Apple Says Bite ME!

The CEO of AAPL says that phone sales are accelerating in China. The low range yesterday was a mark of $92, now $109.  Now very few people got to pickup AAPL at $92, however the market flux gave us some great opportunities. One of the things that influenced the price of options was the demand to protect their portfolio (beware) for you are paying the high prices for protecting yourself when the masses are headed for the door.  This is why we suggest that you learn to naturally hedge your portfolio on a regular basis.  One of the trades we put on yesterday was a purchase of the SPY at $192.63 and sold the 192 call option for $4.25.  This gave us some downside protection and upside as well.  You would think the option would have increased in value with the SPY trading above $194 but it was not.  The reason is the price flux yesterday caused the prices to be difficult for the option creators.  We were able to close the calls today with a profit and lighten our load in SPY with a profit on that position as well.  Another trade we put on yesterday was selling the AAPL puts, as we expected AAPL to rebound with statements from the CEO that sales were accelerating.  This move was also a winner.

We continue to believe that AAPL is a long term buy and selling calls against any new position makes sense, and mixing up your buying on weakness is a good move.

As always, consult your advisor before investing of any kind. Options are nOT suitable for all investors and people can and do lose money.


Three Minute Window

The market opened down over 1000 points. What did you do? One thing we did not do is sell.  The SPY was slightly above 187 at open an within three minutes it was 192.  In times like these you don’t panic.  Now that premiums are very high for Calls and puts, it’s time to take advantage.  We bought some SPY at $192+ and sold the at the money calls for over $4.00 for the week.  We may see more selling , however we have hedged the downside another 2%.  If you believe the market will not rise in the future you either stay in cash or buy/sell Puts using a PUT spread.  In other words buy the SPY 192 and sell the 188 to limit you loss. 

The key is not to panic and sell. Here is another example, BX was $30 at open and moved up to $33.75 in a matter of minutes. Wow what a great move up for those that are buyers.  You can ease you way in on days like these VS running away with the bears.

As always consult your advisor before investing of any kind. Options are not suitable for all investors and people can and do lose money.

Cover Me UP!

Owning stocks without any hedge is the kin to being naked.  You are totally exposed to the downside without any protection. If you are an aggressive investor that is how you handle markets like these. If however you  want to be more conservative, with the prospect of lowering your cost basis, creating income, and maximizing yields, the Covered CAll strategy is for you.

The Sensei wants you to look at top quality stocks that pay a dividend. The dividends are NOT guaranteed and we can only go by past performance, which is NO guarantee.  The dividend does help buffer the downside.

Here are a few stocks that if they don’t move up, you can still make money. The first one is T, it’s dividend is above 5%.  The next stock we like is BX, with a 7% dividend, run by investment managers. If you own the stock you get the dividend, even if you have sold calls against your position.

As always consult your advisor before investing of any kind, options are not suitable for all investors, people can and do lose money.

Heads I win, tails you lose!

When you play with these rules you feel pretty confident about winning. This is the way we feel when we are playing the option field. This morning our Sensei sold PUTS on FB. Winner

We bought calls on AAPL. Winner

We bought calls for SPY. Winner

The secret here is playing where the rules are in your favor. One of the biggest mistakes option buyers make is not giving themselves enough time.  The market needs time to move in both directions. In these cases we bought or sold given ourselves until the end of the month.   We therefore don’t rely on one day, but have an opportunity to dollar cost average, ladder our options, and have both time and in the money situations.

Time stops for no one and when you don’t give yourself enough time you are at a distinct disadvantage. 

One of the next big mistakes is being greedy.  Yes, it is sweet to double your money, however this involves tremendous risk.  Last week we spoke of PUTS against DIS, they were up 1500% and they vanished to worthless.  So plan ahead of time for taking profits.

As always consult your advisor before investing of any kind. Options are NOT suitable for all investors and people can and do lose money.

No Guts No Glory, that what Custer said.

You probably know how Custer charged and got murdered. This is the case with those that just dive in. In cases where the market shows signs of weakness, “pay attention”.  We suggest that you use PUTS to allow you to buy some of your favorable positions at a lower price.  An example wound be (T), this stock pays a 5.40% dividend at this price. This gives you some downside protection.  If you were to sell the August 21, 33 PUTS, you would pickup .20 in premium. This you are waiting for the stock to come to you. Caveat, as a PUT buyer if the stock goes much lower your purchase price is $33.  The stock would have to drop another 2% from this point, Our Sensei feels this is a good play.  We love the dividend payout and it’s a good long term hold.

As always consult your advisor before investing of any kind. Options are not suitable for all investors, people can and do lose money.

