Master Income Update – Monday, 31 August 2009
Good morning,
If a back’s broken, it has to be SHLD. Just look at the massive,
one-day hemmorage/sell-off Aug 20th.
Then a Barron’s article (the weekend before last) painted about as
ugly a picture possible. They see it cutting in half from the $60s
into the $30’s in the next 12 months.
All I need to see is the price action and volume on the 20th – and
how this action slammed it through some key moving averages.
Anyway – how do you trade something slipping down the slippery
slope?
How I do it is first go out to, say, January and hitch up to some
Jan 70 puts for example. These are priced where about half the
premium paid goes toward intrinsic value and half toward time value.
Then I like to give it a little time to see if it’ll start heading
lower.
If I get into a little green, then you can sell some out of the money,
near-term puts here and there –playing the time decay curve game.
Hell a stock doesn’t nose-dive down to zero on a steady march.
“Support buying” comes in, big market swell days come out of nowhere,
and the ride, as you know, is bouncy (all the way up and all the way
down…especially in the world we’re in today!)
Basically what you’re doing is a bear put spread – but on the
calendar.
Of course you don’t have to do any of that fancy stuff…buying puts,
then seeing the stock drop is as vanilla as it gets (don’t forget
doing some position sizing…meaning buy some puts…the stock drops,
then buy some more puts).
Most of the put buying I do is to protect my hind-end when I’m long
stock…or when I attempt to soften out the ride of the overall account
by buying some puts on some of the indices.
But every once in a while I like to point out what I think is some
killer opportunity. Profiting with puts (not hedging) can be
powerful when you notice major cracks in the action out there from
time to time. And SHLD seems to fit this bill.
I’m not making any new moves in the income account this morning,
all is steady as she goes.
Over and out,
–P
Master Income Update…
I am easily bored. With movies, long meetings, etc.
You probably are the same way?
Anyway – where I’m going with this is the update today ain’t the
most exciting thing you’ll come across today.
Let me show you what I mean…here’s some things I’m doing today:
Selling to close GMCR Sept 55 puts (I had 10 puts extra)
Selling NYX Dec 21 puts and buying NYX Jan 24 puts.
Selling ICE Dec 70 puts and buying ICE Jan 80 puts.
Buying back CRM Sep 46 calls and selling CRM Oct 50 calls.
There I said it – are you still awake?!
I’m not talking about many new trades lately because we haven’t
moved into any new trades lately. The income accounts we have
going are full – and sometimes you just have to let some good ‘ol
time go by and not do much of anything.
Speaking of time, hanging out over a weekend is always a nice thing!
I like how we’re positioned on pretty much everything right now.
Our biggest income position is ICE, followed by CME, then Mastercard
and ISRG. The last 3 are all over $200 per share – but remember,
if you’re able to take advantage of portfolio margin, and buy your
puts, the requirement to own them shrinks way down. (there’s also
commission differences when you trade more expensive stocks with
their bigger premiums with LESS contracts than a $20 stock, where
it takes more shares and option contracts to grab the same level
of income.
Okay – that’s it from me for now…
–P
Pirate Update – Thursday, 27 August 2009
Good morning,
Outside of a few retailers that are temporarily flashing some
green on the pre-announcement front (if you have shopped any mall
lately and walked by the hundreds of “on sale”, “prices slashed”,
“buy 1 get 2 free” signs…you know what I mean).
Not much teeth in this. It’s a temporary thing – the stock price
can move because of it – but as far as sustainability, don’t count
on it!
There’s some names out there that look compelling.
I like the move ESI is making right now. It finally looks like it
wants to break out of the cess pool it’s been in for 5-6 months.
There are also a healthy dose of new highs that come out every
morning. Stocks like NILE for example. However I’ve also read
in various places about the “short squeezes” that are going on in
a lot of stocks. Basically investors that have sold short get
caught with a rising stock – and when enough of them freak out and
buy back their shorts — it of course causes some launch up in the
stocks. But these can be fake-outs – and I think there’s a fair
share of stocks, especially newer flashier companies this is
happening with.
As you know I watch the market cycle very close. The stock market
in general has been trading in a real tight range the past few
days and usually that means it’s going to move in either direction.
It may be the market starts to leg down.
With the kind of ground it has covered over the past months -it’s
just not a shock that we could have a break in the action.
And most stocks go the way of the overall market.
Of course over on the income side of things it’s different, because
you are selling time premium in the short term months – and
protecting your hiney by buying longer term puts. It’s a market
neutral position instead of having to have a stock move in one
single direction to make money.
