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  • #5,721
  • Oct 31, 2014 12:08am Oct 31, 2014 12:08am
I don't really trust P/L projections above, they don't account for fast iv drop post-ER, which will likely be 15-20%. So, calls will be worth less than projected. The iv spread between the two calls will be the same, so the price differential between the two calls will be the same, as well, as a percentage - but the value of the calls will decrease, so the max profit will be less, and the b/e points will be further out.

Another way to play BABA ER might be through YHOO. YHOO IVR at bottom of its range. YHOO especially vulnerable to the downside & will fall if BABA were to tank on the ER 11/4. So I might play a BABA ER fail thru its proxy, YHOO.....
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"If The Fool persists in his Folly he will become wise." - William Blake
  • #5,722
  • Edited 1:09am Oct 31, 2014 12:23am | Edited 1:09am
Punchbowl still full, the party just moved East....Nikkei up near 4% Asian Friday....U/J spikes > 110.50....QE4 is a Japanese project

http://www.bloomberg.com/news/2014-1...ice-gains.html
"If The Fool persists in his Folly he will become wise." - William Blake
  • #5,723
  • Oct 31, 2014 1:41am Oct 31, 2014 1:41am
Quoting The Fool
Another way to play BABA ER might be through YHOO. YHOO IVR at bottom of its range. YHOO especially vulnerable to the downside & will fall if BABA were to tank on the ER 11/4. So I might play a BABA ER fail thru its proxy, YHOO..... {image}
mmm
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"If The Fool persists in his Folly he will become wise." - William Blake
  • #5,724
  • Oct 31, 2014 7:20am Oct 31, 2014 7:20am
Quoting StrayDog
... Well.... never mind, but again - LNKD ER's today AH. And I am bearish. ....
Yipe, totally wrong on that - saved by enormous bid/ask spreads... so, I was bearish on AMZN and LNKD, didn't traded both of them, so zero plus zero = zero...
Since LNKD didn't breached EM of $16 (so far at least), I will learn something on 160/240 Nov strangle I was looking at.

What was that?
I didn't understand yesterdays heavy increase in price of LNKD 240 Nov calls in last 20 minutes of trading... one moment they were $1.00, and then puf! they are suddenly $1.40 - 40% up, and LNKD only moved from $200 to $201.xx.... so like no more than 0.7%... and those are Nov monthly options, with more than 20 DTE, not like weeklies on expiration Friday. Insider trading on some calls maybe - that lifted the price of ALL calls? That was indication of an expected up move...

This BOJ action... I am glad I closed my idiotic NQ100 short at 4,065, since holding it would be just a lot painful today... all this rally will put my VIX long positions where the sun don't shine.
Hope is dangerous in this game.
  • #5,725
  • Oct 31, 2014 7:39am Oct 31, 2014 7:39am
Quoting StrayDog
all this rally will put my VIX long positions where the sun don't shine.
yeah I need to roll out of my UVXY short puts (Nov $20/$22 bull put spread), take a little loss there, just let the long puts ride for a while

QE4 underway, just don't fight the FedBoJECB, etc. I guess BoJ just upped the ante for the ECB. I guess commods will keep sliding - look at gold. EUR/USD could be dropping below $1.25. I guess US equities are going to be making new highs, basically from here on out. Only some exogenous shocks might slow the stampede into equities. I guess UST yields will keep dropping, following dropping yields elsewhere? IDK, I guess you just buy calls now - BABA anyone?
"If The Fool persists in his Folly he will become wise." - William Blake
  • #5,726
  • Oct 31, 2014 8:03am Oct 31, 2014 8:03am
Quoting The Fool
{quote} Did a Nov $22/$20 UVXY vertical put spread for $0.57 credit. A bet that S&P will not be making new highs in the next few weeks....
change of plan
"If The Fool persists in his Folly he will become wise." - William Blake
  • #5,727
  • Oct 31, 2014 9:24am Oct 31, 2014 9:24am
Quoting The Fool
....... QE4 underway, just don't fight the FedBoJECB, etc. I guess BoJ just upped the ante for the ECB. I guess commods will keep sliding - look at gold. EUR/USD could be dropping below $1.25. I guess US equities are going to be making new highs, basically from here on out. Only some exogenous shocks might slow the stampede into equities. I guess UST yields will keep dropping, following dropping yields elsewhere? IDK, I guess you just buy calls now - BABA anyone?
Yeah pointless to fight the power... about BABA, I agree with your above posts, I just think IV drop is going to be larger than 15-20%.
I will skip BABA, since I have some important things to do on Nov 4, and I will be out of the town pretty much all day.

