OptionPundit

Category: Option Trading

  • OPNewsletter : May’09 (+11.2%), Jun’09 (Opening Shortly)

    It feels great when a single covered call option spread (done only @ 7.3% of 10K portfolio) can deliver OPNewsletter monthly subscription fee, cover commissions and still deliver profits, without making adjustments throughout the holding period. And what if the newsletter doesn’t get a single cent if doesn’t deliver profits? Welcome to OPNewsletter (A “No Profit, No Fee” Newsletter)! It is up +11.2% (x-brokerage) and +8.5% including commissions for May’09 alone (a 16th positive month out of 17 months.).

    As I stated earlier, after many months of waiting, we crossed our 60% portfolio investment guideline. It’s always an advantage if the trading capital was preserved. Yes, we did have a few months of low positive returns, but that preserved capital is an out performance in itself (vs. general markets) and now we can start using this preserved capital for further gains vs. wasting energy in recouping the losses.

    Maximum investment incurred this month was +64.4% and we are continuing to use that as basis for returns calculation even though we are now in credit generation phase. We have +51.19% in cash (assuming 10 k portfolio) that we can start using for opening June’09 portfolio shortly.

    We are nicely positioned to reap further gains and we still have 2 weeks to go for May expiration. I don’t have to worry so much about the market fall as that will further benefit our portfolios particularly IWM.

    1. USO is up +5.36%
    2. UPS is up +4.8%
    3. IWM is up +7.19%
    4. GDX is up +4.04%
    5. X covered call was rolled after +23.29% gains
    6. HAL was closed for +22.69%
    7. AMZN was closed for +15.83% and
    8. IBM was closed for +23.01%

    OPNewsletter has been using Fundamental, Technical, Greeks’ as well as Market Psychology for trade analysis to create our portfolios and diversified into different sectors (Markets, Gold, Oil, Tech, Retailer, Transports, etc).

    dow-may-1-2009We didn’t do an Iron Condor for the 2nd month as I still don’t feel it is the right environment. Though, in retrospect it may seem that it is/it was but I am not convinced. See attached chart, Dow up almost 45 points in 3minutes before close, manipulations any one?

    I am thankful all the OPN members (old as well as current subscribers). Thanks for advocating OPN to your friends, colleagues and trading buddies. This has been helpful in adding constant stream of new members and still maintain the quality.  I am also thankful to all the members for participating in the forum and expanding knowledge horizon of other members.

    If you would like to sign-up or benefit from Jun’09 portfolios of OPNewsletter, pls click here to sign-up for the waitlist.

    Looking forward to opening June’09 income portfolios,

    Profitable Trading, OP

  • OPNewsletter (Outperformance)- May’09 +6.1%

    Option Trading is equally useful to retail traders and can generate consistent income if used properly. Hope you enjoyed the free trade alerts for some earnings play (You may sign-up for the Basic membership that is free till Dec 2009)

    A Fantastic week for OPNewsletter! We played HAL, IBM, UPS and AMZN for earnings and all these one day players nicely added value to the portfolio. We chose to close HAL and AMZN and to keep IBM and UPS for further gains. These were special circumstantial opportunities and we took full advantage without having to worry which direction stocks will move post earnings.

    After many months of waiting, we crossed our 60% portfolio investment guideline. Maximum investment incurred was +64.4% and we shall continue to use that as basis for returns calculation even though we are now in credit generation phase. We have 42.5% in cash (assuming 10 k portfolio). The capital preservation strategy worked nicely. We moved out of markets in early when OPN subscribers were clearly warned of the upcoming market meltdown when I shared the need to stay away should Dow slips below 10,697. That was on Sept 15th, well in advance before the real disaster struck. As I always say, if you know how to preserve trading capital, you can always make it back to market. At OPNewsletter, Capital preservation is always a higher priority than missing a potential investment opportunity.

    Net, overall OPNewsletter is up +8.62% (x- brokerage commissions) and +6.13% (including commissions). We are nicely positioned to reap further gains and we still have 3 weeks to go for May expiration. I don’t have to worry so much about the market fall as that will further benefit our portfolios.

    • USO is down -1.34%
    • UPS is up +3.67%
    • IWM is up +6.08%
    • GDX is up +8.46%
    • X is up +13.01%
    • IBM is up +19.88%
    • HAL was closed for +22.69% and
    • AMZN was closed for +15.83%

    (If you would like to join for “No Profit, No Fee” OPNewsletter, pls click here to sign-up for the waitlist)

    We have reached our investment capital deployment goal for the month and I am not planning to add any more investment capital unless there are opportunity that I don’t want to miss at all. I am not expecting any major adjustments except in IWM if markets make strong move up. The probability favors downside.

    Looking forward to 16th positive month for OPNewsletter.

    Profitable Trading, OP

  • Harley Davidson (HOG), Run Away or Ride

    Harley Davidson (HOG) will be announcing results prior to market open tomorrow. The expectation is to deliver $0.52/share.

    While it can always turn tables around to beat earnings (via price increase etc), I would like to play bearish on this. Fine, I agree that it has a very loyalist customer base, the expectations are already low and all that. But consumer spending going downhill, big ticket items on hold and “needs” taking over “wants”, I don’t expect Harley to announce wonderful results. I don’t have enough information to make comments on how the financial arm doing but my gut says it might not be doing to well either.

    (You may want to sign-up for the Basic Membership (Free until Dec 2009) that I use to share free trade alerts for registered members)

    Bottom line, I am not positive about HOG announcing a great set of results and therefore will look for bearish trades (either vertical or the backspread, double calendar is also an option).

