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Let's Trade Options

  • #11,941
  • Jan 28, 2016 11:07pm Jan 28, 2016 11:07pm
Quoting Soros
any advice guys?
hmm I don't think many or any here just do long puts or calls, most are trading spreads of some kinds, but welcome & post some trades so we can see what you are up to.
"If The Fool persists in his Folly he will become wise." - William Blake
  • #11,942
  • Jan 28, 2016 11:09pm Jan 28, 2016 11:09pm
Quoting The Fool
{quote} hey ChinaT, ah yes, the Year of the Monkey - a good year to make babies, according to the Internet. I never thought about that holiday transpo spike connection to oil demand, but that certainly makes sense.....anyway, Happy New Year, mate.
Thanks mate. Probably I can share some strategy with you since we are enthusiasm of option. Simple but highly profitable strategy and one of my friend running now. Or you can give me some opinion about it.

1) Buy out of money CALL options. Maybe 8 - 10 strike price away.
2) Buy out of money PUT options. Same 8 - 10 strike price away.

Since that far, you might get extremely low premium.

If the volatility high enough to covered your both cost and some premium profit, you can just close the profit one. If the loser have no more premium, just keep it. But remember 1 thing, never allow the option to exercise unless you have naked 0 premium contract.

Let me know your idea.
  • #11,943
  • Jan 29, 2016 12:12am Jan 29, 2016 12:12am
Quoting The Fool
{quote} hmm I don't think many or any here just do long puts or calls, most are trading spreads of some kinds, but welcome & post some trades so we can see what you are up to.
Hei bro, I think I also providing the same answer for him. Basically we have no direction at all where the stocks or derivatives will go. Professional speaking, we do not own a naked option usually.
  • #11,944
  • Jan 29, 2016 12:31am Jan 29, 2016 12:31am
Quoting ChinaTraderz
Thanks mate. Probably I can share some strategy with you since we are enthusiasm of option. Simple but highly profitable strategy and one of my friend running now. Or you can give me some opinion about it. 1) Buy out of money CALL options. Maybe 8 - 10 strike price away. 2) Buy out of money PUT options. Same 8 - 10 strike price away.
well, that's a long strangle. I'll show an example, in AAPL. I really doubt AAPL could fall much more. We just came off the AAPL earnings, so the iv of AAPL options has fallen. If you are just buying options, you want to do it when the price is low, when the iv is low.....IVR now 28% on AAPL. Mar $85/$100 long strangle shown below, debits $2.78. I am showing the P/L state at Feb expiry, when the trade still has 30d to Mar expiry.
Attached Image(s) (click to enlarge)
Click to Enlarge Name: 2016-01-28_2222AAPL.png Size: 109 KB
Click to Enlarge Name: 2016-01-28_aapl2.png Size: 79 KB
"If The Fool persists in his Folly he will become wise." - William Blake
  • #11,945
  • Jan 29, 2016 2:33am Jan 29, 2016 2:33am
That's nice mate. But it doesn't need any direction right? As long as the volatility are there, we can earn anyway. Yeah, I agree the only way to do is when the IV is low enough, we can do that. For instance if the total cost of both is 60 cents, we just need either call or put options value more than that could profit us. If let's say CALL have 80 cents, PUT shall be 0 value. Hence we can close the CALL profit and wait for PUT to come back anyway. Even if it doesn't come back, the cost had already covered by the CALL profit we have earned. That's my idea on this.
  • #11,946
  • Jan 29, 2016 3:55am Jan 29, 2016 3:55am
strangles are too expensive, ChinaT.....I can do better with spreads. However, nothing pays better than a long option in a directional trade when you catch a trending move and the long option goes deep in the money....
"If The Fool persists in his Folly he will become wise." - William Blake
  • #11,947
  • Jan 29, 2016 12:39pm Jan 29, 2016 12:39pm
Quoting The Fool
NFLX crushed earnings but was dragged down in the general funk, will be back to $110+ I betcha {image}
yeah, I don't quite get it, NFLX still sliding, $91.xx, gotta be a buying opp, but if it will slide hard today with a big rally underway maybe it will keep sliding next week.....? Will prolly pay to wait....
"If The Fool persists in his Folly he will become wise." - William Blake
  • #11,948
  • Jan 29, 2016 12:54pm Jan 29, 2016 12:54pm
Quoting ChinaTraderz
That's nice mate. But it doesn't need any direction right? As long as the volatility are there, we can earn anyway.
No, ChinaT - with a long strangle, as shown on the P/L for the AAPL long strangle just above, you are going to need the underlying to move, just rising implied volatility will not likely be enough to get you very far out of the hole you are in. Nothing wrong with going long options, especially if you are good (or lucky) at picking directions through good TA/FA - but with long options, time is your enemy - they start losing value as soon as you drive them off the lot....that's why most pro options traders are selling options or spreading.
"If The Fool persists in his Folly he will become wise." - William Blake
  • #11,949
  • Jan 29, 2016 1:10pm Jan 29, 2016 1:10pm
Quoting The Fool
strangles are too expensive, ChinaT.....I can do better with spreads. However, nothing pays better than a long option in a directional trade when you catch a trending move and the long option goes deep in the money....
FXE is poised for that directional play, Next week I'll be putting in a order 9 months out long 110 calls, Fool is right when going long in options timing is everything unlike with spreads where you can trade yourself out if its going against you,

