Mini-blog for a mini-trade

This post may also be read here: http://www.cboeoptionshub.com/2015/07/27/hitting-a-single-in-svxy-by-meredith-kelley-zidek/

Sometimes it isn't the biggest trade that brings the most joy.  What I'm saying is that a half-baked idea so impulsively formulated that I didn't think to throw the trade through until seconds before market close on Friday...

(see illustration below:)

...turned into an instant money-maker that grew to all but 15% of its full potential value less than one trading day after the crazy wish-making order was incredibly filled.


So what do you think I did?  Instead of waiting four more days to find out if the tide would turn against me and if the tide might contain sharks and jellyfish, I just cashed it right in today.  Someone else took ten cents, and I thought I would probably not unload it for five, but in another wish-making fishing-line-throwing, I just cast my line to see if anything would bite.

Instant fill!  No more worries about SVXY holding a knife to me up at the 98 level.  I really, really, didn't want to be responsible for selling someone $78,400 worth of that security.  Wow, what a way to make $213!  There has got to be an easier way.  (Just kidding.  I'd do that any day, a dozen times over, for $213 while I sit here and exchange bon mots with other traders on twitter.)

In my excitement, I neglected to thoroughly explain this:  The opening order was timestamped received at 03:59:47 on Friday as pictured, and I assumed it got swept away with the deadwood, but to my amazement, at 04:04:49, the order was filled and this short-lived but fun-filled adventure got started. 
 
It's the timing and the price on entry and exit that made this a fun one, not to mention the way I no longer have to think about SVXY cornering me into some social obligation I'm not prepared to fulfill. I really didn't want to attend the 98-strike party and was looking for a way to gracefully decline just as soon as I accepted.

If $213 doesn't thrill you - well, every trade cannot be a ball hit out of the park.  Look back to some of my earlier posts in the month for more exciting fare - and I still have something in the works for this Friday. 

Will that complete your order?

This post may also be read here: http://www.cboeoptionshub.com/2015/07/15/trade-analysis-selling-svxy-puts-by-meredith-kelley-zidek/

If you read the last post about the sea monster adventure otherwise known as writing UVXY 52 calls just before the Greek Drama unfolded, see the associated graphic and locate the portion of the sea monster that is closest to the sun.  That is to say, on July 8th and 9th, with my strike looming close and my account being distressed (including special notices in bold, red typeface sent to me), I must have had "making money" on my mind more so than "losing money," since I took some positions in the same direction, but from the other side of the table.  No, not just the other side of the table - more like pretending to leave, saying goodnight to everyone, then walking around the outside of the house and sneaking around the back where I could lay my trap undetected by anyone still playing cards at the table inside the house.

Due to some stroke of luck, or maybe having something to do with the many pictures of Alexis Tsipras propping his face up with his fingers, the UVXY calls deflated in value like a marshmallow just taken out of the microwave, and similarly, the SVXY puts written in the backyard of the allegorical poker-playing shack turned into something like a popsicle forgotten on the front seat of a car overnight during the hottest part of July.  There was a little to be salvaged from them yesterday, but since July 24th is a few days away, I decided to "take it off the table."  (Many card-playing analogies from someone who hasn't played anything more than "Go Fish" and not since about second grade.  I'm just not a card player.  I hear people talk, though.)

The post title is meant to allude to drive-thrus, and indeed, I did take the kids out for ice cream and slushies yesterday. And that's about all I did, in between stalking the next opportunity to scoop up some premium that someone else took it in their head to buy, that hopefully will send the red-print notices to them next time.



Nuts and bolts: I risked the possibility of being forced to buy $28,000 worth of stock. I got a margin call from my broker for $19,618.93 overnight Thursday, but that's because I still had the UVXY monstrosity open at the time.  The margin call disappeared with no action needed on my part.  I was behind in this position by $468 at one point (maybe more - I don't remember how high the bid/ask got). I set out to make a maximum of $1,313.20, but I closed early and realized $1,123.00.

Rang the register

The aforementioned non-slam-dunk has been closed, and it's sort of a relief, although I admit I'm a little burned up about not getting the last $150.  That is a personality trait within myself that I had better learn to control.  Time is money, and I can probably make more during the four days between now and Friday, or at least have other things on my mind, and not wake up dreaming of scanning the options chains.

Well, maybe I'll still dream the same thing, without the side-dream about rolling two weeks out.



Nuts and bolts:  I risked being either assigned $52,000 worth of short UVXY shares or having my account debited in order to deliver 1,000 shares at $52 each to the contract buyer at a cost to me of whatever the difference would be between the contracted $52 and the price at which I'd have to obtain the shares (example:  $62 UVXY would cost me $10 per share or $10,000 as a loss to my account).  I could have bought shares at a price under (or even over) 52 to make these calls covered, though, at any time before assignment.   At one point I was behind in this position by $3,350 (or more - I don't remember every bid/ask but I think I may have seen $7.00), and I did receive a margin call for $19,618.93 from my broker, but it was in conjunction with the position detailed in the July 15th post.  The margin call disappeared with no action needed on my part.  I set out to make a maximum of $3,135.20, but closed early and realized $2,970.00.

