I don’t have time to blog right now.  It seems like Trump is going to win which is going to cause the market to fall big time.  It’s going to fall big.  It’s going to be violent.  This is how you make money.  I’m going to go short Vix, long Nasdaq, all with options.  F politics.  The world is not going to end, the world is not going to end.  Make money, it’s American. You live in your capitalism world, take your profits and donate it to the poor if you are racked by guilt.

OK, bad timing for a blog.  I got a new job, no time for blogging.  Busy would be an understatement.

So here is the dilemma, I make moves based on my hopefully articulated strategies, and then others following said blog miss the timing and strategy outlined.

Basics for following a options strategy:

-Never run out of money

-Never risk more than you can lose 100% of

My last post was pretty clear…. follow oil down (with an inefficient eft tracker USO) and cost base down more and more as it goes lower.

So…. I did exactly what I said I was going to do in my last post and here we are in May, and I (we) are way way way up.  I’m sorry I didn’t have the time to play by play this, but the lower oil got the more I cost based into it.  When I started moving 5 figures per trade into this strategy I actually pushed the date out till 2018 and lowered the strike  (mange risk … its still relevant with options.)

So bottom line, WE nailed this trade.  I’ve got a 75% return so far in the last 6 months on my now close to 40K ‘gamble’.

Other moves that were timing based worth mentioning, PSTG (quick double), NOW (quick double).  YHOO had a double and cashed out at cost so playing with house money.  qcom and twtr are basically compete loses unless a miracle happens with both.

Bottom line is this.  I was 90% in with OIL and we nailed it.  The question is what now.  I am up 70 or 80% but if Oil gets to $70 by the end of the year I could be up 1000% (10x).   My gut says go for it, but I just don’t know yet.  Not a bad place to be.

 

 

 

 

I entered a small position on Oil when it first dipped below $40 and I just today added more to my position when it broke below $35.  I will continue to cost base down on big moves and I will roll the date if I get to within 4 or 5 months of expiration.  This strategy is a break even on any bounce back to $37 or less based on time and how low things go.

I have stated this in the past but its good to revisit it.  My strategy is usually to find oversold stocks with a lot of negative sentiment around them.  Options do not track the underlying stock with a black and white value based on time.  Stock sentiment has a factor as well, momentum stocks for example typically have a much higher premium on the future calls than stocks that are really negative.  To make money on options you have to overcome the premium you paid to get the leverage they offer.  You can actually see this in action if you look at a stock that is on its way UP during a big run, say its X, the future option action is say 100.  But on its way down based on some negative news it may trade at X again but the same option can be say 80.  So if your time horizon is long enough out, say 1 year, time decay is not really hurting you too much, the value of the option can be somewhat “emotional”.  (There are technical terms to quantify this that include the delta, gamma, vega and theta… go research if you want.. my reference to emotional is the “vega” in nature)  Most professional traders wait for a floor and a bounce before they buy a stock.  The problem with Options and that strategy is you then have to pay the premium of the positive sentiment.  Trying to catch a falling knife means you can get cut, but if you are committed to the trade and cost base down with a plan, you can maximize your returns and minimize the risk.

Here is why I think this Oil play is a good return on the risk…

I am buying the Jan 2017 $15 strike on USO.  Tracking WTI is not perfect with USO but its close enough for my purposes.  At $15 USO tracks to WTI at around $46/7.  Note I don’t think its going to get above $47 by next year, it doesn’t have to.  I will sell or roll long before that date gets too close, I pick 15 because to me its the sweet spot, far enough out of the money that its cheap but within the window of any bounce to get a return.  Remember I am looking for 2x, 5x, or greater returns.

Lets explore worst case (lose all or most of my money):

My version of a worst case is Oil drops to the mid $20’s and stay’s there till August, this option position will be worth 1/2 maybe 1/3 of what it is now as I will cost base down every $5 move on WTI.  I would then be forced to roll out an additional 6 months, that will cost about 25% if I stay on the same strike, or it would be even if I go farther out of the money.  I could repeat this strategy probably 2 more times before I go to zero.  Each time of course Oil has to recover to a higher point for a break even but that is saying Oil will not hit $45 in the next 2 years?  I’m comfortable with that bet.  Any spike back up to the Mid $30’s within a year with this strategy would allow an exit at even or a profit.

