Wednesday, March 24, 2010

Still want some oil exposure going into summer

Toward the end of February I was trying to get some exposure to oil going into summer via RIG. I was stopped out because my entry flat out sucked. Then I tried again recently with HES and was stopped out yet again. Here again I think entry is the common theme. So I think I need to make a few tweaks with respect any energy trades that I put on. One is I either need to get a better entry or I need to reduce my trade size to allow for a wider stop loss area. I can also play directionally with some limited risk/reward trades buying call spreads or selling put spreads. I am leaning towards the latter as I prefer to collect the credit when using spreads.I am currently looking to sell Put spreads on the following oil names: DVN, HES, and maybe something with USO. But I am going to sit on it and wait to see what the oil numbers are that are coming out today. I am really starting to prefer analyzing potential positions when the markets are closed as I don't feel the need to rush and put something on at the fear of not being able to get in. I really think this is the reason I have entered a few positions at bad prices. I get excited and emotional about wanting to add positions. I have to remind myself that there is no rush and there is always opportunity.

I continue to work towards a passively active trade management style. If that even makes sense. I want to manage my portfolio and be involved on a daily basis. But I do not want to be tied to the screen 24/7 watching my positions.

I will post if I make a move in any of the oil names mentioned above.

Just to keep me honest no positions will be added today. I need to analyze potential plays tonight and will get ideas ready for execution tomorrow or in the coming days.


  1. I also like the idea from IWO to add some income trades with negative theta to balance out my longs with positive theta.

  2. I understand perfectly the passive active statement. I've evolved from a watch CNBC every second of the trading day type of person years ago, to now not even wanting to see quotes until 4PM EST. I'm aware that markets can and do move after hours, but in general I found it impossible to objectively evaluate anything while we're trading. I start to second guess my positions the second we tick the opposite directions of my trades.

    I thoroughly love following the markets and related news that move them every day of the week, but currently don't enjoy following during the actual trading hours. I am sometimes frustrated with finding a trade I'm interested in after the market is closed, only to see that opportunity disappear by the time the market is open. However, I would rather lose those opportunities than continue to make trades during market hours where I'm acting on impulse and not doing my due diligence. I guess one of the reasons I don't like to follow during the day is I find it hard to not act on impulse, but I can keep myself from watching. I have the same problem with alcohol. If I drink, I drink too much, but I can choose not to drink at all and therefore mitigate the problems associated with my drinking. I think it's just a part of my personality. I'm either on or off, no in between.

    On the income trades with negative theta, this is why I want that separate account when its time for me to put money back to work with covered calls. I have a hard time with the psychology of watching one win while one loses. Consequently, since I picked up my trading activity 18 months ago, I found myself not wanting to have negative theta trades. But unless I'm going to increase the size of my trades, I need to put that capital to work again in some fashion. But until I feel comfortable with how to hedge those positions I think I'll sit in cash.