Master Income Update -
Friday, 29 January 2010
Good morning!
Tooooot. Tooooot.
That’s me tooting a little horn over here! Don’t look now, but I’ve
called a few directional shots well lately…all documented on my
daily updates:
GMCR over earnings (to the upside)
GOOG over earnings (to the downside)
AMZN over earnings (to the upside)
EDU (to the downside)
All while the market is turbulent as hell and deciding which cycle
it’s going to travel in next.
Not bad!
So while we’re on the subject of “direction” – if you want to know
the king poo-bah trade of them all…it’s Apple on the downside.
Yesterday’s crack started it all. Today, it’s down another $3+.
But the entry is not yet! Yes, the floodgates are open for this one
to have some massive profit-taking (as Apple’s massive news cycle is
all through AND institution’s sell programs are likely in full swing)
…but the time to go short (buy puts) on Apple is going to be AFTER
the rush of buyers comes in to figure they’re buying up Apple at a
discount.
This may take some days, or weeks. But as soon as Apple cracks after
this next buying wave – I’m going to get in with some 3-4 month puts
and just sit there on my thumbs watching those puts go up in value.
Anyway – just wanted to get that out of my system!!
Speaking of c-r-a-c-k-s – look no further than NEU. As much as thing
has climbed – the wheels have just come off.
I love downside shots like this! But again, just like with Apple, the
time to go short IS NOT NOW!!!
The time to go short is after buyers rush in thinking they’re picking
up the shares on a discount (or whatever the hell they’re thinking),
but it’s waiting for a buying push. I like getting short when this
buying push wears off.
Then I like doing a very vanilla put purchase…no fancy spreads,
condors, straddles or strangles. Just a nice, straight-forward
put purchase, 3-4 months out!
(by the way, what’s nice about being “in the game” is tasty opportunities
like these that come along and present themselves on a silver platter
right in front of our eyes. It’s kind of like rolling into your
favorite lunch place starving. All you have to do is order and pick up
your fork! Not much work required!)
Speaking of AMZN – I am going to stay in the puts I sold short. They
have flattened, but they are still worth $3 or so (these are the Feb
125 puts I sold for $7+)
I am also rolling down 1/2 my position on FSYS. Earnings aren’t at
anytime in Feb – and this stock looks simply lost. I am buying back
Feb 45 calls and selling Feb 35 calls. FSYS is at $35.70, down
$1.63. The other half of my calls are at the Feb 40 call strike.
MHP has been a solid, nice stock. I have two call strikes on this
one too. I am rolling half of this position too. MHP is one of those
more conservative, dividend payers, consequently I do slower, more
conservative income trading with it.
Anyway – with that said – I am buying back the in-the-money Feb
30 calls (MHP is at $36, up $.44) for almost entirely all intrinsic
value…and I am selling March $35 calls in this roll.
There’s no $1 strike price increments here, there’s no $37.50 calls.
The next strike up is the $40′s and they’re worth next to nothing!
So selling the March calls gets some more time premium in the door.
The other half of my calls are the Feb 35 calls.
Anyway – that’s what I have for you today so far. I’ll see you on
the other side of another weekend!
Over and out -
–P
This is Karson – The Pirates First Mate
I just wanted to give you a quick update on ENER.
ENER has moved down a bit since it was last mentioned so I am
making an adjustment. With a little over 3 week left to go until
February expiration it is not worth it for me to hold onto the 12
strike calls, so I am buying these back and reselling them at the
Feburary 11 strike. The reason I am not going down to the 10′s is
simply because I am anticipating some kind of recovery in this
stock and I don’t want to end up having to buy my calls back if it
does end up making a nice comeback.
The more you trade a particular stock the more you become familiar
with how it behaves. ENER in particular is off in its own world.
The rest of the market made a nice climb over the last 6+ months
and ENER didn’t do squat!
I hope this finds you well.
–
-Karson Keith
-The Pirates Office-
Master Income Update -
Thursday, 28 January 2010
Good morning,
I led by saying the market has a “stomach ache” – I think this is true.
