I entered an ETF position yesterday, sort of on a whim but with some idea of what I was getting into.
VXX is the ipath mid term volatility index ETF. It is a 1:1 rather than a leveraged ETF so tracking should be mostly linear...even though the price is higher than the VIX value. I figured that it is very low now...even though it could go as low as 15 it closed out at 20.1 yesterday. VXX closed out at about $26.80.
Actually, upon closer inspection the relationship is not necessarily linear as it tracks lower at some key points wehre it should not be quite so low. I suppose, like a leveraged ETF it has some medium term tracking problems due to inherent costs and percentage move tracking.
I set a limit order for $27.50 and was obviously filled at that price as it came down. My stop is set at $25 as the lowest it has been was $26.42 when the VIX hit the mid 19's. My current target would be $34 as that is the resistance level so far. If that is broken the next is $41.
This could be a position to hold for the next drop in the market as the correlation is close enough for my shorter timeframes.
The thing about the VIX is that as it approaches zero it tends to slow down as zero is not a value that it could reach, in practise. The lowest it has ever been, since 1992, is 9.31 late in 1993 and under 10 a few times between 2005 and 2007.
Historically it tends to follow trending models and the 200DMA is a nice one for the medium term. The exception was the meltdown in late 2008...which threw most historical models out the window for any style of trend trading.
I am, according to the chart, positioned for a counter trend breakout. Due to the nature of the VIX that is a relatively safe bet at these fairly low numbers.
Jeff.
Questrade, My direct access discount broker.
Friday, February 26, 2010
Thursday, February 25, 2010
Forced short covering...again...odds and sods
I have been dabbling in stocks again. Trying out another service. I'm a sucker for trying these new services but, like I have mentioned before, only of they come with a money back trial period.
The reason I liked the look of this particular service, besides being associated with a reputable group, it does not stick with one trading vehicle. Trades are all between days and weeks to a few months so there is no long term plan and no concentration on really short term trades. It also trades stocks long and short, some options and ETFs.
The issue arises with the short again. I had a very small short position in one stock, 15 shares, and I got the call today that it was going to have to be covered by 1500h due to a lack of inventory. The broker was going to see about borrowing more to enable me to keep my short. I hadn't heard back so I covered for a small loss at 1500h only to come home to a message on my machine stating that I could keep the position... Seeing as I got this call once I expect that I would get it again so this stock is off of my short list... literally.
My Optioneer trades are going along fine. I just had my account balance transferred to the new account so I can trade freely again..it was tied up for the transfer period after last week's expiry.
Overall my account is up, by exactly how much I will know better tomorrow, but the February loosing trades have taken their toll. All in all I am down about a month's worth of profits less the adjustment spreads. It seems larger than it needs to as I was increasing my account with cash deposits and the past profits were based on slightly different rules. I did not have as many trades on the go. One month's profits today is more than last month's which was larger than the month before that.
I am up to 7.5 trade capability now and it is all available in one account and I can trade the Eminis to use up the odd amounts as well. Placing additional call spreads on the fly will, over time, recoup the last losses. Given the expectation of very few losses and having no expectation of being able to place extra above margin call spreads I suspect that the two will cancel each other out at worst, at best I can boost my returns with these spreads.
All in all I am satisfied with where I am in trading right now...although I am going to add a bit of daytrading back into my toolbox next week. I've added some cash to my margin account to boost the buying power up to $20K or so. I am planning on up to 5 trades in the first hour of trading. Sort of trying out an old idea of trading off the start while taking advantage of some data input form a new source. We'll see where that takes me.
Jeff.
The reason I liked the look of this particular service, besides being associated with a reputable group, it does not stick with one trading vehicle. Trades are all between days and weeks to a few months so there is no long term plan and no concentration on really short term trades. It also trades stocks long and short, some options and ETFs.
The issue arises with the short again. I had a very small short position in one stock, 15 shares, and I got the call today that it was going to have to be covered by 1500h due to a lack of inventory. The broker was going to see about borrowing more to enable me to keep my short. I hadn't heard back so I covered for a small loss at 1500h only to come home to a message on my machine stating that I could keep the position... Seeing as I got this call once I expect that I would get it again so this stock is off of my short list... literally.
My Optioneer trades are going along fine. I just had my account balance transferred to the new account so I can trade freely again..it was tied up for the transfer period after last week's expiry.
Overall my account is up, by exactly how much I will know better tomorrow, but the February loosing trades have taken their toll. All in all I am down about a month's worth of profits less the adjustment spreads. It seems larger than it needs to as I was increasing my account with cash deposits and the past profits were based on slightly different rules. I did not have as many trades on the go. One month's profits today is more than last month's which was larger than the month before that.
