Sunday, March 31, 2013

Tasty Trade Interview with Tim Sykes

The above interview is only about 15 minutes long with Tom Sosnoff (of and Tim Sykes. Tim Sykes got his fame in trading penny stocks after he turned his $12,415 Bar Mitzvah money into $2 million bucks. He is character to say the least. Although he has done well trading penny stocks and training his students to do the same. Tom Sosnoff argues that he is an outlier and that over time the statistical change of trading directionally and doing better than 50/50 is zero. As anyone who has watched Tom speak, he is all about increasing your probability of success (increasing your edge), doing this by selling premium and reducing cost basis. 

Its an interesting video and very entertaining to listen to two very outspoken people in the trading space.

And 1 favor that we ask: 

If you like the hard work we put into our blog posts and videos, PLEASE help us out by sharing them. Click the share links below and share them on FB, twitter, etc. It really helps us get more exposure and grow IN THE MONEY TRADES!

Thursday, March 28, 2013

Options Assignment On A Covered Call Position (NLY)

I know that many of you out there reading this blog, wonder what happens when the call options you sold against your stock position get exercised? And then the next thing you are likely asking yourself is what you have to do?

As you can see from the screen shot, I was notified via email from my broker at TD Ameritrade that my calls that I sold against my 1,000 shares of NLY were being exercised early. It was a good ride, I was able to collect a few dividends, but what would had been the 3rd dividend was called away from me right before the ex-dividend date. The call was in the money by at least a $1/share, so it made sense for the buyer of that option to exercise his/her option to collect the dividend.

"Option Assignment is just a fancy term describing the fact that the owner of the option as exercised his right to buy your stock, since you as the seller of the option have the obligation (in the case of being short calls)."

So what happens now?

Everything from this point on is automated. The entire covered call position will be removed from your account. In my example my 1,000 shares of stock was sold at $15/share, leaving me with $15,000 in capital to re-allocate or get back into the same position if I still liked it. Additionally the call that I sold for about $0.55/share is mine to keep. So in reality I actually now have $15,550 dollars to re-allocate. There is an $15 fee that I was charged for this transaction.

Click here if you want to read more about Option Assignment.

Good Luck Trading! 

In The Money Trades

And 1 favor that we ask: 

If you like the hard work we put into our blog posts and videos, PLEASE help us out by sharing them. Click the share links below and share them on FB, twitter, etc. It really helps us get more exposure and grow IN THE MONEY TRADES!

Tuesday, March 26, 2013

Retail Trader with $105MM in profit

I didn't get a chance to see this interview when it first aired, but all I can say is WOW! The funny thing is the comment that Tom makes about the fact that professional SPX pit traders don't even know this lady exists and wouldn't believe that there is a retail trader that has made this much money. The video is about 52 minutes, but is really interesting and worth your time.

Oh and by the way if you are not already a tasty trade member you should check it out here! This is the best education you are going to find on trading, I personally don't think you could find a paid service that beats what Tom and Tony give each and every day. Look the membership is free when you sign up for a free account at think or swim.

Good Luck Trading!

In The Money Trades

And 1 favor that we ask: 

If you like the hard work we put into our blog posts and videos, PLEASE help us out by sharing them. Click the share links below and share them on FB, twitter, etc. It really helps us get more exposure and grow IN THE MONEY TRADES!

Sunday, March 24, 2013

AAPL Stock

Chart Multi-Month Downtrend in AAPL:


As anyone knows that has been trading AAPL for any length of time, it has been in a strong and decisive down trend for months (since September 2012). I know many, myself included are wondering when the move lower will be over. So I have decided to take a closer look at how AAPL stock has been performing technically.

In the above chart I have drawn in support at $419 and resistance at $485. Once you draw these support and resistance lines, AAPL seems to be trying to digest the cliff dive it took from $705 back on 9/21/12. Because of the hear mentality my guess is a lot of people got hurt playing APPL and will be licking their wounds for sometime. With that said I do think AAPL has bottomed, but I also think it will trade sideways in this new consolidation channel for sometime to come.

