Nervously trading AMZN. Getting a bit longer AAPL, but hedging with VXX

Greetings All.

One of my New Year resolutions is to trade less, a LOT less. But I have failed miserably thus far even going so far as to trade 33X yesterday. OK, I know Fidelity (my platform) thinks this is just great, but I think I trade much worse for it. So I am writing them down, and limiting them to just 10/day or 50/week. We’ll see how that goes.

Today I have taken off my last long call in AMZN, the Feb16 200 and made a good bit on it. However, I did not take off the Feb16 265 call that I am short. I got $10 for it when I sold it and now it is trading about $15. I’m nervous that AMZN could spike after earnings so I spent about $5 on a Feb16 280/300 bull call spread as a bit of insurance. This required 3 trades. I still own a Feb16 240 put and a Apr 275/255 bear put spread. If AMZN tanks after earnings, I’ll do pretty well. If it cranks up, well, then not so much.

I broke another rule today. I bought some long AAPL calls. I put on a couple of calendar spreads BTO the March 450 calls and STO the Feb8 465 calls for about $14.6/each. I am short a 450 call for this week and next and this helps provide a bit of protection if AAPL starts to take off, which I think it could. All it will take is some sort of announcement. Today’s move may just be announcement of a higher storage iPad. This is setting up for some new enterprise announcement. Health care?

Finally, bought a bit of insurance. Did a buy/write on VXX buying the underlying for about $23 and selling the Feb16 25 call for $0.50. This is a really low level in volatility that just can’t be sustained.

AMZN Earnings, What to do, Mr Grasso?

So I watch CNBC, probably too much. but I do like to catch Fast Money both at the noon hour and after the market closes. I like it because of the diversity of traders that appear, some I trust and some I don’t.

I like Steve Grasso. I particularly like his predictions in the S&P Cash Futures and his lines of resistance and support. One of the names he has been touting for at least the last few months is AMZN. I think I remember him saying it was one of his favorites. So I was a little shocked to hear him say today that for the whole time he has recommended it, he has never bought a share of the stock. Can’t get too pissed at him about that, the stock is at all time highs and he hasn’t profited a nickle. But I have, I had three calendar bull call spreads on using the February and April 200 calls as my stock replacement.

Today Grasso said he thinks the stock will pull back after earnings tomorrow, and I believe him. I took off three of those spreads today and left one on. I bought an April 775-750 bear put spread to protect the profits in that one. But I may just pull the trigger and close that one out tomorrow as well. We shall see. My other choice is to sell the call and make about a kilobuck on it and let ride the Feb16 265 call that I sold for about a kilobuck and is now trading at about $1.6K. If I do that I may buy a 280 call for a little insurance, but really the conservative move is to just close it out and see if I make a few $$ with my put spread. Hell I even sold the 10 measly shares of the underlying I had in the name, that I had kept mostly to just have the price on my screen.

Could be wrong here, but it never hurts to book a profit . . . .

PCLN pulled back a bit today. It was an excellent opportunity to square things up a bit. Most of my call spreads are now pretty deep in the money but was able to structure things so that I have about three of them with all of the short call positions being around 710 or so with lots of implied volatility that should dissipate as we get close to Feb 16 expiration.

GOOG is still my favorite name at the moment. Acting really well and earnings are in the rear view mirror.

CRM jumped up today on the news that there is a 4/1 stock split coming. Did you see that Mr AAPL? Did you see what CRM did, just with that mathematical accounting trick?

At least APPL did stabilize today. Carter Worth on Fast Money seems to feel pretty comfortable with it getting back to 500. His rec: short the S&P and go long AAPL. Truthfully, that’s my plan, at least to a certain extent. Bought 5 bear put spreads in the SPY today, the Mar 145/140, for about .65 each. Pretty cheap insurance, if you ask me . . .

1/27/2013 Trading AMZN ahead of earnings (and GOOG, PCLN, SPY, AAPL)

Looking ahead this week, as far as my portfolio goes, the most significant event is AMZN earnings on Tuesday. Currently I have 4 calendar spreads working, I am long 2 of the Feb16 200 calls and 2 of the April 200 calls. Up pretty good on the Febs, but just a bit on the Aprils.