Want FXE for $1.80 or under september 2016 expiry
  • #11,950
  • Jan 29, 2016 7:47pm Jan 29, 2016 7:47pm
Quoting Soros
hey guys i recently started stock options and trading on the daily expiry, basicaly i look to see how the stock has been performing for the past week, if 80% of the time it closed higher ill trade put, 80% off the time closed lower past 5 days ill put a call end of day expiry, basicaly its taking the path of least resistance since stocks reletively tend to move smoother than forex, any advice guys?
The other thing is I rarely trade stuff that expires the same day as when I put the trade on: (1) it doesn't give me any time to do anything with the trade if it doesn't go my way; and (2) I mostly sell premium (short strangles, credit spreads, etc.), so it's more advantageous to do setups 25-45 days out, where you can take advantage of theta decay ... .
Fireworks are fun ... as long as you don't blow your fingers off.
  • #11,951
  • Jan 29, 2016 8:11pm Jan 29, 2016 8:11pm
Quoting Cecil Gee
{quote} FXE is poised for that directional play, Next week I'll be putting in a order 9 months out long 110 calls, Fool is right when going long in options timing is everything unlike with spreads where you can trade yourself out if its going against you, Want FXE for $1.80 or under september 2016 expiry
You're exactly right there, but I haven't had a great deal of success with debit spreads because I can't do a heck of a lot with them if they don't work out (you can try funky stuff like financing the roll of a debit spread that didn't pan out by expiration with another setup, but then it may start to get complicated ... ).

Like GLD, though, I've got specific levels in mind for the Euro/FXE -- 1.10 and 1.14:

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We've seen 1.14 several times this year and they've been around extreme risk off events (late August market downturn; Paris attacks); we could naturally see another one of those, but it's having difficulty clearing 1.10, probably because of the new combination of the Fed rate liftoff (modest as it was) plus the ECB's being in potentially full on "ease mode." Because of that combination of things, I'll only short and only on another one of those risk off spikes ... .
Fireworks are fun ... as long as you don't blow your fingers off.
  • #11,952
  • Edited 8:35pm Jan 29, 2016 8:17pm | Edited 8:35pm
Covered Mar 19th SVXY 25/30 short put credit spread for 50% max ($82/contract).

Still have a Feb 26th SVXY 30/35 that I put on for 1.69 that is poised to go at 50% max, too. (I'll miss these little fellas ... .)

If we get another drop to around 36, I'll hit it again. Doesn't hit that level very often:

Attached Image (click to enlarge)
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As an inverse, SVXY, I imagine, suffers from inverse contango and is unlikely to hit this level again soon. In fact, I got into quite a pissing match with a guy over in TradingView whose opinion was that SVXY would, like VXX and UVXY, eventually go to zero in the absence of backwardation/splitting ... . It is, in fact, the exact opposite, it will go to infinity in the absence of splitting assuming continued (inverse) contango erosion. That being said, it's funky and hard to call a "bottom" in it, since it doesn't behave like other instruments ... .
Fireworks are fun ... as long as you don't blow your fingers off.
  • #11,953
  • Jan 29, 2016 8:50pm Jan 29, 2016 8:50pm
Quoting ZebraSquirl
{quote} Yeah, 90 days. I start to get "itchy" after two weeks of staring at an iron condor ... . Hence, the "Aggressive Midget" ("Aggressive" because it's relatively low POP%; "Midget" because it's of "short" duration): Here's the setup I put on today at NY open: SPX Feb 5th 1785/1795/1930/1940 Iron Condor Probability of Profit: 60% Max Profit: $385/contract It's not my usual cup of tea, but I don't have nearly enough time to effectively scalp /ES, so this is my "sugar substitute" for that ... . Edit: I fully expect to take it up the pooper on this...
Covered this Aggressive Midget for a small profit yesterday ... . Glad I did in 20-20 hindsight with this upmove.
Fireworks are fun ... as long as you don't blow your fingers off.
  • #11,954
  • Jan 29, 2016 8:57pm Jan 29, 2016 8:57pm
Quoting ZebraSquirl
Layering on SPY iron condors here before the vol pisses out of the market. The short put wing's at the 1 SD; the short call at the edge of the expected move to accommodate that crappy vol skew (the call side may come back to bite me later, but I always have a roll in my pocket): SPY Feb 26th 171/175/196/200 iron condor Probability of Profit %: 66% Max Profit: $114/contract Buying Power Effect: $286/contract Break Evens: 173.86/197.14 I'll look to put on that puppy tomorrow and maybe add some early March action next week if this vol holds up. Gotta...
Filled for 1.18 ... . Not sure I'm so glad about that with where that 196 short call lays ... .
Fireworks are fun ... as long as you don't blow your fingers off.
  • #11,955
  • Jan 29, 2016 9:19pm Jan 29, 2016 9:19pm
Quoting ZebraSquirl
As an inverse, SVXY, I imagine, suffers from inverse contango and is unlikely to hit this level again soon. In fact, I got into quite a pissing match with a guy over in TradingView whose opinion was that SVXY would, like VXX and UVXY, eventually go to zero in the absence of backwardation/splitting ... . It is, in fact, the exact opposite, it will go to infinity in the absence of splitting assuming continued (inverse) contango erosion. That being said, it's funky and hard to call a "bottom" in it, since it doesn't behave like other instruments ......
the weekly chart tells a story.....all big drops appear to have recovered. That August crash was a mofo though.
Attached Image (click to enlarge)
Click to Enlarge Name: 2016-01-29_1916SVXY1.png Size: 107 KB
"If The Fool persists in his Folly he will become wise." - William Blake
  • #11,956
  • Jan 29, 2016 9:24pm Jan 29, 2016 9:24pm
Quoting ChinaTraderz
{quote} Hei bro, I think I also providing the same answer for him. Basically we have no direction at all where the stocks or derivatives will go. Professional speaking, we do not own a naked option usually.
The one exception I'll make to that rule would be a naked short put in an underlying worth <$15 that I'm trying to acquire shares at a cheaper price.

