A pretty eventful week.
Stock market: I took it in the chin big time, but at least I took it like a trooper. It could have been much worse but I had calls written against most of my longs. However my timing to jump into the market could not have been worse. Up 20k until august expiration and now down 40k and counting. I am anxiously waiting for this month expiration on Friday. What seems strange to me is that there is only one week left until expiration, however you can get some good premiums writing out of the money calls, and I mean some of them at 10-30% above current prices. Does someone expect a violent swing to the upside this week, or it's just mispricing due to volatility? I wrote quite a few really out of the money calls, not a lot of cash, but still, at least some pocket change against the deep losses I have on paper.
Yesterday I was watching CHK getting decimated (I have 200), and decided to buy 2 January09 7.5 puts, at least not to be left empty handed. My entry price was $45 and I wrote right there 2 of what I thought were deep in the money calls at 35 and 32.5 for January, expected return was something in the range of 12-15% a year. However, it blew on the downside through my support prices and I was paralyzed, instead of closing my positions right then, I took the wait and see approach and now it's down to $17. I was thinking about how the CEO bought a load of stock in the $50s and I remembered Worldcom's CEO. The wise guys on Wall Street knew that if wcom goes under a certain price the CEO will face margin calls and they took him for a ride shorting the stock until the guy needed to sell everything. And voila, somebody asked cramer last night about chk and he said that its CEO had to sell all the stock due to margin calls. So my gut feeling was right, another "poor" CEO taken for a ride by the wise guys who “helped” him build a strong position into his company stock. Ironically, now we might see a rebound in chk, and when I bought the 2 puts I was thinking that BP put some $1B into chk so it might not go under after all; but their cash situation is not good.
What else hurts me? Umm, let's see. Everything.
BP, big position there, hope it'll keep its dividend. I sold a lot of 60 calls for this week.
COP, a smaller position 200, had many occasions to get rid of it, I did not; have Nov70 calls written against it.
EP, 400, I bought before September expiration it was unusual call activity, thought something was up, instead it went down like a rock along with all the other energy stocks. I had some calls written against it but basically useless.
EMC 1500 had similar unusual call activity in august and September, bought into it, it blew through all my deep in the money calls.
MSFT 1100, wrote October 23 and 20 calls for 7% annualized and bought at 26-27, now I am afraid it'll go through 20, unbelievable.
INTC 1500, all the October 21 calls blown up, 14-15 this week, no comment.
STON, my dividend play, went down some 50%, but I'll hang on to it.
BMY long time holding, it has a nice dividend but I don't have solid calls written against it, so it punished me.
PFE big position, and calls against it, but still, it hurts.
NRG how stupid was that? I bought because Buffett bought. Never again. The truth is it went up immediately so I might have made a quick buck there, but I wrote January deep in the money calls, and like everything else, what seemed then like deep, now it doesn't seem that deep anymore. Crazy...
V still have 100 and 2 2010 100 calls that I should have sold a long time ago. Balanced by a short 65 call January09.
PCN, PTY I really did not understand what I was doing, bought just looking at the yield and seeing that Gross has some 2M shares in PTY. Now seeing him on TV that often, I realize I don't even like the guy.
TAN, PBW, my alternative energy plays, down 50%, no comment. Good thing I got rid of some other plays, or rather they got called.
GE, lots of it long, one of my older positions, don't know why. Lots of out of the money calls written against it, it seems there is some enthusiasm for the stock in the near term, I don't get it.
CSCO short and short puts, some overall short.
QQQQ, short and short puts, some short overall.
NKE short 400, short 4 puts Oct65. Had another -400 and -4 puts Oct70 but got called away, I made something there but nowhere near the losses I got on the long side. And now, the puts seemed like a bad idea; but I did it before earnings, and immediately after earnings it went up decently, so it looked good at the time. Anyway, the puts help me, in that I don't need to make the hardest decision: when to cover.
PG shorted 1k at 67 or so (some was due to last month naked calls) and wrote some October puts at 62.5. amazingly it went thorough 62.5 like a knife through butter. I should have waited more.
KFT, WMT, CL all short and/or wrote naked calls. I wanted to go against the crowd mentality: recession proof stocks, blah, blah. In fact I was thinking that generics will go better in a recession.
XLY shorts but have short puts as well and I needed to cover massive amounts, 2k, because my broker “could not locate the stock for borrowing”. Same happened with SPY. So basically you cannot short at will, that's why I went for the safe plays like PG. Strangely, I could not short WMT for a long time.
