The Novice Stock Options Investor

M

magix3d

This is a new beginning for me, and a full commitment to being a successful trader. I will use to this forum and my blog to share aspirations and performance as a trader. I've come to the conclusion that if I share my successes and failures for people to read, it will help in motivating me to do well.

So here are my current positions:

BIDU NOV 100-110-120 custom CALL butterfly + 2 120 calls
Cost basis: 3.11


DGI DEC 35 Call
Cost Basis: 0.95


GLD JAN 11 135-144-153 custom CALL butterfly +2 153 calls
Cost Basis: 2.10


GOOG NOV 560-570 call spread
Cost Basis: 2.40


WYNN NOV 90 PUT
Cost Basis: 1.05


Friday morning has me compelled to exit my WYNN PUTs. I'm looking at the chart and it doesn't look like it's going to reverse. Especially after it closed at a new high today. LVS earnings pushed it up, and if I hold these puts thru monday it just seems to be a big low probability gamble that this will be worth anything.

I've been reading through my new book, "Trading in the ZONE" by mark douglas. There was this one section in the book where he says [paraphrase]: It's easy to see the trend when you're not in the trade. Even though I so badly want to cling and hold these PUTs to zero, I'm pretty sure the best thing to do is cut my losses. I'm 99% sure I'll be exiting tomorrow, the question is when will I be exiting? I'm already at a 40% loss in the position, my stop loss is at 50% loss. I think it would be best to follow my trade plan.

Trades for Tommorow

For tommorow's trading day I'm looking at getting back into AAPL if it trades back to 300 per share, maybe entering a spread to day trade.

The GLD looks like it bounced off the 30 sMA and the DMI+ is moving upwards. It looks like a good probability that this will continue upwards. I'm looking to enter at some ITM calls.
 
What a good way to wake up friday morning. My NOV 130 GLD calls fill at 3.15 and I just sold for 4.00. That DMI+ cross over and 30 sMA bounce proved to be a good signal.

I close out my NOV 90 Puts WYNN for a 50% Loss.

So far I'm up for the year and really can't complain. A part of me feels lucky on my past few trades, and I did have some on my side. However, the difference this time while trading is that I actual entered on most of my trades because of signals (objective) and not emotion:) That's something to be proud of.
 
On my real account.

I just had half my profit in my BIDU butterfly. I did buy back one of my short 110 calls near the lows for the day. My funky butterfly is as follows: long x2 100 calls, short x3 110 calls, Long x4 120 calls. I currently have 9.38 risk on the table with an unlimited profit potential. If it expired right here I would be at 50% ROI.

My Short term AAPL 300-320 NOV Call spread is up about 12%. I did this trade as a stock replacement play. Original cost of the trade was 7.00 currently now at 7.85

I have my DGI 35 CALLS that I bought for 0.95 x4, earnings will be announced before the open. In case I don't wake up in time, I will be placing a limit order to sell at 1.9. Anything can happen :)


PAPER Trading with think or swim:

I was practicing some day trading with my play money account. It's interesting, because I did learn some stuff. I actually got to see the OCO order in action.

I did 7 trades. 2 wins, 5 losses, P/L = -$320 I would've lost more, but it felt good to follow a mechanical strategy. I actually would've came out even almost if I paid attention to my WYNN trades. I forgot to put in a stop.

As I've read from these forums, "you learn something every day."
 
Every 30 days I will do a recap of all my trading. This is my first time in a long time that I'm doing so. The focus of this journal entry will to evaluate my entry rules, or why I entered these positions.

9/27/10

GOOG NOV 560-570 Call spread x2 for 2.75.

If anything, this was my first trade in over 8 months. Google was a stock I was interested in, so what best way but to start off with a stock that I was interested in.

My exit strategy was to exit half the position when it doubled, and a stop loss if it closed below a value of 50%, or 1.375.

My reason for ENTRY was I was following a solid back tested strategy of the 10/30 sMA average. So I figured I needed to get started again, so this where I started and why. I was lucky and the spread more than doubled.

I DIDN'T follow my trade plan and decided to sell a 620-630 call spread to turn it into a condor. I end up exiting out of that position because once GOOG 620 intraday, it was time to exit.

So I end up selling one of my spreads to lock in some profits for $7.50. Not to bad to have a 272% ROI, but I did lose $220 on buying back my credit spread.



Lesson Learned: Follow my trade plan, and build in an "adjustment trade" for flexibility for trading. Also, spend more time understanding the behavior of credit spreads.

Results: $665 gain 1 spread still OPEN.

10/11/10

DGI DEC 35 Calls x3 for 0.95

Reason for ENTRY: Elliot wave 4 or 5 buy. I got from an optionetics seminar. There was a specific reason to enter, not a random guess.

My exit was at a 50% loss or on or after earnings. Because if it didn't move enough volatility was going to crush the calls.

Well, earnings reported and the stock traded downwards. I knew gamma was larger since I was getting close to 30 days to expiration. So I exited intraday on 11/3 for a 0.5.

