Master Income Update -
Monday, 30 November 2009
Good morning,
Worldwide ripples of debt defaults causing perceptions of another 60
banks potentially going under is the…
EXACT REASON WHY WE WANT TO BE INCOME TRADERS
(check that)
MASTER INCOME TRADERS!
While the market’s opening up in solid territory today…I guess you
can say that -so far- the coast is clear.
But it’s always something isn’t it? And who knows what the fallout
will be?…or what the ‘perceptions’ will lead to?
If it’s not Dubai sending shockwaves around the world about troubles
paying off debt it’s incurred by building fake islands and shopping
malls with indoor ski hills…
…if it’s not that – it’s something else.
It’s the nature of the beast of what we’re living through today.
And with our government racking up the kind of debt it is -
it makes this Dubai “scare” look silly in comparison.
We live in the “something” world, as in: if it’s not that, it’s
going to be something else!
Geeeeez, just listen to me.
But it’s true!
The power behind building up some trades – where no matter what happens-
you are fully protected AND building income on top of it all. Well,
there’s some real muscle and power in that.
There are no new pre-announcements from Friday on (including today
which is weird).
I am content sitting in what I’m sitting in as we round the bend and
head into the month of December tomorrow.
I am doing a few moves in exisiting MIT trades today though.
I am rolling 100% out of YHOO Dec 16 calls. Buying these back and
selling YHOO Dec 15 calls.
I’ve been able to roll now for several months in YHOO – and the way
I see it, is YHOO is about as dead and lifeless as a corpse. I like
Yahoo, I use it everyday – but the stock won’t budge no matter how
much you poke it with a stick.
While there’s income you can make on a stock like this. I’m less and
less crazy about Yahoo. I’ve got April 13 puts underneath – and since
the Dec 16 calls are almost maxed out – I’m going to roll down to the
Dec 15 calls (the stock’s at $14.91).
It’s also a very small trade in the entire mix of things. I’m just
telling you about it because I’m deciding to trade it this morning,
and I want to explain some of the reasons why.
The only other thing I’m doing today is with Mastercard (MA).
MA has been a mover and a real moneymaker. With the stock at $238,
I have two sets of calls sold on it…half at the Dec 220 calls and
half at the Dec 230 calls.
Both of these calls are in the money as you can see. (I own April
210 puts on my entire stock position, fyi).
MA is another MIT trade where income’s been able to come in, and
where lots of “rolling” as taken place.
Anyway – what I’ve decided to do today is sell some Dec 240 calls,
and I’m doing that by buying back some of my in-the-money Dec 220
calls.
Now here’s how the ratio of my MA trade looks AFTER this roll is done:
One-quarter of my calls still at the Dec 220 calls.
Half my calls at the Dec 230 calls.
And the remaining quarter of my calls at the Dec 240 calls.
(with full puts at the April 210 puts).
Basically the Dec 220 calls are close to maxed out – and by buying
these back and selling Dec 240 calls- more income potential exists.
Just glancing around – I’m in MOS and it’s all steady-as-she-goes.
(this was a rather recent MIT trade which we’re going to grab some
of the spoils of its recent special dividend disbursement, etc)
However, if MOS breaks above $60 per share with any kind of volume…
this would be very significant on a bullish basis…and I would
adjust this MIT trade accordingly (I’d probably buy some straight
out call options for 3-6 months out too).
MOS, by the way, is trading around $54 right now.
Okay – that’s it for me…over and out.
–Preston
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Master Income Update -
Friday, 27 November 2009
Good morning,
The market closes early today -
Mix in with that a Dubai scare (regarding all their debt building up
entire new cities that may affect 80 banks worldwide) – and we have
a scared and shortened market session today.
I’m not doing any new trades today and will look forward to a new
fresh week come Monday.
Hope you had a great Thanksgiving & go easy out there.
–P
Master Income Update -
Wednesday, 25 November 2009
Good morning,
Like I’ve said – there’s a bunch of time on our hands — almost like
a 5-day weekend where the market harldy trades between now and
Monday.
The market will be opened for a shortened session on Friday…but
other than that – it is “time city” – and of course it’s the passing
of time that pads our pockets.
I’m deciding to cash out of the CTRP calls bought a few days ago.
With the quick move up – these have gone up around 20% in value. I’m
just going to sell them and call it a day. I can always hop back
into CTRP – perhaps when I do an MIT on it I will sell January calls
(if I decide to get into the trade in the next few weeks).
