12/30 Weekly Summary

Last update of the year! First of all, let me wish a happy 2012 to all of you! Let all of us be happy, healthy and wealthy in 2012!! Now, as to the current position, the IBM calendar recovered during the week and I'll keep the trade on as per plan. This has been a slow week on the trading side, but very busy with preparations for our move. We are moving next week, so my next posting will be out of Florida!
Cheers!
Gustavo

12/23 Weekly Summary

This past week was very good for the NDX Iron butterfly, I was able to get out of the position at my profit goal by end of day on Monday the 19th. Considering I started the trade on the 14th, that's super fast!

On the flip-side, the IBM tripple calendar took a hit when IBM hit 180 on the 21st, the position is underwater and close to its stop loss, I'm monitoring and if need be will shut it down.

As for this week, no new trade to enter. We are moving from California to South Florida next week, so as you can imagine, there are quite a few things for us to do. For now just keeping a close eye on the IBM calendar.

Cheers and Happy New Year!

12/16 Weekly Summary

Got my two positions for the JAN/12 expiration cycle this week. After evaluating our trading goals for 2012 we have landed on keeping it simple and staying the course with only a few strategies. So I'm going to focus on the IBM triple calendar and the NDX Iron Butterfly (with less adjustments).

Cheers!

Gustavo

12/8 Weekly Summary

Posting my weekly update a day earlier as I will be out of pocket for the weekend. Today I closed all my last remaining cash-secured put positions, they were all profitable at or around my profit goal. Last week I took out the NDX iron butterfly. For the JAN-2012 cycle I plan on rolling the cash-secured puts, a NDX Iron Butterfly (entering with 1/2 of the position size) and an IBM triple calendar.

Cheers!
Gustavo

12/02 Weekly Summary

This week was good for all my positions, first with the NDX iron butterfly, I took it out this week when the market rallied back and it got to my profit goal (around 10%). Now, for the cash-secured puts, they are looking good and I may start trimming them down this week week as some of them are approaching very close to the profit targets (about 90% of the credit, or 1% of the margin value).

I mentioned in a few postings that I have been looking for much more of a no-touch trading strategies, and to be honest the most challenging part of trading is what happens when your position starts to be under water.. Controlling the urge to not look at the market every 10 to 15 minutes is not easy, at least not easy to me. So I have some controlling to do last week and was very glad I was able to keep my cool and only adjust at the time of day and price levels I had originally planned. I think just by being aware of that it helped me to stay on control and manage the anxiety.

Other than that, we are getting ready for the Holidays!
Cheers!
Gustavo

11/25 Weekly Summary

The short week for Thanksgiving holidays was harsh on my positions, we had a lot of down-side pressure and most of the trades took a hit on P/L. I added another Iron Butterfly to the NDX trade, this is the adjustment I have decided to do in order to keep this trade as close to no-touch as possible. On the bright side, the volume was very light and due to this being a Holiday week a lot of the heavy traders were not in this action, so let's see what next week bring.

11/18 Weekly Summary

Looks like the market took a bearish instance this last week, in the past 10 days we had a few 1+ standard deviation days to the negative side and very few positive days to show for on both the daily and the 5-day spike charts. On the portfolio the positions are doing well with no need to adjust anything this week. Only adjustment in sight for the NDX is to add another butterfly if we hit the down-side adjustment level.

11/11 Weekly Update

Last Monday, Nov 7th I have closed the NOV cash secured puts and reloaded with the DEC contracts. I also started a NDX iron butterfly and am planning to trade it with a very simple adjustment strategy: add another butterfly at the top or bottom if the market moves up or down to the outside range of the butterfly, the plan is to go for about 10% of the total position size and so far I have only 1/4th of the position loaded.

Notice NDX trading in wide swings on a daily basis, the key difference is that these swings are not moving on a trend, it has been moving in a zig-zag sideways mode.

10/31 Daily Summary

Did not remove the cash-secured puts just yet, truth is I did not have time to work on it early this morning. I want to see it reach 90% of the max profit, it is not quite there yet, so will hold on for a few more days to let time decay do its job. NDX took a dive Today, as you can see, the past few days have been so active that Today's move is not even 1 standard deviation. In the old days a 40+ points (-1.72%) move was quite an event, not so much these days.

