Friday, March 30, 2012

$IBM - TA video by Dan F. and CPS levels

here is dans video that includes IBM at the end.  Dans Video

if you are looking at entering with CPS (credit put spreads) then i would keep the strikes at /below the 50day moving average. its on my watchlist but with earnings looking to be on 17th ahead of opex , i will not enter until after.

Thursday, March 29, 2012

Dan Fitzpatricks video on $AMZN 3-29/2012

here is his video: AMZN video

if you are looking to enter using credit put spreads..look at his chart.. keep your put spreads under the 50day moving average.

Mad Money Lightning Round 3/29/2012

Cramer covered the following during tonights lightning round: SLW, EBIX, GWRE, ARCT, NLY, YUM, MDT, AGN, NG, TWX , CSX

unfortunately dont follow any of these to offer my 2 cents, here is the summary and video:

Lightning Round 3/29/2012

$CSTR video analysis by IBD

here is the link for the analysis video by IBD..  IBD video

might get interested myself if it pullsback closer to 50day or fills that earnings gap

Wednesday, March 28, 2012

$APA chart and setup 3/28/2012

been on my watchlist for a while but havent traded for months. never seem to get decent premiums for the levels im looking at.. losing all its moving averages. will now be watching if it keeps dropping down to some support at 92.. then will price out credit put spreads to be at/below the low from dec near 85.. earnings look to be in early may. set alert

follow me on twitter @mark_lexus by clicking at the right side for more free charts , setups, and my trades

UPDATE - closing the $CF trade entry from 3/28/2012

12APR - took profits this morning on this trade, stock is 5 points higher than when i entered plus some time decay. reached 83% of max profit. only .10 left in it, better to have that buying power available since a few on my watchlist are reporting in next 10 days. may be able to get into some May spreads.

Buyto close - Apr160/165 credit put spreads at .10x12 = $120 = $600 profit

28mar - the setup i posted on monday(see bottom) hit today.. dancing with 50day moving average again on the china on again off again saga. Same trade and strikes i made last week.

Sold the Apr 160/165 credit put spreads at .60 x 12 = $720 credit

Using the low from few weeks ago as support line to shoot against. 150day is right at short strike with 200 day slowly catching up. Trademonster shows this spread to be at 86% of max profit at time of entry. if it keeps going down will just ride it out to opex and adjust as necessary then. if it bounces strongly will take profits per my 40-50% rule. might see some movement thursday/friday because Beaks and the crop report.

setup from monday
26mar - pretty much looking for the same thing i was on previous trade. will be looking for a pullback to test the 50day again like it did thursday. will then use the low from 6mar as the support level to shoot against. likely be looking at the 160/165 credit put spreads first. Earnings last time i looked appear to be after Apr opex so that will not be a factor (but will mean i will not enter May spread until after earnings). If something happens to cause to drop right thru the 50 day will then probably  be looking for pullback all the way down to that 168ish low and reevaluate then. set alert at 182 to get it on radar

$POT chart and setup 3/28/2012

dont get to trade this often because of lower share price, mainly stick with CF.. heard TeraNova mention today he sold his position.. heres what im looking for:

right near the 50day today, will be watching for a further pullback to the low support from 2weeks ago near 42.50.. if it hits that level will the price out credit put spreads at/below the support line near 38 from december. some type of usda report on friday i believe so might be a mover on that day.

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How to make Soccer more interesting for Americans

this has nothing to do with stocks but seeing someone tweet about soccer made me think of this:

How to Make Soccer more interesting for Americans:

1. Smaller field size
2. Less players (just like hockey 4 on 4 situations are more exciting)
3. Players that fake leg injuries to be ejected.
4. Eliminate those annoying horns.
5. Need Cheerleaders
6. Reduce playing time to 60min.
7. Make the goalie a midget.

Monday, March 26, 2012

3/28/2012 revised $CAT chart and setup

3/28/2012 - didnt get the break thru 50day i was hoping for on last setup.. would now avoid new credit put spreads because seems to be losing the near term support right here. it could reverse tomorrow..but who the f_ck knows.. i will wait for continued selloff down to the 200 day near 97 before entering.. at that point will price out credit put spreads at/below the 88 support level. double check earnings before entry though. set alert

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3/26/2012 need to double check earnings date but it has formed weak near term double bottom. now will be watching for a break thru 50day near 111, will then look at credit put spreads at / below that double bottom low near 104ish. set your alert

$AMZN setup and trade

premiums have come down on this stock because of the sideways action the last month and a half. was hoping for a move down to get close to the bottom of the recent channel.. today broke out of the channel and above the 200 day. if you are looking to enter via credit put spreads on this breakout then keep the spread at / below the 50 day moving average near 185.. so 180/185 would be the first spread id look at.
nothing really has changed for the stock to warrant the big move in my opinion but it now must hold that channel breakout level.. resistence becomes support.. testing and holding the top of the channel near 196 could be another trigger for entry or adding a few lots.

CLOSING - $MA new entry with credit put spreads 3/26/2012

13 apr - closed this credit put spread this morning at 82% of max profit.

Buyto Close Apr400/405 credit put spread .10x10 = $100
Sold to Open at .55x10=$550 credit
Profit = $450


26mar - posted the following setup for an entry this weekend
Mastercard chart and setup

 didnt expect it so soon, maybe something Bernake said. So like i said in the setup i entered the following today after it broke out today:

Sold Apr 400/405 credit put spreads at .55 x 10 = $550 credit

Trademonster shows this spread to be at 86% probability of max profit

Dennis Gartmans newletter and my comments

Dennis Gartman is frequent contributor on CNBC / Fast Money. He is widely followed on the street. I find his on air appearances lately to be double talk about his positions, trying to justify why he bought or sold a position.

