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Let's Trade Options

  • #6,101
  • Edited 12:50am Dec 3, 2014 12:32am | Edited 12:50am
So, CREE ER's 1/19, it puts on a good i.v. crush and the rush starts 3-4 weeks pre-ER, usually. Poor bid/ask spread and odd division on the strikes, though - I may look at it a little later in the month, probably better candidates.
Attached Image (click to enlarge)
Click to Enlarge Name: 2014-12-03_cree.png Size: 118 KB
"If The Fool persists in his Folly he will become wise." - William Blake
  • #6,102
  • Dec 3, 2014 1:12am Dec 3, 2014 1:12am
GLD double diagonal would be great if gold would just pin on $1,200 for next couple weeks. That'd be GLD $115. See in the vid the peculiar P/L behavior - max P is at the midpoint of the DD up until 3 dte, the characteristic double humps only develop in the last 2 days before expiry. Gold catching some bids in overnight trade, I need to be on guard against moves much north of $1,230 or so...

http://screencast.com/t/fjTKCPPE0OiL
"If The Fool persists in his Folly he will become wise." - William Blake
  • #6,103
  • Edited 7:48am Dec 3, 2014 4:51am | Edited 7:48am
Quoting The Fool
https://www.tastytrade.com/tt/shows/...w?locale=en-US L&J discuss setting up calendars in stocks that have earnings coming on in the Jan-Feb cycle, something I have on my list to get crackin on this week.
Mmmm, my favorite traders will watch that later.

Add-on
To be honest, I would prefer your version for binary events... like that on EWZ, cheap, very cheap calendars, preferably under $0.10 ...



IBM
After striking recent billion dollar services deals with ABN Amro and Lufthansa (OTCQXLAKY), IBM (NYSE:IBM) has continued its streak, landing a 7-year, $1.25B contract to transform and manage WPP's (NASDAQ:WPPGY) global technology platform. The deal, which expands an existing alliance between the companies, covers the building of a "hybrid cloud infrastructure" that will allow WPP to expand its use of big data and analytics.

Is it good enough for IBM to bounce?
Hope is dangerous in this game.
  • #6,104
  • Dec 3, 2014 4:56am Dec 3, 2014 4:56am
Quoting The Fool
So, CREE ER's 1/19, it puts on a good i.v. crush and the rush starts 3-4 weeks pre-ER, usually. Poor bid/ask spread and odd division on the strikes, though - I may look at it a little later in the month, probably better candidates. {image}
IV crush from tt list
Attached Image (click to enlarge)
Click to Enlarge Name: !!! IV contraction list for ER's.png Size: 90 KB
Hope is dangerous in this game.
  • #6,105
  • Edited 7:31am Dec 3, 2014 6:36am | Edited 7:31am
Quoting StrayDog
Looking at ANF (ER's tomorrow BMO) .... It had outlier moves - more than 20% in either direction before. So, since IVR is already at 85... maybe some $1 wide credit spread? .....
ANF moved just a little to the downside - you never really know with this retailers.
That ANF 28.5/29.5 bear call spread is positive now (I didn't get filled yesterday ).... BUT bid/ask spread is just awful... -0.30 / 0.03
On the other hand - my first idea was short strangle 25/32 - BUT I didn't want that... It was $0.61 credit, now under $0.10.

Add-on
After first hour of RTH, ANF is rising (was down only at open), bear call spread would be negative now, strangle remains the same...
Short strangle seems to regularly outperform any other credit play for ER's
Hope is dangerous in this game.
  • #6,106
  • Edited 7:31am Dec 3, 2014 7:18am | Edited 7:31am
Quoting StrayDog
Moody's lowers Amazon outlook to negative from prior stable, reaffirms Baa1 rating......
1) I am in AMZN Jan 345/350 bear call spread for $1.35 credit. 47 DTE. .....
That was 2 days ago... I was right to be bearish... closed that today, but too early . I will tap myself over shoulder for idea.

