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Let's Trade Options

  • #11,641
  • Dec 30, 2015 7:46pm Dec 30, 2015 7:46pm
Quoting The Fool
{quote} Ima have to look at what you been doing with these covered call trades when I have more time to think. re: IWM, I filled the tres bullish "Big Kahuna" exactly as shown above. I really shoulda followed my gut and bought SPY weekly $210 calls - anybody coulda guessed they would try to jack up the index into the close of the year, what with it sitting dead flat for 2015 as of yesterday....$210 calls tripled today....
Basically I regard them as "fillers" since you're doing them with low priced stock, so they don't take up a lot of buying power; something to do between earnings. The one exception in the bunch is TWTR, which is +$20. Naturally, if one of these little fellas takes it upon itself to rip to the moon (SUNE maybes), I'll chase price up the ladder with my short calls if I can.

But the universe of sub-$20 stocks with high IVR/high IV is quite small, and a lot of them are correlated -- oil and gas, energy, mining, commodities ... .
Fireworks are fun ... as long as you don't blow your fingers off.
  • #11,642
  • Dec 30, 2015 7:55pm Dec 30, 2015 7:55pm
Quoting The Fool
a bet that GLD will recover 2015's losses by the end of Q3 2016 {image}
I've been trying to figure out a decent GLD play for months ... . I have a laddered short put vert setup on 30, 60, 90 days out; the short put of the verts at the 1 SD. Not all that happy with the setup. May look at one of these uber, long-dated diagonals which could give me a little bit more flexibility than these verts do ... .
Fireworks are fun ... as long as you don't blow your fingers off.
  • #11,643
  • Dec 30, 2015 8:13pm Dec 30, 2015 8:13pm
Quoting StrayDog
{quote} Yeah, you are right about that. I told that before -> always have something to decay in the background... Loking to DO THAT in the coming year. Today, I sold /ES Feb 2120/2150 call spread for $9.50 CR. (since I do not beleive in new highs soon... new ER's cycle is just around the corner, with AA reporting on Jan 11th)
Earnings, yeah! But still helps to have something going on in the background. Theta decay isn't fun to watch, but it's something when nothing else is going on ... .
Fireworks are fun ... as long as you don't blow your fingers off.
  • #11,644
  • Dec 30, 2015 9:02pm Dec 30, 2015 9:02pm
Quoting The Fool
The only nice thing in my books now is the final decay of the UVXY Jan $20/$22 short puts vert I got for 78c credit several weeks ago. Had a chance to take it off for about 50c net at one point, but if we keep falling into 1st week of Jan, I will have that chance again as time is running out and theta does its thing
looking at those now it was a 68c credit.....need to get thru next week to see theta explode the week after that...I will prolly try to let them run to expiry to get the full credit....have been making IRA contributions the last weeks & feeling the cushion...
"If The Fool persists in his Folly he will become wise." - William Blake
  • #11,645
  • Dec 30, 2015 9:12pm Dec 30, 2015 9:12pm
short day tomorrow but maybe oil will rally a bit, stocks also, and UVXY fall back to its low of the week?
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"If The Fool persists in his Folly he will become wise." - William Blake
  • #11,646
  • Dec 30, 2015 9:24pm Dec 30, 2015 9:24pm
I will really miss these weird things if the SEC shoots em down. There's a few months before the shoe drops, anyway....
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"If The Fool persists in his Folly he will become wise." - William Blake
  • #11,647
  • Dec 30, 2015 11:05pm Dec 30, 2015 11:05pm
coming down to the wire soon for Jan4 week ER calendar trade setups. NFLX shown, can put on a pretty big iv ramp. IVR not exactly low - maybe it'll take another dip if markets rally into next week? ER is 1/20....but looks like I waited too late to set up Jan/Jan4 calendars. Will have to think about catching a big iv ramp with calendars in Jan4/Jan5, planning to get out just before expiry...the iv of the options in the DC below are already like 65% to 75%, but they could go up another 10-20% into the day or so before the ER, in which case the P/L will look even better