You can get a 30day free trial subscription of his newsletter (no credit card needed), click here The Gartman Letter

His pricing is a crazy $400 a month..yes, a month. His analysis covers, currencies, politics, energy, agriculture, japan/china. But what he doesnt do which i would expect for a $400 a month clip is to recommend stocks..sticks to generalisms.. "i am long a fertilizer company, i am long a shipper" type comments. Gets repetative

I would not pay $10 a month for this but check it out for free.

Sunday, March 25, 2012

$CF chart and setup for 26mar new entry

pretty much looking for the same thing i was on previous trade. will be looking for a pullback to test the 50day again like it did thursday. will then use the low from 6mar as the support level to shoot against. likely be looking at the 160/165 credit put spreads first. Earnings last time i looked appear to be after Apr opex so that will not be a factor (but will mean i will not enter May spread until after earnings). If something happens to cause to drop right thru the 50 day will then probably  be looking for pullback all the way down to that 168ish low and reevaluate then. set alert at 182 to get it on radar

follow me on twitter @mark_lexus by clicking on right side of screen to get more free charts and setups

Saturday, March 24, 2012

$MA Mastercard chart and setup for new entry 3/26/12

had a strong day on friday, newest setup for a new position using credit put spreads would be if stock breaks thru resistence near 429ish, ie to a new high, then would look at credit put spreads at/below the low from 2 weeks ago near 405ish.. that would be the support line to shoot against. earnings last time i checked look to be after apr opex.. the 50day is near 390, that would be logical level to shoot against also but that level does not offer enough premium. set your alert at 429

Friday, March 23, 2012

$LGF Options Action Hunger Games trade

23mar2012 - mike khouw had the following put calender trade on LGF:

Sell the Apr 13 put for about .60
buy the May 13 put for about .90
for total debit of about .30 ($30 for one lot)

he is making this a directional trade. i like the trade mainly that you only risk the .30 . have to admit i dont know much about the stock outside of the constant cnbc Hunger Games blabber and Mad Men. I have another suggestion if you want to do this for protection, as in you hold the stock and dont want to sell just yet and expect a near term pullback.. a "put spread collar":

Sell the Apr 15call for about .95 credit
Buy the Apr 15put for about 1.45
sell the Apr 13 put for about .50 credit
If you enter as a 3leg trade you may get this filled for zero. do a lot for every 100shares you own

Your max gain is the $2 wide put spread, so $200 for every lot. You can see the put spread is already in-the-money.  Looking at the chart you can see all the volume this week thanks to cnbc, with corresponding spike and pullback. Also $13 seems to be some support from prior to the cnbc plugs, $13 being the bottom of our put spread / and our max profit target.

So again, for zero cost you can put on a $200 protection trade while giving you a little more upside up to $15 level. I would put this on if i was long stock and wanted to hold it.

follow me on twitter @mark_lexus by clicking on the right side of page for more setups and trades

Options Action trade on $BAC 3/23/2012

mar23,2012 Options Action show Brian layed out the following Risk Reversal trade for BAC:

Sell the May 9Put for about .40 (credit)
Buy the May10call for about .55 (debit)
Total for a one lot is a .15 debit ($15)

As usual the comments of "you might be put the stock" get thrown out there. Ive posted this previously, You will be "put the stock" at OPEX, not sooner unless it plummets. so close out the puts portion if it looks like that will happen. Also, they didnt mention that for every one-lot of this you need to have $900 in margin/buying power which is to buy the stock at $9 (because of that put you are selling).. so a 10lot costs will require $9000 in margin for as long as you hold those puts.

Brian emphasized that any moves about $10 is all profit. Mike mentioned that if stock moves up you can buy back the put and then "spread it out" which means to sell a higher strike call like the may 11 or 12.. All true. For this spread to be profitable at opex the stock needs to be at $10.15 or higher.

I like risk reversals since they are a way to commit a low amount of capital to the trade. but here is a suggestion on how i would do it a bit differently. I would initiate this as a "call spread risk reversal".. as in sell that higher strike call now. looking at option prices at closing the:
   May 11call is going for about .25
   May 12call is going for about .13

I would go with the may12 strike and my trade would look like this:

Sell the May 9Put for about .40 (credit)
Buy the May10call for about .55 (debit)
Sell the May 12call for about .13 (credit)
Total for a one lot is a .02 debit ($2 debit)

so for a 10lot i will pay $20 buckst. still have to have the $9000 in buying power set aside. My gain is capped at 12 because of the may12 calls im selling. Max profit is $2000 on the trade, max loss is the 20bucks from entry. If it closes below$9 your (Brians) thesis was they wanted to own it anyway. so you took a shot at $2000 gain for only $20. this is an excellant trade if youve had that buying power set aside waiting to get a position on BAC

will keep track of this trade to see how it did at opex.

Thursday, March 22, 2012

Fast Money Web extra and Cramer segment $PCLN 22mar

Priceline was featured on a Mad Money segment, clip here:

PCLN Mad Money clip 

and on the Fast Money web extra, see clip here:

PCLN FM web extra clip

i have not been able to get into credit put spreads since latest earnings. cramer and FM desk bullish, hard to get in at 700 though.. i would look at doing a diagonal spread for 1/5th the capital of stock:

Buy the Jan2013 600call for about $154 ($15400) and
Sell the Apr2012 740 call for about $10.50 ($1050 credit)

perfect case is stock keeps moving up to near 740 at apr opex and you keep the $1050, gain on the long call, and sell another short call for May at higher strike.

follow me on twitter @mark_lexus for more free setups and trades

Closed the $CF credit put spread trade

23mar - per my rule.. if credit spreads profits by 40-50% within 2-3 days of entering i take my profits. The assumption is that with plenty of time left till opex that i have a good chance of reentering another spread, possibly even the same strikes. But if not then i still have a profitable trade. win-win. closed spreads for 44% of the max potential profit.

yesterday - Sold Apr 160/165 credit put spreads at .70 x 10 = $700 credit.
today  - bought to close the spread at .39 x10 = $390
Profit for one day trade = $310

comments: this entry kind of snuck up on me, noticed the price testing the 50day in afternoon. presumption was that 50day held and would bounce, therefore spread decreases in value (profits to me)... sometimes they work perfect, sometimes you have to let time decay do the work. i'll take it and look to reenter lower

22mar - stock pulled back a few bucks today, testing the 50day moving average. presumption is that it holds, like last time which in hindsight was a successful test and rebound. shooting against that low from 2weeks ago as a mild support line, short strike is right at the 150day moving average with the 200 day moving up slowly.

