I posted a new video this afternoon on how to use my naked puts spreadsheet. This spreadsheet compares naked put option choices. My videos will show this spreadsheet whenever I write naked puts and figured it made sense to get this explanation out there before I start posting actual trade videos. Hopefully, I’ll get my first trade in this week in my new account since the check is scheduled to clear on Thursday. Even if today’s slide continues into Thursday, I think it’ll be a good time to start rebuilding my account, actually even moreso if we can get a few more days trading lower to help my entry points.
For those of you who downloaded one of the previous versions of this spreadsheet, this isn’t much different, but has some subtle changes that make it better (maybe I’m biased). If you’ve already tweaked an earlier version, I doubt it’s worth replacing it and having to make updates again. If you aren’t using a spreadsheet to compare your naked put choices, this is a great starting point (OK, I’m very biased).
I posted my first YouTube video this morning. You can view it below or directly on my new YouTube channel.
It’s not really catered to regular My Trader’s Journal readers since you all know these basic points, but I figured I should start with a high-level overview of options trading and single contract puts and calls. I didn’t cover spreads/combinations or Greeks or anything beyond what could fit in a very broad summary for a beginner.
My new account will be funded as of next Thursday, and I’ll try to get to trading and posting trades again soon after the check clears. In the meantime, I’d appreciate any “likes” you can give my video to get me started on the right foot. The same goes for subscriptions to my channel, all views, likes, and subscribers will help me grow the channel and ideally get some good dialogue going again in the comments section here and there.
I had no options expire on Friday, but did find the time to open my new account with Interactive Brokers on Friday so I can get back to regular trading with a full balance again.
I mailed my check for the new account in Friday afternoon’s mail, so it should get to IB by tomorrow or Wednesday and then I’ll have access to the funds the first full week of February (after the required 10 day hold on checks).
The only position I have in my account is with Disney (DIS). I have 100 shares I’m long and with one covered call that’s out of the money. I might even roll my DIS covered call lower or just sell it when me new account is funded, just so I can start clean again. Since I’m not doing it today, I might just wait to see how DIS moves over the next couple of weeks. The way the market is moving, I might have timed it well to be in cash right now.
Disney ($DIS) is the only stock I have in my account right now and have been trying to decide if I should exit with a loss or hold on for a gain. I chose the latter and plan to make this work through a covered call. While DIS was trading at $109.30, I sold one February $110 covered call for $2.45 and received $244.32 after paying $0.68 in commission.
My cost per share is $112.01 after deducting the $2.99 premium I received from my original short put that was assigned. If this February covered call is assigned, I’ll have a gain of $43.00. It’s not much, but it’s a gain. This total doesn’t include the $149 in dividends I received since being assigned the shares. At this point, I just wanted to get out close to breakeven for tax purposes before I start over.
Looking back on what I gained or lost on a trade is good for learning from mistakes and successes, but it’s not what should usually drive a trade decision, outside of a tax implication if I’m are close to a gain becoming classified as long-term. The more important deciding factor is how much can you gain with acceptable …
The chart below shows the daily prices for the past three months on the Dow Jones Industrial Average (aka $DJIA, $INDU, $DJI) after the index closed for the week at 19,963.80 on Friday, January 6, 2017.
The Dow has gained almost 9% since the election as animal spirits took over trader sentiment for a month and a half. However, the large cap index has failed to push above the round 20,000 barrier that has no significance other than it has four zeros and the press likes round numbers as targets. These large round numbers always draw a lot attention on the news, perhaps because it’s a way to draw in viewers and readers, but their efforts end up making the number matter, if only until the trading algorithms can work past it and a more worthwhile headline can take its place.
The normal trading pattern that occurs when nearing a round number is for the first one or two attempts to fail before the bulls can finally push above the otherwise meaningless barrier. …
December was another strong month for me in a year that ended with a loss in my account. The way I traded TLT (without hedges) forced me to take losses when the market temporarily dipped even though my longer-term outlook was correct. The old Keynes adage fits in here (paraphrased) that the market can stay wrong longer than I can stay solvent. It’s moot that I was right in the end. What mattered is that I couldn’t stay long all my equities and short my bonds during the post-Brexit sell-off. By the end of 2016, a year that finished with double digit gains, I finished with a near $8,000 loss (see below). One of the silver linings is that I finished more than $20,000 off of my lows, so that’s something.
I ended December with a Net Liquidation Value (NLV) of $92,244.41 and a Net Asset Value (NAV) of $92,244.41 according to Interactive Brokers (IB) after finishing November with an NLV of $90,956.43. The difference in month end values gave me a gain of $1,287.98 (~1.42%) on paper for December and a realized gain of $3,972.49 on eight closing trades (two of which were covered call assignments). I received no dividends and paid $41.41 in short interest for my short TLT shares held during November. The net …
I used today as a house cleaning day. Since I’m sitting on a year with realized losses that are greater than my capital gains, I decided to close all my positions that had a gain rather than drag the gains into 2017. I’ll still have more than the $3,000 limit to right off and will carry the balance into the new year, but at least I cut that deficit a little today.
I placed these closing orders at the end of last week and they all hit within the first 10 minutes of trading today. I might have been able to make a few more bucks if I waited until later in the week, but with family in town for the holidays, my son off from school for the week, and client accounts to finish trading for the year, I figured entering the limit orders last week would be easier than trying to time the perfect exit point. I don’t even plan to sell replacement orders until next week when we see how the market opens the new year.
This is the order the orders came through, but there was no significance on how I prioritized them. It just worked this way. …
Today was the ex-dividend date for MDY and someone decided to assign my shares a day early so they could take advantage of the dividend. After closing at $104.69 yesterday, my one MDY December $290 covered call was assigned and I sold my 100 shares of MDY for $290.00 while I took a full profit ($579.75) on the call option.
I missed out on the $1.165 dividend, but was able to take the profit on the shares and the option in 2016, a year I filled up with realized losses thanks to TLT. My biggest mistake was not failing to roll the covered call early and getting the dividend. The biggest mistake I made was selling a covered call as early as I did, in the middle of a post-election rally. I can console myself knowing that I was patient enough not to sell earlier, but leaving money on the table is never fun. When I add up all the premiums I received since buying MDY, I ended up finishing with a $2,599.24 profit on the series of trades. That’s consoling too.
My other December option I had coming into today was on IWM. I’m long 100 shares of IWM and have …
Going into today’s 2:00 pm Fed rate decision, I expected a quarter point rate hike, as did practically all of Wall Street. They telegraphed it very clearly and did not disappoint. I entered a limit order for an MDY naked put at the money on the high side of the fairly wide bid/ask prices. My expectation was that in the final few seconds before the announcement, the ETF would spaz (technical term!) and I might get a trade in.
After I entered my order, the bids dropped by nearly a dollar as the air started to leave the room. I clicked on my order and was going to raise my ask price, but my order triggered precisely at 2:00 as the ETF showed trades $0.62 apart in the first 5 seconds of the hour. While MDY was trading at $306.14, I sold one MDY March $305 naked put for $9.50 and received $904.74 after paying $0.26 in commission.
The ETF traded as expected with its quick flutter of algorithmic/flash trades and I got the trade I wanted, but I thought stocks would stay fairly flat and option prices would drop a little as the clarity on the single piece of data calmed …