Now (50 min after open) it trades for $0.75... Lost 40% of value in just 2 days. It was Jan expiry, 47 DTE.
Hope is dangerous in this game.
  • #6,107
  • Dec 3, 2014 9:19am Dec 3, 2014 9:19am
Quoting StrayDog
{quote} IV crush from tt list {image}
cool list, thanks for that....it's still a little early to go in on some Jan/Feb earnings cycle calendars, but I will be looking those over...
"If The Fool persists in his Folly he will become wise." - William Blake
  • #6,108
  • Dec 3, 2014 9:28am Dec 3, 2014 9:28am
Quoting StrayDog
To be honest, I would prefer your version for binary events... like that on EWZ, cheap, very cheap calendars, preferably under $0.10 ...
Oh definitely, only those situations like EWZ & the Brazilian election, where the calendar front month iv skews heavily over the back month, do not pop up every day - but it is something to keep in mind and look for. And as we have discussed, such scenarios arise in the earnings cycle iv patterns. A really juicy binary event is always worth inspection for some skew opps...

re: IBM - with IVR <20%, I have been looking at IBM as a calendar candidate, but I don't like the options pricing, will pass on it...
"If The Fool persists in his Folly he will become wise." - William Blake
  • #6,109
  • Dec 3, 2014 9:42am Dec 3, 2014 9:42am
I've got a lot of resistance at 89.18 on the $index for it to get through at the first attempt so I'm looking for a fall back, looking to take a cheap put option on the DIA, DOW etf
  • #6,110
  • Dec 3, 2014 9:45am Dec 3, 2014 9:45am
Quoting Cecil Gee
I've got a lot of resistance at 89.18 on the $index for it to get through at the first attempt so I'm looking for a fall back, looking to take a cheap put option on the DIA, DOW etf
DIA Dec 2014 177.500 put (DIA141205P00177500)
-OPR
0.26 https://s.yimg.com/lq/i/us/fi/03rd/down_r.gif 0.13(32.50%) 17:25

if I can get in for 20c or lower today I'm taking the risk
  • #6,111
  • Dec 3, 2014 10:07am Dec 3, 2014 10:07am
Hey CG, market might tank if the ECB does not throw it the QE bone. $/JPY 120.0 looking large, one of the market sages I recall said that would be a turning point. Whatever.

If the ECB holds off on QE and then the FOMC gets a little hawkish with the rate rise "forward guidance" next week, we could see some serious downside action into December expiry. So, I think a cheap index put should wrap out to Dec opex, at least. Maybe even better, go lower with a Dec/Jan calendar or diagonal....
"If The Fool persists in his Folly he will become wise." - William Blake
  • #6,112
  • Dec 3, 2014 10:42am Dec 3, 2014 10:42am
Quoting The Fool
Hey CG, market might tank if the ECB does not throw it the QE bone. $/JPY 120.0 looking large, one of the market sages I recall said that would be a turning point. Whatever. If the ECB holds off on QE and then the FOMC gets a little hawkish with the rate rise "forward guidance" next week, we could see some serious downside action into December expiry. So, I think a cheap index put should wrap out to Dec opex, at least. Maybe even better, go lower with a Dec/Jan calendar or diagonal....
Yeah... and I will not risk VIX jumping, so I have closed my AAPL short strangle. Will monitor things tomorrow and on Friday for possible similar oportunities.

Quoting StrayDog
..... AAPL 2) Looking to exploit vol crush after sellof in AAPL, IVR jumped to 65 - I entered 1 SD short strangle, Jan 104.29/127.14 for $1.90 credit.
I bought to close that strangle for $1.32. It has lost 30% of value in 2 days, solely to vol crush, IVR dropped from 65 to 45, so managing a winner and freeing some margin.
Hope is dangerous in this game.
  • #6,113
  • Dec 3, 2014 11:04am Dec 3, 2014 11:04am
Two really good videos about vol skew, both from yesterday...