Sold Apr 160/165 credit put spreads at .70 x 10 = $700 credit.

Trademonster shows the 165 strike has delta of .17 (currently option is priced to assume a 17% probability stock is at 165 or lower on opex)
Probability of max profit is 83%.
Target profit is 80% of the max potential ($700 is max) or if stock rallies and this spread profits 40-50% in 2-3 days will take profits.

Learning about options for Newbies

If you are trying to learn about options either because you are trying to trade full time or part time while at work to get some extra cash, here are some FREE sites to go to. First and foremost you have to dedicate some time to learning, consider how much time you spend talking, watching,reading about sports each week.. cant you dedicate a couple hours a week to learn how to make money? how much are you making on sports? and i dont mean the $40 you made on your gay fantasy football league.

First, watch all the free webinars you can, i made it a point to try to watch at least one a day when i got serious. they are usually about an hour each so its not a lot of time to commit. Watch it at night if you work before you go to bed, TIVO all that gay stuff you watch on the Bravo channel if you have to.  Sources for free webinars are:

a. your brokers website.. Trademonster has dozens, Ameritrade has dozens, etc

b. try , lots of free stuff there. some sites might require you to login but who cares..its free.

c. also , lots of free webinars, podcasts, online classes... you can download to Ipod and watch whenever..probably on ipad / iphone as well

d. you dont have to pay to get educated so if you are thinking about signing up for a $599+ class...well you are probably the greater fool..too much free info out there

Second, you should read a few books about it.. my top 3 list is here

Investing books to read

all are available either at libray or free pdf download.

Third, follow successfull traders on twitter.. look for ones that mention their losers along with winners. Avoid the ones the are cheerleaders, constantly humping their stocks. if you watch a trader carefully and after a while think "this MF'er always makes money" he is either a paper trader or very good at being a hindsight trader convincing his followers he was in it all along. The best ones will post their technique / methods for getting into trades, post their entries and their exits.

Take the successful technique and apply it to the stocks you like.. dont keep asking "what do you think of this trade" .. paper trade it first until you are comfortable.

no she doesnt have anything to do with options

Wednesday, March 21, 2012

Low Cost Way to Trade $AAPL (with treat)

heres an easy, lower cost way to trade apple instead of buying 100shares for $60000. If you have a long thesis and would like to hold the position for long term. instead:

Buy 1 of the Jan2014 500calls for $162 ($16200)

This call option has a "delta" of .73 which means this option will increas 73cents for every $1 move up in the actual stock. Now add the following:

Sell 1 of the Apr2012 630 calls for $11 ($1100 credit)

Now you have a Diagonal Spread, and it requires no additional margin or buying power. Best situation is that stock closes on Apr opex at 629, you keep the $1100 and gain in value of the 500long call. Then resell another option for May. But what if stock takes off you are thinking.. according to the Trademonster Analyse tab.. stock has to move all the way up to about $800 at Apr opex to lose money since the long 500 call is gaining in value while the 630short call is losing. Flip side is you have $1100 in protection for downside BUT you have until 2014 to keep selling short calls against your long call..legging into a new diagonal every month.. thats lots of earnings reports, lots of Iphone refreshes, lots of cnbc blabber, etc.. But what if it goes down you are thinking...yeah, it could..but i have 2 years to keep doing this...2 years..thats alot of weekly /monthly options

Buy 1 of the Jan2014 500calls for $162 ($16200)
Sell 1 of the Apr2012 630 calls for $11 ($1100 credit)
Total buying power for every one lot = $15100 vs $60000 for 100 shares

(so if i had $60000 i would buy 4 of these diagonals and get $4400 in premium)... 4x the return when using LEAPS vs stock

your treat:

follow me on twitter @mark_lexus for more free setups and trades

Fast Money Web Extra 21Mar $LULU $NKE

i am not in either name but both are on my secondary watch list. would need some type of B.S. selloff on earnings first for an entry. heres the link for the show:

Click here for Fast Money web extra

Dont tell me you cant eat cheap

had to share this. as you probably know i am a low carb eater which means i am a high meat/fat eater.. i picked up these 5pound and 3pound tubes of ground beef at Kroger..manager marked down to move fast..5lb logs for $2.95 , 3lb logs for $1.99. Each 5lb log is a weeks worth of meat loaf..crazy. plus checkout boy missed one.. got this whole pile for $32.. 2months of meat. what food inflation?

$CAT chart and setup 21mar

update on bottom

21mar - have not been in this name in a while. on my secondary watchlist. losing the 50day today. will be watching for for continued pullback to low from 2weeks ago, then will price out credit put spreads targeting at/below the 200day. If going short today, use a stop right above the 50day.

22mar - getting real close to entry target. probably no entry though..the 90/95 credit spread is only paying upper 30cent range..really would like .50 or higher to enter. will keep watching.. the 95/100 although decent premium and ok probabilities doesnt line up with any type of support on chart.

