{"id":302,"date":"2011-02-14T02:24:14","date_gmt":"2011-02-14T08:24:14","guid":{"rendered":"http:\/\/www.greenbackcafe.com\/?p=302"},"modified":"2011-02-14T02:24:14","modified_gmt":"2011-02-14T08:24:14","slug":"northern-trust-ntrs-sep10-55-call-long","status":"publish","type":"post","link":"https:\/\/www.greenbackcafe.com\/index.php\/2011\/02\/14\/northern-trust-ntrs-sep10-55-call-long\/","title":{"rendered":"Northern Trust – NTRS Sep10 55 Call – Long"},"content":{"rendered":"

In 2010, after much paper trading, I finally embarked on a campaign to trade options on my cash account. Over the next several weeks, I plan to report my trades, their results and what lessons, if any, I learned. Whether or not you accept the veracity of these reports does not concern me \u2014 these trades illustrate a lot of the things I did wrong, and should be instructive.<\/em><\/p><\/blockquote>\n

\"Bouviers\"
My mother used to have a Bouviers named Sebastian; he was a good dog, but he never gave me trading advice ...<\/figcaption><\/figure>
\nAugust 5, 2010<\/strong> – At Options Profits, Mark Sebastian suggested his readers buy September calls of Northern Trust Bank (NTRS) with a strike of 55 at .30 or better. His justifications? At around $49, it was trading near its lows (upside move more likely…); the implied volatility for NTRS was relatively low, making the options cheap; \u00a0following the paper, Mark noticed someone buying a lot of 50 and 55 calls on NTRS; and finally Mark likes NTRS, knows people who work there and likes the institution. Personally, I’ve worked with people from Northern Trust, and also like the institution, but I don’t consider that a great insight on which to base a trading or investment decision. Then again, I’m a computer programmer, not a professional investor\/trader.
\nAugust 6, 2010<\/strong> –\u00a0This was my first trade based on a suggestion from Options Profits. I bought 3 Sep 10 55 calls on NTRS at $0.35. The most I could lose was what I paid for the calls plus the commission for opening the trade, about $120.
\nAugust 11, 2010 <\/strong>–\u00a0I sold my calls for $0.65. After commissions, I netted a profit of $60.03, about 44% in a week.
\nThis was my second trade, and my second “success”. I think I was getting cocky.
\nWhat I did wrong:<\/strong><\/p>\n
    \n
  1. I seem to remember doing this trade on the day before NTRS announced earnings, and the price going down a bit the next day to $0.25. The point of the trade was not a catalyst-induced price action, so I should have waited to see what happened after<\/em> the earnings announcement.<\/li>\n
  2. I also jumped the gun because I had just<\/em> gotten my trial subscription to Options Profits and was anxious to let the rubber meet the road. I bought in at $0.35 even though Mark said $0.30 or better.<\/li>\n
  3. I was too timid in position sizing for this trade; in retrospect, I should have bought five<\/strong> calls, rather three — the larger a position, the less impact commissions have on profitability.<\/li>\n<\/ol>\n

    What I did right:<\/strong><\/p>\n

      \n
    1. I set up an exit strategy as soon as the buy order was filled — a limit sell at $0.65. I set it up to cover commissions and still give me a good profit cushion.<\/li>\n<\/ol>\n

      I probably left some money on the table for this trade too, but I’m happy with it.
      \nLooking at the price action for NTRS between 08\/05\/2010 and 09\/17\/2010 (the expiration date on these calls), the highest that NTRS got was $50.50. The action on this out-of-the-money call was all based on increasing volatility and premium — it never got close to the strike, so there was no intrinsic value to the call, ever.
      \nSometimes, the paper is wrong.<\/p>\n","protected":false},"excerpt":{"rendered":"

      August 5, 2010 – At Options Profits, Mark Sebastian suggested his readers buy September calls of Northern Trust Bank (NTRS) with a strike of 55 at .30 or better.<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_genesis_hide_title":false,"_genesis_hide_breadcrumbs":false,"_genesis_hide_singular_image":false,"_genesis_hide_footer_widgets":false,"_genesis_custom_body_class":"","_genesis_custom_post_class":"","_genesis_layout":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[7],"tags":[],"class_list":{"0":"post-302","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-trading","7":"entry"},"featured_image_src":null,"featured_image_src_square":null,"author_info":{"display_name":"Rick S.","author_link":"https:\/\/www.greenbackcafe.com\/index.php\/author\/rick\/"},"jetpack_featured_media_url":"","jetpack-related-posts":[],"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/www.greenbackcafe.com\/index.php\/wp-json\/wp\/v2\/posts\/302","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.greenbackcafe.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.greenbackcafe.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.greenbackcafe.com\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.greenbackcafe.com\/index.php\/wp-json\/wp\/v2\/comments?post=302"}],"version-history":[{"count":0,"href":"https:\/\/www.greenbackcafe.com\/index.php\/wp-json\/wp\/v2\/posts\/302\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.greenbackcafe.com\/index.php\/wp-json\/wp\/v2\/media?parent=302"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.greenbackcafe.com\/index.php\/wp-json\/wp\/v2\/categories?post=302"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.greenbackcafe.com\/index.php\/wp-json\/wp\/v2\/tags?post=302"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}