Santa’s Good to the Elite (XOM)

We set a lot of trades here at Options Trader Elite. Roughly once a week – and sometimes more – we set a trade that’s the envy of the newsletter world, both in terms of its return and its sheer entertainment value.

arrogant

There, there, Rachel… take your Zoloft, my love.

As it turns out, we very often set trades with December expiries. Not exactly sure why, but it just happens to work out that way.

And so it was with last Friday’s options expiry, that we now have a bevy of initiatives that either closed down, or that we feel it’s now appropriate to take off the table.

And so, without further delay, we ask Rudolf to run them down for you now.

sharpen

We start with a trade that was launched May 6th in a letter called Rising Rates Returning wherein we claimed the top was in for bonds, the whole market was about to turn lower and everyone should be out of fixed income product for a good long while.

As it turns out, we were wrong. The top of the bond market is going to be a longer, more drawn out affair than we originally anticipated, and so our trade didn’t produce as we had hoped.

The details went like this –

We recommended you purchase PUTs on the iShares 7-10 Year Treasury Bond ETF (NYSE:IEF). Specifically, we directed you to the December 114 strike, then trading for $13.70.

And as of last Friday’s close, the PUTs expired in the money, but with a loss, at 106.21.

We take home $7.79 from an initial investment of $13.70. Call it a loss of 43%.

ouch

Next trade on the block is our August 12th initiative that closed out last Friday, too. It was from a letter called The Outperformance Game and went like this –

Buy the XLY December 69 CALL for $1.33 and sell the SPY December 205 CALL for $1.44 for a credit of $0.11 per pair traded.

We sold the XLY for $2.30 on the 2nd of December in a letter called Short Term Profits on an Oil Bounce. Along with our $0.11 credit, that’s $2.41 in the plus column.

The SPYs closed Friday at 206.52 – that’s in-the-money – and now trade for $207.47.

Sell them immediately for a loss of $2.47 on the SPY side and a loss on the trade of six dollars.

Line ‘em up!

Next in line is our trade from Short Term/Long Term on Europe, our letter from September 16th, in which we recommended buying the iShares MSCI Germany ETF (NYSE:EWG) October 29 CALLs for $0.60 and selling three December 26 PUTs for $0.25 each. Total credit on the trade was $0.15 per pair.

As of Friday both the earlier and later options had expired worthless. Our take – $0.15 per pair, our original premium.

comeon

Try this on for size…

On December 2nd in Short Term Profits on an Oil Bounce we recommended you look at selling three Exxon Mobil (NYSE:XOM) December 87.5 PUTs for $0.44 each and buy a January 95 CALL for $1.33. Total debit on the trade was $0.01 per quartet traded.

And how did it turn out?

Couldn’t have been better.

Take a look here –

xom

XOM stock performed precisely according to script, leaving the 87.50s to expire out of the money while bouncing beautifully toward our open January 95 strike. The 95’s are now fetching $1.13 each, and we think it’s wise to grab it while we can.

Why? If they’re flying, why not leave them alone?

 

Flying, they are. But we say the move off the lows was very sudden and could reverse just as abruptly – especially considering the resistance overhead from the declining moving averages (red arrow).

It’s the crossover of the 137-day moving average last week that gives us the most concern (blue box). Even if we get another dollar out of the move, there’s too much to lose on a reversal. And with MACD trending so low beneath its waterline (in black), we don’t see any immediate burst above resistance before our January 17th drop-dead date.

And as the title of our letter suggests, we were only playing this one for a quick bounce.

Call it an 11,200% victory in just three weeks ($1.12 on a penny invested) and laugh, laugh, laugh all the way to the eggnog.

From Russia and China with Lots of Action

 

On the 25th of November we reset an existing covered Call position on the Market Vectors Russia ETF (NYSE:RSX) by selling the RSX February 24 CALL for $0.22 and two December 20 PUTs for $0.20 each, thereby reducing our adjusted cost base for the shares to $20.85. The letter was called It’s All up to You – and the Trades You Make, and there we also noted that we expected a dividend payment at the end of December in the vicinity of $0.70 to further lower our price per share to $20.15.

As it turns out, the dividend was, indeed, paid, coming in at $0.64 a share, so the true adjusted cost base for the trade is $20.21.

That said, our December PUTs ended up in the money, so we now own 200 more shares of RSX purchased at $20 apiece.

And our options are as follows –

1. Close out the newly purchased shares for a loss of close to $800,
2. Leave them be, because they are on the rise, after all, or
3. Sell an additional round of CALLs against the new shares to pocket some cash on the trade.

We believe number three is the best option and we’re recommending you –

Consider selling two RSX January 17 CALLs for $0.55.

Reduce your cost base for the trade and await our full analysis of the Russian situation next week.

Wrap It!

 

Our last trade of the day was initiated two weeks ago, and the profit here is now too juicy to look the other way.

The letter was called Rotating East and in it we offered you the following advice –

Sell the Baidu Inc. (NASDAQ:BIDU) January 9th 210 PUT for $2.34 and buy the BIDU February 260 CALL for $4.15. Total debt on the trade was $1.81.

And…?

Today the PUT trades for $0.54 and the CALL is fetching $4.50. Buy back the former and sell the latter for a gain of $3.96 and you net $2.15 (396 – 181), or 119% in two weeks.

Howzat for a stocking full of joy!

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Options Trader Elite wishes a grand Xmas holiday and a very Happy New Year, full of safety and joy for all ye faithful readers!

 

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Options Trader Elite wishes a grand Xmas holiday and a very Happy New Year, full of safety and joy for all ye faithful readers!

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With love of the hunt,

Hugh L. O’Haynew, Senior Analyst, Normandy Research

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