Options Trader: Weekly Wrap-Up

by: Philip Davis

We made new highs and that’s all that matters at the end of the week. The markets are hot and that’s undeniable and we’ll see how the first real week of earnings season treats us.

We started the week in crisis but I titled the Monday Morning Post "What doesn’t kill us, makes us stronger." After a very brief dip, it turned out that confession was indeed good for the Financial Sector’s sole as the XLF caught fire and looked strong all the way to a retest of 36, which is up exactly 5% from the Sept 10th turn around. While I still think we’re whistling past the graveyard - what can you do? As I said Monday night: "The train has now left the station and all we can do is grab the bumper and hold on tight because it looks like it’s going to be a wild ride…"

Tuesday morning we looked for some justification for our bullish behavior but there really isn’t much, other than the global trickle down theory, where we stand firmly at the bottom of the barrel, picking up scraps as the rest of the world markets are running away with the ball. By the end of Tuesday we closed out 53 positions in just 2 days as we moved to more cash and a more bullish stance with 40% of our Short-Term Portfolio in open calls.

By Wednesday morning we were bullish enough not to buy the sudden dose of bull that was spewed by the media and by Wednesday night we were certain it was just a shakeout. We were properly positioned Thursday and Friday but by Friday we were back to covering ahead of the weekend as we can only take "Don’t worry, be happy" just so far!

Of course we had a good week:

  • Short-Term Portfolio up 64%, 749% for the year.
  • Long-Term Portfolio up 7%, 228% for they year.
  • We opened up 3 new portfolios for the quarter:
    • The $10,000 Portfolio is now the $11,425 Portfolio
    • The $25,000 Portfolio is now the $30,069 Portfolio
    • Our $100K Dow Portfolio is up to $105,560
  • The Happy 100 Portfolio is almost back even, down 1.1%
  • Our Stock Portfolio is gained another point, up 37% for the year
  • Complex Spreads jumped 46% (thank you Google!), 358% for the year.

Thanks to a good round of early cutting, we only had to close out 30 more positions after Tuesday and, happily, lots of that was good old-fashioned profit taking. 22 of our 83 closed positions were losers but they averaged a 30% loss and were mainly the losing ends of spreads, which is why our remaining positions are in such great shape!

Even with the losers, our 83 closed positions averaged a 46% gain with huge cash gains from COP, FXI, PTR, RIMM, XOM and, as usual our DIA plays. Google (NASDAQ:GOOG) is NOT one of our gainers as we haven’t closed those amazing positions yet, we just took our losses in this round as we re-covered with $590s.

We’re still mainly in cash (70%), which may have cost us a lot of gains but there certainly isn’t much out there I would consider a bargain just yet. 23 open calls remain in the STP but, on a cash basis, they are 50% covered by 12 open puts with 24 covered postions rounding out the group. The LTP has it’s own covers now, large open puts on (NYSE:XOM) and (NASDAQ:BIDU), which cover the 18 open calls but we’ll be quickly taking those profits off the table if they markets can’t hold onto last week’s gains.

On the whole, it was a great week, nothing to complain about but I’m still waiting for the shoe to drop - my own personal "Wall of Worry" to climb!