Option Trade Ideas:

As you can see on the chart, AAPL stock is trading in the middle of its new trading range with implied volatility around 33%. I think implied volatility is a high enough level given the chart pattern of AAPL to consider selling an iron condor. Here is the one I am looking at specifically in the month of May:

AAPL Stock Iron Condor
Analysis of AAPL Iron Condor Using Mini Options
The above screen shot is displaying a May iron condor selling the $475/$485 callspread and the $430/$420 putspread. As you can see I am looking at the mini options that just became tradable on the 18th of March. A mini option is 1/10 the size of a regular option. So in this case it represents only 10 shares. 

You can collect around $6.12 for this $10-wide iron condor. It has 54 days left until expiration with a 55% probability of success. I think the probability is a bit higher looking at the technicals. for every 1-lot you put on you are looking at a max gain of $62 on $38 of risk.

Profit Range: $423.84 - $481.15
Last Close:   $461.91
Max Loss: $38
Max Gain: $62 (almost 2x)

Good Luck Trading!

In The Money Trades

And 1 favor that we ask: 

If you like the hard work we put into our blog posts and videos, PLEASE help us out by sharing them. Click the share links below and share them on FB, twitter, etc. It really helps us get more exposure and grow IN THE MONEY TRADES!

Thursday, March 21, 2013

Passive Income in Stocks & Options

Over the course of the past few years my activity (# of trades I make) and duration (how long I hold positions) has changed a lot. There are many reasons for this, but most of all the original reason I got involved in the financial markets was to find another stream of income. Due to my personality when I start something I get a little obsessive which was great for getting up and over the learning curve quicker than I probably would have otherwise.

The past 2 years or so my involvement has been much more passive as I have put less positions on and with longer duration. Now part of this is the fact that the markets have progressively calmed down in terms of volatility but the other part is my desire to manage a more passive income stream. But another part of this has been due to the fact that the majority of my income that I am using to trade and invest with over the past 2 years is in a self directed IRA.

My wife and I are now in a position where we have a large stash of cash that we had set aside to buy a house this year. We have since decided to put that off and are now looking for other ways to put that money to work instead of sitting in the bank, earning half of a percent interest. It really is a joke. I share this because we are now going to put some money in to some high yielding REITS. Of course I will try to sell some covered calls against any position that we put on.

Creating Passive Income with Stocks & Options:

Our overall goal is to generate $200 a month in passive income. We are only going to put about $15-$25k to work. But with the two candidates that we are looking at, it seems reasonable that we could do this. I have traded NLY for the past two years, and it has a great dividend. It is currently yielding around 11%. We are also looking at an ETF that invest in a variety of REITS, its ticker symbol is REM. It too is yielding around 11%. 

Based on a 11% return and not taking into account any premium we can collect from the calls we sell against the position. In order to generate $200/month in passive income, we need to invest about $22,000. Now let me also point out that most of the REITS out there that I know of pay quarterly dividends and not monthly. But the income target is taking the total dividend received in one year and dividing in by 12. 

The other thing this does not contemplate is the re-investment of those dividends. We have not decided if we will re-invest or pull the dividend payment out every quarter and look for another spot to put money to work.

Anyways, just thought I would share another view of how to use stocks and options to accomplish certain income goals. Before I go, I must also point out that there is always a possibility of the stock or ETF trading lower in price and could lead to a loss of principle.

But you know what they say "without risk there is no reward".

Good Luck Trading!

And 1 favor that we ask: 

If you like the hard work we put into our blog posts and videos, PLEASE help us out by sharing them. Click the share links below and share them on FB, twitter, etc. It really helps us get more exposure and grow IN THE MONEY TRADES!

Monday, March 18, 2013

Mini Options Are Here

A few weeks back I wrote a post about mini options coming available, well guess what...they are finally here. If you use the think or swim trade platform than you probably got an email letting you know that they were available and a short list of the underlying's that would have listed mini options for you to trade. What you probably did not get is that the CBOE has decided they will not charge retail investors any fees to trade them.

Here are the stocks you can trade minis on: GLD, SPY, AAPL, GOOG, AMZN.

Although I am very excited to finally have a comfortable way to trade options on these "Big" guys, There are two things I need to happen before I do:

1) Volatility to come back

2) And time to pass to see how liquid they will be

Until both of these criteria are met I don't anticipate I will be trading them anytime in the next couple of weeks.

