31 results for tag: theta


Jan 15. Down 500.

Years ago I resisted the Dot Com stock boom. I knew that stocks were being valued in crazy ways, I knew it had no fundamental basis. Eventually, I joined the party and played the game. I lost a whole lot of money and suffered an extended medical depression. The mental anguish was absolutely terrible. At one point, a person who was helping me through it all told me that he thought I would trade again. It took me a long time to get back in the waters, but I did - with a horrifically painful lesson learned. That lesson? :: Markets can move farther and faster than you ever dreamed. Ever since then I've kept this lesson first and foremost in mind ...

Jan 13

After closing the WalMart puts for 5 cents, we waited until a day when WMT was down 1%. We got it Tue and Wed and have a new position that is short three 63 puts, expiring Friday. This position needs to be rolled now, on Thursday morning. We have placed an order to roll this out for one week at 48 cents and subscribers will be getting the price adjustments as we click them lower during the day. We like to try and roll weekly options on Thursday so we avoid getting pushed into the last few hours of a contract. The market makers know that you want/need to roll on that last day, so pricing deteriorates. Sometimes we end up rolling expiring weeklies on ...

End of the week Jan 8

Our WalMart (WMT) trade worked well this week. We sold cash secured naked puts at an average price of 45 cents and they expired. We kept the entire profit on our 3 contracts, or $131 after commissions/fees. This is the best possible result for a weekly trade. It does not often happen so don't assume that you can do this week after week. Most trades need adjustments and rolling forward (more time) to work out profitably. Trading options is work that requires planning and patience. It is not gambling! We will watch WMT for a day when it is down at least 1% and then sell naked cash secure puts again. Subscribers get those trade alerts before they are ...

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 ...

WalMart dividend

Tomorrow is WalMart's Ex-Dividend date. We were short some shares and did not want to pay the dividend. (Yes, if you are short - you pay the dividend!). There are many strategies to handle this, including just paying it. We decided to buy some shares and sell calls, setting up a covered call to end the day with only option positions. No shares owned, no shares short. It's paying us about $60 a day with little Delta risk. Our profit since inception is about $360. This concept of the Ex-dividend date is very important to understand. WalMart goes Ex-dividend on May 7. Anyone who owns shares prior to that date will become eligible for the dividend. (It ...

WalMart profits continue to build

We are now up over $350 since the inception of this trade string. Our position is net 500 shares to the long side and the daily time decay (Theta) is $21 a day. Our Delta is near zero, so market risk is completely under control. This trade took a long time to get to a profitable structure but now we only have to manage the position. There were six transactions in WMT this week, so let's review: On Monday, we sold the Weekly 79 put for 36 cents. Later on Monday, we sold another for 42 cents. Then we sold the 80 put for 60 cents on Wednesday. Prices change every day, and this week the changes were in our favor. Today, we closed the two 79 puts for 5 ...

WalMart is now paying us.

WalMart continues to work for us. We've made back our early losses and gained almost $2700 since February 10. We are now profitable by $165, and our daily time decay is paying us $30 a day with risk near zero (Beta-weighted to the DIA). We have continued to rebuild the position so the net position now is 700 shares long. This is created through a combination of short puts against our 300 short shares. The stock has reversed course and now appears to be in an extended bull market, rising steadily from the low 70's in early February. We could guess that better weather has begun to result in better sales for the company and is helping the stock to ...

WalMart – $2600 in profits since Feb 10!

We are now up over $2600 since the low of our position around February 10, when WMT closed at $73.76. It's stock price has moved up about $5 since then, and our ongoing position is making over $200 a week with a low-risk structure. Out Delta is kept near zero, today it is 10 (Beta Weighted to the DIA). Our daily time decay, or Theta, is $46 and the position consists of some short stock and a collection of short puts. The plan is to continue trading the position for income. Currently, we are short 300 shares as a result of selling some uncovered calls earlier. We are going to work today, Friday the 25th, to sell some ITM puts that will close that ...

Ending XLB

We are nearly out of XLB. The trade has gone very well, we are up $458 and now only short 2 May 46 puts. These 2 put contracts can be closed for about 20 cents, so we could potentially make another $40 or so, if we let them expire in 21 days. The risk reward is not in our favor now as the maximum we can make is $40 while our maximum loss is many times that. If, over the next 3 weeks, XLB drops to 43, we will see our short puts lose $300 for each contract, or $600. We don't like those numbers. If you have the potential to lose $600 or more, you must have enough compensation to make that risk worth holding. So, we will close the remainder of the ...

Our WalMart trade is now working

We track our Profits and Losses on a weekly basis. Every Monday, we fill out our form and take a detailed look at each position. There is NO reason to hold any position that is not making you any money if you have built an options portfolio. The point is income, options decay over time, and should be paying you every single day for the risk you have accepted. Stock ownership does not do this. Over the last 10 weeks, we have averaged about $250 a week on this position. In order to get to this status, we had to work on correcting a losing position for the first 5 weeks. A beginning trader would look at that period and have a hard time dealing with the ...