ROLL: DRYS Bear Diag. Dec 75/Jan 70

Rolled 12/21/07

Today I saw that the stock was approaching support at 70. Notice the descending triangle that is still forming where the stock has a flat bottom at 70 and lower highs starting at 130 in late October and heading down to now. Therefore, I had confirmation of my bearish trend, so I rolled my bearish diagonal trade by buying back my December 75 put and sold the Jan 70.

Bought back Dec 75 for $2.63 debit & sold Jan 7o put for $6.10 giving me a total credit of $3.47.
New adjusted cost basis= $31.10-3.47= $27.65

Max Profit:
3.47/27.65=12.5% ROI in 28 days (to Feb expiration)


Max Loss:
$5.53 max loss= (20% of adj cost basis of 27.65)
New stop set to $22.12

Exit Strategy:
If not called out, I will exit and roll into Feb 1 week prior to expiration.

OPEN: DRYS Bear Diag. Jun 100/Dec 75 (Paper)

Traded on 12/20/07 at 2:48 pm

Being 1 day away from expiration, I decided to paper trade this bearish diagonal. This is the first time I have opened a trade 1 day before expiration, so I needed to test it out before trading it in my client’s account. If you are new to trading, I highly recommend you paper trade for at least 3 months successfully before you go to real money. Although it is paper trading, treat it as though it is real money. This makes a crucial difference in the way you will trade in this account.

During a trading session with my trading partners, we saw a price pattern called a descending triangle (see chart) on DRYS. This is where the stock creates a defined support line and then and lowering line of lower highs. They both eventually meet at a point and this technical signal usually indicates a bearish move, it’s just unsure of exactly when that will happen.

I bought 1 contract of the Jun 100 put for $34.90 and sold the Dec 75 put for $3.80 giving me a total debit of $31.10.

Max Profit:
If not called out: $3.80/34.90= $380.00 = 10.9% in 2 days

Max Loss:
Stop loss set at $ 24.88 (20% loss)

Exit:
I will roll the Dec into the Jan tomorrow on expiration day.

ROLL: HRS Bull Diag. Feb 50/Jan 60

Rolled on 12/13/07

Since it's a week away from expiration, I am rolling to the next month by buying back my Dec 65 and selling Jan 60 call. The stock is still maintaining a bullish to neutral trend overall and it appears that it tested the 50 day moving average (green on chart). I am still keeping the Feb 50 as it is deep ITM. Rolling a week prior to expiration allows you to capture the most extrinsic value when selling options. It is deceiving to think that waiting to the last day gives you the most fluff to sell, but market makers know this so they start squeezing it out well before the last day. Also, I don't get exposed to the risk of getting called out on exp. day.

My original cost basis was $12.40
I bought back the Dec 65 for $0.12 and sold the Jan 60 for $3.07

New credit= $2.95
New adjusted cost basis= $12.40- $2.95= $9.45

Max Profit:
If not called out: 2.95/12.40 (orig. cost basis) = 23.8% ROI
If called out: (10 (diff. between strikes)-9.45 (adj. cost basis))/9.45= 5.8% ROI

Max Loss:
New stop loss set to $7.20 per share on 12/13/07 (20% of adj. cost basis)

ROLL: BG Apr 100/Jan 120

Rolled on 12/13/07

I am also rolling BG as well as HRS today (see my notes on my roll on HRS for Jan)....I switched to keeping just a paper journal for a few weeks to see if it was easier than online. I have realized that it is much more organized online and great for accountability. This is why I have several older trades from the end of Dec and early Jan that I am posting today on 1/8/08.

Since it's a week away from expiration, I am rolling to the next month by buying back my Dec 125 and selling Jan 120 call. The stock is still maintaining a bullish to neutral trend overall and it appears that it tested the 50 day moving average (green on chart). I am still keeping the Apr 100 as it is deep ITM.

My original cost basis was $23.40
I bought back the Dec 125 for $0.40 and sold the Jan 60 for $4.55

New credit= $4.15
New adjusted cost basis= $23.40- $4.15= $19.25

Max Profit:
If not called out: 4.15/23.40 (orig. cost basis) = 17.7% ROI
If called out: (20 (diff. between strikes)- 19.25(adj. cost basis))/19.25= 3.9% ROI

Max Loss:
New stop loss set to $15.40 per share on 12/13/07 (20% of adj. cost basis)

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OPEN: BG Bull Diag. Apr 100/Dec 125

Traded on 12/4/07 at 3:03pm

Bought Apr 100 Call for $25.80 & sold Dec 125 Call for $2.40

Total cost basis= $23.40 per share or $2,345.90 total w/ commissions

Max Profit (in ~2 weeks):
If called out: $1.60 (Diff. between strikes minus cost basis)/$23.40 (cost basis) = 6.8% ROI
If not called out: $ 2.40 (credit)/$25.80 (debit) = 9.3% ROI

Max Loss:
Stop Loss ordered for $18.72 on 12/4/07 ($4.68 actual max loss= 20% from debit of $23.40)

Exit: If not called out, ~ 1 week before expiration, I will buy back the Dec and sell a Jan call to minimize total cost of trade even further.

Bullish trend with neutral candle today and slight weakness on ATR ($ price change of stock) indicator at bottom of chart. Support at 111 with stock at one year high. As long as stock stays below 125 I won't get called out and can roll into next month. If I get called out, I still make a great ROI (6.8% and have protected myself with portioning the trade to the portfolio size as well as setting my stop loss).

Happy trading!

OPEN: HRS Bull Diag. Spread Feb 50/Dec 65

Traded on 11/16/07

This is what the chart looked like when I got into HRS. Bullish to neutral trend. Resistance at 65, stock at ~63. As long as the stock stays below 65 I will not get called out and can keep the long position and sell the short again next month.

Bought Feb 50 Call for $13.90 debit and Sold Dec 65 Call for $1.50 credit

Total cost basis (debit) = $12.40 or $1,245.90 w/ commissions

Max Profit (in ~ 1 month):
If not called out- $1.50 (credit) /$13.90 (Debit)= 10.8% ROI
If called out- $2.60 (Diff. between strike prices minus cost basis)/$12.40 (cost basis)= 21% ROI

Max Loss:
Stop ordered on $9.90 exit on 11/16/07 ($2.48 actual loss from debit of $12.40)

Exit: If not called out, ~ 1 week prior to expiration, I will keep the long Feb call buy back the Dec short and sell a Jan call.