Welcome back Meta-Traders.
Hurricane Irene came and went this past week trashing the Northeast USA and leaving thousands without power and billions in property damage. The winds didn't meet expectations but the rain was intense and we got about 8 inches of rain in less than 24 hours. That led to severe flooding in anything vaguely resembling a flood plain as shown in this photo posted by one of my Facebook friends. Fortunately, I came through with no property damage, no flooding an no loss of electricity. There's one bullet dodged.
As for the financial markets, we closed out the month of August which was particularly cruel to the Equity Markets. I was hit hard in that sell-off, but i'm trying to make the best of the volatility and produce some alpha using options.
Recall I went into last week long AMZN in both accounts and long a pair of AMZN September 190 calls. My August 110 call expired worthless at the bottom of the sell off which was a good thing. But I was deep in the hole on the AMZN stock and the pair of calls. Well AMZN had an amazing V-shaped recovery and rallied all the way from 180 to the low 200's as of last weekend.
As my calls came into the money, I sold one at $22 on Tuesday about a point above where I bought it, and held onto the other one for further gains. $210 seemed like a reasonable target since it was an earlier support area.
The rally continued as the week went on, and I was reminded from watching CNBC that this rally had the look of end-of-the-month window dressing, with money managers and hedge funds trying to repair their badly damaged portfolios for the monthly statement. I held onto the other call and sold it on Thursday for about $26, pulling in an extra 5 points as a bonus. Another bullet dodged.
AMZN continued to push higher on Thursday and I bought the September 200 call for about $17 not long after I sold the 190 call. This was not a particular smart move since I was in a nearly identical position just 10 minutes earlier. But there was a decent chance AMZN could fight its way up to the next strike at $220 and I wanted to be on board for that move.
Well that position didn't work out and I watched in the early afternoon as the market started to come apart. So I closed the September 200 call for about a $170 loss and turned around and sold to open the October $220 call for 9.6 bring in a healthy $960 of premium. With the stock at $213 that could translate into a 7% return if called, and a 4.5% return if the stock closed below the $220 strike at expiration. That turned out to be a good move and AMZN started to sell off and ended the week at $210.
Finally on Friday, I bought 100 shares of OIH, the Energy Services ETF at about 129 with the intention of selling the September 130 calls for $4.10. My limit order expired worthless, but I expect i'll have an opportunity to get into that position this coming week.
Netflix had a pretty good recovery during the week and traded as high as $241 during the week. Recall I sold last week at about $216 taking a hefty loss from my entry in the high 200's. On Thursday, a news story broke and NFLX gapped down sharply and close the week at about $213. I avoided getting sucked into the recovery rally. From experience, I've seen that once a growth stock goes bad, its best avoided on the long side. Another bullet dodged.
As for Forex Robots, we saw some improvement. Atinalla finally took home a winner after 9 consecutive losses. Atinalla FE took home a pair of winners after 5 consecutive losers, all of which were larger than these 2 gainers. Atipaq Full Portfolio had a pair of winners reversing a long series of losing trades. This portfolio was up over 50% just a few short months back.
Its been a long slide down for the robots portfolio after being up almost 23% for the year a few months back. I checked this morning, and i'm still up for the year just about 9%.
As for new developments, I started a demo of Sunqu, the new neural-network based Expert Advisor from Asirikuy. Its a topic I have some history with, and certainly worthy of a review. I've been unable to get a clean backtest, so stay tuned. But the demo account has been added, so check the right side of the blog for demo results.
That's it, have a great weekend, you earned it!
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