http://screencast.com/t/2ZtgJrkIXlD
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"If The Fool persists in his Folly he will become wise." - William Blake
  • #11,648
  • Dec 31, 2015 12:26am Dec 31, 2015 12:26am
Quoting Cecil Gee
will be putting in a order on FXY for jun 2016 exp, a strangle $81 call and $79 put.
your strangle for a 5 lot trade, top is at expiry bottom is on 4/01/2016.....you need a move above $83 or below $76.50 to make money.....looking at the chart for the last year, the high & low are $83.66 and $77.19......could be a tough slog
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"If The Fool persists in his Folly he will become wise." - William Blake
  • #11,649
  • Edited 2:31am Dec 31, 2015 2:21am | Edited 2:31am
YUM puts on some pretty good moves at ER's. looks like you can count on about 10-15% iv drop post-ER....looks like also YUM wants to trade around $80 +/-, I will try to fill this YUM Feb/Apr calls diag for 20c....YUM ER's 2/3
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"If The Fool persists in his Folly he will become wise." - William Blake
  • #11,650
  • Dec 31, 2015 3:03am Dec 31, 2015 3:03am
not so clear, but watch for effects in the iv of options out in March and beyond....EWZ & PBR

https://uk.news.yahoo.com/brazils-ho...-business.html
"If The Fool persists in his Folly he will become wise." - William Blake
  • #11,651
  • Dec 31, 2015 6:24am Dec 31, 2015 6:24am
Quoting The Fool
{quote} your strangle for a 5 lot trade, top is at expiry bottom is on 4/01/2016.....you need a move above $83 or below $76.50 to make money.....looking at the chart for the last year, the high & low are $83.66 and $77.19......could be a tough slog {image} {image}
looking for a larger move than that maybe in a 8 month period, less would be much better
  • #11,652
  • Dec 31, 2015 10:30am Dec 31, 2015 10:30am
Quoting Cecil Gee
looking for a larger move than that maybe in a 8 month period, less would be much better
I may look to trade the yen in 2016, but if I do, I will take me chances (defined risk only) on yen strength only. The other currency trade too good to pass up in 2016 will be GBP, with the hugely disruptive Brexit referendum looming.

Have a safe and Happy New Year's Cecil and good luck in 2016!
"If The Fool persists in his Folly he will become wise." - William Blake
  • #11,653
  • Dec 31, 2015 11:14am Dec 31, 2015 11:14am
Quoting The Fool
{quote} I may look to trade the yen in 2016, but if I do, I will take me chances (defined risk only) on yen strength only. The other currency trade too good to pass up in 2016 will be GBP, with the hugely disruptive Brexit referendum looming. Have a safe and Happy New Year's Cecil and good luck in 2016!
i see yen strength too as to my options position i do strangles because its a safety net when its priced low enough, all the best to you too mate and best wishes for 2016
  • #11,654
  • Dec 31, 2015 1:19pm Dec 31, 2015 1:19pm
filled a lot of the YUM wide call diagonals shown above. If I can get into some put side matchers for cheap in the coming week, I will. I am also in double calendars on NFLX, as shown above, and AAPL, as shown a few pages back. Need to free up some margin.....
"If The Fool persists in his Folly he will become wise." - William Blake
  • #11,655
  • Edited 3:00pm Dec 31, 2015 2:32pm | Edited 3:00pm
S&P gonna close red for the year, 365 days lat(er) and a dollar short....
"If The Fool persists in his Folly he will become wise." - William Blake
  • #11,656
  • Dec 31, 2015 8:31pm Dec 31, 2015 8:31pm
My last trade of the year was to roll down the short call of my IWM poor man's covered call to 114 for a .51 credit ... .

* * *

For some of these earnings plays going forward, I'm going to be a little bit more liberal in letting the probabilities play out, which'll include letting them go to assignment. This is why it's important to me to get comfortable working these covered calls/puts; it seems to be a somewhat more flexible and simpler way of managing some of these tested setups back to at least scratch.

