I’ve been reading The Options Bible lately, which I didn’t think I’d get much out of other than mechanics of different options strategies, which I feel pretty comfortable with already.  However, while reading the section on selling naked puts, it discusses on how you can sell PUTs as a way to mark an entry point to when you want to buy a stock, while collecting premium.  Lately, I’ve been looking at AAPL when it was in the high 90s and I was wanting to get back in if it was going to go back to 90 again, so I realized I could sell PUTs, collect the premium, and then if it does go back to 90, and if I was assigned, I would be obligated to buy the shares for $90, a price I wanted to pay for anyways.  If it never got down to 90 then the PUTs would expire worthless and I’d keep the premium I collected.

Now, when it actually gets back close to 90, I may chicken out and want to change my mind based on a different market outlook, so the only way to get out of the obligation would be to buy back the PUTs but by then they would have increased in value if the move down was quick, probably causing a net loss.  However, if I was still convinced 90 was a good price target for me then it’s a good way to commit yourself to buying at that level and collecting some premium on the way down.  Pretty cool!

I sold my Apache April 135/125 call spread yesterday after I had reached a 100% gain on it. I could have probably made more as oil is up even higher today, but I wanted to lock in a rare profit for me.

This trade was very attractive to me at the time when I bought it in December, it had a potential 900% gain if the stock hits 135 by April expiration, but as March options are going to expire soon theta is going to kick in pretty quickly and if I don’t start to get in the money soon then I’d be really hurting. APA has already had a nice run-up lately and in this market things don’t continue going up for very long so I wanted to take the profit I had while I still had it. Looking at it today, I would have been up only 85% so I’m glad I sold when I did.

This was perhaps the longest time period of an option I had ever purchased: 4 months! At the time I bought it APA was over $100 a share, then it swooned downed to 90 then recently rallied with oil and natural gas rallying. It’s been a wild roller coaster ride but buying that extra time allowed me to get into or near a profitable price point through the crazy volatility.

NOTE: after taking a second look at this chart I just noticed a couple of “hammers“. I just read about hammer and hangman reversal signals earlier this week in TASC and this chart has a good example of two hammer trend reversals.

The ADX/DMI is a technical indicator growing in popularity. The more I read about it the more I like it and more people seem to be liking it as well. Here’s a primier on the ADX/DMI. In today’s market it’s pretty hard to find stocks in a strong positive trend, except for gold (GLD) or oil (USO) but there are plenty in strong negative trends that might provide for some good short opportunities. Does anybody know of any good ADX/DMI cross-over screeners online?