HUH's crash and burn trading thread

Sorry I didnt' get a chance to get online yesterday afternoon to do any updates. We've had a nice bounce back up to 390 on RUT. I'm still holding my remaining 2 march put positions open waiting for a good opportunity to exit. If we can get a couple of days of consolidation around these levels to digest some of this rally or even a small pullback on profit taking would be ideal.

In the meantime I've added the following 3 positions in the last 2 days:

bot jun 400/390 put/short junQ 39 iwm put @ cost of $133.54
bot jun 330/340 call/short junQ 34 iwm call @ cost of $155.06
bot jun 410/400 put/short junQ 40 iwm put @ cost of $115.06
 
We are pretty overbought still, although we got a small pullback today I'd expect a little more profit taking before we attempt a real sustainable rally over 400. Otherwise we may have a new trading range between the 340 and 400 level that could last until april. I am still holding my remaining mar positions open. Here is the reason why I am still holding these 2 positions open:

bot mar 480/470 put/short mar 47 iwm put@ cost of $133.06
bot mar 400/390 put/short mar 48 iwm put @ credit of $307.22

The worst case scenario would be if RUT settled at 400 this friday because the following would occur:

480/470/47iwm put close (1000-700-133.06) = profit of $166.94
400/390/48iwm put close (-800+307.22) = Loss of $492.78
So if RUT closes at 400 and I close IWM for 40 I would have a loss of 492.78 - 166.94 = loss of 325.84

The best case scenario would be if RUT settled at 390 then we'd have:
480/470/47iwm put close (1000-800-133.06) = profit of $66.94
400/390/48iwm put close (1000-900+307.22) = profit of $407.22
So if RUT settles at 390 and I close iwm for 39 I would have a profit of $474.16

Another scenario is if RUT settles at 370 then we have
480/470/47iwm put close (1000-1000-133.06) = loss of $133.06
400/390/48iwm put close (1000-1100+307.22) = profit of $207.22
So if RUT settles at 370 and iwm closed at 37 I would have a profit of $74.16. So really the main danger is if we have RUT go above 400 or below 370.

I don't want to close right now because the problem is that the 400/390 put spread is trading for about $600 while closing out the 48 iwm would cost about 910 to close which means that position would be roughly breakeven. Now we only have 3 trading days plus settlement day left and there's about $400 of premium left to suck out of the 400/390 put. That means as long as RUT stays between 370 and 390, I should gain roughly about $100 of premium a day. So my gameplan is basically to see if we can stay between 370 and 400 for the next 2 days as that would provide sufficient return to go ahead and close out march.

Anyway I added a jun call and put position today. Here is a list of the current OPEN and CLOSED positions for this cycle.

CLOSED POSITIONS
short mar 42 iwm call @ profit of $244.92
bot jun 420/430 call/short junQ 43 iwm call@ profit of $118.38
bot jun 420/430 call/short junQ 43 iwm call@ profit of $91.88
bot jun 410/420 call/short junQ 42 iwm call@ profit of $131.58
bot jun 410/420 call/short junQ 42 iwm call@ profit of $88.58


OPEN POSITIONS
bot mar 480/470 put/short mar 47 iwm put@ cost of $133.06
bot mar 400/390 put/short mar 48 iwm put @ credit of $307.22
bot may 370/380 call/short may 38 iwm call@ cost of $168.06
bot may 370/380 call/short may 38 iwm call@ cost of $188.06
bot may 360/370 call/short may 37 iwm call @ cost of $193.34
bot may 400/390 put/short may 39 iwm put @ cost of $188.06
bot jun 480/470 put/short junQ 47 iwm put@ credit of $56.89
bot jun 380/370 put/short junQ 49 iwm put@ credit of $506.80
bot jun 410/400 put/short junQ 49 iwm put@ credit of $327.77
bot jun 480/470 put/short junQ 47 iwm put@ credit of $16.49
bot jun 330/340 call/short junQ 34 iwm call @ cost of $120.06
short junQ 39 iwm call@ credit of $394.53
bot jun 360/370 call/short junQ 37 iwm call @ cost of $118.34
bot jun 320/330 call/short 33 junQ iwm call @ cost of $153.51
bot jun 350/340 put @ cost of $492.36
bot jun 390/380 put/short junQ 38 iwm put @ cost of $113.34
bot jun 400/390 put/short junQ 39 iwm put @ cost of $133.54
bot jun 330/340 call/short junQ 34 iwm call @ cost of $155.06
bot jun 410/400 put/short junQ 40 iwm put @ cost of $115.06
bot jun 360/370 call/short junQ 34 iwm call @ cost of $153.51
bot jun 420/410 put/short junQ 40 iwm put @ cost of $128.51
 
