Let's Trade Options

noting bond futures are bid, which will be good for equities, but I held off on any swing trades, will see what happens after bonds are trading Tuesday....

Nice bounce off the 200 dma, back to the 50 dma, where I bet it will dither for a while. Too much inflation data and Fed yakking gives the market constipation. I will play some double diagonals a/o calendars for Friday/Monday, but I will pay a little more than usual, to try to avoid dying in the middle. The small profits from the 1dte flys will help me. Something like shown - EM for Friday about 60, everything comes close to the middle, may add more fotm hedges to guard the tails.

this was this weeks SPX double calendar...I closed the call side for a $1.50 loss, took off the put side at $6 and then $7.50 net, a pretty nice gain overall...

The weekend is going to be full of news and rumors about war in Palestine. I have to bet on further downside on Monday.

I like trading the weekly SPX double calendars and as shown above, when they hit well, they pay really well. I have had more than a few, though, where the trades lost money on each side. A couple have been near complete losses, and, given the size of SPX and the debit needed to trade the calendars, those losses really sting.

The classic mo for trading calendars is to put them on in advance of an increasing iv - often the back long options are placed at or near a known event where iv is due to increase. Alternately, you can look for some backwardation, so when you sell the front option of the calendar, it will earn enough to make the calendar more inexpensive.

What I just realized is there's another way to set up the weekly calendar that saves money on the debit, and that is using the Friday AM/PM spread. The Friday AM-settled options only occur on the 3rd Friday of the month....a holdover from old days when there were only weekly and monthly options.

These options are heavily traded and have much higher OI's than any of the SPXW weekly options strikes. They settle on Friday at the open, which means they have to be managed on Thursday b4 Thursday close. You could also try to time Friday AM expiry otm for an itm run on Friday PM. (The latter very tricky because of the overnight risk.)

More to my point, the Friday AM/PM spread options are much cheaper than something similar, like Friday PM/Monday. In the calendars shown below, compare the AM/PM calls to the Friday/Monday calls: $1.25 vs $2.55....@ the puts it's $1.40 vs $2.75.

They don't have as high of a MaxP, but it's not 1/2 as much, more like 2/3, whereas the spread price is half price. Can't believe I'm only now discovering this, after trading these things for a decade. But, I'll take it. Much cheaper calendars means they can be brought closer together to eliminate the heavy loss of a doji week. Too bad it's only once a month.

possible to set up a dbl cldr with very wide b/e's on the outside, guaranteed netgain everywhere inside. At some point you could do some tail hedging with XSP. I'll see if I can get in one of these in the coming week at lower cost, maybe by Tuesday...

will look for a good entry on the AM/PM Friday calendar Tuesday.....contracting iv's will help...

RUT DC

What I filled for SPX AM/PM dbl cldr....looks like a winner. I lucked out early with that 4450 50c fill, had another set and chased that all the way to >$1.00, gave up. Trying same idea @ 4460 for $0.80, no go...

...got in the 4460 cldr calls for 75c....i am bullish, about 3:1 calls to puts, but opex pin @4400 might be sticky

Well, let's see if we can't make some money here. In the following:

NKE Oct27 102 PUT at $0.90

Should be good for some spending money.....

LOL...wrong again...not long after entry bearish news re NVDA hit the wires, overnight ASML, explosions and atrocities. I may close out some call positions near be today, we'll see

Nike chart looks bullish, like it wants > $110 again. Stocks generally want to rally now & head to a happy ending come Xmas. Just need to stop the negative news flow somewhat, get some good data re: inflation. Might be a tall order....

Added to the following:

NKE Oct27 102 PUT at $0.75, so that puts my average cost at $0.825

Also, got into the following:

NKE Oct27 103 PUT at $1.08

Luckily I was at my computer for lunch so I caught the little spike up. A lot of times, I have noticed over the years, if you get a sharp, quick spike in the middle of the day with no news, it seems like it is the Market Makers doing it for whatever reason, maybe to make people cover their shorts. Or maybe they just gets the shorts on stops, I don't know. But they tend to be short-lived most of the time.

Overall, it may be bullish into the end of the year, but remember, I am only concerned with the short term, and by my indicators, it is going to move down for a little bit, enough to make money with the options, anyway.

If the stock just drops to $101, that is only a ~$2 move which is nothing for this stock, but would be a very good payday on these options.

AM/PM SPX dbl cldr in actual size...I had high hopes for this one, obviously it would have been better if the spoos had rallied instead of dumped. Looks like I'll make some $, just not the motherlode I'd imagined...

..a bit of a rebound Thursday, to 4340+, will be nice...then the call cldr will come off at near be, maybe a little better, and the put side will bring in the dough....

...the put calendars came off for $5 - a net $3.75 gain...all the oversized call spreads are worthless. I will step away with a small gain overall (my bad for heavily fading the calls). The p/l models were never very accurate until today. I learned some things about trading this AM/PM spread:

- need to heed the theta difference between AM/PM options. That will limit the profit potential, because you can't manage the AM trade down to actual expiry. You have to get out by NYclose, but expiry is the following day at NYopen. A retailer like me doesn't have the ability to trade the SPX options overnight.

- the beauty of this trade idea is the good possibility of getting into spreads at very low cost; otherwise, the inability to play the pin is a drawback

- anyhoo, it's only once a month, we'll see in November....

Added to the following:

NKE Oct27 103 PUT at $0.88, making my average cost $0.98

In the following:

NKE Oct27 104 PUT at $1.28

Apparently, lunch time is a good time to be at the computer.

So, my total NKE trades are:

NKE Oct27 102 PUT at $0.825 avg cost

NKE Oct27 103 PUT at $0.98 avg cost

NKE Oct27 104 PUT at $1.28

These should be good for some pretty good money.

And now, we wait.....

bearish trades looking good all over the place...the steady rise in bond yields is a problem for stocks. Kind of hard to see the train wreck unfold in extreme slow motion, but it is there. There's going to have to be some further capitulation to force the Fed to ease off the hawk. We should start to see the employment numbers going soft, there could be some more regional bank troubles, and, of course, there's another Fed govt shutdown queued up for mid-Nov.

...checking the Nov and Dec call calendars - as below, they are available now for 45-55c. I think that price is there for a while @ the fotm calls. More like 75c for the puts. But cheap. I think profit potential is capped @ maybe 5x, not the 10x shown on the P/L graph, but I could be wrong. I'll shoot again around the 2nd week of November....