Thursday, April 21, 2005

First Profits of the month!

I took some profits today, and it felt great! I mentioned earlier that I had bought some option picks from two of Steven Smith's column on realmoney.com. In last week's column he had suggested YUM Calls, AFC Calls, and OSI Puts. I couldn't get a fill anywhere near the price he suggested buying the YUM calls at, but I did get fills in the AFC and OSI positions. OSI sunk today, and I sold my puts for a profit of $149 profit per contract. It was fortunate that I was not executed on the YUM calls. Yum's earnings weren't good enough, and it dropped today. I feel relieved that I did not chase that one up. If I had actually been able to get executed at the price he suggested it would have been a very small loss so it was actually a great call on his part, since it was such a low risk relative to the potential reward for the trade.

Steven Smith wrote another column yesterday where he suggested TXT and HAR calls as further earnings plays. Now this is a situation where I missed out because I was unwilling to chase the price up. He suggested buying TXT at $0.75. I put a limit order in at $0.75, and never got filled. There were plenty of opportunities to get executed at around $0.90 though after I read the article. The earnings for TXT must have been good, because the calls closed at 2.70 today, and traded well up into the mid $3.00s intra-day, so I missed out on a big gain. I did get executed on the out of hte money bull debit spread in HAR at about the price hs suggested. HAR was up big today ahead of the earnings, but the bull spread was still out of the money. Earnings were after the bell so we'll see tomorrow if I'm able to make any money off of this one.

I know why I was reluctant to chase these positions up. (TXT and YUM) It's because last week, I chased up TWX and UNH, which have been my most problematic positions. You win some, you lose some...phantom gains aside, it's still probably a good policy not to chase stocks that have run up. I must not let the missed opportunity in TXT affect my discipline.

I also sold my QQQQ May 31 Calls today. I feel very good about my other sale (OSI). By the time I woke up, it is unlikely I could have sold at a higher price than what I got. In fact I got executed within $0.10 of the high for the day. I do not feel very good about my sale of the QQQQ calls. I only made $28/contract. My intuition told me that the market would be strong all day. By the time I woke up, the market was up big, and I felt that shorts would be panicking on such strength and would cover into the close, pushing the Q's higher. Well after a small run in the nasdaq higher, the nasdaq ticked down a couple points and I opted to hit the bid on these options. I immediately felt dumb for it. It was pure emotion. I didn't want to risk having to get out of this position turn into a small loss. One camp says you can't go broke taking profits, but I disagree. For the amount of risk I was taking on in that position I should have had the patience to hang on for a bigger gain.

The May short premium portfolio ticked into the green today. The Good news for GOOG and EBAY obviously helped me quite a bit, but more importantly TWX moved up big today and is no longer in the money. I'm still concerned about GS and UNH. I suspect that the over-all market will trade higher between now and May expiration, and that should keep GS and UNH above their strikes. (I hope.)

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