Toyota Motor Hearing. Are You Kidding Me?

Ok Traders, I have to say something about the Congressional Hearing.  How many times can you ask the same question?  I laughed so hard yesterday when one of the leaders of our country decided to ask yes/no questions.  He asked really dumb questions, and then got I don't know for the answer.  What then made me laugh was the fact that he was reading, saying please submit for the record, and then gave the, "if so, then... asked another stupid question."  Simply, an embarrassment to me.  Today I heard the same question over and over.  What are they trying to prove?  Don't they know that Toyota is going to come up with a plan to resolve this issue?  This is worse than the steroid case.  Today, a Congressman had brought a part that is in the Camry and then said there is a similar part from another vendor used in the same car.  He then had to ask why different parts are used in one line of cars.  He is a leader in our Country!  C'mon Man!  Every freakin' business in our country does the same when they use many vendors.  Has he ever looked at a computer?  How about the simple Intel and AMD chips in computers?  The same model, different chips, same output basically.

Ok, done venting! Back to work.  If you have been looking at the website http://www.optiontradingteam.com/ you will see that there is now a direct link to the blog and many changes happening.  I am shifting to one newsletter for $20.00.  You get all four of the strategies in one now.  It just makes more sense for me to do it that way.  There are a few more things changing on the site, and I expect to start the newsletters the first week of March.  This is when the first trades will be issued and will be the inception of the service officially.  I am done with the testing, formatting and all the behind the scenes stuff.  I am ready to get this off the ground officially and look forward to trading and talking about what I am doing.  I hope it is very beneficial for everyone that follows me and the service that our team will be putting out.  I am very excited about it and welcome any and all inputs, comments, and suggestions!  I am especially excited about making short little videos that will demonstrate many of the trades and will also allow me to discuss questions and topics of choice to assist in educating us all.  I am looking forward to the improvements in the site and the service that is about to be provided to the proud members of our team.

Happy Trading!

Quick Trade update: I closed out the FEB UAUA short 14 calls for a small loss and continue to hold the MAR 16 Short Calls.  Currently I am up on those, but at about a breakeven with the the loss on the FEB calls. I mention this because I tweeted about the position and I need to get the complete disclosure of where I am at in the trade.  Look for the detailed update.  I just had to rant tonight because of two days of insanity by our Congress.  They could be spending our time and money on something that makes more of an impact to all of us in the world.  It is an important topic, but not worth two days of the same questions with no real purpose.  Everyone already knows the issue and the pressure and questions should be on the results and actions that are needed.  I just ask that they get on point and drive toward the right answer vice grand standing how important they think they are.  Enough said, whew.  Enjoy everyone!

What Have I Been Doing?

Hello Traders!

     I have not forgotten everyone out here in the wild world of trading.  I have been very busy working on things other than trading.  Unfortunately, that has to happen from time-to-time for me.  So, you ask, "What have you been working on?" 

     I have been very busy working on upgrading my website with some wonderful designers that work at LightMix Design Studios.  They are helping me to add some great things to the site.  I am adding a video page that will be called the Film Room.  I intend on showing several of the trades that I execute in the video, show some of the things that I look at in the market to help me decide which direction I think we are heading, and to maybe provide some humor or entertainment.  I am human, a sports fanatic, a wild trader, and a man that likes to have fun every once in a while.  I will be keeping it professional for the most part. *laughing*

     I am also developing a new newsletter service that will consist of four specific strategies that I use to make a portfolio that is made up of options.  The site will get very in depth to the four strategies, will track each strategies performance and will give you an overall portfolio performance.  I am very excited to get this all going.  I am going to be publishing the first newsletter this week and will most likely distribute it for free here on the blog for all to read.

     The portfolio is starting this week.  All the initial positions for the longer term strategies will be opened this week and building on them as I go.  The market lately is acting up a little so, it may not be prudent to dive in head first into all the positions.  I do have trades that make money in a down market also.  I am not always a bull, or a bear.  I like to even try to make money in a sideways market.

     I have also been looking at some other fun things to help build my reach to the world.  I have been using Twitter on this blog, and that is going to be added to the home page of my website.  I am excited about that because it gives me a very easy way to update things very quickly and to allow everyone to see that Tweet almost immediately.  That is a lot of fun and will also be something that allows me to get everyone into the Member's Area of the website to see the new trades that I make in The Winner's Portfolio.