IV Per Strike (skip first 6.5 min of chit-chat )

and

The Simplicity of Vol Skew

Example of inverted skew - BABA, equidistant calls are more expensive than puts. (We had that already on YHOO)
Normal skew is when equidistant puts are more expensive than calls, like on SPY.
Hope is dangerous in this game.
  • #6,114
  • Dec 3, 2014 11:22am Dec 3, 2014 11:22am
Quoting StrayDog
{quote} Yeah... and I will not risk VIX jumping, so I have closed my AAPL short strangle...
Yeah, I'm mindful of that, too, although I think Draghi will say enough Thur. I think the real risk is on a bit of hawk from the FOMC. Anyway, I am watching AAPL and if it will break back above $116 my Dec vertical will be worth about $50 net and I might call it good enuf
"If The Fool persists in his Folly he will become wise." - William Blake
  • #6,115
  • Dec 3, 2014 11:32am Dec 3, 2014 11:32am
http://www.businessinsider.com/the-e...lusterStock%29

"Credit Suisse are one of the only institutions expecting a full QE announcement tomorrow."
"If The Fool persists in his Folly he will become wise." - William Blake
  • #6,116
  • Dec 3, 2014 12:35pm Dec 3, 2014 12:35pm
BABA put calendar example... IVR low, only 11, Inverted skew.

Attached Image


POP is low, debit high... but no analyzer can predict future IVR, so in case BABA really goes down, that would automatically ramp up volatility...
I will keep this in mind for some other stocks, where calendars would be cheaper. Since it is Jan/March, she can in theory sell that front option multiple times. I personally don't have patience for that, but 2 months difference could be good.
Hope is dangerous in this game.
  • #6,117
  • Dec 3, 2014 12:42pm Dec 3, 2014 12:42pm
BABA put calendar too spendy, I could do multiple (potentially profitable) positions for that debit. I like calendars, but they have to come in cheap. If you are good and/or lucky you can leg in - buy the back strikes first and then catch a move to sell the front strikes for as close as possible to a wash or even a net credit. Easier said tan done...
"If The Fool persists in his Folly he will become wise." - William Blake
  • #6,118
  • Dec 3, 2014 12:47pm Dec 3, 2014 12:47pm
Quoting The Fool
BABA put calendar too spendy, I could do multiple (potentially profitable) positions for that debit. I like calendars, but they have to come in cheap. ...
Exactly. That example is good as a concept.

Quoting The Fool
If you are good and/or lucky you can leg in - buy the back strikes first and then catch a move to sell the front strikes for as close as possible to a wash or even a net credit. Easier said tan done...
Easier said than done, I agree...

Anyways, I am waiting for tomorrow and Friday all in cash.
I had some difficulties with TWTR Jan 35/49 short strangle, because I did it in low IVR...
After modification - rolling 49 calls to 45 calls for credit, I have closed that now for a total of scratch .
Maybe tomorrow nothing will happen and VIX glides under 12... or maybe it will rise, so I can reload some positions or find another ones. But I will not play a guessing game with open naked positions.
Hope is dangerous in this game.
  • #6,119
  • Dec 3, 2014 12:49pm Dec 3, 2014 12:49pm
Hooray....., another new SnP high, VXX/UVXY at new lows.
"If The Fool persists in his Folly he will become wise." - William Blake
  • #6,120
  • Dec 3, 2014 12:56pm Dec 3, 2014 12:56pm
Quoting StrayDog
... After modification - rolling 49 calls to 45 calls for credit, I have closed that now for a total of scratch . Maybe tomorrow nothing will happen and VIX glides under 12... or maybe it will rise, so I can reload some positions or find another ones. But I will not play a guessing game with open naked positions.
Well done. I am letting AAPL vertical ride. Everything else I have active is hedged - calendars and verticals in SPY, IWM, PBR, EEM, etc. Only that GLD double diagonal open to rad risk. Hoping to get that into next week safely... Ciao, peeps, trade safe.
"If The Fool persists in his Folly he will become wise." - William Blake
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