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Let's Trade Options

  • #11,601
  • Dec 24, 2015 7:45pm Dec 24, 2015 7:45pm
example, w/AAPL, has ER 1/25, Monday of Jan5 week.....the Jan5/Feb1 calendars shown will have a juicier P/L than what is indicated in the first graph, since iv's on the options will be up from ~25-30%, maybe up >40% ---- the 2nd graph shows a 10% global iv increase on expiry day
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"If The Fool persists in his Folly he will become wise." - William Blake
  • #11,602
  • Edited Dec 25, 2015 6:08pm Dec 24, 2015 9:47pm | Edited Dec 25, 2015 6:08pm
The trick in the double calendar approach above is to pick names that will put on a large iv expansion in the month before the ER.....and to buy in when the IVR is very low...I am looking thru the good late Jan ER names:

Jan 18: CREE.......Jan 19: EBAY, NFLX......Jan 20: XLNX........Jan 25: AAPL, YHOO........Jan 26: FB......Jan 27: AMZN
"If The Fool persists in his Folly he will become wise." - William Blake
  • #11,603
  • Edited 12:56am Dec 26, 2015 12:37am | Edited 12:56am
Quoting The Fool
: Jan 18: CREE.......Jan 19: EBAY, NFLX......Jan 20: XLNX........Jan 25: AAPL, YHOO........Jan 26: FB......Jan 27: AMZN
1/18 is MLK Day, exchanges closed
"If The Fool persists in his Folly he will become wise." - William Blake
  • #11,604
  • Dec 27, 2015 4:49pm Dec 27, 2015 4:49pm
Quoting The Fool
{quote} Yes, you can. Using weeklies. Set up trades that expire the week before or the week of to catch iv expansion and other trades with week-of or week-after expiry to catch the crush. Typically, you will be getting into the first trades a month before the ER and into the second just days before, at most. Anyway, that's the theory. Does not always work out, but what does? Another approach is to set up double calendars or double diagonals well in advance of the ER, with the back long legs beyond the ER date, and hope you catch a directional runner...
Awesome possum. Just have to retrain myself a bit. I typically look for high IV plays. Now I have to look at the earnings calendar and match it up with a low IV screen ... . These next few days may be a good time to look to put some of the Jan earnings announcement "poppers", assuming we get the typical low volume, low participation that makes for low volatility ... . AAPL (announces in 30 on 1/26) currently sticks out with an IVR of 18/IV 28, but vol could go lower, naturally ... .
Fireworks are fun ... as long as you don't blow your fingers off.
  • #11,605
  • Dec 27, 2015 4:59pm Dec 27, 2015 4:59pm
I seem to be doing a lot of covered calls lately ... . I'll look to put these on tomorrow/next week:

JCP, buy 100 at 6.15, short 1 Feb 19 7 call, 6.15 debit. $85/contract if called away at 7.
HUN, buy 100 at 11.41, short 1 Feb 19 12 call, 9.72 debit, $228/contract if called away at 12.
UNG, buy 100 at 7.69, short 1 Feb 19 8 call, 6.91 debit, $109/contract if called away at 8.
MW, buy 100 at 15.05, short 1 Feb 19 16 call, 14.01 debit, $199/contract if called away at 16.

(I swear to God I'll get even with UNG ... ).

I'm not doing this one, because I've already got a short strangle on:

GPRO, buy 100 at 18.22, short 1 Feb 19 19 call, 17.18 debit, $182/contract if called away at 19.
Fireworks are fun ... as long as you don't blow your fingers off.
  • #11,606
  • Dec 27, 2015 5:03pm Dec 27, 2015 5:03pm
I considered cover calling GRPN, but the thing appears headed for the crapper. Nevertheless, here's the setup:

Buy 100 GRPN at 3.28, sell 1 Feb 19 3.5 short call, 3.01 debit, $49/contract if called away at 3.5.
Fireworks are fun ... as long as you don't blow your fingers off.
  • #11,607
  • Dec 27, 2015 5:05pm Dec 27, 2015 5:05pm
Quoting ZebraSquirl
I considered cover calling GRPN, but the thing appears headed for the crapper. Nevertheless, here's the setup: Buy 100 GRPN at 3.28, sell 1 Feb 19 3.5 short call, 3.01 debit, $49/contract if called away at 3.5.
Oh, what the hell, slapping that one on just for pure entertainment value ... . Silliness ... .
Fireworks are fun ... as long as you don't blow your fingers off.
  • #11,608
  • Dec 27, 2015 7:29pm Dec 27, 2015 7:29pm
/NG trying to settle in above $2.00, was up a dime early - the /NG - UNG relationship is roughly 1:4....I am holding Jan UNG $8.50 calls, obviously would love to see gas price make a spike .... lol Christmas temps were near 80F across the entire south USA.....perhaps a real cold snap could freak the gas traders out...?
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"If The Fool persists in his Folly he will become wise." - William Blake
  • #11,609
  • Dec 28, 2015 10:32am Dec 28, 2015 10:32am
Quoting The Fool
example, w/AAPL, has ER 1/25, Monday of Jan5 week.....the Jan5/Feb1 calendars shown will have a juicier P/L than what is indicated in the first graph, since iv's on the options will be up from ~25-30%, maybe up >40% ---- the 2nd graph shows a 10% global iv increase on expiry day
filled the $116 AAPL Jan5/Feb1 calls for 15c, iv uptick will make the put side fills a little dear so I will wait/see

