9/19 – Relentless

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Not that the market has broken key resistance levels in the indexes. The market moved strongly to the upside after the open. I have to come up with better directional strategies.


Not that the market has broken key resistance levels in the indexes. The market moved strongly to the upside after the open. I have to come up with better directional strategies.
Last night I decided I need to get better at directional bets, which would offer me safety from Volatility spikes or drops, and protect me from dramatic price swings.
I came up with a strategy I employed this morning. Ratio/Backspread.
I started the morning off with electronic paper trading of FCX with a Call Ratio Backspread. Sell 10 Jan105c and buy 15 115c for a net credit of -1.40. The stock soared and the spread quickly made $1000. It has settled back slightly, but I exited 2- 2by3 spreads at .45.
I obviously enjoyed the strategy so I put some on for real, this time MER. Sell 10 Jan 75c/buy 20 – 85c for a net credit of 2.27 with the underlying @ 78.47. The stock immediately fell back a bit and my spread moved against me. The downward breakeven @ at expiration is 77.20. The good news is that even though this is a bullish strategy it is also delta neutral, and gains value below the breakeven. If we see a dramatic selloff, it becomes a winner. The worse case scenario is that stock moves is at 85 @ expiration. I will not hold it this long. I will sell it within 60 days of expiration if it is between the breakevens. I will hold it if it moves down dramatically.
Merrill Lynch Call Ratio Backspread Risk Grap
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USB broke up to resistance of $34-$34.50. This was a multi-month consolidation. I would like to see it turn around and give me awhile to start unwinding my substantial 32.5c calendar position. Right now I wish I would have bought more of 35c hedges.
MEDX – added 4 units of 15p calendar @ .05. I am looking to add more
TRB – 2 units 27.5p calendar picked up for an ave of .08 credit. awesome.
I am a bit jacked with the strong up in the mkt. Too Far Too fast. Ideally the SPY would drop 15pts by the end of the week. I am not counting on it, but it would be nice.
I have a number of currently excellent positions, but I would like to start the unwind process on a few.

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