Tuesday, March 20, 2012

Fast Money Web Extra 20mar $LVS

tonights Fast money web extra was half about $LVS and the other half about Guy Adami's aversion to feet, cant say i was interested in either but heres the link to the snippet:

Fast Money Web Extra 20Mar

The $AMZN trade that wasnt 20mar

stock breaking out today, up 7+. has been in a narrow channel for over a month, when you get that sideways movement the volitility starts to drop, ie the premiums go down which means you have to be tighter on your spreads than usual. was hoping for a pullback to test bottom of channel in low 170's. this breakout today would get me looking at credit put spreads below the bottom of the channel so at least 175. but premiums are not as good as id like, would rather have gotten into the 170 level to line up with the lowfrom Jan. so like i always say in my rules that if i dont like trade within first 5seconds i pass on it (gut check). my gut overules all strategies.
follow me on twitter @mark_lexus for free setups / and my trades

$CMI setup 20mar

have not been in this name for a while but still on watchlist. will be looking for a pullback to test the low from last week / 50day moving average near 115. if it hits that then would like to get credit put spread at/below the 200day near 100. not confident that premium will be good enough but will price it out then. setting alert and waiting

Here's an $FFIV trade i will make in 3weeks

hopefully you have read my lastest posts about adding credit put spreads to an ITM diagonal spread  AAPL - adding credit put spread to ITM diagonal 

i have diagonals on FFIV as well, with a DITM 2013 long call and an APR 115 short call. This strategy is the exception to my normal rule of not holding credit spreads thru earnings. Reasoning is that the short call provides a huge hedge if im wrong. Dont get me wrong, entering credit spreads to play earnings move is a valid strategy. Essentially setting up for a lower than expected earnings move and / or volitility crush. I would only put those on right before the earnings to take advantage of premium increasing in ramp up to the reporting date and only with stocks you are most comfortable with, as in the ones you know the most about. Not for just looking at earnings calender and entering trades on whatever reports the next day.

So Apr 115 short calls worth about $1600 each with stock at 130. I will be looking to enter credit put spreads at/ below that 115 short call strike. so either the 110/115 or the 105/110, probably day of earnings on 18apr. strike will depend on where stock is on that date. if its under 115 i will reevaluate. Why not enter now? because the price of that spread will likely increase because of earnings, so there will be no time decay. so stock could stay flat and just because IV increases the spread price goes up (loses value). so i might as well just wait till the last day to put it on. the 110/115 spread has an 80%probability of max profit right now.

Bottom line: will look to enter either 105/110 or 110/115 credit put spreads on 18apr ahead of earnings to go with the diagonals i already have

follow me on twitter @mark_lexus for free setups and trades

Monday, March 19, 2012

closing $AAPL trade today from 21mar

3apr - closed this position today, with 18days to go to opex was right at 75% of max profit, if stock pulls back from all the hype i will look to reenter.

Sell Apr 560/565 credit put spreads at 1.10 x 7 = $770 credit
bought back at .27 x 7 = $1.89
Profit = $581

follow me on twitter @mark_lexus for more free setups and my trades

original posts
21mar - using the post below as a reference.. i just missed an entry yesterday, my AON order for the strikes i was looking at was on the ask then apple went up from today keeping under that 570 i mentioned below, i entered:

Sell Apr 560/565 credit put spreads at 1.10 x 7 = $770 credit

went with a half size order since i am not getting it at a support level to shoot against.
Spread shows a 77% probability of max profit using Trademonster Analyse tab at time of entry. The Apr570 short call i also have within diagonal is worth about $4700 right now so that is my hedge. I may be adding a few more lots to this position on a pullback.

follow me on twitter @mark_lexus for more free setups and my trades
19mar - if you just reviewed this same strategy with CF from a few months ago, i am now considering the same thing with AAPL The CF Add Credit Put Spread to ITM diagonal post

A strategy i sometimes use when i have a diagonal spread where the short call is in-the-money (ITM).. i have AAPL diagonals which is a Deep-in-the-money (DITM) 2014 call and a Apr short 570 call. The objective with entering a diagonal is that the DITM call is way cheaper than 100 shares of stock and that i want to collect the premium of the short call.. essentially just like a covered call.. to be able to get some upside participation with the DITM call and collect the short call premium. if youve followed my trades you will remember that the Apr 570 short call was rolled from the Mar550 for zero. so , on to the trade..

That Apr570 short call is worth about $4400. so if stock closes at opex at 570 or below i keep that $4400, and i keep the long DITM call and will sell another short call for May. remember, i will be keeping that 2014 long call regardless of what the day to day movement of the stock is so i ignore that LEAP, i have 2 years to keep selling short calls or doing ratio spreads, or whatever. like i said, the short 570 call is worth about $4400 today, that gives me a $4400 worth of downside protection (hedge if you want to call it that). now i would look at adding credit put spreads to this "position" . objective is to get strikes UNDER that short call strike of 570.. at or below 570.. point being is if stock goes down i want all of that $4400 short call premium to offset any loss i may have with the credit put spreads. Using this thought process you could go as high as the Apr565/570 credit put spreads. now that is an possible option with a juicy premium. Best case for me would be for that 570 level to line up with some type of support level.. nothing really there, small gap fill. The level that jumps out at me is the previous breakout level near 550. might get some support there. Even though i can go as high as 565/570 i still want the credit put spread to adher to my other rules.. the probability of max profit goal and lining up with some type of support level. that brings me to being at/below the 550 level so a 545/550 spread is first one i will look at. its probability was 75% of max profit when i looked earlier today.