I'm also thinking that that a 50% max take profit is nonsense when it comes to earnings plays, which are setups for the same Friday post-earnings or the Friday thereafter. The whole deal behind the 50% max is that you don't capture as much theta decay in a 45 DTE setup as the setup gets closer to expiry. The same thing doesn't apply where you're looking for quick, massive vol contraction over a less than 10 day period of time ... . Price either bounces/dips, but stays between your short strikes and settles for a period of time or it pretty much violates a side right away and then also settles there for a time. My experience has been that the POP% is fairly accurate, so if you have 100 trades, all of which had a 72% POP at the time they were entered, you will have 72 expire worthless (max profit), and 28 that are tested in some way (with one side expiring in max profit and the other having to be "managed"). Frankly, I want max profit on those 72 trades; I'm going to have to fiddle with the 28 tested ones anyway.

Naturally, those big dollar plays will have to still probably be done via iron condor ... . I don't like managing them post-test, but I've gotten comfortable with the tweaking, massaging, rolling that has to be done to work those ... .

Which leads me to another thing: screw index ETF iron condors. The only way to do those effectively (because of vol skew) is to leg into the short put side on dips and the short call side on bounces. Naturally, if you've got the patience for that, rock on, but I don't. So I'm going to work SPY or IWM via these poor man's covered calls, since it solves the whole skew problem, in my mind ... . Gotta have something on in the background and if it ain't SPY/IWM/DIA/QQQ iron condors, then it's gotta be something else ... .

Happy New Year's everyone!
Fireworks are fun ... as long as you don't blow your fingers off.
  • #11,657
  • Dec 31, 2015 8:44pm Dec 31, 2015 8:44pm
Quoting The Fool
YUM puts on some pretty good moves at ER's. looks like you can count on about 10-15% iv drop post-ER....looks like also YUM wants to trade around $80 +/-, I will try to fill this YUM Feb/Apr calls diag for 20c....YUM ER's 2/3 {image} {image}
Yes, it does. It kind of fell off the bed the last time around with the Chinese market weighing on the whole enterprise ... . The plan is to spin off the Chinese segment, but I'm not sure what the time line is (no doubt beyond this earnings announcement; "late" 2016 is what the article says). http://www.fool.com/investing/genera...mpaign=article

I played last earnings, had my short side tested, rolled yada yada, but am still holding onto the short put side of the iron condor (68/73 short put spread), which is due to expire shortly before earnings. I didn't want to slap another short call side on in the event the thing does an oversized pop because of further details regarding the spin-off ... .
Fireworks are fun ... as long as you don't blow your fingers off.
  • #11,658
  • Dec 31, 2015 10:08pm Dec 31, 2015 10:08pm
I talked about synthetic short stock elsewhere....
http://www.forexfactory.com/showthre...89#post8665189

I can't do em in the IRA, though - can't do the naked short calls. However, I can do the synthetic long stock with naked short puts cash-secured. A way I might play these is on the very cheap stocks & try to catch a spike....like PLUG, for instance....it jacked to >$11 a couple years ago. So, put em on with long-dated options (if that's the game) and cross fingers. You can set em up for almost nil debit, but you will tie up margin on the short puts - the 10-lot trade below eats $200/contract, so $2k, less the $570 credit on the short puts .... trade acts like long or short stock above/below the b/e's - so boy howdy pray for a spike - 10 lot position just like long 1,000 shares. Now, if it PLUG falls - well, it ain't got much room to go down, worst could happen is it tanks and the R/S....

Pretty cool, for about a $1.5k bp hit you can control 1,000 shares for 2 years - an outright long 1,000 share position would take >$20k cash ....
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"If The Fool persists in his Folly he will become wise." - William Blake
  • #11,659
  • Edited Jan 1, 2016 12:04am Dec 31, 2015 10:27pm | Edited Jan 1, 2016 12:04am
some of these beat-down energy names will be good candidates for synthetic long stock....trading this way will test your ability to bottom pick....CHK has spent almost all of the last 10 years trading above $13.....others to look at: DNR, PBR.....
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"If The Fool persists in his Folly he will become wise." - William Blake
  • #11,660
  • Dec 31, 2015 11:33pm Dec 31, 2015 11:33pm
Quoting The Fool
some of these beat-down energy names will be good candidates for synthetic long stock....trading this way will test your ability to bottom pick....

then there's gold & the miners.....won't stay in the basement forever....who will survive?.....Yamana?....currently trading for $1.86, was trading above $9 to start 2014
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"If The Fool persists in his Folly he will become wise." - William Blake
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