Quick little post offering a teachable moment in a currently open position on my books. [Read more…]
[Options Premium] Charge Back
Risk management is Rule #1.
Last month, I put a trade on that didn’t work out. Believe me, it happens (shocking, I know! /EndObviousSarcasm). There was a level that invalidated my thesis and it was breached. I don’t fight with price action. When price is speaking, I listen. So the trade was exited and I moved on, accepting my manageable loss.
Fast forward just one week from my exit and the chart has repaired itself and has established a newer, clearer level to lean my risk management against. My overall bullish thesis on this stock hasn’t changed, and now with new levels to observe, I’m going back in for a new try with a similar spread, but at new strikes and a new expiration. [Read more…]
[Options Premium] Bearish in Biotech
Geez… the calendar turned into October and traders are acting like Halloween is already here! The up-and-down trading action so far in the first three days of October can be downright frightening if you’re chasing every whipsaw in this schizo tape.
Considering my portfolio is leaning a bit long at the moment, it feels prudent to put some downside exposure on.
The biotech space has been a laggard all year. If broader markets still have additional spook in them, it is likely biotechs will lead the way. So I’m positioning myself accordingly. [Read more…]
[Options Premium] Laughing on the way to the bank?
Ok, today’s title is a cheeky play on the ticker symbol I’m trading today. I couldn’t help myself.
Today I’m getting into a low conviction trade, but shifting the probabilities in my favor so that even if I’m wrong, I still have a good chance of reaching my profit objective. Pretty sweet, right? This is one of the many reasons I like trading options. [Read more…]
[Options] October Expirations Open Positions Review
It’s that time again where we start heading into the next monthly expiration cycle and I review any options positions that remain open which might require some adjustments, monitoring, or closing before we get too close to expiration.
The October expiration cycle has been good to us. At the time of this writing, I’ve already closed two positions that hit my stop loss levels ($NKE, $DE), and two others that hit my profit objective ($GLD bull call spread, $PHM bull calendar spread). And as usual, the bulk of profits for this cycle came from just a couple trades.
These are the remaining open October positions that need some monitoring: [Read more…]
[Options] Using Vertical Spreads to Manage Long Call Positions, Part 1.
During the course of my day-to-day engagement with the markets and market participants, including subscribers to All Star Options, I’m often asked my thoughts about how I would manage some position that somebody is in. Usually goes something like this:
Sean, I’ve been in this inverted double reverse downward dog position and now I’m losing money. What should I do?
Ok, so I made up the name of the position, but you get my point. People do weird things and they are looking for help.
One commonality I get from people engaging with options is that they bought long-dated calls (sometimes Leaps) in stocks they are bullish on in lieu of buying stock. And they got lucky — real lucky. So lucky in fact that they are sitting on enormous open profits on calls that are now WAY in the money.
But this has them in a bind.
They want to continue to participate on the upside if the stock has more room to run, but they are scared to death of losing any part of their open paper profits. It’s getting to a point where they are paralyzed with indecision. I’ve been there. I know the feeling.
Can I have my cake and eat it too?
Yes, using vertical options rolls. [Read more…]
[Options Premium] Cleared For Takeoff
Sometimes, the charts set up where one could make a case for a consolidation being on the cusp of breaking out. One such beleaguered company appears to be doing just that. If there’s any follow through, there is blue skies ahead and I’ve got a play lining up on the runway to take advantage of the tailwind. [Read more…]
[Options Premium] In Good Hands
I love it when steady dividend payers breakout to all-time highs. What’s better than a stock breaking into blue skies and paying you a dividend to hold on? In the recent All Star Charts monthly conference call, JC uncovered an opportunity in an insurance company stock that has us thinking about profits. Sure, we options traders don’t get to collect any dividends, but it is nice knowing that yield-starved savers will keep a bid under stocks like these as long as interest rates remain comically low. [Read more…]
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