My plan is to liquidate the April calls and the shorts against them and 1 of the 2 Feb16 calls. My basis on that call is about $63 and I will stay short a Feb16 275 against it. This way I can stomach a fall to about $253 before I start losing money. Against this I plan to buy an April 265/240 BEAR put spread in case we get a pullback to below $250. In that case I will wait for things to settle out and then probably sell a BULL put spread down at the lower valuation.

As to other positions:

AAPL – still just trading horribly. But just as stocks don’t go up forever, a stock with a PE of 6-7 (forward earnings, back out the cash) growing at 20%., just can’t go down forever. Still the largest single position in my portfolio (ouch). Feel like giving up, but I know that feeling generally only appears around the time of a bottom. I think there is still a good chance that they will announce something and everyone will jump on board again all at once. This usually happens about 2 weeks after I sell the entire position. James Altucher just published a great article here. And if you can appreciate a bit of sarcasm, check out Bryan Goldberg’s piece from yesterday here.

GOOG – fast becoming my favorite trading vehicle. Moves well, but not huge in either direction (see AAPL). I have been doing well selling credit spreads with moves up or down. AND they have already reported earnings.

PCLN – plan to take a good chunk of my calendar spreads off this week. Almost straight-line move up on Friday. Report earnings tentatively on Feb 25th. Seems like a good time to buy a BEAR put spread or two out a few months and sell short term BULL credit put spreads against them

QLD – I own about 400 shares of this etf and am short the Feb16 62 calls against them. I think I am going to roll this 4 calls into the Feb16 55 (or even 50) calls as a hedge against a market pullback. If that happens I will start to nibble on the QQQs eventually replacing all of the QLD with the QQQ. I have quite a bit more SSO and SPY than I do the QQQs but I think that the Nasdaq will get popped harder in a pullback. I am also accumulating a little bit of QID (inverse QLD), TWM (double inverse IWM), SDS (double inverse SPY) and VXX (plain old volatility)

So to summarize; AMZN-thinking it will pull back short term. Selling most longs. AAPL-hoping it stabilizes but did buy some April BEAR put spreads on Friday. GOOG- staying with this name. PCLN-staying mostly long now but will divest by earnings

Good luck to all this week and  . . . . . Aloha!


Goodbye 2012, Hello 2013

I came into this year like I do most years, eschewing resolutions. I’ve never found them to work, and many times backfire when they go unrealized. I broke this rule this year, deciding on one resolution that seemed easy to fulfill. That resolution was to post to this blog at least 5 times a week.

Suffice it to say, I am about a month late . . . .

But on to other matters. 2012 was shaping up to be a very good year for me. I trade in several accounts, about half of which is our taxable account. I also have several retirement accounts I trade in as well as a couple that I manage for my adult daughters. I trade these accounts very differently, being the most aggressive in out taxable account and more conservative in the others. In my kids accounts I can only write covered calls and in the retirement accounts I limit myself to covered calls and buying just a few calls or puts. Only in the taxable account do I buy and sell spreads and other multi-leg strategies. Up until about the end of October I was doing really well in the trading account projecting a return of about 25-30% for the year compared to a 10-15% return in the others.

But then, the proverbial wheels came off the wagon. AAPL started to fall just after the iPhone release and I chased it down thinking it was going to stop falling. It stopped about 600 around October earnings and then proceeded down to 502 or so. It then rebounded to above 590, making many of us believe the rally would continue. But, no. It turned around and went back down to 500 and lingered until January earnings. After that it gapped down to 460 and settled today at 440.

The numbers are staggering. AAPL lost an enormous amount of market cap and now trades at a PE of about 10 trailing earnings, a discount to the S&P 500. Back out the cash, which is almost 1/3 of the share price and the PE is about 7.

Is it over for AAPL? Will it trade down to 400, or lower? Will it gap fill back up to 500? Hell, I have no idea. But then, I read the following article:

One of the more interesting points in this article is how much AAPL has ramped up it’s R&D budget from about $750M to a little over a billion from the 1st quarter of 2012 to the first quarter of 2013. The implication is that AAPL is working on something new. Also, why doesn’t AAPL buy back stock at this depressed level with their cash hoard? Perhaps they are saving some to build out infrastructure to support this new product.

Analysts are all falling into line saying that the growth of AAPL is over, that their products will soon be commodities with declining margins. But leave it to AAPL to come out with something else, a product or perhaps even a service that could blow everyone away. If that happens, I don’t want it to be just about a month after I’ve sold all my stock