I ran a little experiment…

I ran a little experiment for about 8 months last year, did not post because I was not sure how it was going to work out but here is another easy to manage, high return tactic. I got this from options income blueprint. I do not subscribe to this particular branch of it, but easy to understand and I reverse engineered it using different names. They were using AAPL, LNG, and GILD.

It is called perpetual income engine. Very simple, take about 2-5 stocks that tend to stay in a range with good option premium. Start by selling a 1 week put either ATM or 1 strike below. It is either assigned or is not. If it is assigned immediately take delivery of the stock and then on Monday sell the ATM or 1 strike out of the money covered call. If not assigned, then sell the next week put. It is very easy to implement and does not take much time.

I used 3 tickers last year, TSO which has since become ANDV, XBI, and WDC. As I am starting to review my trades from last year for taxes, I see how effective it was. It takes a while to sort everything out but the results were impressive given the simplicity.

8 months, 3 contracts each name so only tying up about 50,000 of capital earned a 57.7% return. Annualized 86.55% return. Pretty impressive given the simplicity. Obviously I will keep this going and will start posting my trades now. They will be known as #pietrades.

I do not have all the numbers yet, but the last year appears that naked puts and strangle selling was the most effective, followed by PIE trades, and a very close third goes to #fuzzies based on return on capital. However the #fuzzies worked the best for recovery of positions that went really bad. Not surprisingly given the one-sided market credit spreads did not do as well last year.

I am always looking for the most efficient way to use capital, make money, and give me more free time. Based on these results I will probably focus on those 3 strategies most of this year and will add in the occasional #spycraft when the volatility is decent.

#perpetualrollingstrangles

#spycraft alternative. While waiting on…

#spycraft alternative. While waiting on SPY to show better prices, the /ES is showing better prices with the slight increase in VIX.

1 contract (sticking to the initial guideline) STO 1 /ES 43 DTE strangle at 2615 put and 2910 call for 8.0 credit.

Plan is to take it off at 25-50% profit hopefully in 1-3 weeks.

AAL covered call in small…

AAL covered call in small account. Feb 2 CC at 52.5, just 2 contracts. Debit of 50.91. Making some money on @fuzzballl company.

#spycraft update. For those still in the trade you should be making good $ now. I closed out yesterday at a 125 loss on 5 contracts. With the vix being so low and the parabolic market at the moment (i thought the new years goofy juice would have run out by now) I am going to hold off on additional trades at least until we have a pause, a slight pull back, some volatility or at least not a 1 sided parabolic move. I think any short strike in SPY right now is going to exceed the expected move (probably to the upside) and just require a bunch of adjustments.

I want to make money, don’t need to be right but the risk is not worth the reward at the moment on credit spreads and IC on SPY or any of the other indexes. I will find an edge in individual names until the volatility returns and earnings will help that. Even a vix of 12 would be appreciated at the moment!! Is that asking too much?

#spycraft We are showing a…

#spycraft

We are showing a whopping $9 profit on the adjusted call side of the Jan 12 271 long call 6, 272 short call and 276 call 5 of those. I am going to close mine this morning. This could be the start of a 3 point or 30 point reversal but with only 11 DTE there is not much more time to adjust and now we have a slight profit, if we wait until expiration it will be a $410 loss. The hedge worked, time to take it off and will establish new range tomorrow.

Of course you can stay in if you think we are going higher. I personally will close. We made $255 credit on the IC initially. With the adjustment we are now up $9. Not being greedy, just want to keep most of the initial credit and move on and we have the opportunity at the open to do that.

Unhedged #Fuzzy (this is really…

Unhedged #Fuzzy (this is really long!!)
My good friend @MamaCash calls these “Unhinged Fuzzies” and that always makes me smile. Over the past couple of weeks, the power of these revealed itself to me. So that’s why I called Mr @fuzzballl an onion last night 🙂 These fuzzies are revealing very important layers of opportunity to apply in different circumstances.

Yesterday morning I woke up remembering one of John Carter’s classes from a few years ago where he talked about “HPTM” High Probability Moments in Time. Couple that with Jeff’s upside VIX warning and Eureka! HPTM is here. My immediate thought was “put down all the toys.” No more 2-lot 3-lot 5-lots on various tickers. Time for BIG laser focus on SPY/SPX RIGHT NOW. However long this window lasts this is when fortunes are made.

Before I talk more about yesterday though, let me give a couple-paragraph primer on unhedged fuzzies, because I know some people are following this carefully. And when the check-out girl at the grocery store this weekend asks you “why not just buy calls instead of a fuzzy,” here’s your answer:

100 shares of stock = 100 Delta (P/L moves 1:1 with stock, it is stock)
1 At-the-Money call = 100 shares of stock = 50 Delta (only moves 1/2 with stock)
(1 ATM Call) + (- 1 ATM Put) = 100 Delta—this is a synthetic long stock position with 100 delta
A synthetic stock position is a very cheap way to approximate ownership of stock, but there’s not a huge advantage in it. In a 401K you still are required to hold the full buying power risk of the naked puts, in margin accounts there is some buying power reduction on the naked puts. But note that you have a large naked put position with synthetic stock.