Another stock that caught my eye today for it’s volume and price action
(and no news curiously enough) – is BUCY. With all the skyrocketing
gold and silver prices – and now what looks like could be a re-awakening
of commodities in general (just look at MOS and what it’s done since
we’ve done an MIT trade with it) – BUCY is right there perking up
as well.
BUCY makes a ton of mining equipment and is in that mix whether a
dry hole is found or it’s a gusher (don’t know my mining terms too
well!) – BUCY got just slammed along with every other stock at the
end of 2008 – and it’s been on a nice rise for most of 2009.
Recently it’s been hitting its hit near $55 – but at $53 and change
today (up $2+ on bigger than normal volume) – it may just want to
breakout anyday here.
The premiums are compelling enough (if you were to sell the Dec 55
calls…remember, you have to realize these are out of the money
PLUS it’s only for like 3 weeks time if you factor out the rest of
this Thanksgiving holiday) -
So an MIT trade could be started here on BUCY….for some reason I’m
going to go with a straight out call purchase again. I like how
the market is moving here and some of these names (like BUCY) seem
like they have some extra pop to them because of the gelling
circumstances out there.
This may not be for you – but what I’m doing is buying some BUCY
Jan 50 calls. These are in the money – and will move nicely if BUCY
decides to break out and run (I’d love to see BUCY break $55 on big
volume and make some strides).
Like I’ve said before – at that point, I may decide to “exercise the
calls” (which means turn it into stock) and then make it into an MIT
trade…(an MIT trade that already packs a punch from the beginning
cause you already have some profit juice going in it!) – or, I may
decide to just sell the calls and make some quick money.
I’ll let you know!
As far as updates to current MIT stuff – here’s a look at what I’m
doing:
I am rolling out on 30% of my position with ISRG:
I am buying back Dec 250 calls and selling Jan 270 calls.
By the way, every single MIT trade I have, all the calls are sold
in the December month. These ISRG calls I’m rolling are the only
ones in the inventory that are going into January!
I am doing this because the bulk of my calls are the Dec 280 calls.
ISRG is a volatile mother…this trade has been “built” for quite
some time – and this is simpmly some intuition I have on the stock -
to have most my calls at the 280’s and now have some at the 270’s (into
January).
I am rolling out of Mosiac Dec 50 calls and selling the Dec 55 calls.
I am doing this primarily because the Dec 50 calls are maxed out -and
by selling the Dec 55 calls – I am selling new options that are mostly
made up of time value.
And with this weekend being so long, etc – I see this new “sell” of
calls getting off to a good start. Commodities seem to be picking up
across the board and with the old calls being maxed out in profits -
these new ones open up some more profit potential.
I’m doing the same on a very small scale with BIDU – buying back
1/9th of my position…buying back the Dec 370 calls and selling
the Dec 440 calls.
I have calls sold all over the board on BIDU. This is buying back
my lowest strike and selling an at-the-money strike. Again, the
way in the money one was just maxed out…selling the at the money
you get $16 bucks for the premium.
Okay – that’s the novel from me today!
Hope this finds you well…
–Preston
Master Income Update -
Tuesday, 24 November 2009
Good morning,
Dissecting yesterday’s big move – it all came in on smaller than
normal volume.
I suspect it may be because of a holiday week and shortened trading
and all that jazz.
While the market cycle has turned up again to the upside- what’s been
missing (so far) is any kind of budge on the accumulation/distribution
grades. The ones I look at are on the Nasdaq and S&P 500.
By the way – the acc/dist grade is proprietary to IBD – and that’s
where I keep track of my market cycle stuff.
In layman’s terms – this new push up in the market is letting out a
collective yawn so far.
Why do I mention the market cycle and comment on it? It’s because
it provides us a compelling edge we want to use in our MIT trading.
3 out of 4 stocks go the way of the overall market cycle. And tucking
away this edge – it helps us craft our MIT orders/trades to give us
a better edge than the average Joe.
Speaking of edges – there is an individual stock that pre-announced
better than expected earnings yesterday evening – and it is feeling
the love from investors right now, this morning.
Volume is off the hook. The price action is compelling. And the
stock is hitting a 52-week high, after having gone sideways for
several months. Anyway – every piece of this set-up I like for a
bullish edge.
The stock is ADI.
ADI also carries a near 3% dividiend yield.
The only drawback to it is the premiums for December aren’t fetching
that much. I like to see this higher.
It could be that the Thanksgiving holiday (basically an extra loooong
weekend is being factored in. Plus, we’re dealing with less than a
full month for December getting in here).
But I love the setup. Enough that I’m going to trade this one with
some straight out calls…
With ADI trading here at: $29.78, up $1.84…what I’m doing with a
very small (relative to my account size) amount is buying some Jan
27.50 calls.
