My OPTION TRADES..... part 2

Sold puts on $18 SGY for Dec.
Credit $0.15
Annualized % return..........16%.
otm safety cushion...11%

SGY is a financially healthy and reasonably priced stock at my BE price of $17.85
It has a few negative issues, as it relates to it's sector, but those issues are already mostly priced in.
Overall this is a solid company, and a good price, and there is reasonable tech support in the 17 - 20 range, per the 5 year chart below:
http://finance.yahoo.com/q/bc?s=SGY&t=5y&l=on&z=l&q=b&c=
The credit may not seem like much,... but viewed in the "context" of the price of the stock, the 18 days remaining until exp, the tech support, the otm cushion, and the % return.... it is reasonable.

Side note.... did you check out the beautiful voice on this lady?
http://www.youtube.com/watch?v=ggyhlc5NXlM
 
Sold puts on $22.5 AMX for Jan.
Credit $0.45
Annualized % return..... 16 - 17%

Very good L-T tech support between 22 - 23, per the 2 year chart below:
http://finance.yahoo.com/q/bc?s=AMX...l=on&z=l&q=b&c=

Company has a little more debt than I'd like to see. But is financially healthy and able to meet it's debt payments easily.
Thus, it's debt is really not an issue at all.
Company is also reasonably valued at my BE price of $22.05
 
Well there was some interesting reading in that lot.

Anyway, I thought I'd post my first trade offering ever. Its something that our little Newcastle, Australia trading club has been looking at for a while. I'm submitting it for comment, not as a recommendation.

We've noticed some interesting IV moves of a few of the bigger stocks - AAPL in particular - ones with their own VX (VXAPL, VXGOG etc).

IV tends to climb on these stocks coming into earnings and to explout this we've adopted the following broad approach (AAPL as an example)

We buy straddles starting about 3 weeks out from earnings assuming IV is reasonable low to start with. We add more or sell as the straddles move into profit - personal decision. In the last week before earnings we are out of the straddles and then put a close watch on IV. From about 3 days out to a few hours before close on the day of earnings we will prepare to place a wide-mouthed IC. Shorts at 10 delta. As a rule anytime delta on AAPL nears 50 we are in regardless of days to go until earnings.

Post-earnings we usually see an IV crush and our ICs approach maximum profit. Rarely are the ICs held for more than a day or two past earnings.

If there is a significant price move on earnings the IV usually counters most of the impact. On the odd occasion that it doesn't we will hold the IC for a few days until it settles. We won't get max profit but we'll still make a nice bit of cash in a short time frame.

back test it for yourselves to see how well it works for you.
 
Quote from Put_Master:

Sold puts on $41 NTES for Dec.
Credit $0.50
Annualized % return.....14%

2 year chart shows very reasonable tech support in the 40 - 41 area.
Hence my BE price of $40.50.
Trade initiated with the stock trading at $44.
Fundamentals are mostly reasonable, and company is financially healthy
http://finance.yahoo.com/q/bc?s=NTES&t=2y&l=on&z=l&q=b&c=
More...
With the $41 NTES contract expiring in 2 weeks, and the stock currently trading under $41,... today I sold $40 naked calls for $2.05, anticipating ownership of the stock on option exp day.
Thus turning the naked call into a covered call.
This is of course a risky thing to do.
But I am taking that chance.
As exp day approaches, if if looks like my decision was incorrect, I'll need to make the appropriate adjustment at that time, to minimize my damage.

Currently my BE price on the trade is $40.50.
If I am correct and collect the $2.05 credit, my new BE price will be $38.45
 
Sold puts on $23 AMX for Dec just before the close.
Credit $0.40
No point in annualizing such a short trade (2 weeks), as short trades always yield a somewhat meaningless very high % return.
I don't usually do such short trades, but I like the stability of the stock in the 22 - 23 area.... per the 2 year chart.
And this gives me a BE price of $22.60.
http://finance.yahoo.com/q/bc?s=AMX&t=2y&l=on&z=l&q=b&c=
I also like most of the companies fundamentals at my BE price.
Their only fundamental negative is their debt level.
The debt level is higher than I like, but they have no problems covering it.

Speaking of debt, I'm currently on more than my usual % of margin. But I anticipate several Dec trades expiring in 2 weeks.

I currently also have an active $22.50 AMX put for Jan, which I initiated earlier in the week. BE price for that $22.05.
 
Quote from Put_Master:

With the $41 NTES contract expiring in 2 weeks, and the stock currently trading under $41,... today I sold $40 naked calls for $2.05, anticipating ownership of the stock on option exp day.
Thus turning the naked call into a covered call.
This is of course a risky thing to do.
But I am taking that chance.
As exp day approaches, if if looks like my decision was incorrect, I'll need to make the appropriate adjustment at that time, to minimize my damage.

Currently my BE price on the trade is $40.50.
If I am correct and collect the $2.05 credit, my new BE price will be $38.45
More...

"Thus turning the naked call into a covered call.": do you mean naked put instead?

Is there a risk if prior to expiration the stock goes up significantly (the position becoming a short call)?

Are you not currently short a (gut) strangle?
 
Quote from Put_Master:


No point in annualizing such a short trade (2 weeks), as short trades always yield a somewhat meaningless very high % return.
More...

Why do you consider it meaningless? If one were to compare two time frames, say 8 weeks and 2 weeks, are there insights to be gained?
 
Quote from tradingjournals:

"Thus turning the naked call into a covered call.": do you mean naked put instead?

Is there a risk if prior to expiration the stock goes up significantly (the position becoming a short call)?

Are you not currently short a (gut) strangle?
More...

I currently have a naked put on $41 NTES.
If/when it gets put to me in 2 weeks, I would normally then sell a covered call on it.
But I lose 2 weeks theta between now and then, and I "assume" the stock may be trading lower than $40 as well.
If that occured, I would not get as much credit ($2.05), for a $40 Jan call by waiting.

Thus I decided to sell a 40 naked call now, when the stock was trading over $40, plus 2 weeks additional time value, in anticipation of the naked put being put to me.
If/when the stock is actually put to me, the naked call will become a covered call.

Most of the sector (Chinese), NTES is in, is taking a beating. That is why I'm taking the chance, and not expecting a rally any time soon.
It's not a stock specific issue. It's more of a sector thing.

On a positive note, with just 2 weeks remaining, time decay should eat away at the $2.05 credit pretty quick, in case there is a mild rally.
But it is definately a risky thing to do.
I'll know in the next week or two if it was a stupid thing to do.
I'd appreciate any constructive criticism/analysis of what I did.
 
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