Say I want to acquire shares in TWTR, but I don't want to pay $16.80 for them. I can do one of two things: (a) wait until price drops, at which time I will buy shares at that price; or (b) sell a short put below current price. For example, the 15 short put goes for .88 ($88) at the mid price. If price is greater than $15 at expiration, I keep that "chunk of cash"; if it less than $15 at expiration, I am assigned the shares, and my cost basis in the shares is basically $15 minus the credit I received or $15-.88 or $14.12 (excluding fees/commissions).

Naturally, this seems like a "win-win" situation, since I either get the shares at the price I want or I keep the premium received for the short put (without getting the shares at the price I want, but leaving me free to "try again). The drawback is that TWTR can, of course, continue to decline in value ... .

I only do these in extremely cheap underlyings because my max loss is limited to: the price of the short strike minus the premium received for the short put, in this case 14.12/per share x 100 shares or $1412 (max loss would occur if TWTR went to "0") and buy and hold isn't my cup of tea the vast majority of the time because it ties up buying power.

You can naturally do this on more expensive stuff if you are looking to build a portfolio of good underlyings and proceed to do reduce cost basis via covered call ... . I do have quite a few setups like those that I put on for extremely cheap (mostly beaten down commodities plays); I consider them fairly long-term propositions ... .
Fireworks are fun ... as long as you don't blow your fingers off.
  • #11,957
  • Jan 29, 2016 9:26pm Jan 29, 2016 9:26pm
Quoting The Fool
{quote} the weekly chart tells a story.....all big drops appear to have recovered. That August crash was a mofo though. {image}
I shorted that top small ... . Funnest trade of 2015, even though it only made me like $80/contract because I went credit spread.
Fireworks are fun ... as long as you don't blow your fingers off.
  • #11,958
  • Jan 29, 2016 9:27pm Jan 29, 2016 9:27pm
I am in this SVXY combo, which will make me $5k richer if it can rally to $60 by Mar expiry....P/L modeled w/ additional 20% iv reduction, which doesn't hurt the fly....
Attached Image (click to enlarge)
Click to Enlarge Name: 2016-01-29_1924svxy2.png Size: 84 KB
"If The Fool persists in his Folly he will become wise." - William Blake
  • #11,959
  • Jan 29, 2016 9:35pm Jan 29, 2016 9:35pm
Quoting The Fool
{quote} the weekly chart tells a story.....all big drops appear to have recovered. That August crash was a mofo though. {image}
The March 18th SVXY 30/35 short put cred spread is currently going for a 1.39 credit at the mid, but I'd naturally prefer something north of 2.00 for that setup, which would put the break even at 33 bucks ... .
Fireworks are fun ... as long as you don't blow your fingers off.
  • #11,960
  • Jan 29, 2016 9:41pm Jan 29, 2016 9:41pm
Quoting ZebraSquirl
{quote} The March 18th SVXY 30/35 short put cred spread is currently going for a 1.39 credit at the mid, but I'd naturally prefer something north of 2.00 for that setup, which would put the break even at 33 bucks ... .
the bid/ask on relatively illiquid SVXY & UVXY really messes with the verticals - you have to scan the chains for mispricing, but those show up with regularity. I think flys and brokewing flys are the way to go with these guys.......the UVXY puts fly combo I am in for Feb expiry has 10-bagger potential, I just have to watch out for the downside bust
Attached Image (click to enlarge)
Click to Enlarge Name: 2016-01-29_1934uvxyboo.png Size: 93 KB
"If The Fool persists in his Folly he will become wise." - William Blake
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