Naked Index Calls = $$$$
- Thread starter paysense
- Start date
In keeping with strategy parameters [indeed the market's action of late is...curious(?)]:
Data suggesting steady economic growth and mild inflation sent stocks sharply higher in early trading.
May core consumer prices rose less than expected, the fifth 0.1% rise over eight months.
Again, many leading stocks were in motion
Greenspan & Co. - my Hero!!
Volume was up 34% on the NYSE, 68% on the Nasdaq.
Volume HUGE (as expected with options expiry)
Indexes gapped up with timely 08:30 AM EST release of data!
So, the question is what to do? Well -
Around 7 AM (10 AM EST)
SPX Jul 1545 at 16 (11) now 20
DJX Jul 137 at 1.6 (1.1) now 1.95
QQQ Jul 48 at .66 (.52) now .8
thx BJL BUT YES, SPX 1545's, DJX 137's, and QQQ 48's ALL stopped out - COOL (stops limit larger losses and keep head on straight)
Due to gap, losses as follows. Let's use max case scenario, as confident all will be well made up in due time. Remember, I wanted to bring in $250,000 into $1M account (yet was told this would take $3M so these stated losses would likely be ~1/3 less). Also, I was told that if I bought calls with the call sells, margin requirements would be less - and losses may not be as much(?).
By the next play...I will nail this info (knowledge) down...but for now let's take worst case:
I thought I'd get 100k/100k/50k (max) gains or 25% return into account, but in fact I incurred
SPX (81.81%) * 100k = $81,818
DJX (77.27%) * 100k = $77,272
QQQ (53.85%) * 50k = $26,923
or about $186,000 loss or 18.6% (ouch!)
This market dictated that I increase exposure with covered calls (a separate Collective2.com account). My recent positions had all been stopped into cash.
IOC purchase @ 38.94 to sell JUL 40 calls @ 3.9.
The allocation to this position was 35% of a $100,000 account - for a (max) possible return of 12.74%. At 35%, this would grow the fund 4.46% if called in 5 weeks.
Note: the naked option strategy - although can be implemented in conjunction with the Covered Calls Strategy, currently is not.
In keeping with my stand-alone Covered Call Strategy, getting kicked into cash and staying in cash benefited best this time. Longer-term (1 yr+) I think it still benefits to combine the two strategies and I will do so in the near future with a separate C2 account (just like I will start a separate account to chart out the strictly naked option strategy).
If combined, the 18.6% drawdown would now be attempted to be lessened in the near-term with covered call positions as the market allows.
Again to sum, 25% max (possible) return turned into an 18.6% loss - more than the 12.5% stop target, due to market gap. Collar/Spread may have been MORE OPTIMAL for gains AND for losses - who knows? I WILL RETURN to this post and iron out specifics - eventually. So perhaps (guessing) 15% possible gain turned into a 11.1% loss. That DD is a little bit more than what happens to my Covered Call Fund (~10% - stock specific) about once a year - so by looking at my charts...this is made up with CC's rather quickly.
The most recent DD was stock-specific the previous was late-Feb's pseudo-correction - it was odd in that it only lasted 1 month. This pullback was odd in that - well, don't get me started
In conclusion, hopefully more than half(?) these trades eventually pan out - so stay tuned.
PaySense (GilL)
Data suggesting steady economic growth and mild inflation sent stocks sharply higher in early trading.
May core consumer prices rose less than expected, the fifth 0.1% rise over eight months.
Again, many leading stocks were in motion
Greenspan & Co. - my Hero!!
Volume was up 34% on the NYSE, 68% on the Nasdaq.
Volume HUGE (as expected with options expiry)
Indexes gapped up with timely 08:30 AM EST release of data!
