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Del
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Post by Del »

Ahoy!

XLE woke up hungry. It's trading near 89 during morning coffee. Maybe I will not get assigned today.

This is double-good news for me. For one, I have a put on Feb. 24 at strike 91, which will very likely get assigned. That could see me holding more XLE than I really want at this time and account size, and I'd have to make some difficult decisions.

But more urgently, my monthly condor on SPX expires today, and the index is trading dangerously close to my bottom price. I'm biting my nails and "praying" for some Friday exuberance to keep me out of trouble. I'm very happy if my energy sector leads the way up.

So far, so good. But Mr. Market is still just sipping his first cup. It's going to be a long day!
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Post by Del »

And, boy! What a day it was!

This was a fine day to enjoy holding XLE! Crude oil prices rose 2.3%; XLE jumped 3.9%. XLE closed at 90.21.

The net result was a nice little "up" candle for SPX, which was all I needed.

I also sold a new condor on SPX to expire on March 10.
=====================

Several milestones accomplished today:

$10,000 in net sales of condors, year-to-date (Week 7 of trading).

Remember that $20,000 I borrowed from home equity to increase my trading fund? I drew my first payment from earnings today ($625). By ratio, I earned $2600 on that $20k. So I'm still holding $2k after debt service.

Still, this has been extraordinary performance. Almost twice what I budgeted for at the start of the year. I must be careful to avoid expecting this pace through the rest of the year. It's still early.

Hard assets:
Half in XLE, half in cash.

Soft assets:
35% of my value secures active condor contracts.
9% of account value secures short puts on XLE.
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Post by sweetandsour »

Congrats Del!
The Indians will not bother you now, on account of ... you are touched.
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Post by Del »

sweetandsour wrote: 10 Feb 2023, 19:15 Congrats Del!
What are you hearing lately about the Strategic Petroleum Reserve?

At one point, Biden said that he would buy to restock when the price per barrel dropped below $80. West Texas Intermediate has been mostly trading under $80 since late November.

Oh wait... I just found a chart:
https://ycharts.com/indicators/us_endin ... um_reserve

SPR has a capacity of 720 million barrels.
During the Trump era, levels were steady around 640 M barrels.
Trump wanted to fill the SPR to max when oil was $20 - $25 per barrel, but Democrats in Congress would not allow it.
A year ago, level was 588 M barrels.
Current level is flat at 371 M barrels since December. There is no sign of any increase from Biden's low.

Oil prices are not going to get any cheaper than this for a very long time. China is finally gearing up to recover from their covid policies. India is growing steadily. Russia does not show any willingness to steady peace in Ukraine. Biden isn't going to let America drill from our own reserves.

For the time being, Biden, Xi, and Putin are controlling oil prices by policy rather than market demand.

Many analysts are predicting an increase in oil (and gasoline) prices down the road. (But what do they know, right?)
https://news.yahoo.com/oil-prices-predi ... 54199.html
https://capital.com/oil-price-forecast

On the other hand, analysts are a bit dodgy as to whether Energy stocks will out-perform the broad market as they did last year. I am still going to hold XLE in my trading fund. I don't think the run is all done yet. The fundamentals are all very strong.
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Post by sweetandsour »

Del wrote: 11 Feb 2023, 08:48
sweetandsour wrote: 10 Feb 2023, 19:15 Congrats Del!
What are you hearing lately about the Strategic Petroleum Reserve?

At one point, Biden said that he would buy to restock when the price per barrel dropped below $80. West Texas Intermediate has been mostly trading under $80 since late November.

Oh wait... I just found a chart:
https://ycharts.com/indicators/us_endin ... um_reserve

SPR has a capacity of 720 million barrels.
During the Trump era, levels were steady around 640 M barrels.
Trump wanted to fill the SPR to max when oil was $20 - $25 per barrel, but Democrats in Congress would not allow it.
A year ago, level was 588 M barrels.
Current level is flat at 371 M barrels since December. There is no sign of any increase from Biden's low.