Lets explore my version of a likely event (close to break even, slight profit)

Oil drops to the low $30’s and stabilizes, I cost base down again when its close to $30 and wait.  It might be a painful Q1 but as we come out into Q2 we start to see a slow recovery and momentum shift.  So even though the price may be the same, sentiment will now be positive or at least not so crazy negative as it is now.  On any sort of spike I can likely break even or take a modest profit next summer.  Remember the additional capacity from shale plays in the US are not an instant on, instant off scenario like a lot of other Oil in the world.  The market is constantly surprised that production in the US has stayed so high in the face of low prices, but it takes time, many months, and for some plays years, for them to play out.  Once things are flowing it makes sense at almost any price to continue the project.  But there is no question that new project activity has fallen off a cliff, that will eventually re-balance the market above $40.

Lets explore the upside of the bet.

If Oil in the next 9 months gets back to $50 this play will 5x in value, if it went to $60 it would be crazy, 20x or more in value.  And what scenario’s could  take Oil back to those (historically modest) values?  Long shot, but Opec (Saudi’s, Iraq, Iran, Russia) could come together and slow production, agree this is unlikely but you never know.  More likely is that Middle East conflict could spill into Saudi and even if production isn’t actually affected the threat of that possible disruption would spike Oil.  Or US production could fall dramatically and the re-balance that everyone is saying is 2 years away could happen much faster.

If I could call the bottom for Oil I would obviously wait till the lows and buy my options and wait.  But I certainly don’t have a crystal ball so all I can do is follow my strategy, start under $40 and cost base down till it bottoms.  Its important to be in the right mindset with this strategy.  Lower Oil means a chance to cost base down and increase the upside win since you have a bigger position.  You can’t go all in with this bet, you have leave yourself enough cash to continue to cost base down as it falls.

Final note.  This is a contrarian view.  I read all the articles from all the experts on Oil… storage capacity is running out, Iran is going to flood the market, US dollar is going to go way up, blah blah blah.  This is gambling, I like my reward vs risk ratio so I’m placing my bet 🙂

 

 

I haven’t made many moves in the last Month or so, I’ll provide a quick update, but wanted to share that with WTI below $40 I finally got my window to get long again.

OK, quick summary.

I had a short on the market that I closed yesterday with the big sell off.  Took a 50% loss, but it was a small bet.  I’ve been a little surprised that the market rallied so hard with no big pull backs over the past 60 days.  I do wonder where we go from here, seems to me a little toppy so I don’t think we will have a huge 2nd leg to the rally, but I don’t sense we are way overbought either.   As long as the Fed does a “one and done” message with a really slow ramp on rates I think we will grind up and down overall, and we will move into a longer period where individual stocks will move more independently than they have in the past where everything goes up or down in unison with the market.

I had a long VIX play that is coming up on expiration, we had a spike in volatility a couple weeks back and I took 1/2 off the table when my position over doubled, so I still have some left that I’m looking to close out over the next week or two.  Its the houses money now.  I will continue to look for entries into a 2-month window of long VIX if we fall below 13 or 12.

I still have QCOM, which I had more than a double on, but got greedy and didn’t sell, now I’m sitting on a down 25% position.  Dumb move.  Its way out in Jan 2017 so I have lots of time and they are crawling back up to almost even now based on some recent deals.

I still have 1/2 my Yahoo, I sold 1/2 of my position with a 150% return, lesson learned from QCOM.  I’m actually looking at almost a Triple on the position right now but I want to see what shakes out with this recent board statement that they are exploring options to maybe sell the core and keep the BABA stake.  A little risky perhaps but I could really use a nice 10X return to get back some funds from my eternal refusal to stop betting on VMEM.

VMEM, all positions going to Zero.  Ug.  The stock is now trade at .85cents.  What a joke they are.  The lowest option call is $2.50 so there is no way to play this long or short without just buying the stock.

TWTR, still have a small position of 2017 calls, lots of time on this one, down a bit right now but nothing major, there is a huge spread on the bid and ask so it hard to know what its really worth right now.  I will keep an eye on this and maybe will cost base down one time.