So, the question is what to do? Well -
Around 7 AM (10 AM EST)
SPX Jul 1545 at 16 (11) now 20
DJX Jul 137 at 1.6 (1.1) now 1.95
QQQ Jul 48 at .66 (.52) now .8
thx BJL BUT YES, SPX 1545's, DJX 137's, and QQQ 48's ALL stopped out - COOL (stops limit larger losses and keep head on straight)
Due to gap, losses as follows. Let's use max case scenario, as confident all will be well made up in due time. Remember, I wanted to bring in $250,000 into $1M account (yet was told this would take $3M so these stated losses would likely be ~1/3 less). Also, I was told that if I bought calls with the call sells, margin requirements would be less - and losses may not be as much(?).
By the next play...I will nail this info (knowledge) down...but for now let's take worst case:
I thought I'd get 100k/100k/50k (max) gains or 25% return into account, but in fact I incurred
SPX (81.81%) * 100k = $81,818
DJX (77.27%) * 100k = $77,272
QQQ (53.85%) * 50k = $26,923
or about $186,000 loss or 18.6% (ouch!)
This market dictated that I increase exposure with covered calls (a separate Collective2.com account). My recent positions had all been stopped into cash.
IOC purchase @ 38.94 to sell JUL 40 calls @ 3.9.
The allocation to this position was 35% of a $100,000 account - for a (max) possible return of 12.74%. At 35%, this would grow the fund 4.46% if called in 5 weeks.
Note: the naked option strategy - although can be implemented in conjunction with the Covered Calls Strategy, currently is not.
In keeping with my stand-alone Covered Call Strategy, getting kicked into cash and staying in cash benefited best this time. Longer-term (1 yr+) I think it still benefits to combine the two strategies and I will do so in the near future with a separate C2 account (just like I will start a separate account to chart out the strictly naked option strategy).
If combined, the 18.6% drawdown would now be attempted to be lessened in the near-term with covered call positions as the market allows.
Again to sum, 25% max (possible) return turned into an 18.6% loss - more than the 12.5% stop target, due to market gap. Collar/Spread may have been MORE OPTIMAL for gains AND for losses - who knows? I WILL RETURN to this post and iron out specifics - eventually. So perhaps (guessing) 15% possible gain turned into a 11.1% loss. That DD is a little bit more than what happens to my Covered Call Fund (~10% - stock specific) about once a year - so by looking at my charts...this is made up with CC's rather quickly.
The most recent DD was stock-specific the previous was late-Feb's pseudo-correction - it was odd in that it only lasted 1 month. This pullback was odd in that - well, don't get me started
In conclusion, hopefully more than half(?) these trades eventually pan out - so stay tuned.
PaySense (GilL)
Just keep creating C2 accounts and then you can delete the ones that lose money and push the winning one.
By the way selling naked calls and doing covered calls do not offset well cause naked calls have unlimited risk and covered calls have capped reward.
By the way selling naked calls and doing covered calls do not offset well cause naked calls have unlimited risk and covered calls have capped reward.
It may also seem that stops aren't necessary. After all (for now) my "top" call (initiated by making call sells) proved that if I stayed into all my (CC Fund) positions I'd give the appearance of having 'sheer genius'.
Trust me (lol), I've been through enough market drops to know these stringent stop methods in the long run are absolutely necessary.Ga
If a client has 5M made on 1M in three years and we go into a 10-20% correction (not unheard of for a late-stage bull) - these funds would likely erase more than that, to only have to gain back an even larger percentage to reach new highs. Believe me, cut the loss at 7-15% of the $5M and WAIT for the next surging bull market.
If you (at the highs) reached 5M...wouldn't you like to keep 90% or $4.5M after a 500% run? Or would you like to bottom out at 80% or $4M?
Like the NFL - "you make the call"
Furthermore...let the market be your guide and you can't go wrong. Today's broad-based surge in much higher volume - coupled with few market leaders really feeling much with recent market fall (despite all the distribution days that stacked up), at least dictate that I "phase" back into covered call positions. If they and the market fare well...I just keep doing what I've always done. Following in the wake of the market bodes well (for me).
Ps
Trust me (lol), I've been through enough market drops to know these stringent stop methods in the long run are absolutely necessary.Ga
If a client has 5M made on 1M in three years and we go into a 10-20% correction (not unheard of for a late-stage bull) - these funds would likely erase more than that, to only have to gain back an even larger percentage to reach new highs. Believe me, cut the loss at 7-15% of the $5M and WAIT for the next surging bull market.