This "setup" is noticably different that my previous setup..different levels. Let me again stress this one is ONLY IF YOU ALREADY HAVE A DIAGONAL SPREAD. ideally where short call is already ITM because stock took off. Again, i am ignoring what happens to the value of the DITM 2014 call since i will hold that anway. heres what happens with the "position":

1. Stock stays above 570 at opex. the credit put spreads expire at max profit. The short calls will get rolled to the next month, i will pick a strike where i will either roll up for no cost or for a credit.
2. Stock between 550 - 570. credit put spreads expire at max profit. Short call expires worthless and i keep the $4400 and sell another short call for next month.
3. Stock below 545 at opex. Credit put spreads will get rolled down and out to next month just like i would do with any spreads where stock moved against me. Short call expires worthless, i keep the $4400 and apply that to any debit i need to roll the puts. oh, and resell another short call, bringing in more premium, which i can also apply to the put roll

2 out of 3 clear cut profitable scenarios. the key is for you to have the same thought process i do about that LEAP. i bought it to hold to 2014, i didnt buy it to flip after aaple moves 20bucks or drops 20bucks. if stock takes off i will just make less.. really hard to lose money with diagonals when you use LEAPs that far out. so like my buddy @traderDr once said..heads i make money, tails i just make less money.

i will be pricing out this strategy tomorrow (20 mar).. note: a sudden selloff will be ideal to get in on this

Sunday, March 18, 2012

$GOOG chart and setup 19mar

for 19mar, comments below chart

after this weeks trading the setup is similar to previous week. Stock is trading in a channel for couple of weeks now, getting close to breaking out of top of the range. breaking out of the range would usually be a trigger for entry for me. for that example i would keep my credit put spreads below the bottom of the range near 600. but what will probably keep me out of a trade in near term is that google has earnings the thursday before opex last time i checked. As usual the volitility of the options will increase into an earnings date, that will negate any time decay that this spread is supposed to have. I want to get BOTH time decay and benefit from stock increase. The only setup i see that will get me to enter is a selloff, quick selloff preferred, down to the bottom of the channel near 600ish. I would like to get credit put spreads below the support line at 565ish, but definately below the 200day moving average near 578. This entry will be for a rebound in stock ahead of earnings, the presumption is that bottom of channel support holds and stock rebounds. If stock floats around here or breaks out upward it will do so without me. so i have an initial alert at 605 to get the trade on my radar.

Follow me on twitter @mark_lexus to get all my charts / setups and trades.

Friday, March 16, 2012

Comments on Mikes $AAPL Options Action trade

as usual i have some comments about a trade on options action and why i would not take it. mike khouw recommended:

Sell Jun 600/630 call credit spread for about $1000 credit for each lot

for every one lot you will need about $2000 of buying power. if youve followed my past trades / blogs / setups etc you will know i  have certain guidelines i use to enter credit spreads. nothing magical about them its just what ive used to get my system. lets go step by step:

1. Call credit spreads: I dont like and rarely enter into credit call spreads. have had a poor track record getting winners, dont like rooting for stocks to not go up and when im wrong i seem to be wrong big time where the stock takes off and i have to take a loss vs rolling to following months. red light for this rule

2. Probabilities : using the Trademonster analyse tab. it shows that this trade as of todays pricing has a 56% probability of max profit. that is almost a coin flip. thats almost like guessing. anything could happen of course but when given a choice i would prefer to enter a trade that has a 75% + probability of max profit vs 50%.. red light for this rule

3. Time to expiration: this is a Jun spread which is 92days away. this will give you plenty of time to let the stock recover if it moves against you if you have the discipline to hold to near expiration. (like mikes trade from Jan on GOOG..would have been a winner if held). I am going to assume i never have picked the exact top or bottom and stock will move against me, so i need at least several weeks of time left before opex for stock to recover. this is the main reason i do not sell weekly credit spreads. you might be comfortable with it but i have to go with what my trade history shows (which means you should be keeping track). Green light for this one

4. Does earnings impact the spread (ie, does company report prior to opex). Several issues with this. AAPL reports right after Apr opex. Anything could happen, either blowout earnings again and stock rallies or a miss and it drops. no one knows, i dont know, mike doesnt know. so we are back to a coin flip for the earnings event. for every spread i have on before earnings that profits ive had one that was big back to 50-50. Secondly, earnings will spike the volitility of the options (price). though this will mainly be focused on the weekly options for that week, this increase will still affect this June spreads against you enough that it will wipe out alot if not all of the time decay. Red light on this one.

5. Simplicity - honestly i dont know how easy it would be to adjust a $30 wide spread if i had to. i would assume that the bid/ask when rolling would be wide which would make is harder to get split the bidask to get a decent fill. Instead compare it to the Jun625/630 credit call spread.. selling 7lots gets you $1100 premium, need $2300 of buying power and has 64% probability of max profit ... with that i get an easier ability to adjust the position if needed to a following month. Also look at the breakevens on mikes spread vs my example one.. his 600/630 with $10 premium .. loses money at 610 or higher at opex.. my example 625/630 with $1.60 premium starts to lose money if stock is 626 or higher.. so my example trade makes almost the same amount, risks almost the same amount, has a higher probability of max profit and has a breakeven $15 higher. Yellow light on this one

6. Technicals - i prefer to use support / resistence / moving averages to base my short strikes on.. AAPL just hit 600 yesterday so this call spread would be right at that resistence. if i had too i would use a higher strike for more cushion but thats just me. Marginal green light for this

bottom line is i would not enter this trade, mainly because i dont like call credit spreads, the probability of max profit is far too low, the spread will be affected by earnings in april. alot can happen at Apple and in market by June so if i had a short thesis like mike did i would go for a shorter term trade, Apr opex to start like Dan Nathan was getting at. I will paper trade this spread because im curious as to how it will look if i try to roll it.

what does Nikki have to do with this trade???? nothing at all.. not even a little bit.. its your treat for reading

