My Trading > My Trading Journal > January 13, 2012

My Trading Journal

January 13, 2012

9:00 pm (PST)

ORCL, SCHW, and ANF were all fine. FSLR seems like it might be on the verge of a breakdown back in the 30s. My spread is at 26 so I am not particularly worried. XHB was down 22 cents like I thought.

I've been trying to get out of my SCHW spread @ 0.03 and ORCL spread @ 0.05 but they aren't getting filled. Since ORCL is up so much, I entered an order to write a 500-lot call spread and turn my put spread into an iron condor. I only got filled on 80 of them. As far as new trades, I put on a large position in TLT (and ETF that tracks the 20-year Treasury Bond). Here are my trades today:

  • Sold 80 ORCL February 30/31 call spread @ 0.07
  • Sold 600 February TLT 123/124 call spread @ 0.35 for my account
  • Sold 60 February TLT 125/126 call spread @ 0.25 for my mom's account
Regarding TLT, the bond market has been nearing its extreme highs of the past few months based on re-ignited fears about Greece. I think that most of the bad news is baked into the market. The other thing to remember is that whether or not you think that the Greece situation will end god or bad, the fact that it is nearing its "end point" is, by itself, a good thing. It takes away the uncertainty in the market. The other major issue affecting the bond market - the economy - also looks like a non-factor due to most of the bad news already being bakes into the market. TLT gapped up today pretty far and is hitting resistence of 2 weeks ago at around 121.50.

Here is the intraday chart which shows where I got in.



I almost didn't get filled on the order because I had the order in at 0.36 and wasn't getting filled. I wanted the market to tick up a bit and trade into me, but I didn't want to lose out on a fill, so I lowered the order to 0.35 and got filled. This is important to point out because there have been many times when I will lose out on a fill because I am waiting on an extra penny on an options spread. If I am selling a spread at 0.10 then an extra penny can be enough to hold out for since you are getting 11% more premium selling the spread at 0.10 instead of 0.09 - but at 0.35 an extra penny is only giving you 3% more premium.

I am a little nervous about the TLT spread because I think I might have wrote it a little too close to the money. There are times where you can get "premium greedy" and going to close to the money to get a high return on your margin. I am also worried about the low volatility in the market right now. I shorted the TLT because I thought its large rise over the last few months indicated that the bond market has now reached a top (within a couple of points). But low volatility is often a precursor to a large move - and if either the stock market or the bond market itself became highly volatile, this could trigger the bond market to take another leg up into uncharted territory. The following chart shows the rise in the TLT (the black line) vs the VIX (the blue line).



This second chart shows the rise in TLT vs the large drop in the implied volatility of TLT options (a measure of the expected volatility of TLT itself).



To further compicate things, after the close, a WSJ blog post cited a bunch of downgrades in the Eurozone. Hopefully this news was already priced into the market. I believe it is.

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