Oct 16, 09

Back in end of Aug, I wrote a AIG Nov 33 Put @ $5.50. It was the first trade I made that is longer than one month. I decided to close this today @ $0.82. All in all a net of 13.53% in a month and a half. I am quite happy with this. If I hold my other Nov trades even, I would have basically achieved my Nov target. Additional gain would be the icing on the cake. I have a AIG Nov 45 Call and STP Nov 16 Put. My AIG is in green where as STP is in red. Let's see what happens.

In the mean time, I just wrote STP Dec 14 Put @ $1.25.

Week of Oct 12, 2009

This week is the last week for Oct expiration. I have two open trades. C Oct 5 Put @ $0.63 and STP Oct 16 Put @ $1.63. Unfortunately both are in the money, but fortunately, if both stocks could hold at their current level, I would still be in the green. I am looking forward to Nov as I have an AIG Nov 33 Put @ $5.50. Also, I wrote AIG Jan 35 Put @ $5.95. As you can see, I am rather conservative if you may say, or "chicken". I tend to write quite far out of the money. I am trying to minimize my risk to hope to achieve average of 3% or more return monthly through option writing. So far, I made loss in July -2%; +5% in Aug; +6% in Sept; +1% in Oct. Will see how Nov goes.

Also, I have been sitting on 100 shares of AIG and have not had a chance to utilize it, till today. I decided to write AIG Nov 45 Call @ $4.85. It is kind of risky as we are in the midst earning season. But, it could go either way as I see the outlook is still uncertain. Should AIG goes up, I will need to see if I want to give up my shares or roll forward.

10/15/09:
It is too unfortunate that market has given in on the recent up trend just a couple of days before the Oct expiration. I just closed my C Oct 5 Put @ $0.25, which I opened @ $0.63. About 6% net. I also closed my STP Oct 16 Put @ $1.00 (~2.5% net).
For STP, I did a spread to roll over to Nov @$1.7.

OPTION Basics (2) (CALL and PUT)

There are essentially two types of options:

1. Call Option

2. Put Option

For each of the Call/Put, there will be buyer and seller. Let us look into each of the scenario. We will go through “buyer” perspective for both Call and Put before touching on “seller” perspective.

Call Option

Buy Call: When an investor buys a Call, he is buying the right to purchase the underlying stock (100 shares) at the specified fixed price (strike price) by the specified date (expiration) in the future. To re-iterate the examples given.

Example 1:

Mr. A buys “1 AIG Aug 12 Call at $1.50”.

Mr. A is buying the right to purchase 100 shares of AIG at the price of $12/share between the point of transaction till the expiry date.

Mr. A pays $1.50/share (the premium) to attain this right.

So a Call buyer would profit if the share price goes up. A Call buyer is bullish on the stock.

Suppose at the end of the expiration, AIG stock has risen to $17/share, the buyer would close the transaction and make $5 gain ($17-$12) on the stock, “EXCLUDING” transaction fees and premium paid.

Put Option

Buy Put: When an investor is buying a Put, he is buying the right to “sell” the underlying stock (100 shares) at the specified fixed price (strike price) by the specified date (expiration) in the future.

Example 2:

Mr. A buys “1 AIG Aug 12 Put at $1.50”.

Mr. A is buying the right to Sell 100 shares of AIG at the price of $12/share between the point of transaction till the expiry date.

Contrary of buyer of Call, the buyer of Put is bearish of the stock. A Put buyer would profit if the share price drop.

Suppose at the end of the expiration, AIG stock has dropped to $9/share, the buyer would close the transaction and make $3 gain ($12-$9) on the stock, “EXCLUDING” transaction fees and premium paid.

On my next post, I will touch on sellers' perspective for both CALL and PUT.

Week of Sept 21, 2009

What a day for AIG. No trade for today, but I would like to mention that both my AIG Sept 15 and 19 Put had yielded 5.5% and 6.5% respectively. My initial target is have and average of 3% to 4% return monthly. So far I am still there on my monthly target.

Week of Sept 14, 2009

Oh well...I been out for a few weeks...

Lets see what's new. Well, I closed C Sept 4 Put @$0.04 (bought at $0.34), resulted a net of 5.88%, based on my calculation (minus fees etc)

Also, I wrote AIG Nov 33 Put @ $5.50 back when AIG was at $45, premium is now at $6.70. Now that didn't go well. :(

Today, I did a spread. Bought to close my STP Sept 16 Put @ $0.92 (sold at $1.10). Still a loss but minimal. I wrote STP Oct 16 Put @ $1.63.

Hope I am back for more as been really busy with work and was really not able to focus...

Week of Aug 24, 2009

Not much has happened for the pass week. I had basically held on to my trades. I had AIG Sept 15 and 19 Put but it seems that even this is deep out of the money, the time premium is still there so I guess I will sit on these till expire.

As for my C Sept 4 Put, I will consider to close and free up my fund for next trade sometime next week of so.

One trade I made this week was selling C Oct 5 Put @ $0.63. Again, after I sold, Citi traded south. It would have been better if I were to waited a couple of days but, hey, who knows.

Anyway, Citigroup has trade up and I am in green now. I hope the momentum of financial stocks would continue for a while but it is still quite uncertain at this point of time.

Have a nice weekend.

Week of Aug 17, 2009

On early Aug, I sold AIG Sept 11 Put @ $1.01. It is now at $0.17. Since I need some fund to write new puts, I decided to close this, thus a 6.59% net gain in about 2 weeks. Not too shabby.

I am trying to explore on LEAPS. If the price is right, I may buy some LEAP calls. Will see if there is any attractive potentials.