     I have also started working in a new area of the internet social networks.  I am going to be posting articles, comments, and instablogs on Seeking Alpha (http://www.seekingalpha.com/).  If you are a follower of me here please check me out there.  You can view me as Option Coach.  I look forward to the comments there as well as here.

      I look forward to the next few weeks more than ever, and 2010.  This is going to be another great year of trading and we all have a lot to learn in the markets.  If you think you are an expert and you are not learning then you are far better than me.  I learn everyday and I will never consider myself to wise to not learn more.

     Have a great week everyone.  Please provide me with feedback in the way of comments, and click on an add or two so that I can buy something special this year! *laughing*  I hope that you are enjoying the blog, the website, and most of all my newsletter that will be demonstrating my option trading portfolio. 

      Happy Trading Everyone!

UNH Long Call Option Trade Evaluation

Hello Option Trading Friends,


I closed the UNH position on Christmas Eve due to the poor performance of UNH since hitting highs. The rally in the stock had fizzled and I had to move away from the position once the CALLS at the 30 strike were trading at $2.00. This is equal to the purchase price of 10 of the CALLS I had purchased on the 11th of December. I decided to lock in the gains and move away from the trade with a very good gain. The entire position was closed with just over a 30% gain prior to commissions. I feel this was a very well executed trade, although I gave a little back at the end of the trade. I am still very pleased with the performance of the trade. This may be a position I look to establish again, or even look at a spread strategy due to significant support at the 30 dollar level. I will have this on my watch list and if the pull back continues to that level I may enter into the position again. I like the health care sector because of the passing of the bill through the Senate giving more clarity to the direction health care reform is going. We still have significant negotiations between the Congress Bill and the Senate Bill and when that is done investment into the sector will be much easier to evaluate. Like I always say clarity is the best situation for the market. When we get that clarity the underperformance of the sector should subside and appreciation should be much easier. I am done selling the thesis for the sector. I am doing a lot of looking for good setups to enter various trades, but patience has been good for me in recent trades. The S&P 500 has performed well, but with it trying to break out of this current range it is in I am finding trades hard to commit to because of potential breakdown in the market. The start of the year has me nervous to an extent, but with the break above 1120 on the S&P I am encouraged. The lack of volume in these holiday trading sessions has not convinced me though. When positions are taken here at the start of the year it will be interesting to see how the market reacts and the amount of volume will be important. I continue to look for favorable setups in either direction. I will also be listening to all those smart people out there making projections to get an idea of what the smart money is thinking and where they are positioning for the New Year. Look for my next trade, live updates will come via Twitter (Option_Coach), and what my thoughts are for the next year. I am a little more flexible than most. I have my general thesis, but I am not afraid to change direction based on the current actions and trends of the market. That is exactly why I love option trading. I am always ready to move, and can use many different strategies to support my thesis. Below is a chart of my last trade and the detailed performance of the trade. I am going to continue to try and give you as much detail on my trades as possible to demonstrate my performance. I hope that it is helpful and that if you follow me into the markets that you are getting the information you need to be effective and confident in the trade and the strategy. I look forward to comments and would really appreciate the follow of the blog. I will try to answer all the questions generated promptly. Enjoy the New Year’s Celebration and happy trading to all of you. Here is the evaluation I promised you.

Positions:

07DEC09 Long 5 contracts JAN 2010 28 CALLS (UNHAT) @$1.50
11DEC09 Long 10 contracts JAN 2010 30 CALLS (UNHAF) @ $2.00
11DEC09 Long 10 contracts JAN 2010 30 CALLS (UNHAF) @ $1.73

Closed on December 24, 2009:

07DEC09 Long 5 contracts JAN 2010 28 CALLS (UNHAT) @$1.50. Closed 24DEC09 for $3.65
11DEC09 Long 10 contracts JAN 2010 30 CALLS (UNHAF) @ $2.00. Closed 24DEC09 for $2.00
11DEC09 Long 10 contracts JAN 2010 30 CALLS (UNHAF) @ $1.73. Closed 24DEC09 for $2.00

Total Capital Invested: $4,480
Total Liquidation Amount: $5,825
Total Capital Gain: $1,345
Percentage Gain: 30.02%

Note: Totals do not reflect commissions paid for the trades. Actual gain will be slightly lower due to the commissions. I do not include the commissions for simplicity and because of the different rates that are charged by brokers.