Stock market: I took it in the chin big time, but at least I took it like a trooper. It could have been much worse but I had calls written against most of my longs. However my timing to jump into the market could not have been worse. Up 20k until august expiration and now down 40k and counting. I am anxiously waiting for this month expiration on Friday. What seems strange to me is that there is only one week left until expiration, however you can get some good premiums writing out of the money calls, and I mean some of them at 10-30% above current prices. Does someone expect a violent swing to the upside this week, or it's just mispricing due to volatility? I wrote quite a few really out of the money calls, not a lot of cash, but still, at least some pocket change against the deep losses I have on paper.
Yesterday I was watching CHK getting decimated (I have 200), and decided to buy 2 January09 7.5 puts, at least not to be left empty handed. My entry price was $45 and I wrote right there 2 of what I thought were deep in the money calls at 35 and 32.5 for January, expected return was something in the range of 12-15% a year. However, it blew on the downside through my support prices and I was paralyzed, instead of closing my positions right then, I took the wait and see approach and now it's down to $17. I was thinking about how the CEO bought a load of stock in the $50s and I remembered Worldcom's CEO. The wise guys on Wall Street knew that if wcom goes under a certain price the CEO will face margin calls and they took him for a ride shorting the stock until the guy needed to sell everything. And voila, somebody asked cramer last night about chk and he said that its CEO had to sell all the stock due to margin calls. So my gut feeling was right, another "poor" CEO taken for a ride by the wise guys who “helped” him build a strong position into his company stock. Ironically, now we might see a rebound in chk, and when I bought the 2 puts I was thinking that BP put some $1B into chk so it might not go under after all; but their cash situation is not good.
What else hurts me? Umm, let's see. Everything.
BP, big position there, hope it'll keep its dividend. I sold a lot of 60 calls for this week.
COP, a smaller position 200, had many occasions to get rid of it, I did not; have Nov70 calls written against it.
EP, 400, I bought before September expiration it was unusual call activity, thought something was up, instead it went down like a rock along with all the other energy stocks. I had some calls written against it but basically useless.
EMC 1500 had similar unusual call activity in august and September, bought into it, it blew through all my deep in the money calls.
MSFT 1100, wrote October 23 and 20 calls for 7% annualized and bought at 26-27, now I am afraid it'll go through 20, unbelievable.
INTC 1500, all the October 21 calls blown up, 14-15 this week, no comment.
STON, my dividend play, went down some 50%, but I'll hang on to it.
BMY long time holding, it has a nice dividend but I don't have solid calls written against it, so it punished me.
PFE big position, and calls against it, but still, it hurts.
NRG how stupid was that? I bought because Buffett bought. Never again. The truth is it went up immediately so I might have made a quick buck there, but I wrote January deep in the money calls, and like everything else, what seemed then like deep, now it doesn't seem that deep anymore. Crazy...
V still have 100 and 2 2010 100 calls that I should have sold a long time ago. Balanced by a short 65 call January09.
PCN, PTY I really did not understand what I was doing, bought just looking at the yield and seeing that Gross has some 2M shares in PTY. Now seeing him on TV that often, I realize I don't even like the guy.
TAN, PBW, my alternative energy plays, down 50%, no comment. Good thing I got rid of some other plays, or rather they got called.
GE, lots of it long, one of my older positions, don't know why. Lots of out of the money calls written against it, it seems there is some enthusiasm for the stock in the near term, I don't get it.
CSCO short and short puts, some overall short.
QQQQ, short and short puts, some short overall.
NKE short 400, short 4 puts Oct65. Had another -400 and -4 puts Oct70 but got called away, I made something there but nowhere near the losses I got on the long side. And now, the puts seemed like a bad idea; but I did it before earnings, and immediately after earnings it went up decently, so it looked good at the time. Anyway, the puts help me, in that I don't need to make the hardest decision: when to cover.
PG shorted 1k at 67 or so (some was due to last month naked calls) and wrote some October puts at 62.5. amazingly it went thorough 62.5 like a knife through butter. I should have waited more.
KFT, WMT, CL all short and/or wrote naked calls. I wanted to go against the crowd mentality: recession proof stocks, blah, blah. In fact I was thinking that generics will go better in a recession.
XLY shorts but have short puts as well and I needed to cover massive amounts, 2k, because my broker “could not locate the stock for borrowing”. Same happened with SPY. So basically you cannot short at will, that's why I went for the safe plays like PG. Strangely, I could not short WMT for a long time.
posted by cristi oprescu at 8:49 AM
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