Category: Stock Picks

Today was insane.  I saw the Dow down 120, then up 20, then down 150 and then up 30 by the end of the day.  I had a hard time focusing on my work and I’m sure more than a couple of coworkers noticed me charting all my stocks and then studying my spreadsheet for what I should do.  Once I took a deep breath and put all my options in a new excel spreadsheet I felt better and only made two trades for the day.  I compared what I’ve received in premiums plus the current price of the underlying stocks to the strike where I’d be forced to buy the stock (assigned) if the stocks closed below that price at June and August expirations.  I’m actually only down on a few and overall I’m still sitting on a paper profit for what I have sitting out there.

Not to be one to sit and hope for all of my positions to work themselves out on their own, I sold some naked calls to give me a better chance of ending June and August option expirations with more money than I have now.  That’s always my goal - what can I do now that will improve my chances of having more money in one or two months.  I started with Boeing (BA) and then move to add to my collection of Alcoa (AA) options.

While BA was trading …

Last week I charted the Dow Jones and said the break of the trend line was a bearish indicator.  The only hope would be that the $DJI didn’t stay below that line the following two days.  Instead, the $DJI edged lower and we ended up with a horrible Thursday well below that line.  I’ve made my point on the Dow’s direction, so today I turn to the S&P 500 ($SPX.X) to chart.

Starting with the good stuff, the January 23rd low was 1,270.05, the March 10th low was 1,272.66 and the low on Friday, June 27th was 1,272.00.  That’s a pretty solid floor, not counting the March 17th low of 1,256.98. 

The uglier side of the story is with the trend lines and moving averages, the VIX and history.  For the past month and a half the lows have only gotten lower each time it bounces back down.  The 10, 20, 50, 100 AND 200 day moving averages are all above the S&P 500’s current price.  The VIX (aka fear indicator) crept up to 24 before pulling back some on Friday afternoon.  That doesn’t come anywhere close to where it was the last couple of times SPX hit 1270/1272.  Without higher fear, some investors and traders are still holding on thinking the bottom is here already.  …

This is turning into a recurring theme for me.  Instead of finding new stocks to trade on, I’m going back to previous winners and trading again.  This time I came back to Monsanto (MON) to try to squeeze out another profitable trade.  I sold June 110 naked puts on MON last time.  Before that I sold April 100 naked puts.  Prior to that I sold January 95 naked puts on MON and started my MON trades 13 months ago with a July 60 naked put

Before June options expired I watched MON start to fall from its highs.  I didn’t think I was in much danger of having it fall all the way to 110 to cause an option assignment, but continued to watch thinking that I’d be back in when I thought I could find a good entry point.  Options expired and MON continued to fall.  Implied volatility never got out of control, but was still high (near 50) compared to other equities.  I considered the 120 strike, but thought with a stock this volatile I need to leave more of a cushion for it to bounce around.  While at MON was continued its slide this morning and was trading at $124.13 I sold one August …

Just after 3:00 pm yesterday my order to sell VIP naked puts hit.  While VIP was trading at $29.32 I sold two VIP August naked puts (VIQTF) and received $438.50 after commissions.  I raised my limit order during the day hoping to catch VIP as fear built and the premiums rose more than they should.  In the last hour of trading my order hit and VIP went back up for the next 45 minutes before closing at 29.30 for the day.  VIP can drop another 3.5% before I take a loss on these new naked puts.  With nearly two months to go before August options expiration I expect VIP makes another run up above 30.

I rarely sell in the money (ITM) naked puts, especially during a bear market, but this time I’m taking a fairly calculated risk.  VIP is at the bottom of its trading range and I already have 200 shares I’m long with covered calls sold on them.  By selling this short straddle (sold puts and calls on the same stock, same strike, same expiration) I am guaranteeing one of the legs (aka one side of the two options I’ve sold) will end with 100% profit.  On one leg I won’t take 100% profit, but will hopefully be able to take a partial profit.  I’m not as concerned about the upside of taking …

It’s been more than 30 days since I took my loss on NVDA.  That allows me to avoid the wash rule and get back in to trying to pull out a profit on it.  If I had gotten right back into NVDA within 30 days after I sold it, I could not have written off my losses on the shares for tax purposes.  Since I sold my shares for 20 and 22.50 over a month ago NVDA climbed even higher, but now is falling again. 