But I will say that if you all ready have some small positions in any of these names, it may make sense depending on your position and price point to sell some calls against your positions. I know I have been beating a dead horse here on the covered call. But this is the strategy that I have been teaching my in person group and feel like it is the one everyone should be most familiar with.

Still no new positions for me. The SPY is about $1.80 off its high for the year at $156.80. I am still anticipating a test of the 2007 all time highs, and soon. Other than that I continue to sit tight on my positions and watch the companies I am holding deposit money in my account via the dividends they pay out. With the exception of my position in CLF, everyone of my positions is in the money (ITM).

Good Luck Trading!

And 1 favor that we ask: 

If you like the hard work we put into our blog posts and videos, PLEASE help us out by sharing them. Click the share links below and share them on FB, twitter, etc. It really helps us get more exposure and grow IN THE MONEY TRADES!

Sunday, March 17, 2013

My First Covered Call

I remember selling my first covered call very vividly as it was a life changing experience. It was early 2000 just before the NASDAQ bubble burst and the stock was CSCO. A friend of mine had called and sent me to Yahoo Finance website and tried to explain to me how a covered call worked. The option chain and terminology was too confusing for me, I didn’t get it. He tried again a few weeks later and it was still Chinese to me. For some reason the third time through it clicked and I had the same experience that many have, you ask “Why doesn’t everyone do this?” I thought there must be a trick, I couldn’t be understanding it correctly because I would have heard about this by now, etc. You have to remember this was the year 2000, long before self-directed investing was the norm. Commissions were high relative to today and not every broker even offered you the ability to trade options. I remember having to jump through hoops signing documents and taking a test just to prove I knew what I was doing, which I didn’t.

I thought I did at the time but in retrospect it’s obvious I was clueless. Though I did understand the risk/reward of a covered call, I didn’t know what implied volatility was. All I knew was that CSCO was trading at $39 and I just sold a $40 strike price call for $3.40. I don’t remember the numbers exactly but they are in the ballpark. It was only a few days prior that I had finally understood the mechanics of a covered call so I was excited as hell to press the button knowing that no matter what happened to the price of that stock, I just pocketed $3.40 x 1000 shares = $3400. I literally remember feeling giddy inside and even asked myself; well doesn’t this mean you are kind of semi-retired? Because at the time the tech bubble had yet to burst, I think my account balance was $300,000 and I had only written one covered call on a portion of my holdings. This falls in the category of if its sounds too good to be true, it probably is.

Needless to say the tech bubble burst later that year, CSCO finally got its ass handed to it, my account balance fell far from its peak. My only solace was that I had lowered my cost average on that purchase by a significant amount by the time things settled sometime after the 9/11 bottom. It wasn't until the markets bottomed and volatility settled down that I started to realize how little I knew. The inquisitive moment came when for the third month in a row I sold the same covered call strike price of $27.50 but the prices of the calls kept going lower. Again, I don’t remember the exact numbers but let’s just say I got .60 the first month, then .40, then I clearly remember seeing the bid was .15 and I thought, I can’t sell that, why would I limit my upside risk for only .15? Didn’t I get $3.40 for my first call a year ago? WTF is going on? I guess I’m not semi-retired anymore. I heard that term implied volatility again on TV so I decided to look it up, I hadn’t any idea what the hell they were talking about. But it planted a seed, and a few years later I finally put the time and effort in to learning more about this magical tool that changed my life.

Some twelve years later I've written literally hundreds of covered calls and profited well over $100,000. But there have been trading losses and stocks that went to $0 along the way. My point is the calls that expire worthless most of the time help to offset the unavoidable losses of risk in the markets that we all experience. It’s a great tool for the long-term investor. The irony for me is that sometime in late 2008 as the markets were crashing I abandoned long-term investing and turned to actively trading, well, after hiding under the covers for about three months that is. I remember hearing something I’ll never forget, it went something like this, “The buy and hold investor is dead, you need to trade these markets if you want to make money investing.” I had a great run trading from 2009-2011 until I blew up my account.

So now I’m at a reset moment for my trading/investing career. The markets are clearly vastly different then when I first invested in 2000. I’m in a different frame of mind personally, different career, literally a much different world. I’ve had great success and failures with differing types of trading activity. I’d like to think I’ve learned a lot along the way and have never been in a better position to profit from these experiences. But the truth is I think luck with timing has been responsible for the larger part of the profits over the years. 