I’m doing this because there is a strong edge that this stock moves
north at least a couple bucks between now and then. And I can decide
if I want to exercise these call options and turn it into stock (and
basically start an MIT trade off with an extra bang and profit kicker),
or just cash in the calls and make money that way.
Either way – I love this trading setup this morning!
(if you were to go with a pure MIT trade right here – I would buy
the stock, and sell Dec 30 calls…then look to buy half of some
3-4 month out puts – most likely at the 25 strike price).
by the way – CTRP is moving up nicely today. The calls I bought on
CTRP are moving higher as well. I may decide to cash these in
today for a quick profit.
Amazingly, I am not doing any moving around with my current MIT
trades! Usually there is at least a move or two every day. But for
two days it looks like my fingers will be motionless on the keyboard!
(expect for writing all this that is!!)
Hope this finds you well.
–Preston
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Master Income Update -
Monday, 23 November 2009
Good morning!
Well there’s an official new MIT trade I’m getting into today! And
I’ll tell you all about it.
First, whenever I find something new, it is always weighed AFTER I
look through everything I have.
What I mean by that is I always weigh first whether or not to add to
any positions I currently have.
And while I could add here or there — I’m deciding to get into this
new trade.
Let’s get busy.
Boy I’d love some of those long trumpets and some red carpet for this
one. Why? Because it’s a welcome home of sorts. It’s been a long
time since I’ve uttered these words, or had the opportunity to
trade it.
I’m talking about ticker: INT – and I’m talking about a stock split.
A 2 for 1 stock split to be exact. INT is “World Fuel Services” which
I believe is in the refinery biz. But late last week, Nov 17th to
be exact, they announced a 2 for 1 stock split.
Now I don’t have time to run through each and every reason of why
certain stock splits are compelling to trade – but I’ll lay out
enough.
This will be INT’s 4th stock split in 15 years (INT has been publicly
traded for nearly 20 years). Some have been 3 for 2’s. The last
one in 2005 was a 2 for 1.
I checked for the next earnings announcement and it will be in Feb.
(one of my favorite set-ups, bar none…is when a company decides
to time their stock split with their earnings announcement being
on either side of the split by a week’s time)
Anyway – I don’t know if you know this or not – but there’s hardly
been any splits announced since late 2007. There has really been a
dry spell.
There was another company that announced s 2 for 1 split on Nov 18th,
but it’s in the healthcare arena…and I don’t want all this
Congressional stuff hanging over a trade…where one of the outcomes
could be the “legislating out of business” outcome.
So INT is what I’m lasered in on.
The quote on it here is INT = $55.06, up $1.31. The Dec 55 calls are
going for $2.10 X $2.25 (or close to). INT stock trades around 450K
shares a day. I went and checked the options to make sure they
were not a roach motel…and low and behold, they are traded on almost
every options exchange in the land – so we’re good there.
The split will reflect on Dec 8th (this is a very fast turnaround
on what I call the “stock split timeline”).
By the way what happens to the options when you go through a 2 for 1
split? Easy. You end up with double the contracts, and the strike
price gets chopped in half.
Mathmatically nothing happens because of a stock split – however it’s
the perceptions that are tweaked out there (perceptions that the
company must be hitting a nice momentum groove with earnings, etc)
I’ve traded stock splits (directionally) for many years – and I always
enjoy the set-up that gets put on the plate in front of me.
But this time, I am trading into a split with an MIT trade. Here’s
what I’m doing. Buying into INT…then I am selling the Dec 55 calls.
Over on the put side – I’m going to do it a little differently.
Because of the current market cycle. Because there’s the edge of the
split. Because of the trend in INT, etc…the edge for this trade
is more on the bullish side.
So while I’m selling at the money calls – for right now, I am only
going to buy half the puts.
For these I am going out to May and buying the May 45 puts.
What I plan to do is see how INT gets through its split in a couple
weeks. And then maybe in mid December, depending on how it acts – I
could make INT a bigger trade in the mix.
Again, earnings aren’t until Feb. So there’s plenty of time to get
into full one-to-one put protection mode.
So anyway – this is what I’m doing this morning and why.
So far, I’m not making any adjustments to all the MIT stuff I’m in.
I hope this finds you well and kicks off your week with a bang!
Over and out…
–P
Master Income Update -
Friday, 20 November 2009
Hello there!
Good heavens I can’t believe how fast the day is flying by. Normally,
my better half is here to take care of stuff…but she’s off with
girlfriends attending the “New Moon” movie that they’ve had tickets
for for 3 months. Good hell, it’s like they’re all 17 again.