But part of the reason I said it, is cause I HAVE A STOMACH ACHE.
I think it’s cause of this “Huckleberry” syrup I had yesterday (I was
the only one who had it) – and I’m not in a good way…with a horrible
night last night.
Anyway – I can’t help but think the market is having indigestion and
some nausea.
I didn’t watch the State of the Union last night – but from what I
gather, capitalistic endeavors didn’t receive much love from the pulpit.
Apple looks like a baked Apple pie. A few days back I sold out of
one set of my calls. Today, I’m selling out of the remaining April
calls on Apple.
Mainly – all our reasons are gone for owning them, and there’s no
sense rooting for it, or hoping it will turn around. Like I said, it’s
now a baked Apple pie and time to sell it.
I was looking to turn these calls into stock at some point down the
road. I bought these April 190 calls for $22 or $25, and I’m selling
them here for around $19.
On the other side of the fence is AMZN – with the market scared and
taking a beating, AMZN looks to be relishing in the investor reaction
to AAPL.
And/or the comination of this PLUS the fact Amazon announces earnings
after the close.
After all this pulling pack in AMZN’s shares – and given the crappy
day in the market today – I wouldn’t be surprised to see AMZN scream
higher tomorrow. That’s how the options appear to be priced.
Now – you never quite know what’s going to actually happen – so all
this is kind of “gut” talk (there’s the reference to my stomach again!)
Another little intuitive thing I have going is that I have owned
AMZN for several months now – and there’s no other way to get an
intuition other than owning a stock…can’t explain it…it just is!
(A little bit of digress is mentioning Green Mountain Coffee, GMCR,
after owning it, it just looked ready and primed for a killer reaction
to earnings. It is up $6+ today and those Feb $80 puts I sold turned
out to be a killer little side trade! BTW, I’m buying them back this
morning for $1.15)
Anyway – since options cost so damn much all across the board on
AMZN, with the stock in the $125′s, up $2+ — I am going to sell some
puts on AMZN….specifically the Feb 125 puts (at the money puts).
The premiums here are north of $7 bucks. Realize that in doing this,
you can be on the hook to buy AMZN at $125. Since I wouldn’t mind
adding to this trade anyway – this is just a clever way of buying
more shares at a discount. And if AMZN streaks up $10 bucks
tomorrow – they will quickly flatten and become next to worthless.
For a “just in case”…I am buying some Feb 110 puts for around $2.50.
This still lets me profit about $5 bucks and protects me for an all
out disaster if it gaps down to $80 bucks a share tomorrow. Anyway,
I like the risk/reward/odds of doing this on AMZN before earnings.
Moving on – I am selling half of my GOOG puts today. Rather than
try and guess how far it’s going to go down (GOOG penetrated through
the low point it has put in the last 5 days…it probably has some
more sizeable downside…the question is when?) – I’m going to sell
half for around $40, $41…then I can just let the other half ride.
Who knows – I could be selling the remaining 570 puts for $50, $60,
$70 or more? This was a power-packed side trade.
Okay – I’m doing a lot more stuff – but I don’t want to bog down
your “Crackberry” (Huckleberry??) or your email, etc…so look for
another update from me in 5-10 minutes.
Over and out..
–P
Master Income Update – Part 2
Jan 28, 2010
Con’d…
What was known as perceptions a few weeks ago, can be all the sudden
turned inside out.
If you had a directional trade that had a compelling edge, and reasons
to move (and DID move the right way) …a market climate like this
can squelsh out all the promising light.
I have calls in AKAM…Feb 23 calls, and I’m selling all of them
today. These are going for around $2.75.
I am scaling back my AMED calls. These are the June 50 calls. I am
selling an amount equal to 25% of what I had. These are going for
around $8.50
(notice…these calls aren’t yet at a 50% amount of cost, it’s just
a decision I’m making cause of the drastic turn in the market cycle).
