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Author Topic: Trades for Week of Aug 29, 2011  (Read 844 times)
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tamo42
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« on: 2011 Aug 30, 10:10:50 am »



There haven't been many coins posted this morning, so I figured I would take a moment to talk about the trades I'm doing in the stock market this week.

So far, they have all been about gold.

Yesterday, I sold some weekly $161 GLD puts for $0.23. Based on the way the margin requirement is calculated, this trade will return about 1.43% if it expires worthless on Friday. If GLD drops below $161, then I'll be buying at that price, which is OK by me. Today, this option is trading for $0.06 so I could buy it back and lock in an overnight return of about 1%. Hmm...

Today I also opened a more strongly bullish position by buying October $177 calls. I think the dip is in and the inflation trade will resume.
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Neal McSpadden
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tamo42
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« Reply #1 on: 2011 Aug 30, 01:27:17 pm »

Closed out the $161 puts for $0.06, a profit of $0.17 per contract.
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Neal McSpadden
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tamo42
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« Reply #2 on: 2011 Sep 01, 01:13:43 pm »

I'm opening a light short on the SPY this afternoon. I bought some Sep 9 $120 puts for $1.66 per contract. We seem to be at the upper range of the current move so I'm expecting the S&P to head back into the 1180 area or lower.

I'm a little uncertain about gold's next move. It's consolidating, but some indicators say up while others say down. I'm keeping my long for now though.
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Neal McSpadden
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tamo42
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« Reply #3 on: 2011 Sep 02, 08:45:00 am »

I sold 2/3 of my SPY contracts for $2.84 per contract. This takes my money off the table. I think Monday will continue to decline, but if you are long on options that are expiring soon the time value eats away at you very quickly. So because the option expires next week, it's a bigger gamble.

The solution? Play only with profits.

My GLD is up big, but that's a longer-term option and I am more comfortable taking the time risk over the weekend. I think this move is just getting started.

I sold my NGD calls today for a 50% profit, but that position has been open quite a while - a few weeks IIRC. The chart looks like it's rolling over to me. I actually have a few puts on it (very light) that I used as insurance. Since they are pretty much worthless now, I may as well let them sit there on the outside chance that NGD tanks.
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Neal McSpadden
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« Reply #4 on: 2011 Sep 02, 10:39:52 am »

I think Monday will continue to decline, but if you are long on options that are expiring soon the time value eats away at you very quickly. So because the option expires next week, it's a bigger gamble.
Don't you have a holiday next Monday? Are we in different countries?
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tamo42
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« Reply #5 on: 2011 Sep 02, 11:26:58 am »

You're right, markets are closed Monday.
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Neal McSpadden
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tamo42
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« Reply #6 on: 2011 Sep 02, 01:31:43 pm »

I ended up closing everything. +80% on the spy put, +30% on GLD
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Neal McSpadden
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« Reply #7 on: 2011 Sep 02, 07:57:30 pm »

Hi tamo,

Congrat on your trade profit!! Are you a professional option trader (you are trading weekly options)? Seems like you are also into the technical side. Selling some $161 GLD puts requires lots of money (at least to me)!

I am bear on the construction sector (and the housing market of course), especially those single house builder. I believe the housing market hasn't hit the bottom yet, and even if it stopped declining, it will only go side way for like two years. The more the ill housing market is being pumped the longer it's going to stay unhealthy.

There are huge open interests in KBH Sept, 11, $7 and Oct $5. also in PHM sept $4, and oct $4. both are losing money with low cash flow building single house. What do you think?
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tamo42
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« Reply #8 on: 2011 Sep 03, 07:19:08 pm »

I wouldn't say I'm a professional options trader. Rather, I trade a lot of options Smiley.

Market prices have changed slightly since I opened the short put GLD trade, but the margin required was somewhere around $1600 per contract. Since margin is 2:1 for most people, that's $800 of cash you actually need in your account. Incidentally, $0.17 profit on $8 a cash outlay is 2.125% return for one day's work. Not bad.

I think you are right that housing has not reached its bottom in real terms. But the question is will it continue to fall in nominal terms? After all, we can only trade nominal prices. With that said, KBH and PHM have both gone through a bullish engulfment on this most recent wave. Entering a short trade here would be aggressive. If you want to be more conservative, wait and see what the next wave will bring.
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Neal McSpadden
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tamo42
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« Reply #9 on: 2011 Sep 06, 12:04:55 pm »

Looks like I should have held through the long weekend since things went as I expected. However, my booked profits and uncertainty on Friday outweighed my speculation regarding what would happen.

Oh well, waiting for the next entry...
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Neal McSpadden
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