Matt's Trade Log - 9/30/08

Forgot to enter yesterday's trades, so I will do those first:

• Sell 1 RIG JAN10 100 call
• Sell 1/2 AAPL NOV08 120/125 backratio put spread
• Sell 2 AAPL NOV08 75/85 vertical put spread

Today's trades:

• Sell 2 RIG NOV08 95/100 vertical put spread

Yesterday was a horrible day for most novice investors, I'd imagine, along with probably a lot of very experienced investors. News, or rather the lack thereof, of the government bailout plan sent stocks dropping. And it didn't help that AAPL was inexplicably downgraded yesterday morning.
That downgrade, in my opinion, can only be reasonably explained by market manipulation. AAPL is one of the strongest stocks around, and they've already taken a beating recently. Earnings are coming up in one month or so. The iPhone 3G was released in July. If you do the math, you realize that the previous earnings announcement really had no iPhone 3G sales accounted for in those earnings - so earnings for AAPL have yet to be impacted by any sales of the new iPhone 3G. In addition, we are approaching the holiday season. I expect AAPL's picture to only get rosier.
Likely, those downgrading AAPL are hoping to drive the price down so they can stock up. Many of these individuals have had to exit strong AAPL positions (causing the recent price fall) in order to cover other losses they've sustained in this market. Being able to make a killing in AAPL can help them, and downgrading AAPL can help them make a killing.
That's why I entered two AAPL trades yesterday, both bullish positions.

Yesterday I sold my RIG leap, primarily because a) I got a strong sell signal and b) because the sell criteria I established at entry were breached, as RIG plunged through 120 down to under 110. That option was purchased for $38.80 and sold just a few days later for $27.50, for a loss of $13.30. However, today I've taken on a lower-risk bullish position in RIG, selling a put spread at 95/100. Frankly, RIG would have to break a 52-week low in order for this position to fall out of the money. Sure, it can happen, but I have to say I don't expect it will.

Matt's Trade Log - 9/25/08

Two trades today, both on UA:

• Sell 1 UA APR08 25 call
• Sell 2 UA NOV08 35/40 vertical call spread

The sell of the one call was to exit a position. I had a buy signal going in, but it turned to a sell quickly; this is happening a lot in today's market. Originally I bought 2 calls, and I sold a diagonal on one of them, so I'm keeping that position and getting out of the other while UA falls. Purchase price was $14, sold today for $9.90 for a $4.10 loss.

With UA going down, however, it seemed reasonable to sell premium against it on the way. I sold this 35/40 vertical call spread for $1.55. UA has a fairly strong resistance at about 37 so hopefully we'll be okay on this one.

Matt's Trade Log - 9/22/08

Only one trade today, a Buy 1 RIG JAN10 100 call. Got a buy signal on RIG, and I hope it isn't a fake.

I haven't been speaking much about exit strategy on entered positions, which I believe is a mistake. So I'll start today. RIG's mark is at about 125 today, with a resistance at about 132. So when RIG hits about 130ish, it will be time to consider the position again. On the downside, RIG's reasonable near-term support is at about 120, which is still above the call strike. Should 120 become a resistance line (if RIG falls through 120 and stays), then we'd have to consider cutting our losses.

One nice thing about this option is that the breakeven point, if I held it to expiration (which I won't), is only at about 139, which is a very doable price point for RIG over the next year. Another good thing is that it only contributes a negative theta of about 2, meaning it really isn't losing that much value every day. That's the benefit of buying long-term options.

An E-Commerce Experiment

We've started a new e-commerce website, Surly Jack's Outpost (http://www.surlyjacks.com). Surly Jack is a fictional character we made up as the fake owner of the store, by the way. Don't let him offend you, he's actually not that bad a guy, really.

Surly Jack's was going to open today, but there were just too many things that needed to be done to make it by today. It should be opening up within the next few days. It will be interesting to see what it takes to make this a profitable venture, if possible.

For updates on the progress, you can follow Surly Jack's blog and/or twitter, or go to MySpace and become his friend.

Matt's Trade Log - 9/19/08

Two trades today:

• Sell 1 UA OCT08 45 call
• Sell 4 SPY OCT08 130/132 vertical call spread

Finally, with the rally in SPY, I got a good opportunity to balance my SPY position with a call spread on the high side. A high VIX is making it easier to sell spreads that are pretty far out of the money, and this one appears to be quite a ways outside a near-term resistance line. Of course, with what has been happening lately, who knows. Still, I feel better about balancing out my delta, although it is still positive which doesn't really match my sentiment.

Selling the single UA call makes a diagonal out of half of my original UA position. My UA position is now long 1 UA APR09 25 call and long 1 UA OCT08/APR09 45/25 diagonal. Another way to consider the diagonal is like a covered call, but where the call is covered by another option with a longer time frame, instead of stock.

Matt's Trade Log - 9/18/08

Finally, a positive day. It wasn't much, but it was something.

