Just wanted to lock in profits on a trade, made the trade, but owing to the fucking middle of the night time-zone, and the little numbers on my position tracker, missed the add to my position, caused a bit of stress as the market was moving.

Best I chill. Make a fresh coffee.

Took 2 days to move the trade to a guaranteed profit. The question only remains now: how big?

I’m just in the process of writing next week’s newsletter and have finalised the stock selection that will be next week’s Trade of the Week. Now while last week’s histrionics and market adjustments resulted in a heroic save, the point of the exercise is to make money, so to that end this week is dedicated.

This week’s stock as a little macro attached to it, which may create some volatility in the name. Current IV is at the low end, thus we can benefit through any IV gains. To avoid last week’s fiasco, this week the position is hedged. The market goes up, we get paid. The market goes down we get paid. What if the market is unchanged? If the market literally has zero movement all week, we lose. If the market moves, but then returns to the starting point we can get to B/E.

Now the risk is a guaranteed 40% of invested capital. That is a disaster, worst scenario loss. It is unlikely that we cannot improve that to 0.00%. Now the rewards. Probable returns to this trade are 44% return on capital. If we catch a bit of luck, those returns will rise to +256% on invested capital. Nice.

While the newsletter will make a market directional call, that is of course the original mission of the newsletter, the Trade of the Week will insulate you from worrying about directional moves, all trades in the future will be hedged positions, hell I’m here to make money, not give myself an ulcer.

In summary, this week is designed to make money. The results will appear at market close next week. So far the record [all directional trades] stands at 1 win, 1 loss, 1 B/E. I intend to significantly add to the win column.


Not much happening. Pretty much hovering around that $55.oo level, that was at initiation of this trade the maximum loss. Now through adjustments, this is simply a breakeven point. Will the market, and hence SBUX actually move either today or tomorrow? Difficult to say, the market seems stunned currently, and dilly-dallying is all we’re about currently.

The $55.oo area was at initiation of this trade the Max Loss area. After taking defensive action yesterday, it is now a B/E area. There are [after today] 2 trading days for the stock, assuming it trades close to $55.oo today, to trade into profit. I’m looking currently if I can protect the downside here. Watch this space.


By buying the $52.50 Puts @ $0.09 the downside @ risk is covered, except for a hole around the $53.oo area. Thus the choice is: [i] take some protection now [ii] wait to see if price trades higher into close circa $55.00.

I purchased the Puts @ $52.50 @ $0.08 If the market crashes badly, I’m in position to make good profits, but that hole around the $53 area, which has been strong support, is where all the risk is concentrated.

Just been watching the pricing on the Options, and the hole @ $53.oo is not going to be a major. The Put calendar spread placed yesterday, looks, currently to actually hedge this really well. So currently, I’m actually quite satisfied.

We are going to close inside that H&S pattern. The SPY has bounced nicely through the late morning to afternoon. Of course tomorrow brings all manner of new issues, and we have Bernanke talking again on Thursday.

SBUX has followed the SPY. I was a bit early on this trade, but, have eliminated some of the risk in this trade. If…always a big if, the market trades marginally higher into Friday, this trade could well hit maximum profit @ $57.50. The risk at $55.oo is essentially gone. There is a possibility of turning that to a B/E point.

With the market trading lower, the SBUX position has taken a hit. To reduce the loss, and potentially salvage the position I added a Put calendar spread @ $55.oo

So far, so good. I expected the weakness in the open from SPY and stocks to follow. SBUX followed that plan so far. For the rest of the week I need the SPY to bounce back into consolidation territory which should take SBUX with it.

$57.50 is the required price to earn maximum reward of +166% on invested capital. Should problems develop, there are some strategies that I can use to again lower the risk etc. No requirement yet, I’ll re-evaluate day-by-day.

This is last week’s Trade of the Week. Yesterday I rolled out of the Bull Spread into a Backspread for two reasons: [i] potentially it increased profits, [ii] it reduced risk. Well, the profit factor looks virtually impossible. The reduced risk however has reduced the losses by $100/contract. Should we flash-crash, then I could actually gain a profit, I only mention it as it is the flash-crash anniversary today.

The trade actually highlighted an issue in selection, which relates to correlation. This can be fixed, which will be taken into account next week. Either way, the trade closes today on expiry.

*Trade now closed for loss of $265/contract

I adjusted the position in the BIDU trade rolling out of a Bull Spread into a Backspread. As a result, I lower my risk exposure, increase my potential profits, realistically by a factor of 4 [considering the time to expiry] and in the event of a catastrophic collapse, gain a profit.

Damn, I love Options.

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