Okay I’m getting windy here. No new trade today.
–P
Master Income Update
Tuesday, 25 August 2009
Good morning!
The internet where I’m operating this morning is horrendous – not
sure if it’s a sunspot/space thing – or if you’re feeling it
where you are.
Anyway – it gets old sitting there waiting for things like we did
back in 1998!
A couple things…
I am rolling out of some puts on various stocks and buying new
ones with further out months and/or strike prices.
Here’s a look:
CMI
Selling Dec 30 puts, Buying Jan 39 puts
(also rolling Sep 41 calls up to the Sep 46 calls)
FLR
selling Oct 40 puts, Buying Jan 45 puts
BIDU
Selling Dec 250 puts, Buying Jan 280 puts
ICE
Selling Dec 70 puts, Buying Jan 75 puts
ISRG
Selling Oct 185 puts, Buying Jan 190 puts
MA
Selling Oct 170 puts, Buying Jan 180 puts
Why was I in some Oct puts in the first place when they were only
3 months out at the time I bought them?
Depending on the stock, the set-up and the market cycle at the
time, going with a shorter term put first of all gets you in the
door at a cheaper price.
It lets us sell the first month or two of call premiums. It lets
us see how the stock is going to behave.
For example. Mastercard has made us some good money. The stock is
jumping up $6 bucks today already – and the stock price is getting
away from the put strike price.
I want to be in this trade longer…the stock and my growing
balance in it says so. So it’s time to re-do the puts. I am
selling the Oct 170 puts above and then buying Jan 180 puts.
Does this cost money to do? Yes! But it’s our “cost of doing
business”.
And when you have portfolio margin going in full swing – you will
notice your margin balance will grow (your buying power/cash
available) as you adjust the put strike price tighter with the
stock.
Okay – gotta run at the moment.
–P
Master Income Update -
Friday, 21 August 2009
Hello there!
It’s expiration Friday. All but one of my short August options have
already been rolled out.
Yet why am I breathing so hard and feel like a full day’s already
taken place?!!!
By the way – the one August call that I’m rolling into Sept is on
CME. The CME Aug 270 calls which I am rolling into the Sept 280
calls.
Despite the recent change to “market in correction” (which could be
changing back again soon to “market in confirmed uptrend”) – I am
also doing a small directional upside trade this morning.
I like RKT – it keeps popping up in front of me – demanding to be
noticed and seen. Earnings aren’t until November – the stock’s
close to $51…and the simple trade I’m doing is buying some Oct
$45 calls. These are around $6.90 – which is almost entirely
intrinsic value. This is a cheap way of dipping the toe in the pool
to see if this wants to act right – and to let us take some
ownership of the stock at $45 (which would make sense if RKT heads
up to $55, $60…well…you get the picture!
This isn’t one of those over-extended stocks – I like the set-up,
I find it compelling – now it’s the stock’s turn to dazzle us.
I am buying more ICE today and selling Sept 95 calls against it.
I am buying Jan (2010) 75 puts.
Salesforce is maybe what’s got me breathless. Here we climb into
an income trade yesterday – and I guess I figured earnings were
out since there was all this earnings talk and guidance. But I was
wrong…earnings came out late last night – and the stock is the
talk of the town. It’s up $7+ and it has me taking some action.
First of all, I am buying more CRM. I am selling Sep 55 calls and
buying Nov 48 puts.
Second of all, I noticed that the Sept 45 calls I sold yesterday. I
noticed that the premium today was almost entirely intrinsic value,
which means the full measure of time value when I sold them yesterday
had been realized.
Do you get what I’m saying? I’m saying the drastic up move in the
stock maxed out my gain already in the Sep 45 calls. Meaning you
don’t have to wait for the next 2 to 3 weeks to realize this.
It’s already cooked. Which means I rolled it up to the Sep 50 calls.
I am still short the Sept 46 calls.
I also rolled up a set of CRM puts. I sold back the Jan 37 puts and
bought Jan 45 puts to make the protection tighter.
Good hell this trade is 24 hours old and I feel like I’m on the
treadmill with it…but in a good way!
I’ll bet with our market cycle, economy, Obamanomics – that some kind
of surprise news is just around the corner to take the excitement
out of the market. CRM will likely fade some – and maybe tread
some water for several weeks before it gets more legs to motor.
But who the hell knows? That’s why we’re over on the income side
of things almost exclusively!
