October Performance (Tech bets save the day)

Ended the month down 1.5%. Some of the tech bets were the saving grace for the month.

Put Spread on AAPL contributed  0.4% to the portfolio.

 Call Spread on GOOG + speculative put selling contributed 0.7% to the portfolio.

MSFT contributed  0.5% to the portfolio.

ADBE contributed 0.2% to the portfolio.

NFLX contributed  -.3% to the portfoio.

In total the tech bets made 1.5%. I guess these are offset by 3% loss in pairs bets.

Short NFLX

Opening a small short exposure to NFLX.

Buy November 155 put at 3.6, Sell November 140 Put at 1.22.  Given that there are weekly options for the month of expiration. There are better opportunities to capture theta in these options. Would recommend selling earlier maturity options if only interested in theta. Beware that the delta move might kill the trade. Of course you will still be left with decent theta if the stock moves in your favor.

New Trade (Retail)

Long URBN at 29.44, Short TIF at 49.83

Time Spread on AAPL

Opening a time spread on aapl. Buy Nov 300 Put at 6.7, Sell October 300 Put at 1.31.  Worst case we lose $540.

Position Update

Current positions updated at the bottom of the screen. Portfolio is fully hedged. GOOG is closed, however the corresponding SPY hedge is open. Accordingly it is still shown among the active pairs. Portfolio is down 1.7% for the month.

Add to MSFT

Long MSFT at 25.12, Sell April 2011 28 call at 0.66

Thank God!

Closed out of GOOG just in time. Some blood bath tomorrow after AAPL? Almost to the moon and back! Hope SJ had started selling some calls on his own holdings.

Close Out GOOG

close out 580 Put at 0.6. De-risking. $150 in one day. Not bad!

Add some protection to ADBE position

Sell 2011 Jan 36 Call  at 0.40

Long GOOG?

Really short term Put looks attractive to sell. The 580 Put that expires on 10/22 is trading at 2.1. Selling 1 Put gives a delta exposure of +10K to Google with a down side protection up to $578. Of course if google crashes we end up with a 58K long exposure to google.  If GOOG trades above 580 on 10/22  $210 is yours to keep. Will the momentum continue for a week? Apple reporting on Monday is sure to beat. The tech frenzy might just continue for another week. Shorting equivalent amount of SPY could give additional protection.

Please note this is a high risk strategy for someone working on $50K in capital. If you are working on $500K then its a different story altogether. If your risk appetite is low please keep away. 

At this point options on aapl look very expensive. One could make a play on implied vol going down significantly after earnings. However constructing this position is more difficult and will require constant monitoring/re-balancing.  The vol drop after earnings could be very lucrative.

Close Out FRX

Close out Call on FRX at 1.6

Long MSFT

Long MSFT at 25.06. Like the 2.7% dividend. In addition some big Wall Street banks don't believe in this anymore. Do believe this could be a better bet than US treasuries. Where's the 10 year treasury right now? 2.53%... I will probably start selling some calls at some point just to get some downside protection.

Add to Short ZUMZ

Sell Nov 25 call on ZUMZ at 1.85.

T o recap

Long DKS, Short ZUMZ

Sell 2 22.5 Put at 0.85, Sell 1 25 Call at 1.85

Reducing Short exposure on ZUMZ

Not done by direct buying or closing of position. Instead sell November 22.5 Put at 0.83

Popcorn or sine wave?

Argument can be made that when a pair reverts to mean it will eventually follow through to the other side leading to the other extreme. I've not been following that strategy though. The stock price moves resemble more of popcorn style moves.  Also if anyone has better ideas on a close out strategy would be greatly appreciated.  Couple of things happened in the last few days. One pair hit the 7-8% threshold (UMPQ/CBU), but we didn't close out at that time and now we are back to square one. The other pair overshot our estimate (MTN/MAR) and we ended up closing out too soon...

Long ADBE

Long ADBE at 27.84. Purely speculative. Rumors of MSFT take over.

In addition to the stock, bought 2 call at 31 with January 2011 expiration.

Expect a premium of at least 30-35% to the current price, given the way deals have gone through in this sector this year.

Short MAR

Sell Nov 37 Call at 0.85

Close Out (MTN/MAR)

MTN at 38.2,  MAR at 35.92