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Some House Cleaning

|Includes: APWR, BKE, Lockheed Martin (LMT)

Over the past several weeks I've made a number of trades in the account but haven't had a chance to post. Below summarizes a few trades I've made to close positions, and the returns for each of these positions. I also summarize a rolling trade made for a net credit last week. Later posts will summarize two new positions.

A-Power Generations Systems, Ltd. Naked Puts


On 11/3, I sold 10 March $10 APWR puts for a net credit of $1700. I entered the trade with the idea that if exercised, I would purchase the stock at an effective purchase price of $8.30 per share less commissions, a price at which I considered the stock to be a compelling investment. Alternatively, if the puts expired worthless, I was happy to collect the $1700 of premium. Since selling the puts, the stock has run away from me. On 12/17, I took the opportunity to repurchase the puts at $.30 per share, substantially before expiration. My net gain on the position was $1,349.95.

Including commissions, and taking into account the amount of cash necessary to purchase the shares upon expiration ($10,000), my real return on this investment was 16.22%, or an IRR of 247.85%. My return on the position taking into account just the reserved cash required by the brokerage borders on the absurd and isn't a particularly helpful number (this number will however be taken into account in determining my aggregate returns because it will presumably be offset by losing positions overtime).

Lockheed Martin Diagonal Call Spread

On 12/17, I closed out my diagonal call spread on LMT. I had originally opened this position on 10/15, before their Q3 earnings report by purchasing March 70 calls, and selling December 75 and December 80s. Following management remarks regarding a poor outlook, the stock dropped substantially, and I decided to ratchet down the position by buying back the December 80 calls and selling additional December 75s, for a net credit. In late November I then rolled the December 75s to January for a net credit. Subsequently, the stock steadily drifted upwards and on 12/17 I ultimately repurchased the January 75s and sold the March 70s. Ultimately, the position (actually multiple positions) resulted in a profit of $1,184.22, and an IRR of 142.3%.

Over the next several months, I will look to reestablish a Lockheed Martin diagonal call spread when an opportunity presents itself.

Buckle Diagonal Call Ratio Spread

On 10/23 I entered a diagonal call ratio spread by purchasing 6 June 25s and selling 4 December 30s. On 11/20, I added to the position by purchasing 6 more June 25s, and selling 5 more December 30s. Finally, on 12/18, I rolled the December 30s to March for a net credit of $1,627.91. This position is currently outstanding.


Disclosure: Long LMT, BKE