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How to Read an Options Table -- Determining an Exit Price for a Stock -- Understanding Downside Risks in Investing -- How Naked Put Selling Works -- 10 Tips for Keeping Emotions out of Investing

January 16, 2018

Rolled NFLX Naked Put

Filed under: Finance,Stock Picks - 16 Jan 2018

I sold a naked put $10 out of the money on Netflix ($NFLX) on December 12, while NFLX was trading at $185.70 and on January 2, NFLX gapped higher and has barely hit a speed bump since then. It finished $0.30 higher today, but that was $4.54 below its intraday high. I’ve been hesitating to chase my next trade on NFLX since stocks have been on such a great run for so long, but decided I needed some more skin in the game finally. While NFLX was trading at $224.20, I sold one NFLX March $205 naked put for $5.30 and received $529.31 after paying $0.69 in commission.

Even with this naked put being more than $19 out of the money, I can still make 2.65% (15.49% annualized) on the money I’m keeping in reserves. NFLX can fall 10.92% before I lose a penny. I considered taking more risk and aiming for a higher strike, but 15%+ is where I’d like to be on an annualized basis. The rumor of a NFLX buyout is what got the stock moving at the beginning of the year and I think that fuel for the stock price will ease off and it should come …

January 6, 2018

DIA Chart – 6 Months Daily Prices

Filed under: Finance,Stock Picks - 06 Jan 2018

The chart below shows the daily prices for the past six months on DIA, the SPDR ETF that tracks the Dow Jones Industrial Average, after closing the week at $252.72 on January 5, 2018.

DIA finished Friday within a few cents of its all-time high set only five minutes before the close. Such a strong close at the end of a day, and even more so at the end of a week, illustrates how investor sentiment has swung to an extremely bullish outlook. Investors didn’t want to end the week without having as much money invested as possible. This rush to buy could be more of a bearish indicator from a contrarian point of view because there are very few bears left. When bears become scarce, it leaves few buyers who are not already fully invested and that’s when stocks tend to hit weakness. The American Association of Individual Investors survey showed 58.8% bullish in its most recent survey compared to the historical average of 38.5%. Only 15.6% of those surveyed considered themselves to be …

January 2, 2018

End of Year Summary 2017

Filed under: Account Summary,Finance,Indices - 02 Jan 2018

Bullish investors made a killing in 2017 and I made a decent gain (when not comparing myself to the benchmarks), but I didn’t keep my focus on trading last year as I wrapped up my divorce and dealt with my mom’s death. I highly recommend avoiding a divorce and losing a parent in the same year. Even though I get along great with my ex-wife and it was time for my mom’s suffering from cancer to end, the emotional toll distracted me, not to mention the actual days spent dealing with each event rather than being at my desk trading. Maybe I needed a break from trading my account every week. Maybe having a year with distractions will help me in 2018 as my focus on investing already seems better than it has been for a few years. Before I can get to a new year of trading, I need to reflect on the year that just ended.

My account ended December with a Net Asset Value (NAV) of $107,211.56 according to Interactive Brokers (IB) after finishing November with an NAV of $106,555.24. I had a gain of $656.32 (~0.06%) on paper for December and had $1,713.28 in realized gains from my three closing trades on my ADI, AAPL, and …

December 28, 2017

My New Upcoming Book

Filed under: Media,Reading - 28 Dec 2017

I’m finished trading for 2017. We only have an hour left in today’s trading and then tomorrow is the final trading day of the year. I’m planning to write another book using my 2018 trades, as I did with my 2012 trades, and figured I should just wait for my next trades to fit into the new book instead of trying to squeeze something into the end of this year that has been fairly dull trading for me (and I suppose for those reading my blog). While I had some good trades, the quantity was much lower than what I plan for 2018.

