July options month has started and I am excited about having a new focus and fresh start. The last two months have been filled with trades that didn’t exactly fill my comfort and more importantly that I do not have the experience to manage. Risk management is everything! I think finding the right profitable trades is easy. What happens if they don’t go the way you expect? Then what? From now on, I will be focused more on naked puts, calendars, butterflies, bull put spreads and bear call spreads. I also have a new spreadsheet, which will do a better job of accounting for my real time results. I have slacked off a bit the past two months on results and that hasn’t made me too comfortable.

I have been focusing on some tweaks with the white hoof to do a few things:

1.Limit risk into the trade. Essentially, have a lower cost basis.

2.Be able to strictly focus on the high volatility movement at a point where the market’s fear and greed is high.

3.Adjust my breakevens accordingly after earnings are out.

I have speaking with a fellow trader (Gekkotrader) about these new tweaks and am planning to back test them on a few of the post earnings trades. Essentially, when earnings are out, check how the stock is doing. If the stock is down, this makes it that much better for a fill, because one would hope there will be a retracement. Even as the stock retraces, vol will typically go down.

We also want to limit our cost basis. Some of the previous debits have been under $1, which allows for us to be able to size accordingly, but generate more dollars and better returns. The downside is due to the high volatility movement, you will have to size for max loss. Be prepared to do that.

I will post some of my new trades that follow these new rules. I have already done this on AZO, CSUN, EXM, MDT and PWRD.

I want to be clear about some of the trades and posts on the blog. For folks reading, please use caution and have your risk parameters in place to preserve capital.

1.I am a new trader since December 2007 and I have pledged to paper trade profitably for the next 6-12 months to not only understand the “language” of trading, but also be emotionally prepared. It is my experience that too many folks want to dive in and don’t have the proper foundation. With the lack of emotional strength, all their investments vanish!

2.I recognize that a lot of the fills I receive are generous due to paper trading. Fills will cost more when using real capital due to the bid/ask spreads and general open interest in a trade. In regards to this, I will try to adjust the mid prices to have more reasonable fills. With that mind, the returns may be a bit aggressive as well. This blog is a resource and does NOT serve as investment advice.

3.Do your diligence. If you don’t agree with a trade and/or have questions, ask.

Happy Trading!

Best,

G$

I held on to the Oracle short straddle a bit longer for the volatility crush to happen after earnings. As the stock was trending down, I sold the call portion of the trade for a debit of .18. Today, I closed the put side out for a debit of 1.28. My profit is .46 / 8.22 = 5.6%!

I had opened up a short straddle on IWM on March 24th to capitalize on the volatility crush. I received a credit of 2.18. I closed the trade yesterday for a debit of 1.12. My profit for the week is 1.06 / 23.18 = 4.5%

I closed the last piece of my Target calendar for another credit of 1.34. I had a nice profit of 7.8% in about 2.5 weeks!

I closed my first Google bull call spread for a credit of 16.45. That gives me a profit of 20.5% in 5 days! Thanks Mojo!

I closed my Priceline iron condor today for a debit of 1.33. With the recent run up in the market and stock, I decided to take my profits. This gives me a profit of 13.6% in 6 days!

I recently received a trade tip from Trader Nate’s blog for a double calendar on Level 3 Communications. I placed a one month calendar at the 105 Puts and 110 Calls for a total debit of 3.13.

On March 25th, I saw that the stock was moving up, so I decided to pay attention closer and mitigate my risk. I closed half my position on the 32.5 calendars and added the same number of contracts on the 35 Put calendars. I sold the 32.5 calendars for .77 credit and had an additional .75 debit for the 35 calendars. I will have to ask my fellow trading group how to calculate the cost basis and potential returns on this trade.