UNH Option Trade Update- Adjustment of Stop Losses

Hello Option Traders!

This trade continues to work well for me. I would like to update you on the status of the trade and what I am executing in the way of protecting gains. In this post I will update you on several of the potential follow up actions that I may be considering. UNH has moved up almost 16% without a down day and I would be a fool not to expect a small pullback. I will get into that more later in the post because I first want to get through the current status of the trade and the adjustments that I am making to the protective stops. As always I have a chart that has a few points of interest highlighted. Thanks again to free stock charts for the great charting service. All the charts that are on this site are from their great service at www.freestockcharts.com. I use that service all the time and find it to be very useful. Please refer to the chart as I cover some of the key points of the current status of this outstanding trade.

Positions:

07DEC09 Long 5 contracts JAN 2010 28 CALLS (UNHAT) @$1.50 currently trading for $3.75

11DEC09 Long 10 contracts JAN 2010 30 CALLS (UNHAF) @ $2.00 currently trading for $2.225

11DEC09 Long 10 contracts JAN 2010 30 CALLS (UNHAF) @ $1.73 currently trading for $2.225

Total Capital Invested: $4,480

Total Liquidation Amount: $6,325

Total Capital Gain: $1,845

Percentage Gain: 41.2%

NOTE: All totals discussed exclude commissions. There are many trading companies out there with many different rates so I am keeping it simple by just excluding the commissions from the totals.

Trade Update:

This trade is coming together nicely. I managed to get the anticipatory portion of the trade for a very nice gain (over a double now). The add on at the breakout is working nicely. I did pay up a little at the start of the day, but managed to add again at the end of the day around where I really wanted to get for pricing. I paid up due to the strong move and didn’t want to miss out if the stock continued to rally with little pull back. The average cost for the 20 contracts at the add on point is $1.865 which is respectable. I really was hoping to get around $1.75, but I am comfortable where I am and the stock has continued to move with very heavy volume. That volume is showing great conviction to the trade and makes me feel very good about this trade going forward. Here is where I am going to talk a little about being cautious at this point. Since UNH turned and started the rally it is up over 16% in just a few days. There is going to be a profit taking day, or a tough market day (maybe tomorrow with the FOMC meeting bullets) that causes a pullback. I am not saying this trade is done, but I am saying protect your gains. I am going to be protecting them with the following protective stop plan that is highlighted in the protective stop section. Here is an interesting note for you if you followed me into this trade. First, congratulations, and if I, we if you came along, will break even at expiration if the stock remains where it is right now. I feel that is a great situation to be in and provides great opportunity to create some follow on strategies. I have been looking at selling JAN 33 CALLS creating bull spreads. This lowers the risk of the trade by lowering the cost basis and the breakeven point, which puts the trade at a gain at expiration if the price remains where it is right now. I have also considered selling the DEC 32 CALLS also. Currently, they were trading at @0.25. I think that might be worth the short term (3 days) to lower the cost basis by $625 (about 14%). I would not be disappointed with the trade being called away at 32 if a move up occurred by Friday closing the trade. That would be over a 50% gain overall. If I decide to execute that trade in the morning I will Tweet it. That is fairly aggressive, and would be executed only if I decide I don’t like the JAN spreads at this point. I am also thinking a slight pullback is due and that would be a nice cushion to add with the idea of again selling the JAN CALLS on Monday to lower cost basis further and locking in more of the gains. Remember, if you feel that this trade remains extremely bullish, staying long only gives the best return outside of adding to the trade, or some other leveraging strategy. Again, if I change the position during the trading day, I will post it in Twitter which updates the blog automatically on the upper left section, or follow me at Option_Coach on Twitter.

Protective Stops:

Here is my thinking with these stops. I am going to give you two aggressive approaches and an absolute stop. I also will update my protective stop 50% rule for the record, but with the stops in place I should not get there, but I always put it out to ensure that this rule is always in place.

Aggressive approaches: (These are designed to lock in gains, and close position entirely)

 Stop Loss set at near yesterdays low. UNH @ $31.00. Close all positions. This will lock in about 20-25% overall gain.

