Happy Tuesday Night!
The past few days have been a mish-mash of stuff. Just stuff in general. We've been doing the trading, but not much time for blogging until tonight. So here we go! A whirl-wind recap of two days and prep for a 3rd. Whoo Hoo!
Recap Sunday 7/20
Tonight turned into me spending most of my trading and blogging time rebuilding the tool we use to evaluate possible options in Google Docs so that Nick and I can use it simultaneously. I have to say -- Google Docs is a great tool. I do enjoy the fact that we can edit the document together. So far, I can do everything here that I had in our good old Excel spreadsheet. I'll let you know if I come up with something I can't do though. Just for future reference.
So our document currently has 5 tabs:
Tab 1 = Trade Standings
On this tab, I'm tracking the running gross and net by classification of trades, short put verticals, short call verticals and iron condors, as well as the running total.
I'm also tracking our success rate at close. If we make money or break even, it's a Favorable close. Losing money is unfavorable. (Obviously.) Again, tracking by classification of trades, and calculating percentage of favorable closes.
Tab 2 = Rules
Ready for this? Here you go! Since I've been promising the rules, here's what we use:
Never risk more than 5% of account value on any one trade. (We would really like that to be more like 2%, but due to the small size of the account that we're working with, we had to increase it, otherwise we can't do any trading! In any case, as our account increases in size, we'll keep adjusting this so eventually we'll be at the point of only 1-2% risk on any one trade.)
| Short Put Vertical | |||
| Bullish strategy -- think stock price (price of underlying) is going to go up | |||
| Delta Range | 0.3 | 0.4 | |
| Stock Volume | 1,500,000 | or more | |
| tight bid/ask spread (low/mid/max cents on the dollar) | 0.01 | 0.05 | 0.1 |
| Days to close | 20 | 50 | |
| Return on Risk min, | 30% | ||
| Option Volume approx | 500 | ||
| Option Open Interest | 1,000 | ||
| Acceptable Max Risk | 5.00% | ||
| Exit rules: | |||
| % max profit | 0.65 | ||
| % max loss on trade | 0.25 |
| Short Call Vertical | |||
| bearish strategy -- think stock price (price of underlying) is going to go down | |||
| Delta Range | 0.3 | 0.4 | |
| Stock Volume | 1,500,000 | or more | |
| tight bid/ask spread (low/mid/max cents on the dollar) | 0.01 | 0.05 | 0.1 |
| Days to close | 20 | 50 | |
| Return on Risk min, | 30% | ||
| Option Volume approx | 500 | ||
| Option Open Interest | 1,000 | ||
| Acceptable Max Risk | 5% | ||
| Exit rules: | |||
| % max profit | 0.65 | ||
| % max loss on trade | 0.25 |
| Iron Condor Strategy (selling condors -- a short strategy?) | |||
| neutral strategy -- think underlying price is staying within a horizontal range | |||
| Delta Range | 0.2 | 0.28 | |
| Stock Volume | 1,500,000 | or more | |
| tight bid/ask spread (low/mid/max cents on the dollar) | 0.01 | 0.05 | 0.1 |
| Days to close | 20 | 50 | |
| Return on Risk min, | 20% | ||
| Option Volume approx | 500 | ||
| Option Open Interest | 1,000 | ||
| Acceptable Max Risk | 10% | ||
| Exit rules: | |||
| % max profit | 0.65 | ||
| % max loss on trade | 0.25 |
Watch trades every night. Be prepared to cut and run if need be.
Do NOT trade over earnings. At least not yet. Not until we're a lot more comfortable with our skills.
There you go! Our trading rules. At least as they stand so far. You'll notice several things are identical across all three strategies. We set it up this way so that as we refine our rules, it will apply only to that category.
Trading Tabs 3,4,5 = Short Put Vertical, Short Call Vertical, Iron Condor
Each options strategy has it's own tab to help us make sure we're following our rules.
The tabs are mostly set up to do the work for you -- as long as you copy down the template row appropriately and enter the few pieces of data that needed for the calculations. Basically, we enter:
- option closing month, to make sure we're within our 20-50 day rules.
- applicable strike prices
- credit per share of the option contract.
Using this tool, the only pieces in our rules that we have to manually check are:
- Volume of underlying
- Bid/Ask spread
- Volume of option
- Open interest of option
It goes SO much faster that Nick and I can both be using this tool to figure out what possibilities exist.
Sunday night trade set-ups
Short Puts:
Nick and I both looked at Micron Technology, Inc. (MU) -- actually I think Nick found it and then we chatted about it. We looked at the Aug 14 32/31 put spread. Basically, we thought it was going to turn around and continue the ongoing uptrend. But I was hesitant. I put a condition on that the stock had to reach $33.95 or higher get in. Well, it didn't get that high, and I didn't get in. Nick didn't put the condition on, though, and he got in. He reports back that it's doing well do far. (I'm attempting to get in again with tomorrow's trend.
We also looked at SPY and IWM for potential short puts. SPY didn't fit in our rules regarding risk and return, so we passed on that one and will keep watching it. IWM actually had better numbers on the short call, so we went and attempted that one.
