The fluctuation in volatility, earnings surprises and expectations for a market correction made October a tough month for option writers.

We started the month off with several positions in the energy sector only to be stopped on some extreme volatility in oil prices. Those positions were followed by FWLT and FLR and a profit warning in the sector took us out of those. It was a tough month and we ended up losing some money. Fortunately it was not a lot and one good November position can replace that in a snap.

We only tried seven positions in October and the last position in EBIX accounted for two thirds of the $1.57 loss. EBIX hit a new high the day after we initiated the position and then fell off a cliff. A wide bid/ask spread on the option handed us a 90-cent loss despite a tight stop.

I purposely avoided opening any additional positions in late October for fear of a month end correction. That correction came to pass as expected. I believe that the markets will return to an upward trend in November once we get past the FOMC meeting and the Non-Farm Payrolls on 11/6. Once the markets return to a positive trend we should find it easier to write additional puts. Writing puts is a bullish strategy for uptrending markets. Hopefully November will see that trend return.

Jim Brown

Current Portfolio


Recommendation History

Click here for September Results

Click here for August Results