Friday, November 30, 2012
In hindsight, had I just purchased JRCC shares, I would have made more than $1.40 per share from the time I shorted the $2.50 puts till today vs. the net premium of $0.30 I was able to collect on this options trade. But I do like the novelty of options trading!
I'm looking for another options play on JRCC - perhaps a short call...
Wednesday, November 28, 2012
Wednesday, November 21, 2012
Ever since I got displaced by Hurricane Sandy, I've had CNBC running in the background day and night. Last Friday, I discovered a show called OptionsAction, which is the main reason for my foray into options trading. Going naked and doing long straddles? What's not to love about options trading, right?
My JRCC short put is a bullish strategy I implemented the first trading day I was approved for Level II trading and if it works out and JRCC market prices continue to trend upwards, I have basically just locked in a 14% gross monthly gain for a few minutes' work: $0.35 premium divided by $2.50 strike price = 14%... It's kind of like putting money away in a high-yield CD for a month if this scenario plays out.
If price trends downwards and closes below $2.50 at expiration, I'm obligated to buy @ $2.50, which would put me in a long JRCC position at an entry price of $2.15: $2.50 strike price minus $0.35 premium = $2.15 cost to me.
With VIX at 15.26 - even lower than Lehman levels, I'm thinking we stand a good chance of seeing a spike higher on some of the year's most battered stocks - including stocks that are correlated with economic conditions in China.
Annual 50% Fib level on JRCC is $5.175 and with tonnes of data coming out from China over the next month plus the unpleasant discussion on The Fiscal Cliff in the US, we may test higher levels again.
I chose a $2.50 strike price as the premium of 14% was a lot higher than the premium on the $2.00 strike price of 5%.
Rumour has it that 90% of options expire, so if I can find high probability short term puts to short, this could maybe, sort of, end up being highly lucrative in a 9FM, I really miss you sort of way.
I'm still trying to figure it out, but could shorting long term calls make sense if a company appears on the verge of bankruptcy?