I fell asleep! The ExDiv date snuck up on me for BP and I got Put the stock. So my cost basis is 43.06 and it closed today at 37.50. Ouch! Not only that, but I have to wait 3 more months for the dividend!

One bright spot is Pandora (P). I was able to roll the MAY 11 to JUN 11 for a very nice $0.85 credit yesterday.

The rest of my Covered Calls are all going to expire well OTM (Out Of the Money). There really aren’t any potential writes on these since the prices are so low, and I hesitate to write Calls with strikes at or below my cost basis. So I plan to sit on the sideline and wait for a rally.

GOOG Triple Calendar

Remember the triple Calendar I entered in my Paper Trade account on GOOG back in March for their April earnings? I have some nice charts and graphs that I want to share with you and I was hoping to use OnDemand to do it, but TOS has a problem with OnDemand in that they are only showing 8 strikes on their option chains. With that limitation, I can’t use that for my illustration. They say it’s a bug that will be fixed, but they haven’t done it yet – it’s been well over a month. I guess that’s what happens when you become part of a large corporation – I’ve seen it many times.

But, I figured out how to do it using thinkback, so the video will be completed soon. It was a pretty cool trade – volatility crush is good. Too bad it wasn’t real.

An Emergency in the House

I had to take Buffy (my dog – you’ve probably seen some pictures of her in the upper right column) to the hospital for emergency surgery. She had a bladder stone blocking her urethra and couldn’t pee – I can’t image what that must feel like. With all the commotion, my latest spread on ISRG ran away from me. It put me back negative for the month, not to mention the hospital bill!

Two good things, though. Buffy should be coming home tomorrow and the current strong trend gives us a lot of low hanging fruit.

Happy Trading

◄Jeff ►

This week should tell us the direction of the market for the near future, at least according to technical chart analysis.

Click image to enlarge

If you look at the chart of the S&P Futures on the right, you’ll see that the close of the most recent week and the previous high from (coincidentally) May of 2011 are almost exactly equal (1363 on 4/25/2011 and 1362 on 5/4/2012).

In technical charting terms, this is defined as previous resistance, which was blasted through in Mach of this year. Typically, this previous resistance turns into support, and over the last 3 weeks, we have had repeated tests of this major support point.

So the question is: is this a base for a new Bull run? Or is it a show of weakness and the start of a Bear correction?

New CC/NP Scan

I’ve posted a new scan for Covered Calls and Naked Puts in the Downloads section on the right. In The Money CCs and NPs are highlighted.

April Results

On the 2012 page you’ll find the Spread trades for April updated. It was a good month and the old Guru finally beat the S&P for the month. Last week was pretty good too (hey Molly, lots of singles), with mostly Bearish trades as winners. I lucked out on LNKD (home run) when they blew away their earnings forecast.

Happy Trading

◄Jeff ►

Here’s the CC screen for this week (see Downloads on the right). I’ll try to get one out each weekend. They seem to be relatively popular with 100+ downloads, so I’ll just keep doing them weekly.

4/29/12 – Update: I have had a few requests to add a Naked Put Screen. It’s combined with the CC scan, just on another tab (NP tab).

Note that there are a lot of ITM strikes in this screen. This should tell us something. For me, it means the volatility is not there and we need to go ITM to get the 2% or better return. That’s OK though, since if the market continues to rise we get Called and make the max. But, if it falls, there is more downside protection with ITM Covered Calls.

The criteria for the screen is as follows:

• Price: $5-$50
• Avg Volume: >1,000
• Dividend Yield %: 1-10%
• Historic Volatility: > 30
• Open Interest: >500
• Return if Call Assigned: 2-10%
• Static Return: 2-10%

Happy Trading

◄Jeff ►

I’ve spent the last few months searching for a Covered Call service to replace CallWriter – I have not found one that sends any shiver up my leg. Actually, I keep falling back to my scan from optionsXpress.

So, I did a scan tonight (see downloads in the far right column). I went forward all the way into LEAPS, so there is a lot of data on this spread sheet. As usual, all prices are between $5 and $50, high volume, high open interest. ITM Covered Calls are highlighted in gray.

Enjoy.

Happy Trading

◄Jeff►

Below are my results from the earnings plays that I did this this week. The anticipation was intense, along with the stress. I think it was all worth it, since I did come out pretty well overall.

To my surprise, the Iron Condors on both ISRG and CMG expired at max profit. That seems to be a good strategy as long as it’s done close to the earnings date when IV is high and Deltas are wide. To determine the short strike price for the IC’s, I first looked at the debit for an ATM Strangle and then added and subtracted if from the current price. I chose a short strike outside that range.

For F5 Networks (FFIV) – I was too slow in the morning in exiting, otherwise the profit would have been a little better.

Happy Trading

◄Jeff►

I know, I always want to limit my risk and I like to be a net seller of options, but this one might be too hard to ignore. The underlying is LinkIn, and if you don’t know about this company, then you aren’t. (Get it?).

This is not a recommendation. Make sure you read my disclaimer.

• Right now the stock is at 104.58 and 100 shares is 10,458 total.
• The MAY 90 Call (expires 5/18) is at 17.40 for a total of 1,740
• Their earnings announcement is scheduled for 5/3
• Implied Volatility of that option is 71% and is sure to rise as the earnings date approaches, adding juice to the premium
• The delta of the option right now is 0.80, meaning for every $1 the price of the stock goes up, the option goes up $0.80 ($80).
• As the price goes up, delta will increase in an attempt to equal 100
• Extrapolating their current trend (if it continues) would put the stock around 112 near the earnings date, for a gain of $600.

Happy Trading

◄Jeff►

This video expands on the previous ISRG Iron Condor by adding a Calendar Spread on each end. The subject of this earnings play is F5 Networks (FFIV).

The Calendars spreads out the profit tent, giving a much wider profit range, even if price goes absolutely crazy! The Calendars have additional capabilities as discussed in the video. Please watch and enjoy.

(If you can’t see the video, click here)

Happy Trading

◄Jeff ►

You just never know what is going to happen when a company announces their earnings, especially if it’s a hot company, like Google (GOOG). What a shocker! They beat all estimates and yet the price declines significantly. So what kind of option trade can one do to capitalize on all the volatility as earnings approaches?

Turns out there is an old, reliable spread called an Iron Condor that you can sell in anticipation of earnings. It doesn’t work with all, but some of the high fliers are good candidates. One such candidate I’m considering for Monday is Intuitive Surgical (ISRG), makers of the infamous da Vinci Robotic Surgery Device. This particular strategy was sent to me by a fellow option nerd who also lives in Columbus. He got the idea from a TastyTrade interview with Nick Fenton from last week.

As you can see from the risk profile above, there is a pretty darn good chance that ISRG will remain between the breakevens into expiration. If you want to get a bit more inside my head, watch the video and try to follow my convoluted thought process.

Happy Trading

◄Jeff ►

Watch my video on how I successfully rolled my APR Naked Put on BP to MAY. Patience pays off as I got the price (credit) that I wanted, but I had to wait most of the afternoon for that to happen.

My cost basis is now at 43.06 and so far I have collected $388 in credits.

I now have a paper trading account at Interactive Brokers, so I will be doing more demos of the platform.

Note, in this video, that the commission charge was a paltry 1.43. It would have been 5.00 at my commission rate at TOS. I am not, however, planning on moving my Spread account to IB – just because of the features and service I receive from TOS/TDAmeritrade.

Happy Trading

◄Jeff ►

Sorry. I had to delete this video. I plan to re-release it when I am ready to do another Buy/Write in Interactive Broker’s Trader Workstation.

Happy Trading

◄Jeff ►