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Real Deal - Feb 2016 #4 (SPY - Bear Call Spread)

Feb 2016 #4 (SPY - Bear Call Spread)
Placed an order (SPY Bear Call Spread) yesterday and the order get filled while I was sleeping. SPY Bear Call Spread, 29 DTE and capture $1.92 ($192 per options contract) premium. Options detail as per the screenshot below.

Rationale:
1. Resistance @ $195

2. I am risking $318 to make $192 in the next 29 days. As long as SPY remain below $195, I will profit $192. If SPY price goes against me within the 29 days, I will repair the trade base on the market condition and my perspective of the market. Follow up on this position will be blogged in the future post.

3. The Return On Margin of the trade is 60% ($192/$318) in 29 days. 

Stay tune for my next updates!

Real Deal - Feb 2016 #3 (XLE - Bear Call Spread)

Feb 2016 #3 (XLE - Bear Call Spread)
Enter XLE Bear Call Spread, 29 DTE and capture $0.82 ($82 per options contract) premium. Options detail as per the screenshot below.

Rationale:
1. Strong resistance @ $58.50~59.00, expect bearish candlestick to be formed (likely piercing patterns).

2. I am risking $354 to make $246 in the next 29 days. As long as XLE remain below $58, I will profit $246. If XLE price goes against me within the 29 days, I will repair the trade base on the market condition and my perspective of the market. Follow up on this position will be blogged in the future post.

3. The Return On Margin of the trade is 69% ($246/$354) in 29 days. However, I have the tendency to capture 50%-60% of the premium rather than 100% of the premium (meaning I will not wait 29 days to profit $246, I will close the position if I capture ~$120). This allows me deploy my available dollar to other trades and also avoid a winning trade to become a losing trade. 

Stay tune for my next updates!

Real Deal - Feb 2016 #1 (AAPL - Bull Put Spread) - Update +17.95% return in 7 days

AAPL credit spread is closed with $0.70 premium captured ($70 per options contract)

Return On Margin = 0.70/(5-1.1) * 100% = 17.95% return in 7 days. Not a bad result!

Real Deal - Feb 2016 #2 (USO - Rollover Covered Call)

In order to explain the trade that I intend to enter today, I would need to show my previous position in USO (US Oil ETF). The below screenshot illustrates my existing position:-

In brief, on 15 Jan 2016,  I bought USO underlying stock 100 units @ $8.805 and I subsequently sold USO Call Options (detail in the screenshot) @ $0.33.

Fast forward to today, 17 Feb 2016 (after 1 month from the trade entry), the stock price is trading at $8.47. Now, let's look at the position un-realized P&L.

It shows -$2.00. Isn't it cool? :) Imagine if I do not add options to my position, I would be down $33.50 ([$8.47 - $8.805] *100 ) vs now merely down $2.

If you are observant, you should have noticed that my USO Call Options is going to expire in 2 Days and it is now trading at $0.015.

What I intend to do now is to close this position and open a new positions with longer duration to capture more premium. This will subsequently reduce my cost base in USO.

Alright, this is what I have just done! I hit and sell at bid price @ $0.42 (lazy to wait much longer as I am blogging this, in normal circumstances, I would sell at mid price and wait for the market to fill my order).

With this adjustment, my USO cost base now is $8.075  ($8.805 - $0.33 + $0.02 buy back - $0.42).

I will update the position again :). Have a nice day!


Disclaimer: This is just for educational purpose only and not a recommendation.

Real Deal - Feb 2016 #1 (AAPL - Bull Put Spread)

Happy Chinese New Year to all! Last year was a great year to me and I hope this year will be another fantastic year!

Though this is a festive session, I never stop reading, listening, discussing market news, commentaries, as well as options trading/investing. I always believe that trading the market will make us young. :)

I will start sharing my live trade in my real account with my commentary.

Feb 2016 #1 (AAPL - Bull Put Spread)
Enter AAPL Bull Put Spread, 36 DTE and capture $1.10 ($110 per options contract) premium. Options detail as per the screenshot below.

Rationale:

1. Market is bearish today but I expect S&P Futures to hold strong at 1800 support. As a contrarian, I initiate a bullish to neutral position (Bull Put Spread) against a strong fundamental stock, Apple (AAPL).

2. AAPL has been ranging between $92 to $112 since Jan 2016. There is a higher chance that this range-bounce continue for the next month or two unless there is fundamental change that push the price out of the range. 

3. I am risking $390 to make $110 in the next 36 days. As long as AAPL stock price remains above $90, I will profit $110. If AAPL stock price goes against me within the 36 days, I will repair the trade base on the market condition. Trades follow up will be blogged in the future post. 

4. The Return On Margin of the trade is 28% ($110/$390) in 36 days. However, I have the tendency to capture 50%-60% of the premium rather than 100% of the premium (meaning I will not wait 36 days to profit $110, I will close the position if I capture $50 to $60). This allows me deploy my available dollar to other trades and also avoid a winning trade to become a losing trade. 

Stay tune for my next updates! 

Options Chains

It is very important to understand the options chain and let's deep dive into few of the important information that we can gather from this options chain.

1. AAPL - this is a ticker, represents the stock that we are keen to trade

2. Last Price of the AAPL - it shows $95.42, the price that AAPL stock is traded at the time of snapshot.

3. Days to expiration - it shows 45 days to expiration, inclusive of weekend and holiday. Do note that every options has the maturity date and this info shows the length of days to mature.

4. Strike Price - This is the price that will determine if options will expire or exercised on maturity day, which is when #3 = 0 days.

5. Options chain - There are 4 quadrants:-

 a) CALL ITM - Represented by the top left quadrant (shaded in yellow), the strike price is < last price, #2 (Have both intrinsic value and time value)

 b) CALL OTM - Represented by the bottom left quadrant (shaded in white), the strike price is > last price, #2 (No intrinsic value, only time value)

 c) PUT OTM - Represented by the top right quadrant (shaded in yellow), the strike price is < last price, #2 (Have both intrinsic value and time value)

 d) PUT ITM - Represented by the bottom right quadrant (shaded in white), the strike price is > last price, #2 (No intrinsic value, only time value)