I am up to 7.5 trade capability now and it is all available in one account and I can trade the Eminis to use up the odd amounts as well. Placing additional call spreads on the fly will, over time, recoup the last losses. Given the expectation of very few losses and having no expectation of being able to place extra above margin call spreads I suspect that the two will cancel each other out at worst, at best I can boost my returns with these spreads.
All in all I am satisfied with where I am in trading right now...although I am going to add a bit of daytrading back into my toolbox next week. I've added some cash to my margin account to boost the buying power up to $20K or so. I am planning on up to 5 trades in the first hour of trading. Sort of trying out an old idea of trading off the start while taking advantage of some data input form a new source. We'll see where that takes me.
Jeff.
Friday, February 19, 2010
Continuation
I see that the Fed raised rates by 0.5% this morning...so. Markets absorbed that news and just kept on trucking.
In closing some of my old trades I see that some previous long term options trades are getting close to the money and one has actually gone slightly ITM...nice but of little import to me at this point as I have written those off as not worth my attention any more...they were some of the more speculative trades from one of the options advisory services that I tried out.
One trade was a financial that just raised it's dividend by 17% this week and the stock has jumped nicely which bumped my options up. There is still a bit of time left on this one so I will ride it and see where it goes from here.
I sold off one recent buy for a nice 14% gain and closed some losers for around 5% losses. Seeing as I am just getting wound up in these trades I am not too excited either way about what to expect...after all this is one more trial.
On the Optioneer front, I had a number of trades expire today making me some nice cash. I cannot get the updated valuations yet to see where I sit overall as the data has not been crunched. I may get a chance to do some math this weekend and update my progress page. With the couple of losing trade legs closed I don't expect any great profits for February...At least there are no great losses. I am planning on watching for some EOM March trades next week aiming to cherry pick some nice point spreads. Hopefully I can set some "extra" call spreads into some of these trades boosting my profits.
Jeff.
In closing some of my old trades I see that some previous long term options trades are getting close to the money and one has actually gone slightly ITM...nice but of little import to me at this point as I have written those off as not worth my attention any more...they were some of the more speculative trades from one of the options advisory services that I tried out.
One trade was a financial that just raised it's dividend by 17% this week and the stock has jumped nicely which bumped my options up. There is still a bit of time left on this one so I will ride it and see where it goes from here.
I sold off one recent buy for a nice 14% gain and closed some losers for around 5% losses. Seeing as I am just getting wound up in these trades I am not too excited either way about what to expect...after all this is one more trial.
On the Optioneer front, I had a number of trades expire today making me some nice cash. I cannot get the updated valuations yet to see where I sit overall as the data has not been crunched. I may get a chance to do some math this weekend and update my progress page. With the couple of losing trade legs closed I don't expect any great profits for February...At least there are no great losses. I am planning on watching for some EOM March trades next week aiming to cherry pick some nice point spreads. Hopefully I can set some "extra" call spreads into some of these trades boosting my profits.
Jeff.
Wednesday, February 17, 2010
Hindsight and the call
Well, given the current market I certainly wish I had stuck to my original call. I had some discussion with my broker and I suggested that the S&P 500 would rally back to about this level before deciding where to go next. My closest put strikes were the 1040 and 1035, which I closed. The level never hit 1040 but did head under 1050 for a bit. So in hindsight I was right, but decided not to take the risk.
I left my 1025 strikes alone though and placed some recouping call spreads and got into some low put strike trades for March expiry. I am now waiting for my cash to clear trades so I can get into more March trades, likely just the EOM at this point though as the 30 day mark is today or tomorrow.
The trade service trades are going OK, two of my short positions stopped out yesterday for the targeted losses...perhaps the last will cover today as well. The long trades are fairing well enough. I have a reasonable confidence that these two services may actually pay for themselves. I say it that way as I am only trading small under 100 share positions so the odds of making huge gains are stacked against me as breakeven is anywhere from a 20 cent to $1 move in the underlying... on stocks that range from $5 to $50 that is a substantial enough move to require.
Having said that the targeted profits are in the $3 to $10 range so the risk is not so great.
Off to more training today so I will be stuck away from the charts and will have to rely on my stops and targets to monitor my trades for me. Probably a good thing to wean myself from habitually checking in anyway.
Jeff.
I left my 1025 strikes alone though and placed some recouping call spreads and got into some low put strike trades for March expiry. I am now waiting for my cash to clear trades so I can get into more March trades, likely just the EOM at this point though as the 30 day mark is today or tomorrow.
