Wednesday, August 29, 2012

Don't believe your broker or platform blindly

PROBLEM: your platform is not perfect nor accurate. I don't know who you use but I can guarantee you that not all the information that you see is accurate and/or correct.

DON'T rely on your broker/platform for accurate info!
We always tell you to have multiple sources of information. Yesterday I saw $TM (Toyota Motors ADR) in the heat map of the Russell 2000. My first thought was since when is Toyota a small cap? Then there was the size of the box; it took about a quarter of the grid. So, I tweeted the question out on stocktwits and twitter but got no response. Then I emailed ThinkOrSwim (pretty impressive platform and a good size broker) with the question and got this response: "Thanks for your patience. It appears that this symbol was inadvertently added to the Russell 2000 watchlist, therefore it was showing in Heatmap; it has since been removed and is no longer showing. If you continue to see it, please restart the trading platform."

LESSON: Make sure to check more than one source. If something seems off a bit or too good to be true (in quotes, news, dates, earnings) CHECK IT and CHECK IT AGAIN! In this case it wasn't so crucial since I didn't have a trade setup based on the information but I was looking for market direction to see if I should close other positions.

Friday, August 24, 2012

Lessons Learned When Selling Spreads

If you sell spreads like I do then you might be reminded of a few good habits here. For the purpose of this post, assume that my trades are all selling spreads. These can be Credit Put Spreads, Credit Call Spreads or Iron Condors. These are not recommendations; these are my thoughts and/or rules to MY OWN trading. Trading options is dangerous and could lose you a lot of money. I only trade with money I can afford to lose.

I have a set of rules (I listed few below) and I NEVER break them for WHATEVER reason (believe me it only takes one negative situation to make you rue all your successful rule bending attempts).

* I Don't trade willy-nilly. I have a daily target. I Don't try to push the target for I will probably find myself bending other rules which will eventually cost me money. Occasionally it is ok to fall short of the target.

* I have a budget and stick to it. By that I mean that I established a fund for options trading and I don't add to it to fix potential problems.

* TAKE THE LOSSES: sometime I can't ROLL out of trouble. I just take the loss and live to trade another day. Don't develop a gambler attitude like "I can make this loss up by..." Just take the loss and consider it tuition for lessons learned (I have had many). The money will be wasted IF you don't actually learn the lesson and APPLY it 100% of the time going forward!

* I use multiple resources. All resources are fallible! dates, quotes, spreads, news can be wrong so I check multiple places before placing a trade. perfect example is the trademonster earnings date feed. I also use automated calendars via Google and yahoo who send me reminders of dates on watchlist of stocks. These keep good track of company presentations announcements etc.

* I check into competitors of what I am looking to trade. They may have catalysts that will indirectly affect my decisions and/or positions. Perfect example is FFIV and CRM. I wanted to open a new position in FFIV yesterday but held back because CRM was reporting after hours.

* A few of my rules

- The most important rule of all: I call it my BAAD rule (long story for another day) = staying away from trouble wins over all other factors. example: if I had a position with short time to go till expiration. And this position is in danger of getting breached by price, YET it still has a chance of expiring worthless for maximum profit I close it for partial profit or roll it to give it more time to become a winner! in other words, I resist the urge to keep it on for the off chance I get lucky. This risk on hopium that things will turn out ok will get me in trouble more often than not.

- NEVER LEAVE THE CHEAP UPPER OR LOWER LEG OPEN!!!!!! I had a situation where .05 cost to close ended up costing me $4.5 with hours to go till expiration. So I close all positions that cost pennies to close for almost maximum profit. .05 is as good a level as any. If a position is sizable I may close it at .1 or maybe close half if you don't feel like you want to contribute to your broker's bottom line. The cost of 1 major mishap here would offset all the .05 closes that this rule will cost you.

- THERE ARE NO SURE THINGS: I never assume that a spread that I sell-to-open is a sure thing (like I sometimes read on the twitter stream; you know who you are ;-)

- If I am not so sure of my trade yet I feel compelled to still put it on, then why not open half of a position?

- I try to keep all my trades to be 1wide. I find it much harder to adjust wider spreads. especially closer to expiration as the protection leg ends up losing premium much faster than the short leg (especially if the spread is under pressure).

- I have woken up on days to a $150,000 maintenance call due to getting exercised. You can read about it in a previous post:
"$QLD Lesson in "exercism" #2 $NDX"
It's worth a read.