Oh joy, I'm the proud owner of 200 shares of IWM. I got early exercise on my march 47 and 48 iwm put. I'm bringing it up because people were probably wondering "what happens if you get early exercise on your puts and calls?" Well the answer is NOTHING :)

At this point with a couple of days left till expiration it is irrelevant whether I own a DITM 48 put or I own a 100 shares of IWM that I paid 4800 bucks. If the market rallies then the DITM 48 put would have lost value point for point with the upward movement of IWM. Right now the 100 shares I have will gain the same value as the 48 put would have lost if the market rallies.

Conversely if the market drops then I will lose the same amount on my 100 shares of IWM as I would have lost holding the 48 IWM put short. Since I have the cash to buy the 200 shares and hold the position as long as I want early exercise is meaningless. Also since there's no ex dividend date this week it makes absolutely no difference that I got early exercised. (Its actually better because now the b/a to sell the IWM shares is only .01 apart versus trying to close the short 48 or 47 iwm puts where the b/a can vary from .05 up to .15! Other than that I'm just waiting to see if we get a pullback down towards 390.
 
Well this was an entertaining cycle. We went from nose diving to basically being right back to where we were when the option cycle started on Feb 23rd. Alas I'm saying bye to March and looking forward towards april (I don't have any positions expiring in april but I may close some junes early). This rally gave me an opportunity to go ahead and close out my remaining mar positions at an acceptable price. I had the following situation occur:

bot mar 480/470 put/short mar 47 iwm put@ cost of $133.06
The initial cost of this position was 133.06. I got early exercise on my 47 iwm put which means I had to pay 4700 to buy 100 shares of IWM, so that means this position became:

bot mar 480/470 put/bot 100 iwm shares @ cost = (4700+133.06) = $4833.06
Today I sold the 100 shares of IWM for $4179.50 which means I am left with
bot mar 480/470 put @ cost of (4833.06 - 4179.5) = $653.56
So that means that as long as RUT does not settle above 470 this friday I would make (1000-653.56) = $346.44 profit. This seems to be the most likely scenario as it doesn't seem likely we will rally another 50pts on the RUT from this overbought level but hey you never know!

bot mar 400/390 put/short mar 48 iwm put @ credit of $307.22
I got early exercise on this position as well and this became:
bot mar 400/390 put/bot 100 iwm shares @ cost = (4800-307.22)=4492.78
I went ahead and sold the 400/390 put spread for 87.64 and sold the 100 shares for 4179.50 which resulted in the following loss amount: (4492.78 - 4179.5 - 87.64) = loss $225.64

So assuming RUT settles below 470 this friday I would walk away with a profit of 346.44 - 225.64 = $120.80
I know its not a lot but considering these two positions looked like big losers and I was doing damage control just a week ago, I'm happy to walk away with something for my efforts.

So march is done and I'm moving on to other developments in my june positions. I want to do an adjustment on my jun 320/330/short 33 iwm call position. I wanted to do it today but I want to wait and see if we get a pullback tomorrow under 410. If we close above 410 then I'll probably do an adjustment on that position. Lets see what happens next.
 
I unfortunately did not have much time to do much with the market this afternoon. I did open the following put position this morning:

bot jun 450/440 put/short junQ 44 iwm put @ cost of $118.54

I am still looking to do an adjustment on my 320/330/33 jun call position but I didn't have market screen time to do any fooling around with the position. I'll take a look tomorrow cause once again we need a pullback to digest this move up. Its the same as before, you can only stretch a rubberband in a straight line so long.....and that applies to rallies too! If we do get a pullback under 410 then I won't bother adjusting until we've gotten our pullback and get some stabilization so we can ATTEMPT to find a trading range.
 
I'm glad I got the heck out of those remaining 2 put positions on wednesday rather than waiting till today. Nice pin action on IWM to stick it right around 40, gotta give those MMs some props. Anyway here are the closed positions in the March cycle and an update on the current return.

