Wednesday, November 18, 2009

Closed DRYS positions today

Today DRYS has begun to act really weak again after announcing a $300 million debt offering. I decided to book my profits for now and look for another entry if it comes. It feels like this is the weakest of the dry bulk shippers.

I closed 10 short puts of DRYS for a net gain of $146 of the $2,700 potential.

I also closed my 10 put spreads for a net gain of $220 of the $1,100 potential.

An interesting think that I did notice today, is that although the stock was down today, as implied volatility came in I was actually able to take some extra profit on this down move.

4 comments:

  1. The put spreads that I closed were in my trademonster account. After I closed this position I turned around and sold another 10 puts at Jan '11 expiry at the $5 strike for $1.07 per contract or $1,070.

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  2. I never paid attention to things like implied volatility until a few years ago. I used to read about it and tried to research it, but failed to see how it applied to me when the main thing I was doing was selling covered calls.

    But by accident I ended up finding out more about it just like you have. I followed some positions after I closed them out and saw that because volatility had come down, even though the stock didn't move it would have cost me less to close them out a few days later.

    What I learned was to keep this in mind for the future for situations like if you own calls, you might want to sell them when volatility gets high and look to buy them back cheaper as vol comes in. Also, it's an opportunity to sell naked puts on something. It gives you a little extra time premium for the same amount of risk, that is if you think it's just a spike in volatility.

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  3. Wow! When I got into the office this morning and checked in on DRYS, looks like it shot up about $0.50. I guess I left a few hundred bucks of profit on the table, but that is okay.

    The interesting thing I also noticed that I will be watching is the increase/decrease of premiums at a particular strike price but with different experation dates.

    In particular I was looking at the $5 strike with Jan '11 experation vs Jan '12 experation and the Jan'11 put was down like .10 where the same strike in Jan '12 was down like .15.

    I will keep my eye on this relationship.

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  4. I also sold 10 $5 puts with January '12 expiry for $1.56 per contract of $1056 total.

    This strike and expiration has a -$0.30 delta, which means for every dollar that the underlying moves this moves down by $0.30. When I sold these DRYS was trading at $7, I am expecting a move to $8 in the next move with volatility decreasing.


    Based on the current delta that would allow me to buy these back in a month for $1.26 per contract less any decrease from reduced volotility. I am looking to pull in anywhere from $300-$500 in the next 20 trading days.

    But I will keeping my eye in the Baltic Dry index as my main indicator for the Bulk Shippers. But I am happy with how DRYS was able to shake off the news of the $300 million debt offering.

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