Mohawk (MHK) has been falling steadily since the end of May. I started with two naked puts at the July 65 strike (received $348.50) and chased the profit with two July 65 naked calls (received $148.50). MHK kept falling, so when I charted it again yesterday afternoon to see where I thought support could be found. All I could see was that it was at a hitting the trend line of lower lows and was at a 52 week low. I expected a slight bounce, but not high enough to avoid being assigned the 200 shares from my naked calls on Friday, four days from then.
The trend line of lower highs was coming in just above 60, so I entered a limit order to sell more naked calls while MHK was trading at 57.60. Today, while MHK was trading at $59.94 I sold two MHK July 60 calls (MHKGL) and received $258.50 after commissions. This brought my total premiums received up to $755.50. If MHK is above $60.00 at the close on Friday I’ll be assigned 200 shares and will sell covered calls to bring my position back to a profit. If MHK is above $60.00, I’ll take a $250 loss and move …
ETN was down more than $10 this morning. That’s over 13% down from yesterday’s close. I planned to wait until after Friday’s options expiration to sell calls on it, but decided I had to cut my losses sooner rather than delay it.
While Eaton (ETN) was trading at $69.28, I sold one ETN July 70 call (ETNGN) and received $159.25 after commissions. ETN came off its low of $68.75 soon after I made my trade. I could’ve made another $100+ if I waited 15-30 minutes.
I originally sold a July 90 naked put (ETNSR) and received $219.25, so this gives me $378.50 to cut into the $2000 I’ll lose on the stock if ETN closes above $70 when options expire on Friday, three days from now. Losing more than $1600 is pretty bad, but I’d rather have that loss wrapped up than have my losses get bigger. If ETN does stay below $70 at the end of Friday, I’ll write new covered calls and reduce my loss a little more. Just to throw a wrench in this, I’ll be on vacation Thursday and Friday and won’t have access to my account to close any of these close options rather than take the assignments.
I’m charting the oil ETF USO again after I last charted USO at the end of May. I drew a few trend lines then and as our (those who eat and drive) bad luck would have it, the shorter trend line of higher lows held support. That same line is still holding and the price of oil looks like it still has room to climb. USO is also an optionable ETF making it an easier trade to make using less money.
The best part of the chart for oil bears is that USO (note that USO’s price does not equal the price of a barrel of light sweet crude, but moves in the same patterns) just hit a ceiling of higher highs that has offered a stopping point for the rise for the past month. That would lead us to believe that oil should drop some next week as it digests the run up that it had on Friday.
Oil bulls have a lot more ammo to support their argument for longer term upward price movement. USO just moved back above its 10 day moving average and its middle trend line that disregards the one to three …
I saw T. Boone Pickens on CNBC earlier this week talking about his plan to reduce our dependence on foreign oil. Wind is a major part of the plan. Natural gas is also a part of the plan. He plans to make his money on the wind farms he has bought the land for and plans to develop. He mentioned the uses for natural gas a few times and that led me back to Chesapeake Energy Corp (CHK).
I planned to look it up earlier to see how the options were moving and forgot to do it for a couple of days. When I saw the markets down big this morning I remembered to look again and saw CHK up nicely. I checked the chart and saw CHK gapped up today and also saw what could be support around $58 based on the rising trend line of higher lows. That’s also close to the 50 day moving average. I was looking at August puts since the September contracts aren’t posted yet and started to place a limit order at the 57.50 strike, but changed it to the 60 strike to bring in more cash flow, albeit with a greater risk.
I’ve sold Apple (AAPL) options a few times and have an overall profit from my series of trades. I don’t like taking big risks with it since it is so volatile and try to sell naked puts far out of the money (OTM). I like trading it due to its volatility too. That makes the premiums much richer.
This morning, while AAPL was at 175.04, I sold one AAPL August 155 naked put (APVTK) and received $399.25 after commissions. That’s $20 OTM meaning AAPL would have to fall more than 13% in the next five weeks for me to take a loss on it. I could see AAPL coming back down to closer to $160-165 based on the chart, but don’t think it’ll drop below $155 (or $151 if I want to think about a break even trade). It’s holding above its 10 day moving average right now and although it closed below its 20 day moving average yesterday it is back above it today. To the higher side, $180 could be a near term ceiling with the 50 day moving average hovering around there. If it moves in that direction pretty soon I’ll have to consider naked calls far out of the …
I have been down on my Kraft (KFT) July 32.50 naked puts (KFTSZ) since soon after sold them. This morning I received an email that those 300 shares were assigned early. I was forced to buy 300 shares of KFT at the 32.50 strike and paid $9,769.99 with commissions. I received $362.75 from my original sale of these naked puts which makes my cost $31.36 per share. KFT closed yesterday at 28.70 and is up $0.15 during lunch today. I’m not sure how soon I’ll dump my shares. The options are not worth much to try to squeeze anything out of them, but I also don’t think the downside risk is too great. For now I’ll sit on my 300 shares since I have the cash to cover the cost of buying them. Once July options expire I’ll probably take the loss on whatever hasn’t recoved on them yet. If KFT can get back above 29, it could have a short rally.
[EDIT: KFT closed up $0.29 today at 28.99, off of its high of the day by only $0.07. It broke the $29 mark I was hoping for, but closed below it.]
This is the letter I received from TD Ameritrade:
Date: 07-08-2008
The Dow Jones Industrial Average (ticker: $DJI) hasn’t recovered since I wrote about the trend line break two week ago. In fact a second break occurred on June 26th and now the old support level (floor) is acting as a ceiling as the downward trend continues.
The DJIA’s 10, 20, 50, 100 and even its 200 day moving averages are far above its current trading price. Each could act as a road block on the Dow’s way back higher, whenever that day comes. I’m not calling for a sustained rally any time soon although we’ll likely see some bull runs mixed in before we find some real footing.
Today’s my 37th birthday, so I’m cutting this post short to go do birthday stuff with my family.
As if the past few days of $1000+ losses weren’t bad enough for me, NVDA took a nose dive pre-market today and never recovered. It closed the shortened trading day down 30%. They took a major charge for a production glitch and piled it on by lowering quarterly sales forecast.
I am sitting on four August 17.50 naked puts which, in all likelihood, means I’ll own 400 shares on or before August options expiration. Not seeing a chance for a near-term rally in NVDA I sold naked calls to try to lesson my loss. As my experience with NVDA went last time around, I’ll be chasing this profit for a while before exiting. While NVDA was trading at 12.66 I sold four NVDA August 15 naked calls (UVAHC) and received $187.00 after commissions. If something amazing happens and NVDA climbs above 15 before August 15th I’ll take a loss of approximately $450 on it. If it doesn’t, I’ll continue to sell covered calls on my 400 shares and try to get back to a profit overall.
TDW has fallen $5 over the past two days moving my July 65 naked puts to a paper loss. Looking at the chart, 65 now looks like a harder point …
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 …