$EOG entry and chart 16mar

16mar -
this is a 1/3rd setup, 1/3rd gut, 1/3rd fundamental trade. EOG will continue to be strong along with oil prices is the fundamental, gut is ive been looking for an entry, missed a good one near 110 expecting at 50day test, so today alot of energy stocks were up. EOG got right near resistence during day. perfect setup would be to wait for break above 120 high from last month but would not have decent premium or levels to shoot against at that im getting in a little early. earnings will be after Apr opex. despite not having the perfect entry setup i will still need to have the required probabilities in order to using the Apr 105/110 credit put spread. the 110 level lines up perfectly with the low from selloff last week and is the 50day moving average which is rising and will act as support going forward.. Trademonster shows this spread to be 80% probability of max profit. so i have 2 of the 3 preferred trade setups working... 1) good TA entry -- probably not perfect 2) probability of max profit at 75% or higher --check 3) one or more support levels to be at/below --check.. support line and 50day.

16mar - Sold Apr 105/110 credit put spreads for .71 x 10 for $710 credit

$MA chart and setup 16mar

pretty simple setup, pullback to test the low from last week near 410 i will be looking to add a few lots to the apr385/390 credit put spreads.. this level matches up with the support line at 390 and in few days the 50day moving average will be above that level as well. i use Trademonster, im sure your broker has a probability calculator as well. The 385/390 spread is at about 88%probability of max proft here and will probably still be above my 75% threshold near 410.

Thursday, March 15, 2012

Investing Books to Read for Free

These books are what made the difference to my trading:

1. The complete guide to option selling: how selling options can lead to stellar returns in bull and bear markets by James Cordier

This book is available at library and for free download via pdf at link at bottom
check ebay also before going to amazon

2. The Option Traders guide to probability, volatility, and timing by Jay Kaeppel

This book is available at library and for free download via pdf at link at bottom
check ebay also before going to amazon

3. How to make money in stocks: a winning system in good times or bad by William J O'Neil

Also available at library and free download. this is the only one i bought (off ebay) for 1/3rd the price of amazon so i could highlight / reread

all these books and many more can be downloaded for free in pdf format at:
Traders Library  <-- this link sometimes works and sometimes it doesnt...

you can download The Complete Guide To Option Selling directly from my google drive here --> Option Selling book

you can download  The Option Traders guide to probability, volatility, and timing directly from my google drive here --> Jay Kaeppels book

so for no cost you could get all of these books and read at your convenience in pdf.. i dont have a kindle reader or an ipad but if you can read pdf documents on them then i guess you could do that too. Your Welcome.

also here is a writeup for Tips for Newbies to Options / Stocks Learning about Options

if this information helped you out and saved you some money (ie, the pdf downloads). i would appreciate a small donation for my time to provide this to you.thanks (by the way, i receive no referral fees if you buy the book online nor do i for the Traders Library link..just putting the information out there for you)

comments on those $AAPL credit put spreads for new entry

15mar - below is the trade i closed yesterday. so as you can see the apr510/515 credit put spread closed for .50... now just the next day the stock is about 15 points higher and this spread can likely be sold for .55-.60 ... since i dont speak in "greeks" mentioned online and on cnbc..the volitity (IV) of the options have increased with all the giddyness...usually as the stock goes up the pricing of these spreads goes this case the increase in IV has negated that...same thing happens if there is some event in future that is getting priced in.. as in earnings. which is why i always say i dont sell credit spreads where earnings are before opex. the rise in IV negates the time decay. selling spreads because you have an opinion on what earnings will do is something else and is up to you and your research/thesis.
   so bottom line with IV up on this spread if stock pulls back 10-15 bucks this spread will also increase more than usual and may allow me to get back into this position 20 bucks higher than i did last time.. have alert set for 575.

14mar- closed the credit put spreads i entered 2days ago. remember my rule of if the spread gets 40-50% of the max profit in 2-3 days i take profits. Good chance stock will reverse and can enter spread again.

Sell Apr510/515 credit put spreads at $1.03 x 11 = $1133 credit
bought back today at .50 x 11 = $550
profit on 2 day trade = $583 for 51% of max profit

Wednesday, March 14, 2012

Heres why i dont use credit CALL spreads $AAPL

3apr, recent price action warrants a repost of this:

i know what your thinking... its gone up too far too fast, its going to reverse soon, its a blowout top, its a crowded trade, etc.. lots of legit reasons why apple should go down.. so then youre wondering how to play that without actually shorting the stock, then you think youll just sell some credit call spreads, collect the premium and laugh all the way to the bank, thanking the market for inflating the premiums at these levels. heres why i dont:

First reason i dont sell credit call spreads is my history.. i have had a poor record picking tops. for every one i get right i seem to get one wrong and spend months rolling it to get my money with Mastercard now. so it has become a coin record with credit put spreads is 85%+ the choice is easy. do what works, dont do what doesnt work.

   Second, i really dont like the feeling of being in a position to be rooting for a stock to not go up. just doesnt fit with the way i look at things.
   Third, using $AAPL as example..the stock is hitting high after high..a big part of my method is to base entries on technical analysis and select short strikes against other TA levels..moving averages/support lines/trend lines/fibs. with call spreads there is no overhead resistence..yeah, no shit, its at a high, nothing but air that takes away a big part of my risk management.
  Now you may be skillfull and profitable with credit call spreads but i have to go with what has worked for me and what hasnt worked for me. i too think apple will pull back..whether thats this week or next month it doesnt matter, there is no hurry, another setup will form and at that point i will be able to make an entry.

what does jennifer love hewitt have to do with this post....nothing

New $AAPL setup 19mar

comments below chart

new setup for 19 mar after this weeks trading. there is a gap down to about 568 that needs to get filled. previous breakout thru resistence ie new high was near 550 last week. best case entry for me would be a pullback first to fill this gap and then all the way down to test that breakout near 550. if that happens i will look to enter credit put spreads that are at/below the low was 516.. i have previously traded the 510/515 Apr credit put spreads and have these spreads in my Trademonster saved que for quick reference. with all the movement recently the volititly is up (the premiums are juiced) so would expect to get at least $1.00 credit for this $5 wide spread. If Apple moves down rapidly..say 10-20 dollars either by itself or with general market selloff i may pull trigger early to take advantage of the short term spike in IV and premium..maybe with a half size position.

