My OPTION TRADES..... part 2

PM, Thanks, that makes sense.

I'm trying to find some companies that might work for long term put sales - six months to LEAP-length and those managed care names were on a yet-to-be-researched watch list. At this point the only thing I know about them is that a few have only govt-funded clients and the rest either have multiple lines of insurance and multiple types of customers, and/or they also have non-insurance but health-related businesses, like United Health.
 
Quote from Claudius:

Hi Put_Master,

Thanks for sharing your trade ideas with us, and congratulations on your success.

I've gone through most of this thread and while I may have missed it, I haven't seen asked or answered the leverage question.
You do seem to have hinted that it's north of 100%

On average, how much leverage do you use?

If every single current contract you have written was put to you tomorrow, what % of your equity would you need to buy the stock?
More...
My degree of leverage fluctuates month to month, and within each month.
I have a max I prefer to never go over.... which is 50% of my account value. (If a $100,000 account, not more than 50,000.).
I have not gone that high all year.
For the rare times over the years that I've come close to it, it's only during the final week, when everything remains deep OTM, and I'm getting a jump on the next month or two early.

Bottom line...if my trades are getting close to their strikes, I'll be on very little margin, compared to when the majority are deep OTM.... and expiring within a week or so.
I'm more likely to close successful trades early when I'm on sig margin, assuming I can keep most of the income.
My level also depends on issues like, how many have earnings pending within the contract, how many are heavily shorted, how concentrated I am within a certain sector and how volatile is that/those sector, and so on.

So I really don't have an answer, other than I'm on more margin later in the contract month than I am early in the contract. And even then it depends how deep my otm cushions are, how strong their tech support is, how financially stable and reasonably priced the stocks, how volatile the stocks are, ect...

BTW, I trade for more than just myself. So don't assume all my trades are in my account. I assist a family member with their trades.
 
Quote from Put_Master:

Today I initiated a new $37 NTES naked call for Jan.
Credit $2.40
Thus, my new break even price for this initial deteriorating $41 NTES December trade is now.... $37 minus all my naked call commissions.

Now I just have to hope NTES does not exceed $41 over the next 8 trading days.
If I'm correct over the next 8 trading days, I will have lowered my cost basis from an initial naked put at $41.... to a BE covered call I own at $37.
Initial naked put credit $0.50.... plus 1st naked call of $1.10..... plus 2nd naked call of $2.40 = $4
$41 - $4 = $37
More...
NTES is not bahaving today.
I will have to make a decision over the next day or two, as to whether to wait for a drop back below 41, in which case NTES becomes a covered call, or to close my naked call.
At the moment, I have a $4 cushion via my put and calls, to ease any potential buy back losses.
I will also have theta working in my favor if I don't close the trade right away. But that assumes the stock does not keep rising.
Any thoughts?
 
Quote from Put_Master:

Sold puts on $40 WCG for March.
Credit $1.35
Annualized % return....... 14%
5 yr chart below:
otm safety cushion...13%

http://finance.yahoo.com/q/bc?s=WCG&t=5y&l=on&z=l&q=b&c=

This is a financially healthy company, and is also very reasonably valued at my strike of $40, with a BE price of $38.65.
If the $40 area is broken, the next support is in the $35 area.
(I like it when the next support is reasonably close.) 2 yr chart below:
http://finance.yahoo.com/q/bc?s=WCG&t=2y&l=on&z=l&q=b&c=

I'm trading the March contract, because the Jan credit results in too low a % return, (9.6%) for a $0.35 credit.
However, will consider the Jan contract if the stock keeps dropping, and offers a higher credit.
I'm currently being paid $0.45 "per month" for the March contract, vs $0.35 per month for the Jan.
More...

I'm hoping to close this March, $40 WCG trade tomorrow, or soon, if the stock rises another $0.30 or so,... assuming I can close it for $0.95.
No point holding a trade 3 months, if I can keep 30% of the initial $1.35 credit, after just a few days.
 
Quote from Put_Master:

NTES is not bahaving today.
I will have to make a decision over the next day or two, as to whether to wait for a drop back below 41, in which case NTES becomes a covered call, or to close my naked call.
At the moment, I have a $4 cushion via my put and calls, to ease any potential buy back losses.
I will also have theta working in my favor if I don't close the trade right away. But that assumes the stock does not keep rising.
Any thoughts?
More...

I suggest that in future you screen Chinese ADR's out of your watch list.
This space seems to get more than its fair share of stock fraud and price manipulation. It's an added layer of risk that you would be better off without.
 
Quote from Claudius:

I suggest that in future you screen Chinese ADR's out of your watch list.
This space seems to get more than its fair share of stock fraud and price manipulation. It's an added layer of risk that you would be better off without.
More...
I agree with you regarding that sector.
I believe this is the only stock I've ever invested in, in this sector.
I don't know that I will eliminate this particular stock from my future watch list, but i am more cautious of this sector than others.
Hence the reason I moved quick to lower my break even on this stock from $41 down to $37,.... if I became long.

At the moment, technically, I see upside resistance in the 42 - 43 area. So I'm going to see if it backs off from here, before I cover my naked call.
It basically dropped initially because the sector dropped, and now it's having a rally, for the same reason. It's a sector rally.

The next 2 days will be "interesting" for me.
If I'm long the stock my BE is $37, and if I'm naked the call, my BE is 41.
 
Quote from Put_Master:

I'm hoping to close this March, $40 WCG trade tomorrow, or soon, if the stock rises another $0.30 or so,... assuming I can close it for $0.95.
No point holding a trade 3 months, if I can keep 30% of the initial $1.35 credit, after just a few days.
More...

As hoped for, I closed this March $40 WCG put today for $0.95.
Keeping 30% of the $1.35 credit.
Really no logic in holding a trade 3 months, if I can lock in 30% of the profit in 3 days.
 
Good trade PM. Hope that covers and more the misbehaving NTES.

Can I ask, what sites do you use to analyse the fundamentals? I use Finviz and Yahoo. Any other recommendations?
 
Quote from Put_Master:

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
More...
Closed the above $22.5 AMX trade for Jan.
Closed the trade for $0.30.... thus keeping 33% of the initial $0.45 credit, after one week.

I like the tech support at my strike, but given the market uncertainties pending over the next month, and the fact that I initiated the trade with a mere 4 - 5% otm safety cushion, and it really has not improved since,... I think it's a good idea to lock in 1/3 of the credit after one week.
 
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