Other than that I just have OIL.

I’m long the USO jan 2017 $15 call.  Its probably going to be a tough 6 months with WTI but I think we will stablize into next year and then start to creep back up to 50-60 range.  If by next fall we are back to 55 or 60 on WTI, this OIL bet will likely 5x return.  Also still have the XLE 2017 calls, same bet, just tracking big oil companies rather than the commodity itself.

My finally note is to highlight that I am going WAY out on expiration dates now.  Outside of VIX and VMEM everything is 2017 dated.  VIX will close this week or next and VMEM is worthless.  If we get a big pullback on OIL in the next couple months I will continue to find money to cost base down.  I’m all in with this bet.  I really believe that $40 is the ‘natural’ bottom for WTI.  Yes it can go way below but I don’t think that it would spend more than a few months below $40, so with 2017 as my window this feel like a solid play.

 

 

 

 

I haven’t had a chance to update this in a bit but I’ve made a few moves.  I really don’t like the “bad news (job report) so we rally” that we just had, that was played out back in August and now its back, but it is what it is.

Oil (WTI) rallied 5% and broke above $49 so I sold the rest of my USO position a couple days ago.  This was such a good trade 🙂  I entered a small short with a Apr $15 put.  It feels like OIL is in a range of low $40s to high $40s.  I’ll exit and reverse the trade again at $44 or $43.   These 10% moves up and down with OIL equate to moves of about %50 on the options.

Made some really nice gains on SPY that I entered back in the worst of the pullback, sold with a really nice profit.  I entered a Short with the Dec $194 PUT on SPY.  We had a 5% rally in effectively 2 days.  Seemed a little too much too fast so this will be a quick hit or I’ll take a loss and sell, I’m not overly bearish right now.

Quick summary of some other things:

Twtr – I really got this one wrong, I did not think they would keep Dorsey as CEO.  Silly me for actually listening to the board when they said he was not being considered because he was not a full time candidate.  I have a 2017 position that will likely pay off nicely and I’ll add on additional weakness but lesson learned (again) about cost basing down and using the same position vs one further out.

Qcom – JT bought this one so I had a look and thought it looked OK so I bought some Jan ’17 $75 calls for .67 cents.  Position is up 45% in a couple weeks, thanks JT.

Yhoo – play long Jan 17 $50 calls based on the spin out of BABA, up 50% so far will add on weakness and take 50% off the table if I get to a double.

VIX – got a low alert on the VIX so I thought I would try this one again, going long Dec $20 call, got in this morning for a $1.80 I think we are due for some more volatility so this feels good to me.  If we spike the VIX back to 30 this will be a monster play.

I’ll try to update this more often now that I’m back into a normal routine.

The market really wanted a 1/4 point with a “one and done statement” and they didn’t get it.  So where do we go now?  I think we are going to stay range bound going into the end of the year with lots of action to play with.

This is going to be a traders game for the next 3 months.  I’m going to buy and sell spring SPY options on all really big moves up and down.  I’m going to short or long the VIX above 30 and and below 18.  I’ll add to Oil (WTI) on moves below $42ish.  I’ll exit the OIL position I have left if we spike above $50 again, I feel good that I’ll get another chance to get back in at these levels, or lower.

I’m going to start building a shopping list in the event that we do get a big pull back.  I’m about 2/3 cash right now and I’m waiting to get a sense of where the markets want to go before I do anything other than trade the swings.

This week is the big one (fed week), I’m personally hoping for a small 1/4 point raise on Thursday.  If we get a raise I think we may get a very short knee jerk pull back, but then I think we will rally hard into the end of the year.  If we don’t get a raise we will need the fed to basically say there are going in Oct or Dec with very strong language.  If they don’t raise, and are vague, then I think we face downward pressure into next year.  If the market really sells hard into Thursday I may enter some short term bets late on Wednesday.  I’m going to look at a Wednesday Strangle or Straddle if the conditions look right.

Oil is grinding down, which should open up a window to start getting back into my USO Jan, 2017 position.  If we get a big pull back into the mid 30’s on WTI this will be a really really solid trade.

