Stock Investment » EEM

Stock Market Investment :Sold EEM Puts at the Open

admin — Wed, 26 May 2010 09:15:33 +0000

When I sold EEM covered calls yesterday I mentioned that I was nervous about its prospects, but would consider adding new naked puts if/when it dipped to the .50 area where I thought it would find support. I entered a limit order about 35-40 cents above the bid/ask and let it

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When I sold EEM covered calls yesterday I mentioned that I was nervous about its prospects, but would consider adding new naked puts if/when it dipped to the .50 area where I thought it would find support. I entered a limit order about 35-40 cents above the bid/ask and let it sit. With the fall this morning my order was triggered. While EEM was trading at .48 I sold two EEM July 34 naked puts at .02 and received 2.57 after commissions. My limit order was actually for .75, but with such a drastic fall to start the day I lucked out and got the market price at open which was much better than I was planning for.

This gives me 200 shares long of EEM along with a strangle in July with 34 strike puts and 39 strike calls. Ideally EEM will end expiration in July in the upper range and I can re-write the same approach. If it breaks above I’ll end the series of trades with a profit. If it falls below and I’m forced to buy another 200 shares my cost will be much lower than what I started with and will be able to maintain the position fairly easily at that point with covered calls every other month until they are assigned.

EEM dropped below my .50 target for a total of about 15 minutes this morning before recovering. It traded as low as .21, but quickly bounced back from that bottom. I don’t have any grand illusions that EEM will be back above any time soon, but I still think these puts have a good chance of finishing with a profit for me. It’s funny though, once you set a price target and the stock gets there it’s a mixed feeling of “wow, I got that right” and “Oh no, what happens from here.” I’m still in the camp that says the world isn’t ending (yet) and that we are very close to some great buying opportunities. Using naked puts to find even lower entry points still appears to be a better strategy than just outright buying the shares at current market prices.

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Stock Market Investment :Position Updates – SPY and EEM

admin — Wed, 26 May 2010 09:15:33 +0000

As I mentioned a few days ago in my May options expiration post that I planned to sell covered calls on a couple of stocks that were assigned to me. I started with SPY and targeted an options strangle (sell a put and sell a call at different strikes on the same underlying stock) and my [...]

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As I mentioned a few days ago in my May options expiration post that I planned to sell covered calls on a couple of stocks that were assigned to me. I started with SPY and targeted an options strangle (sell a put and sell a call at different strikes on the same underlying stock) and my limit order didn’t hit. I wanted to sell a July 104 put and July 112 call for a net credit of .10. I actually could’ve gotten .10 when I first started watching it, but waited with the expectation that it was going to drift higher. When it started going the other way I entered my limit at .10 only to see it melt away from me as volatility drained from the markets. By lunch time the same order was trading around .50-6.60. I decided to give in and lower my limit order, but then decided I wanted to remove a little more risk.

Risk in this situation included downside and upside risk. In the event of another steep selloff I thought I should lower my strike to delay an assignment too high. In the event of a rally I wanted to be a part of it for longer and raised my strike for my calls. While SPY was trading at 8.93 I sold one SPY July 101/113 strangle for a net credit of .22 and I received 9.97 after commissions. I sold the July 101 naked put for .79 and the July 113 covered call for .43. I picked the 101 strike because I don’t see this correction going lower than 20% from SPY’s recent highs. (That would be just under for SPY.) I chose the 113 call strike because I wanted more room for the 100 shares I own to grow from here and if called away I wanted to have a decent profit. So far I’ve taken in .19 in premiums on SPY and if called away at 3 I’ll lose .00 on the stock shares. That will leave me with a profit of .19. I thought about aiming higher on the strike, but decided that I can be happy making back money on my other positions that are in the money now if we get a big rally. If SPY gets above 3 by July I might be worried about its staying power unless we hear some better than expected news soon.

While waiting on SPY I placed an order on EEM too. I was planning to sell a strangle on it, but then started second guessing myself, mainly because I’ve moved past the point of having enough cash to back all of my puts and have some other stocks I’m eyeing for more naked puts. I do expect to add at least one more naked put on EEM and maybe two, but just not today. While EEM was trading at .46 I sold two EEM July 39 naked puts at .32 each and received 2.57 after commissions. With my trepidation on EEM I knew I wanted to reduce my cost and basically took the highest strike for July that paid at least a 20% annualized gain if the stock stays flat. The 39 strike was the winner. The .50 range might be an area of support for EEM and if/when it gets down there and proves that I’ll probably sell the extra puts I’ve been considering.

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Stock Investment :Options Expiration – May 2010

admin — Sat, 22 May 2010 12:28:10 +0000

What started just a couple of weeks ago as an easy ride into expiration turned around on me very quickly, especially in the last few days before today’s relief. I’m still not sure what to think with where the markets are heading over the next week/month and so I started

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What started just a couple of weeks ago as an easy ride into expiration turned around on me very quickly, especially in the last few days before today’s relief. I’m still not sure what to think with where the markets are heading over the next week/month and so I started adjusting some of my positions today to remove some risk.