....also trying similar trades on NFLX and XLNX
"If The Fool persists in his Folly he will become wise." - William Blake
  • #11,610
  • Dec 28, 2015 4:32pm Dec 28, 2015 4:32pm
Quoting The Fool
/NG trying to settle in above $2.00, was up a dime early - the /NG - UNG relationship is roughly 1:4....I am holding Jan UNG $8.50 calls, obviously would love to see gas price make a spike .... lol Christmas temps were near 80F across the entire south USA.....perhaps a real cold snap could freak the gas traders out...? {image}
I got into a covered call at market open with a cost basis of 7.36 (more than I wanted to pay frankly); just my luck, price proceeded to break my Feb 19th 8 short call ... . Up to 8.46 at the close (+.77) ... . Going to let it stew for a bit before considering rolling that shortie 8 out ... .

We're in the middle of a modest blizzard here (6") with higher amounts across the state, depending on whether you live in the upper (Minnesota border), middle, or lower (Missouri border) tier of counties, but up until last week, I was wearing shorts, a t-shirt, and a hoody outside with daytime highs about 20 degrees above normal ... .
Fireworks are fun ... as long as you don't blow your fingers off.
  • #11,611
  • Dec 28, 2015 4:49pm Dec 28, 2015 4:49pm
Quoting ZebraSquirl
I seem to be doing a lot of covered calls lately ... . I'll look to put these on tomorrow/next week: JCP, buy 100 at 6.15, short 1 Feb 19 7 call, 6.15 debit. $85/contract if called away at 7. HUN, buy 100 at 11.41, short 1 Feb 19 12 call, 9.72 debit, $228/contract if called away at 12. UNG, buy 100 at 7.69, short 1 Feb 19 8 call, 6.91 debit, $109/contract if called away at 8. MW, buy 100 at 15.05, short 1 Feb 19 16 call, 14.01 debit, $199/contract if called away at 16. (I swear to God I'll get even with UNG ... ). I'm not doing this one, because...
Filled all those covered calls, but at prices less generous than originally forecast: GRPN @ 3.05; JCP @ 6.36; HUN at 10.60; UNG at 7.36; MW at 14.01 (the only one that got filled without changing price). Also did TWTR @ 21.48 (100 shares at 23.30; Feb 19 24 short call). That should occupy some of my capital on the slip and slide down into earnings season ... .
Fireworks are fun ... as long as you don't blow your fingers off.
  • #11,612
  • Dec 28, 2015 7:41pm Dec 28, 2015 7:41pm
Quoting ZebraSquirl
We're in the middle of a modest blizzard here (6") with higher amounts across the state, depending on whether you live in the upper (Minnesota border), middle, or lower (Missouri border) tier of counties, but up until last week, I was wearing shorts, a t-shirt, and a hoody outside with daytime highs about 20 degrees above normal ... .
SNOW/ice jamming the interstates in Texas, winter tornados across the south, enough to freak the gas traders a bit and make the shorts run to cover. I am looking to net 50c on Jan $8.50 UNG calls, fingers crossed to get there Tues. Tempted to hang in all the way to Thurs and the storage data release, but I will likely take a nice 5-bagger to end the year if I see it....