If you (at the highs) reached 5M...wouldn't you like to keep 90% or $4.5M after a 500% run? Or would you like to bottom out at 80% or $4M?
Like the NFL - "you make the call
"Furthermore...let the market be your guide and you can't go wrong. Today's broad-based surge in much higher volume - coupled with few market leaders really feeling much with recent market fall (despite all the distribution days that stacked up), at least dictate that I "phase" back into covered call positions. If they and the market fare well...I just keep doing what I've always done. Following in the wake of the market bodes well (for me).
Ps
...has anyone thought of the POSSIBILITY that the innocuous runup - that continues to defy the odds - may come back to earth the more harder the high it defyingly flies?
Does anyone remember 'irrational exuberance' hig-flying late '90's.
Markets do correct and late-Feb and last week were a joke. At these junctures - despite missed calls on bottoms and tops - do in fact eventually get called right and severely profited from.
I keep my losses mnimal and ramp up gains during times that are most profitable for ME and my use of a covered call strategy. I'm loving this because I do this year-in and year-out QUITE unlike the next guy, and thankfully for those that may get some value from it.
So when summer comes and goes and the eventual vault lower is a bit more than maybe was expected...you can look back at today's trades and grin sheepishly - all the while knowing...
Does anyone remember 'irrational exuberance' hig-flying late '90's.
Markets do correct and late-Feb and last week were a joke. At these junctures - despite missed calls on bottoms and tops - do in fact eventually get called right and severely profited from.
I keep my losses mnimal and ramp up gains during times that are most profitable for ME and my use of a covered call strategy. I'm loving this because I do this year-in and year-out QUITE unlike the next guy, and thankfully for those that may get some value from it.
So when summer comes and goes and the eventual vault lower is a bit more than maybe was expected...you can look back at today's trades and grin sheepishly - all the while knowing...
...and so the market tanks. Not that we couldn't see this coming. But again I may be premature - we have to wait and see where the market heads to now.
My (stopped at 50% increase to premium) WOTM naked index calls are about even again - but were cut in keeping with my strict stop-loss methodology.
Again I am pre-testing an old strategy of mine to one day hit C2.
funny...I was just checking these prices earlier today and making the following notations:
"STAY SMART. Market now getting pinched - (mid) Wed. Higher volume today. New highs not being made - overhead resistance. Lack of conviction from buyers. Distribution days did stack up. Artificially inflated market - pehaps to allow for those that couldn't call it right a chance to get out.
JASO 30.36 x 2.2 (cl@29.83 x 1.85) TASR 12.42 x .65 (cl@12.42 x 0.6)
With market these likely to pull back...can wait."
Perhaps now I can sell SPX's (Aug calls) on the bounce tomorrow.
General (Naked Index Calls = $$$$) strategy highlights...
SPX Jul 1545 at 16 (11) covered at 20, now back to 10.4.
DJX Jul 137 at 1.6 (1.1) covered at 1.95, now back to 1.2.
QQQ Jul 48 at .66 (.52) covered at 0.8, now back to .61.
Sell price in parenthesis - initially went profitable with about 10-20% premium reduction...then went to 16, 1.6 and .66 -respectively, before irritating gap up that forced (stopped) buys at 20, 1.95 and 0.8 - respectively.
I will keep all posted if indeed we may be warranted to attempt this 10-15% lop off of low-hanging fruit that may soon make itself available again. One out of two right may bring the strategy back about even but by year-end may average 3 out of 4 right for reasonable annual average.
And for today's action:
BULLETIN: Dow drops 146 points as markets tumble straight into the close.
Apparently bond prices are again pressuring stocks:
"Bonds are starting to weaken again and reigniting fears that there may be further risk to bond prices which would subsequently put pressure on stocks," said Steve Goldman, market strategist at Weeden & Co. in Greenwich, Connecticut.