I’m also rolling out of Mastercard Sep 190 calls and into Sep 210
calls. As it sits, this trade now has Sep 210 calls, 200’s and 195’s
all for September.
As the CRM trade sits there are now equal amounts of sold calls at:
Sept 50 calls
Sept 55 calls
Sept 46 calls
Puts are at:
Nov 48 puts
Jan 45 puts
Jan 38 puts
That’s my story and I’m sticking with it! Have a great weekend!
Hooray! August expiration finally is in the can!!
–Pirate
Master Income Update -
Thursday, 20 Aug 2009
Hello there!
The stock I’m getting into for a Master Income Trade this morning
has a lot of stuff going for it.
Saying that – here’s a reminder:
A stock that “has a lot going for it” doesn’t mean it has a lot of
“Price to Book” value, a “double bottom pattern” or that it’s CEO
is the life of the party.
What I mean by it “has a lot of stuff going for it” has a different
meaning when you’re talking about being “market neutral” with an
edge. It means something different when you are approaching the
trade with an income angle.
Here’s some of what I mean:
And by the way, here’s the name of the stock: Sales Force, CRM!
It has $1 strike price increments. The stock is very actively
traded. Same for the options.
There is activity here, on steroids!
Next, they just got earnings out of the way last night (or this
morning) – which means they got their “guidance” out of the way and
out of their system.
The stock here at $46 shows the Sep 45 calls trading for around
$3.20 – $3.40. And like I said…want to go with the $46’s? They
have ‘em.
Here’s the trade I’m doing…
Buying CRM stock
Selling half Sep $45 calls and half $46 calls
Over on the put side, I am going for half of the Jan $38 puts and
half Jan $37 puts.
I like this trade. And it’s a new one for me this morning.
I’m doing some other stuff as well…
ICE appears to be breathing some sighs of relief…the whole CFTC
saber-rattling looks like it may be in the rear view mirror. I am
adding to ICE by buying the stock and selling ICE Sep 95 calls.
I also rolled up a set of puts I have on ICE…basically selling
back the Dec 65 puts and buying Jan 2010 70 puts. (it’s amazing
how little moves like this will increase your margin buying power!)
I also rolled out of ISRG Aug 220 calls and into Sep 220 calls.
Anyway – there you have it…a killer Master Income Trader update!
Over and out,
–P
Master Income Update…
Wednesday, 19 August 2009
Good morning,
You always want to have your downside protected when entering into
any kind of income trade.
I shout this out ’til I’m blue in the face.
But you can see this come alive, especially in the hot-to-trot type
of stocks (right now my mind goes to the Chinese names that have
busted out of the gate as of late).
Hot-to-trot break-out names offer compelling premiums because they
are exciting…because they are MOVING.
But even the best break-outs and most compelling stories can have a
hitch.
What can happen? They can announce earnings that are a little
bit off the blistering path – and wham…the stock gets hit and
it breaks down below some major moving averages into no man’s
land.
Longtop Financial (LFT) fits this bill perfectly. Look at it. Look
at the breakdown in price over the past couple of days (cheating by
those who have inside info. by the way).
Then take a look at it this morning in the aftermath of the
earnings announcement.
The stock is taking a break –
The earnings look, sound, feel great. But the blistering pace is
what’s missing…which makes the announcement a disappointment.
But if you’d gotten into an income trade on LFT a few weeks back,
you’d be sailing along just fine right now.
Even if LFT lies over and plays dead for the next 3 months – you
are in the driver’s seat to collect income streams by selling calls.
And you sleep extremely well at night.
This is a perfect lesson to point out and cement in.
As far as the market and set-up opportunities – it’s really light
out there. The market rallied some yesterday, but it was on very
light volume. Today is looking like a carbon copy.
At anytime there’s money to be made on the likes of big huge brand
namers like MA, GS and ICE. You buy the stock, sell short term
at the money calls and buy 6 month out, out-of-the-money puts.
The dividend is gravy as you play the ‘time decay’ game. (short
term options have a steeper time decay curve…long term options
don’t).
But I prefer to add an edge on top of the whole thing. Which is
why the this stock and why right now?
Compelling pre-announcements give me this. The market cycle gives
me this. A stock quietly making a new 52-week high gives me this.
You don’t want to always be making trades out of things. There are
times when you just need to hang back and not do a damn thing.
Keep your mind active – be on the hunt…but you don’t have to be
trading all the time.
Anyway – these are just some of my thoughts here.