CLOSED POSITIONS
short mar 42 iwm call @ profit of $244.92
bot mar 480/470 put/short mar 47 iwm put@ profit of $346.44
bot mar 400/390 put/short mar 48 iwm put @ loss of $225.64
bot jun 420/430 call/short junQ 43 iwm call@ profit of $118.38
bot jun 420/430 call/short junQ 43 iwm call@ profit of $91.88
bot jun 410/420 call/short junQ 42 iwm call@ profit of $131.58
bot jun 410/420 call/short junQ 42 iwm call@ profit of $88.58

Total profit for mar cycle = $796.14

So far we have the following returns:
Jan cycle = $683.17
Feb cycle = $2051.06
Mar cycle = $796.14
Total gain = $3530.37
Percent return = 3530.37/30000 = 11.76%
Goal = 30-11.76 = 18.24% until goal reached.
 
Heres a list of my current open positions that are going into April cycle, note I added another jun 380/390 call position today:

OPEN POSITIONS
bot may 370/380 call/short may 38 iwm call@ cost of $168.06
bot may 370/380 call/short may 38 iwm call@ cost of $188.06
bot may 360/370 call/short may 37 iwm call @ cost of $193.34
bot may 400/390 put/short may 39 iwm put @ cost of $188.06
bot jun 480/470 put/short junQ 47 iwm put@ credit of $56.89
bot jun 380/370 put/short junQ 49 iwm put@ credit of $506.80
bot jun 410/400 put/short junQ 49 iwm put@ credit of $327.77
bot jun 480/470 put/short junQ 47 iwm put@ credit of $16.49
bot jun 330/340 call/short junQ 34 iwm call @ cost of $120.06
short junQ 39 iwm call@ credit of $394.53
bot jun 360/370 call/short junQ 37 iwm call @ cost of $118.34
bot jun 320/330 call/short 33 junQ iwm call @ cost of $153.51
bot jun 350/340 put @ cost of $492.36
bot jun 390/380 put/short junQ 38 iwm put @ cost of $113.34
bot jun 400/390 put/short junQ 39 iwm put @ cost of $133.54
bot jun 330/340 call/short junQ 34 iwm call @ cost of $155.06
bot jun 410/400 put/short junQ 40 iwm put @ cost of $115.06
bot jun 360/370 call/short junQ 34 iwm call @ cost of $153.51
bot jun 420/410 put/short junQ 40 iwm put @ cost of $128.51
bot jun 450/440 put/short junQ 44 iwm put @ cost of $118.54
bot jun 380/390 call/short junQ 39 iwm call @ cost of $138.06
 
Looks like we still going higher on this rally off the lows. Next level to watch would be the 440-450 range. My expectation right now is that we have some more to go higher but we will start to pullback and settle into a range for some consolidation. Luckily I still have 8+ weeks on all my positions so there is plenty of time for the market to rally and settledown into a range which is why I'm not exactly in panic mode at this point. Nevertheless the market can stay irrational longer than I can stay solvent so I'm going to go ahead and start doing some adjustments on the call side. I did the following today:

I added a put position:
bot jun 450/440 put/short junQ 44 iwm put @ cost of $98.06

I also purchased the following vert spread:
bot jun 420/430 call @ cost of $532.36

I am trying to sell the 320/330 jun vert spread I own for $900 or more but so far I don't have a fill so I am going to keep trying. I will probably be doing 2 more adjustments (I have 2 330/340 jun positions as well) over the next couple of days.

This is a very nice rally after a pretty nice pounding, but technicals can only take you so far before fundamentals take over. The 200 day EMA is down to roughly 533 and dropping on RUT. For me, in order for a bear market to end, I need to see the 50 and 200 day cross to the upside. Looking at the fundamentals of the economy I don't really see a reason right now for the market to break the 200 EMA at 533 so I think that falling EMA is going to be a difficult resistance level to break by the end of the june option cycle. Thats why I think the upside move is limited to somewhere below 500 (The 533 EMA is constantly dropping everyday). So although this move upside is scary to look at, I feel that there is a good possibility that we will settle in to a nice range once the initial excitement ends.

If I am wrong then I am planning on taking what the market gives me and trying to minimize losses until we do settle down. Time will tell :)
 
HUH, don't follow your posts much, but just want to say that you seem to have a good grasp of the market considering your relative lack of experience. I'm impressed. Good trading to you.
 
Quote from piezoe:

HUH, don't follow your posts much, but just want to say that you seem to have a good grasp of the market considering your relative lack of experience. I'm impressed. Good trading to you.
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Thanks for the comment. Just when I think I have the market in my grasp, something new and weird happens that turns everything on its head, I guess thats what keeps it exciting! :)
 
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