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Let's Trade Options

  • #4,501
  • Aug 19, 2014 11:25am Aug 19, 2014 11:25am
Quoting njr
{quote} Hey SD, Generally 1.5+ SD OTM. I've previously traded various asset classes such as spot FX, CFDs, Stocks, Commodities, etc but I now only trade the OTM options mainly on ES mini, YEN futures, occasionally SPX...
Thanks njr.
Hope is dangerous in this game.
  • #4,502
  • Aug 19, 2014 11:30am Aug 19, 2014 11:30am
AAPL over $100. Seems like it will test ATH today.
Hope is dangerous in this game.
  • #4,503
  • Aug 19, 2014 1:07pm Aug 19, 2014 1:07pm
Any views out there when/if this market will fall and begin to normalize? SPX looks like it'll hit 2000 pretty soon. What happens after that? A further push higher? Looking at the options at Dec 31 exp, there is currently 25% probability it'll hit 2050 and 14% probability it'll hit 2100 by that date. Or will it start to plateau after it hits 2000? Please look into your crystal balls and let me know :-)
  • #4,504
  • Aug 19, 2014 3:43pm Aug 19, 2014 3:43pm
Quoting njr
Any views out there when/if this market will fall and begin to normalize? SPX looks like it'll hit 2000 pretty soon. What happens after that? A further push higher? Looking at the options at Dec 31 exp, there is currently 25% probability it'll hit 2050 and 14% probability it'll hit 2100 by that date. Or will it start to plateau after it hits 2000? Please look into your crystal balls and let me know :-)
Historically, on average, the mid-term election seasons show increased volatility in the Summer/Fall leading up to the Nov elections. I had thought we might see some of that by now, but not yet. Everyone has variously speculated that the end of the taper (due in Oct) would finally scare the bulls, but that has to be baked in already.

Strength in the US stocks & bonds is as much about the strengthening US economy as it is about the flat eurozone economy. Every time I turn around bunds have dipped further; other EZ sovereign debt the same, at all time lows all over. Getting 2.3% or 3.0% on us 10Y/30Y Treasurys looks real good in comparison. And risk capital flows to US equities along the same path.

Seems like only some geopolitical type risks are able to shake the uptrend. If the Republicans take control of Congress late this year, that might do it, but I doubt it. Dec Spy $220 calls are only $0.11, I should just load up now.....
"If The Fool persists in his Folly he will become wise." - William Blake
  • #4,505
  • Aug 19, 2014 6:28pm Aug 19, 2014 6:28pm
Quoting The Fool
{quote} Dec Spy $220 calls are only $0.11, I should just load up now.....
My suspicion is that all the top men (and women) will get together at Jackson Hole and decide what the next big deal will be for Global QE. The Eurozone is in dire need of a weaker euro. They need to borrow a few printing presses from the Fed. If that happens maybe a stronger dollar will weigh on US stawks.
"If The Fool persists in his Folly he will become wise." - William Blake
  • #4,506
  • Edited 1:20am Aug 20, 2014 12:55am | Edited 1:20am
Quoting The Fool
{quote} Historically, on average, the mid-term election seasons show increased volatility in the Summer/Fall leading up to the Nov elections. I had thought we might see some of that by now, but not yet. Everyone has variously speculated that the end of the taper (due in Oct) would finally scare the bulls, but that has to be baked in already. Strength in the US stocks & bonds is as much about the strengthening US economy as it is about the flat eurozone economy. Every time I turn around bunds have dipped further; other EZ sovereign debt the same,...
Good points TF,

Geopolitical is probably the top of the threat list for a market pullback at the moment. Interestingly Mr Cashin suggests Jackson Hole could do it, specifically any 'misalignment with the Yellen and Draghi views and the market'. Let's see what happens!

http://www.cnbc.com/id/101930171

When (not if) this market tanks, I'll probably sell some ES mini futures. Even a 1% pullback will net a healthy profit!
  • #4,507
  • Aug 20, 2014 1:26am Aug 20, 2014 1:26am
Quoting njr
{quote} Good points TF, Geopolitical is probably the top of the threat list for a market pullback at the moment. Interestingly Mr Cashin suggests Jackson Hole could do it, specifically any 'misalignment with the Yellen and Draghi views and the market'. Let's see what happens! When (not if) this market tanks, I'll probably sell some ES mini futures. Even a 1% pullback will net a healthy profit!
2010, September, EUR began a 1,200 pip move, right after Jackson Hole, rectum still sore. EUR/USD back down <$1.20 now would help get the cheese moving again. I think SnP 2k will be pierced. And then the World will end. Go out and spend that money - you can't take it with you to Valhalla...
"If The Fool persists in his Folly he will become wise." - William Blake
  • #4,508
  • Aug 20, 2014 1:31am Aug 20, 2014 1:31am
futures pointing to a flat open. I could use some breathing room on UVXY bull put spreads and SSO bear call spreads. Pretty much where most of my current action is.
"If The Fool persists in his Folly he will become wise." - William Blake
  • #4,509
  • Aug 20, 2014 1:41am Aug 20, 2014 1:41am
Quoting njr
Interestingly Mr Cashin suggests Jackson Hole could do it, specifically any 'misalignment with the Yellen and Draghi views and the market'. Let's see what happens!
I agree with Artie that it has been a beautiful Summer.
"If The Fool persists in his Folly he will become wise." - William Blake
  • #4,510
  • Aug 20, 2014 1:47am Aug 20, 2014 1:47am
Quoting The Fool
EUR/USD back down <$1.20 now would help get the cheese moving again...
$1.2750 before Christmas.
"If The Fool persists in his Folly he will become wise." - William Blake
  • #4,511
  • Aug 20, 2014 5:08am Aug 20, 2014 5:08am
Quoting The Fool
{quote} $1.2750 before Christmas.
$usd now needs to clear 82.48 for the above to materialise
  • #4,512
  • Aug 20, 2014 7:56am Aug 20, 2014 7:56am
Quoting The Fool
{quote} Historically, on average, the mid-term election seasons show increased volatility in the Summer/Fall leading up to the Nov elections. I had thought we might see some of that by now, but not yet. Everyone has variously speculated that the end of the taper (due in Oct) would finally scare the bulls, but that has to be baked in already. Strength in the US stocks & bonds is as much about the strengthening US economy as it is about the flat eurozone economy. Every time I turn around bunds have dipped further; other EZ sovereign debt the same,...
Excellent post. Really enjoyed reading it. Very good points there.
Hope is dangerous in this game.
  • #4,513
  • Aug 20, 2014 8:21am Aug 20, 2014 8:21am
Quoting The Fool
{quote} ... Everyone has variously speculated that the end of the taper (due in Oct) would finally scare the bulls, but that has to be baked in already....
Tuesday's Notable Options Activity: Apple, Hertz & VIX