Over and out,
–Pirate
Master Income Update
Monday, 17 August 2009
Good morning,
I believe Mr. Market has had the blinders on – galloping ahead one
day after another. Today it’s like the blinder slid a little bit.
And only after a tiny peek at the reality of the consumer and their
zapped spending power – the market is freaking out.
Maybe the blinders are going to come off for a while?
Judging/guessing/trying to be smart about what the stock market is
going to feel, perceive and interpret is a fool’s game.
All we can do is observe – then react. We’ve known for several weeks
now how hot the current upcycle’s been. With 90% of stocks trading
over their 200 d.m.a.’s etc.
If today finishes out like it is now – this rally will be under
pressure, no doubt about it.
I’m doing a whole bunch of rolling out today…
Here’s a rundown:
(”out” = bought back)
GMCR – Out of Aug 65 calls, sold Sep 60 calls
GS – Out of Aug 160 calls, sold Sep 160 calls
ICE – Out of Aug 95 calls, sold Sep 90 calls
ICE – Out of Aug 90 calls, Sold Sep 85 calls
ICE – Out of Aug 85 calls, sold Sep 85 calls
VPRT – out of Aug 45 calls, Sold Sep 40 calls
NYX – out of Aug 26 calls, sold Sep 26 calls
NYX – out of Sep 30 calls, sold Sep 27 calls
VECO – out of Aug 20 calls, sold Sep 20 calls
CMI – out of Aug 39 calls, sold Sep 41 calls
Siginicant positions that haven’t yet been rolled out of:
ISRG, MA & CME (All August calls here)
On a side note – VRX is acting completely aloof from the carnage
out there today. It’s up and it looks really solid.
I have some outright calls on VRX, the Sept 30 calls. These were
bought for $.70 cents when the stock was around $25. If I get any
kind of powerful move in VRX – my plan is to exercise these call
options and have a compelling income trade started on it.
VRX is at $27 and change – up $.30 cents today on very decent volume.
On another note – RST isn’t pretty. They missed earnings and cut
their forecast. Even worse…they were about to do a secondary
offering of 4 million more shares. Can you say hurting?
Missing like this in the infancy of being a publicly traded company
hurts all the more. Institutions can dump your stock and it can
hurt really bad. This is what’s happening today.
Wouldn’t be surprised to see this at $10 bucks a share in a few
months.
Over and out,
–P
Master Income Update-
Friday, 14 August 2009
Hello there…
The market is letting off some steam – and it’s been a while.
90% of stocks are trading above their 200 dma’s. On a day like today
we’ll have to see how foreceful the volume out there registers.
We’ve definitely been changing up to selling “at” to “in” the money
call options in looking/dealing with this market cycle. This is
more defensive (this is more premium in the pocket)!
For example, if you’re looking at a $90 stock – you can split it up.
You can sell half the $90 calls and half the $85 calls – what you do
is effectively create a new strike price (the $87.50 calls).
I am going to be doing quite a bit of rolling out come next week -
Wednesday is usually a day to do most of it, even though it can
happen on any day!
I’m content to let this weekend hit…finally!
Over and out,
–P
Master Income Update
Wednesday, 12 August 2009
Good morning,
Here’s some stuff I’m doing today:
Rolling out half my position on VPRT…buying back the Aug 40 calls
and selling Sept 45 calls.
Rolling out remaining half of SBUX income trade. Buying back Aug 17
calls and selling Sept 18 calls.
Rolling out of 1/3 of ISRG income trade…buying back Aug 210 calls
and selling Sept 230 calls.
Rolling out of 1/3 of MA income trade…buying back Aug 190 calls
and selling Sep 200 calls.
Rolling out of half of BIDU trade…buying back Aug 320 calls and
selling Sep 340 calls.
Rolling out of 1/4th of NYX trade…buying back Aug 26 calls and
selling Sep 30 calls.
I like to keep things staggered – especially the bigger the position.
What the means is having multiple strike prices going. The more
bullish an edge I have, the more these point to the “at” and “out”
of the money strike prices.
With all that said – I also keep watch of the market cycle and as
of yesterday, 90% of stocks are trading above their 200 day moving
average. It’s rather extreme…yet we’re in extreme times!
You’ll notice that most of the rolls above, the at the money strike
was sold. In the case of NYX…I already have Sep 28 and 29 calls.
This roll I decided to do the 30’s…but the bulk of my strikes are
slightly in the money here (with NYX).
That’s all for right now…
–P
Next Page »