The trade service trades are going OK, two of my short positions stopped out yesterday for the targeted losses...perhaps the last will cover today as well. The long trades are fairing well enough. I have a reasonable confidence that these two services may actually pay for themselves. I say it that way as I am only trading small under 100 share positions so the odds of making huge gains are stacked against me as breakeven is anywhere from a 20 cent to $1 move in the underlying... on stocks that range from $5 to $50 that is a substantial enough move to require.
Having said that the targeted profits are in the $3 to $10 range so the risk is not so great.
Off to more training today so I will be stuck away from the charts and will have to rely on my stops and targets to monitor my trades for me. Probably a good thing to wean myself from habitually checking in anyway.
Jeff.
Monday, February 15, 2010
Just can't help trying promising services
Well, I signed up for two more trial memberships for trade advisory services last week.
The first is a stock version of the option trading service that I tried out a little while ago. That one I cancelled due to the strategies not fitting with my account setup or my ideas...naked option writing is not my foreseable future. As usual, I enteredi to the service with the intention of trying it with my active account, no paper trading here. Now, the first week didn't pan out so well as they opened with some long stock positions right as the correction took back some profits. I have closed two of the four trades for small losses but they were small trades anyway.
The second is a new to me service that takes long and short stock and ETF trades as well as some long options (both calls and puts). I already liked his approach and the guarantee was 30 days but it was only $100 for the first quarter. Some of the grades are already showing paper gains. He sets a target entry and exit price as well as stop loss settings...it doesn't get any easier than that. I already put three short positions on. This service looks like this could be a keeper as he reacts to the changing market quickly. I actually signed up for a full annual membership today with a half price deal...pro-rated cancellation policy is in effect after the first 30 days.
I'll track these on my performance page as I get time to set them up on their own tracking spreadsheets. I transferred $5,000 into my kEvin account to give me some playing room (3 times margin if I choose to use it).
Meanwhile I am just waiting out this week to see where my Optioneer trades end up at expiry. I have some losses to book and some adjustment trade profits to figure out. I am spending the week in Missouria on training course so I my have some spare time in the evenings to play with the spreadsheets.
Jeff.
The first is a stock version of the option trading service that I tried out a little while ago. That one I cancelled due to the strategies not fitting with my account setup or my ideas...naked option writing is not my foreseable future. As usual, I enteredi to the service with the intention of trying it with my active account, no paper trading here. Now, the first week didn't pan out so well as they opened with some long stock positions right as the correction took back some profits. I have closed two of the four trades for small losses but they were small trades anyway.
The second is a new to me service that takes long and short stock and ETF trades as well as some long options (both calls and puts). I already liked his approach and the guarantee was 30 days but it was only $100 for the first quarter. Some of the grades are already showing paper gains. He sets a target entry and exit price as well as stop loss settings...it doesn't get any easier than that. I already put three short positions on. This service looks like this could be a keeper as he reacts to the changing market quickly. I actually signed up for a full annual membership today with a half price deal...pro-rated cancellation policy is in effect after the first 30 days.
I'll track these on my performance page as I get time to set them up on their own tracking spreadsheets. I transferred $5,000 into my kEvin account to give me some playing room (3 times margin if I choose to use it).
Meanwhile I am just waiting out this week to see where my Optioneer trades end up at expiry. I have some losses to book and some adjustment trade profits to figure out. I am spending the week in Missouria on training course so I my have some spare time in the evenings to play with the spreadsheets.
Jeff.
Wednesday, February 10, 2010
Update...nothing major.
It's been over a week since my last post but it is not because I haven't been trading. I have been very busy at work and just finished a large proposal today only to have to book flights for next week as I head to Missouri for a training week.
On the trading front I had a couple of close trades that I closed partially to avoid large losses and I have adjusted them by opening matching lower strike put spreads to recoup some of the loss. I am also looking at increasing the call sides of some of the best iron condor trades to boost the returns by a couple of percent. I have not taken the time to do the math on my current progress...I'll do that after expiry next week and again at EOM expiry.
Actually, that is worth looking closer at. I can run some call spreads without eating up my working capital as the broker/accountants do not consider call spreads, as far away as I set them, a risk. In theory I could run only call spreads and have a very safe account and probably increase my "working capital allowance" by 30% or so.
Math time.
The last trade that I placed had the call spread worth 0.75 points and the put spread worth 1.05 points. That is (net commissions) $148.50 and $223.50 respectively or 1.8 points for the entire trade...$372.