 Stop Loss set if UNH @ $30.5. Close all positions. This will lock in a gain of just over $300.00.

Absolute Stops: (This is the absolute stop on this trade)

 If UNH breaks 30 close entire position. The aggressive stops can be mental stops if you like and if you want to give yourself room for a pullback in this very bullish position. I have set a conditional stop on this one that automatically sends a sell order if the ask on UNH hits 30 all 25 contracts will be liquidated. This will result in a small loss around $370.00. This is a hard stop.

 As always I put this in here. If at any time you are down 50% from where the trade opened that day close the position. I keep it simple. The current value for the position is just over $6,300 dollars, so if at any time the position is down to $3,150. I will liquidate the position. This should only occur if there is a large gap down in the market or UNH that bypasses the absolute stop in the above absolute protective stop.

My Current Protective Stop Plan:

My current stop plan is the one highlighted in the chart above. $30.5 is my stop because I am very bullish and I want to give the stock a little breathing room to continue higher following a huge burst with good volume, but I want to lock in a gain vice a loss. I gave several stop plan actions above for you to consider that make good trading sense.  I always reserve the right to adjust.  The absolute stops are in place at all times and the agressive stops are mental stops for me with the option of creating spreads. There may be a test pullback prior to moving up. I feel the catalyst of the bill not getting past and if it does with little effect to the HMO’s bottom line. Also, another catalyst to consider is that this would be a semi defensive play if interest rates were to rise. I could see capital coming into the health care sector as a defensive move to an interest rate hike or talk of it by the FED. The underperformance of this sector and it not being affected by rate hikes as much would make for another great reason to own this sector.

I will post any actions I take on this trade on Twitter which is updated real time on the blog as I stated before, and if I create any spreads as mentioned you will also see that post. Then, at the end of the day I will give you the updates to exact pricing and strategic plan for the trade from that point on.

Happy Trading!

UNH Breakout With Volume. Add To Option Positions.

Good Morning Option Trading Friends!

It happens quickly sometimes.  UNH has moved up quickly.  Up over 6% yesterday.  The close above 30 is impressive and I am adding to my position this morning.  I will put out a note of caution.  The stock has moved up over 10% in a few days.  The 30 dollar level is going to be very important to hold now. A failure of this level is possible due to the big move, but the futures this morning are strong, and that could help to support the move.  The catalyst is still in place and momentum of a technical breakout is in place.  I have see stong option volumes still and there have been several other technical analysts pointing out breakouts from the 30 dollar level.  Here is a chart to illustrate the breakout.  I will summarize below.

The Position:

Long 5 contracts of the UNH JAN 2010 28 Calls (UNHAT) @ $1.50.


The Trade:

Adding to the current long position by executing the following at the open of the market on 11DEC09.  Details of trade execution will be posted on Twitter and post on the blog.  A summary post will be in the next update.

Buying 10 UNH JAN 2010 30 CALLS (UNHAF).  I will be looking to get into this position less than $2.00.  The market looks to be opening higher.  This is a bit of a premium to close yesterday, but should be feasible.

Protective Stop Options:

I have two scenerios for stops.  I am concerned with a pull back due to the strong move and I will be tight on the stops.  I will be looking at the 30 level in UNH to hold and will be monitoring to close there, but I don't want to cut short.

Stop at 30 if aggressive.
Stop at 20DMA if you want to let the volatility subside and see upside
Stop if option position is down 50% (This is always a rule on a directional trade)

Enjoy the day!

Trading Options On Health Care Reform Approaching Approval

Hello again my Option Trading Friends!

     I have started a new position two days ago.  I want to share this trade with everyone, and give you my rules for the trade.  You can still enter the trade at about the same price I entered. This trade is in anticipation of a breakout above a very strong resistance level.  This trade can also be started if the breakout actually occurs.  I will be adding to my position upon a breakout of this resistance level and moving stops and adjusting trading plan at that point. This post will cover the anticipation trade that is currently on in my portfolio, with my rules, reasons for entry, and cover the potential catalyst.  I will be using the following FreeStockCharts.com chart that I have marked up to highlight the trade.  Please refer to this chart as I discuss the trade.  If you have any questions or comments on the trade I look forward to you seeing them in the comment section of the blog.  There is a comment tab at the bottom of the post that I would love for everyone to click on and provide me with your feedback, questions, or general comments.  Ok, let,s get started, here is the chart:

Summary of Trade:


      This is an anticipatory long only directional trade that I have already started. I expect to see this position retest the resistance level it has tried to break several times now. I feel there is a strong enough catalyst coming that will move the stock above this resistance and much higher. There is some market risk now with the markets currently trading in a very tight range and potential for a breakdown or breakout. The move from March has been very impressive, and with the new calendar year on the horizon we may see a change in sentiment when big institutions get back in the game following the start of the year, or a continuation. I have been waiting for the market to show its hand, or for strong catalyst positions to arise like this one. I am going to be aggressive with the length of time on this trade due to the New Year, and how the catalyst should play out. Please, read on to see current position and the options that I have for this trade. I will explain several of the reasons for entering the trade in more detail below, but first let's get you the trade information and then I will explain.

Current Position:

At Point 1 on the chart I entered the following trade at 0935, 07DEC09:

      Long 5 contracts of the UNH JAN 2010 28 Calls (UNHAT) @ $1.50. 

The Trade Plan:

Entry Point: This current position was entered in anticipation of a move back to near the resistance level that I show in the chart near 30. I feel strongly that this move will happen and wanted to put on some risk to take advantage of a move to that level. As I write this the bid/ask is $1.70/$1.74. I feel that is still a very good entry price for this trade if you want to get involved. I would enter into this position anywhere down to UNH at 27.5. This is the first support at which I feel comfortable entering a long only anticipatory position.

Protective Stop:  I have two rules for the protective stops of this position. 

          Rule 1: Stop out if at anytime the long only call is down 50%.  Please, follow this rule strictly! For me  

                      on this trade it is at $0.75.  Adjust for your entry price accordingly.

          Rule 2: Stop out of entire position if UNH closes below 26.5. This should be very close to the 50%

                      mark, but gives up support at this level and not worth the risk of holding for a bounce.

Reason for the Trade:

     I have a few reasons for entering the trade. The first is the government catalyst for this stock. As everyone knows the government is in the throes of trying to get health care reform passed. Within the past few days the private option has been thrown out and that is a positive for companies like United Healthgroup Inc. (UNH). That is why I entered the trade where I did in anticipation of a break above the resistance at 30. I had this on my watch list for a while now looking for that break above that level. When I heard the news I went ahead and entered a small position to take advantage of the run up to 30 and the test of the resistance. Thus, making a little money along the way. I typically would give more time to a long only play, but due to the new year coming, UNH earnings on 21JAN10, and either a passing/failing to pass of health care reform prior to end of the year I didn't feel it necessary to pay up for time. I compensated for buying near the money strikes vice deeper in the money giving some leverage if there is a solid move in the time frame I a looking at. I really feel either way on this bill we see a pop out of the stock, which I am hopeful will break the 30 level creating a potentially large move. The magnitude of the long term triangle is about 15 points and would put the target at 45. If you look back in time you will see that is the top of a gap that occurred and should provide for a new resistance point. I find this very interesting that the two points coincide in my eyes. Either way they go on this bill we will know by the end of the year and I feel that either way it is a positive catalyst for UNH without the private option or going into next year. If the bill goes into next year it is probably a dead issue. Thus, back to business as usual for the company, and that means they continue to make great money. The following is last reason that I have for getting involved in this trade. The 30 strike and strikes very near that have been being bought heavily as compared to the puts in the stock. Typically, this is a very good confirmation indicator for me. The last trade in Mosiac that I highlighted worked very well with the same type of indications in the call activity.


The Breakout of Resistance with UNH breaking out above 30:

I am going to add to this position in a very aggressive manner. The specifics of how I am going to add to the position I have not narrowed down yet, but if it happens over the next few days I will consider staying long only, but increasing my size substantially until the momentum stalls and then may take follow on actions of creating spreads or locking in the gains. I will keep you informed real time of all the trades I take in this plan via the twitter update, and then the end of the day post update here to the trade.

I will continue to post updates on this trade as I track it and new updates to news and events occur. This is going to also be a time sensitive trade for me due to the January strike and the New Year. So, if there is not a significant move I may walk away from the trade and put it back on the watch list waiting for the breakout trade only. I will keep you posted on my thoughts here at a minimum of weekly.