From the text:
1. VIX - Buyer of 145k of the Oct 16 calls paying 1.10 vs. selling 145k of the Jan15 20 calls at 1.37 midday. That VIX diagonal call spread is expressing a view that a big move higher in VIX between now and January is likely to come before October expiration. Oct VIX futures closed at 14.10, vs. 15.90 for Jan VIX futures. August VIX expiration is today on the open.


I didn't read anything about diagonals yet, but I can see the idea behind it on this example. So, unlike a vertical bull call spread, where both legs have same expiry and which you do for a debit, in diagonal call spread you actually receive a credit buy selling calls with later expiry.... and give yourself more time. If I understand this correctly.
Hope is dangerous in this game.
  • #4,514
  • Aug 20, 2014 8:58am Aug 20, 2014 8:58am
What are really the plays for smaller accounts? If you try to collect a premium from a $1 wide spread, your commissions will probably take big % of your gains.

Here is what I was thinking yesterday - Hey, what about a Chicken Iron Condor for TGT, which announced earnings today BMO.

TGT was $59.30, and expected move was just about $1.27.
So, for IC 57/58 + 60.5/61.5 with this week expiration I could get filled at $0.32 up to max $0.34 credit. I did not do it, because if I place IC so close, on the edges of EM, then I would like to receive 40% of the spread width. But it would require probably higher IV than TGT have. I did that before on more volatile stocks.

So, out of $0.34 credit, or 34 USD credit, you will pay about 4 USD for commissions, and receive a 30 USD net credit.

It looks like this now
Attached Image (click to enlarge)
Click to Enlarge Name: Screenshot - 20.8.2014 , 15_43_04.png Size: 5 KB


Midpoint is at $0.11 credit. So you took 34 USD, and buyback IC for 11 USD, right? The tastytrade guys would say - Hey, thats a 67% winner!
Yeah, but out of that 23 USD gain, probably 8 USD will go to commissions, and you will earn 15 USD. Is it worth the risk?

So, the solution could be to play the wider strikes for more credit?
Hope is dangerous in this game.
  • #4,515
  • Aug 20, 2014 9:07am Aug 20, 2014 9:07am
Quoting StrayDog
{quote} VIX - Buyer of 145k of the Oct 16 calls paying 1.10 vs. selling 145k of the Jan15 20 calls at 1.37 midday.
That was yesterday. I see now that another 31,600 diagonal spreads are bought today, couple of minutes after open. Oct 16 calls for $1.20 debit, and Jan15 20 calls for $1.40 credit.
Hope is dangerous in this game.
  • #4,516
  • Aug 20, 2014 11:21am Aug 20, 2014 11:21am
Quoting The Fool
{quote} 2010, September, EUR began a 1,200 pip move, right after Jackson Hole, rectum still sore. EUR/USD back down <$1.20 now would help get the cheese moving again. I think SnP 2k will be pierced. And then the World will end. Go out and spend that money - you can't take it with you to Valhalla...
Best not to short that S&P500 then
  • #4,517
  • Aug 20, 2014 11:49am Aug 20, 2014 11:49am
Quoting StrayDog
{quote} I didn't read anything about diagonals yet, but I can see the idea behind it on this example. So, unlike a vertical bull call spread, where both legs have same expiry and which you do for a debit, in diagonal call spread you actually receive a credit buy selling calls with later expiry.... and give yourself more time. If I understand this correctly.
I'll show you some examples of how I do diagonals later today when I have some free time,
"If The Fool persists in his Folly he will become wise." - William Blake
  • #4,518
  • Aug 20, 2014 12:41pm Aug 20, 2014 12:41pm
http://video.cnbc.com/gallery/?video=3000303699

Art: "Volume=Validity." Well, a print is a print. SnP 2k/Dow 17k on the way, valid or not...
"If The Fool persists in his Folly he will become wise." - William Blake
  • #4,519
  • Aug 20, 2014 1:03pm Aug 20, 2014 1:03pm
http://www.forexfactory.com/news.php?do=news&id=500456

ruh-roh!!!
"If The Fool persists in his Folly he will become wise." - William Blake
  • #4,520
  • Aug 20, 2014 1:03pm Aug 20, 2014 1:03pm
FOMC Minutes according to ZH....

http://www.zerohedge.com/news/2014-0...ld-rise-sooner
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