Update 1/21/11

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Most of the gains from last week were given back this week when the market traded lower and now all positions are covered.

NOV Bullish Diagonal

After a couple of down days I covered NOV on Thursday by selling 4 Feb 70 calls for 1.90. I used a ratio, i.e. only sold 4 calls against 6 long calls as the delta of the option I sold was higher than I wanted. Profit is currently 311%.

FCX Bullish Diagonal

I made several trades in FCX last week after some significant down moves in the stock. On Tuesday I covered the longs by selling 2 Feb 125 calls for 2.96. On Thursday I rolled those calls down to the 119 strike after FCX gapped lower on earnings. The roll yielded a credit of 1.05. On Friday I decided to close the entire position after determining resistance was broken with no further resistance in sight as well as profit targets being hit. The closing trade was selling the May/Feb 105/119 diagonal 2 times for a 10.46 credit. This gave a final profit of 102%. I will be looking for a replacement position this week.

XLE Bullish Diagonal

On Thursday I covered XLE after 2 down days by selling 3 Feb 71 calls for 1.02. Profit on XLE is currently 313%.

UA Bullish Diagonal

On Thursday I also covered UA by selling 2 Feb 60 calls for 0.75. There is currently a loss on the position of 

15%.

Update 1/14/11

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It was a nice week for the diagonals this past week especially on Friday.

NOV Bullish Diagonal

NOV was a great example Friday of this diagonal trading strategy working. The position was up 95% in 1 day. In order to get returns like that, a couple of things have to happen. First, the position size (not risk) has to be increased by adding additional shares with credits. This can only be done when the underlying stock has moved in the direction of the diagonal position (up for a bullish trade in this case). The number of contracts in NOV has been tripled over the life of the trade- I started with 2 contracts and have worked up to 6 contracts at this point. Second, the diagonal has to be uncovered (the short call bought back leaving the long call naked). According to the rules I follow, I uncover a diagonal when the stock and MACD indicator have moved up 2 consecutive days. In NOV this occurred on Tuesday and I bought back the 6 Feb 70 calls for $1.52. Once you have a position setup like that and you get a move in the right direction in the underlying, you can have some nice profits occur. NOV was up $2.18 on Friday to 69.31 and the position is now up 385% overall.

FCX Bullish Diagonal

On Tuesday I uncovered FCX by buying back the 2 Feb 125 calls for $4.10. On Thursday I rolled the longs calls from the 99 to the 105 strike for a $4.35 credit. Overall the FCX position has a profit now of 177%. FCX has earnings on Thursday so I will be covering the long calls either Tuesday or Wednesday.

XLE Bullish Diagonal

No adjustments were made to XLE this week and the underlying was up 2.5 points on the week. Profit now is 342%.

UA Bullish Diagonal

On Friday I uncovered UA by buying back the 2 Feb 60 calls for $1.20. The position turned profitable this week and is up 12%.

Update 1/7/11

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NOV Bullish Diagonal

NOV gapped up on Monday enabling me to roll the longs up and add a couple of contracts. NOV then proceeded to trade lower the rest of the week, and on Tuesday I covered the long calls by selling 6 Feb 70 calls for $1.75. Overall profit now is 218%.

FCX Bullish Diagonal

FCX followed the same pattern as NOV, gap up Monday then down the rest of the week. On Tuesday I covered NOV by selling 2 Feb 125 calls for 3.55. Overall profit is 189%.

XLE Bullish Diagonal

XLE alternated up and down days this week and ended near where it started the week. No trades were made with this sideways action and profit now is 248%.

CTRP Bearish Diagonal

CTRP was up strongly this week and I decided to close the position Tuesday after CTRP broke through resistance. Final profit on the trade was -61%.

UA Bullish Diagonal

I opened a new diagonal in UA today. The long was the Jul 50 calls and the short was the Feb 60 calls. The 7.25 debit position is down 5% after 1 day.