SPY closed 2014 @ $205.54.....we are within pennies of that today....I see nothing but chop ahead....crystal ball is cloudy...or that could just be me.
"If The Fool persists in his Folly he will become wise." - William Blake
  • #11,613
  • Dec 28, 2015 9:46pm Dec 28, 2015 9:46pm
Quoting ZebraSquirl
Also did TWTR @ 21.48 (100 shares at 23.30; Feb 19 24 short call). That should occupy some of my capital on the slip and slide down into earnings season ... .
TWTR double cal maybe get for < 25c net, ER is 2/3 - the P/L shown is @ 2/3 with a 10% iv increase global. Now....the problem with a modeling a global iv increase is that it won't go down that way: the front (expiry week) options iv's will go up more than the back....just so you know that going in....the better idea for these anyway is to catch a runner in the following weeks so the long options can finish deep itm.....I'll let ya know if one ever works out that way..........anyway, if we get that 10% iv rise, the trade would be profitable from $15 to $30.....
Attached Image(s) (click to enlarge)
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"If The Fool persists in his Folly he will become wise." - William Blake
  • #11,614
  • Dec 28, 2015 11:41pm Dec 28, 2015 11:41pm
Quoting The Fool
I am looking to net 50c on Jan $8.50 UNG calls, fingers crossed to get there Tues. Tempted to hang in all the way to Thurs and the storage data release, but I will likely take a nice 5-bagger to end the year if I see it.....
MAYBE I better hold....
http://news.yahoo.com/snow-starved-n...183324809.html
"If The Fool persists in his Folly he will become wise." - William Blake
  • #11,615
  • Dec 29, 2015 12:07am Dec 29, 2015 12:07am
scoping out a general rally for Q1/Q2....was it a Big Kahuna?....a cheap vert on the outside of a cheap diagonal extends the b/e and decreases the max loss out on the diagonal death slide
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"If The Fool persists in his Folly he will become wise." - William Blake
  • #11,616
  • Dec 29, 2015 3:01am Dec 29, 2015 3:01am
nattygas still rallying overnight, looks like UNG will open > $8.50 --- looking at the weekly UNG chart back 3 years I see these 3-6 week rallies, $3-$6 moves.....if the weather will cooperate colder......if this weeks build is low.....idk, I bet we might see $10 by Jan opex.....I am gonna close some $8.50 calls for 50c net but hold on to some for glory. Paid 10c for em.....
Attached Image (click to enlarge)
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"If The Fool persists in his Folly he will become wise." - William Blake
  • #11,617
  • Dec 29, 2015 11:38am Dec 29, 2015 11:38am
Quoting The Fool
nattygas still rallying overnight, looks like UNG will open > $8.50 --- looking at the weekly UNG chart back 3 years I see these 3-6 week rallies, $3-$6 moves.....if the weather will cooperate colder......if this weeks build is low.....idk, I bet we might see $10 by Jan opex.....I am gonna close some $8.50 calls for 50c net but hold on to some for glory. Paid 10c for em..... {image}
Right now, 8.75 with Jan 8.5 calls at .57 ... . .50 for .10, that's pretty glorious already. Naturally, 1.00+ for .10 would be glorious-er ... .

Unfortunately, can't do squat with my Feb 19th 8 short call in my covered call setup at the moment. The only way I can roll it up and out for a credit is to roll it to the Jan 2017 9 strike for .42. Lol.
Fireworks are fun ... as long as you don't blow your fingers off.
  • #11,618
  • Dec 29, 2015 11:45am Dec 29, 2015 11:45am
took off 3/4 of UNG Jan $8.50 calls for 50c net, will see if a short build Thursday can get me a little more for the rest.
"If The Fool persists in his Folly he will become wise." - William Blake
  • #11,619
  • Dec 29, 2015 12:00pm Dec 29, 2015 12:00pm
trying to fill NFLX Jan4/Jan5 $126 calls calendars @ 50c.....rising iv towards the Jan 20 ER release will make them pay ... could've got in for around 40c last week, tried 45c at todays open....I played with modeling them and maybe $2.50 for a perfect finish on expiry day
"If The Fool persists in his Folly he will become wise." - William Blake
  • #11,620
  • Dec 29, 2015 1:25pm Dec 29, 2015 1:25pm
Trying out one of these "mullets"/"poor man's covered calls" in IWM. Here's the setup:

Aug 19th 97 long call
Feb 19th 115 short call
Entire Package: 16.88 debit

I'll look to take the whole thing off for 50% of the credit received for the short call (2.77 or about 1.38), and roll if profitable, leaving the back month in place.

From the perspective of the take profit to BPE ratio, it's not that stellar a trade -- an 8.2% return or so (I generally look for 10%+ in any ordinary covered call setup). Naturally, it'll depend on how soon you reach that figure; if you can do it in 30 days or less, fabulous; if it takes you 90, not so much so. Course a lot of that depends on how the underlying moves, volatilty, etc. -- the usual things that you have absolutely no control of.

However, I think it beats the iron condors as a kind of low key, background trade (plus, you save a few in fees/commissions since you only have two legs instead of four and can leave the long call in place for at least a couple of options cycles).

Note: They're called a "mullet" 'cuz "the business is in front; the party's in the back ... ."
Fireworks are fun ... as long as you don't blow your fingers off.
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