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1. Why did I take this trade?
Goldman Sachs Group Inc. (NYSE: GS) dipped to an established support level @210 on Mon Feb 12/07. On Tuesday, it put in a higher intraday low @ just under 211. I sensed that the pullback was finished wanted to play the reversal back up to resistance @215. I bought GS Mar07 230 calls on the break of intraday resistance @212.50.
2. What was the initial stop?
Initial stop was at 212.10
3. Why did you exit where you did?
GS had trouble with the 217 level early this morning, so I exited my calls without hesitation.
4. Is there anything you would do differently?
No.
I did re-enter a position in GPYCF, basically a low risk play of any potential run up to 219.
Showing posts with label options. Show all posts
Showing posts with label options. Show all posts
Thursday, February 15, 2007
Goldman Sachs Group Inc.
Monday, February 05, 2007
Options Trade: Nymex Holdings, Inc. (NMX)
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1. Why did I take this trade?
It was going up, and I was itching for an options trade. I bought Nymex Holdings, Inc. (NYSE: NMX) Mar07 140 Calls when I saw some big blocks come in at the bid. Probably not the best reasons, in retrospect.
2. What was the initial stop?
The initial stop was 128. It was briefly hit soon after I bought, but soon went back up.
3. Why did you exit where you did?
This morning, ICE was looking pretty bullish, and I felt that NMX would ride on ICE's coattails. I wanted to sell into strength, and no longer cared if I left additional profits on the table, as I was more focused on not making any more mistakes on this trade. I put in a limit sell of 2.30, and was pleasantly surprised to find out that someone took my offer about 15min. later.
4. Is there anything you would do differently?
Yes.
The entry was poorly executed and could have costed me a lot. I basically bought at the ask. The bid/ask at the time was 1.50/2.00. I screwed myself on the entry by buying at the ask. From now on, I will walk up the bid in order to get a better entry or look for options with smaller spread. By that I mean I will start at some discretionary price higher than the best bid, and start incrementing my bid until it gets taken out. I did this before with GROW and got a good entry.
In any other set of circumstances, I would not consider this a screwUp. But, in light of my new set of circumstances, I need to consider this a screwup so that I will push myself to improve and cut down on my mental errors.
ScrewUps are more memorable than victories anyways.
Friday, February 02, 2007
Options Trade: Google
I got spanked by GOOG today for slaggin' Blogger.....
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1. Why did I take this trade?
Google (NASDAQ: GOOG) showed signs of recovering from the opening pullback. I bought GOOG Mar07 550 calls (GOPCY) when it broke above the close of the second candle.
2. What was the initial stop?
The initial stop was the low of the 2nd candle.
3. Why did you exit where you did?
I got the alert when GOOG dropped below 481.50, and I got filled @1.55.
4. Is there anything you would do differently?
Yes, the position size was too big and this was not a high probability trade. I should have waited for more confirmation that GOOG would go back up (since it had just sold off hard yesterday). But more importantly, I should have taken a smaller position size on this higher risk play. The loss on this option trade accounted for over half of today's losses.
Thursday, February 01, 2007
Google Straddles - Update
How did the GOOG straddles from yesterday do?
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GOOG closed @481.75 today, which was still about $20 away from the downside breakeven of 460.90.
GOPBO closed today @5.20 (originally 21.20)
GOPNO closed today @22.10 (originally 17.90)
So you would be down $17 on the calls, but up $4.2 on the puts, for an overall loss of $12.8, or $1280.
While I'm not absolutely certain, it seems to me that buying straddles does not seem to be a low risk play.
Wednesday, January 31, 2007
Google Straddles
This is just a thought experiment, not an actual option trade that I have made, or will make.
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The premise here is that Google (GOOG) will explode for 30points up or down pending on a good or bad earnings report tonight after market close.
Google is currently sitting at 502.21
Possible Google Straddle as follows:
Buy GOPBO - GOOG Feb07 500 Calls (currently 21.01/21.20 (bid/ask))
Buy GOPNO - GOOG Feb07 500 Puts (currently 17.60/17.90)
Chart looks slightly interesting, but I don't know what to say about it, since I'm not familiar with the straddle play.
Upside Breakeven = 500 + 21.2 + 17.9 = 539.10
Downside Breakeven = 500 - 21.2 - 17.90 = 460.90
Max Loss = $3910 per straddle
These are not good odds. Probably would have been better to buy the straddle earlier, when the calls and puts were cheaper. And I've noticed that the breakeven points have moved farther out just now.
But I am curious and will check in on these options tomorrow to see how they are doing....
Also, BIDU will almost certainly move in sympathy with whatever direction GOOG takes, so BIDU should be worth watching as well.
Tuesday, January 30, 2007
Options Trade: CTrip.com International, Ltd
Summary
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1. Why did I take this trade?
CTrip.com International Ltd (Nasdaq: CTRP) was a pick in the HCPG newsletter from a couple weeks ago. I decided to keep it on my watchlist because stocks from China have been hot recently. When it gapped up to 69 last week, I put it back onto my watchlist, with an alert level @71. It hit the 71 early in the morning and fell back down, so I started stalking it. The fourth time it broke above 71, I bought some Mar07 75 calls.
In retrospect, the Mar07 75 calls were not the best choice because of the low option volume.
I found out later that there was another trader, Russ, who bought CTRP @70.45.
2. What was the initial stop?
Initial stop was just below congestion @70.75.
3. Why did you exit where you did?
I was overly cautious to begin today's trading session. When I saw that CTRP was falling down from its opening price, I lost any interest in finding out where today's intraday support level would be, and promptly sold my calls
4. Is there anything you would do differently?
This question was tough to answer for CTRP in this particular scenario. It's the same as asking, "How much profits are you willing to give up in order to realize even more profits?"
