Insurance Agent Trade on SLB

Schlumberger (SLB) is an oil services company. I don’t know a lot about oil services, but a quick look on the SLB page on Yahoo Finance showed that out of 30 analysts that follow the stock, many rate it a buy, and some even rate it a strong buy. Very few if any rate it a hold. That’s the kind of stock that I like for an Insurance Agent Trade.

I started following the stock in early December. At that time the stock was looking pretty weak. The 5-day EMA line was below the 20-day SMA line – not an indicator of booming performance that I want to see before I execute a trade.

But on December 23, SLB started to turn up, and while it was perhaps a day or two early, I entered the trade, selling a Put vertical with a Feb 75/80 for $.46. For 50 contracts, my maximum profit was $2300. Two months is a bit short for the typical Insurance Agent Trade, but I wanted to diversify my holdings a bit and add a shorter term trade to the mix.

SLB_Trade_1

On January 6, after three down days for SLB, the 5EMA was crossing below the 20SMA. I decided to protect my position slightly by selling some Call spreads. I sold the Feb 95/100 for $.39. Since I was still bullish on SLB, I wanted my position to have a bullish bias. So I only sold 26 Call spreads on top of the 50 Put spreads that I had sold two weeks earlier. This made my overall position an unbalanced Iron Condor. A perfect trade for a stock in a trading range with a bullish bias.

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“Why 26 Call spreads?” I hear you ask. Simple answer. I asked for 30, and could only get filled on 26. The goal was to have an unbalanced Iron Condor. Getting filled on 26 out of 30 was enough for me, so I didn’t try to go after any more.

Over the course of January, the stock made a higher low on January 10, and then a higher high at 91, but never really threatened the short call at 95. Overall the stock was stuck in a range, but it had a slightly bullish bias.

On February 3, less than 3 weeks until expiration, the price fell to support at about 86. That took the price of the Call spreads down. I closed the Calls for $.05, giving me a profit on the call side of $.34 each or $884.

In early February, I placed a Good Till Cancelled order on the Put spreads for $.07. Finally, on February 6, my order filled for $.07 each for a net profit on the Put side of $1950.

After commissions, this trade gave me a profit of $2580 for a return of slightly over 10% in about six weeks.

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On February 26, I decided to get back in to SLB with a new trade. I sold a May put spread at 85/80 for a net credit of $.52 for each spread. The trade behaved fairly well and I entered a GTC order for a .08 that filled on April 15. This gave me $.44 net profit. With another 40 spreads, this was a profit of about 10% or $1880 in about 50 days.

SLB_Trade_2

 

 

2 thoughts on “Insurance Agent Trade on SLB

  • May 2, 2016 at 2:14 pm
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    Gary, thanks for your comment. Sorry for the delay in responding, I was at the beach last week.

    For a bullish trade like this, a big positive move would give you less credit when you made the trade. for example, if on Tuesday you could get 5% per month for 3 months, and there was a big pop, you might only get 4.5% per month if you entered the trade. Perhaps that’s not enough for you, and it might cause you to pass.

    If the big move passed through resistance, you might conclude that it is likely to continue moving up. Perhaps this might cause you to raise your put strike up $5.00 and make the trade.

    If there is a big move down, but the move lands at support, I might wait a day to see if support holds, then make the trade.

    If your trade is far enough out of the money, you might look at a big move down as “so what” and make the trade anyway; you’ll get a bit more credit after a move down.

    The short answer, is unfortunately, “it depends” :)

    Happy to answer more if you have a specific situation you want me to look at.

    Regards,

    John

    Reply
  • April 27, 2016 at 3:24 pm
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    Please talk about the advantages or disavantages of entering into a trade after a big run-up day or a run-down day.

    Reply

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