And I’m on fumes as I got to crunch an In-n-Out Double/Double late
last night on their first day open in business IN MY HOME TOWN.
It was so awesome and the 45 minute drive-thru wait was worth every
last minute. I’ve already ordered a blanket, golf balls, plates,
etc from their merch catalog (had plenty of time while waiting in
the car)…
That brings me to today. And there’s only a few things that needed
to be rolled into December as I’ve been doing that steady for the
past week or so.
One thing that held me up and made me scratch the noggin is the whole
dealio with Mosiac options…as in why there’s two options for
every strike price -and after some phone calls, etc – it’s because
of the special dividend that’s being paid out.
I had 2/3′rd of my MOS calls at the Nov 50 calls – and these were
the options that had the special dividend inflated in them (believe
me – I talked to 3 different brokers and got 3 different responses
back…I still don’t understand it…all I know is I owned my stock
over the record date and the pay date is coming around Dec 12th)…
The puts were also “tainted” and need to be bought back and not rolled.
MOS has really put on a great move…a stock isn’t supposed to fly
over a special dividend “ex-date” and just keep pushing up day after
day!!! But it has…
So here’s what my trade looks like now in MOS:
I bought the stock in the $49’s – and now it’s trading at $55.
I now have 2/3rd of my sold calls at the Dec 55 calls (sold today at
$2.68)
I have 1/3 of my calls at the Dec 50 calls (these are the weird ones
still…but I’m keeping them for now)
I now have 2/3′rd of my puts at the March 45 puts.
And 1/3 at the March 50 puts.
I know that loud mouth Cramer has been whooping it up about commodity
stocks lately (which would include fertilizers like MOS) – but what
the hell does he know? I DO KNOW that he has a huge following and
that stocks move in the wake of what he says and predicts. So
that’s a little of what may be going on here.
But around $4,000 will tumble into the kitty come Dec 12th or so on
the shares I’ve got. And the options are active and the premiums
look good for one month of time. That’s why I’ve decided to roll
puts up, roll calls out and stay with this one. It’s off to a great
start.
I am also rolling out in MRK. MRK has been on the move lately.
MRK carries a big dividend payout “stick” – the stock is moving
the right way…the trade has been “built” and I want to stick with
it.
On MRK I am rolling out 100% of my puts, I am selling the Jan 26
puts and buying the April 31 puts.
On the call side, I am buying back the Dec 34 calls and selling the
Dec 36 calls.
Basically, the 34’s are all but maxed out on their earnings potential,
I am selling the Dec 36’s because they are near the money and are
mostly made up of time value.
Usually when I roll it’s out to the next month, but in some cases
it’s the same month but just a higher strike price.
The only other position I have that has November calls to roll is on
30% of my NYX trade. NYX has been in a creeping decline lately. The
last calls I have on it are the Nov 26 calls, which are worth pennies
here on the last day of option expiration.
I am deciding to buy these back and sell (this is a roll-out) Dec
25 calls.
NYX is a long-timer and I’ve been able to write a lot of premiums on
it – it also has near a 5% dividend yield with it.
Finally – I like CTRP…the reason is -is cause it’s been so battered
in just days after investors LOVED it’s earnings picture and guidance.
It looks to me like it’s been lost in the shuffle…in technical
language (don’t tell anyone I talked technical analysis…okay?!) it
has “filled in its gap”…
And if the market cycle stay up – and we get some decent trading
come Monday/Tuesday – this one could rock right back up there a good
$3, $4 or $5 bucks.
When I see an edge like this – sometimes I like to buy straight out
call options. What I plan to do, is perhaps exercise these and turn
it into an MIT trade.
But you can also just turn around and sell them, if you get a good
movement up, and just cash in.
Anyway – with that context – I am buying some CTRP Dec 65 calls with
the stock here in the $67’s. If you do this, you want to be smart
with your money management…I’m doing this on a level where it’s
hardly any skin (versus the potential reward) in it. Remember, we
can always sell out of an option that’s not going the right way…say
at a 50% loss area…my point is, you don’t just have to sit there
and watch the whole thing vanish away!
Okay – I got you up to speed.
I will see you on the otherside of this weekend. And just think -
with Thanksgiving coming up on Thursday – it’s going to be a veeeery
looooong weekend – which works in our favor BIG TIME as MIT traders!
Over and out -
–Pirate
Master Income Update -
Thursday, 19 November 2009
Good morning,
We all know this kind of steam needs to come out of the market. Well
the steam’s coming out this morning and most stocks are feeling it.