Results: 47% loss $135, position CLOSED

10/18/10

GLD 135-144-153 x1x2x2 JAN 11 Butterlfy for $2.66, I buy 2 spreads

On 10/27/10 I basically double down for another 2 spreads for a debit of $1.53. The trade is working, but in hindsight It was really luck. After it closed I saw that it was bouncing of the 30 sMA. That's the main reason why I stayed in the trade, but not the reason why I entered.

My stop loss is at 50%. My avg cost now for the position is about $2.10. So my stop loss would be 1.05.

On 10/29 I place an order the night before to buy the GLD 130 NOV call for 3.15, I later day trade it for 4.00 a few hours later. The trade was placed in there after I filled it. MY REASON FOR ENTRY was that a bounce off that 30 sMA. I sell for 4.00. I make $170 on my 2 calls.

On 11/3/10, GLD make a fairly deep pull back intraday. It traded below the 30 day sMA. To me, there was a good possibility that it would close above the 30 day. So I do a bit of scalpling to get comfortable day trading options. So I buy back 2 of my 144 JAN 11 calls for 1.08, then re sell them for 1.28, locking $40 on my longer term GLD butterfly trade.

Results:

#1) 135-144-153 butterfly currently sits at a $95 profit with a max loss of $1059. OPEN

#2) NOV 130 calls Buy for 3.15, sell for 4.00 x2. $170 profit. CLOSED

10/17/10

BIDU 100-110-120 NOV 10 butterfly 1x2x2, 2 spreads. $3.11 each

Reason for ENTRY: looks like it was going to bounce off the 20 sMA.

Exit plan: 50 % loss or 1.62.

Profit exit, sell half if doubles to $6.22. The order is GTC right now.

I did some scalping to lock in some profits. I buy back on eof my 110 short calls for 2.78 and re sell it on 11/3 for 3.70, locking in about $100.

---------------------

I got a headache right now. I will posting trades on WYNN, AAPL, ATVI
 
10/21/10

WYNN 4 November 90 PUT for 1.05 each.

Reason: was trying out a reversal play off the bollinger bands. I projecting for it to reverse to the 20 sMA.

Exit: .50 per option

Volatility kept most of the value as earnings of MGM and WYNN grew closer., but on 10/29 I hit my stop loss at 0.51. The chart was too strong, and the risk was too great. I almost exited out at 0.72, but I was too greedy hoping what I saw wasn't going to happen.

I followed my plan, I feel good about it. But the chart pattern was telling me a story that was convoluted because I was in the trade.
 
10/29/10

AAPL 300-320 NOV Call Spread for 7.00 x1

When you see stock shoot up almost 20pts in a day you can't help but wonder if it's a right time to buy. I love Apple and their products, but I had to look for a good entry point. On 10/29 it closed below the 20 day sMA and I felt I had an edge that it would bounce. Because the stock was on a tear, I OPTed to do a very short term day trade.

I'm learning to trade and get comfortable with these very near dated options, so that is why I did one trade. I also made a very tight stop loss and profit stop. Exit at 3.50 for a loss or 10.50 for a profit.

A few days later my GTC order filled at 10.5. a $350 profit! Not a bad way to learn. After some re-evaluation, I could see that the stock was gettting stronger and the "bounce" of the 20 day was starting to be more apparent.

I almost regretted getting out, but I was thinking: "would I really want to risk another 10.50? I opted in for a cheaper spread.

So I re-entered for AAPL NOV 310-320 call spread that's doing quite nicely. My new exit plan is 1.75 if at a loss, but if it reaches $300 or about the 320 price level I would either adjust or just let the trade ride since time would be in my favor.

Results:
#1) AAPL 300-320 NOV Call Spread for 7.00 x1, $350 Profit CLOSED
#2) AAPL 310-320 NOV Call Spread for 3.60 x1, $228 profit OPEN


ATVI NOV 10 Call

Reason for ENTRY: earnings were just annouced and the stock gets slammed. I see good support at the 11.20 price level. I make a techincal stop and not a stop loss. So this trade is tight.

Loss Exit: If trades intraday at 10.9 I will exit the trade
Profit Exit: Exit at $100 gain. And quite possibly roll into another trad .

Results:
Profit $3.00 OPEN
 
Bought MGM NOV 12 Calls x3 for 1.05. I set a plan to exit 100% loss, but violated my trade plan and exited at a $63 loss total or about 0.21 per contract.

I want to get into MGM later, but not now. So that's one of my day trades used up for the week =(

I entered NFLX, 180-190 NOV x 2 for 1.64

Here is my trade plan: stop loss $0, Profit stop: exit half at double, time stop friday 11/12/10

I've been trading the market while it is open, and I don't feel nervous. Maybe because everything is moving my favor slightly. Either way, I'm more comfortable. I'm comfortable with the $63 loss. It's a part of doing business.
 
MGM NOV 14 Puts x 2 for 1.41 OPEN

Target is the 12.50 or 12.25 level. Doing some small option day trading and learning.
 
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