It is now getting late and I need my sleep. Happy Trading and enjoy the holidays! Maybe the Government will give us a nice gift in some strong catalyst for this trade. Stick to the rules, and look for updates on here or on the sidebar from Twitter.

MOS Position Closed

Hello Option Trading Friends!

I closed my most recent position today. I am very pleased with the way the trade worked, and of course happy with the gains in the account. When I opened the trade the catalyst was very large trades in the September 50 to 60 calls. This extreme trading was also noted by several traders out there also. I liked what I was seeing and the stock was at a few interesting technical levels. Trading right at the 50 day moving average, and at the same level where it gaped up. I thought that was a great opportunity to get into the crazy potash and grain sectors. I think that this sector over the long haul is going to be great, but the short term catalyst of potential takeover and the volume in the options got me into the trade. Now that you know why I got into the trade let me summarize the performance of the trade and show you the results.

SUMMARY OF TRADE:

Please refer to the chart below for the visual of timing of the trade. You will notice three points of interest. Just below the chart you will see my complete explanation of each point of interest.

POINT 1: September 2, 2009 I opened the trade that I summarized in the post I made on September 1st. I took option 2 that I discussed. The big point on that was that I took on more risk to aid in financing the trade and looking for a strong move within the first few days.

THE POSITION (POINT 1):

Sept 2, 2009 Long 10 OCT MOS 50/60 Bull Call Spreads @ $2.65
Sept 2, 2009 Short 10 SEP MOS 50 Naked Puts @ $3.00

TRADE PLAN: Goal was to see a quick move up and to lock in quick gains and lower risk. I had mentioned that I would lock in gains or even close the position if move up was not made by the 4th. The catalyst was large option volume in the SEP Calls which had a very short time frame to expiration. Supported also by the technicals I mentioned earlier. My Stop was set if the spread was down $1000 or if the stock dropped to 48.

POINT 2: September 4th, 2009 MOS moved up nicely and I was able to cover the short position prior to the weekend as planned for a very nice gain of $1400. This removed the significant risk I had with the naked puts, and significantly lowered the break even point of the Bull Call Spreads. I always love being able to lock in a nice gain as planned and removing the risk over a weekend. It makes the sleep much better over the weekend in anticipation for the open on Monday. The stops of down $1000 on the spread or if 48 was reached in the stock were still in place. With the $1400 gain locked in this means I was going to have a minimum of a $400 gain on the trade even if stopped out.

THE POSITION (POINT 2):

September 4th, 2009 Long 10 OCT MOS 50/60 Bull Call Spreads @ $2.65 remains open. Covered the short 10 SEP MOS 50 Naked Puts @ $1.60 for a $1,400 Gain.

POINT 3: September 18th, 2009 I closed the position as the S&P 500 futures started rolling over with about 30 minutes left in the market. Triple witching often leads to the end of the day sell offs on Friday, and I also believe the market has had a very nice run. Also, MOS was approaching the 55 dollar resistance level which it has failed to penetrate 3 other times recently. I personally did not want to hold the position over the weekend again because negative news of any sort could create a very rough day on Monday. It was fortunate that I closed the trade because Potash (POT) had negative news following the close and selling occurred in aftermarket for the whole sector. A little bit of luck always works. Other reasons for closing the trade was that the Call activity in the OCT strikes was not nearly as strong the last few days. Coupled with the downgrades that have occurred the last week I was ready to move away and with the nice move up during the day I felt I should lock in the gain and not be greedy.

FINAL TRADE RESULTS:

September 18, 2009 Closed Long 10 OCT MOS 50/60 Bull Call Spreads @ $4.55 Gain: $1,900 September 4, 2009 Covered the short 10 SEP MOS 50 Naked Puts @ $1.60 Gain: $1,400

Total Gain: $3,300 in 16 days (Less Commissions)

TRADE EVALUATION: This was a very good trade and I am very pleased with the price action and execution of the trade. The early execution of the trade with the naked puts allowed for a little extra time which paid off. The closing of the trade today was a good trade. MOS was approaching 55 which was resistance and the rolling over of the futures combined with the slowing of aggression in Call buying were good reads to close the trade and well executed.