10/30 Weekly Summary

The market seemed to be in a wide range with an upward bias. It seems we had quite a few days with over 1 standard deviation moves last week and the intra-day movement has continued to increase. While the NDX did not move up or down by too much this week it sure did move around. I have a few cash-secured puts that are about to reach their max profit so I may take them out sooner than planned and wait a few days to get back in.

As I have mentioned, I started backtesting a version of the iron butterfly without a lot of adjustments, basically the only adjustment is a consideration at the beginning of the trade about loading all contracts at once or loading contracts in a scaling fashion (start with 1 lot and add others if the first lot gets into trouble). So far the results are looking interesting and I'll do a few more months of testing and am looking to get a small position in December contracts to get back in the iron butterflies.

Cheers,

Gustavo

10/24 Daily Summary

NDX moved higher Today, so did the 3 cash-secured puts I have in my portfolio. So far looking really good. I will be out of town for the rest of the week, may not have time to post updates and even if I do have time I will be away from my home computer so chances are I won't have my daily view.

10/20 Daily Summary

No major change Today on my positions. One thing to notice the % of days with 1 std. deviation intra-day is moving higher and higher.. This indicates market volatility regardless of smaller range when looked from a close to close perspective.

10/19 Daily Summary

NDX pushed lower Today for about 1 standard deviation, not as much down-side pressure on the stocks I have the cash-secured puts on, that's always a good thing. Actually, that's the reason I picked these stocks: They tend to suffer less when the market takes down-side pressure.

10/18 Daily Summary

Today's up-side move was beneficial for my 3 positions, not much to do on these, which is something I LOVE!

10/17 Daily Summary

Just a brief posting to update everyone on the current positions I have on, as you can see I have 3 cash-secured puts and they are working ok thus far. I'm also posting the daily summary view for volatility spikes on the NDX.

In preparation for 2012 I have been looking at possibly trading a straight-forward iron butterfly strategy with fewer (if any) adjustments. The key is to have a good feeling for how the market is behaving in the weeks prior to entering the trade. I will post a study report I'm working on once it is complete to give everyone a perspective on what I'm talking about.

Cheers,

Gustavo

10-15 Weekly Summary

I have been back in the market with cash-secured puts on KO, WMT an PG. So far they are working well. A few observations in this week's summary as it relates to the chart above:
1) Notice the % of prices moving over 1 st. deviation intra-day has been moving higher, we're moving from 20 to 40% it means volatility is back (or never left).
2) Notice on the 5-day price spikes we have formed an up-side swing, I don't use this as a trading signal but have started to study trading with this information handy to warn of a change in trend direction. I have also been following the IBD publication daily and they have good tips on the market structure and confirmed up-trend vs. down-trend.
3) Last, but not least, on the 1 day chart you will notice quite a few spikes with over 1 standard deviation, they all cluster in the last few weeks, seems to me the market is back to delivering wider swings.

I have been studying what sort of strategy should I use in 2012. Thus far the long-term options are the cash-secured puts and synthetic covered calls. I will also look at traditional non-directional strategies (i.e. condors, calendars and butterflies). The key think pulling me away from the NDX Iron butterfly is the daily maintenance it requires as well as the increased margin requirements from my broker. The new margin requiremensts force me to have 3x the amount of the trade in margin, so it becomes a not optimum use of my capital.

9-30 Update

I took vacation time from the market just prior to the government default debacle, slowly getting back in with a few long term positions (cash secured puts on PG and WMT), I'm now studying trading plan for 2012 and looking to include long term positions and non-directional calendars or condors with very little adjustments. For now I'm easing back in the market.

Posted is the updated deviation chart, quite a difference from early August, yet one must not ignore the fact these charts tend to adapt to the current market environment (with increased volatility and wider moves).

Cheers!

Gustavo

8/7 Weekly Summary

This is certainly not a pretty picture, notice how we had several days with over 2 standard deviation to the down-side, also have been a lot of intra-day volatility with the indexes trading a wide range up and down several times in a day.

Even though I have been trading longer term posisions, with a weekly overview and no adjustment other than stop loss. This time around I have personally taken all my positions to the sidelines on 7/26, about a week before the default deadline and congressional vote.. Many times we get hit by a storm that comes out of nowhere, we adjust, take the hit, etc.. This time around we had clear dates and the storm was brewing on everyone's radar, so I navigated my small little boat to the pier, tied it down and am waitting for the storm to pass.

