was a touch of greed, caution or an attempt at patience.  Anyway, it backfired on me as all three started off higher today and I missed what would have been good trades yesterday.  I was eyeing UWM due to the good premiums and thought the chart (yesterday) showed a good entry point if only it would pull back a touch.  ITRI was written up in this week’s Barron’s as a good pick (I agree) and I thought the risk/reward was worth it for yesterday’s stock price and option premiums, but now ITRI is a little higher than I’d like to work with for an entry point with lower premiums.  I left my orders in on those two through the end of this week.

JPM did me a favor and although it started off high, it came rolled over a little and moved below yesterday afternoon’s …

I’m pretty happy with how February worked out for me, especially considering that I’m not fully invested still.   I finished February with a combined balance of $103,076.06 ($91,897.17 with IBKR and $11,178.89 with AMTD) which is up from my January finishing balance of $98,663.75.  $1,500 of the increase is from the deposit I made on February 8th and $2,912.31 is from growth.  I’m 82.03% invested overall and of my equity allocation (aka my IBKR account) 79.84% is in use, meaning I have over 20% of my IBKR account in cash. 

As I pointed out in my S&P 500 chart a couple of days ago, we got an early technical indicator that it was time to invest heavily again in the short term.  With that in mind I increased my put selling and it has paid off so far.  I had to slow it down the week before options expiration so I could push more of my option expirations to the next month out and now I’m trying to do some more specific stock picking to keep my options weighted close to 50% each for the two forward months.  I’m …

I charted the S&P 500 ($SPX) after the markets closed on Friday, February 26, 2010 when the index closed at 1104.49.
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A few weeks ago when I posted a chart of the SPX I said the Williams %R indicator would give us the best indicator of when to buy.  A few days later Williams %R held to form and issued its own buy rating for the market.  Once this new little rally started, the line of resistance I flagged earlier for the 100 day moving average became less significant and the SPX closed above it, tested it and moved even higher.  After breaking above its 50 day moving average intraday the SPX couldn’t maintain its bull run.  It closed on the moving average one day and then below it the next which issued a bearish signal and again, stocks followed the technical indicator. 

This two day top just so happened to coincide with the trend line that used to be higher lows as support, but now has become …

I thought UCO would dip a little more than it has, but the lower US dollar opened the door for higher oil prices and I decided to take a nibble.  I mentioned in my post yesterday that I would probably sell April 11 puts on UCO, but with the move higher for UCO today I saw an opportunity to take in less exposure and increase my premium intake.  While UCO was trading at $12.20 I sold three April 12 naked puts at $0.90 each and received $267.86 after commissions.

My original plan of selling the $11 strike seemed less appealing when I saw the premiums were down to $0.50 each.  While a $0.50 gain while risking only $10.50 would be a great return I would have had to sell five contracts at the $11 strike to come within $20 of what I brought in at the $12 strike with only three contracts.  I only have $3,330 at risk the way following this path instead of $5,250 as I would have had by selling the lower strike.  Of course the probability of taking an option assignment at this level is higher than at the lower strike, but with so little at risk I don’t mind taking an option …

When my February options were expiring I wrote that I planned to jump right back in on a few of my positions, but by the time Monday rolled around I started having second thoughts.  I entered a limit order to sell new CVS puts if/when CVS takes another dip as it’s prone to do.  I thought about UCO again, but decided I should wait for a dip in oil too.  I haven’t entered a limit order for new UCO naked puts yet, but I’m watching it and still considering the trade.  The $11 strike is getting closer to worth the risk. I actually enjoyed today’s market movement.  There’s nothing like being underinvested while the indexes fall.  I lost less than half a percent and the S&P 500 fell over 1.1%. 

Although I’ve enjoyed that feeling for the day, I don’t want to miss out on future gains, so I added a little to my portfolio today in the form of NDAQ options.  While NDAQ was trading at $18.40 I sold three NDAQ April 19 calls at $0.52 each and three NDAQ April 18 puts at $0.58 each and received $325.72 after commissions.  I started off with a limit order for the strangle at $1.15, but after …

I charted the Dow Jones Industrial Average (INDU, DJIA, $DJI) after the markets closed on Friday, February 19, 2010 when it finished the week at 10,402.35

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The DJIA has made a good run from its lows a couple of weeks ago and the Williams %R indicator was an early indicator more positive days were going to follow the initial bump higher.  The trick with the way the Dow closed the week is that it stopped at resistance from two different trend lines.  I’d be happy to buy in on the Williams %R indicator alone, but I want to see two closes above the two ascending trend lines below.  I’d also like to see heavier volume on the positive days.  We’ve seen heavy volume scattered in over the past month, but it has predominately been on distribution (down) days.

We saw a little foreshadowing of the move higher even before %R perked up.  The short trend line of lower highs broke intraday two days in a row.  Each day didn’t stay …

I sold February INTC Puts last month and took a realized gain on the options this afternoon.  I considered buying my February puts back and leaving it at that, but decided I could take a little risk on INTC since I think the downside is limited.  INTC has been working through a trading range for months and is at the high end of it right now.  That leaves a few paths for INTC to take by April options expiration.  It could fall back into its trading channel and finish lower eight weeks from now, but ready to rebound or it could finish about where it is now (which oddly is where it was when I sold the February puts) or it could break out from this consolidation phase.  Whichever way it goes, I think if I’m going to be invested in the markets, INTC is a key core holding while we come out of a recession and by using naked puts my chances for a profit increase significantly.

With all of that in mind, I rolled the February puts to April expiration.  In other words, while INTC was trading at between $20.87 and $20.77 (yes, it …