4 results for month: 02/2014


U[dating the WalMart trade…

On January 6 WalMart (WMT) closed at $78.21. We opened a position on that day, and built it up over the next few days/weeks.Today, we are short a mixture of puts and calls on WalMart. Our original 78 puts have become $77.5 puts expiring next week. We are short 11 of them. If that 11 contract position was all we had, we would be down over $3 a share, or more than $3300. Or, if we would have bought the 1100 shares outright on January 6, we would be down about $3500.Today, we are down on this position about $2200. This is the magic of options. Over time, even if you are wrong about  the timing of setting up your original position - as we were on this ...

Staring down dragons…..

I like to use the Deep Pocket Options blog to teach a little bit about how traders think. The market has been down in a somewhat disorderly way since the third week in January. There has definitely been some panic selling in certain symbols and sectors. Retail is down big (we trade the XRT), Boeing has been sold off savagely, just to give a couple of quick examples. Downturns like this one, where there is no clear reason for the fear but many cloudy speculations about the future, are usually great opportunities. There is an old Chinese proverb that goes something like this: "When you see 10 dragons coming down the road, 9 of them will never get to ...

Trading a different market.

2014 has brought us a different market, and it is time to change our thinking. At Deep Pocket Options, we felt it was time to do an analysis of the portfolio from a different perspective. When markets are flat to rising, as they were most of last year, we can sell put options and watch them expire, over and over. In this market, with it's quick deterioration, we now have a good number of in-the-money puts. We have a lot of cash in the portfolio, but it's time to think about what would happen if every single position was put to us. In that scenario, we would be forced to use our cash to buy shares as we are "put" all the stock we have contracted to ...

Market Panic? Trading Options? The Fed?

The Fed was pushing up the markets over the last few years. They were right, and have been right all along. The doomsayers were wrong. Now, after being right for 5 years suddenly the Fed has it completely wrong, ---or right, ----or they don't have a clue. It's all BS and the truth is that no one knows what the future brings. We must choose to trade based on history and experience and use this knowledge to gain our edge. This kind of market, where the DOW is down 300 and the S&P is down 400, is a newsletter writer's dream. Panic sells and you can be expecting to be contacted by lots of publishers over the next few days and weeks. They will be ...