Position Update: Pulte Homes, Almost Family – February 2

Account balance. Click to enlarge.

Account balance. Click to enlarge.

The first week of February indicates we’re getting close to expiration on the short put trades for PHM and AFAM. There’s still 17 days left until expiration, but time always moves forward, so I still believe in selling time to make money. Yea for short puts!

So, where are we today with the positions on Pulte Homes and Almost Family? They haven’t been too “Yea!” of late, to be honest. Things are finallly looking a little better than they did last week. PHM did all right, but AFAM almost tripled in value from the opening sale at $.85. Let’s take a little closer look at both of these and see if we’re still okay.

First, let’s look at Pulte, since it’s a little more straight forward. The stock continues in its range since the beginning of December. We have yet to see a lot of time decay on the puts yet, but tomorrow is the PHM earnings report, so that stands to reason. Had I been paying attention, I might have avoided holding a position over an earnings period. Ranges like this do eventually breakout in one direction or the other, so obviously we want it to go up.

PHM, click to enlarge.

PHM, click to enlarge.

But, as previously noted, I’m not too worried about this one even if the shares get below the $10-strike.  However, I believe there’s more of an oppotunity for PHM to surprise to the upside than downside due to all the pessimism that’s baked into the current markets, especially housing. Either way, I’m willing to wait and see. I’d almost prefer the earnings to be a non-event as far as the stock price, but I suppose that’s not likely to be the case.

Now, the position on AFAM could complicate things even with PHM depending on how it chooses to handle itself the next few weeks. We’ve seen a very sharp decline in the share price since entry on the trade. Since, I’m small-time, I’ve also been a little dumb-time on this one. Rookie mistake in not following a strict stop/back-out strategy on this one. The $30-strike puts have nearly triplied on me, hitting up to $2.50 even yesterday. That actually led to a margin call for $300. I’m not exactly sure on the ramifications with that, but if we’re left in the same boat today, I’ll try to check with E*Trade on that.

AFAM, click to enlarge.

AFAM, click to enlarge.

As you can see, unless there’s a huge downturn today, hopefully the margin call will correct itself. AFAM still doesn’t look all that healthy from a technical standpoint. It’s broken below the 200-day moving average, had a downward crossover with the 20-day MA and 50-day MA. It also has stayed just below its previous low close back in October, which may mean more downward movement.

I still stay rather boggled onthis one, and why such a suddent and aggressive blunge south. I continue to acknoweldge that’s the amateur in me allowing myself to “take on” the market and dare it to prove me wrong. But, I still feel like the stochastic is so outrageously oversold on this, along with a MACD needing to perk up a little, that it’s worth holding this in search of a reprieve from the action. If thoday, so far,  is any indicator, that time might be here now.

Let’s see how the rest of the week shapes up. Leave a reply to share your thoughts. Take care loyal readers!

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