Trades: None
Gut Check:
In May, I decided to stop obsessively watching the stock prices and just sell covered calls several months ahead but at "safe" strike prices -- that is, with a strike price of what I bought the stocks for.
Then I stopped looking. The Covered Call for YPF is expiring soon, and now that I've looked, I discovered that PCX has plummeted to around 23 cents -- from $6 when I bought it!
Damn.
My margin account is about 1/2 of its book value.
Not sure what to do except just to wait it out and see if it will ever recover. Can't even write Covered Calls on it.
Can't write Covered Calls on CIM either since the price is low and there aren't useful premiums to get.
Mostly just sitting. Might get to write a 12 to 15 cent Covered Call on YPF early next week for the TFSA account. We'll see.
Overall I think it's been too much watching and worry and I'm going to start pulling out as well as withdrawing money when I can.
Friday, July 20, 2012
Thursday, June 21, 2012
June Trades
Trades: NONE
Gut Check:
Gut Check:
- Stocks still down, but there were some spikes upward in there. If I had set my strikes incorrectly, I might have lost money. Still feels really passive not to take some risks, but at the same time, I'm not obsessively watching the markets. Starting to wonder if it's a good tradeoff by making a (lot) less money in exchange for safety.
- CIM dropped a lot after announcing a 2 cent decline in dividends (was 11 cents in the first quarter). No useful Covered Calls to write at this time. Waiting for it to go up again. IF it goes up again.
Wednesday, May 30, 2012
May Trades
Trades:
Gut Check:
- May 26th: Bought 3x CIM @ 2.79 for both the Margin account and the TFSA account.
- Tried to short 300 shares of FB. Order rejected by QuesTrade -- "not enough shares to short"!
Gut Check:
- Sitting tight on CIM instead of selling any options, since ex-dividend day is probably coming up in June.
- Can't even do a fairly sure trade like FB. I'd psyched myself up all night to do it, since no matter what it's still speculative -- one press release by an analyst and it could reverse its downward trend and spike up in price, like last week with the Needham announcement.
- FB price is plunging again. Down over 50 cents from open, which was my cut-off to get out of the short position. Damn! If I could have shorted it, I'd be up an easy $150. Oh well.
Thursday, May 24, 2012
May Trades
Trade History:
- Sold 5x DNDN Covered Call Strike 14.00 @ 0.25, expiration November 17th
- Sold 8x PCX Covered Call Strike 6.00 @ 0.17, expiration September 22nd
- Sold 8x RENN Covered Call Strike 7.00 @ 0.30, expiration October 20th
- Sold 3x YPF Covered Call Strike 15.00 @ 0.50, expiration July 21st
- Queued a buy for 3x CIM @ 2.75
- Implementing the new trading strategy to remove speculation and spend less time watching the market instead of trying not to get assigned.
- Feeling nervous because this will commit me for several months for some of these stocks. There may be severe regret if they pop up from their current slump and shoot to fantastic values.
- DNDN sold at 0.25, but when I checked the quotes shortly after, it was in the ~0.30 range! Don't know why I got such a lousy price. :-( And for some reason it is showing 0.85 to close the position.
Still considering new trading strategy
Ever since March, I've been stressed over writing Covered Calls on DNDN, trying to make 2% each month at option Strikes that were below what I paid for the stock, since the stock fell. And it fell a lot.
This month, the entire portfolio of stocks is down a lot, so except for YPF, I can't write a Covered Call for options expiring in June without choosing a Strike that is well below the price I paid per share. I might still get 2% ROI on each stock, but that involves a lot of watching, speculation, and stress. And I could be wrong, like I was in March and especially in April, where there was a huge 3% loss in just days.
If I were to remove speculation entirely, I could by selling Covered Calls for options expiring several months ahead. I would gain a certain amount of peace of mind and reclaim a lot of time watching the market and stressing out. In exchange, I am giving up potential gains -- capping any profit from the stocks going up a lot suddenly. And these are all volatile stocks to begin with.
After thinking about this more intently over the last couple of days, I think this will be my new strategy for stocks that have fallen a lot in value. It goes back to the original principles of not speculating and not spending a lot of time watching the markets.
There will be some idle cash in the portfolio because of this, and I think I will spend it on dividend-paying REITS. Looking at CIM at the moment.
This month, the entire portfolio of stocks is down a lot, so except for YPF, I can't write a Covered Call for options expiring in June without choosing a Strike that is well below the price I paid per share. I might still get 2% ROI on each stock, but that involves a lot of watching, speculation, and stress. And I could be wrong, like I was in March and especially in April, where there was a huge 3% loss in just days.
If I were to remove speculation entirely, I could by selling Covered Calls for options expiring several months ahead. I would gain a certain amount of peace of mind and reclaim a lot of time watching the market and stressing out. In exchange, I am giving up potential gains -- capping any profit from the stocks going up a lot suddenly. And these are all volatile stocks to begin with.
After thinking about this more intently over the last couple of days, I think this will be my new strategy for stocks that have fallen a lot in value. It goes back to the original principles of not speculating and not spending a lot of time watching the markets.
There will be some idle cash in the portfolio because of this, and I think I will spend it on dividend-paying REITS. Looking at CIM at the moment.