• Buy 5 AAPL OCT08 155/160 vertical put spread
• Buy 2 UA APR09 25 call
• Sell 2 SPY OCT08 110/112 vertical put spread
• Sell 2 RIG OCT08 100/110 vertical put spread

I exited the AAPL trade today. AAPL is continuing to trend downward. My theory is, when the market tanks, the best companies get hit the hardest because those positions are the easiest for institutions to liquidate in order to hedge their other positions. Whether I'm right or not I don't know, but with AAPL down around 130 the odds of it coming up high enough to make that trade profitable were slim. I decided to exit that trade before I lost more money on it. I sold that spread for $1.45 originally and bought it back for $4.75. Ouch.

However, the rest seem like pretty decent trades. Of course, time will tell. The RIG 100/110 seems riskiest, but $92 is the 52-week low for RIG, and it was only below $100 almost a year ago for just a few weeks. 100 seems like a pretty strong support line, both from a technical analysis standpoint and an emotional standpoint.

With the VIX at over 37 today before settling down a bit, I simply couldn't help selling some SPY premium. It's hard to believe it, but I was actually able to sell this 110/112 spread for $.60 even being as far out of the money as it is - SPY closed at $121 today.

Lastly, UA seems to be on an upward trend, so I bought two $25 UA call contracts. UA's options were trading at below valuation and so buying options instead of selling premium seemed the smart thing to do on an upward trend like we had today.

Matt's Trade Log - 9/17/08

One trade today:

• Buy 100 RAX

For the heck of it, I thought I'd try buying 100 shares of Rackspace (RAX) at about $9.19.

Matt's Trade Log - 9/16/08

The only trade today was:

• Buy 4 SPY SEP08 123/124 vertical put spread

This exited the last position I had for September expiration. I sold this spread for $.30 and bought it back at $.74, so I took a loss on this position. Serves me right for having positive delta on SPY.

Matt's Trade Log - 9/15/08

Today was a very busy day, with expiration approaching on Friday:

• Buy 4 RIG SEP08 125/130 vertical put spread
• Buy 1 RIG SEP08 120/130 vertical put spread
• Buy 1 GOOG SEP08 460/480 vertical put spread
• Buy 2 UA SEP08 30/40 vertical call spread
• Buy 2 FSLR SEP08 250/260 vertical put spread
• Buy 2 USP SEP08 91/93 vertical put spread
• Sell 2 SPY OCT08 116/119 vertical put spread

All of the buys were exiting positions, at losses. I had been holding these in hopes of good news going into expiration week. However, extensive bad news in financials is bringing everything down today. With only four days to go to expiration, it is time to get out of these before things get really bad.

With SPY down today it made a good day to sell more premium on the low side. Again, this is giving me more positive delta in SPY than I like, and it is certainly not representative of how I feel. I'm hoping for any sort of a rally in SPY to balance my delta out on the high side.

As for everything else: Well, it has been a very painful month, but I'm out of a lot of the positions I'd gotten myself into. This should simplify my portfolio management, and hopefully we can recover from a bad month or two and gain our losses back as we move toward the end of the calendar year.

Matt's Trade Log - 9/10/08

Today was a busy day:

• Sell 4 FSLR OCT08 185/190 vertical put spread
• Buy 2 XLF SEP08 22/24 vertical call spread
• Buy 2 GME SEP08 35/45 vertical put spread
• Sell 400 SLV
• Sell 2 SPY OCT08 119/120 vertical put spread

The first and last trades were to enter new positions. FSLR seems to have bounced off of a support line. The breakeven for the 185/190 spread is well below FSLR's historical support. After the drop in SPY yesterday, it evened out a bit today, making for a good day to sell a put spread on SPY. The only problem I have with my SPY position right now is that it has 150 or so positive deltas, which doesn't represent my SPY sentiment at all. When we get another rally, I will try to offset that with some negative delta. Actually, I tried to do that yesterday, but failed to get filled before SPY dropped like a rock.

SLV has beaten me up a bit lately. I would not enter SLV with the current technicals now, so I decided I should exit the position and wait to see when it is right to get in again.

I also exited my XLF position and my GME position. The XLF position was initially sold for $.44 and bought back today for $.28 for a profit of $.16. After commissions it is probably about a wash. I'm planning to stay out of XLF and other UTFs, other than SPY, for a good while now. The GME position I actually entered via two different trades, a 35/40 put spread and a 40/45 put spread, which ended up giving me a 35/45 put spread. The net credit for both spreads, less commissions, was $3.62. I exited the position today at $2.40 for a profit of $1.12. GME was not above the 45 mark, but with the uncertainty in GME lately I decided to buy it back while I could get a profit on it. With expiration in about a week it wasn't worth the risk to hope for it to get much better.

Overall things seem to be getting a bit better. The market is still crazy, but daily losses are slowing, and I hope to see them turn around soon.

Matt's Trade Log - 9/9/08

Only one trade actually went through today:

• Buy 6 AAPL SEP08 185/190 vertical call spread

I originally entered this spread in two different trades. In one I sold the spread for $1.40, the other I sold for $1.37. I bought this spread back today for $0.05, for a profit of $1.35 on half of it and $1.32 on the other half.

