Trading Update June 5th

After the sell off down to fresh lows on this recent pullback, the indexes went into a chop range making things difficult for intraday options traders. Looking back over all the trading sessions that took place after the reversal off $169 on the SPY, price action in general has been difficult to get a read on. We have seen a few new trends float up to the forefront. The main trend being the rally off the open to squeeze people in long and then trickle lower throughout the rest of the session. We’re also seeing difficult in holding short bias trades because of all the short squeezes spread throughout the duration of the trading day.

Tesla TSLA was one of the notable trades today, bucking the weakness in the broad indexes and retracing almost back to $100. The Financials sector took a beating today with Bank of America BAC finally showing her true colors and attacking the $13 area. Techs/Internet stocks ironically were able to hold up pretty well today and afforded themselves a stay of execution. This could be simply due to the fact that these names already sold off considerably from their highs.

I spent the day building into naked option writes on Google GOOGL & Netflix NFLX. I learned a lot today plugging around in a variety of different strikes & expiration dates. After the sell-off from the morning hours, Google managed to stay range bound at $860 up until the close. Unfortunately though, since it was a Wednesday, I didn’t get the premium decay I was looking for.

Now, you’d like at this chart and say to yourself it was probably easy to make money writing both sides on this stock today right? How far you go out of the money on your writes would have definitely been a factor towards determining how successful you’d be. Take a look at this $850 Put I wrote today which was only 10 points out of the money. I struggled to develop the right cost in this and subsequently couldn’t pull out the gains I was looking for.

The Puts and Calls that were a bit further away from the money saw more of a drop in premiums then the one you see above. If the stock manages to do nothing going into Friday, then these options will get crushed as well but I think I needed today to be Thursday instead of Wednesday.

Stick with Lucci!