USO in trading range

Updated: Sep 7th, 2010 | Vance Harwood

For a couple of weeks USO has been in a trading range between 32 and 33.5.   Bought USO at 32.77 and sold S33 10-Sept calls at 0.30.  Break even is 32.47, maximum profit is $0.53 per share.

Portfolio action

Updated: May 27th, 2010 | Vance Harwood

This morning I  put portfolio B mostly in place (see Three portfolios).  I only put in 50% of the large cap weighting (so it is at 25% of the portfolio, instead of the eventual planned 50%).  Psychologically I have found it is better to ease in a little with significant investments like this—if the market goes up from there you can tell yourself that you got at least some of it early in the rally, and if the market goes down you can tell yourself that at least you didn’t put everything in right before it went down.  The games we play…   For the commodities, I felt they were pretty much bottomed out— really how cheap is oil going to get?  So I put in the full percentages for those.

I filled the equity orders between 9:30am and 10:00 EDT.  The mutual funds, as is their custom, closed at the end of the day (arrgh..).

Trades    USO  33.47
SPY  109.16
VT    39.88
IGNAX  16.39
TVRVX   20.45

Doubling up on Oil, betting on VIX dropping

Updated: Mar 12th, 2012 | Vance Harwood

Did covered calls on Oil — bought USO at 37.19, sold-to-open May 37 calls at 1.02 for a net investment of 36.18.

Created a bear spread on VIX options today.   Betting on VIX going down is forecasting that the market in general will be flat or positive.  I sold-to-open June VIX 16 calls at 10.26, bought  June  VIX 32.5 calls at 1.88 for a net credit of  8.38.  I was able to approximately split the bid/ask prices with my combo order.   At the time of the order the spreads were approximately 10.00 / 10.60 on the June 16 options and 1.80/1.95 on the June 32.5 calls.  Going with the published bid/ask prices leaves money on the table.

The VIX cash index was around 28.5 at the time my order filled.   I initially tried to go short on VXX, but Schwab had VXX in the “hard to borrow” category this morning.   I suspect lots of people were trying to short the VXX today.   I went with June options rather than May because there are only 7 days left on the May VIX options–I wouldn’t be surprised at all to see one more down leg in this correction.    I expect the June options will move much down much slower than the VIX index as the market moves away from fear mode.

Back into Oil

Updated: Apr 30th, 2010 | Vance Harwood

I did covered calls on USO,  selling-to-open the 41 May calls at 1.33 and buying USO at 41.47 for a net investment of 40.17.    The US economic situation continues to look up, and the oil spill in the Gulf will do nothing to help the supply situation.  Plus it gives companies an excuse to raise oil prices…

Greed takes a holiday

Updated: Jan 21st, 2010 | Vance Harwood

I believe the best way to understand the ebb and flow of the market is to view it as the interplay of fear and greed.  Of course, economics are important, but I view human psychology as even more fundamental to the movements of the market.

Tonight fear has the upper hand.   US markets have been down two days in a row, the Asian markets are down sharply as I write, even gold is slumping.    Investors are looking at tomorrow’s markets with trepidation–do they really want to stay invested over the weekend?  Is this is the long anticipated correction people have been predicting for months?

For the first time since the 18th of December, the S&P 500 has broken through the lower bound of its trendline.  Over the last six months, this would be where I would jump in, but I think fear will spike up at least for another trading day or two.  Fear has to subside a little bit before bargain hunters start jumping in.    I’ll probably jump into USO first.  If it drops to about 36 I’ll be ready to jump back in with a covered call.

S&P 500 trendline (SPY),  click to enlarge

S&P 500 trendline (SPY), click to enlarge