"It's a catalyst to take some profits," he added. (I agree)
But all is not lost with another higher volume sell-off, right? After all it was 'only' about 1% fall and we are still 'barely' off the highs.
Some may benefit from these postings as RARELY can markets withstand this much selling pressure. Price and volume action from the indexes IS A VALID KEY. It really is quite simple what I have been saying all along - I have been seeing A LOT of selling lately and that (in fact) is what jeapardizes your exposure.
And it looks to me like today's NYSE volume is higher or almost as high as Friday's (quadruple-witching) volume that accompanied the (phenomenal) gap up - that put this rally back on track!
Wednesday, June 20, 2007
Close
An uneven performance turned into an all-out sell-off in the stock market Wednesday, as stocks closed sharply lower on higher volume.
The Dow Jones Industrial Average erased 146.00 points, or 1.07% to 13,489.42.
The Nasdaq Composite was lower 26.80 points, or 1.02% to 2,599.96.
The Standard & Poor's 500 Index fell 20.86 points, or 1.36% to 1,512.84.
Can sell SPX's on the bounce tomorrow. Wed: SPX cl. at 1512.94 Aug 1550's at 17.8. I'd like to sell (55) SPX contracts Aug 1550 (SXMHJ) @ 18.5.
PaySense
My (stopped at 50% increase to premium) WOTM naked index calls are about even again - but were cut in keeping with my strict stop-loss methodology.
Again I am pre-testing an old strategy of mine to one day hit C2.
funny...I was just checking these prices earlier today and making the following notations:
"STAY SMART. Market now getting pinched - (mid) Wed. Higher volume today. New highs not being made - overhead resistance. Lack of conviction from buyers. Distribution days did stack up. Artificially inflated market - pehaps to allow for those that couldn't call it right a chance to get out.
JASO 30.36 x 2.2 (cl@29.83 x 1.85) TASR 12.42 x .65 (cl@12.42 x 0.6)
With market these likely to pull back...can wait."
Perhaps now I can sell SPX's (Aug calls) on the bounce tomorrow.
General (Naked Index Calls = $$$$) strategy highlights...
SPX Jul 1545 at 16 (11) covered at 20, now back to 10.4.
DJX Jul 137 at 1.6 (1.1) covered at 1.95, now back to 1.2.
QQQ Jul 48 at .66 (.52) covered at 0.8, now back to .61.
Sell price in parenthesis - initially went profitable with about 10-20% premium reduction...then went to 16, 1.6 and .66 -respectively, before irritating gap up that forced (stopped) buys at 20, 1.95 and 0.8 - respectively.
I will keep all posted if indeed we may be warranted to attempt this 10-15% lop off of low-hanging fruit that may soon make itself available again. One out of two right may bring the strategy back about even but by year-end may average 3 out of 4 right for reasonable annual average.
And for today's action:
BULLETIN: Dow drops 146 points as markets tumble straight into the close.
Apparently bond prices are again pressuring stocks:
"Bonds are starting to weaken again and reigniting fears that there may be further risk to bond prices which would subsequently put pressure on stocks," said Steve Goldman, market strategist at Weeden & Co. in Greenwich, Connecticut.
"It's a catalyst to take some profits," he added. (I agree)
But all is not lost with another higher volume sell-off, right? After all it was 'only' about 1% fall and we are still 'barely' off the highs.
Some may benefit from these postings as RARELY can markets withstand this much selling pressure. Price and volume action from the indexes IS A VALID KEY. It really is quite simple what I have been saying all along - I have been seeing A LOT of selling lately and that (in fact) is what jeapardizes your exposure.
And it looks to me like today's NYSE volume is higher or almost as high as Friday's (quadruple-witching) volume that accompanied the (phenomenal) gap up - that put this rally back on track!
Wednesday, June 20, 2007
Close
An uneven performance turned into an all-out sell-off in the stock market Wednesday, as stocks closed sharply lower on higher volume.
The Dow Jones Industrial Average erased 146.00 points, or 1.07% to 13,489.42.
