BUY +2 ABB 100 FEB 09 12.5 PUT @.60

I'm out of my short put on ABB to lighten my long positions in my portfolio. This position is definitely one of the higher risk because of the leverage in options. I shorted these puts at \$1.20 two weeks ago. This represent a profit of \$120 - \$15 for commission.

ABB tested the 40 day MA on pretty low volume. It is hanging around the \$13 mark today. However, the market looks weak as we're testing the 850 resistance again on the S&P500 as we speak. So I'm unloading this first because if it breaks down, ABB could dive fast.

[caption id="attachment_1086" align="aligncenter" width="500" caption="ABB Ltd."]ABB Ltd.[/caption]

Posted 29 January 2009 in stocks.

SOLD -2 ABB 100 FEB 09 12.5 PUT @1.20

I went long ABB by shorting its February 12.5 Puts. ABB is holding its 12 support very well on this bloodbath day on the market.

I'm selling puts instead of buying the shares because I want to keep my 50% cash available for a potential rally soon.

[caption id="attachment_1036" align="aligncenter" width="500" caption="ABB Ltd."]ABB Ltd.[/caption]

Upside: Inverse head and shoulder forming. Positive divergence on indicators at this neck level.

Resistance: \$14

Downside: Diminishing volume for past couple of months. 200 day MA still down and 10 day MA just turned downward too.

Support: \$12

Bottom line: So many stocks and indices seem to be tittering at their supports today. I even considered entering into FAS or UWM for a bounce move. But I decided to be safe and placed my bet on strength and clearer signs. Since I entered when ABB is trading at \$12.17 and my stop is \$11.90 or so, I consider this to be a low risk trade for a potential Obama rally next week.

Target: \$15

Stop: Just below \$12.

Posted 15 January 2009 in stocks.

Unloaded some more longs on this +50 points S&P500 day

S&P is up 50+ points today. We gapped up at the open, stayed in a trading range for the day, then slowly rose up in the last hour, but only to lose a small chunk and settled at 850, again. The volume has been low throughout the day and the internals didn't look too good. That's what prompted me to unload about half my positions in the last 45 minutes. The recent beating in my account certainly is making me being very cautious now. I'd rather save my ammo to enter higher later when we get confirmation for a rally than wait for one with bloated bullish positions.

Looking at the S&P 500, TICK, and Advance-Decline line. Aside from the open gap up peak, both the TICK and A-D line failed to impress throughout the day. Actually, it was lack of strength in the numerous 840 tests and the weak 850 breakout about 3:20 that worried me. Notice the lower lows in both the TICK and A-D line at the 840 and 850 breakouts in the chart below.

[caption id="attachment_886" align="aligncenter" width="500" caption="S&P 500 internals"][S&P 500 internals][][/caption]

The first to go was -90 DELL @ 9.90 at 3:25pm for about a 50% loss. I bought DELL at the beginning of October for \$16.49 and it has been underperforming throughout the two months. There's been little volume since I bought, up or down. Even with the exuberant buying on the market today, DELL failed to break above \$10 (it did close at \$10.14). Most important reason for me selling this long term holding now is that there's very little volume even on this up day when everyone's expecting a real bear rally.

[caption id="attachment_887" align="aligncenter" width="500" caption="DELL"][DELL][][/caption]

Next up, I sold my C calls from the strangle placed Friday. As I said earlier in the day, the news that the FED is bailing out Citigroup has rocketed its share price from \$3.17 at my time of purchase to \$6.50 on the morning rush. However, C share price eased down throughout the day and failed to break \$6 with high volume. I sold at about \$6.05. I purchased the +2 Dec 5 calls for \$0.79 and sold them for \$1.77. This was a speculative play and I didn't want to be greedy. So I sold when C share price showed it's lacking steam to continue to move up ahead.

[caption id="attachment_888" align="aligncenter" width="500" caption="Citigroup"][Citigroup][][/caption]

Lastly, I sold my +2 ABB Dec 10 calls purchased at \$1.55 for \$1.70. A breakeven trade after commission. The drawdown was humongous in this trade since I have missed some previous stops. The ABB share price action is a lot like DELL today, a lot of fireworks but no real substance. Yes, the price is up a lot today, but there's no volume from it. In particular, in the last 15 minute, ABB dived back down to its major pivot point of \$11.10. I quickly unloaded my calls then.

