Interesting day.  I really don’t have a clue how this Greece thing is going to play out, the economics of it say that they will get a bail out but since there are politics involved who knows.

TWTR rocketed up on a rumor that google was looking to buy it…. if that rumor gets stronger this could be my best trade of the year.  I didn’t sell any today, hope I don’t regret it.

And its a good thing TWTR was up so much because VMEM continues to fall, now at historic lows, the reality is I guess this stock really could continue to grind lower until they show a earnings call that isn’t a disaster.  In talking with some folks I know that work there they are selling, so I hope to just tough it out till next earnings call.  I don’t know if I have the guts to cost base down again, I have a rather large position already.

I did enter a long on DIA 180, Aug calls for $2.03 today.  Ended slightly down but basically today was a wash.  I’m not really committed to this call so I’ll likely lose my nerve and take profits on any single day rally this week.

Baba and CBI both had nice rally’s today but I’ve noticed that the spreads on things are getting wider this week.  (the gap between the offer to buy and offer to sell prices).  That can set up pretty big swings and it means you have to have patience on your offers when you move into something.

Great day to set up some trades if you believe the world is not going to end with the Greek default.  There is a chance that I might have missed the entry and the market will bounce tomorrow, I hope we get another down day or at least flat to give an entry.  Things are on sale, even aapl if you want a safe boring play.

I’m looking at DIA Aug, 21st 180 calls

Also looking at VIX Jul 22 ’15 $18 Put

I got my fill on TWTR today, .77 cents, feel good about that.  Also bought some CBI Jan $60 calls for $2.20.

BTU (coal got a really nice bounce based on a court ruling against the EPA), BTU was up 10% on a day when the market was down huge, could be a nice little rally in the next few weeks.  Bought 80 contacts at .10 cents and they are trading at .14 to .17 cents now.  That is a 40% worst case to 70% best case return in 5 days 🙂

long UCO could be a play but I have to wrap my head around what the dollar is likely to do, stand by on that one.

We have a lot of data this week that should take the edge off of Greece, Jobs, ISM, etc.

Fun times!!

Lots to cover here.

I’m back into BABA.  I bought calls on this in May, didn’t call the bottom but close enough.  I killed it in this trade with over a double in less than 2 months.  I edged out on the way up exiting over 3 trades.  I think I might have cost based down once as well.  So I’m trying it again.

open 8 contracts of BABA Sep 18 ’15 $90 Call – price $2.07

The fundamentals on this are very strong, basically every analyst is bullish on this with targets for most at $105 or higher.  Technical’s look OK with hard support at $80.  I’ll cost base down on any pull back up to a $5k position and then just roll them out to December if we get into late July with no rally.

Still trying to enter TWTR, I’ve be putting orders in at the bottom of the spread but they aren’t filling.  I’ll keep trying and will likely just pay up next week and then I’ll wait for the new CEO or acquisition rumors to heat up and this will pop.  I’ll have to keep an eye on the next earnings call which is around end of July.

Also trying to enter NMBL again.  I’ve lost twice on this trade and I just don’t want to give up.  I work in this industry and anecdotal sales seem strong, customers like them, and they are always a possible target to be bought.  I missed the recent rally and refuse to overpay on the trade so it may never fill.  But I’m looking at the Nov. $35 calls.  If it continues its pull back I’ll edge in.

I should mention I’m in VMEM Dec $2.50 calls, bought them before I started the blog.  They are dirt cheap right now.  Basically priced for bankruptcy (well not really, but its ugly).  I used to work at Violin, great technology, crappy mngmt.  Its a tough space but they seem to have a good product and the bar is set so low I don’t really see how this stock could go any lower.  But I think I said that at $3.00 as well, opps.  I have a decent position on this at .70cents and you can probably get them for .60 cents right now.  Earnings in early September will be key, could bounce back up to $4.00 easy.  That will be a 300% return on the options.

Last note on a lesson learned and it applies to both Vmem and NMBL.  I have a small position in MLHR that I got beginning of April.  I own the Aug, 21 $30 calls.  I paid $1.32, stock was at $28.  Stock moved over $30 on good earnings but I can’t find a buyer for the options at almost any time premium and there are over 45 days to expiry.  Very frustrating since this should have been an easy profit.  The lesson is that options on low volume stocks is tough, period.  I’ll keep trying to exit but what should have been a double is turning out to be a break even…

I closed my short on DIA right at the end of the day, I got 4.40 so that is a 20% return in one day.  I usually hold out for a more of a move but I just can’t get a good feel for this Greek drama. (as a side note its 90k a year in profit if you squeak out small wins like this everyday)

I like TWTR right now, looking at the Jan $50 calls.  If a Google or Facebook acquisition heats up or some rockstar CEO gets named the stock will bounce.  I see a bottom around $30, with upside of $50 – $90.  Google acquisition target price was $95 before twtr shot it down, stock was higher then but I still think it would drive $80 a share.  I’m looking at .85 as a great way to get into this trade.  And if the lottery hits and Google does heat up then it will be a nice 3500% return 🙂  I love oversold stocks that everyone hates.

I also opened a really crazy bet on Coal.  yes coal.  Coal sucks, everyone hates coal, but if this trade doesn’t lead to bankruptcy then it should bounce back a little bit.  I bought 80 Call contracts of $8 BTU Jan, 17 (NOTE 2017, lots and lots of time) for 10cents each.  I think I already regret this trade but I find that most options will bottom out at this level.  Basically if natural gas prices rise then this will rise too.

I’m keeping my eye on WTI, if it breaks above $62 then I’ll get short via puts on UCO.