OK I’ll Play

The market is moving down as our Sensei said yesterday. The question is how do you play it? The way that play it, is that we look for a bottoming in the day and buy calls several weeks out as the premium has decreased significantly.  The drop in price affects the premium as well as the pressure brought by buyers/sellers.  This morning we bought the SPY August 28 , 205 for $3.01.

We are NOT looking to hold the calls until maturity.  We are however looking for support in the market and the price to appreciate.  As with any game, play when the situation looks like it is in your favor. In this trade we believe the benefits of jumping in are there. 

As always consult your advisor before investing of any kind. Options are not suitable for all investors and people can and do lose money.

AT 3:12 pm, the calls are selling for $4.60. That is a 50% upside. GREAT CALL!

PURR fect day for options

For those of you new to the options market here is a key to your success. When you see the market with extremely high volatility, that is a point of entry.  The market has more down days then it does up day (on average). This means that subsequent down days may have a dead cat bounce. This means that the day is positive but not a trend breaker.  The trend lately has been to the downside.  As you may have noticed the market is negative for the year. Now with the extremes in play we are using days like today to either sell additional PUTS way out of the money or buy in the money calls in hopes of a turn sometime through out the day.  Today we bought S&P calls and sold them after a 10% increase in price. We do this by watching for a settling price and then slowly accumulate the calls if we entered to high. We look to dollar cost average. Being patient on the market and being patient to dollar cost average wisely.  WE did add some AAPL to our portfolio as we think the brand is one people all over the world are willing to pay for.  IN addition we closed the covered calls we sold yesterday as we have accumulated a significant portion of the premium overnight. 

As always consult your advisor before investing of any kind. Options are not SUITABLE for all investors, people can and do lose money.

Watch Out For High Tide

Remember that a rising tide raises all boats. IN other words your position may not be in great shape even though its’ rising.  You must examine your positions from time to time to make sure no structural damage exists.  A good example would be TWTR.  If you see the options on this stock you’ll see that people are expecting that someone will be stepping forward to buy the firm.  You don’t want to buy a stock based on that expectation.  You may take a shot with an option but invest your capital wisely, avoid large losses, and hire a coach. 

You may think you can’t afford a coach, I would ask can you afford not to have one? Look at the Sensei’s recent calls and you’ll clearly see why a membership at optionsdojo is a great investment. The educational value alone can make you a better investor.

Take Them While YOu Have Them Profits

Earlier today we talked about DIS, and how the PUTS had been up as much as 14X the original investment. Well things can change, at this time the return is roughly 6X. Not something to cry about but you need to take profits when they appear unlikely to rise any further. One of the techniques you can use to preserve your profits is using a STOP LOSS.  This is where you place a price that you want to sell your position or buy if need be, where you are still in the black.  Now it is possible for you to get less then your STOP LOSS if the next trade lower is much lower, or you carry it over to the next day and the market opens down, your shares will be sold.

We suggest you speak to your financial advisor before attempting this yourself.  An error can cost you.  One caveat is that in a volatile stock the prices can swing in a short time and you would be out, when you should have help. The other side of the stop loss is a LIMIT ORDER, this is a price on the upside to sell, or the stated price you wish to buy at. A stock can move at anytime and the market order makes the next trade up or down, if you want to pay NO MORE then a specific amount, you can place the limit order so that your order can ONLY be fulfilled at that price.

As always consult your advisor before investing of any kind. Options are not suitable for all investors and people can and do lose money.

OOPS My Shorts

The art of shorting stock goes as follows. If you believe the stock is going to fall you can buy a PUT and profit as the stock goes down.  The amount at risk is the amount you paid for the PUT.  You cannot lose any additional money. Now selling short means that you sell the stock at the current market price and hope that it goes down. You are not paying a premium. You make money as soon as the stock declines. Here is a breakdown of why SHORTS are used instead of the option.

Currently AAPL is selling for $114.80. If you bought the August 14, $114 PUT for $1.72, assuming AAPl will decline you won’t make money until the stock is below $114 minus $1.72 or breakeven is $112.28.  You have $1.72 at risk per share.

Assume you short, you are selling AAPl at it’s current price of $114.80 and if it declines to $112.28 you made $1.72 per share. Now here are the caveats.  If the stock moves up you lose dollar for dollar. So if AAPL moves to $118 per share you are down $3.20 per share. You maximum loss is unlimited, so your risk is greater selling short.  The other caveat is that you actually borrow the shares when you sell, so you incur a carrying or interest charge.  We suggest that you buy a PUT if you are definitely in the camp of the stock on the downside.

As always consult your advisor before investing of any kind. Options are not suitable for all investors and people can and do lose money.