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Teddi KnightKeymaster
I am not sure what your trade plan/motivation about holding SDOW. I do not trade SDOW but I do trade SPXU which is similar to SDOW but it is ultra on SPX.
I am still paper trading this and will be for a while. I am learning the ropes from Teddi’s posts. I can speak to the reasons why I am trading this:
1. Trade with the short term trend.
2. Align your trading with the trend.
3. Another strategy to go along with put selling.The Ultra’s are great for trading with the direction but they can also be dangerous on moves against your bias. So, stop loss is very important and managing the trade accordingly. I am not sure if you are using a stop loss but I think this kind of trading begs for a stop loss.
Teddi KnightKeymasterTeddi
what tech parameters prompt you to switch from SDOW to UDOW or vice-a-versa?Teddi KnightKeymasterJust in time for earnings call: Twitter starts selling promoted Tweets on other people’s apps. https://on.recode.net/1BQZLXP
Teddi KnightKeymasterIf oil is starting a new trend back to the mid 50’s the airlines could have further room to fall.
Teddi KnightKeymasterBIIP…yea, that’s my thought too. They expire in MAY, so yea, I have time to recover from nasty earnings, but I have been watching it “recover” for months! Guess that’s my reminder about doing silly trades.
Teddi KnightKeymasterPossibly time for a new broker. Sometimes the cheapest commissions are not worthwhile if there is no service. I pay a bit more with TD Active Trader but the service level is top-notch and so I stay and pay a bit more.
Teddi KnightKeymasterReally decent trade in Apple Stock. Over the lunch hour I would want to stay with stronger stocks like Apple and forget Twitter. Just an opinion, but for lunch hour trading when I was unable to follow the market, I was taught to stay only with stocks in serious uptrends or showing serious strength.
Teddi KnightKeymasterThanks so much for your comments. They are deeply appreciated.
Teddi KnightKeymasterThere is never a problem tuning the mind as you put it, simply because I already know the rescue in advance. I therefore know that any loss is being made up by the roll out which you saw in the trade. As to 15%, yes that was all I wanted to place at risk in the trade which is why the naked calls was a mistake.
Teddi KnightKeymasterPatience is key to successful investing, but make sure you have a plan even if that plan is owning shares.
Teddi KnightKeymasterI rolled them forward. In other words, I earned more when I rolled than what I paid to close.
Teddi KnightKeymasterHonestly the stock is a good Put Selling candidate and is on my list for Tuesday.
Teddi KnightKeymasterI don’t think it matters what strategy you use but instead consider setting up trades where the odds of success are more in your favor. I can see why you thought of the Amazon trade, but to me it was more gambling than actually investing. When I invest I like to place my capital carefully into the market. I know the risk, which is incredibly high. Therefore I like to set up a trade where the odds of success are stacked in my bias. The Amazon trade I could not figure out how the odds were stacked in your favor. To me it seemed like hit or miss. Your trade in AXP I feel has far more merit. You are looking carefully at the trade and seeking support points. You are basically trying to set the trade up from the start, to be a success. I would rather earn half a percent in a trade stacked in my favor, than gamble for even 10% return on a trade. I like it when I win, because every winning trade compounds my portfolio still further. It is the compounding of the portfolio that grows wealth. I don’t want a handful of winning trades, I want to grow wealth. Whether you use iron condors, butterflies, spreads, Put Selling, covered calls, or simply buy options, it doesn’t matter. What matters is using the right strategy for the trade that will give you the edge to walk away with the profit.
Teddi KnightKeymasterI entered XOM today https://www.fullyinformed.com/members/exxon-stock-xom-trade-alert-feb-2-2015/
Teddi KnightKeymaster$72.50 is the next line of support for American Express
Teddi KnightKeymasterYou can also try TD Ameritrade and Interactive Brokers
Teddi KnightKeymasterTeddi,
Truly a great article. Enjoyed reading this and learning along with the analysed trade! The best thing about being a subscriber is these articles where you’re transparent about everything including the “mistakes”, which helps me learn.
Best,
DarylTeddi KnightKeymasterHi Dr. T
I saw in one of your investing notes that you entered a covered call trade on BABA. I am curious why you did a covered call vs selling a put.
I took the put selling route though I am in the process of squeezing the premium on my ITM put. I will post my trade plan and execution details shortly.
Teddi KnightKeymasterDr. T
Fantastic article!!!
I have read once and I am going to read many more times. There is a lot of information there to digest. I have a few questions though. You mention that 15% of your trading capital is tied up with this trade. I am curious how you:
1. Tune your mindset to digest the loss that you see in your account on the initial 5 puts.
2. Is 15% the maximum capital you would have devoted to this trade even if XOM took a deeper dive?I see this article as a money management and a mind management article.
Teddi KnightKeymasterAXP
Why this stock?
Large cap payment services company. Buffett stock. 1.3% yield(low yield though hence my puts will be less on this)
Trade Plan:
Long term support levels are as shown in the chart below. I will be selling my puts around these levels. I might be more aggressive depending on the price action. I have 3-4 puts to sell against this stock. I have been patiently looking at AXP since earnings last week. It has been steadily falling and has approached the 10/13/2014 levels so, I sold:
1 lot Feb 20 $77.5 for 50 cents on 2/2/2015.
I will take assignment if assigned at the support levels that I sell the puts. However, I will make every effort to roll down and out for profit or break even and take assignment as last resort.
Rescue:
If assigned I will try to reduce the cost basis by selling covered calls.Attachments:
You must be logged in to view attached files.Teddi KnightKeymasterI did not enter any trades today for XOM. I was looking for Feb 20 expiry $80( .50) and $82.5($1) and did not get filled.
I will be patient with commodity stocks on entries.
Teddi KnightKeymasterHi Dr. T
Thanks for the comment. I have been thinking about your comment for a day. I think you definitely have a point about the risk to reward in this trade. I don’t do these trades often. I do one or two of these kind every earnings cycle(3 months).
The criteria that I use are:
1. Defendable stocks
2. General market not soft.
3. Playing volatility crush so pick 1 or 2 day expiry option.
4. 1 lot only entry.I could have made this as an iron condor with defined risk instead of being a strangle. In that way risk could be minimized.
I agree there are other ways to trade and keep the risk minimal. In fact most of my trades are based on put selling large cap diversified stocks.
Teddi KnightKeymasterIt is very seldom that ITM puts are exercised prematurely. If their long put (your short put) has extrinsic value, there is no advantage to the holder to exercise prematurely. They are better off closing their long put (your short put) and capture the extrinsic value.
If there is premature exercise, the stock could just as easily continue down, which would benefit you holding the long put.
Even if both strikes are ITM, nothing is preventing number 1 from happening. Your short put could get exercised prematurely, leaving you a long ITM put. If the stock reverses, and gaps up, you could loose more than the max loss.
As an aside, I have closed an ITM puts spread for more that my max loss. If I remember correctly, it was one 5 dollar wide spread, with both sides ITM. I paid $5.02 to get out of the spread. Paying the extra $2 was cheaper than the $30 in exercise fees that I would have incurred.
Randy
Teddi KnightKeymasterToday was an OK day. I was not happy that I could not enter the trade I planned in the morning. I entered a trade in the afternoon that was profitable. I am paper trading this still so, this is paper profit :)
For tomorrow morning I am expecting to see weakness and rise above later in the day. I am going to play it on what I see and not what I think will happen.
Attachments:
You must be logged in to view attached files.Teddi KnightKeymasterThink or Swim has a good paper trading platform.
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