I turned some of my BUCY calls into stock, bought puts, then sold
calls…and that trade is great. But I have additional BUCY April
50 calls I bought in the $9′s…They are trading today for $8.50ish,
and with the wild pullback in that stock (and new reality, etc) -
I am just going to ditch out on these calls.
I am selling 100% of the calls I have in HITK. These were looking
really bitchin’ -but they’ve fallen off the turnip truck. These
April 22.50 calls are fetching $2.50 or so – it’s time to get out.
I am also selling out of ARUN April 10 calls…these are calls on
Aruba Networks. I liked the set-up for all the reasons…but this
was before all this nastiness. These are trading for around $1.30
Now, I don’t have time to run around and dig up the buy-in prices.
I only work on one screen, opting NOT to ever have 4 or 5 or 6 screens
in front of me. But if you’re in these same trades – you know about
where we got in.
Some of these exits are barely under where we bought – HITK is the
only one that’s around the 50% loss area.
Anyway – moving on…
Rolls…
ISRG. The last of the deep in-the-money calls I have left I am rolling
up and out, as they are almost entirely made up of intrinsic value.
ISRG trades at $335, and I have approx 25% of my calls at the Feb 310
calls. I am buying these back and selling Feb 340 calls (which are
all time value).
MOS. Potash (POT), the king-pin when it comes to the world fertilizer
market issued a less than rosy earnings forecast and it has MOS in it’s
clutches. I have some MOS calls that are waaaay out of the money now.
MOS trades for: $55.81 – I have both Feb 60 and Feb 65 calls sold
against MOS. I am buying back the Feb 65 calls for a song and a
dance, and selling near-the-money Feb 55 calls because of this.
Finally, with GMCR’s move up today, I have some Feb 75 calls that
are now $11 bucks in the money. I am buying these back for almost
entirely intrinsic value – and I’m selling Feb 85 calls.
finally, finally – my eyes are popping out of my head looking at
Netflix (NFLX). Holy moly. The stock has been poo-pooh’d because
the conventional wisdom is they can’t grow anymore, it costs too
much to get new subscribers, etc.
But in the last 3 months, NFLX has added 1 million new subscribers for
a total of over 12 million. They think they’ll add another 4 million
this year too!
This makes me think about the “Golden Years” in Hollywood…which were
smack dab in the middle of the depression. Who didn’t want to pay a
nickel and escape the world back in those circumstances.
Maybe this is working for NFLX today. Anyway – it’s a stunner, I
looked at the chart, but not the options yet…I’ll betcha it’s all
very decent for an MIT trade.
Okay – that’s enough from me. I’m over and out!
–P
Master Income Update -
Wednesday, 27 January 2010
Good morning,
No signs of any righting of the ship. The market woes may be here to
stay for a while.
A lot of stocks I’m looking at look “peaked out”…while some are
battling right there at their 50 d.m.a.’s – others are in a full
fledged retreat.
Apple is battling right there at it’s 50 day moving average (d.m.a.),
same with HITK.
Then there’s the likes of FSYS and ICE who’re off the cliff with
reckless abandon.
GOOG is slipping some more today…I have a limit order in to sell
my Feb 570 puts for $41. Why 41? First cause I’m going to leave the
house and be away from the screen. Second, cause of how GOOG
breached hard, down and out of it’s multi-month long trend.
The fall here can get more severe. But the tricky thing with Feb
puts is just how/when all this imploding unfolds. I’ll take $41 and
exit the scene and call it a short-term trade (bought at $19…it’s
currently around $39).
Also, EDU is sliding down further on a big move today (it’s down almost
$4 bucks today so far)…on big volume. This kind of action is
confirming why we got in (the breakdown in bahavior, plus all that
China news). It’s getting this trade off to a good start.
Getting our attention back into MIT rules and guidelines. In a market
like this one right here…any new MIT trades HAVE to go along with
selling at-, to in-the-money calls. Also, any new MIT trades HAS to
have a full one to one ratio of puts. And if you’re trying to choose
between two put strike prices…I’d go with the closer strike to the
current stock price.
