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January 11, 2017

Sold DIS Covered Call for February

Filed under: Finance,Stock Picks - 11 Jan 2017

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 …

January 8, 2017

Dow Jones Chart – January 6, 2017

Filed under: Finance,Indices,Stock Charts - 08 Jan 2017

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. …

January 3, 2017

End of the Year Summary – 2016

Filed under: Account Summary,Finance,Indices - 03 Jan 2017

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 …

December 27, 2016

End of Year Clean Up

Filed under: Finance,Stock Picks - 27 Dec 2016

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. …

December 16, 2016

Options Expiration – December 2016

Filed under: Account Summary,Finance,Stock Picks - 16 Dec 2016

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 …

December 14, 2016

Sold MDY Naked Put for March

Filed under: Finance,Stock Picks - 14 Dec 2016

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 …

December 8, 2016

Sold QQQ Naked Put

Filed under: Finance,Stock Picks - 08 Dec 2016

After waiting for many months, I realize I should’ve waited even longer before selling covered calls on my IWM and MDY shares. Both calls are trading in the money now. The good thing about that is I can start selling more naked puts with less risk of losing on every position when the market eventually has more than a day or two lower.

While QQQ was trading at $118.79, I sold one QQQ February $117 naked put for $2.55 and received $254.32 after paying $254.32 in commission. I haven’t made a trade on QQQ in a long time and didn’t want to sell a new SPY naked put while at all-time highs. QQQ has been fairly range bound since August. I expect this consolidation phase to end within a couple of months with QQQ moving higher, but if it continues, I want to buy in on the low end of the trading channel. QQQ has stayed between $115-119 for all but a few days for nearly four and a half months.

Selling this put with QQQ at the high end might not be the best move, my cost per share if I’m assigned the naked put will be only $114.46. I’m comfortable …

December 2, 2016

Wrote DVY Naked Put

Filed under: Finance,Stock Picks - 02 Dec 2016

As I mentioned a couple of times recently, my goal is to have is to have a less volatile account for the next few months. After the dust settles in my personal life, I plan to ramp up my risk again. Until then, I’m planning to use lower volatility ETFs for my at the money naked puts and farther out of the money naked puts or at the money covered calls on the more volatile ETFs and stocks.

Since I’m already long IWM and MDY shares with covered calls, I figured I should have some large cap exposure. While DVY was trading at $87.33, I sold one DVY January $87 naked put for $1.65 and received $164.75 after paying $0.25 in commission. I opted to sell it almost at the money since DVY isn’t as volatile (beta of 0.66) as SPY or DIA. I’m also only 66% invested after this trade, so if we see a big “swoosh” lower”, I have plenty of cash available to buy in cheaper and/or ride it out.

If DVY loses ground, I expect it to find support close to $85.55, around its 61.8% Fibonacci line. DVY also found resistance and then support around this level on …

December 1, 2016

End of the Month Summary – November 2016

Filed under: Account Summary,Finance,Indices - 01 Dec 2016

November was an amazing month, but for those of us who were short bonds, it was even better. I finally exited my TLT position in full as the price plummeted. I could’ve made more by hanging on and rolling my puts lower, but decided the easy money was made and I didn’t want the risk in my account right now, mostly for short-term personal reasons over concerns of the risk in staying short.

I ended November with a Net Liquidation Value (NLV) of $90,956.43 and a Net Asset Value (NAV) of $90,985.79 according to Interactive Brokers (IB) after finishing October with an NLV of $84,028.47. The difference in month end values gave me a gain of $6,927.96 (~8.24%) on paper for November and a realized loss of $4,516.22 on eight closing trades. (IB lists my realized loss for November as $6,371.00, due to a difference in calculating the base of my TLT short position, a difference of $1,854.78. I ran a report for the full year and IB shows a loss $581.82 greater than what Quicken reports. I’m not going to bother trying to figure out the cause of the multiple errors since I use IB’s tax forms and the total balance amounts match.) I received no dividends and paid $394.50 in short interest and dividends for my short …

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