Short Calls:
IWM -- We had some back and forth on this one. Was the call option better, or the put option? Well, the numbers indicated that the call options had the better returns for similar risk. We decided to go with a conditional order and sell the call, if the underlying price went down below our target. It didn't. It went up. had we got in the on the put, we'd probably be net positive at the moment. On the plus side, having the condition order on saved us from getting into a trade that was going to go against us in the short term. So that's a good thing. Yeah conditional orders!
GLD -- Gold seems to be on a downward trend, so we got in with a short call for the August expiration at 128/129. We didn't do any conditions on this, and we got in. Hurray!
FOXA -- We looked at this, and it looked close to our rules for a call spread, but the bid/ask spread was too far apart. Additionally, it was a weaker trade, so we left it alone.
TWTR -- We attempted getting into the August 41/41 Call spread. We were thinking that the $40 mark was going to be a resistance level, but we put the order on with a condition that the stock moved downwards. It didn't. We didn't get in. Which also means we didn't lose anything.
Iron Condors:
We looked at a couple, but nothing was really working out for us that much. We didn't get into our out of any today.
We did have the condor on the QQQs going. As I predicted on Friday, it wasn't looking good. I probably should have closed it out for Monday, but that's okay. (We wound up getting out of it today anyways.)
So that was Sunday! On to Monday.
Recap Monday 7/21
Existing Option Contracts in our portfolio:
GLD -- We got in, and were at break-even by end of day. This is a monitoring role now. Hopefully it will keep moving the way we want it to.
QQQ -- this condor wasn't looking great with what I wanted to happen, but had potential to go back into the channel (for lack of a better term). I left it alone and we stayed in it.
Finding new positions for 7/22:
This was freaking hard, and very frustrating. I swear I spent about 3 hours or more trying to find things. It didn't work very well. Virtually everything I tried fell through for one reason or another. The big reasons were that either the deltas on the options didn't fit what I was looking for, or the risk/return ratios were not within our established rules. Not entirely sure what happened with that, but I spent a ton of time searching with not much to report back on.
I did find ONE though. (Just one, solitary position that fit everything.)
We got into Twitter (TWTR) with the August 36/35 Short Put Vertical. So far, it's a bit of a wash, and as of a few minutes ago, the price of the option is just $0.01 above our sale price. Hopefully it will go the way we want it to.
I finally got so frustrated that I just went to bed.
And all that brings us to today!
Recap Tuesday 7/22
Existing Option Contracts in our portfolio:
GLD -- Still looking good to stay with it. We've got the OCO exit trades working, so this is letting time work for us now and keeping an eye on the underlying. So far, so good though.
QQQ -- As I suspected on Friday, this closed out at a loss for us. $9 down based on this trade. Yuck again. Unfortunately, I can't say I didn't call it.
TWTR -- We're in, and I'm thinking that it should hopefully turn back around without getting too close to our first strike. I put on our exit trades, as the OCO order, of course, and we're all set to let this one go with daily monitoring. Hurray!
Finding new positions for 7/23:
Wow! Talk about a change from yesterday. It took Nick and I all of 45 minutes to come up with 4 new positions to attempt trades on, and at least another 4 to watch for tomorrow. If only yesterday would have been this way! I would have been a happier lady.
Short Puts Attempted:
- MU -- 32.50/32 August expiration. It fits our rules, and it looks like MU might continue the overall uptrend. We're really close to the 1-year high right now, but it's been a constant uptrend. Here's hoping it continues to go up and not stop us out.
- PLUG -- 5/4.5 August expiration. PLUG had a bit of a gap up yesterday, and then the bulls came in today and drove price back down, though still higher than yesterday's open. I think it might continue to ride the trend up, but we'll see. On with a condition to give us a solid cue that it'll keep going up.
- CSCO -- $25.50/25 August expiration. This one is also using a conditional order. We think it's going to continue the positive trend, but we want a bit more confirmation before attempting to get in. I'm not sure we'll actually get into this based on the conditional order, but again -- we'll see!
Watch list for tomorrow:
- QQQ
- SPY
- F -- EARNINGS ON THURSDAY! We'll be holding off until at least Thursday.
- IWM
Short Calls Attempted:
Just one of these tonight. KO (Coca cola).
Every time I look at the chart tonight I have to do a double check. There's a huge gap down between close yesterday and open today. I'm not entirely sure why that happened yet. I didn't do much research or headline scanning to figure it out, but that's okay. We figured we would try a conditional order here to see if the gap down is going to "stick". If we do get in, great! If not, we'll look at it again tomorrow.
Iron Condors Attempted: 0 We didn't find any that really fit our criteria. So we didn't try to put anything on.
I think we're all set for tomorrow now. I have to say -- it's so much easier and more fun when Nick is involved too. I do enjoy bouncing ideas off him and trying to see what works better. One of these days we'll get this all figured out and be more successful than not, and then we'll go from there!
Happy Tuesday night -- looking forward to seeing what Wednesday has to offer!
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