I had no options expire today, so I’ll give a short account summary instead. This is what’s in my account right now:
+300 shares of IWM
+100 shares of MDY
+100 shares of DIS
-1,300 shares of TLT
-800 contracts on TLT July $127 covered puts
My account balance has been massacred by the run higher in bonds (aka drop in yields), but I’m holding tight. I’m ecstatic that I cut my TLT ratio spread position at the end of May. Even with TLT trading above my formerly long strike, I would’ve lost another $3,600 if I had held onto the combination.
It’s bad enough that my balance is down to $80,202.79 (as of 2:12 pm). I would’ve been more upset with myself if I had held on and lost more. My plan was to sell more TLT covered puts or naked calls, but when TLT shot higher, I crossed off more covered puts from my plan and decided to wait on new naked calls. However, the run higher for TLT has been so violent, I opted to keep more cash on the sidelines for now. I’m going to wait for the Brexit (British exit from the EU) next week before making …
Short-term memory can be deceiving sometimes and that’s one of the many reasons I find it important to keep a trader’s journal. If I had not looked back to see my balance at the end of April, I would’ve thought I had killed it in May. Instead, I simply came back strong from the mid-month lows, but actually lost a little over the month.
I ended May with a Net Liquidation Value (NLV) of $87,347.84 and a Net Asset Value (NAV) of $87,284.27 according to Interactive Brokers (IB) after finishing April with an NLV of $87,801.47. The difference in month end values gave me a loss of $453.63 (~0.52%) on paper for May and a realized loss for the month of $2,238.16 on five closing trades (four trades if you count my two TLT May $125 puts trades as one) and the $370.55 in short interest and dividends for my TLT short shares that I paid. Quicken reported that I have an account value of $87,329.65, a penny more than IB’s reported NAV after accounting for interest accruals of -$45.37. I could see the difference in one trade that must be a rounding difference, so I’m leaving it for now and will fix it in July if I don’t get a rounding discrepancy …
I spent some money today, $3,752.39 to be exact. As I did at the end of May, I closed out my ratio spread on TLT that included short in the money calls. TLT dropped hard at the open, down nearly a $1 and I jumped on the opportunity to get out of my short option position while I could. I didn’t want to have the short options in place as TLT went ex-dividend tomorrow since I only had $0.12-0.15 in time value remaining. The shares would’ve been assigned and I would’ve had a margin call.
While TLT was trading at $129.07, I bought to close 10 TLT June $125 calls for $4.10 each and paid $4,104.11 including $4.11 in commission. I received $9,968.26 for these calls originally, so I ended with a realized gain of $5,864.15 on this leg of my combination. The bad news is that I had two legs in this trade and the other one cost me dearly.
Nearly an hour and 20 minutes later, after watching TLT climb steadily all morning, I sold my long calls for June too. While TLT was trading at $129.85, I sold 20 TLT June $134 calls for $0.18 each and received $351.72 …
I only had two options expire today – 10 TLT May $125 covered puts and three TLT May $134 naked calls. Both legs were set to expire worthless and I planned to sell new puts and calls for July, but margin limitations didn’t agree with my plans. Since both legs were far enough out of the money, I considered them nearly impossible to be assigned after mid-day and decided to let them expire worthless. While TLT was trading at $130.13, I sold eight TLT July $127 covered puts for $1.45 each and received $1,156.67 after paying $3.33 in commission.
I tried to sell 10 puts, not just eight, but margin limitations wouldn’t let it go through. I saw that by reducing my order to eight, it would go through. However, after the order triggered, I had a margin warning (so frustrating). That made me go back in to buy back some of my May puts to appease the system. While TLT was trading at $130.10, I bought to close five TLT May $125 covered puts for $0.01 and paid $5.00 total since IB doesn’t charge commission to close options for a penny on the final day of trading.
My account continued to regain value in April even after March’s amazing month of gains. My account value peaked a few thousand dollars higher than I finished, but still am happy to have another solid month in the books. I expect May to help me again, but it will really depend on how bonds move throughout the month.