And 1 favor that we ask: 

If you like the hard work we put into our blog posts and videos, PLEASE help us out by sharing them. Click the share links below and share them on FB, twitter, etc. It really helps us get more exposure and grow IN THE MONEY TRADES!

Tuesday, March 12, 2013

Another Day, Another 52 Week High

I honestly wish I had more to share, but with volatility so low and markets at their highs I just don't see a lot of opportunity. And like I have been saying for the past 6 weeks or so, I continue to believe that the markets have a general theme of moving higher for 2013. Which to me means that volatility will remain at the low end of its range. Today we made yet another 52 week high at $156.10:

With that thesis in tact I continue to prefer to hold my high yield covered called positions and collect the dividend and premium as I wait for opportunity to come back into the market by way of increased volatility. This is true for my IRA account. As far as my trade account is concerned the only position I have on is the short VXX with a short put on (covered put).

Lastly I continue to believe that we are destined to take out the all time high set back in 2007 at $157.52:

Good Luck Trading!

And 1 favor that we ask: 

If you like the hard work we put into our blog posts and videos, PLEASE help us out by sharing them. Click the share links below and share them on FB, twitter, etc. It really helps us get more exposure and grow IN THE MONEY TRADES!

Sunday, March 10, 2013

When to use Futures instead of Options

If you've taken the path that many retail traders have journeyed you probably started with buying stocks, then options, then futures. If you haven't yet made your way to futures this post is for you. Recently I've been looking through my past trades going back to 2008 before the financial crisis hit and I had just started to trade something other than a covered call. Prior to the end of 2007 and early 2008 I had solely been a covered call writer for about six years. I was looking through past trades to try and get a feel for what I used to trade and how my numbers were so great for so long. In a past post I commented that most of this was luck as I was long and writing calls from 2002-2008. But I found something that contradicts that.

I got bearish in February 2008 and started dabbling in buying puts for the first time. Clearly I didn't know what I was doing and I'll show you why. Below is a screen shot from my trade log.

Though I did great that month as the market was falling, I was actually taking on more risk than needed given my intentions. All I knew what that was I was bearish and wanted to play the market to the downside without shorting SPY or DIA because at the time their prices were so high that a short position took up too much capital. Up until this time all I knew was options, I was still trying to understand futures and wasn't ready to use them with real money until I had a better understanding.

What you can't see in that snap shot is the price of the underlying at the time I initiated the trade. But I can tell you what I was doing. I was buying DIA at about $10 In-the-Money (ITM) and looking to sell when the underlying moved $1, or about 100  Dow points. I knew enough at that time to know better than to buy At-the-Money (ATM) options as if I did that a large portion of my purchase would have been time value. I don't know what VIX was at this particular time but it isn't  important to this post. Even if VIX was at a an all time low and I was essentially paying very little time premium, this was still a case where had I been a better educated investor/trader, I would have been using futures. As you can see from the entry and exit dates, I was looking for very quick strikes. This wasn't meant to be a long-term trade or investment, I was just trying to profit from each 100 points move in the Dow.

Now instead of paying $12.60 for $10.00 worth of intrinsic value, I should have just used options and shorted the YM, or ES if you trade the SPY. This is just another case of me being lucky on direction and cashing out thinking I knew what I was doing. Its real easy to look at your record and think you must be doing something right, that's not always the case. And for me, it wasn't until a few years later that I truly learned how to use futures that the light went off. I clearly remember thinking to myself, "why the hell did you used to buy ITM premium instead of just shorting futures." The honest answer is just that I didn't know any better. While you can make the argument that buying an ITM put carries a defined risk while shorting futures carries unlimited risk, what I didn't mention was that had I been wrong and this moved against me I would have been quick to take my losses and move on. I had no intention of letting it ride and hoping I didn't lose 100% of an ITM purchase. So knowing what I know now, I would have shorted the futures and used a stop order at whatever point I deemed necessary.

If anyone reading finds themselves in that category of crossing over from options to futures and have any questions feel free to comment below and I promise to respond.

And 1 favor that we ask: 

If you like the hard work we put into our blog posts and videos, PLEASE help us out by sharing them. Click the share links below and share them on FB, twitter, etc. It really helps us get more exposure and grow IN THE MONEY TRADES!