Let's see what this new week brings us. Cheers!
Gustavo

7/25 Weekly Review

Looks like things improved a bit last week. There is still some volatility in the market though. I'd say until we clear this budget debacle we won't see this volatility go away. For now I'm closing any position that reaches 90% of the credit (Gold cash secured puts are almost there) and I have a few protective contingent orders if any of my underlying stocks (KO, PG, WMT and COH) go down by more than 8%.

Hopefully lawmakers won't be dumb enough to not reach an agreement to bump their own credit line and force a US default. That would be no good, no good at all.. :)

7-17 Weekly Summary

Looking at this past week one can see it was still very active compared to last week. In terms of the past 30 days it seems things got a bit calmer, yet we still had a couple of days with over 1 standard deviation last week. On an intra-day basis the % of days with over 1 st. deviation intra-day just edged higher to 60%, quite a big number and consistent with summer times, when we have more volatility and usually less volume in the market.



I've been thinking about going back go a few simple income strategies, using a small account and trade a few no-touch iron condors or calendars, but first will take a look at what other traders are doing in the Sheridan Mentoring site.

Cheers!
Gustavo

7-10 Daily Summary

One of the blog readers asked about the daily summary charts.. Here is an updated NDX chart. WOW.. This is a wild environment for sure, so make sure you are aware of storm conditions if you're trading iron butterflies or income trades for this matter.

What I have been up to?

Ok, it has been a long while since my last posting. I feel guilty for leaving the blog catching dust lately, but at the same time day-to-day workload has increased a lot and when I come home I barely have time to say hi and it starts the dinner, bath and bed routine with the kids.. :)

Needless to say, I had to adjust my trading routine to adapt to this new reality, so I have limited my trading to a few strategies on stocks instead of the NDX Iron butterfly, mostly these are no maintenance trade, except for watching the stocks to make sure they don't bite the dust..

I have what I consider long-term positions on GLD, KO, PG, WMT; GLD is mostly a hedge against inflation in my portfolio, we're looking to get back into real estate so I may move away from GLD and go into brick and mortar rental properties :)... KO, PG and WMT are what I consider stable plays and I'm using two strategies on them: Cash-secured Puts and synthetic covered calls.

I'm also reading the IBD newspaper on a daily basis and watching for breakouts among the IBD top 50 stocks. So far I have two break outs: COH and ORCL.

All and all, the portfolio is stable and seems to be a good fit to our busy life.. I refresh the positions once a month by rolling to the next expiration cycle. My stop loss is to close any open position if the underlying stock falls over 8%.. So far they're doing good and I'm keeping a "sane" balance to life and trading!

Cheers!
Gustavo

4/25 Daily Summary

Just a quick review of my portfolio, things are looking good and the market seems to be holding its ground and not going into a total sell off. I'm looking for fresh break outs in the IBD 50 list, may initiate a few new trades if the conditions are right. I'm glad SOHU went to new highs Today and so did Oracle, these are the two break out plays I have, I used synthetic covered calls on them and they're working nicely.

Cheers!

4/20 Daily Summary

Wow! I confess I had to do a double-check on the market price when I saw this huge spike to the up-side. I wonder how this would affect any trader in a butterfly position on the NDX.. Hopefully the butterfly trader would have cashed out prior to this spike based on the quiet action in the past several days.

I'm basically just watching and reading, not doing any extra trading. Not taking any breakout on the IBD 50 unless they get convinced we're back in an up-trend.

4/19 Daily Summary

My portfolio allocation for this month is working well for me, I've noticed some recent market activity and the market conditions on IBD have changed for "up trend under pressure", so I'd say let's keep an eye on this recent market activity. So far I have not pulled the plug on any of my positions, will only close them out if the market conditions worsen. Here is the break-down of what I have on this portfolio:

-Gold: This position is a Cash-secured put on GLD, sold the May 140 Put. These will eventually get assigned and I plan on holding a portion of my portfolio in Gold for a while. Bottom line I do not trust the current market and government's approach of printing money to pay for their own debt.

