Naked Index Calls = $$$$

[paysense]

I'm liking the Midap 400. These stocks go up higher quicker and down farther faster.

I also like AUG now since (impending? - I know LoL;() correction wil last more than a month and can gain a bit more from time premium (erosion)

You pick the best trade for me. I still gotta go read up on spreads, etc.

GilL

PS Remember...the point was can this manager make money with his CC fund during downtrends with other strategies - since the "money won't stick (around)" or "slippery" money? will bale out of my funds (even with a 50% AVG annual return with the CC management)?

 

[paysense]

Looking at the Dow's erratic action, I don't think we have to take yoo much more of THIS.

PaySense

(place your bets...do we go higher or lower from here today,lol?)

 

[paysense]

OK so you can fire Gill now...

I've read up (a bit) on spreads and we are in this ballpark:

"Bear call option vertical debit/credit spread trading strategy"

Find some info on WOTM "bear call spreads", in layman terms with examples and we get somewhere quicker.

In the meantime, with today's action a 6-mo chart of the major indexes summarize as follows:

Nasdaq's jump today is pretty strong. Can it carry the market back up to new highs? Currently looking at Vix - typical of action last summer and Feb-Mar...but Vxn (Nasdaq) has been/is more subdued. Fear has subsided (for today) after an early jump.

Meanwhile market is content (for now) to flirt with disaster (downturn), staying close to the very edge.

I'd say wait on Mid option spread trade and all the while: "See Vix/Vxn...just wait."

Gilbert aka Paysense

Any suggestions on Mid strikes, margin reguirements, profit possibility, stop-loss would help - otherwise (down the road) we'll have to just say we profited xxx from that call less losses from previous call, etc., etc.

I'm stopped out - I'm taking a nap. Market do what you are gonna do!!!!!!!

 

[paysense]

So today's action from this snapshot was quite mixed and non-committal:

Sure many stocks that made my weekly list that were targeted as good buys have/are doing well.

Others I acutally went with went enuf down for this manager to cut, but also are doing fine. Then there are those that every once in a while implode - like IOC, which some may know I did have.

PALM sometimes makes my CC Candidates list apparently ran into trouble today. Also note that RIMM will be coming down in price (after its after-hours surge) when it splits. Perhaps its option premiums will become attractive with the lower stock price.

In any event, for me I need to know the trend or I am putting capital too much at risk. I can't have half the positions work out and the other half lanquish/tie up capital for a few months.

So like when I am in cash waiting patiently for the bottom of a correction to confrm, I will wait for this market to resolve itself.

Meanwhile, I guess the index option trades with each day are going more and more profitable. But we'll visit this later.

Pay (gilbert) senSe

 

[paysense]

Perhaps at this juncture, increasing our exposure with these WOTM index call sells [we've done the SPX's and we've done the MID's] is in keeping with strategy goals?

I say yes...so now do the QQQ's!

Remember...we started with a hypothetical $1M account. Got into the SPX's, DJX's and QQQ's (naked) with the original intent to recieve $250,000 from premiums. Our stop-loss target was set at 50% (increase in option price).

This likely would only occur if we encountered a gap up within a few days from our sell date. This in fact did occur and we got stopped out with a gap up from the major indexes. Our loss was more than 50% and resulted in a ~$180,000 hit to our fund (vs $125,000).

So we sat on $820,000 and entered the SPX trade - still going well.

Then (note the 'phase' in) the MID trade - still going well. (Note: the actual strike price and strategy - spread or naked call write - was left to the masses to determine, since this trader had/has not ironed out the specific details -- which will unfold eventually, before enacting strategy at C2 site).

Now the QQQ trade. Again any help on the details to implement - in keeping with my strategy goals - would be appreciated.

Summary of strategy goals.

(1) Take "large" account i.e. $1M.

(2) Profit off "tops" and "bottoms" with index option sells apparently well recognized by trader (me).

(3) Keep strict stop loss method of 50% loss of possible gain from premiums.

(4) Potential opportunity for strategy plays thought to be 2-4 times per year.

(5) Annual target return to exceed 50%.

(6) Efforts and risk to achieve target understood to be relatively very minimal.

Details to uncover.

(1) Exactly which option strategy is optimal for these goals.

(2) Completely understand margin requirements.

(3) Determine (max) return per occurance (event) with decided (upon) strategy - then (re-) calculate stop target.

(4) Is this worth the time and risk for capital or not

Paysense

 

[paysense]

So truly...how our these trades doing. Well right now the SPX is about the same.
MID is slightly higher.
QQQ levels I feel warrant good WOTM trade.