SPY 1000 Shares: $273,000
SPY 10-lot synthetic naked put risk: $273,000 (indulge me in being less than precise)
Buying Power required: $273,000

Enter the 3rd leg of the Unhedged Fuzzy: The Protective Put
This is done in the same expiration cycle as the synthetic, in fact on the same order (hold your control key to add the leg). Currently I’m using $4.00 spread-risk on SPY. Here’s what my orders look like:
BTO 273 Call
STO 273 Put
BTO 269 Put
What just happened? All of this is on a 10-lot:
Risk: $4,000 (+ trade cost) vs $273,000
Income: UNLIMITED 700 delta ($700 for every $1.00 move in SPY (vs $500 for ATM calls))
Buying Power: FREE for portfolio margin, $4,000 for IRA vs $273,000

Let me give you a real example of how I recently used this trade that I’ve not yet reported. I really like the Gorilla Trades service. I’ve been a subscriber for probably 10 years. If I’d been a faithful follower I’d probably have $25 Million by now, but I’ve not been a faithful follower. Last weekend they came out with their top 3 picks for 2018, all 3 biotechs, all 3 are take out candidates for 2018: EXAS, EXEL, GWPH. All 3 look awesome to me! Do I want to buy 1000 shares of each and just sit on them for 6 months waiting for a buyout that may or may not come? Some of these have very high vol, meaning the market thinks they are either zoom or doom stocks. Do I want to risk 1000 shares on doom? Enter the unhedged fuzzy. Here were my Tue trades:

EXAS July 55/55/45 for 3.56 x 10 (this position is up $2,740)
EXEL May 31/31/27 for 2.55 x10 (this position is up $150.00)
GWPH May 135/135/125 for 9.65 x 5 (this position is down $1175.00 but only because of weekend b/a spread, it’s been up and down )

Point is….I have nice positions tucked away on 3 biotechs using very small risk and buying power….any one of these 3 could bring in a $40K windfall (or more), but if it doesn’t, what is my risk? I’m not sitting on thousands of shares of speculative stock. EXAS I’m most comfortable with, their product is amazing, so I took bigger risk there with a $10 wide protective put (they present at the big health conf this next week). EXEL I’m less familiar with, less risk. GWPH, less risk with less size.

Alright, back to yesterday morning. Woke up, big opportunity still in the markets. But its Friday, we’ve breached key expected move targets (not just for 1 week but 2 weeks). Still I removed hedges from 40 SPY fuzzies that I had, I added 30 Feb SPY Fuzzies for about 2.30. That gave me 70 SPY Fuzzies. 70x $272 x 100 = $1,904,000. Buying power used, next to nothing. Risk: $28,000 + trade cost. I still have a hard time believing the power of this myself. I rode this to the sign of resistance around 2 hours before the close, it was pretty quiet for most of the day. Grabbed about .50 of SPY move = $3500. Then I closed the extra 30 fuzzies and put fresh hedges on the other 40. When resistance broke and we had strength into the close I added another 10 unhedged fuzzies on for Monday morning. So I’m currently sitting on 40 hedged, 10 unhedged. My intent was to keep these trades open longer, but I tend to be a nervous nelly on Fridays. However, this is a tool I plan to use over and over; shorter duration expiries on limited trend trades, longer duration (hedged) on income trades.

This is really long, I know, thank you if you’ve made it this far. These trades, with their limited risk and effective use of buying power, are showing great versatility for trending/contraction/income/momo/long/short/hedge/speculation opportunities. Hope this was helpful for those of you still getting the #fuzzy concepts.
Sue

#spycraft

#spycraft Closing out the put…

#spycraft

Closing out the put side of the Jan 19 IC at 260/256. Currently going for 0.03. Removes a lot of the downside risk and if we get above 275 will have decent profit on the call side now. Max risk to downside with the puts closed is now $1110 on 5 contracts plus the 6 longs from this morning. If we start pulling back will close the long while it is still worth something then handle the short call spread like a regular credit spread.

Going out to play in our 11 inches of snow now!

#spycraft Taking @jeffcp66 recommendation. Just…

#spycraft

Taking @jeffcp66 recommendation. Just bought 6 Jan 19 271 calls. Original position was 5 IC at 272/276 on the call side. With the market going into booster phase again makes sense to go directional.

If we get above 273 will start making a little money as long as we close before expiration. If we wait too long and it does not get above 275 then we will lose about the same as we made and would be a scratch. Original position made $255, will lose 275 to 170 between 273 and 275. Above that a nice gain.

2017-12-01-TOS_CHARTS