Friday, March 8, 2013

Markets Continue March Higher

As we have recently taken out the highs on the year I continue to stick with my thesis that the theme for this market in 2013 is onward and upward. In a recent post I mentioned that I used the recent pullback when we had a spike in volatility to add some more positions. I am basically 95% invested in my IRA portfolio and will likely remain invested throughout 2013. I will however keep capital available in my trading account to make other trades as I see opportunity.

I think we likely continue marching higher until the SPY reaches its highs from back in 2007 at $157.52 before we see any meaningful pullback. At some point I will likely get some short deltas mixed in the bunch to offset my long directional bias as a hedge.

Good Luck Trading!

And 1 favor that we ask: 

If you like the hard work we put into our blog posts and videos, PLEASE help us out by sharing them. Click the share links below and share them on FB, twitter, etc. It really helps us get more exposure and grow IN THE MONEY TRADES!

Wednesday, March 6, 2013

How I Blew Up My Account: Part II

If you missed Part I you can find it here. I promise it won't be a trilogy. I left of by saying I got out of a large bet at exactly even sometime in late 2009 and was feeling extremely lucky. While my friends and family were down 50% or more in their retirement accounts I was feeling a bit guilty but also selfishly happy for myself. I'll be honest and say I was very nervous as the jobs I was preparing myself for in grad school simply weren't going to be available as the labor market shed 200K plus jobs a month. I sat in cash for a while more than happy to drawn down $2000 per month until I could figure out what to do with my life. I had no solid idea what I wanted to do, just something finance oriented, hopefully investment related. It hadn't yet occurred to me to try and trade the market for a living. It wasn't until a full year after school, a bunch of unanswered job applications, and a few failed interviews that I decided to take the plunge.

If you haven't yet seen my bio page, take a look here . Those numbers are real and most of those trades can be found in the archives of this blog. It was at the end of calendar year 2010 that I took a look at the numbers. Here is an incomplete list of what led me to try and trade my account for a living:

  • Track record was looking good
  • Was having fun
  • Was in denial about the true nature of the economy
  • Truly thought I could at least continue to average $2000 per month which paid my bills
  • Needed to buy time either to let the economy rebound or find my next calling
  • False sense of security from past experiences
  • I'll just say denial again, and a little bit of being a baby. I wasn't hurting bad enough to hit the streets looking for anything and everything. I had a bit of an ego. It was difficult to interview for jobs that didn't pay much. I wanted to shout "do you know I don't need this job, I just want it". 
In short, I was in need of some humbling but I did not think that at the time. Denial is a powerful force. So I set out on what was supposed to be a 6-month journey just to see what happened. I just searched the archive and found the post from after my first six months, you can read it here. Wow did that ever hurt to read. I was so happy at that point, really flying high thinking I might have a shot to stay self-employed and thus end my miserable job search in a terrible market. Try looking for a job when you're 39, have a limited real world resume, and its the worst job market anybody has seen in our short lifetimes. Wasn't fun and was easy to run away from because I had the capacity to do so. All regrets. 

It was late July 2011 and I'm thinking that while things have gone well so far, if I was truly going to try and make a living, or justify not looking for another career, then I was going to have to trade a little larger and be willing to take some risks. I didn't mind the account fluctuating or taking losses, as long as the long-term average was in the ballpark of what I needed. I was going to give it another 6 months, make it a whole year, then reassess at the end. I was shooting for $4,000 a month, but if I came in at $3,000 I was easily going to green light myself to do this another year. I clearly remember that thought process. Does it really make sense for someone my age to try and get by on $36,000 a year? No, again though, I wasn't wanting to deal with reality.

I had been having great success with trading the ZB futures. It was beginners luck that lasted well over a year. I don't think I ever got cocky or arrogant, but I did feel confident. This combined with my denial and desperate need to try and make this work set the stage for my fall. Since I had recently decided that I needed to be willing to take on more risk in an attempt to truly see if this could work, I found my opportunity. If you take a look at the ZB bond chart we had recently had a parabolic move that came crashing back down. I made money all the way down, again just lucky timing. I thought the world was overreacting again and was willing to stay short ZB feeling like it will eventually come back down again. I was short four contracts at about an average of 127, was long some TBT which is equivalent of being short some more ZB, was short some out of the money VXX calls, and long some BAC. 