- Cash Secured Put: These are stocks I studied in the past down-cycles and they usually go down less than the market when we have a sell off. They're also stocks I feel won't go away any time soon.
PG : Sold May 62.5 PUT
KO: Sold May 67.5 Put
WMT: Sold May 52.5 Put

-Synthetic Covered call: In addition to the stocks I selected to play cash secured puts, I''m using this section of my portfolio to play break outs on the IBD top 50 stocks. IBD publishes a really good list of stocks with strong sales and earnings, they maintain a good grip on these stocks, their accumulation ratio, fundamentals, etc. Good way for me to stay plugged in without having to do all the research on my own.
WMT: Long Jan/11 45 Call, short May 52.5 Call
PG: Long Jan/11 50 Call, Short May 62.5 Call
ORCL: Long Jan/11 25 Call, Short May 34 call (break out play called on IBD)
SOHU: Long Jan/11 65 Call, Short May 100 call (break out play called on IBD)

Cheers!

4/7 Daily Summary

No major change Today, I've started to put together a few charts to show (in my true fashion) what I'm doing and how my positions are doing on a daily basis. I'm still working it out, but this shows how I'm allocating my portfolio in MAY and APR option cycles. Tomorrow I plan on exiting the APR positions and roll into the MAY contracts.

The chart above is for the MAY positions
The chart above is for the APR positions.

4/6 Daily Summary

Hi everyone, it seems not a lot of movement in the past few days, that's only on the surface, in reality we are gapping around and fading up-side movements.. I'd say there is some sort of fear coming back. As one of our readers, Doodelzack, pointed out the NASDAQ is re-balancing by reducing its weight on Apple and adding more MSFT. In addition to this, we have the Federal budget stand-off that might lead to a government shut down (according to IBD, NASDAQ dropped 4 and 3% in the last 2 times the government closed its doors).. This plus some noise around the FED having to hike rates may be causing some volatility in the short term, so let's all stay alert to that..

I have been taking it easy on my trading, creating a portfolio with a bit of Gold, some cash secured Puts and Synthetic Covered calls.. I'm doing a lot of backtesting as well as building the positions slowly on my portfolio. Bottom line is I'm looking for something with a lot less adjusting and a longer term perspective due to my time constraints.. Not to mention keeping it simple is always good.

4/4 Daily Summary

Not much market activity Today. I've started some cash-secured put positions for the MAY expiration cycle. As I have mentioned earlier, my plan now is to take a simpler approach and trade a basic strategy for a while, this will allow me to continue trading while on a reduced schedule and also allow for more time to bring my wife along to the trading/investing strategies so we can work the business together.

3/29 Daily Summary

No NDX Iron butterfly in place right now, the covered calls are working out ok with this recent up move.

3/28 Daily Summary

No major market change Today, I'm interested to see what happens next, are we going to find some footing here or come back down? Volume doesn't seem very convincing..

3/24 Daily Summary

First and foremost, let me go out and say it: I'm glad I'm not in the APR butterfly right now.. Look at this 30 day st. deviation chart, for about a month we have had 1 large day just about every other day.. This means a lot of adjusting to stay in the trade, in fact, the position I considered entering this week would be already undergone a cut and roll.

I'm in the process of re-evaluating all my trading, pros and cons, and the fact that with the newborn baby I want to spend some time with my family. I'm a firm believer that your trading style needs to match your lifestyle and personality. With a new baby and additional responsibilities at work, I'm finding the simple cash-secured put/covered call strategy a blessing from the sky.. :)

A reader posted a few good questions on my last posting, so let me repeat them here and address them to all:
What type of returns do you look for in your naked puts?
About 1 to 1.5% over the value held in margin. For a current position, I've sold the 72.5 vall on COST for about .70c, it is a bit below my goal, but since I was assigned COST last month, I wanted to start writing the calls anyway.

Overall, I'm looking to get about the same or better results as the market, with reduced volatility by selling the calls and puts to bring money into the bank when the stocks are moving side-ways.

Why naked puts over just buying the stock?
I start with selling a naked put, then I let it be assigned into stocks. Once I own the stocks I start selling the covered call. First of, you need to select the stocks you would like to own right away. Then, but selling extra premium with options you bank some money every month and reduce your down-side risk on the stock.

Isnt the margin and downside risk almost the same yet your participation on the upside is capped?
Yes, it is, the upside is capped, but I'm not looking to do this strategy on fast-moving stocks. My goal is to select a few stable stocks that I won't mind owning and keep selling premium every month, so while it seems the upside is capped, because you "refresh" everything, you essentially bring money every month regardless of what the stock does.