Tuesday, April 27, 2010

New Energy Investment in XLE

I have been wanting to get involved with the XLE ETF for sometime now. But felt that my trading account would not give me enough time for the position to work out. So today I did a buy write at the $62 strike with May '10 expiration for $60.54 with the ETF currently trading at 61.66. Not sure why I did not just sell the $62 put, for some reason I wanted to actually own something. I think it is very likely that I get called out by May expiration which I am fine with and would look to initiate a new position in the same name. But if I do get called out by May it would be about a % gain for 24 days.

If you look at the weekly chart I posted above 61 seems to be an important level on the weekly as it was resistance for several months.

With this trade I am maxed out of my available $10k in the investment account either until I add more funds or if by May expiration I am called out of this position or the puts I have sold on NLY and ANH expire worthless. We will see in 24 days.


  1. Do you have an portfolio policy/plan for your investment account like you do for your trading account? It sounds like you've got three positions and you are maxed out, just wondering if you have any preset max position size for this account. What are your investment account objectives?

    I gave some more thought to me wanting to separate my accounts; I forgot about the margin aspect. I need to keep the total account over $100,000 to qualify for portfolio margining. Though I have yet to use it, I might be interested in using some of that leverage once I'm comfortable with what I'm doing. I think until then I'm just going to sit tight.

  2. I do not have any solid policy/plan for my investment account. But I have been thinking about what they would be. For example, the positions would be constructed of selling puts and covered call type strategies as well as investing in stocks with divedends. My goal for a return would be 10%. But right now I am kind of winging it. But when I come up with something more solid I will share.

  3. That's pretty much what my investment portfolio looks like in my head, covered calls on dividend paying stocks with a minimum goal of 10% per year, but preferably 12-15%. I would probably rather sell ITM calls so you at least get the dividend should the stock decline rather than no dividend but a better entry price with using naked puts. It all works out to be similar in the end. I think I'm willing to go up to a maximum of 5 names, so 20% of the portfolio. But that decision would have to in part be based on how much of my total capital was allocated to the investment versus trading portfolios. I'm hoping to get some more clarity on this in the coming months when I've got more time to dedicate to this issue.

  4. After I initiated this position I told myself that I would cut the position if it slid 10% below my cost basis including covered call premium. Since transferring to TOS all my positions are in one account again. But I am okay with it. Because I realized that I have to treat investments with the same risk management policy that I do for trades. In that you have to have a maximum loss that will get you out of the trade.