First to two trades I’m putting on today. One has already filled, $GOOGL, and one I am waiting to see if it will fill today, $OSTK.
I am long both these names via call spreads and also slightly hedged with one put spread in each of these names. All my calls are also hedged in the sense that I always sell a call when I buy a call, that is I RARELY outright buy either calls or puts. I am 95% spreads.
The $GOOGL trade:
The last post I wrote that I was considering a butterfly in $GOOGL. I, in fact, did that today buying one March 16 1210 call, selling two March 16 1270 calls and buying one Mar 16 1300 call. This cost me $1450. At this expiration, the breakeven would be 1224.5 and max profit would be at 1270.
However, I’m sure that should the stock really advance I would buy a call calendar buying the Mar 16 1300 and selling an earlier dated 1300 call.
The $OSTK trade:
$OSTK reports today. Implied volatility is VERY high for this name (mostly because of cryptocurrencies). So I wanted to take advantage of that and sell an iron condor. I’m going out to March 2cd as this is where the numbers seem to be the best. The strikes are 40/50 puts and 100/110 calls. I’m trying to get $270 for this which is pretty low for the $1000 you have to risk for it. But the I’ll take it if I can get it. Again, after earnings today either one or both of these spreads may be closer to the price and I can trade around it.
FastMoney Halftime today:
Mario Gabelli was their hedge fund guest today and he was very proud of the fact that he doesn’t trade derivatives. He just researches and then buys and sells the equities. He said he has something like 650 names in the portfolio.
I think that’s great and for the bulk of my assets I have something similar. That is I turn these funds over to a manager and they trade either funds or ETFs based on their research. As I stated before they returned about 18% last year, and yes that is less than the S&P which I believe was 27%.
But in my retirement account I trade in, and the account that these trades are in I got about 78% return last year. You just can’t get that kind of return without taking substantial risk and that’s why I don’t bet the farm on this account. And I get that kind of return by trading options, which of course are derivatives.
And even though it is a smaller part of my overall account, its still fun for me and the smaller position, I think, frees me up to be a better trader.
Bottom line, I think its good to have both value investing in your portfolio and a wee bit of speculation, too. Let’s face it, if you’re reading this, you like to trade. Me too. Just size you positions in each so it doesn’t consume you, or keep you awake at night!
Good Luck with your trading!