Time decay at work

Here we are, almost two weeks after I wrote the non-slam-dunk calls you see in the post below.  As you can see, last Wednesday and Thursday they were trading for around $2 or so per contract, and now they are doing exactly the same, with the underlying trading even a little higher today than it was on those days.  That's because the clock is ticking, the hour is getting late, and people are leaving the party.  Does anyone really think UVXY will perform that parlor trick (fetching $52 per share on the sale block), if it hasn't done so yet?  Traders talk with their money, and the money is saying "no."  (Bids are $1.97 on this nonsense, as I type.)

Last night I had to do some homework, though.  After the price action in UVXY yesterday (and a friendly "message" from my broker), I realized that to keep my broker happy (I tend to bite off a little more than I should - my eyes are bigger than my stomach), I should think about rolling.  Why roll?  "To avoid being assigned" is a classic answer, but I have another answer.  Two answers, really.  One is the obvious:  To buy time.  The other is to reduce the number of contracts, and thus the potential liability (which will make the broker scrutinize other people and leave me alone.)  I don't mind waiting a little longer to make money.  Sleeping well for seven or fourteen extra nights to realize a profit is a good tradeoff for sleeping poorly and facing some kind of adverse action, so if it's a difference of just a few weeks, depending on how much money we're talking about, I'll choose to wait.

(Oh yes, I also snuck in some short 70 July 24th puts on SVXY yesterday and the day before, and that had something to do with my name popping up on a list of people my broker felt compelled to communicate with yesterday.)

So anyway, I priced some farther-dated UVXY calls at various strikes, and looked at them again this morning, and was all ready to do it if necessary.  Not necessary, as of now.  But maybe I should wait until Janet Yellen speaks before publishing this. Yellen, what are you sellin'?  What happens after Janet speaks, there's just no tellin'.

Bumpy ride

Instead of hearing about my trades after they are closed, how about examining and inspecting one while it is in progress?  Get your protective wear on.  Goggles and gown advised; it's a gross specimen.

July 17th UVXY 52 calls sold to open at $3.15 on Monday, June 29th

And that pic is from yesterday.  Were I inclined to update it, you'd see the mountain range rise again to approximately the worried-face level.

I'd enjoy documenting only the slam-dunk sha-zing/sha-zam results, but that leaves out the details on the "work" (er...  worry) in between.  What fun would that be, to see the finished plates coming out of the kitchen on an ornate tray, and not see the cook behind the swinging doors cursing and running around with a red face?  Some of those seamless-appearing trades farther down the blog look like they were born winners, but really it took some fancy footwork before they crossed the finish line in the black.  See if you can untangle them, based on dates, if you'd like to re-create the adventure (a prime example being a bunch of short SVXY calls in the 90 or so range that needed covering, and turned out to produce gains due to advantageously-timed purchase and sale of shares, despite share price breaching the strike and exceeding it by several dollars.)

By the way,  I never set out to do anything exciting.  My goal is to end with more money than I started with.  I like to set up a challenging puzzle for myself with a cash prize at the end.  If I have to pay to play the game, then I wrecked the puzzle.  If I make a few dollars, then I solved it. That's all I'm trying to do.  Sometimes my eyes get bleary and my brain gets weary from watching the scrolling green and red numbers and hearing the barrage of insights from every pundit on the internet who has a great idea on how things "should" be done.  I listen to just about all of it because I think I might learn something - and oftentimes I do - but ultimately, I have to focus on pretty much one thing at a time and remember that my goal is to get across the street without being hit. 

As simple as it gets

So, in my last post I asked if anyone wanted to guess what I might do with the SVXY 99 calls expiring today.  That's all I had open at the time - no fancy combination of anything; just one lone set of naked calls (as simple as a trade gets) that would have to either be closed out or allowed to expire. The answer is that I disposed of them on Monday, not wanting to wait five days to earn the last $80 out of that deal, when better deals appeared to be on the horizon.  Here's a graphic of what I did, along with the other crazies who jumped on board to participate in this party.  As you can see, someone got a slightly higher price ($1.39) than I did, and once, just once, I would like the meet the individual(s) responsible so I could... give them a nice handshake and a compliment on their good work.

I held that for only four trading days, and that's not bad - I believe that $837 is best scooped up when you find it that quickly, so scoop it up I did. Some people obviously vacuumed up the last few crumbs, since SVXY hasn't given even a hint of interest in a level like 99 any day this week.

Never one to enjoy a dull moment, I made my moments jaw-clenching this week by writing some UVXY calls that expire on the 17th. Scoring those on Monday mid-afternoon was sweet, but even sweeter were the scores made by those who followed me on Tuesday and got my price by double. How do you think I felt on Tuesday? Worse than the way I feel now, that's all I'll say about it. Yesterday I was feeling pretty good, but today I don't believe I'm completely out of the woods. I like to be ultra-conservative (umm... yes, I know - Ha ha!) when writing contracts on these instruments. I like low stress. I prefer to just watch the money trickle into the account like water flows from a spigot into a bucket. Any sign that the pipe might burst is an unwelcome development. Follow along while this trade "matures" and find out whether the outcome is faucet-bucket-flow or call-the-emergency-night-plumber-for-help.