I AM ALIVE!!!

It has been a couple of weeks since my last post. If you look through the feed you will likely notice that my last post was on May 23rd. I really can't believe that it has been almost three weeks. Never fear I am alive and well and have continued to trade the markets. But over the last few weeks I have been pretty busy with work in both my day job and in my side pursuits. More recently I have been teaching myself programming skills. Before we break off into market analysis I will leave you with this quote I live by from Jim Rohn: "A formal education will make you a living, but self education will make you a fortune".

My last post was the first of what would be the first corrective move to the downside after hitting all time highs at around 1,685 on the /ES.

Chart from May 23rd

And 3 weeks later...

Looking at the chart above you can see that the markets pulled back about 90 points and have found support around 1,597 on the /ES. During this time we finally got a pull back and a awesome move lower in JNJ:

Remember JNJ had an incredible run of 19 strait weeks to the upside without a single down move. Although the above chart is not a weekly chart, you can see that JNJ topped out a penny shy of $90 and hit a low at around $82.50 11 days later. Only to remind us that there is cycality in the market...meaning that the market goes up AND it also goes down.

As public as I have made it, it is no secret that I have been net short the market place. But over the recent pull back I have been selling puts in NLY which finally showed some life today. I am short 20 put contracts that have an equivalent delta of about 30 SPY. If you look back in the archive you will see numerous posts about my fascination of NLY for its juicy dividend. I made really good money until exiting the trade in March and have been since been patient to build up a healthy position again. My effective long price puts me long the stock around $13.30/share. The current yield at this price is around 13.5%. There is ton's of chatter about rising interest rates and reform to fannie mae and freddie mac....I don't care!

I have continued to play in and out of VXX as a compliment to my short position in the /ES. I have mostly been short puts to get long volatility since my position in /ES is short premium which by its very nature is short premium. So although intrinsically I am up a little money...the expansion in volatility that has happened over the past few weeks doesn't show me up as much as I would be at expiration. But that is fine with me, I am currently getting paid $33/day in theta in my aggregated position. My profit range on this position is 1,537 to 1,645. I think the recent high at 1,685 has given us something to trade against to the upside.

Getting back to VXX...with a pop volatility I covered the latest short puts I had and turned around and sold out the Aug '13 $21/strangle for $5.15.

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!

Who buys at all time highs???

As I write this post this morning the markets are back within arms length to ALL TIME HIGHS! I really don't know how you can buy all time highs. If history tells us anything, buying all time highs whether in the stock market or in the housing market or any other market for that matter is a losing trade. But we have to remember that the markets can stay irrational for longer than expected. If you don't get too big for your pants, you can weather the storm.

In continue to be a difficult environment to sell option premium given the super low volatility environment. 

Positions: Short /ES, Short JNJ, Short GME, Long CLF, Long NLY,

Markets at all time highs are not great on my portfolio but I do have 2 pieces of saving grace:

1) I have positive theta

2) I am long CLF and that is offsetting negative P&L as we move higher.

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!

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!