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Posts Tagged ‘DLB’

Deep OTM NP Strategy – NOV Week 1

Posted by mounddweller on November 12, 2011

Fellow Traders,

Below are the selections which meet the criteria for Week 1 of our Deep OTM NP Strategy.  For newer readers and others who may have forgotten let me remind you that our Week 1 criteria is simply NPs with at least 10% down side protection (DSP) and a Put Factor (PF) of at least 2.0 or higher.

As you can see, as is usually the case this late in the monthly expiration calendar, it is pretty slim pickings.  So much so that I couldn’t find a single one that I would be comfortable owning.  What held me back from highlighting any of these as a possible trade is the fact that all of them except SIRI all report earnings this week.

If I had to choose at least one I think I would go with NTAP.  Networking stocks have done relatively well in the 3rd quarter.  Thus, odds would be in our favor that NTAP will at least match earnings expectations.  Also, NTAP has the strongest balance sheet of the stocks on our list.  It has a net cash position (cash net of debt) of $9.36 / share.

Well, that’s all I have to report for this week.  Best of luck to everone in the final week before expiration.

Regards,

Troy

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FEB Expiration – Results

Posted by mounddweller on February 21, 2011

Fellow Traders,

Just a quick post to update everyone on my trades that closed at expiration on Friday.  I had a number of NP trades  that closed OTM.  They are as follows:

As you can see one mistake can do a heck of a lot of damage to what otherwise was a good month.  So, lesson learned.  STICK TO YOUR GAMEPLAN!

Regards,

Troy

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DLB – the Obituary

Posted by mounddweller on February 21, 2011

Fellow Traders,

As promised, I am posting the final results of my ill timed NP trade in Dolby Labs (DLB).  You’ll recall on 2/7 I STO 2 FEB $55 puts at $0.55.  I closed out the position 8 days later having suffered a small loss of money and a huge amount of self-esteem.  Mr. Market always has a way of putting us in our place.  On 2/15 I BTC my 2 FEB $55 puts at $3.50.  Net loss, including all commissions, fees, and expenses was $610.94.  I won’t spend anymore time repeating why I initially entered the position or my mistakes.  You can read about those here: https://troysmoneytree.wordpress.com/2011/02/13/np-trade-dlb/

Best of luck to all in your upcoming trades.  I would suggest “strapping your self in” and tightening your stop-losses.  I suspect the ride is going to get a lot bumpier from here.

Regards,

Troy

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NP Trade – DLB

Posted by mounddweller on February 13, 2011

Fellow Traders,

Wanted to update you on a trade I made this past Monday (2/7/2011).  I had a busy week so wasn’t able to get it posted sooner.  Not to worry though, after reading this post you’ll be glad you missed it!

This trade is a perfect example of what happens when you abandon your rules and start flying by the seat of your pants.  This trade didn’t come from either my VISIONS trading strategy or my Deep OTM NP Strategy.  

DLB came to my attention as a selection in one of the several newsletters to which I subscribe.  The author of that newsletter thought they would come out with good earnings and resume their climb higher.  Shortly after the new year they had fallen from around $67 down to $60.  On this past Monday I noticed they were at $56.50, having fallen sharply after reporting earnings the previous Friday and the FEB $55 put was selling for $0.55.  At the time it looked to me that the stock had found a bottom and would not fall much further.  Looking at the chart below you can see this wasn’t the case.  The stock continued to fall all week long before finally catching a bid on Friday, closing up $0.06.

So  here’s where I stand on this trade.  I sold the FEB $55 put at $0.55.  Thus, my break-even price is $54.45.  Friday, the stock closed at $53.80.  It is currently sitting right at support levels it established back in late August.  I am going to watch the position closely this week.  If it fails to hold at this support level I am going to buy back the puts at a loss and chalk it up as a lesson learned.  If the stock remains flat or begins to recover slightly I will probably roll the FEB puts out to MAR.

Now, let’s get to the real purpose of why I posted this trade.  I wanted to share with you why I think this trade is not working out.

(1) First and foremost, I didn’t follow my trading strategy.  I did something on a whim.

(2) I didn’t look close enough at the support levels.  Had I did I would have seen the stock had the potential to fall below my chosen strike price.

(3) I didn’t look at what my options (no pun intended) would be if the trade moved against me.  DLB option strike prices are in $5 increments.  I don’t have a lot of flexibility going forward if I choose to stay in this trade.

(4) Last, but not least, I let my desire to achieve a certain level of monthly option premium income cloud my judgement.  This caused me to miss or ignore some of the things I referenced above.

I’ll let you know how it all turns out when I close out the trade.

Regards,

Troy

Posted in Portfolio Updates | Tagged: , | 4 Comments »