[caption id="attachment_889" align="aligncenter" width="500" caption="ABB"][ABB][][/caption]

Like everyone else, I am really hoping for a good bear rally. It would do everyone, both bears and bulls, some good at this point. The thinking is, after so many fake rallies lately, this one has to be it, right? However, having learned my lesson in bottom picking in this bear market, I'm putting my hope/logic aside and interpret what I see in front of me. From today's price and volume movement, this rally doesn't seem like it will follow through.

I do hope I'm wrong though, if we can hold the 845/840 level on the S&P500 tomorrow. Then I would be looking to add to my already 60% long holdings.

[S&P 500 internals]: [DELL]: [Citigroup]: [ABB]:

The need for trailing stop: Expired November 2008 options post-hoc review

I have been trying to catch falling knives for a few weeks now. Every time I think we're at a bottom, the market rally a bit to get my hopes up and then continue to drift down more. In retrospect, there are so many trading no-no's I have broken with that dangerous mentality. My account is down significantly as of this writing and I have learned many old and new lessons throughout these weeks. In fact, I have demonstrated improving trading technique and psychology even as I was losing money overall (what an oxymoron). Rather I'm trying to comfort myself or not, the fact is that losing money is simply unacceptable in trading. So I will review these trades in this post and perhaps learn something from them.

As the title suggest, this is a post for post-hoc analysis of the options which I held into expiry (3 losing and 1 winning). I'll do this chronologically. The longest Nov09 position I have is SLW Nov 2.5 Call. I have been a big fan of SLW as I've written and traded SLW numerous times.

Instead of writing paragraphs upon paragraphs, I've annoted my charts more than usual and will show more and write less in this post. I noted my entry point in each trade, and labelled the stop and post-hoc ideal exit/stop points.

[caption id="attachment_857" align="aligncenter" width="500" caption="Silver Wheaton"][Silver Wheaton][][/caption]

My effective entry point in my SLW Nov 2.5 Calls were at SLW share price of \$2.90 (SLW closed at \$2.81 Friday). I bought 2 Calls for \$0.55 and at expiry, they are worth \$0.325. A loss of \$45 + \$15 for commission as of this writing. I held on to my 2.5 calls and exercised them, so +200 shares of SLW for me.

Next up is ABB on the same day. The share price for ABB was at \$10.31 when I entered. ABB closed Friday at \$9.95. I bougt the three ABB Nov 10 Calls for \$0.90. They are worth \$0.05 each. A total loss of \$255 + \$15 for commission.

[caption id="attachment_858" align="aligncenter" width="500" caption="ABB Ltd."][ABB Ltd.][][/caption]

Then we have TCK entered at TCK share price of \$5.575. I bought two TCK Nov 5 Calls for \$1.00 each and they are now worthless. A complete wipeout of \$200 + \$15 commission.

[caption id="attachment_860" align="aligncenter" width="500" caption="Teck Cominco Ltd."][Teck Cominco Ltd.][][/caption]

Lastly, there's this puny winning day trade in the last 40 minute of Friday. I bought a UYG Nov 3 Call for \$0.55 and it expired for \$0.95. A profit of \$40 - \$15 comission, so a total of +\$25 so far. I held on to this call and exercised it. I have +100 shares of UYG to carry over the weekend.

[caption id="attachment_868" align="aligncenter" width="500" caption="Ultra Financials"][Ultra Financials][][/caption]

As you can see, if only I have used trailing stops, I could have held onto some of the profits and not turn winning trades into a losing ones. I didn't want to let the large swing in premiums stop me out from a big rally. That's why I didn't use trailing stop. However, the lack of subsequent follow-through and confirmation in the rally should have been a glaring alarm sign. I should have put in trailing stops from this lack of strength in the rally. Any counter-trend position should be carefully managed with tighter than usual risk management.

I have let my undying hope for a rally clouded my judgement. This stubborn need to be right is a very fundamental psychological flaw in trading. If I can't stop doing that in the future, I might as well quit trading manually and focus on developing my quantitative financial engineering work. However, as I have noted, I think I'm improving lately and upon further reflection, I believe I have come up with a potential methodology to correct myself in the act ... More on this as I develop on this technique.

[Silver Wheaton]: [ABB Ltd.]: [Teck Cominco Ltd.]: [Ultra Financials]:

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