Friday, August 17, 2012

$MA sep position (extension of successful Aug position)

BACKGROUND: If you follow me on twitter or stocktwits you know that I like to sell iron condors on about a dozen stocks ETF's and indices. I try to keep my strikes far enough from price at the sell-to-open time. Successfully sold MA iron condor in august 405/400-460/465. Nothing has changed in fundies since then. Also, I don't see any material catalysts specific to MA so I want to extend this trade into September.

TRADE: sold-to-open an iron condor in $MA and it looked like this:
SEP Credit put spread 400/395
SEP Credit call spread 465/470
MA at 428ish
Size: 12x

* Since May, MA has been forming bullish AND bearish patterns like it's ready to break out. Although I am not a 100% reliant on technicals, this makes me a bit nervous.

* So, I went a little wider than aug because of the number of days till expiry. I would rather go wider (less chance of incident) and add a lot (bigger $ at risk) than have a breach on one of the legs.


* lower leg: Full profit odds: 89.5%
* Upper leg: Full profit odds: 90.5%
* Total Reward/risk= .21 (which is decent in my book)
* Total Dollars at risk=$4968
* Max profit (amount took in today)=$1032


Friday, August 3, 2012

another joke that had me rolling.

I did not know this

When you drink vodka over ice, it can give you kidney failure.
When you drink rum over ice, it can give you liver failure.

When you drink whiskey over ice, it can give you heart
When you drink gin over ice, it can give you brain problems.

Apparently, ice is really bad for you.
Warn all your friends.

you can't fix stupid - Friday comic relief

Someone sent me these jokes so I am sharing... I can't vouch that they are real stories but they sure are funny.
In the words of the great Ron "Tater Salad" White, "You can't fix stupid," I give you LIVING proof:

I handed the teller @ my bank a withdrawal slip for $400.00
I said "May I have large bills, please"
She looked at me and said "I'm sorry, all the bills are the same size."
When I got up off the floor I explained it to her....

When my husband and I arrived at an automobile dealership to pick up our car, we were told the keys had been locked in it. We went to the service department and found a mechanic working feverishly to unlock the driver side door. As I watched from the passenger side, I instinctively tried the door handle and discovered that it was unlocked. 'Hey,' I announced to the technician, 'it's open!' His reply: 'I know. I already got that side.'

This was at the Ford dealership in Canton, MS

We had to have the garage door repaired.
The Sears repairman told us that one of our problems was that we did not have a 'large' enough motor on the opener.
I thought for a minute, and said that we had the largest one Sears made at that time, a 1/2 horsepower. He shook his head and said, 'Lady, you need a 1/4 horsepower.' I responded that 1/2 was larger than 1/4. He said, 'NO, it's not..' Four is larger than two.'
We haven't used Sears repair since.

My daughter and I went through the McDonald's take-out window and I gave the clerk a $5 bill. Our total was $4.25, so I also handed her a quarter. She said, 'you gave me too much money.' I said, 'Yes I know, but this way you can just give me a dollar bill back. She sighed and went to get the manager, who asked me to repeat my request. I did so, and he handed me back the quarter, and said 'We're sorry but we could not do that kind of thing.' The clerk then proceeded to give me back $1 and 75 cents in change.
Do not confuse the clerks at McD's

I live in a semi rural area. We recently had a new neighbor call the local township administrative office to request the removal of the DEER CROSSING sign on our road. The reason: 'Too many deer are being hit by cars out here! I don't think this is a good place for them to be crossing anymore.'
From Kingman , KS

My daughter went to a local Taco Bell and ordered a taco. She asked the person behind the counter for 'minimal lettuce.'
He said he was sorry, but they only had iceburg lettuce.
From Kansas City

I was at the airport, checking in at the gate when an airport employee asked, 'Has anyone put anything in your baggage without your knowledge?' To which I replied, 'If it was without my knowledge, how would I know?' He smiled knowingly and nodded, 'That's why we ask.'
Happened in Birmingham , Ala.

The stoplight on the corner buzzes when it's safe to cross the street. I was crossing with an intellectually challenged coworker of mine. She asked if I knew what the buzzer was for. I explained that it signals blind people when the light is red. Appalled, she responded, 'What on earth are blind people doing driving?!'
She was a probation officer in Wichita , KS

I work with an individual who plugged her power strip back into itself and for the sake of her life, couldn't understand why her system would not turn on.
A deputy with the Dallas County Sheriffs office, no less.

They walk among us......and they  VOTE