Therefore Atticus doing right with WOTM naked put sells and I'm right doing WOTM naked call sells.

<i>Atticus
26-Jun-2007:Jul 1400p 6.2 100,000 contracts made? 62,000,000 -- now at 3.5
A paltry $1,460,000,000 in initial haircut, but IB is giving me three days to wire to cover. Beat that Gilberto!</i>


However, I think we are going lower from here. Again not sure what percent return would be for these trades, nor capital required, or margin call scenarios.

06-26-07 08:08 PM

<i>Paysense:
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</i>


Sell 125 contracts SPX Jul 1535 (SXMGH) @ 8
--now 6.2

<i>Paysense
06-26-07 09:53 PM

...spreads (I'm told) reduce margin requirements...

SPX (SXMGJ) Jul 1550's @ 4

same amount of contract buys.

Point being...profiting off the top with index options.</i>


SPX (SXMGJ) Jul 1550's @ 4
--now 3.1

<i>Paysense
06-27-07 04:44 PM

I'm liking the Midap 400. These stocks go up higher quicker and down farther faster.

I also like AUG now since (impending? - I know LoL;() correction wil last more than a month and can gain a bit more from time premium (erosion)

You pick the best trade for me. I still gotta go read up on spreads, etc.

GilL</i>

See attached .gif from 06-27-07 04:44 PM post and today's attached MID prices. Price was 887.50 - is now 895. So let's agree to make a decision (I know - after the fact) and select the Aug 920's. Sold at 11 - to buy back now would be 12.5 ( a loss but within parameters).

pAYs

 

[paysense]

Not sure what the market wants to do from here. First we see LOTS of day where institutions unload shares en masse - usually a precursor to some market weakness or impending correction.

Then we see (some) support levels breached among the benchmark indexes and then (some) picked up at their 50-day M.A.

Some trends went slighlty down (lower highs/lower lows). Others the opposite. Then the Nasdaq retook the leadership role and with the QQQ broke out above overhead resistance.

With this mostly rangebound/highly volatile action, our WOTM naked index calls were perhaps safe enough - with the exception of the QQQ's that the AUG 48's are now near our 50% targeted stop-loss.

I had sought some help regarding our conversion of these trades to spreads - that reduce margin requirements, yet perhaps produce the desired percent return.

As I say - no telling if Nasdaq's breakout will pull the MID/SPX up thru to new highs in the next 2 weeks or if we'll experience another sharp volatile drop back to the 50-day M.A.

I haven't received any sound submitals with respect on how to limit losses with spread trades, and since I don't have time to even read "Options for Dummies" (which I doubt will address this issue)...I guess the silent majority wins since whatever knowledge they possess will be of no help.

PaySense makes sense to just work on other things for a while;

 

[paysense]

This look familiar (LOL)?

OK heres the summary (you make the call whether these could/should be stopped and how):

Tuesday 26-Jun-2007
SPX @ ~1492.5
Sold SPX Jul 1540 (SXMGH) @ 8
Bought SPX Jul 1550 (SXMGJ) @ 4 to create "spread".

Friday 06-Jul-2007
SPX @ ~1530
SPX Jul 1540 (SXMGH) @ 10.5
SPX Jul 1550 (SXMGJ) @ 6

Wednesday 27-Jun-2007
MID @ 887.5
Sold MID Aug 920 (MQWHD) @ 11
Bought MID Aug 930 (MQWHF) @ 7.6 to create "spread".

Friday 06-Jul-2007
MID @ ~916.25
MID Aug 920 (MQWHD) @ 20.3
MID Aug 930 (MQWHF) @ 14.9
Note: MID Aug 930 (MQWHF) purchase selected (today) after-the-fact, since the 'actual' selection was never posted.

Friday 29-Jun-2007
QQQ @ 47.55
Sold QQQ Aug 48 (QQQHV) @ 1.07
Bought QQQ Aug 49 (QQQHW) @ 0.63 to create "spread".

Friday 06-Jul-2007
QQQ @ ~48.85
QQQ Aug 48 (QQQHV) @ 1.75
QQQ Aug 49 (QQQHW) @ 1.13

So you see...a bit confusing - not the least of which is this market has "gotten me" these last two phases of profit attempts.

Thus far the Jul SPX spread is far enuf (for now) OTM and to unwind now would incur a small 12.5% loss to expected gain - for now perhaps stick with it. See if it continues with the Nasdaq to move up toward the 1540 strike...or perhaps to get a "fluctuation" down in the next two weeks. We will need to unwind at a 50% loss.

