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[Weekend Summary]
Dear Member,
You may recall that I had been able to engineer a free trade on the Sept 22.50 calls on CYBX after adjusting a bearish call spread to lock in a nice profit. This week, with only three days to go, I was able to sell those calls as well and increase the profit.
The markets certainly stayed in a tight trading range this past week, not yet signalling a direction. The NASDAQ rode along its current support around 1900, the DOW Industrials seem stuck around 10,300 and the SP-500 slept in a hammock between 1120 and 1130. This kind of market often bodes well for calendar spreads. However, my put calendar spread on AZN did not cooperate. The stock gapped down over $2 on Monday morning requiring adjustment. I bought back the Sept 45 puts at a loss and held onto the Jan 45 puts I was long. Ultimately I closed out that position as well and made $1.05 on that leg. However, the trade lost $1.50 overall.
Promising trades were hard to find. I did open a credit spread on Ebay (EBAY)when it was unable to hold above resistance. I sold the Oct 95 calls (XBAJS) and bought the Oct 100 calls (XBAJT) for a net credit of $1.25 (a positive $1,250 on 10 contracts) before commissions, but I'll need to watch this one closely as the stock runs along the support/resistance line near $92.50. If the stock stays below 95 by expiration I keep the $1,250. If it starts to run up, I'll be buying back the 95 calls I sold and will try to profit on the move up in the 100 calls.
I have been in the Harley Davidson (HDI) Feb 60 straddle for a little over a month and the volatility has increased somewhat. HDI has been trading between 57 and 63. Straddles often require patience and HDI is no exception. A decent move in volatility and/or a strong move in the stock (in either direction) should make this trade profitable.
I would really like to see some direction in the market. I don't care which way. Maybe Mr. Greenspan will fire it up next week. He certainly has a propensity to move the market.
One thing to keep in mind that I have learned over my years of options trading is that many trades will lose. The key is to take the losses when necessary and keep them in check. Generally, the first loss is the best loss. When positions become profitable, try not to get too excited and take the profits prematurely. Instead, let them run and follow behind them with smart stops. Recoginizing there will be losses, cutting those losses and recognizing there will be profits and learning how to let the profits run is what makes a good trader.
Have a great weekend!
Sincerly,
Bill Kraft
CutLoss, Inc.
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