Also, with any roll-outs, you want to roll to calls that are more
defensive (more at, to in-the-money). The puts should be right there
for you, kicking in big time in this market right now.
I’m not doing anything new today – content to watch out earnings
keep unfolding, and the market behavior. However, I’m close to
making a bunch of moves – so stay tuned!
Over and out…
–P
Master Income Update -
Tuesday, 26 January 2010
Good morning,
Here’s my take on some things and what I’m doing this morning. May
as well start of with the most compelling thing in my face.
VMW.
VMW is busting out to a new high on 6 million shares of volume.
Normal avg. daily volume comes in at 1.6 million. Today looks like
it will go down as the biggest volume day of the year by a long
margin.
The high of the day so far has been just short of $49. VMW right now
trades for $47.50.
Yes, we’re in the middle of earnings, and the market cycle has taken
a hit (at this point it’s caution…don’t know if it turns and runs
south, or, if it’s a brief period of time).
So I am trading this accordingly…
VMW is a very compelling MIT set-up – and it’s also a trade I like
going long on first…which can only enhance gains and returns, etc
(if it proves out of course!)
With all that said, this morning I am buying an appropriate number of
call contracts on VMW for my personal situation and account. (do so
accordingly if you trade this too!)…
I am buying VMW April 45 calls, which are in the money calls. They
are going for around $5 at this writing.
Moving on…
The “exchange” stocks are really acting spooked. Take ICE and CME
for examples. They are spooked because of the President shaking things
up and talking about limiting how banks can trade between eachother.
Even though it would have to get through Congress (house/Senate), and
it has a snowball’s chance in hell of ever getting through…they are
volatile as hell and scared. CME announces earnings on Feb 4th.
The calls I’ve written here for Feb are drastically out of the money
as CME is scraping and hovering around my (where were once out-of-the-
money) put strikes.
So on approx 1/3 of my calls, I am bringing them down from the Feb
340′s to the Feb 300′s. The 2/3rd of my calls are still at the Feb
330 calls.
Stocks in a predicament like this can often bounce fiercely to the
upside – with earnings around the corner – I want to see how it
reacts.
And the same goes for many, many positions I have right now.
I am rolling out of a portion of my deep, in-the-money ISRG calls.
With ISRG at $337 and change (ISRG knocked a homer out of the park
last week, leaving me with some deep in the money calls that are
almost entirely “intrinsic value”) -
I am rolling up some of my Feb 310 calls to the Feb 330 calls. These
are in the money still…but there’s time value here that works in
our favor.
That’s all I have for now!
–P
Master Income Update -
Monday, 25 January 2010
Good morning,
Does the market let off more steam and cool down, or is a short
pause ready to revv up again?
That is the question. Add earnings season on top of it – and we’ve
got a market that can’t make up it’s mind (on steroids).
The GOOG puts I bought last week sure had a nice day on Friday, and
GOOG’s down another $10+ today (on big time volume). The news over
the weekend came straight from the top…it was made known the
founders have filed papers revealing the plan to sell off quite a bit
of stock.
This is normal, especially when all your wealth is tied up in pretty
much one thing – but this is spooking the stock on top of the sell-off
from the earnings announcement late last week.
The Feb 570 puts I bought at $19 are almost at a double. It’s anyone’s
guess what happens to GOOG over the next 3 weeks – but the slicing
and dicing through the 100 day moving avg. on megahuge volume ain’t
good. I am putting in a sell order at $41, in case while I’m enjoying
my day – the stock sinks even lower. Stock right now $539, down
$11 and change.
AMZN announces earnings this week on Jan 28th. And a slew of companies
are stepping up to the plate this week as well.
Even if there’s good news coming out of a company – like surprise good
numbers and forecasts…if the market cycle is in the middle of a shift
to the downside, it makes it very hard for buyers to stay with a stock
while the rest of the market sells off.
Anyway – I’m very curious to see what happens over the next week or
two with all these earnings coming out.