The Nasdaq Composite was lower 26.80 points, or 1.02% to 2,599.96.
The Standard & Poor's 500 Index fell 20.86 points, or 1.36% to 1,512.84.
Can sell SPX's on the bounce tomorrow. Wed: SPX cl. at 1512.94 Aug 1550's at 17.8. I'd like to sell (55) SPX contracts Aug 1550 (SXMHJ) @ 18.5.
PaySense
Difficult to actually jump into selling WOTM naked index calls since the "top" is not as clearly defined for this managers risk appetite.
Previous posts indicated that selling the SPX's "on the bounce" - which we did get Thursday 'may' have been optimal...in hindsight it may be given today's action from the benchmarks.
But in this "rally" cash is still being put to work wiith covered calls:
http://www.elitetrader.com/vb/showthread.php?s=&postid=1509141#post1509141
If market corrects as (perhaps) indicated by a breach of lower support levels index call sells may be initiated...until then
PayS
Previous posts indicated that selling the SPX's "on the bounce" - which we did get Thursday 'may' have been optimal...in hindsight it may be given today's action from the benchmarks.
But in this "rally" cash is still being put to work wiith covered calls:
http://www.elitetrader.com/vb/showthread.php?s=&postid=1509141#post1509141
If market corrects as (perhaps) indicated by a breach of lower support levels index call sells may be initiated...until then
PayS...so here we are AGAIN,
Tuesday: How do you like this market? It is truly schizo.., now mixed - despite headlines.
BULLETIN >> BLACKSTONE GROUP SHARES TRADE BELOW IPO PRICE
Consumer confidence index falls to 10-month low
Home prices fall at fastest rate in 16 years
Vix up again
SPX, RUT, MID, SML all at lower support level...a break about to unfold?
cut POZN @ 16.85 (covered call trade)
...but still BULLISH (at breaking point - has to be??)
At least today problems are starting early in session.
...just wait
now taking off like a rocket?!? If anything I'll wait until end of day (for new CC buys).
As far as naked call sells - this would be the first (upon breaking support level):
sell 125 contracts of SPX Jul 1540 (SXMGH) @ 7.8
Tuesday: How do you like this market? It is truly schizo.., now mixed - despite headlines.
BULLETIN >> BLACKSTONE GROUP SHARES TRADE BELOW IPO PRICE
Consumer confidence index falls to 10-month low
Home prices fall at fastest rate in 16 years
Vix up again
SPX, RUT, MID, SML all at lower support level...a break about to unfold?
cut POZN @ 16.85 (covered call trade)
...but still BULLISH (at breaking point - has to be??)
At least today problems are starting early in session.
...just wait
now taking off like a rocket?!? If anything I'll wait until end of day (for new CC buys).
As far as naked call sells - this would be the first (upon breaking support level):
sell 125 contracts of SPX Jul 1540 (SXMGH) @ 7.8
AHHHHLRIGHTTTT!!!!...someones gotta do it :
...now plummeting to reach new lows - MAN, this market just loves to hang by a thread!!
I REALLY think it has to go down from here. I really do.
In fact so much so...let's start with the naked SPX call sells. By the end of the day if support is SERIOUSLY broken we'll add the QQQ and/or DJX
Will we get it right this time? (Right according to my strategy parameters - since we/I may have been right with the original sells...but stop-losses at 50% increase to short sell price is in keeping with longer term strategy success)
Sell 125 contracts SPX Jul 1535 (SXMGH) @ 8.
Paysense
...now plummeting to reach new lows - MAN, this market just loves to hang by a thread!!
I REALLY think it has to go down from here. I really do.
In fact so much so...let's start with the naked SPX call sells. By the end of the day if support is SERIOUSLY broken we'll add the QQQ and/or DJX
Will we get it right this time? (Right according to my strategy parameters - since we/I may have been right with the original sells...but stop-losses at 50% increase to short sell price is in keeping with longer term strategy success)
Sell 125 contracts SPX Jul 1535 (SXMGH) @ 8.
Paysense