I ended April with a Net Liquidation Value (NLV) of $87,801.47 and a Net Asset Value (NAV) of $87,562.17 according to Interactive Brokers (IB) after finishing March with an NLV of $84,650.40. That gave me a gain of $3,151.07 (~3.72%) on paper for April and a realized loss for the month of $2,317.26 on only two closing trades. I received $81.62 dividends in April from my MDY shares and deducted it from my realized losses. I also paid $397.86 in short interest, debit interest, and dividends for my TLT short shares. Quicken reported that I have an account value of $87,591.63, the same as IB’s reported NAV after accounting for interest accruals of -$29.46.
While TLT’s influence still dominates my account (which was a good thing again in April), my long positions on DIS, IWM, and MDY all gained ground in April. I keep saying that I’m going to write covered calls on these long shares, …
Taking a loss is never fun, but I should’ve done it sooner maybe. My ratio call spread on TLT set to expire in May didn’t quite go as planned. While TLT was trading at $128.43 this afternoon, I bought to close 10 TLT May $126 calls for $2.85 each and sold to close 20 TLT May $133 calls for $0.25 each. I paid $2,372.38 including $22.38 in commission to dump all 30 contracts.
I brought in $54.52 in February and ended with a realized loss of $2,317.86. That loss comes even with TLT falling $3.19 between my opening and closing trades. My plan was for TLT to fall below $126 by expiration. I could’ve made a decent profit if I hadn’t used such a low strike to sell, but I had no idea TLT would stay elevated this long.
While the ETF could still fall another $2.43 in three weeks, I didn’t want to have to pay the dividend after tomorrow and have an early assignment that would force my hand anyway due to a margin call (again). The time value on the short shares was roughly equal to the expected dividend payment, so I would’ve been banking on further weakness in TLT more …
Once again, I have no options expiring today. I haven’t even made a trade in weeks. So, I’ll give a portfolio update instead. I was planning to sell covered calls on my IWM, MDY, DIS shares, but the charts showed a lot of upside available and I waited. Now, I’m thinking about it again and will probably get to it next week. I might buy a put spread to help hedge my IWM position too.
TLT is still my biggest account influence. My balance fluctuates daily in large part due to the price of TLT. The big debate I’m having now is if I should sell my hedges and cut the losses I expect to have from the time value erosion between now and May expiration and then to the June expiration too. Days like today, when TLT rallies and I save $1,650 on paper, make me want to stay long with these hedges. My other option (no pun intended) is to sell new calls above my hedges. I’d have some risk added, but would still have my hedges in place if TLT only pushes a little higher. I also might sell more puts. My TLT May $125 puts have gained …
March was a fantastic month for nearly everyone who was long stocks. My gains were cut by my short position on TLT, the 20-year Treasury ETF, but I still had a really good month. My stock ETFs produced all of my gains. My TLT shares that I’m short cost me $3,884, but my options on TLT cut that loss by $3,578 to give me a net loss on TLT of $306. TLT actually fell a few cents in March, but I was forced to buy 600 shares for a loss to start the month.
I ended March with a Net Liquidation Value (NLV) of $84,650.40 and a Net Asset Value (NAV) of $84,341.63 (not counting $8.16 in interest accruals not yet paid) according to Interactive Brokers (IB) after finishing February with an NLV of $80,095.43. That gave me a gain of $4,554.97 (~5.69%) on paper for March and a realized loss for the month of $3,198.06 on six closing trades. I received $97.99 dividends in March and deducted it from my realized losses. Quicken reported that I have an account value of $84,305.32, the same as IB’s reported NAV after accounting for dividend and interest accruals of -$81.62 and +$45.31 respectfully.
My account is still very biased towards my TLT short position. I only …
The chart below shows the monthly prices for the past year on SPY, an S&P 500 Index ETF, after closing the week at $206.92, on April 1, 2016.
Technical indicators can be cruel sometimes. As with every stock and index prediction tool, sometimes they give false positives. If they didn’t, everyone would use them and nobody would fall prey to a bear market. The occurrence of these false positives is the primary reason technical investors need to use more than one indicator. Three of my favorite technical indicators to use together are trend lines, moving averages, and Williams %R.
The Williams %R indicator, sometimes simply called %R, was early in its forecast for doom before the August 2015 correction. The steep decline hit stocks the following month before % R had a chance to reset for another red flag. The same indicator accurately predicted the return to the downside in December 2015, but gave a false positive for a lasting rebound in January 2016. The beauty of %R is that when it does give a false positive, the next signal tends to be very …