Other than sticking a limit order on GOOG puts, the only other action
I’m doing is in my CRM MIT trade.
CRM trades for $64.32 and I have 1/3 of my calls sold at the Feb 65
calls and 2/3rd at the Feb 70 calls. CRM doesn’t announce earnings
until Feb 24th.
And since the Feb 70 calls aren’t worth much now – I am going to roll
down half of them to in-the-money Feb 60 calls. This will leave me
with 1/3 at 60, 1/3 at 65 and 1/3 at 70…all summed up, it means I
have exactly 100% at the Feb 65 calls (do you see the math there?)
(on the put side I have both May 60 and May 65 puts)
Alright, that’s all for now.
–P
Master Income Trader -
Friday, 22 January 2010
Good afternoon!
Wow – another sell-off day is about done. Apple is really feeling it
today. And right off the bat, I will tell you that I’m selling the
most recent addition of Apple calls that I just bought.
These would be the Apple April 200 calls. I don’t ever bat an eye at
this…I don’t care what I was seeing, or what the reason was — the
fact is, the stock’s getting hit – and the market is still digesting
all this crap from the White House (basically…we’re the next target!)
Anyway – Green Mountain Coffee Roasters (GMCR) announces earnings next
week (on the 27th or 28th) – and GMCR is acting rather curiously
strong.
You see what happened to ISRG today? GMCR has done a comparable jump
several times before. And the stock is looking and holding very
strong despite how the market’s been selling off.
Anyway – as you know I have an MIT trade going on this one – I really
like the premiums, and it’s been a great money-maker. Sometimes when
I see a situation like this, and there’s a trade I’m already in (and
don’t mind adding more to it) – I will sell some puts (selling puts
to open) as a way of buying more.
The way I see it on GMCR, is the premiums are extra fluffy right now
because of the looming earnings date. And this will flatten right
after the news is out.
So I am selling some GMCR Feb 80 puts today with GMCR around $81. The
premium is almost $5…and if GMCR finishes higher than $80, then this
premium is all mine to keep.
If something really funky happens to the stock…I can either sell
the puts for a loss, or buy some puts underneath, buy more stock and
then sell calls.
Bottom line, is I see GMCR exploding because of earnings. By the way,
the “size” of this selling-puts-to-open trade on GMCR is approx 15%
the size of my current MIT trade on GMCR for reference.
On ICE, most of my sold calls are at the Feb 110 call strike price.
With ICE getting hit, I am rolling these down (100% of my ICE puts
are June 100 puts). With ICE around $101 – I am buying these Feb
110 calls and selling Feb 100 calls. This just gets me extra, extra
defensive on this one!!!
Lastly on ISRG. I am rolling up and out of 30% of my calls which are
now very deep in the money due to ISRG’s explosion today. I am buying
back ISRG Feb 300 calls and selling ISRG Feb 340 calls. ISRG trades
today for $344 and change, up $40!! Way to go ISRG!!!
On the put side – I am rolling up 60% of my puts from the April 260
puts to the April 310 puts. This tightens the downside risk – and it
also releases more margin on the portfolio margin side of things.
I’m set everywhere else – I do have some long calls still out there,
but the size of them is palatable in each case. On the MIT trades,
the market can throw the biggest haymaker it wants – and “it’s all
good”!!!
Sorry for the late delay in the update today!
Over and out for the weekend –
–Preston
Master Income Update -
Friday, 22 January 2010
Good morning,
I had something come up quickly this morning – so look for a normal
update later on in the trading day today.
See you then!
–P
Master Income Update -
Thursday, 21 January 2010
Good morning,
The market sell-off continues into day 2. It’s ugly out there. The
uptrend out there is adding more and more “distribution days” as IBD
likes to call them — and it’s happening right as most companies are
announcing fantastic earnings.
The scare yesterday was news that China may be curbing their lending
habits (as in…China buys a ton of our debt). Other nations are also
in hoc to China. Hot Chinese stocks that trade on our exchanges also
didn’t do well yesterday.