Two things can be taken into account here. Assuming that the trade risk is the typical $5000 (less profits...but let's keep the math simple) for each iron condor. The call side is $5000 and the put side is also $5000 but the put side is the only real risky part, which only stands to reason that it is also the more profitable part. Even though there is $10,000 of risk on the table they only count the put $5000.
I can place a call spread and risk $5000 with out always having to foot the $5000, in fact I have two such trades right now where the call "risk" is over my allowable spare cash balance...but with a call at 1205 there is VERY little chance of it getting nailed. I may have a margin call if the market took off all of a sudden though...either I would have to close the trade, close another trade or send more cash to cover the potential loss.
Back to my math for a moment.
For a full iron condor with $148.50 in call premium credit and $223.50 in put premium credit if I doubled the call side I would have $297 in call only credit PLUS the put side for a total of $520.50 while only putting up $5000 of capital. This makes the return on "assumed risk" 10.4%.
That beats my 6% target hands down, or $300 per trade per month.
Assume that I can run 9 trades (simpler math here, 6% is $2700 in profits), the calls are worth 1/3 of the total trade and I can either double the calls on 3 of them or trade only calls I could see two outcomes.
1) bump the calls on two returns (9 trades x $300 + 3 calls at $100 = $3000) that's $300 a month or the equivalent of one full trade.
2) trade only call spreads and use an additional 30% capital ...ooops I hadn't thought that one through. I would have to be able to make 3 times the number of trades to only hit the same profit level...that is a 300% margin allowance... that is more than pushing it.
So, while my "all in " approach has me not able to cherry pick the trades I certainly can cherry pick the trades that have better call premiums to increase.
Having said that, I should be able to add to an existing iron condor while it is in process. Place a trade, fill and a week later if the S&P500 levels go up and the call premiums rise with the level I can "top off" the trade with an extra, shorter term call spread.
Nice.
Jeff.
On the trading front I had a couple of close trades that I closed partially to avoid large losses and I have adjusted them by opening matching lower strike put spreads to recoup some of the loss. I am also looking at increasing the call sides of some of the best iron condor trades to boost the returns by a couple of percent. I have not taken the time to do the math on my current progress...I'll do that after expiry next week and again at EOM expiry.
Actually, that is worth looking closer at. I can run some call spreads without eating up my working capital as the broker/accountants do not consider call spreads, as far away as I set them, a risk. In theory I could run only call spreads and have a very safe account and probably increase my "working capital allowance" by 30% or so.
Math time.
The last trade that I placed had the call spread worth 0.75 points and the put spread worth 1.05 points. That is (net commissions) $148.50 and $223.50 respectively or 1.8 points for the entire trade...$372.
Two things can be taken into account here. Assuming that the trade risk is the typical $5000 (less profits...but let's keep the math simple) for each iron condor. The call side is $5000 and the put side is also $5000 but the put side is the only real risky part, which only stands to reason that it is also the more profitable part. Even though there is $10,000 of risk on the table they only count the put $5000.
I can place a call spread and risk $5000 with out always having to foot the $5000, in fact I have two such trades right now where the call "risk" is over my allowable spare cash balance...but with a call at 1205 there is VERY little chance of it getting nailed. I may have a margin call if the market took off all of a sudden though...either I would have to close the trade, close another trade or send more cash to cover the potential loss.
Back to my math for a moment.
For a full iron condor with $148.50 in call premium credit and $223.50 in put premium credit if I doubled the call side I would have $297 in call only credit PLUS the put side for a total of $520.50 while only putting up $5000 of capital. This makes the return on "assumed risk" 10.4%.
That beats my 6% target hands down, or $300 per trade per month.
Assume that I can run 9 trades (simpler math here, 6% is $2700 in profits), the calls are worth 1/3 of the total trade and I can either double the calls on 3 of them or trade only calls I could see two outcomes.
1) bump the calls on two returns (9 trades x $300 + 3 calls at $100 = $3000) that's $300 a month or the equivalent of one full trade.
2) trade only call spreads and use an additional 30% capital ...ooops I hadn't thought that one through. I would have to be able to make 3 times the number of trades to only hit the same profit level...that is a 300% margin allowance... that is more than pushing it.
So, while my "all in " approach has me not able to cherry pick the trades I certainly can cherry pick the trades that have better call premiums to increase.
Having said that, I should be able to add to an existing iron condor while it is in process. Place a trade, fill and a week later if the S&P500 levels go up and the call premiums rise with the level I can "top off" the trade with an extra, shorter term call spread.
Nice.
Jeff.
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