Oil prices are not going to get any cheaper than this for a very long time. China is finally gearing up to recover from their covid policies. India is growing steadily. Russia does not show any willingness to steady peace in Ukraine. Biden isn't going to let America drill from our own reserves.

For the time being, Biden, Xi, and Putin are controlling oil prices by policy rather than market demand.

Many analysts are predicting an increase in oil (and gasoline) prices down the road. (But what do they know, right?)
https://news.yahoo.com/oil-prices-predi ... 54199.html
https://capital.com/oil-price-forecast

On the other hand, analysts are a bit dodgy as to whether Energy stocks will out-perform the broad market as they did last year. I am still going to hold XLE in my trading fund. I don't think the run is all done yet. The fundamentals are all very strong.
Energy market is difficult to predict right now,, for me anyway. But what about the CPI announcement tomorrow, and what will the market do? What is a good option to sell today, with tomorrow's CPI expectation? I don't see prices coming down locally here, not overall, including gas.
The Indians will not bother you now, on account of ... you are touched.
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Post by Del »

sweetandsour wrote: 13 Feb 2023, 06:38
Energy market is difficult to predict right now,, for me anyway. But what about the CPI announcement tomorrow, and what will the market do? What is a good option to sell today, with tomorrow's CPI expectation? I don't see prices coming down locally here, not overall, including gas.
I was studying XLE over the weekend. I noticed all of the long tails on the bottoms of recent candles, indicating that the market tends to drop in the morning and recover during the day.

After the exuberant trading in XLE on Friday (closed at 90.21), I very much expected XLE to drop a bit on Monday morning to touch resistance before heading back up to find today's trading level.

Pre-market futures on SPX were still bullish, and so am I.

I have horizontal and diagonal resistance lines on XLE intersecting today at 89. So I had two trades set up:
- Sell March 10 put at strike 89 when the trade price hits 89. I estimated price at $255. I ended up getting $235.
- Buy two calls for June 2024 at strike 90 when the trade price hits 89.

I am going to hold these for a long time, just like a stock. Two calls give me a delta of just over 100, so it's equivalent to holding 100 shares. (That was my goal: hold some calls that were equivalent to holding 100 shares.) I ended up paying $2,433. (I estimated $2380)

XLE opened at 89.75. It touched 89 in the first 20 minutes or so, reaching a low of 88.82. At this time (9:48 am), it is back up to 89.78.

So I called this morning's trading correctly! YAY!!! But I am resisting the temptation to let it go to my head. I've been wrong a lot more times than I've been right.

I currently hold 300 shares of XLE, and options equivalent to 300 more shares. I also get some delta benefit from the puts I sold. My overall delta is 813. I make/lose $813 for every $1 move in XLE trade price.

I can sell covered calls above my long calls, just like on stocks. I plan to sell some calls when trading price reaches 92. I will evaluate then.
=================================================

I will confess: I didn't notice the CPI news on deck for tomorrow. I wish I had. Tomorrow could be crazy; that's all I'll dare to say about it. VIX doesn't seem to be concerned, which isn't entirely reassuring. Anything could happen.

I am very reluctant to share advice on options trades on CPS. I don't know your goals and expectations, time frame, capital available, or risk tolerance. And I don't know how quickly you will read it. I don't know who else will read it.

But you have my phone number. We can talk anytime and look at charts together.

I'd love to coach you on selling credit spreads and condors. That's where I make most of my cash, by an overwhelming margin. I've made $11,000 year-to-date on credit spreads/condors, and about $600 on XLE.
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Post by sweetandsour »

Del wrote: 13 Feb 2023, 08:24
sweetandsour wrote: 13 Feb 2023, 06:38
Energy market is difficult to predict right now,, for me anyway. But what about the CPI announcement tomorrow, and what will the market do? What is a good option to sell today, with tomorrow's CPI expectation? I don't see prices coming down locally here, not overall, including gas.