Tried to do some other trades today, but they did not go through when they were initially routed, even though they were routed as limit orders under the current ask at the time. Some SPY trades I particularly wish had gone through, as SPY fell quite a bit today, turning a once-profitable SPY position into a non-profitable one. Hopefully SPY will rally a bit later this week and give me a chance to exit.

Matt's Trade Log - 9/8/08

Exited two positions today:

• Buy 1 GOOG SEP08 510/520 vertical call spread
• Buy 3 AAPL SEP08 145/150 vertical put spread

The GOOG position I was able to buy back today for $.05. That position was initially sold for $2.35, making an overall profit of $2.30.
The AAPL position I bought back today in order to save some risk, as AAPL was flirting with the $150 mark today. That position was originally sold for $2.02 and bought back today for $1.65. Not a ton of profit but still in the black.

The next few days are going to be primarily exiting positions as expiration approaches, so hang on tight.

Matt's Trade Log - 9/5/08

Two trades today:

• Buy 1 BIDU SEP08 380/390 vertical call spread
• Sell 2 FSLR OCT08 230/260 vertical call spread

The first trade was to exit an existing position. This filled at $.05 which I consider to be a point where there is so little left to gain that there is no reason to hold the spread any longer, regardless of the time left in it. That spread was initially sold for $2.50 for a profit of $2.45.

The second trade was to enter a new position due to FSLR's sudden drop. The drop is so sharp that it appears to have completely broken support which was at about 250. This will make the other existing SEP08 250/260 vertical put spread a loser unless something amazing happens next week. Right now I'm just trying to hedge my losses. Problem is, I'm generally bullish on FSLR, so I don't know if this was a good idea or not. Still the technical analysis on FSLR seems to indicate that a sharp rise through 250 again in the near term is unlikely. We'll see.

Matt's Trade Log - 9/4/08

Trades today:

• Sell 2 SPY SEP08 119/123 vertical put spread
• Sell 2 RIMM OCT08 125/130 strangle
• Sell 2 AAPL JAN10 150 call

AAPL has shown the sell signal so it is time to unload the long positions until things turn around for this stock, and pretty much every other stock I'm watching. However, this drop in all my stocks proved good for RIMM, as the huge drop merited me about a $500 gain on the strangle. Had I waited until today (8/5) I would have made even more. However, I'm content to lock in a nice gain on that trade.
With the overall market going down, I decided to sell another vertical put spread on SPY. I'm not bullish on SPY; rather, I'm trying to establish a low side of an iron condor position while SPY tries to find a support line.

Matt's Trade Log - 9/3/08

One trade today: Sell 2 RIG NOV08 120 call. Lately RIG is a sinking ship (pun intended). This is a strong company that for some reason Wall Street hates right now. I'll wait until they are liked again and then get back in. For now, I'm sick of losing money on this one.

Matt's Positions as of September 2

The stock market is the definition of fair-weather friend. I looked to be ready to post a modest but reasonable gain for August, when suddenly a week's worth of weirdness took away some $4000 of my portfolio's value.

Anyway, here's the positions as of September 2.

AAPL:
Long 3 SEP08 145/150/185/190 Iron Condor
Short 3 SEP08 185/190 Vertical Call Spread
Short 5 OCT08 155/160 Vertical Put Spread
Long 2 JAN10 150 LEAP

AEMD:
Long 5000 shares

BIDU:
Short 1 SEP08 380/390 Vertical Call Spread

FSLR:
Short 1 SEP08 250/260 Vertical Put Spread

GME:
Short 2 SEP08 35/45 Vertical Put Spread

GOOG:
Long 1 SEP08 460/480/510/520 Iron Condor

RIG:
Short 1 SEP08 120/130 Vertical Put Spread
Short 4 SEP08 125/130 Vertical Put Spread
Short 5 OCT08 115/120 Vertical Put Spread
Long 2 NOV08 120 Calls

RIMM:
Long 2 OCT08 125/130 Strangle

SLV:
Long 400 shares

SPY:
Long 5 SEP08 123/124/131/132 Iron Condor
Short 3 SEP08 123/124 Vertical Put Spread
Short 2 OCT08 120/125 Vertical Put Spread

UA:
Short 2 SEP08 30/40 Vertical Call Spread

USO:
Short 2 SEP08 91/93 Vertical Put Spread

XLF:
Short 2 SEP08 22/24 Vertical Call Spread

This month profit (loss): (5.93%)
Year-to-date profit (loss): (5.85%)

This month's strategy:

1. Greater focus in fewer positions. I'm too spread out. I was trying some new things, but they backfired on me quite a bit.
2. Trade indicators on Rule #1 stocks. I need to construct positions that I can exit if the indicators turn to sell. This leads to:
3. Favor even-numbered positions, so I can close out half if I'm wondering if it is time to exit.
4. When buying options, always buy at least six months out. I'm getting beaten up on what would otherwise be potentially good strategies because I'm not paying attention to my time frames.
5. When there is nothing left to do, trade SPY. Don't try to force trades or enter into additional positions.