Category: Beginners

I received the following email from TD Ameritrade this morning regarding an option assignment from my naked puts on Boeing Co (BA):
Date: 11-14-2007

Dear Valued Client,

RE: For account ending in ****

You have recently been assigned the following option position:

 1 BAWT.

If you don’t have sufficient cash or positions to cover this assignment, please wire the necessary funds or make the necessary trades to close your position.

If you want to trade the position created by this assignment but it hasn’t posted to your account …

I love Wall Street if for no other reason than the sayings that come out of there.  “A Dead Cat Bounce” is used when a stock or index has fallen hard and then has a short lived bounce or up tick before coming back down.  Basically it means that even if a cat is dead weight and you drop it, you stand a chance to see it come off the ground again before settling back to being a lump of …

It’s been a few months since I wrote about the VIX hitting four year highs.  On Friday, the CBOE NASDAQ Volatility Index (VXN) closed at 32.52, its highest point since Q3 2003.  The VIX is trying to get back there to its recent highs too and if we get another 100+ point drop in a day it should reach a new near-term high again.  The VXN is surging this time more than the VIX due to …

Today is an important day to remember this, a gain or loss is not realized until you exit your position.  I’m taking a beating today - down 3%, but only on paper.  Out of the 17 positions I have open right now, 11 are down, but I haven’t sold any of these.  That means I’ve taken no losses.  When I went through one of my sanity checks to see how I’m doing in real terms I …

This post is somewhat of a continuation of an earlier post on patience. 

Every weekend I chart one of the major indices (QQQQ, DJIA, S&P 500) and post about it to give myself an idea of where I think the overall markets might be headed.  A few weeks ago I started keeping my opinion of the near-term market direction at the top of the home page.  I think this is crucial as part of a trading model that works …

I checked the futures this morning and saw the markets were headed higher as Motorola (MOT) helped lead the way.  Since I sold five naked puts on MOT worth nearly $10,000 in underlying value (12% of my account balance) last week and was in the money on them after yesterday’s close I was excited to see such good news in the headlines praising MOT.  I clicked on the Yahoo! Finance link and saw the following headlines which made me glad I had already …

The debate over good debt and bad debt may never be agreed upon.  Pick any day and you can find an article written about the benefits of borrowing money to fund certain major purchases such as a mortgage for a house or a loan for a car or something more frivolous.  I’m adding to the articles that do not think debt is good for most people.

People start getting into financial trouble with bad credit card debt which is a type of loans to deal with.  Those who …

I’ll be selling my NYX shares with options expiration upon us this weekend.  I am exiting the position with a profit as I planned when I wrote my most recent covered calls on NYX, although the stock itself is down from when I first started trading on NYX with a naked put last December, over 10 months ago.  NYX has fallen from 100.10 when I first sold a naked put to below 85 while I write this at 45 minutes before market close on the last day of …

For anyone interested in covered call selling, consider understanding naked put selling as a better option.  The risk/reward graph of both methods will show writing naked put options is the same as writing covered call options.  (selling = writing, for those not familiar with the term.)  They both pay you up front to limit your upside return while leaving you open to big losses if the stock goes to $0.00.  I’ll admit when assigned a stock after selling a naked put I write …