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Peeking my head out with some trade reviews

May 16, 2007
tags: , , ,

Ladies and Gentlemen,
Please excuse my long silence on the blog. Life seems to get in the way of trading and blogging sometimes and one just has to decide what noise to filter out from time to time. These posts take a long time, so the blogging has had to take a back seat for a while. I’ll be busy with performances in the next two months, so it’ll be sporadic, but I’ll try to get some action going here again. I will make an effort to do shorter, simpler posts. (I know I’ve said that before!) But this won’t be one of them. It is a review of some of the trades I’ve discussed or proposed on the blog. Most of it is actually a post I put together well over a month ago but never published.

First, just a follow up on the WFR trade I set up in this post, the contingent sell order I had set to sell at or below 58.83 triggered on April 13 and the options sold for 13.60, a total loss in the trade of $720. This is within the acceptable risk allotment, as discussed in that post. It is a bummer to get stopped out on an inter-day swing, particularly when it moves up $7 starting the next day. Of course, whether or not I would have taken profits at $67 as mentioned before it gapped down at earnings is a whole other story. I will point out, though, that had I held over earnings and been on board for that big gap down, the selling price on April 27 would have been right around $13(I looked at a chart of the option), still keeping me within the acceptable loss parameter of $1000.

And now for the “Draft” that I never published:

It’s been a long time coming, so I’m finally reviewing some trades I did from our list.

Back in early February, I mentioned a potential trade on CRDN going into earnings. Looking back at it, it wasn’t exactly a screaming entry signal. But with a plan to capitalize on growing IV going into earnings and SELLING BEFORE EARNINGS, it was a reasonable play. I did wait a few days for the entry from the day I posted the idea. I chose the OTM calls because with rising IV, the 60 calls would be likely to have very worthwhile gains if the stock did move up to the 60 level. This was a paper trade.

Not including commissions, the trade resulted in a profit of 36%. Note that I sold at the weakest point of the three days surrounding the sell day.

On January 29, I put up a very extensive post on COH. After rambling through various ideas, I considered the prospect of a March 40/45 vertical spread. This was a very conservative trade idea giving the stock plenty of time to move past the 45 level for the max profit potential. Of course, looking at the run the stock had immediately after the post, I would rather have been in straight calls, but so it goes. A profit is a profit. Because of the quick run up, I put in place a GTC limit order to close the trade for almost the full profit potential well ahead of March expiration. Had I placed the original trade on January 30th rather than the 31st, I would have had a slightly better credit. Regardless, not including commissions, the trade shows a 34% return.
This was a paper trade.

Finally, a trade with a great entry and foolish but lucky exit. This was with real money. I did a post on list performers and mentioned a potential entry for ZMH. The next day the stock closed higher for a beautiful “high of the the low day” entrance. After gapping up on big volume, the stock pulled back a few days and on the first resumption of upward movement, there was the entry. I moved up my stop loss order on the evening of the 25th and mistakenly placed a limit order instead of a stop order. So it sold the next day immediately. I turned a quick 20% profit and was very lucky that I was out before the next day’s market sell off. I’ve made public admissions of entirely moronic losses I’ve taken, so why not admit to a moronic profit? Actually, though, the entry was quite good, just a silly exit. Regardless, this still shows the value of a great entry. Even with the market’s ups and downs since then, a holder of this stock or deep ITM options as I suggested would still be comfortable holding a position here at a small profit.

Okay then. That’s all for now. Be careful out there. Markets look a bit long in the tooth.

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