Even though CTRP is currently at 73.63, it could just as easily have been testing 72 instead.
Under what conditions could I have seen myself holding? At the minimum I would want to see a green bar to open to at least indicate that there are buyers stepping up to the plate. Plus it would give me a possible intraday support level to work with. Neither of those happened in the first 15-min, so I wasn't willing to give up profits.
In other words, the break above 73 @ around noon would have been a new and separate trade from my point of view.
Note that the breakout above 73 was messy - that subsequent dip down to 72.70 took out a lot of stops I'm sure.
Monday, January 29, 2007
Options Trade: Goldman Sachs Group Inc (GS)
This trade had a subtle mistake that I only realized after reviewing the trade.
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1. Why did I take this trade?
I bought Goldman Sachs Group Inc (GS) Mar07 230 calls because GS broke out of the morning pullback and looked like it had enough volume to break above friday's resistance @214.25. The Mar07 230 calls had decent volume in the past so I stuck with the same ones. I actually am happy with how I executed my entry.
2. What was the initial stop?
The initial stop was just below the low of the initial opening pullback @212.50
3. Why did you exit where you did?
No particular reason, other than the fact that I finally realized that this trade was not going to work out.
4. Is there anything you would do differently?
I did not honour my stop loss level and it costed me. GS actually offered me two chances to get out - the first was when it broke below 213.50 @1pm, the second one was at my stop loss level. I was distracted by fighting with the IB webtrader at the time, but I can't use that as a valid excuse. Just was not mentally focused.
I think I also started to lose my objectivity when I saw that it was trying to recover above the 214 level. Kind of subtle, but that was probably the turning point for me. The best thing that I could have done was simply to unconditionally honour my stop loss, plain and simple.
Saturday, January 27, 2007
Options Trade: Bunge Ltd. (BG)
This trade actually took place on Jan 23/07.
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1. Why did I take this trade?
BG was a HCPG newsletter selection. It broke out of a textbook pullback from earlier this week. I bought the BG Mar07 80 Calls when BG broke above the mini-resistance @75.75. The timing of my entry was pretty good (IMO).
2. What was the initial stop?
Initial stop was @75.30.
3. Why did you exit where you did?
I had to think long and hard as to why I did not dump at least half of my position when BG failed to stay above 77. I think part of it is due to some lingering hope that volume would come in to drive the price back up. Also, because I bought March calls instead of Feb calls, the move up was not as much, and I was hoping for a bigger move. And I didn't want to believe how messy it became in the afternoon in contrast to how beautiful it moved in the morning. Unlike my options trade in MA, it just came down to a lack of focus on the execution of my trade. Although I did not physically lose much money on this options trade, seeing the potential profits disappear was a big loss mentally and emotionally.
4. Is there anything you would do differently?
Yes, consider selling at least half my position when the upward momentum shows visible signs of stalling out.
Friday, January 26, 2007
Options Trade: Goldman Sachs Group Inc
This trade makes me wonder whether the pain of missing out on a run-up is better or worse than the pain of giving up profits....
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1. Why did I take this trade?
Goldman Sachs (GS) gapped up on Wednesday morning. The bullish price action led me to believe that it would break above the OR bar (first 15-min candle). As soon as I realized that, plus that there was enough buy volume pouring in such that it would never fill the gap, I decided to purchase the Mar07 230 calls when GS broke above 215.
2. What was the initial stop?
Initial stop was the bottom of the first 15-min candle, just below 213.
3. Why did you exit where you did?
I closed out my options when I realized that it was not even going to be able to recover above 217, let alone a recovery bounce back to 219.
4. Is there anything you would do differently?
Hope is bad, never hope for a trade to recover!
When it broke below the OR bar on Thurs., that should have been my signal to get out. Definitely I should have closed my trade when it broke below 218. It's just that GS was acting so bullish on Wednesday that it never occurred to me to plan out what to do if the worst case scenario (ie. giving back all the gains made on Wednesday) were to occur.
For me, the threshold at which the pain (of seeing real profits slip away) exceeded the emotional hope for recovery was when GS dropped below 217. I will definitely need to train myself to have a lower tolerance for such painful mistakes.
Note that the options (GPYCF) closed higher on Thursday than the price I initially bought it for (on Wednesday), even though the underlying stock closed lower on Thursday than where I had entered. This is the first time that I have seen this happen, and I'm not sure what it really means.
Wednesday, January 24, 2007
Options Trade: MasterCard Incorporated
Summary
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1. Why did I take this trade?
I bought MasterCard (MA) Feb07 115 calls when MA broke above 108.25 because the chart gave an indication that the opening pullback was finished. As it turns out, my entry was not ideal at all. MA started falling down some more not long after I bought my calls.
2. What was the initial stop?
Initial stop was at 107. Why didn't I sell before it dropped down to 107? Because the drop down to 107 was on low volume. Plus, the 10d EMA was creeping upwards on the 5d chart, so I was reasonably confident that there was buying support @107. 
However, I recognize that this was not a compelling technical reason to keep holding instead of closing out the trade. In other words, I would rate my entry as a C+ in terms of risk.
3. Why did you exit where you did?
MA became overextended after it broke above 112.5. Everyone who bought in the past 2 days were now selling. I needed to follow the rest of the herd and capture and protect my profits.
4. Is there anything you would do differently?
Yes, the entry could have been timed better. MA turns out to be an example of buying support instead of buying the breakout. I should have been more mentally alert and focused on the 107 level more - it turned out to be a somewhat significant support level. Alternatively, I could have bought half of my position when it broke above 108.25 initially, and then buy the other half when it bounced back up from the test of the 107 level.
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