    JP Morgan (JPM) is another major company to announce its scorecard tomorrow. It’s anybody’s guess on how are they going to report especially with the developments that took place last week. Goldman (GS) reported solid numbers, inferring from that we might see positivity from JP, but hey, I have no intentions to play this one.

    Disclaimer– As of this writing, I own the mutiple bearish trades (and still have some open orders), but I may close it without any prior notice. If you do want to follow this trade, pls do your own due diligence and consult your financial adviser. There is not much time left for April expiration, should you decide to follow this trade, pls keep either a risk management plan in place or risk only the montey you are willing to lose 100%

  • OPN Apr’09 +12.5%, 15th Positive Month (Out of last 16)

    Get ready for an action filled week that has lot of economic data flowing in, traders returning from holidays and banks announcing earnings. Of course, Banks have to have positive impact due to “relaxation” in Mark-to-market accounting rules. This week is also flooded with other earnings and option expiration schedule, an excellent environment for exceptional opportunities.

    April was another winning month for OPNewsletter. 15th out of last 16 months. In spite of the whipsaws we observed, this month didn’t require much adjustment, almost sitting idle generating cash for OPN trades. OPN has successfully rolled over the portfolios for May holdings (If you would like to sign-up for OPNewsletter, pls click here).

    OPN closed +12.54% x-commissions +9.10% including commissions. We used up almost 38% of our capital. That’s a pretty good returns considering that we could sleep well without worrying about adjustments. If not the last few days volatility of X, the results would have been far better, but that also didn’t result into any significant adjustments and we closed +11.78% based on the way OPN calculates for intra month and >+6% even assuming the max capital.

    IWM and USO portfolio closed for +13.97% and +14.55% based on OPN way of calculation. Essentially the returns are much higher when compared with less capital involved (OPN uses the maximum capital invested at any point as the base for the whole month vs only for the duration it was used). For more information on OPNewseltter, pls click here. This was the 2nd running month of profits for USO. Last month we closed USO portfolio for +22.8%.

    The above result doesn’t include results from speculative trades i.e. SKF +100%, AAPL +100%, NKE and FDX Put and so on. Some of these free trades and also the SKF smiling, BAC Trade, and AA Earning play were shared for free with the registered members. You may want to sign-up for the Basic Membership (Free until Dec 2009) that I use to share free trade alerts for registered members.

    Net, a great month and looking forward another one. We have already started May income portfolios and are positioned to take advantage of market moves. If you would like sign-up for OPNewsletter, pls click her e for OPN Waitlist.

    Profitable Trading, OP

  • OPNewsletter (Apr’09) +7.6%, 15th Positive Month Out of 16

    A terrific week and 3 cheers to the Bulls for sustaining the momentum. Finally, my witty Oct’08 remark on “Mark to Market” relaxation a.k.a “do-what-you-want” came true; G-20 supported by $1trillions and a market that went down nearly-2% and then back up +6.5% to close overall +5.75% (Dow). Ups-n-down, and then up up and up. There is no doubt markets are overly stretched but continuous strength in the face of overbought indicators is a sign of strong momentum. Markets continues to discount all the bad news and turns bullish mad on almost at every ray of hope; I hope that light at the end of tunnel is not another locomotive.

    For OPN portfolios, so far, are doing fine this month as well. We increased our investments by almost 3.65% last week and in spite of this increase, we are up overall +7.6% x-commissions and +5.3% including commissions for April portoflios.

    • IWM Portfolio is up +7.46%;
    • X portfolio is up +17.2%,
    • USO portfolio is up +6.88%;

    So far we have deployed 37.8% of assumed 10K capital.

    This is the 15th month of positive gains for OPNewsletter (out of last 16) since I reopened it in Jan 2008 and this period includes one of the worst bear markets, at least of my life time. The success spells for the consistency and for the promise from OP “Powerful option trading strategies for Consistent Income“, month after month. And hence earning the buck for the work i.e. “No Profit, No Fee“.

    I shall start looking for May’09 portfolios soon. If you would like to sign-up for the OPNewsletter, pls click here.

    I hope you read a big picture post. There have been multiple +20% type rallies and even this time around as well. But this time it is different, it is on sustained buying power as well as sustain drop in selling pressure. But hey markets can do anything, anytime, so just be cautious and if you do plan to go long, you may wanna go in increments.

    If you would like to trade alongside OPNewsletter, pls click here

    Have fun, Profitable Trading, OP

  • Option Business aka Insurance Business

    A bounce is due, no, I think overdue. We have all realized that Mr. Market can remain irrational longer than one can remain solvent. So though the probability of bounce is high, don’t count on it for long term bull market till there are sign of economic improvement. The primary trend is bearish, as clear as that could be.

    However, this market is bringing its own unique rewards. I would like to compare it with insurance business and let’s apply their business model to option trading.

    As the risk is rising, Options’ premium is rising as well and as an option seller it is to our advantage. So why not start building positions that are going to give regular income stream. An example of that strategy is called Covered call (Covered Call is an option strategy in which a call option is written against long stock on a share-for-share basis).

    I earlier shared a real trade example of covered call on SRS, where I was able to keep full 17% of profits for 4wks. I again opened it this month and have done a few changes to maximize my yield. Of course I can’t expect to have 17% month after month, but even 5-7%, month after month via credit generation from short roll over, can result into substantial gains. Alright, Ultrashorts are not for weak heart. Let’s move on to a company like Caterpillar (CAT).

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