That brings me to my second note. I could use some help editing my book from MTJ readers. Please let me know when you see spelling and grammatical errors in my blog posts. (Email me or comment below the post if that’s easiest.) If my year goes close to what I plan, I’ll have another section of the book (a friend might write this part) with general option information instead of only being a journal of trades. Please email me (alex[not this part]@mytradersjournal.com) if you’d like an early copy of that section to proofread for me. …

December 15, 2017

Options Expiration – December 2017

Filed under: Finance - 15 Dec 2017

Today is the last monthly options expiration day of the year and I had three options expire worthless, giving me a full profit on each of them. My ADI December $80 naked put gave me a realized gain of $266.70. My AAPL December $155 naked put gave me a realized gain of $516.89. I sold replacements for both of these contracts, but haven’t replaced my MDY put yet. My MDY December $320 naked put gave me a realized gain of $929.74. That’s a total of $1,713.33 for the month and I could’ve made more if I had sold any of these at higher strikes. As I write this at 1:25 pm, ADI, is trading at $86.92, AAPL is trading at $173.40, and MDY is trading at $343.51. I left a lot of money on the table by not pushing for more, but the risks seemed worthwhile at the time. If nothing else, it would’ve been good to roll these contracts higher sooner. ADI is the only one I really thought about rolling early, but just didn’t make the time for it.

These are the two new trades I made. While ADI was trading at $86.96, I sold one ADI March $85 …

December 12, 2017

Sold NFLX Naked Put

Filed under: Finance,Stock Picks - 12 Dec 2017

I try to stay away from high P/E stocks due to the downside risk of margin compression, but opted to take a risk for the fat option premium on NFLX today. Part of that risk acceptance is due to the fact that I have three options expiring in three days that are far out of the money and another two set to expire in January that are a little out of the money. In other words, I have cash that needs to be put to work and since I have little risk on the table so far, I decided I could accept more downside risk. It might reduce the risks I take with other January and February puts I sell in the next couple of weeks. If I have a couple of options with better than average returns, I’m OK with the potential loss on one or two trades.

I missed out on most of the FANG gains for the past couple of years outside of an occasional AAPL naked put and decided to jump in with NFLX after I got my recent rate increase email. The news had already been out there that subscription prices were going up and the …

December 1, 2017

End of the Month Summary – November 2017

Filed under: Finance,Indices - 01 Dec 2017

Through very little effort in my account, I was able to pull out a little more of a gain again. I fell below the major indexes further, but hopefully I’ve had my last major event pulling me from trading for a long time. After fighting cancer for more than two and a half years, my mom died the week before Thanksgiving. I spent the last week of her life with her and my dad and Thanksgiving week with family. I didn’t think about investing much at all during those two weeks. My options expiration post consisting of six sentences was my only focus on my own investments for almost the entire month. I’m caught up on my clients’ accounts through yesterday and plan to devote more time to my account again now. That said, I know I’ll have a busy two months with client meetings since so many people like to do year-end or beginning of the year reviews and planning. I can’t really do less than I did in November, so I’m excited about being back in front of my screen and focusing on something fun (and preferably profitable).

My account ended November with a Net Asset Value (NAV) of $106,555.24 according to Interactive …

November 17, 2017

Options Expiration – November 2017

Filed under: Finance - 17 Nov 2017

I’m slammed for time today, so just a very brief update to offer for now.

I had one QQQ November $149 naked put expire worthless today and replaced. While QQQ was trading at $154.28, I sold one QQQ January $153 naked put for $2.87 and received $286.32 after paying $0.68 in commission.

I had one IWM November $149 naked put that was going to finish in the money and so I rolled it. While IWM was trading at $148.59, I bought to close my November put for $0.46 and sold to open one IWM January $148 naked put for $3.41. I received $340.32 after paying $0.68 in commission for the January put.

November 1, 2017

End of the Month Summary – October 2017

Filed under: Finance,Indices - 01 Nov 2017

October was another good month for me and those investors who are not short the market. I know I sound like a broken record. I did well, but could’ve done better if I had invested more and taken more risks. Not being fully invested during a bull market is begging for missed opportunities each month. The Dow gained 4.34% in October and the S&P 500 gained 2.22%. I wasn’t close to those returns thanks to my cautious approach. I’ve pretty much written off this year as a transition year and am just trying to make it through December with a reasonable gain. I plan to come out fighting (aka trading) hard in 2018 and hope not to time my more aggressive trading with an overdue correction.

My account ended October with a Net Asset Value (NAV) of $105,711.65 according to Interactive Brokers (IB) after finishing September with an NAV of $104,502.82. I had a gain of $1,208.83 (~1.16%) on paper for October and had $656.954 in realized gains from my four closing trades on my AAPL, IWM, and QQQ naked puts. I received $52.00 in interest, but no dividends in October since I’m not long shares of anything yet. Quicken reported that I have an account value of $105,659.01, which is …

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