Tiger Shrimp Trade #1 - da first Covered Call!

It's been a while since I've traded or bought physical bullion. Getting back in the game. 

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First covered call ever. Much thanks to Andy Tanner's 4 Pillars for helping explaining this better. I always had theoretical knowledge of this, but like anything, inspiration without perspiration is usually sterile. 

But first, what is a covered call? 

Wiki says: 

A covered call is a financial market transaction in which the seller of call options owns the corresponding amount of the underlying instrument, such as shares of a stock or other securities. If a trader buys the underlying instrument at the same time the trader sells the call, the strategy is often called a "buy-write" strategy. In equilibrium, the strategy has the same payoffs as writing a put option.

If R-Kelly were to do his usual dictionary definitions, a straight up G-Funk definition would be:

Yo dog, I like this thing, Imma buy a 100 pieces of it and sell you the option to buy it at a future time for a future price. In case prices go up, you are already locked in at this price. If it goes down, no worries, you can buy at the future lower price. Either way, this insurance dog, is cheap. Good for you for risk management, good for me to generate a little cashflow. I give up a little upside gain, but hell, it limits my downside risk and if the market does nothing and goes sideways like yo mamma, it's all gravy. 

Underlying Asset: 100 shares of SLV (at the time was $14.91) or $1491 in play -- this was purchased previously at $16.00 a share

it's been a long time since I've moved anything aside from buying physical silver in small and big chunks

August 2nd, debt ceiling madness.

Just waiting for investors to get pissed at the U.S. dollar. I'm all-in on this hand, might be time to start looking to liquidate some 95% of all the physical silver.

Need to clear the slate mentally and emotionally and get out of commodities. As sexy and profitable as it's been, it's made me negligent and foolish. Sure you never go broke taking a profit, but buying at 15 and selling at 50 doesn't take brains either when you're riding a wave.

At the end of the day, it's not helping the economy. To squat on a resource is the opposite, it kills the economy. It's not quite adding to the goods and services. Maybe a tiny bit in the mining sector and the middlemen who push the precious metals. But still, it's not being an entrepreneur, it's not investing in a fashion to grows jobs and businesses.

To get really personal, it's not monthly cashflow. You can't eat gold, silver or platinum. Definitely can't eat copper. Actually I have eaten gold...

So yea, it's been a long time coming, it's time to cash out and build monthly cashflow.

*sigh

I sell my hundreds of ounces with the resolute determination to earn the money back to buy a 1000 oz brick.

It really is hard to metaphorically, "empty your cup."

Still, when you gotta clear the slate, you gotta do it.

"The good life is the enemy of a great life." -N. Dornan

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p.s.

after doing my taxes for the first time with a portfolio, wow, a schedule D looks pretty sexy I must say, it's kinda shocking how much goes to taxes, especially options over equities. To clear commission costs, high inflation and taxes, you have to return 40% margins otherwise you're swimming backwards.

Gosh, I barely did that in 2010. =/

I don't know how traders do it consistently. Most don't succeed long-term.

April Trade #4

Trade #3 was bad, thought the market was going to go down due to over exuberance. Over exuberance continued. It's ok.

TRADE #4 - nice, clean, simple

Bernanke had his speech today mid-day. He hinted of increased inflation and scaled back his big "recovery" platform. He totally side-stepped the currency issue and said that was basically not in his job description, rather a matter for the U.S. Treasury.

B.S.

Precious metals markets ROARED in response with the 1 hour of trading time remaining. Gold soared $20 bucks instantly, silver roared up a few bucks and is still going after hours right now.

So in two hours, before the speech, I went in at $1.46 x 100 = $146 + $5 comission = $151 invested

I sold my position for $2.13 x 100 = $213 + $5 commission = $218

Net Gain after commissions was = $57

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Slowly rebuilding my portfolio...

Sort of in a cash crunch, might pull out some bucks. I need more funds to straddle and play both sides. Shooting with such limited ammo is tricky. Forces you to be too conservative cause you can't lose any more principal. Not that it's a bad thing, but my best strategy lies in the non-directional straddle.

Mhm.. straddles..

Fortunately there is a Ferrari called the Challenge Stradle, the pimped out version of the 360 Modena =D

So pimped out that the car is VEGAN. to hell with leather interiors, cloth is lighter. =)

Wow, silver hella did not go down. It went up. WAY up.

That put option went to hell. Sold it for at a loss. Eh, sometimes it's madness to swim against the current.
While a $40-50 loss isn't the coolest thing in the world, busting out a calculator to figure out how much the rest of your real silver holdings is suddenly worth can really help improve your mood.

April Trade #2 - SILVER!

Good morning ladies and gents,
Woke up at noon to find silver busting out another all-time high at $41.88 from a $1.22 gain just today due to inflation woes and poor job outlooks.
When all goes to hell, commodities go through the roof yo.

Even though it's an all-time high since 1980, this price is not sustainable after today ends. The price will come down I strongly believe and correct to the 41.40 level at least, if not to the support/resistences of $40.50 as tested from the prior days.

I could also be reading this trend wrong since it "looks" still bullish with higher highs and higher lows.
Yet, knowing the fickle small silver market, I think it'll come down. If I'm wrong, stop limits in place and we're all good.

