Sold 4 MFC 10OCT Puts 17.00 @ @1.43, Mark $16.27, Loss -0.5%
Not much is happening in the market as it is trading in a tight range. This is not good for my options as the time delta will slowly eating away my premium. So I’ve decided to unload this position at a small loss just now as the market is testing support across the board.
The U.S. dollar index is testing $86 resistance. Oil is testing $78 support. S&P500 is testing the 1070 support zone.
Purchase price for these puts were $1.48 per contract last Wednesday. When Manulife Financial (MFC.TO) was trading at 16.38.
Loss is ($1.48 – $1.43) * 100 * 4 = $20 – $13.95 * 2 commission = $47.90 = 0.5% of account.
As you can see, the commission is horrible on my RRSP trading account at Questrade. I will wind down trading options from now on and move back to trading forex in the summer. My live account at Dukascopy is ready…
Update: The market finally broke support the day after this exit. This was not a good exit as I lost patience. MFC is testing $16 support on June 29th opening hour and I don’t expect it to hold. This could turn out to be a winner if I had held.
Manulife Financial (MFC.TO)
Bought 4 MFC 10OCT Puts 17.00 @ $1.48, Mark $16.38
The market is under pressure as illustrated by EUR/USD weakness (Figure 1). I’m not sure which way it will go just yet. But I am placing my bet on the bears as oil (DBO) has already cracked.
I waited the whole week for a retracement to re-enter a short position. I thought the FOMC announcement today could produce some sort of short-term rally. But nothing materialized. This lack of a retracement rally after a 30 points drop in the S&P500 between Monday and Tuesday is good for the bears.
Furthermore, seeing that EUR/USD is testing resistance again, I am establishing an equity short with a financial company. In particular, Manulife Financial (MFC.TO) is my victim as it appears to be the weakest of them all (Figure 2).
EUR/USD hourly chart
I say that because despite the recent advance in the market, MFC.TO is still struggling around the year-low (Figure 2).
Manulife Financial (MFC.TO)
My mental stop is a close above $16.50. A hard stop is $1.00 on my options premium.
That equates to ($1.00 – $1.48) * 100 * 4 = -$192 – ($13.95 x 2) commission = $219.90 = 2.3% of account.
Sold 3 ABX 10OCT Puts 46.00 @ $4.15, Mark $43.97, Breakeven exit
My Barrick Gold short isn’t working as I hoped. My puts premium is moving closer to breakeven to my purchase price of $4.00. Furthermore, the market is cracking above resistance levels today. In particular, ABX.TO is marking a bullish engulfing candlestick pattern after a test of its 50-day moving average support (Figure 1).
Yes I know, there’s a massive resistance at $44.00 for ABX.TO. But…
As much as I’d like to believe in the bears, this short position is not safe anymore. I can’t let a positive trade turn negative. It’s better to miss an opportunity than lose money. So I’m ditching this now to reduce my risks at above breakeven seeing that I have another smaller short position in play. Which is underwater at the close, by the way.
My return on this trade is ($4.15 – $4.00) * 100 * 3 contracts = $45 – $12.95 x 2 commissions = $19.10
I’m just lightly short now and mostly in cash.
Barrick Gold (ABX.TO)
ABX.TO intraday
Bought 3 ABX 10OCT Puts 46.00 @ 4.00, Mark $44.67
Right on the heel of my oil short loss, I am taking another stab at shorting the market. This one is Barrick Gold (ABX.TO). I am moving away from shorting financials because the puts premium are almost doubled that of the calls! It seems that too many people are betting the banks will take a hit in the next fall.
In the long term, ABX.TO appears to be in an up trend. However, the intermediate trend is turning negative as shown in Figure 1. $45 is an obvious resistance for ABX.TO. Even with today’s positive market moves, ABX.TO fail to catch on the bullish wave and only touched $44.86 in the morning optimism (Figure 2). Who knows, perhaps it might break it sooner than later. But the reward/risk is decent to short ABX.TO seeing that the $45 resistance is right above.
Barrick Gold (ABX.TO)
I will give it a month’s time to move below $44.00. Worst case stop loss is $2.50 on the premium. That is ($2.50 – $4.00) x 100 x 3 = -$450 – $12.95 x 2 = $475.90 = 5% of account total. My mental stop is $3.00 on the premium. Which is about 3.3% of my account total.
ABX.TO intraday
Sold 6 CM 10OCT Put 74.00 @ 6.60 Mark $70.70, +8.0%
The market seem ready to crack but it is not. So I am taking profit on my CIBC short here on a weaker volumn retest of the $70.50 support (Figure 1). I bought 3 puts contracts four weeks ago at $5.00 when CM was trading at $74.02. Then I added 3 more contracts with the same strike price and expiry for $5.65 when CM was trading at $72.30. The average cost was $5.35. Thus, profit is $750 – ($12.95 + $3.00) x 2 = $718.10 = 8.0% of total account.
CIBC (CM.TO) intraday
This is the last of my positions. I have no more outstanding position in any market.
CM.TO looks to be on the brink of a collapse. I may be making a mistake here by offloading my shorts before the fireworks. However, as I was saying, the market is still hanging on. Furthermore, there’s a positive divergence for CM.TO as shown on Figure 2 according to the oscillator at the top of the chart.
So I am taking profit now to reduce my risk as this position is relatively big for my small RRSP trading account.
CIBC (CM.TO) daily chart
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