(except for Mastercard, which just barely did an about face and is
thumbing its nose at the sell-off this morning)
On more extreme days like today – it’s always interesting to see how
the day will close. At the finish line today, will the S&P, Dow and
Nasdaq be further south than they are right now?
Or will there be an about face mid-day and a close in the green?
Extreme days like today (how they open and close) give some clues
about the current market trend.
But for tumult like this – this is exactly why we’re over on the
income -”non-directional”- side of things.
Here’s what I’m doing in my personal accounts:
On VPRT:
Rolling down my remaining half of calls. Buying back the Dec 55
calls and selling the Dec 50 calls.
On GMCR:
Rolling down 40% of my calls…buying back the Dec 70 calls and
selling the Dec 60 calls (60% of my sold calls are at the Dec 65
calls)
On GS:
Rolling down 100% of my calls…buying back the Dec 185 calls and
selling the Dec 175 calls
On BIDU:
Rolling down 10% of my calls..buying back the Dec 430 calls and
selling the Dec 410 calls.
So does today’s trading mean this up market cycle is over? If you
want my opinion -no. We just barely got back into gear with a new
upward cycle. Days like today are common place in an uptrend.
But I also know severe downtrends in the market can start as
innocently as a day like today.
Remember, the market cycle is important because it helps dictate how
we trade (both in which options to choose, and which set-ups are
compelling to start a trade).
I’ll say this…if today happens to be a normal profit-taking day,
and the present market cycle stays intact…if you’re looking around
for another stock to get into, CTRP is one I’m looking at.
It just recently came out with surprise numbers…the market reacted
positively to it, but it’s gettind drubbed today, getting mixed in
with the general selling going on.
I like CTRP for an MIT – and maybe tomorrow or early next week, again
if the factors are good, this one will be ready to climb aboard.
Over and out for now,
–P
Master Income Update -
Wednesday, 18 November 2009
Good morning,
There’s a couple three MIT trades I’m involved with which have some
heat on them. The three being CRM (Salesforce.com), GMCR and VPRT.
As you’ll see…the meaning of “heat” is in a different context here.
It’s different compared to being in any of these 3 stocks and trading
them “directionally” (which is how most people think is the only way
to make money in the stock market…buy something, then hope it goes
the right way, or direction)
CRM announced earnings after the close, they even guided higher on
some things – but investors are selling it off.
This is a trade I’ve been in for several months now – it’s also a
trade I recently adjusted so here’s how it sits:
CRM is at $63.23, down $2.38 on a good volume clip today.
(My average basis in CRM, the stock, is at $48.53)
I own full one-to-one put protection:
2/3rd’s of my put protection is clear out to the May, the May 60 puts.
1/3 of my put protection is at the May 55 puts.
On the call side, right now I have:
2/3rd’s of my calls are the Dec 65 calls, sold for $2.22
1/3 of my calls are the Dec 60 calls, sold for $3.88
As you can see with such a healthy gain in stock price that’s happened
over time – I’m now in a situation with CRM where I really don’t
give a damn where it goes next.
Does it slump for a few months while investors digest its immediate
earnings picture? Does it shake this off and rally higher? Does
the government’s pay czar decide to look into how software companies
are run and who gets paid what? Does an analyst drop a bomb tomorrow
on the entire sector?
Again – a properly built up MIT trade makes all of this a shrug of
the shoulders!
Green Mountain (GMCR) is selling off some today, on no news headlines…
the volume is already approaching a full normal day’s volume.
GMCR is flat-out a noisy stock anyway – this could just be some more
noise…but I’m very similarly set-up the same way on GMCR as I am
on CRM. Come what may…it’s covered and gains are in the bank (and
more income can be had no matter where it goes)
VPRT is letting off some steam as well – and there’s no headlines to
explain. But the price action and volume say everything.
VPRT and I have been friends for several months now as well. This
one’s been a consistent money-maker.
Here’s a little something I’m doing as far as my account goes.
(no new pre-announcements or any other set-ups have grabbed me by the
throat so far today).
On CRM, I am rolling down in 2/3rds of my calls…I am buying back
the Dec 70 calls and selling the Dec 65 calls.
As you know – you can only pocket the amount of premium you sell when
selling calls…it is limited, etc. So when an earnings announcement
comes out and it gets reacted to like this…I figure the stock’s going
to be in stall mode for a number of weeks. In cases like this, I
like to roll down which increases the income potential.
Over on VPRT…I am rolling down on half my calls. That is, I am
buying back the Dec 55 calls and selling the Dec 50 calls.
that’s all I got for now -
Over and out…
–Preston
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