- It looks like my call spread trade with gld will be in a holding pattern until time value expires. I could have done a better job of analyzing the pricing on the options throughout the spread cycle.
- GE seems to be a holder but I cannot do much with it right now. I am holding as they are looking to sell some businesses.
- I am thinking that PBW is at a bottom for the rest of the year. The down trend which was fierce the last month has stopped completely. That is not to say that the ETF is moving up. Just that the down trend has stopped.
This type of financial environment is volatile to me but not scary. It is the reason I bought GLD in the first place. I believe every market has its opportunities. You just have to find them. If you have a strategy, then you will find a market or stock for that strategy. Be patient and do the work necessary to find those positions.
Monday, July 14, 2008
Friday, July 11, 2008
learning to make money with spreads
Hey
Recently I started to look into investing in spreads to minimize the risk, yet still make a decent profit. My first trade was with PBW. The stock had gotten taken down in January and formed a buy doji the length of a runway. For protection, I went out six months to buy the June 22/24 call spread. The stock had gotten as low as 18 but because I had time on my side, I still held. Well, in May the stock moved up to my sell point and I was out of the position with a 47% gain.
Wow! 47% on the first trade. This looks like something I can do with my extreme discretionary funds.
The next trade I made was with GE. I bought the 32/34 Dec call spread thinking that the formula worked once, why not again. But right now the stock is around 27 with new earnings out that met expectations. I still feel pretty safe with this trade because I believe the downturn was the fault of the earnings miss the previous quarter. They also are looking to sell some divisions that should boost the earnings and the stock price.
I have also recently purchased the Dec GLD 92/94 call spread. I purchased this two weeks ago when the ETF was at 91 and today it is at 95. With both calls in the money, I figured that I would carry the two dollars and sell. Wrong.
It seems time has a strange formula that I had not picked up on with PBW. With PBW, there was barely any time value left on the trade. So the spreads were basic. But this is not the case with GLD as there is still five months to go before expiration. The time value for the 94's is currently more than the time value for the 92's. So much so that I am going to have to wait for my profit and now have the risk of the ETF going down during that time. This is an eye opener and I will have to add that to my list of issues with trading spreads.
Recently I started to look into investing in spreads to minimize the risk, yet still make a decent profit. My first trade was with PBW. The stock had gotten taken down in January and formed a buy doji the length of a runway. For protection, I went out six months to buy the June 22/24 call spread. The stock had gotten as low as 18 but because I had time on my side, I still held. Well, in May the stock moved up to my sell point and I was out of the position with a 47% gain.
Wow! 47% on the first trade. This looks like something I can do with my extreme discretionary funds.
The next trade I made was with GE. I bought the 32/34 Dec call spread thinking that the formula worked once, why not again. But right now the stock is around 27 with new earnings out that met expectations. I still feel pretty safe with this trade because I believe the downturn was the fault of the earnings miss the previous quarter. They also are looking to sell some divisions that should boost the earnings and the stock price.
I have also recently purchased the Dec GLD 92/94 call spread. I purchased this two weeks ago when the ETF was at 91 and today it is at 95. With both calls in the money, I figured that I would carry the two dollars and sell. Wrong.
It seems time has a strange formula that I had not picked up on with PBW. With PBW, there was barely any time value left on the trade. So the spreads were basic. But this is not the case with GLD as there is still five months to go before expiration. The time value for the 94's is currently more than the time value for the 92's. So much so that I am going to have to wait for my profit and now have the risk of the ETF going down during that time. This is an eye opener and I will have to add that to my list of issues with trading spreads.
Wednesday, July 2, 2008
Gold for $$$$
Hey everyone
I have recently entered into a call spread with GLD, the gold ETF. I purchased the Dec 92/94 call spread. My analysis on the ETF is fairly simple and are shared below. Remember to always do your own due diligence when investing/trading. I purchased it for $1.25 (includes commissions) and have a sell order in for $1.80 (before commissions).
- Dollar very low
- Oil very high
- ETF broke out of range to the upside
- It is volatile
- European Central Bank will probably raise interest rates to cmbat inflation unlike the US Fed Reserve
- War troubles
- G8 meeting creating worldwide focus on economic issues
I have recently entered into a call spread with GLD, the gold ETF. I purchased the Dec 92/94 call spread. My analysis on the ETF is fairly simple and are shared below. Remember to always do your own due diligence when investing/trading. I purchased it for $1.25 (includes commissions) and have a sell order in for $1.80 (before commissions).
- Dollar very low
- Oil very high
- ETF broke out of range to the upside
- It is volatile
- European Central Bank will probably raise interest rates to cmbat inflation unlike the US Fed Reserve
- War troubles
- G8 meeting creating worldwide focus on economic issues
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