Learning....
I posted on previous page short strangle for SBUX that Robyn from dough traders did yesterday, a 75/80 Nov7... I wanted just to change short strike a bit, so I was interested in 74/80, also Nov7... that was $0.86 up to $0.91 credit. It has traded today from $0.42 to $0.59, so that could be also a 50% quick winner, just like BIDU strangle was. On the other hand, LNKD 160/240 strangle that was ~$2.60 at most, is $4.00 now when U/L trades around $230 ...

CVX and XOM both didn't move at all. Never traded those, but will make appropriate comment in table I am making for another cycle.
Hope is dangerous in this game.
  • #5,728
  • Oct 31, 2014 11:12am Oct 31, 2014 11:12am
I just watched a video from yesterday, where Liz & Jenny talking about shorting a strangle for LNKD ER's

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LNKD Earnings

  1. 10/30/2014

Liz & Jenny want to take advantage of a high priced stock and it's earnings announcement, so they decide to sell a strangle in LNKD. They discuss what their risk is and what the outcome would be in different scenarios.
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Interesting that Jenny also noticed that calls were priced higher, and said "but FB and TWTR was down, hmm...." Since they did a 170/225 Oct31 ... they have a call currently ITM, but enough time till end of day to roll or close.

Note to myself: Very important to stay calm in these situations, and that comes with experience.

Hope is dangerous in this game.
  • #5,729
  • Oct 31, 2014 9:33pm Oct 31, 2014 9:33pm
Quoting The Fool
just don't fight the FedBoJECB, etc. I guess BoJ just upped the ante for the ECB. I guess commods will keep sliding - look at gold. EUR/USD could be dropping below $1.25. I guess US equities are going to be making new highs, basically from here on out. Only some exogenous shocks might slow the stampede into equities. I guess UST yields will keep dropping, following dropping yields elsewhere? IDK, I guess you just buy calls now - BABA anyone?
I did buy some BABA 11/7 $113 calls for $0.35 today, just a little lotto ticket. I might look to play something larger on YHOO weeklies on Monday. BABA IVR @ 94%; YHOO scraping bottom at 24%.
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"If The Fool persists in his Folly he will become wise." - William Blake
  • #5,730
  • Oct 31, 2014 9:48pm Oct 31, 2014 9:48pm
We have elections here on Tuesday. One hears surprisingly little about it in the press. I think most people have such low expectations that government can actually accomplish anything at all, it doesn't even matter who gets elected anymore. Meanwhile, worldwide QE will be sloshing around in the markets and it'll probably be a call buyer's orgy for months or years. Only the usual scares - ebola, war, etc. might cause a downturn. If the USD gets very much stronger that might weigh on equities, or not. I guess I will be looking for bullish equity plays....

http://finance.yahoo.com/news/unknow...230953453.html
"If The Fool persists in his Folly he will become wise." - William Blake
  • #5,731
  • Nov 1, 2014 10:55am Nov 1, 2014 10:55am
Thanks for the tt vids on calendars, SDog. I noted Sosnoff says why he doesn't use (or show use of) the ToS analyzer - because the results are not accurate, because there are too many unknowns that the analyser does not/can not account for....

Anyway, I get what they say about using calendars especially to the put side - the hope/expectation there is for an expansion of iv that would benefit the back month option. However, there are other situations where one might expect an iv expansion - i.e., that is, following a large iv contraction, such as what may (typically) follow an equity ER.

An example is FB. After the ER drop from $81+ to $74, IVR dropped down to 13%. IVR might flatline or go a little lower, but it can not go very much lower. And, given the equity-positive QE-forever environment we are in, one could see FB rebounding over the next months. Buying a call calendar could do well on FB. The Nov/Dec $80 call calendar gets bought for $0.87. A Dec/Jan debit is nearly same at $0.89 and may benefit from rising iv into the Jan Q4 ER date.
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"If The Fool persists in his Folly he will become wise." - William Blake
  • #5,732
  • Edited 11:36am Nov 1, 2014 11:13am | Edited 11:36am
Quoting The Fool
Buying a call calendar could do well on FB. The Nov/Dec $80 call calendar gets bought for $0.87. A Dec/Jan debit is nearly same at $0.89 and may benefit from rising iv into the Jan Q4 ER date. {image} {image}
Nov/Dec $80 has b/e's at $75.65 and $84.80 on 11/21 with a max profit of $1.24/$1.64; Dec/Jan is similar, with slightly higher max profit. The Dec/Jan $77.5 might be better, at a $1.01 debit it has b/e's at $73.50 and $82.00, max profit on 12/19 of $1.18/$1.60.