Opened small position, 5 PUT – DIA 181 Aug 21, ’15 $3.60

I’m a little nervous with this one, if the Greece thing comes out with some miracle solution then the market will rally and I’ll probably have to cost base down.  If Greece drama drags out (which I think is likely) the market should pull back nicely.  I’ll have my finger on the sell button if we pull back over 150 in a day.

The last 6 months I’ve returned about 27k in profit, which is really outstanding from my perspective, I don’t think I’ve ever had more than 20k invested at any one time so the risk/reward feels pretty awesome. This will be the first time I’ve really broken down what moves generated the returns though.

Looking back (data I’m looking at is on the trades and trade history link, top right) I have used the following strategies:

Long and Short the DOW, time frame is from as far as 2 months to expiry and as short as 3 weeks to expiry. Used options on the DIA etf and options against DJX itself.

Long and Short oil, specifically WTI (not Brent), I used options against UCO which is a leveraged etf.

Long and Short the VIX, used options on VXX etf and options on the VIX itself. I’m curious if I made any money on this because its a tough one, I’ll probably write a blog post on this subject since its seems so promising but very difficult to execute against.

Long individual stocks: EMN, VMEM, TRIP, SALE, ODP, NMBL, MLHR, MKTO, LL, JNPR, GPS, COH, BCOR, BABA, GE

OK, so how did it break down:

DOW: $9700 profit across 21 transactions

Oil: $6900 profit across 19 transactions

Vix: $3600 profit across 12 transactions

Individual Stocks: $7400 profit across 30 transactions

Observations

Trading the Dow – so this trade ran about a medium level when it came to stress level, I pushed the limit a few times by not leaving enough time till expiry but only lost money on the trade 3 times vs profit 17 times. Strategy was pretty simple, I would enter a long after a big sell off of 200+ points or multiple down days as we got closer to 17800ish and would take profits as the market rallied back. I would reverse the strategy if I could time it right when we made new highs 18200 to 18300. I was pretty even between long and short plays on this. This market was (and is) very range bound so this worked and will likely continue to work for the next couple months or longer.

Trading Oil – so this trade was easy when oil hit the mid 40’s, I just called a long and made easy money. I tried a spread since I felt the ceiling on Oil was around 60 but I just didn’t have the patience to wait it out. The thing with spreads is you really have to wait till you get close to expiration before they really work. I’ve tried a couple shorts and called it correctly but the time premium on these options make big profits harder to get so I usually ended up with smaller returns then I would have normally held out for. I always got the call right but Oil is affected by the dollar as much as Oil fundamentals so unless it hits a big low again I’m not sure if I’ll continue to push my luck with it.

Trading VIX – this was a very painful and stressful trading experience. I tried several strategies and have to say I learned a lot about this. I feel I almost have a strategy that I can make work but need to run some scenarios on past data to verify. More on this in the future I think, but $3600 of profit and a learning experience, I’ll take it vs the alternative.

Trading individual stocks – this is really what I have to do more of. A couple of my buys were just plain stupid followed on by stubborn stupid and my favorite, greedy stupid. Let me translate. Stupid buys are uneducated buys. Stubborn stupid is cost based averaging down a stupid buy instead of just taking a loss and greedy stupid is watching something go up and then back down. I’m getting better at greedy stupid, I now exit positions 50% if they double at a minimum. I made over 7k but probably wasted at least 4k on dumb moves (ie buying options on a stock days before earnings because of some random article or comment on CNBC). If I can just reduce my dumb moves my basic strategy and execution is solid.

I started trading stocks about 8 years ago, moved into a mix of options and stocks about 4 years ago and now I only trade options.  I have never touched my 401k retirement money, its safe and sound in a well balanced portfolio.  All of the money I invest in options I can afford to lose and though it would make me upset it wouldn’t substantially set me back in life if I lost it all.  (and to be fair I started with so little that really everything I invest at this point is “the house’s” money)

I have had a variety of people ask me for advice on what to buy and how to trade options.  I’ve went through phases with long email chains of ideas bouncing around with friends but it was never really a good way to communicate.  So I figured I would start this blog, my friends can comment and share ideas on the site and I can have a page that tracks my trades.  I also hope that this can bring me a higher level of discipline since my rash decisions will now be open to the ridicule of my peers.

My friend Vinay first taught me the basics of options (thanks again!!), I read a book called Options for the Beginner and Beyond and then I jumped in.  I have tried a lot of different things, some worked, some didn’t.  But with every trade, win or lose, I have learned something to take into the next trade.

Disclaimer:

What I do is very aggressive, very very leveraged and is basically gambling.  If you can’t afford to lose 100% of what you bet on options don’t do it.  Note I said “bet”.  But this isn’t the lottery, Poker is gambling and yet you see the same group of millionaires at the final table over and over.  There is a stat that 90% of options trades expire worthless, but realize that most options are used to hedge risk and lock in profits on the positions they hold.  If they expire worthless it means for the most part they didn’t have to use the insurance that the options were in place for.  Options for the market are insurance, options for me are like vegas where you can play the part of the house or the sucker on the other side of the table.  I never trade ‘naked’ meaning I will never put a position in that can lose more than the investment and I don’t trade on margin.  You have to manage options trades basically everyday.  If you ‘get busy’ and don’t check for a week or two bad bad things can happen.  It only takes a couple minutes on a smartphone to track so there is really no excuse but if you want to go on vacation and fully unplug for a week than you need to exit your positions because stop loss strategies just don’t work well with options in my opinion.  So in summary, don’t do this unless you can lose everything you bet and not be bothered by it, don’t do it if you can’t check the market at least once a day and don’t do it if you can’t handle the emotional roller coaster.