10 results for tag: trading. delta


1/3 chance

Today the market was weak again for most of the day. We took advantage of that weakness to increase our short cash covered put vertical on XLP. We sold another single contract spread, so our position is now "short four XLP 50/48 Feb Put Verticals". We have sold them at an average price of .675 and the price to buy the vertical back is now at .625. The position has begun to go profitable as time decay increases a little bit every day. If XLP is weak again tomorrow, we would place orders to increase it to 5 contracts. The trade is working and XLP continues to remain at the top of our relative strength ratings. It's OK to buy on any weakness.  Rem...

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 ...

WalMart goes profitable.

When we started trading Walmart on January 6, we did not know how things would work out. We had a thesis, and it turned out to be quite wrong. In fact, it would have been hard to have been more wrong than we were. Within the first week, WalMart changed from a Bull trend to a Bear trend and we were down over $1500. That is not how we like to start out trading a new symbol, but the reality is that sometimes it happens. Anyone who tells you they can trade without working through losses of this type, is not being truthful. The critical thing is to have a plan from the start and to work through events as they unfold.   And they DID unfold in the worst ...

XLB #2

Last time, we looked at our actual trades for XLB. On April 10, we opened the position by selling three 47 puts (expiring in 7days) for about 51 cents each. As we have discussed, they expired and we kept all the money. There were some other trades, too. On April 11, we sold one 46 put for 45 cents, taking in about $45. Again, this contract expired at the end of last week, and we kept the $45. Another great result. On April 15, we sold three 46.5 puts, expiring 2 days out, for an average price of 39 cents. We took in about $120, and again, they expired at the end of last week. We kept the money! Also on April 15, we sold two May 46 puts for 97.5 ...

XLB #1

It's time to update the XLB trade once again. To summarize, we are in this trade because the charts tell us that is where we should be. Here at Deep Pocket Options, we like to use ETF's for many reasons: They are made up of a basket of stocks in one "sector", and sectors tend to trend very strongly over extended time frames, we don't have the risk of owning single companies (ANY company can have news that causes violent moves in the stock's price), the SPDR ETF's are very heavily traded along with their options in volume, etc. We have discussed the reasons in previous blog posts so if you are interested, please look them up. As I wrote last week, the ...

Now trading XLB

XLB is in the same relative strength position as when we opened this trade. On ETFScreen.com  the XLB is second, after the SPDR Utilities fund, XLU. XLU has again spiked to the top as a result of the recent market volatility and investor's run towards stability of yield. This will subside and XLU will quickly fall away from the top spot, leaving XLB in charge. XLB is the Select Sector SPDR Materials fund. Top five holdings inside XLB are Du Pont, Monsanto, Dow Chemical, Praxair, and LyondellBasell. Just the fact that XLB is so strong is telling us that there is huge money flow into these companies, and they are not high-tech companies with quickly ...

The WalMart position shrinks

I thought it best to update the WalMart trade one more time this week, as things changed a little bit today. We were able to close our short 76 weekly puts (expiring tomorrow) for 5 cents yesterday. Our broker, ThinkOrSwim, has a special feature that you may not know about, but it's something you should nearly always take advantage of. They encourage you to close any open short option position when it decays to 5 cents by giving you a commission free transaction. That's right. You can close any quantity of short options for 5 cents or less - for free. There is a very important concept behind this - let me give you an example. Our 76 puts were sold on ...

WalMart Bear Market Ends

We analyze our positions weekly to determine their trend. The Walmart trade turned against us soon after we opened the position, as our position was based on the current trend when we started, which was a bull. Within 2 weeks, bull turned to bear. There are some obvious choices when this happens. You can close the trade and get out, which would have worked well. You can just stop adding to your position and let some time pass. Or, you can continue adding in a very cautious way as you determine if the new bear will be short lived. We chose the latter, and the bear market continued to work against us, lasting about 9 weeks. We use a position size limit ...

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 ...