I entered a short on the VIX when it spiked above 28 last week, and exited it on Friday with a 50% profit.  If the VIX spikes above 30 or more 25% in a day I’ll buy the 30 day short.

I have 1/3 of my USO position left, its still up 30% but I’m really looking for a big selloff so I can get back to fully positioned on this trade.

Wednesday and Thursday morning, big days to make some moves.

I wanted to get a quick update on the books, watching the markets get crushed again, down almost 2% on the day.  Jobs number came out a little weak but nothing special. This is the last long weekend of summer and based on how insane markets have been I am not at all surprised on this move.  US Markets are closed on Monday but Asia markets are open so if something funky happens all the big boys would be jammed up with markets closed.  I’m probably going to add a little to my SPY spring calls.  They are up a little and I usually don’t add to positions when I’m in the profit range, but I think there is some good upside going into next week with a short term bounce.

I exited 2/3rd of my OIL position earlier in the week since it broke back over $47, but more importantly it did is so fast that the call side of the options spread got a little extra juice in it.  This is probably one of my best trades ever, I bought in and kept buying as it fell.  This was close to a Triple, yes a 300% return in just over 2 weeks.  So great.

I’m going to research some strategies over the weekend on shorting the vix on a longer term position.  I have a short that is going to zero but I had another one that doubled.  I have to figure out how to structure a spread far enough out.

I’m going to keep at least 10k on the side lines for the next fall in oil.  I’ll look to build back up on my Jan 17 USO calls as it comes back down, probably look to enter on anything below $43ish for WTI.  If it breaks above $48 again I’ll fully exit the last third of my position and then wait.

Lets all hope for a .25 point raise in September, not sure what the very short term reaction will be, but it will give the market a good chance at a great rally into the end of the year.

I’m going to skip recapping this week, every financial news site has the crazy blow by blow of the craziest week I’ve ever witnessed since getting close to these markets 6 or 7 years ago.  I’m just going to recap my trades and the plan going forward.

So lets start with OIL.  What the H.  Ignore the lame Nigeria news point that hit the wire, this was all about a fall that was too fast and short covering.  But in that same theme the bounce off the lows is also too fast and too overdone as well.  Don’t expect this bounce to last, take profits soon.  My OIL positions basically doubled this week so I’ll look to cash out at least 50% of the positions next week, I’m more than a little proud that I had 10k+ into a position that every pundit said was headed to $30.  Ha.  This is still a long term strategy for me but I can’t turn my back on a double on this large of a position in 3 days….

My general market bet is up 75% for the week (SPY spring calls).  I’ll exit 50% on any further big rally days.  Friday is a big day next week with a jobs report, its probably nothing special but anything out of the norm is going to move the market up or down in a big way, I want to be playing with the houses money on SPY by Friday…

VMEM – I had a HUGE gain on this position leading up to earnings (.30 cents to .85 cents), I took 1/3 out with great profits but like an idiot I left the big position in for the earnings TANK.  Good grief they suck.  GRRRRRRR.  I hate that I used to work there and used to sell x10 more then the reps do now.  The lesson I take away for this is that you should not bet on a stock that you are to close top.  Yes being close to something gives you additional insight… but I think the emotional connection is just too much to overcome.

Bottom line is that it was a great week.  No an AMAZING week.  I think next week should be good leading up to Friday, thats the wild card day, I’ll post again before Friday when I decide on my moves.  Get ready for some MAJOR moves on Friday next week.  Its likely going to be crazy.

Time to separate the men from the boys.

I was driving North to LA this morning when the markets opened and I missed one of the best trading opportunities ever.  I tried my best to make moves while driving via my mobile (yeah yeah not safe i know) but I just couldn’t get it done with limit orders since the swings were too fast to track.  I did get into some new positions but not at the levels I would have preferred, but still good I think.

I did start the day with the most random DOUBLE ever though.  On Thursday I shorted the VIX with 150 Sept $13 puts for .10 cents, and then I instantly entered a 60 day limit order with a sell at .20 cents.  I figured if someone offered me a double I’d take it.  Well for some random reason it filled?? 🙂 The VIX spiked to above 50 and my call that it falls below 13 doubled. um…. OK.