Based on how the underlying stocks moved after my trades today it looks like I might have picked the wrong ones to exit as soon as I did, but that’s how it works. Not every trade can be profitable and made at the right time. I’m moving on with minimal realized losses for now and live to trade another day. I’ll probably sell a few more covered calls on Monday or maybe even another naked put or two if we appear to be heading higher again.

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Stock Investment :Option Selling Monday – EEM and KFT

admin — Tue, 06 Apr 2010 13:43:23 +0000

I have to admit, I was psyched when I saw the futures were down this morning pre-market. With all of my options expiring worthless I was sitting on half of my account’s cash unspoken for and ready to buy in at lower prices. I hoped we’d get a pull back and that my Dow Jones [...]

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I have to admit, I was psyched when I saw the futures were down this morning pre-market. With all of my options expiring worthless I was sitting on half of my account’s cash unspoken for and ready to buy in at lower prices. I hoped we’d get a pull back and that my Dow Jones chart from the weekend was wrong. Instead the Dow went low enough to find support along the same trend line I drew that has worked for weeks and I missed a good entry point.

Instead of spending the day complaining about it I checked the stocks where I had options expire on Friday and decided to revisit two of them today. I started with EEM. As I’ve mentioned in the past, I’m using EEM for some international diversification and try to keep an open position in it unless I see it trading near the upper end of its trading channel. This morning it actually dipped closer to the lower end of its trading channel and I took the opportunity (although I missed the bottom) to sell new naked puts. While EEM was trading at .28 I sold two EEM May 41 naked puts for .65 each and received 9.07 after commissions. With a strike of it’s in that no man’s land that makes me always debate if I should sell two or three contracts. Two is a smaller position than I’d usually like and three is a little bigger than I typically like. I like to aim for each position to roughly equal 10% of my account. Since this is an ETF I could reason going bigger, but since I got almost 0 for the trade I decided to start with two contract and then maybe add another one on another dip if we get it.

Once EEM was a done deal I moved down the list from last week’s expiration and started working on KFT. KFT was my steady stock last month and I expect more of the same behavior coming from it over the next couple of months with a tilt higher. While KFT was trading at .67 I sold three KFT May naked puts at .20 each and received 8.61 after commissions. I rarely sell in the money (ITM) naked puts, but with KFT’s steady performance recently and its dividend yield of 3.89% I decided I wouldn’t be upset if KFT was assigned and I turned it into a long term position where I collected the dividends quarterly along with the option premiums each month or two. At the same time, if KFT can climb above in nine weeks I’ll be quite content to be left with the May premiums and no actually shares.

I was planning to open a new position on SSO today too, but after I missed the lows of the day I decided to wait to see if SSO could get above the intraday high (.18) it set last week. I don’t have an order in to trigger when that happens, but do have an alert set up to notify me so I can reconsider the trade. There’s always tomorrow.

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Stock Investments :Options Expiration – March 2010

admin — Tue, 06 Apr 2010 13:43:23 +0000

After what started off shaky for some of these positions ended up being a boring finish for March options expiration and that’s what I like. It’s nice having all of my positions finish out of the money with no option assignments. It gives me the freedom to reassess

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After what started off shaky for some of these positions ended up being a boring finish for March options expiration and that’s what I like. It’s nice having all of my positions finish out of the money with no option assignments. It gives me the freedom to reassess what I should be holding and either get back in to some solid positions or wait for them to come back down from their little rallies.

This is what I had going into today:

Here is how each underlying stock finished by the end of the day:

For the most part, these underlying stocks (and I guess the entire market) have had a crazy run so far for March. I am going to have to give some serious thought to what I should do next. I’m pretty sure I’ll open another position on SSO close to at the money, but probably do it like I did for this expiry by starting with a small position and then adding to it if we get another dip. I want to be sure I have exposure to the upside, but at the same time want to be sure I have some cash ready if we fall another 5-7% again. I still think we’re somewhat safe from a 20+% correction and could also use a small dip to keep this bull market in check.

As a side note, AXA finished today at .35. I left a lot of money on the table by closing this early when it dipped. AXA was trading at .35 at the time I closed the position last month. That’s 0 I could have saved by waiting until today to close my naked puts. The rest of my positions made up for it to give me a profitable expiration, but I recognize I could’ve done better. At the same time, I did replace my AXA position with other options that are doing well, so it’s not exactly an 0 mistake when you consider the replacement positions. Still, I made a mistake by buying it back earlier than I should have.

I’m still easing my way into heavier exposure and today just opened the doors to get back into an options selling spree for any stocks I think could be worth a try. I took in some good premiums this week and just need to get back in the habit of doing that every week so that when I take a loss I still have the profit growth to reach my end of the year goal.

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