6 results for month: 06/2015


Down 300! What did you do?

I hope you were in a position to take advantage of cheaper prices. We know that big market drops are inevitable. We just don't know when they will happen, so it really is not possible to predict them. It's also nearly impossible to hedge against a large one-day move. The talking heads on TV will tell you to hedge one way or another. The problem is that hedging costs money, so in order to get it right, you have to be a successful short-term market timer. Again - nearly impossible. The best way to prepare for the inevitable large drop is to always keep plenty of cash in reserve. That way, you never run out of choices as you react to the market's ...

Building a position in Boeing

Earlier this week, we sold new BA puts at the 143 and 144 strikes, taking in $516 on six contracts. Today, we rolled those positions out to next week, taking in another $350. Our total cash income on this new position is now about $850 after subtracting the transaction costs. Our time decay (Theta) is about $47 a day. Now, the plan is to leave this alone until next Wednesday and then see what choices present themselves. The market is closed next Friday, so we will adjust this position a little earlier in the week than normal. If BA would drop 1% on any day, we will look at increasing the position. The Walmart position - Total P&L year-to-date ...

Are you making any money?

How do you know? If you own a portfolio of stocks and options, your account's value goes up and down on a daily basis. Today, the DIA closed at $178.65. On June 25th, the DIA closed at $178.50. Take a look at your account on that day. What was your P&L for the year? Now, compare it to today, when the DIA closed at 15 cents higher. 20 days have passed - the DIA went nowhere - Did YOU make any money? We are up $17,000 since June 5, which is what we want to see. Our Theta (daily time decay) has been ranging between 500 and 900 so we should be collecting seven or eight hundred dollars daily. The numbers now back that up. If you took a look at your ...

Boeing position update and more

Our new BA position could not have had better timing. After ending last week with no position, we started selling puts again yesterday when BA was down. Today's news drove it down again so we sold more puts. The entire position is now short four 144 puts and short two 143 puts, all expiring this week. The position has a time decay of $77 a day but that only lasts until Friday. Our system has created a profit for the new position of about $50, even though the stock has dropped. Remember, above all - we don't want to lose money! We will continue to build this position only if the stock price drops and then tomorrow we will change our focus to expirati...

How to build a new position – Boeing (BA)

First an update on two other positions: WalMart - We have been working through some losses on this one due to it's extreme bear market (see other blog posts). Two weeks ago we were down $5000 for the year, we're now down $4000 since Jan 1. Our daily time decay is $45, so we are earning about $1300 a month. Also, WMT will pay a 49 cent dividend on August 8, so we want to keep that in mind and try to collect it. This is a covered call position and we are short the weekly 73 calls. As this week's calls expire we will move them to next week. As of now they would expire worthless so we will wait to see what happens later in the week. Apple - We own ...

WalMart Time Decay is not enough now…

We've been talking about our WalMart trade and I've been explaining how we had created a very nice income position. Today, we are down about $1000 since inception of the trade string going back through 2014. Our market risk ( DIA Beta Weighted Delta) is about 180, and the position has no Theta. Yes, that's right, no Theta. We had sold calls against our long 900 shares, but with the drop in the price they were closed or expired on Friday. We will plan to sell new calls next week and bring in some money. This is a beginner's lesson in time decay generated by the selling of short options:: When we started trading WalMart in January 2014, it ...