XLF June Options Strangles Expired Worthless: -$237

My XLF June strangles options expired worthless on Friday. This amounts to a loss of \$207 + \$30 commission.

The two mistakes I made were as follows.

  1. Not Executing My Stop Exit. My stop of \$0.50 premium triggered just a few days after my entry. As can be seen first triggered here and then my attempt to persuade myself here.
  2. As can be seen in Figure 1, XLF dipped to \$11.50 ever so briefly last Wednesday. I had the entire morning to ponder should I have exited with a \$35 loss instead of the \$200+ now. I thought that was the start of a run down so I didn't exit my position. Instead, I really should have placed a stop at around \$11.80.

This is the second time I didn't follow my own rule. And both times I ended up with a loss. I will not make it a third time.

[caption id="attachment_1521" align="aligncenter" width="500" caption="Financial SPDR ETF"][Financial SPDR ETF][][/caption]

[caption id="attachment_1522" align="aligncenter" width="500" caption="Financial SPDR ETF"][Financial SPDR ETF][][/caption]

[Financial SPDR ETF]: http://traderpau.files.wordpress.com/2009/06/2009-06-22-xlf.png [Financial SPDR ETF]: http://traderpau.files.wordpress.com/2009/06/2009-06-22-xlf_prop.png

Posted 22 June 2009 in stocks.

Position Review: XLF, still moving sideway

My June options strangle for XLF is underwater. I have violated my own rule and didn't dump it when the total premium dipped below my stop at \$0.50. The 12 Put/13 Call premium is now worth \$0.15/\$0.095 = \$0.20. This is a loss of \$132 + \$30 comission if I were to close the position now. Frankly, I haven't been watching over this position this week as much as I used to because of work.

There is only one logical reason for me to be still holding on to this. As you can see from Figure 1, the daily chart to the right illustrates a coiling price action over the past couple of weeks. The overall market looks similar to this chart of XLF.

All the writing is on the wall now for a breakout, the million dollar question though, is when? This lack of action could very well drag on for days more. With option expiration just next week, this position is looking like it will expire worthless (more slap on the hand for not ditching when it hit stop).

[caption id="attachment_1510" align="aligncenter" width="500" caption="Financial SPDR ETF"][Financial SPDR ETF][][/caption]

[Financial SPDR ETF]: http://traderpau.files.wordpress.com/2009/06/2009-06-12-xlf.png

Posted 12 June 2009 in stocks.

XLF not going anywhere yet

XLF bounced between \$12 and \$12.50 this week. We broke above \$12.50 to \$12.70 or so at the open but failed to hold it. The decline in volatility (because of the trading range) and the approaching expiration deteriorated the options premium. I just checked my options strangle position after hours just now and realize it's barely below my \$0.50 mental stop at \$0.495. Accordingly I will look for an exit early next week.

On the other hand, the trading range is tightening along with the market. So a breakout move is imminent. This calls for some more patience.

I will watch the market early next week and see if my premium stays below \$0.50. If it does, then I'll follow my plan and sell the options.

[caption id="attachment_1502" align="aligncenter" width="500" caption="Financial SPDR ETF"][Financial SPDR ETF][][/caption]

[caption id="attachment_1503" align="aligncenter" width="500" caption="Financial SPDR ETF"][Financial SPDR ETF][][/caption]

[Financial SPDR ETF]: http://traderpau.files.wordpress.com/2009/06/2009-06-05-xlf.png [Financial SPDR ETF]: http://traderpau.files.wordpress.com/2009/06/2009-06-05-xlf_prop.png

Posted 05 June 2009 in stocks.

Bought +3 STRANGLE XLF 100 JUN 09 13/12 CALL/PUT @.69

I bought three 13/12 June strangles as XLF is hanging around \$12.50 today. My reasons are as follows:

  1. S&P500 is approaching 950 on a giant gap up today. This is an important pivot on many levels. So we either turn back down or break upward from here. Either way, we're at the top of a month-long trading range from beginning of May. See Figure 1.
  2. XLF is testing a trendline from May 2008. This line has been well respected for a year. So a significant move is expected. See Figure 2.
  3. XLF is now at the neckline of an inverse-head-and-shoulder formation and in the middle of a big trading zone, from around \$9.15 to \$15.33. Again, we either break up or not with a big move. See Figure 2 again.

Risk: \$0.69

Stop: if the total premium falls below \$0.50

Target: \$15.33 to the upside and \$9.15 to the downside.

Reward / Risk = 2.83 / 0.69 = 4.1 (upside) AND 3.35 / 0.69 = 4.86 (downside). Both are less than 5.0, but that's because I'm calculating using the maximum potential loss. The R/R would be above 5.0 if I use my exit stop of \$0.50 on the premium.

[caption id="attachment_1497" align="aligncenter" width="500" caption="S&P 500 ETF"][S&P 500 ETF][][/caption]

[caption id="attachment_1498" align="aligncenter" width="500" caption="Financial Sector SPDR ETF"][Financial Sector SPDR
ETF][][/caption]

[caption id="attachment_1499" align="aligncenter" width="500" caption="Financial Sector SPDR ETF"][Financial Sector SPDR
ETF][][/caption]

[S&P 500 ETF]: http://traderpau.files.wordpress.com/2009/06/2009-06-01-spy.png [Financial Sector SPDR ETF]: http://traderpau.files.wordpress.com/2009/06/2009-06-01-xlf_prop.png [Financial Sector SPDR ETF]: http://traderpau.files.wordpress.com/2009/06/2009-06-01-xlf.png

Posted 01 June 2009 in stocks.