I am very reluctant to share advice on options trades on CPS. I don't know your goals and expectations, time frame, capital available, or risk tolerance. And I don't know how quickly you will read it. I don't know who else will read it.

LOL! The questions in my post were conversational, as though directed to myself. But anyway ...
The Indians will not bother you now, on account of ... you are touched.
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Post by Del »

sweetandsour wrote: 13 Feb 2023, 11:37
Del wrote: 13 Feb 2023, 08:24
sweetandsour wrote: 13 Feb 2023, 06:38
Energy market is difficult to predict right now,, for me anyway. But what about the CPI announcement tomorrow, and what will the market do? What is a good option to sell today, with tomorrow's CPI expectation? I don't see prices coming down locally here, not overall, including gas.


I am very reluctant to share advice on options trades on CPS. I don't know your goals and expectations, time frame, capital available, or risk tolerance. And I don't know how quickly you will read it. I don't know who else will read it.

LOL! The questions in my post were conversational, as though directed to myself. But anyway ...
D'oh!

If a guy thinks that the market will drop big on tomorrow's inflation news (along with a big jump in implied volatility), then a guy could buy a put on his favorite index or index ETF (SPX or SPY). It will jump in value due to price drop and volatility increase. Bank quick profit when he sells to close.
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Post by Del »

sweetandsour wrote: 13 Feb 2023, 11:37ping!
Del wrote: 13 Feb 2023, 11:40 If a guy thinks that the market will drop big on tomorrow's inflation news (along with a big jump in implied volatility), then a guy could buy a put on his favorite index or index ETF (SPX or SPY). It will jump in value due to price drop and volatility increase. Bank quick profit when he sells to close.
I set this up as a paper trade, just to see what happens.

Market close 2/13: SPY trading at 412.83

Buy one put March 17 at strike 422 (delta = -.61) at mark $1349. VIX = 20.42
===================
2/14, 7:30 am: inflation report is just a little bit hotter (6.4%) than market expected (6.2%), triggering some fear of more hawkish FED action.

2/14, 8:30 am: Market opens. SPY drops in opening trades. I expect a quick rebound, so I close the trade immediately.

8:33 am: Sell put at mark $1533. SPY trading at 409.7. VIX = 20.04 (Volatility did not spike, which is partly why I expected a quick rebound of SPY trading price.)


Profit: $1533 - $1349 = $184. 13.4% profit on an overnight trade.

SPY touched a low of 409.49 shortly after I closed the trade. Spy returned to 413 in about 20 minutes, recovering to yesterday's close.
=================

I don't favor this type of trade, as it is a bit of dice roll. But some traders do, and it clearly works well when it works. We can reliably trust that the market will "sell the news," and scalping can be fun.

This is a purely "technical" trade, anticipating the emotional reaction of the market. I prefer more "fundamental" trades, backed up with lots of technical analysis. That's my "style." Even a small bet on an overnight trade like this would trouble my sleep that night, and I'm not comfortable with it. Some guys are.

This is why practice and paper trading are so important to successful options trading. There's plenty of money to be made, but a guy has to have some familiarity with different styles, and know his own style.
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Post by Del »

Market is closed today for Presidents' Day. I am still icing my bruises from XLE on Friday.

CPI (consumer inflation) came in just a little bit higher than expected on Tuesday.
PPI (wholesale goods) also a little bit higher than expected.
On Friday, a Fed Reserve board member commented that they might have to raise rates by 0.5% in March.

This triggered renewed fears of a global recession, and crude oil prices fell off. XLE dropped too, closing at 84.50.

I had a short put at 91 to expire on Feb 24. It was likely to close in the money.

But somebody exercised early and I was assigned on Friday evening.

World oil markets don't care about an American holiday. Oil has recovered nearly 1.5% already this Monday morning. If this holds up, XLE should open above 86 on Tuesday.
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