Well the shit hit the fan in August 2011 and all correlations when to 1.0. Bonds went to the moon, past the highs at about 136 set when banks were actually failing, all that was happening this time was rumblings of unrest in Europe, at the time that was nothing new. I thought this was classic overreaction but shit just got worse for four straight weeks. When we took out new all times highs on bonds I only lasted a few more days, I closed out at 140.75. So lets just round to 141 minus 127 x 4 = $56,000, plus the losses on all the other trades, it added up to close to 100K. My only solace is that not only is ZB still above that number today 18 months later, about 143.50 last time I looked, but they went as high as 152. Even had I been smaller in size I still would have pulled the plug at some point. As I found out, my real tolerance for pain was when I got close to $100,000 left in my account. That was just a line in the sand that I didn't think was acceptable to break, purely psychologically. What happens if it hit $97,000? Nothing, just a psychological boundary.

I believe the account balance was somewhere about $212,000 when I started and I pulled the plug at about $120,000. While I still haven't had the courage to update my spread sheet from those trades and then update my bio page on this blog, I do know that my 1099B that year said -$70,000, and I was up about $16,000 before I lost. So that's about right, I knew I lost about $100,000. Now while I don't expect anyone to feel sorry for still having more than 100K left, to me this was devastating on a lot of fronts. First of all I failed, I never thought I would let my account balance get below 200K let alone closing on on 100K. That was beyond any worse case scenario I would have imagine. I had no viable way to make this money back other than trading, and as you can imagine my willingness to trade was non-existent at that point. My account entered a death spiral phase. I was cut in half by 50% in just six weeks combined with no way to make any more money, so do that math and at a straight draw down of $2,000 per month I could tell you approximately when I was going to be homeless. Trust me I did that math constantly. 

I was completely out of my mind for almost a year. I actually found a job I was interested after about four months but the hiring process took about 11 months to be finalized, and I never knew until month 11 that it was going to happen. I spent most of 2012 absolutely miserable, depressed, scared, anxiety, you  name it. Kicking myself in the butt, doing the what if scenarios in your head, etc. Every few months I would get the desire to make a trade. My 2012 1099B shows a profit of $5,000. I traded sparingly and sporadically. I would get cold feet so damn fast, literally couldn't sleep at night if I had a trade on so would cancel it for a small loss if need be just to end the anxiety. I still had this need to make something, anything to help out with expenses and delay living in a storage unit. This might sound like pure exaggeration but I can tell you that it was reality in my head. 

I've been asked by a few already how my psychological state is now when it comes to trading. I think enough time has gone by that most of the fear is gone. I still have some left over guilt and shame. I've got a stable job now and the ability to trade again but I stay small, no more than two futures contracts at a time. But the truth is I did so well for so long that I finally realized its just time to forgive myself and move on. In the end I felt like if I can just start to slowly work my way back, even if it takes literally ten years, as long as I'm on the path then that's all that's important. If I can just trade profitably, no matter how small, then I'm good. I really enjoyed the blog, made some new friends that have stayed in touch even when I dropped off for a year, most notable Dominic, Sandeep, and Darrin, thanks guys. I'm currently getting my ass kicked short the ES but I'm having fun, so I'd say that I've made a pretty good recovery. Now its just time to grind my way back home. 

And 1 favor that we ask: 

If you like the hard work we put into our blog posts and videos, PLEASE help us out by sharing them. Click the share links below and share them on FB, Twitter, etc. It really helps us get more exposure and grow IN THE MONEY TRADES!

Sunday, March 3, 2013

How I Blew Up My Account: Part I

Well this has been a long time coming for me. I avoided it purposely for a long time but I'm definitely ready now a time has lessened the pain of past events. This has the potential to be a long post and I don't want to bore anybody so I think I'll probably break it up and maybe expand or share more as time goes on. If anybody wants more info or details feel free to email me at

The short story goes something like this, though I never set out to trade the markets for a living, it was only in retrospect that my account balance and trading activity suggested I had already been doing just that for about seven years. But to be clear when I say making a living my standard at the time lies somewhere far lower than most people. I was single with no debt and low overhead, about $2,000 per month. I also wasn't paying capital gains taxes as I had a large capital loss to make up for. I had about $250,000 in my account and though there was nothing you would call a typical month, over time there was a mathematical average and it was somewhere just below the $2,000 range. There is much more to the story but essentially I was attempting to make a career change and found myself kind of comfortably going sideways. With each month that passed and block of 6-8 months and the account balance is hovering in a safe balance, I had little desire to force myself to look hard for my next career. I always assumed it would just find me through the course of life.