The MID position is for Aug strikes. It has moved up close enuf to the 920 strike and has already incurred a bit more than the 50% (59%) stop loss target and likely should already be unwound - let's go with that...since these spreads are already revealing to me how my desired stop loss structure will work. Call it a 50% loss to the expected return.

The QQQ trade, as you know, is through the Aug 48 strike. We attempted a 0.44 gain for the spread. That means we unwind the position when the spread "credit" is increased 50% or to 0.66. It has now reached that target. Hence our stop loss method is implemented.

0 for 2 is bad. This time the gap up didn't hurt as bad as the last which "got us" with an unwind at a 72% increase to our desired short profit target. At least this time we were (assuming the SPX trade fails) able to keep this to our usual 50% target.

At least (I think) I figured how these "spread" trades are to be conducted in keeping with my strategy (re: stop loss methods). Goal: Be "right" with 'top' and 'bottom' calls (phase in to help ensure) 3 or 4 times out of 5. Keep losses almost always to 50% target. PERHAPS reap easy 50%+ annual return. We've got some ground to make up with these "mistakes" or "wrong" calls.gAakaPs

At least the 'psyche' is still intact and we encountered (nearly) the worst-case scenario...coughing up TWO gaps up in a row!!! Also note the time impact IS SMALL to manage a fund like this - and ALL SPREAD TRADES SHOULD BE MADE W-O-T-M (not slightly OTM). Perhaps now our $1M account has rather quickly eroded to around $720,000, or about -28%. I quess you'll have to stay tuned

 

[paysense]

From Friday to Monday summary:

SPX back down to 1510.12
SPX Jul 1540 (SXMGH) @ 3.7
SPX Jul 1550 (SXMGJ) @ 1.5
to unwind now would still be 1.8/4 or 45% of expected/possible profit realized.

MID back down to 903.69
MID Aug 920 (MQWHD) @ 16.4
MID Aug 930 (MQWHF) @ 9.6
...was unwound at a 50% increase to expected/possible profit. If had waited until now - despite MID being lower than last Friday - would be 100% increase (loss) to expected/possible profit from spread (11-7.6)

This was unwound at 50% target, yet if wasn't unwound per 50% stop loss rule, position may still expire at expected/possible profit with MID below 920. (Would be profitable if expires with MID price lower than 923.4).

QQQ back down to 48.45
QQQ Aug 48 (QQQHV) @ 1.56
QQQ Aug 49 (QQQHW) @ 0.94
If upon expiration QQQ below 48.44 would be profitable. To unwind now would be 41% increase to credit from spread. (It too, had already reached our 50% stop loss target.)

From previous post:

"Perhaps now our $1M account has rather quickly eroded to around $720,000, or about -28%. I quess you'll have to stay tuned"

If SPX trade works out (8 days until expiration) would actually bring account back up to $820,000.

To summarize our assumptions up til this point...

$1M account

First time around -
Tried to make "spread" trades with SPX DJX and QQQ to profit 25% or $250,000. Stop target of 50% increase to expected/possible profit was actually 72%. So impact to account was not $250,000 profit, but $180,000 loss or 18%.
Account value:$820,000

Next time around -
Tried to make "spread" trades with SPX MID and QQQ to profit 25% (on $820,000) or $205,000. Stop target of 50% increase to expected/possible profit was actually 50% for MID and QQQ. SPX is still pending.
Assuming equal allocations or 33.3% of spread trades between (3) indexes. MID and QQQ loss total is $68,333 ($205,000*.5=$102,500 total possible loss target. 2/3 of this is $68,333 realized loss). Again SPX trade is still pending with expected/possible profit of $68,333 - with max loss target at 50% of this or $34,167
So impact to account may be another $102,500 loss if SPX trade reaches max stop target to bring account down to ($820,000-$102,500=$717,500 (-28.25% of $1M). If max profit from SPX trade is realized, account will stay at $820,000.

paysense

 

[paysense]

Market HUGELY gaps up (again) this morning in heavy trade - a good thing for my covered call portfolio

(see http://www.elitetrader.com/vb/showthread.php?s=&postid=1528736#post1528736), but for this strategy we will now unwind our last "spread":

SPX at 1536.58
Jul 1540 (SXMGH) at 10.10
Jul 1550 (SXMGJ) at 5

Unwind now (since has moved up significantly toward 1540) 5.10 - 4 (expected/possible profit) = 1.1, 1.1/4 = .275 or 27.5% (less than 50% stop loss target), as we can safely say where this market is going from now until expiration (lol).

Loss is .275 * $68,333 (expected/possible profit) = $18,791.575 - added to other losses and...

Total account value: $742,270 (from $1M)