TA entry levels - Break to new high ($AAPL example)

one of my previously mentioned TA levels to use for entries in credit put spreads is when stock breaks to a new high. many on TV will say they are not interested in getting in stocks at 52week/all time high. if a stock is 100 how does it get to 200...has to make a high every dollar it goes up.. write this part down..the 52week low list is not a shopping list for new stocks to invest in... so lets use my recent Apple trade as example since everyone and their cat watch AAPL:

   Stock had all time high near 548 last week..monday this week broke thru that level to 552ish..would have been nice if it was on bigger volume but it is what it that breakout was the trigger to enter. i will admit i was expecting down move back towards 520 so this move snuck up on my. i used the recent selloff low near 520 as the support line to shoot against with a apr510/515 credit put spread. Trademonster analyse tab showed that to be 78%probability of max profit. you could be real ballsy and use higher strikes say a 540/545 and pull in some juicy premium but thats not my style..i target probabilities at 75%+
   Stock behaved perfectly, it continued moving up, almost panic mode feels like..but after 2days the spread has given me a 50% gain. Took profits with that.
  The takeaway..focus on the strong stocks..the 52week high list..the best of breed, the industry leaders... 52week low stocks are there for a reason...the RIMM's the FSLR's

Tuesday, March 13, 2012

The $GOOG trade and comments

Feb28 - Sold Mar 585/590 credit put spreads at .50 x 10 = $500 credit
mar13 - bought back the spreads at .15 x 10 = $150
Trade profit for 14days - $350

Google was working within a sideways channel at the end of Feb., it broke out of the channel and thru the 50day on 28th.. i used the bottom of channel near 600 as support line to shoot against meaning short strikes to be at/below that level.. in hindsight could have gone higher but at the time the 585/590 spread was an 83% probability of max profit. best case is that stock keeps moving up and time decay kicks in.. stock stayed up for few days and then pulled back even into low 590's. didnt touch the short strike. again, this is why i dont use stops..would likely have been stopped out for a loss, instead held on stock rebounded since that day..near 613 now. time decay kicked in and closed for 80% gain. stock actually is a little lower at closing date than it was on i benefited from the time decay even though my entry thesis of breaking the 50day with upward move expected was incorrect.

$FFIV setup 13mar

13mar- stock is moving well, up $5 today and breaking to new high.. the break thru resistence to new high would usually be a trigger for me to enter a new credit put spread. what is keeping me out is that earnings are on 18apr, right before IV will increase into earnings as usual and will offset the time decay. so the only way to profit is stock appreciation. with credit put spreads id like to get that appreciation AND time decay in case the stock does not move. If you absolutely have to enter a new spread, keep the short strike at/below the 50day MA which lines up to the support line from the dip a few days ago.
   I will be looking for a pullback to that 50day if the market sells off with the presumption that it rebounds prior to earnings, best case is getting a spread with short strike at/below the 200day

Monday, March 12, 2012

closing the $AAPL trade from 12mar

14mar- closed the credit put spreads i entered 2days ago. remember my rule of if the spread gets 40-50% of the max profit in 2-3 days i take profits. Good chance stock will reverse and can enter spread again.

Sell Apr510/515 credit put spreads at $1.03 x 11 = $1133 credit
bought back today at .50 x 11 = $550
profit on 2 day trade = $583 for 51% of max profit



Apple hitting a new high today and breaking thru resistence. using the low from 6feb which was 516ish to shoot against for a mild support line i entered:

12mar - Sell Apr510/515 credit put spreads at $1.03 x 11 = $1133 credit

Using the Trademonster Analyse tab this spread has a 78% probability of max profit. If stock pulls back i may be adding some lots to this trade.

Friday, March 9, 2012

The Missing info on Brians $LVS Options Action trade

Brian Stutland just layed out a call spread risk reversal trade for $LVS on Options Action:

Sell:  the Jun 46 put
Buy: the Jun 60/65 call spread

the entire 3leg trade would be for a 10cent credit ($10) per one lot. also for each one lot you need to have $4600 in buying power.

My pet peeve with how they describe what could happen if stock goes down... the "you could get put the stock" type comments. I know air time is tight but i think the OptionsAction crew owes it to the audience to be a little more clear.  Today they implied that if the market corrects and LVS drops below 46 that you will be forced to buy the stock right away. not so. This is a JUNE option... if you do nothing AND the stock is below 46 on JUNE opex then you will be "put" the, your broker will automatically buy the stock for you at $46 ($4600 per one lot)

it is extremely rare for that put option to be exercised early on you especially this far out from the opex even if the stock drops below 46....just watch the 46put "delta"...the closer it gets to 1.00 the more likely they will be exercised on general rule is that if an option delta is above 96-97 then it is time to either close the option / roll to next month.. so this delta will not get near 99 unless the stock drops dramatically lower than 46 and / or you get months of time decay. so i think the options action crew overemphasizes the "you can be put the stock" part of this trade....just adding the comment "at opex" would make it more accurate in my opinion. what doesnt get mentioned is unless the stock really takes off to the upside, you will not realize that full $5 wide spread profit..moves to 65 tomorrow and  you will see a nice gain but you will have to wait till all the way to June opex to see the full profit..which is ok, you might just be looking for a few hundred bucks gain.