I eventually found something and after a year I admitted that it wasn't something I could see myself doing long-term so might as well get out now and look for something else. I had enough money and long enough track record to feel comfortable giving up guaranteed income for a  prolonged period until I could get through grad school and find my next calling. I looked through my trade log and played with the numbers of what it would cost for school, rent, etc. Even if I could just make $1,000 per month for 18 months and thus dip in to savings by about that same amount, then so what, I burn through $18,000 out of my $250,000. There was also that cost of grad school that I just considered an investment and was willing to write a check up front for about $15,000. What kind of MBA can you get for 15K and where will it get you? more on that later but the answer is not much. But it was cheap enough that I figured it was a low cost insurance policy. The goal was to get out of grad school and find a new job with my trading account capital above $200,000. That was just a self set psychological boundary that I never wanted to go below.

I already realize that this post is too long for most people, even if you were interested when you started reading it. So maybe I'll do a video post and talk you through the charts I was playing with at the time and it might go faster. I just thought I would give some backdrop for how I was even in position to blow up my account.

I'll shorten the story here and say that I started school in June 2008 and we all know what happened in September 2008. It was during the market crash that I decided to liquidate my account from what was then a long only covered call writing account, that was my break and butter for seven years. In retrospect it was just lucky, I was simply long the market from 2002-2008 when it was on a multi-year upswing after 9/11. But I never saw that for what it was at the time. Like most amateurs I figured since I was making money I must be dong something right. That was the foundation of what eventually turned in to my demise. The second leg of this story was I got extremely lucky and placed a large defined risk/reward bet on the market the day it bottomed. I had no idea at the time it would bottom that day, far from it because in fact I used the longest dated options that existed at the time. This was March 2009 and I used the Jan 2011 expiration dates. I bought long call spreads on about eight separate tickers and then also sold put spreads against it. I played with the numbers and best case scenario was account balance would be $300,000 on the upside and $100,000 on the downside. I thought the market was pricing in the end of the world and I simply made a bet that that wouldn't happen.

Now again I got extremely lucky, I took some of the profits off after a month thinking the bounce was too much too fast and we would retrace. I took some more off in May, sometime in September when my balance was exactly at $250,000 I took it all off. Another psychological move that would harm me later....................I'll pick the rest of this story up later this week. Spoiler Alert: it ends badly.

And 1 favor that we ask: 

If you like the hard work we put into our blog posts and videos, PLEASE help us out by sharing them. Click the share links below and share them on FB, twitter, etc. It really helps us get more exposure and grow IN THE MONEY TRADES!

Friday, March 1, 2013

Covered Short Put in VXX

Reading Jason's post about how he is trading his position in the /ES along with the segment that I caught the tail end of this morning on got me thinking about a short position in volatility via the VXX. Being that both VXX and options are a decaying asset I just love the idea of this. With that said I am selling 100 shares of VXX and the Apr '13 $24 put against it for $2.46 giving me an effective short price of $26.46.

And here is a chart that really gives you a visual of what I was refering too with respect to VXX being a decaying asset:

This should be a fun experiment. We have 49 days until April expiration. My break-even is my short price of $26.46, which is only about 40 cents shy of the recent high that printed this week when the volatility popped more than 30% in a day. As I continue to see a long bias in the market I don't see a real threat of volatility getting way out of control. And if I am wrong, due to the nature of this particular product I would feel comfortable waiting it out as not only is volatility mean reverting but this asset really can only decay overtime due to how it is composed.

Good Luck Trading!

And 1 favor that we ask: 

If you like the hard work we put into our blog posts and videos, PLEASE help us out by sharing them. Click the share links below and share them on FB, twitter, etc. It really helps us get more exposure and grow IN THE MONEY TRADES!