Today…
Today looks like an old fashioned butt-kicking. Enough reasons are
palpable enough to trigger selling and profit taking out there.
A shining jewel out there, that is unfazed by the Dow being down 200
points, is PLXS. PLXS pre-announced way better than expected
earnings this morning. And if it weren’t for “the market” today -
PLXS would be trading even higher.
As it is – PLXS trades this morning at $32.74, up $3.76 and it’s
already eclipsed 5 times the normal daily volume (in a couple hours
of trading).
Further, this action today is breaking the stock out to a new 52-week
high. This is a compelling new 52-week high as the stock’s in an
overall uptrend…yet it has rolled over and taken a break for a
while. This action today surges it right back into uptrend mode -
a very, very compelling place to enter.
I have to confess – this whole time – I just figured PLXS options
were normal.
In just now checking – they are NOT exciting. They are NOT roach
motels (good thing) – but due to the fact there’s normally only
around 200K volume per day – there hasn’t exactly been a ton of
option trading volume.
This also means there’s not a lot of strikes to choose from. For
example there’s 30 and 35 calls for Feb…but with the stock exactly
in the middle of these strikes – there’s hardly anything of premium
at the Feb 35 calls – and the Feb 30 calls don’t have that much time
value to them. And both options have uncompelling bid/ask spreads.
Yet – the set-up in this stock is one of the most compelling I’ve
seen in months!!!
What I decide to do in cases like this – is just buy some call options.
This is the cheapest way to get on the rocket. And you trade an amount
where you’d feel comfortable about actually owning that amount of
stock at some point, in say, the next 3-5 months.
This means if you’re not comfortable owning 10,000 shares of PLXS,
DON’T BUY 100 CONTRACTS OF IT! Cause that’s what it represents.
To be clear, you are NOT ON THE HOOK to ever buy the shares behind
the call options!! (you have the “right to buy”, not the “obligation
to buy”). But I figure if more people actually thought how many
shares of stock they were controlling when buying options – they’d
maybe re-check themselves on the quantities they buy — that’s all.
Anyway – another reason for just buying the calls is – who knows –
with this kind of interest coming for the stock…in a few months,
maybe there is a lot higher level of volume — where the bid/asks
are tighter everywhere – making you decide you want to turn it into
an MIT trades.
Or hell – maybe the damn thing zooms up and up and you simply have a
very profitable call trade.
Whew…
That’s a lot of bullish talk when the market is tail-spinning. I’m
just pointing this all out cause it’s right here in my face.
ESI is another stock that’s flying in the face of the market today.
ESI is a very actively traded stock – both in the stock and options.
There’s always a healthy level of volaility – because it seems anytime
these education companies (ESI is ITT Technical Institute) jump out
of their shorts and command headlines – it’s not a week or 2 later
until they get bogged down with crappy headlines about how they are
documenting their income because their money comes in in the form of
government loans…and the gov LOVES poking around to see how the
money is being spent on tuition, etc.
But what I want to do here is tell you what I do on days like today.
On back to back days of markets like this. The question that you
probably have is…does your account value get slapped around when
2 days of market action happen like this?
And the answer is yes it does. Even with put protection on and
everything. So why is this? It’s entirely due to this fact: while
the move in the stock price is felt 100% dollar for dollar…the
options DON’T move dollar for dollar, and STILL have time value left
in them.
I specifically mean while there’s put protection, the puts may not
be moving yet at a $1 to $1 rate to the stock. And you only realize
the full income from selling February calls once ALL THE TIME IS
GONE (and there are still several weeks left until the Feb expiration).
Now that’s something I just couldn’t explain on my tip-toes talking
to my neighbor over the backfence. You have to be in this to know it,
see it, and feel it.
So in short – I’m not doing a damn thing – no matter what happens on
the MIT trades I’ve got going, the puts are there, they are paid for,
and as long as the whole world doesn’t end — I’ll be there to sell
more call premiums after the Feb’s expire.
Anyway – I have to get this off now. Over and out for now,
–P
Next Page »
