AKAM close out

I kind of lost my will to be in this position. Besides breaking its uptrending channel and making a series of lower highs, it doesn't pay a dividend. So arguably I should have only been in it using a spread and not cash secured puts as I really wouldn't want to own. It's a bit too volatile for me. I sold to open at .45 and just closed out for .27. That's only $165 after commish and not the $400 I was hoping for. But not bad considering I got short Wednesday at the close. 

AKAM additional position

I previously sold the July 40/39 put spread for .14 with the intent to close if it breaks its support line. Today I sold naked $50 calls for .30. I would possibly close this position as well if we broke resistance to the upside. So this is a long call away from being an iron condor. I am going to continue using the TOS risk analysis screen shots, but most trades will be done at IB until further notice. If we hit either side of the channel I'll probably close out the opposite side of the trade. I'll be quick to curtail losses in some trades as I've already got some nice gains in others.

Update: This position crashed hard today closing literally on the support line. As of closing price it is close to my 1% of capital loss risk threshold per trade at about -1500. I would hate to close this out for a big loss when it's still above the naked strike. Today's price was down 8.68% and the SPX was 3.25%, that would mean AKAM has a beta today of (8.68/3.25) = 2.67. It's listed beta is .93. According to the risk profile I have another $1.50 to the downside on this stock until it reaches my risk threshold. It's up a bit in after hours but that means little. If we open down strong I'll be forced to close it out. It's 50-DMA is slightly above this threshold area at about $40, so if it breaks that as well as the support line on the chart I should use those as reasons to cut the trade. Below is the current chart and risk analysis of the spread trade versus just selling naked puts which was my original intention. The point I want to show is that the spread reduced risk and is allowing me to stay in this trade longer. Had I just used  naked puts the risk threshold would already be violated at -2200. 


Theoretically, let's say the stock does hold this resistance line, and ends up either expiring worthless or maybe trading sideways a few days and allowing me to get out with a much smaller loss. I'm not making any predictions, just pointing out that the spread at least is currently giving me the option of staying in a bit longer and potentially not having to take a maximum loss. I think in most cases you should use spreads to reduce risk and buying power, regardless of how this trade turns out it's been a good learning trade for me. 

Current Chart

Current Risk Profile of spread

Alternate profile had I used naked puts and no spread

AKAM naked put sale

This is the one other trade I had on my radar for today. I'm looking at selling either the naked $40 puts, or the 40/39 put spread. Setting the risk at 1% of trading capital near the break point of the trend line near $40 for either scenario leaves me with a $540 net on the naked $40's, or $480-540 on the spread (depending on if I get filled at .10 or .11). The buying power needed is three times as much for the nakeds and obviously leaves you with extreme risk, so I think I just talked myself in to doing the spread. Initially I thought .10 reward for .90 risk and 100 contracts vs. 15 didn't make any sense, but now that I've done the math this makes even more sense, especially if I can get filled at .11. (Update: After my initial write up I took a look at IV. It is relatively low right now to its recent past, so what I did was increased IV by 12 up to its recent past of 55. I'm assuming that a break of that $40 trend line would coincide with a rising IV. Looking at the two alternatives again after increasing IV, the nakeds leave me with a loss of 1.5% of capital at the $40 break and the spread is still at 1% because you have less delta exposure with the spread. So even if I can only get filled at .10 I'm going to go with the spread.)

The light blue lines are copies of the worst down moves the stock has seen in the last six months. It looks like I would need slightly move than steeper drop than any recent history just to touch the uptrend line tomorrow. Earnings are not due until after July OPEX.  I'm going to look for 1-2 more trades to put on because otherwise the $500 I paid for the SPY put spread as directional bet/hedge doesn't make a whole lot of sense. I think I need to shoot for selling at least $2000 of premium on other trades to be giving up $500 on that SPY bet.