Wednesday, May 23, 2012
Rethinking my strategy and targets
I was looking at Facebook this morning, intending to short it. I'd heard it might be allowed today, and QuesTrade did let me queue a short order (possibly a naked short). I decided to tune in to Twitter to see what was going on with FaceBook. Generally negative, it seemed, until a story broke about a valuation at Needham rating it a "buy" with a price target of $40. I personally find a a less optimistic and comparison-based valuation more realistic.
In any case, the effect, it seems, has been to inch the pre-market price up over 2% (at the time I am writing this). So much for doing a short. I suppose it is still possible if you can trade in the brief ups and downs and are willing to watch the market, BUT the cost is time. Since last night, I'd been thinking of my overall options trading strategy and how much time it has consumed in the last few days.
I have been aiming for 2% in the worst case, and it can be easily exceeded by picking volatile stocks and selling Covered Calls on them. It worked well in the early months, but I always knew that I could end up holding a stock that had plummeted in value. In the early days, I joked about it with my friends saying I could buy BP and they might lose a tanker offshore the next day, leading to a huge price drop. I never imagined that market manipulation could do that just as easily.
Right now, I'm holding DNDN, PCX, RENN, and YPF, all of which gave nice returns initially. But the price has since dropped a lot, so now I can't afford to be assigned on my Covered Calls, which in turn means I need to be careful choosing my Strike prices, and that in turn means keeping a closer eye on price movements in case I need to do a buyback because the stock price spikes up -- like it did with DNDN last month, resulting in a 3% loss in just 3 days.
So now I'm rethinking my whole strategy since 2% a month can sure take a lot of work when you're holding on to stocks you need to babysit. For one thing, I'm thinking of exiting trading altogether. I could day-trade, but that wasn't the point. One of the important factors for me was limiting time spent.
My exit strategy from here might be:
In any case, the effect, it seems, has been to inch the pre-market price up over 2% (at the time I am writing this). So much for doing a short. I suppose it is still possible if you can trade in the brief ups and downs and are willing to watch the market, BUT the cost is time. Since last night, I'd been thinking of my overall options trading strategy and how much time it has consumed in the last few days.
I have been aiming for 2% in the worst case, and it can be easily exceeded by picking volatile stocks and selling Covered Calls on them. It worked well in the early months, but I always knew that I could end up holding a stock that had plummeted in value. In the early days, I joked about it with my friends saying I could buy BP and they might lose a tanker offshore the next day, leading to a huge price drop. I never imagined that market manipulation could do that just as easily.
Right now, I'm holding DNDN, PCX, RENN, and YPF, all of which gave nice returns initially. But the price has since dropped a lot, so now I can't afford to be assigned on my Covered Calls, which in turn means I need to be careful choosing my Strike prices, and that in turn means keeping a closer eye on price movements in case I need to do a buyback because the stock price spikes up -- like it did with DNDN last month, resulting in a 3% loss in just 3 days.
So now I'm rethinking my whole strategy since 2% a month can sure take a lot of work when you're holding on to stocks you need to babysit. For one thing, I'm thinking of exiting trading altogether. I could day-trade, but that wasn't the point. One of the important factors for me was limiting time spent.
My exit strategy from here might be:
- Write a longer-term expiration Covered Call, where (Strike Price + Premium earned) > (price paid per share). Not exactly a LEAP, necessary, but a few months ahead.
- As I return to a cash position, switch out to (boring) dividend paying stocks and do more longer-term expiration Covered Calls.
- When the portfolio is allowed to trade Cash Secured Puts, I will then try that. Or possibly just keep the portfolio at 8%+ dividend stocks and call it quits.
Holding for now
Trades: None
Gut Check:
Gut Check:
- Seriously thinking of shorting FB!
- Holding on all stocks -- No useful short-term calls I can write at the moment, compared to the risk.
- DNDN is climbing upward slowly. Can't write any useful safe options except maybe a November call on 14.00 for a slightly more than 2% return. I might still end up doing something like that. I think I'll give it till the end of the options period. If I'm paralyzed by low prices, I'll write a safe but farther-ahead call. If the price goes up... well, I'd be out and up a bit. Not 2%/month, but at least I'll be out of the position.
- PCX could be busted down to nothing -- there's even talk of bankruptcy, or at least cash flow problems. Still, stock might inch up a bit. Same situation as DNDN -- nothing useful to write now.
- RENN could climb back up a bit while FB slides down. Will wait.
- YPF: I could write a ~1% ROI covered call for Strike 15.00, but there's no point. I might as well wait for the 12.50 Strike to reach a price where I can sell a call on it and still come out ahead. In any case, if the new administration pays out dividends similar to what the company used to do, then there's no hurry and I can just hold.
- Overall I feel paralyzed by inaction, but also anxious to make even a bit of money. Still aiming for 2%/month, but feeling foolish about the risk and I would feel really bad if I lost money making bad bets.
- Very long-term Calls with Strike Prices on or above what I paid for the stock, are another option I need to start looking at. Better safe than sorry?
- I played with too-volatile stocks, and now I have to deal with idle money, and possibly never liquidating them.
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