also, that $4600 in buying power you have to set aside you will have to keep set aside as long as you have that if stock takes off, buy back the put and let the call spread ride..that way you get your buying power back.

personally would not put on this trade...having to set aside $4600 to make a max of $500 plus having to wait 3+ months to get that $500 is not a good use of $4600 to me... June is 3 full opex' rather use that $4600 in buying power to sell 3 seperate credit put spreads in other names like i have been doing....waiting 3months to make $500 is not my style.

what does the picture have to do with this trade....well...nothing

$AMZN setup 9 mar

not seeing anything compelling that makes me want to get into an APR credit put spread now. broke the 50day yesterday but Amazon has been in range for few months, would really need break about 200 to get out of that range..only setup i see for the moment is if it pulls back to test the high volume low in end of jan down to near 174..then will price out some spreads. im not into initiating iron condors but if you have to then keep the calls above the 200day and puts below the 168ish low from early Jan

Thursday, March 8, 2012

A Few comments about "Against the Herd" by steve cortes

bottom line upfront.. i dont recommend you buy the Steve Cortes book "Against the Herd". the only reason to read some or parts of the book are to get more analysis on one of his 6 dont buy gold, or china is going lower, etc. if you need another viewpoint on one of those subjects for your own research for a trade then its ok, but as usual id recommend to pick it up at the library.

There are no secret techniques for trades if thats what you are looking for. also as you have seen on cnbc steve very frequently adds silly metaphors when trying to make a point..the "if you want to pick bottoms, try J-Lo or Coco instead" type comments. Those are used so much in his book it gets to the point of being annoying, almost get one per page.

i like cortes because i appreciate a rational contrarian thesis but spending $20 on the book for a repeat of what hes said on TV is not recommended. I wasnt able to finish the library copy, read first section, thumbed thru the rest.

Wednesday, March 7, 2012

$NFLX setup 7mar

as i posted a last week..losing the low after earnings gets the Netflix to test the 50day / gap fill... hitting the 50day today. i will not get interested in this name again until it fills the gap from earnings near 96.. if that hits then will price out some spreads. am not optimistic about getting an entry on this with credit put spreads since the level to shoot against is in the mid 60's.. that will likely be too far away to get decent premium. setting alert, cross that bridge if it hits.

Closing The Apr $CF trade - credit put spreads 9mar

9 Mar - closed position. again if i have 40-50%+ profit gain in 2-3 days i take profits, very likely i can reenter spreads during this opex.

Sold Apr2012 150/155 credit put spreads for $1.05 x10 = $1050 credit
Buy to close the spread today at .60 x10 = $600
profit for 3day trade = $450

will now look for reentry if stock pulls back


yesterday entered the following trade for CF Industries $CF :

6 Mar - Sold Apr2012 150/155 credit put spreads for $1.05 x10 = $1050 credit

Probability of max profit using Trademonster Analyse tab was 78%. 46 days to opex. Using the 200day MA as support near 160 to shoot against so short strikes below that. Plan is to hold until either time decay/stock appreciation reduces value of spread to where it is 80%+ gain, or take profits if i have a 40-50% gain in 2-3 days. Would look to reenter a spread after that. will update as i take action or adjust.

The Apr $AAPL trade - credit put spreads

8 mar - so much for the sell on the news hype, stock jumped up to 540+ giving me a near 50% gain in these spreads so i took profits at 55cents. like i said below, if i get 40-50% of the max gain in 2-3 days i take a profit. with 44 days left till april opex there is a high likelihood that stock will drop again and that i can reenter if not the same spread then a similar spread..i guess to make it worthwhile i just need to take in more than .55 credit on the next spread. i have had many trades like this where i was up 50% but held..stock pulls back, sometimes right to where i put trade on in first place and then i kick myself for not taking that easy 50%. if it doesnt pullback then i will just pat myself on the back for having another profitable with so much time left till opex it will not take much of a movement in the stock to get a good premium again..could be down $15 in 30min like a few days ago or some other meaningless cnbc hype...greek debt blather, job claims, etc

6mar - Sold the Apr2012 475/480 credit put spread for $1.05 x10 = $1050 credit
8mar - bought to close the spread for .55 x10                                 = $550
                                                                      profit for 2day hold  = $500

yesterday entered the following trade for Apple $AAPL:

6mar - Sold the Apr2012 475/480 credit put spread for $1.05 x10 = $1050 credit

Probability of max profit using Trademonster Analyse tab was 79%. 46 days till opex
Using the support line near 486 to shoot against, so short strike is below that level.
Plan is to hold until either time decay/stock appreciation reduces value of spread to where its an 80%+ gain , or take profits if i have a 40-50% gain within 2-3 days with thought of being able to reentry another spread prior to opex. will update this trade as i take action or adjust.

Tuesday, March 6, 2012

$PCLN setup - 6mar

for Priceline here is what im looking for. its barely making a dent on the chart even being down 12bucks..if it drops below this post earnings low near 625 then the presumption is it will continue to drop to fill the gap up from earnings. i am looking for that gap fill, especially with priceline making most of their money from europe so the cnbc heads will tie in whatever is going on in greece and extrapolate it to priceline. regardless, it is a best of breed stock that is in the top of my watchlist and a constant entry on the IBD50. if stock pulls back to fill the gap, say 600ish, i will then price out some spreads at least at/below the weak support at 560 but ideally at/below the approaching 50day near 540..that would be best case. just note that $5wide strikes as of today are not available until 565 for Apr. , doesnt really matter for the levels im looking at but may affect you if you for some reason want to mess around with calls at current level or iron condor the position. setting initial alert at 605 to get it on my radar.