Well it was a good trading week (up 12% on the week, and 19% on the month). I had a plan going in, and executed the plan. I took partial profits where I could. I entered a few counter trend bounces (XLE, XDE), and reduced exposure in other issues (IWM, USB, BJS).
A little music to read by: Cover of a great David Wilcox tune:
COF – I bought bearish butterflies at the beginning of the week. Volatility was relatively high, and I have a directional bias. Sept 40/35/30p for .55, then sold half for .95. And on friday at the close entered the butterfly @ .67, and added sold to open the same amount of Sept 45/50c spreads for 1.25 and 1.30cr. For a total credit on existing positions of .69 and breakevens 30.69 and 45.69. If we see continued weakness in COF this can be a very nice 7x winner on total risk. And I have stops above swing highs for 1/2 the position.
XLE – Oil was a peach last week. I entered Sept/Oct 74c and 75c calendars with XLE in the 71.5 range. I entered on dollar weakness. I also entered a Texas hedge by selling 70/67p and buying a 73/77c. The spread worked well. I am still long the calendars, earning theta decay.
IWM – I covered 300 negative deltas by wednesday last week as well. It looks like we may be in a range of 72 to 76, and I plan on playing it that way. I am still more short than I desire.
SPY is still in a bearish long term trend moving to the backside of the 2003 uptrend. I just have small 127p calendar positions here. I would like to see a the market break back down @ the secondary trendline. This looks like a perfect shorting op. A confluence of downtrendline, backside of uptrend, and the recent upward move on lighter and lighter volume. All points lower. I am wrong on my shorts above the swing high of 131.65, which leads me to see the next resistance @ 135.
FNM – On wednesday afternoon I picked up significant calendar positions @ 2.5, 5, 6, 7, 7.5, and 8 strikes for .05. There huge paper that hit the market on a selloff down to 4.20. I have about 5K of risk for 18k of reward. As long as FNM doesn’t get haulted, this should turn out well.
USB – I exited about 200 25c and 27.5c calendars for very nice profits. I still have about 150 spreads on, and I would enjoy being out of them by week’s end.
Calendar positions in INTU and BCSI are in good shape, but not quite optimal.
VIX – closed the week @ 18.8, which is relatively low. I want to use the calendar spread to buy volatility, as I think we may have one more slow vacation week before we pick it up again.
I have been reading many pages for the month of August. All very worthwhile.
Confessions of an Economic Hit Man
The Secret History of the American Empire: The Truth About Economic Hit Men, Jackals, and How to Change the World
Mohamed El-Erian – Fantastic Macro on what the growth of Emerging Markets is creating, also including the US economic issues.
When Markets Collide: Investment Strategies for the Age of Global Economic Change
Jeff Augen – My guess is we are in for a volatile autumn. I couldn’t think of a better book to take advantage of it
The Volatility Edge in Options Trading: New Technical Strategies for Investing in Unstable Markets
Trend Following: How Great Traders Make Millions in Up or Down Markets, New Expanded Edition, (Paperback)
Wayne Dyer – And to keep it all in perspective. Reading 1 verse every few days. I bought the book and the audio book for runs.