Some updates to my portfolio

Hi there. Sorry for the big absence :) I got two more first coverage weekly sentiment reports and the last two were more bullish than bearish. In fact, they think the market is overbought but the bears are out of capital and/or cannot risk to bring it back to fair values. It also says that right now the market is going up based on emotions, so let it be! That is the same thing causing the tech boom in 2000.

It seems the market doesn't know where to go at this point and the volume is low and a bit bullish. But it is also very risky. So, caution is the key. With low volumes like this, it is a good time to make new positions such as strangles. Also with the time decay accelerating, selling out of the money put spreads on bullish stocks is a good strategy. I'll let you know about the trades I have done in just a moment.

To get some confidence about the stock I choose, I check:

1) Risk/reward ratio
2) Option liquidity
3) insider ownership (I check it from shortsqueeze.com)
4) insider purchases (either check it in yahoo or check the recent insider transactions through streetinsider.com)

The last two weeks were very successful ones for me testing the bullish put and call spreads. I did it first with MSFT with only 1 contract to give it a test before their earnings:

1) Sold MSFT 18 put for 60c and immediately bought MSFT 17 put for 30c/contract. For this simple trade you risk $70 for a maximum gain of $30. I was bullish on MSFT and saw it was down for a few days, so guessed even with a bad earnings report, it should already be priced in and it turned out right! The day after, I regretted why I didn't do more contracts :) Anyways, it was a sweet low risk deal with no stress. Both of the options are almost worthless now. So, I plan to let them expire (of course, if nothing major happens which I am not worried since I am hedged)

2) Bullish call spread on AUY: I wanted to have a gold investment apart from GDX, so chose this one. Bought AUY $7 call for 1.05 and sold AUY $8 call for 0.45. This trade risks $60 for a gain of $40.

3) Bullish put spread on FCX: Sold $36 put for around $1.23 and bought $35 put for $0.99. risk/reward is $76/$24. The reason for this choice was a recent insider buying of around $35 and good outlook after their report.

4) Bullish put spread on WMT: Sold 2 contracts of WMT $47.5 puts for around $1 and bought $45 puts for around $0.4. risk/reward is $190/$60/contract. WMT is a very good stock. It has performed well in recession, it pays good dividend, A LOT of insiders own it, and it was trading close to it 52 week low of $46.5 recently. So, I thought, it has to be a good trade, and I was rewarded in just the next day, again regretting why I didn't do more :)

5) Bullish put spread on VZ: After VZ report, despite them beating the expectations, I saw the stock going down, so I thought it was a good opportunity to do a put spread on that. I sold 4 $30 puts and bought 4 $26 calls at 60 and 30 cents. It did relatively well, but yesterday, I felt there is more weakness despite the market rally, so I closed it up with some gain. It was a good decision as $30 was too close.

The good thing about this approach is that you can manage it should you feel a weakness like what I did for VZ. There is no reason for stress anyways as the risk is limited.

Some other trades:

1) The MAR $25 calls are finally giving me some good gains I expected. I almost got disappointed about it and failed to average down when it was 5cents/contract. This morning it was trading at as high as 90c/contract! wow! I sold 1 of my two contracts at 35cents yesterday to preserve my initial investment should things reverse, and letting the other one run.

2) I frequently check the site thelion.com to get some extra hints on potential good stocks, so I also bought 1 contract of PDLI $7.5 June call option at 30c/contract. They have earnings release on May 7 and there is lots of time for the option to have profit.

3) With all the noise of stress test for banks next week, I decided to enter a strangle trade on BAC. I have seen BAC easily going up or down 30% in one day. I bought a $7.5 put and a $9 call each around $70 and let it go.

I am still looking for new trade ideas and stocks that can move big. Joe, I am looking at your MDR idea also. Cramer was bearish on MDR. Although I don't believe in him, but at least consider what he says, so I would wait till we get closer to the earnings to see if a strangle trade would make sense on it or not.

Let me know about your ideas. Thanks.