OptionPundit

Blog

  • I am back now 🙂

    After a 3 week hectic travel period I am back friends and I shall be posting the trades of the month soon. So far this has been a great month. Stay tuned.

  • SPY Dec/Jan DD (closed – profit 16.36%)

    I took advantage of today’s market drop and the rise in volatility. Though my original plan was something else, due to this sudden market drop I closed this trade for beautiful 16.36% profit for holding less then 1 month.

    Here are the closing trade details:

  • Dec/Jan- What to play?

    Traditionally December and January are tough period for premium sellers. There are holidays, travel plans and time to enjoy new year bashes. Before we delve into trading plans, let’s review the big picture where we are now:

    Stock markets     : DOW all time high, S&P high and higher, Nasdaq though not close to highs of tech bubble but we are in a strong trendy market.

    Volatility : Low !! Just about to reach single digits. The volatility indices have declined last week even farther. $VIX traded down to 10.04, an extremely low level, while $VXO dipped below 10. These lowly levels on $VIX indicates an overbought condition. But unless $VIX starts to trend higher – rising above 13 or 14, say – then the market should be able to move higher.Premiums: Premiums are low, specially on the call sides. When premiums are low, the risk/reward ratio generally don’t favor “income generation” type players.

    So what to do    ? I don’t want to speculate the direction of the market. Sept/Oct have been historically worst month, but what happened to those months this year !!! Now Dec/Jan are statistically bullish month, so?? Following my believe in trading philosophy (That I learned from my close friend and an excellent option trader Krishna S.): Capital Preservation is higher priority objective than Capital Appreciation, whatever trades are planned for this month, one needs to be extra cautious to ensure there is proper risk management plan in place for each trade.

    Potential strategic choices to play: DD, BPS, Calendars…
    Till then, profitable trading folks,                

    OptionPundit         

  • RUT BPS (Closed 9.6% profit)

    I started this trade with the intentions of opening an Iron Condor. My first priority was to have Bull Put leg to be filled followed by Bear Call (as we are in bullish environment currently and also IV was higher on Puts then on calls). I sold 720/710 Dec bull put for $1.15 credit ($8.85 risk). This risk would have gone lower if I had opened BCS leg as well. However, within 6 days of holding period, RUT rallied and the premium dropped to $0.30 cents. I took this opportunity to close my trade as Risk/reward was not in favor to keep it for next 26 days. This trade gave me 9.6% profit within 6 days. I shall look for other opportunities next week.

    Profitable trading

  • Phelps Dodge BCS Nov 06 (Closed loss – 18%)

    While my call on Nov 2 on PD was right one as the stock is around $93 as of this writing and I had opened the BCS at 100/105 for 1.80 credit. I would have materialized most by now. However, the volatility in the stock was what that made this good trade into losing one as I tried to adjust it at several points. In fact it eroded quite a good % from the portfolio gains this month from RUT. From the chart below, notice how volatile the stock had been in past 1-2week. It moved so much in either direction.


    Following my trading plan, I closed the trade after taking a hit of 18% on this.

  • RUT Iron Condor (Closed-profit 25.8%)

    This is to update that I got filled for my another leg of RUT IC i.e. 720/710 and 810/820. I bot it back for $0.25 while I sold it for $2.15. Here is the attachment of transaction:
    This completes my overall transaction for Nov iron condor. This trade resulted in $1.90+$$2.10=$4.00 over $15.45 risk. That is 25.8% profit in for 1 month holding period of Russell.

    Cheers and profitable trading