Author: Bryan Halliday

Hello Investors,

Today we had a deep discussion on the Put Ratio Backspread strategy. We analyzed the risk/reward/probability. We looked at the net delta, gamma, vega and theta. This was a very advanced discussion but a good one for learning to trade. In addition, we entered into a put ratio backspread in GLD as shown below.

Sold to open: GLD Nov 20th (monthly) 182.00 strike puts (ratio of 1)

Buy to open: GLD Nov 20th (monthly) 176.00 strike puts (ratio of 2)

Net debit: 0.24

Max risk = 6.24 or $624.00

Max reward = Unlimited on the downside

Have a great week!

Hello Investors,

An update and a couple of trades.

Our QQQ short calls are setup perfectly as we move into expiration today. We collected a credit of +1.07 or $107.00 of total income. We will monitor QQQ into the close but as long as we finish below 276/share (highly likely) those calls will expire for a full profit and no adjustments are required.

We want to re-enter into a new bearish position in QQQ. This is similiar to the trade that will expire above. However, it will be a bit more conservative than our current trade because we are selling a little further out-of-the-money on the strike price. The details are as follows:

Sell to open: QQQ Oct 2nd (weekly) 281.00 strike calls for a credit of +0.75. This is a very aggressive “naked call” position that has a large risk profile. So, we will need to manage risk aggressively to avoid taking bigger losses.

We also bought 5 more shares of GILD today at 61.98/share.

Have a great weekend!

Hello Investors,

Markets are down this morning on some news regarding J.P. Morgan Chase and other financial institutions. While we don’t know whether or not they will be found to have done anything illegal. Either way, they will likely pay fines and this news story will fade away over time as it so often does in these situations. Perhaps the more important factor in the short-term is that trends continue breaking down with the S&P 500 now below the 50-day moving average. We are going to lock-in profits on our QQQ trade today. Additionally, we will stick with our plan and keep cash flowing our positions.

We own at least 100 shares in the following stocks. We are attempting to sell covered calls as follows:

October 16th –

Sold to open: DIS October 16th (monthly) 140.00 strike calls for +0.45

Sold to open: BRKB October 16th (monthly) 230.00 strike calls for +0.70

November 20th –

Sold to open: EFA November 20th (monthly) 69.00 strike calls for +0.31

Sold to open: AIG November 20th (monthly) 30.00 strike calls for +1.05

Sold to open: DELL November 20th (monthly) 75.00 strike calls for +0.95 x 2

Sold to open: TMUS November 20th (monthly) 130.00 strike calls for +1.00

Sold to close: QQQ Dec 18th (monthly) 275.00 strike puts (ratio of 1)

Bought to close: QQQ Dec 18th (monthly) 245.00 strike puts (ratio of 2)

Sold to close: QQQ Dec 18th (monthly) 215.00 strike puts (ratio of 1)

Limit Credit: 6.00 which locks-in a profit of +1.48 and we will likely re-initiate a position after the coming rally in QQQ

Hello Investors,

The trades to watch closely into the close today are DELL and EFA. With DELL far more likely to need an adjustment. We will simply “buy to close” the 67.50 covered calls if the stock is at or above that strike price near the end of the trading day. Otherwise, we are in great shape to let all of our covered calls expire for max profits.

In addition, we wanted to re-initiate some of the current positions we have in place to generate more income. We made the following trades:

Sold to open: BAC Oct 16th (monthly) 23.00 strike puts (naked) for +0.31 credit

Sold to open: EEM Nov 20th (monthly) 49.00 strike calls (covered) for +0.28 credit

Sold a short strangle in INDA as follows:

Sold to open: INDA Nov 20th (monthly) 39.00 strike calls (covered)

Hello Investors,

Today we discussed probability vs risk/reward. This is an important discussion when it comes to trading butterfly spreads. A typical butterfly spread will be on the lower end of probability. However, the trade off is an excellent risk/reward ratio. This is the case today in a new trade in QQQ.

Buy to open: QQQ Dec 18th (monthly) 275.00 strike put (ratio of 1)

Sell to open: QQQ Dec 18th (monthly) 245.00 strike put (ratio of 2)

Buy to open: QQQ Dec 18th (monthly) 215.00 strike put (ratio of 1)

Paid debit of 4.52

Max risk = 4.52; Max Reward = 25.48

We will have another class this Friday morning for September monthly options expiration.

Happy Trading!

Hello Investors,

We did some stock scanning and the home builders (DHI and PHM) look like candidates for bullish trades. We had a nice discussion about options expiration and some things you might not have known about exercise/assignments.

We also sold a covered call in our GM stock.

Sold: Oct monthly 40.00 strike call

Collected a 0.58 credit.

Have a great week!

Hello Investors,

Well we have to admit to a mistake in selling the QQQ short-term puts. We took away some of our profit potential. We will lock-in profits on the entire spread today.

Sell to close: QQQ Oct 16th (monthly) 295.00 strike puts

Buy to close: QQQ Sep 4th (weekly) 290.00 strike puts

Filled at 14.65 credit.

We have an 11.65 cost basis so we locked-in a profit of +3.00 or +$300 in the trade. Our naked calls are looking perfect as well!

Have a great day!

Hello Investors,

We are making a minor adjustment to our QQQ position. We sold the Sep 4th (Weekly) 290.00 strike puts against our long October puts owned. We collected a credit of +0.58 per contract. This will pay us a little income. If the markets cascade lower through tomorrow then the adjustment is not ideal. If we fall but settle around 290 or any higher price then we bought in a little extra income.

Have a great day!