This morning, while NVDA was trading at 19.16, my limit order hit and I sold four NVDA August 17.50 naked puts (UVATT) and received $347.00 after commissions.  Two days ago I mentioned that I was eyeing NVDA again.  I wanted to see it down some more before I got in.  It went up instead and I started to chase it and even lowered my limit order.  When I saw the futures were down this morning I raised my limit and soon after 10:00 am it hit.  If these four hundred shares are assigned it will be for $5.00 less than I sold my last lot of 400 shares.  That’s a potential $2000 savings from sale price to buy price and I’ll have received option premiums on each side making the move even better.  This is a clear example of how selling options reduces risk. 

If today …

I bought back the CELG naked put I had for last week’s June option expiration.  I would have done better to let it get assigned and then either sold the stock for a profit (trading at 61.30 now at 1:41 Tuesday) or sold a covered call on it.  I didn’t have a good feel for where CELG was heading since it had faltered lately and opted to take a profit while I had it.

After I bought that naked put back on Friday, CELG seemed to have found support.  I charted it again this morning and put an order in to sell two August 55 puts and not much later I changed my mind and switched it to the August 60 strike.  While CELG was trading at 60.20 I sold one August 60 naked put (LQHTL) and received $309.25 after commissions.  I started with only one option instead of the original two I had a limit order on at the lower strike.  With this option so much closer to being at the money (same price for current stock as option’s strike) the premium I received was as much for one option as it would have been for two.  If CELG continues to climb, I might sell one more at the same strike, but thought it wise to leg in a little slower with so much volatility in the markets now.

I’ve only made one trade for August options expiration and that was a covered call.  I just can’t find the stocks I want to sell naked puts on.  I have one limit order in to sell naked puts on NVDA again.  It’s been more than 30 days since I took my losses on it and now that the wash rule doesn’t affect me, I’m thinking about getting back in.  I sold at 20 and 22.50 and it’s trading close to 20 right now.  I made the right move by letting my shares get called away so I could take the losses for tax purposes and now am eyeing the August 17.50 naked puts.

I read an interesting article on MarketWatch today that painted a gloomy picture of where the markets are heading based on the charts.  I think he’s on to something which explains my lack of trading.  I’d rather miss a short rally than get spanked too bad on a hard pull back or longer bear market with too much invested and not enough cash ready to put into play at cheaper prices.  If I miss an upward swing, so be it. 

I added another $15,000 to my money market (NPLXX) instead of letting it sit in pure cash.  This brings my total money market to $90,000.  I’m only long VIP, so I needed the cash …

Since I bought my covered calls back on VIP on Friday, I wanted to cover them with new calls today as soon as I saw VIP wasn’t heading up again yet.  I bought my calls back with the hopes that VIP would rally soon.  Since I can’t take hope to the bank, I took some risk out of my position and covered early this morning.  While VIP was trading at 30.03 I sold two VIP August 30 calls (VIQHF) and received $438.50 after commissions.

Eventually I expect to take a loss on my shares, but for now I’m going to continue to milk the options for everything I can.  Since I can’t change the fact that VIP has fallen as much as it has since I sold my naked puts that were assigned I have to deal with what I have.  There’s really no benefit in worrying about where the stock has been.  Selling the covered calls could give me a 7.3% return in two months.  That’s a 41% annualized profit if VIP stays flat for the next two months.  Of course it won’t stay flat, but I’ll be happy to see it bounce around $28-$32+ until I can get out.  If I can get out by selling at $30, I’ll have a $858.78 profit on the whole series.  That’s a 12% return from 2/19 to 8/15.  If VIP keeps falling, …