For downside insurance $0.15-$0.20 buys you front month put spreads
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"If The Fool persists in his Folly he will become wise." - William Blake
  • #5,733
  • Nov 1, 2014 12:18pm Nov 1, 2014 12:18pm
bullish IWM. $0.22 debit Dec/Jan $124/$125 diag b/e's at $118.50 & $126.80, max profit on 11/21 $0.97, a 4-bagger....
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"If The Fool persists in his Folly he will become wise." - William Blake
  • #5,734
  • Edited Nov 2, 2014 1:04am Nov 1, 2014 9:33pm | Edited Nov 2, 2014 1:04am
Quoting The Fool
...Anyway, I get what they say about using calendars especially to the put side - the hope/expectation there is for an expansion of iv that would benefit the back month option. However, there are other situations where one might expect an iv expansion - i.e., that is, following a large iv contraction, such as what may (typically) follow an equity ER.
There's a general approach to trading calendars indicated above, at least in regards timing: buy 2 or 3-month calendars in the days/weeks following an equity's ER - so taking advantage of iv drop and also timing the endgame for the ramp-up in iv prior to the next ER.

An example might be AMGN. Spiked on ER last week, the Nov/Dec $155/$150 put DD has b/e's on 11/19 at $165 and $152.35, max profit of $1.09 around $156 on 11/19. Costs $0.44....AMGN closed Fri $162.18....alltime high.
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"If The Fool persists in his Folly he will become wise." - William Blake
  • #5,735
  • Edited 1:22am Nov 2, 2014 1:05am | Edited 1:22am
Actually I might rather look to play something that was beat down on recent ER...as in the FB calls, just above. I am looking for more.
"If The Fool persists in his Folly he will become wise." - William Blake
  • #5,736
  • Nov 2, 2014 1:39am Nov 2, 2014 1:39am
Did USNA point the way for HLF? HLF ER's 11/3 ah.
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"If The Fool persists in his Folly he will become wise." - William Blake
  • #5,737
  • Nov 3, 2014 1:09am Nov 3, 2014 1:09am
Quoting The Fool
Another way to play BABA ER might be through YHOO. YHOO IVR at bottom of its range. YHOO especially vulnerable to the downside & will fall if BABA were to tank on the ER 11/4. So I might play a BABA ER fail thru its proxy, YHOO.....
Still looking at BABA/YHOO correlation plays to start the week, need to see what moves on Monday.
"If The Fool persists in his Folly he will become wise." - William Blake
  • #5,738
  • Nov 3, 2014 8:52am Nov 3, 2014 8:52am
Hey guys... interesting stuff about SPX 2 SD moves.
(This one is for njr, since he is a hard core Snp naked option seller )

---------------------------------------------------------------------------------------------------------------------
2 Standard Deviation Moves

Naked options are thought to have undefined risk. However, we know that an underlying can only go to zero so naked puts technically have a max loss. Since underlyings can go up indefinitely, do naked calls really have a max loss? Today, Tom Sosnoff and Tony Battista take a look at what this undefined risk really means. Using a 2 standard deviation move, they would expect the underlying to close outside of those strikes 5% of the time. However after looking at over 6,000 occurrences, they find that the SPX actually only moves outside of those strikes .95% of the time. For this reason, we can put a lot of context around our "max loss" when trading naked calls!
---------------------------------------------------------------------------------------------------------------------

They took data starting from 1990 up to now, so very interesting to see how rare actual moves over 2 SD are on SPX.

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Yeah, that is why traders like Karen doing indices... this would be a lot different on some individual stocks. That is only a reminder for me, to try to always have something on SnP, like Iron Condor or spreads... especially when IV rank is high, and be patient.
Hope is dangerous in this game.
  • #5,739
  • Nov 3, 2014 10:05am Nov 3, 2014 10:05am
A lot of negativity around TWTR... Could this be a good idea? This trade has no downside risk, since total credit is larger than $1, which is the width of put spread, and I do not see that stock above $47, which is b/e point.
IV rank is low, though...

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Hope is dangerous in this game.
  • #5,740
  • Nov 3, 2014 10:29am Nov 3, 2014 10:29am
Another idea.
IV rank on SPY is 33, not much.
Skewed IC - more distance to downside, and yet credits for put and call spreads are almost the same.

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So far, high IV rank are on SLV, GLD, stocks with earnings... currency ETFs which probably have lousy options.
Hope is dangerous in this game.
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