In summary:

SLV put option (bearish) / May 11 expiration / $42.00 strike

1 contract, paid $258.00 + $5.00 commission 

Well re-post when I sell. w00t w00t

Wish I had more dough to straddle this trade. I prefers non-directional. 

Silver in April

Daily P/L = 45.52% = $88.00
MTD Value Change = 114.22% = $149.99
YTD = -58.6% = $398.24

Had some serious losses trading silver and other things in the wrong direction early in the year. Wasn't in the zone, didn't look at my indicators, watch my numbers.

HOWEVER, debt ceiling crisis has been GREAT for precious metals right now. Been paying attention to the news like a hawk, watching the silver price, caught a great big wave from April 37.00 call options. Spot went to $40.75/ounce the moment I sold. Beautiful trade.

Trade Details:

April 4th - Bought 1 call option (bullish) on the Silver exchange traded fund for $1.24 x 1 contract of 100 options = $124 + $5 brokerage commission = $129

April 8th - Sold 1 call option (bullish) on the Silver ETF for $2.82 x 1 contract of 100 options minus commission charge = $282 - $5 = $277

Net gain? =$158 = in one week

Wow Warren, were you lucky or risking much? 

   Not really, check it, my total investment was $129. I could only lose that much, max, therefore my potential risk and downside was set in stone. Hence, playing options on silver put in a limited risk, unlimited gain situation, which is AWESOME and always the situation you want to be in. 

Then, again, I wouldn't ride a loser all the way from $129 to zero dollars. I'm willing to lose say, 20% in case I placed my positions in the wrong direction. 

All in all, I love silver. I know how it moves. I followed currents events to the T, and I have full faith Obama and his banking/defense homeboys will spend money like no tomorrow, hence our need for more and more toilet paper. Precious metals will rise against this currency fraud and debasement. 

p0wned!!!! - raped and pillaged, here's how it happened

raped

here's how I took it from behind

Yes.
66% YTD returns disappeared to 4-5%.

Yes.
How'd it happen?

#1 - being stupid, yea.
#2 - buying everything with a shotgun, no precision shots, just blind skeet shooting really
#3 - getting out of my circle of competence, wtf was I doing with call options on Tiffany & Co? Trying to strangle medical supply companies AFTER company announcements?

The only good thing I did was calling the peak for silver and doing shorting it when it dropped from $30 to $28 something.

So yea, the biggest losses came from DOG.

DOG correlates with the Dow Jones except in the reverse. I was gonna be smart and do a strangle on the market and milk it going up or down, (mwahaha). Why the Dow Jones and not the S&P? Eh, calls on Dog were cheaper then puts on the S&P ETF.

So that's the start of the problem. Ughhh, for one, I didn't buy at the right delta (rate of change) where if the underlying stock or ETF moves, the option moves with it. Different options move in correlation at different rates and those different rates command different prices.

Homeboy here bought the cheapest possible ones.. Problem #1

Problem #2 - THERE'S NO TRADING ACTION. I failed to look at the "Volume" column. If you glance at the uploaded pic above (2nd one), you'll see there's zeroes going all the way down. No single strike price in any month tops more than 100 contracts. The daily trading volume is soooo little.

This is called, Dante's Inferno, Level 23 or something. You have no demand, no supply, your prices fluctuate literally like wild oats scattered to the wind.

In attempting to sell the losing options, THERE ARE NO BUYERS. Which is why I couldn't get out when the losses first started happening. I was like oh, must be a problem with my trading platform. I didn't see the fundamental reasons and just attributed it to technical problems.

Idiot idiot idiot.

So yes.

Yes. Now that I've had a very nice force-fed helping of Humble Pie, 

I shall rebuild and RETURN to what I know best.. 

Silver. 

Hence, more call options for when it breaks 30 soon. 

Oh my god, yes, I bought as close to 0.60 delta as I could (.55 or something), given my cash situation in my account. 

So yes, rebuild. 

Oh yes, I took the Rich Dad Stock Success Options Course which REALLY helped in setting some good ground rules:

1) always buy at least the first strike price in the money

2) always buy at delta 0.60 or negative 0.60 for puts

3) theta (time decay) kills you, buy at least more than 6 weeks, ideally 2-4 months out

4) to avoid price gaps, you want a healthy trading daily volume of 500,000 shares in the underlying stock/ETF

I failed all of these rules for DOG...

And the kicker? I bought an option called Dog. 

I thought it be funny.

Ahaha.. I'm crying cause it's so funny now. 

j/k j/k, hell hath no fury like a pissed options trader

P.S. [edit]

I realized just now from either a Robert Kiyosaki video lecture that I watched or one of his books, he was talking about derivitatives like how gasoline is a derivitative of oil. Kerosene is a derivivative of oil, etc etc. The further away you get from the original substance, the more unstable you get.

Crude oil itself is pretty harmless. Maybe it'll even douse fires successfully. 

Gasoline itself is harmless, you can put cigarettes in a bucket of gasoline. 

However, in vapor form, it becomes explosive.

So in my case, when you buy the derivativive of a dervitative of another derivitate, you're asking for some deep shit as the final product is wholly unstable. 

Yea, please don't do that. 

That is all. 

Back to work as a property manager.. regulating and filling vacancies 24/7, peace out