In the theme of shorting the VIX I also opened a $16 September put at .70 cents.  I’m going to give it a couple days before I enter a sell order.  VIX options are the most time sensitive play out there so until you get within literally a week of expiry you got room to move.  I’ve been pretty hit and miss playing the VIX but it is spiking to historic highs so as long as we get a little stability in the next couple weeks this should also be a nice double.  I really wish I had more time to study VIX strategies as I think there is a way to capture these moves… selling the calls and puts vs buying… if you sold a call put spread to take advantage of the significant time premium???

So the bottom line is my head is spinning with these market moves.  I love the action.  So why the sell off?? um no one has a good reason.  We don’t have a banking crisis, we don’t have a sub-prime crisis, we don’t have a recession, we don’t have a war, we don’t have any significant political crisis.  No Greece issues.  What we have is China and the fed. Ha.

Do you know what we have??? we have a Bull Market that ran too far with no correction.  Every technical trader out there, which is EVERY hedge fund btw has been building in a sell strategy for an inevitable “correction”.  So what happens when 70% of the market has computer programs set to execute a sell strategy when certain technical factors hit the system that indicate a correction is in motion….. well a negative feedback cycle kicks in.  As a physics kind of dude I love when the physical world collides with the financial, cool to watch.  The problem is its hard to break a negative feedback cycle…

So now what? I have no idea.  But lets looks at the basics:

China is black hole of reality.  Guess what…communism meets capitalism is messy.  very very messy.  For those that are unfamiliar, its usually capitalism vs socialism and communism vs democracy, China is doing a little Communism capitalism which = messy.  So messy we got.  BUT lets look at the basics, we have about 1.5 BILLION people who are looking to crack into the real world economy.  These are real people, 1.5 billion individuals, not statistics, real mothers and fathers fighting for a better life for their children.  So China is slowing in GROWTH… ok, not shrinking, just slowing.  got it.  Their stock market? a joke, fiction, communism fiction, once the market figures out the China stock market is NOT the China economy we will be ok.

The Fed.  The market really really needs the Fed to raise and then to indicate the slowest ramp up ever.  Every talking head idiot that says a raise of .25 points points matters is a moron.  The raise indicates that the economy is getting better, not worse.  Its not great, yes we all know that, but we are growing not shrinking. Bottom line.  Come on, interest rates for consumers may actually DROP if we raise to .25 and then commit to a long hold.  It will kick housing even higher and stop this market madness. I’m not sure the market can find a bottom till we get this.  The fed is very aware of the equities market, but they are NOT a slave to it.  These are very very smart people.  Have a little faith, not a lot, just a little.  (for those that want to debate monetary policy and the fed I’m up for it, Milton Friedman had it right in theory but we can’t get to free market, too many politics, so what we have is this mess)

So what am I doing?  I am staying with my strategy to give this market a little time, no more short term option strategies.  I am going out to January 2017 with all OIL plays and I’ve built a 6k position into USO $15 call Jan 2017.  I will continue to cost base down this position every $2 drop in WTI.  Oil is not viable for the world below $40.  So betting that it will bounce back in the next 15 months doesn’t feel that risky to me.  If we spike back to $60 at any point in the next year this will be a very nice return… (and don’t start with me on the etf contango issues, its just a price to pay, the leverage of options against the etf make it such a small issue its not worth discussing.)

As discussed I have the short on the Vix, September $16 Put.

I also started a position on SPY March 2016 $210 call (general market bet).  I didn’t get the bottom of today’s rout, but close enough to feel good.  I’ll give this one or two more rounds of cost basing down for every 2% the market moves down and then hold till December and then roll it out if we haven’t recovered by then.  I will not hold this past a 3 month expiry, I will roll before then if needed.

I also started a position in XLE January 2017 $70 call.  This is just an additional bet in oil, but with less of a dependence on the US dollar, which could affect WTI.  This is an ETF that tracks big Oil (Chevron, Exxon, Schlumberger, etc)

Fun times.

“Be fearful when others are greedy and greedy when others are fearful”

Lets get it on.