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Let's Trade Options

  • #12,561
  • Apr 2, 2016 9:22pm Apr 2, 2016 9:22pm
https://humblestudentofthemarkets.co...it-referendum/
"If The Fool persists in his Folly he will become wise." - William Blake
  • #12,562
  • Edited 5:15pm Apr 3, 2016 3:09am | Edited 5:15pm
looking at May trades
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"If The Fool persists in his Folly he will become wise." - William Blake
  • #12,563
  • Apr 3, 2016 11:39pm Apr 3, 2016 11:39pm
o no now they be sayin oil rally over, look out below....indeed, it are sliding, putting up a red light on the bull road for equities.....butt....OPEC meets first week of June, maybe Something Will Happen (dun dun dun!) ...and I see these beat down names what they be capable of when a nice turn comes for oil - like a 100% gain in a few weeks capable......so, RIG....May/Aug diag gets you in some Aug long calls with a bit of May discount.....might be worth a 14c risk
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Click to Enlarge Name: 2016-04-03_2058rig2.png Size: 80 KB
"If The Fool persists in his Folly he will become wise." - William Blake
  • #12,564
  • Apr 3, 2016 11:56pm Apr 3, 2016 11:56pm
Quoting The Fool
{quote} that's a short diagonal. something I can't do in the IRA accounts....looks pretty scary... {image}
The usual danger with these is that price of the underlying can run straight through your long option and, if your timing is just wayyy off, you'll be left with a worthless long with the only positive of the whole setup being that you collected credit from the roll of the short. Unlike an ordinary covered call, where you own the underlying outright and can continue to roll the short until the end of time, the clock is ticking on your long option ... .

The perfect outcome is for price to magically finish in such a way that you take the short call off for at or near worthless after your final roll and that the price of your long option is approximately the same as or more that when you put it on toward expiry (so that you keep all the credits you've collected up to that time and bail out of the long at basically scratch), but I pretty much know that's unlikely to happen, sooo ... .

Early on in the life of the setup, you won't have collected much credit, so you'll in all likelihood need a price break above your short call to bail out of the entire setup in profit. As time goes on, and the amount of your collected credit increases, a break above your short call becomes less a requirement to bail out of the setup profitably, since you've essentially reduced your cost basis in the long up to that point.

You can naturally keep rolling your short call post-break to collect additional credit, but with a product like VXX, it's probably best to take profit when you can, since we all know what happens after a spike in volatility ... .
Fireworks are fun ... as long as you don't blow your fingers off.
  • #12,565
  • Apr 4, 2016 12:00am Apr 4, 2016 12:00am
Quoting The Fool
https://humblestudentofthemarkets.co...it-referendum/
Very good post ... .
Fireworks are fun ... as long as you don't blow your fingers off.
  • #12,566
  • Apr 4, 2016 12:10am Apr 4, 2016 12:10am
Quoting The Fool
o no now they be sayin oil rally over, look out below....indeed, it are sliding, putting up a red light on the bull road for equities.....butt....OPEC meets first week of June, maybe Something Will Happen (dun dun dun!) ...and I see these beat down names what they be capable of when a nice turn comes for oil - like a 100% gain in a few weeks capable......so, RIG....May/Aug diag gets you in some Aug long calls with a bit of May discount.....might be worth a 14c risk {image} {image}
Much as I hate oil, I'm always watching it for plays in one thing or another. RIG's probably one of the best of the bunch for options playability (liquid, etc.), along with NE, and KMI. SDRL and ESV are two others, but are swimming in red, so may implode for reasons other than just the price of oil ... .
Fireworks are fun ... as long as you don't blow your fingers off.
  • #12,567
  • Apr 4, 2016 12:13am Apr 4, 2016 12:13am
Quoting ZebraSquirl
{quote} Much as I hate oil, I'm always watching it for plays in one thing or another. RIG's probably one of the best of the bunch for options playability (liquid, etc.), along with NE, and KMI. SDRL and ESV are two others, but are swimming in red, so may implode for reasons other than just the price of oil ... .
And (dare I say it?), there's PBR ... . If I would have covered call'd when I said I wanted to (at or around $3), I would have been out here for a fairly hefty profit. Oh, well, no take backs ... .
Fireworks are fun ... as long as you don't blow your fingers off.
  • #12,568
  • Apr 4, 2016 12:31am Apr 4, 2016 12:31am
Quoting ZebraSquirl
And (dare I say it?), there's PBR ... . If I would have covered call'd when I said I wanted to (at or around $3), I would have been out here for a fairly hefty profit. Oh, well, no take backs ... .
any crazy spekalator gotta have some PBR...it have the added complication of the political volatility in Brazil.....if they get to an impeachment vote PBR will pop on the "buy the rumor" ....and then fall if impeachment fails or languishes. I have lots of PBR bullish spreads, as far as I recall they all out to July...
"If The Fool persists in his Folly he will become wise." - William Blake
  • #12,569
  • Apr 4, 2016 12:47am Apr 4, 2016 12:47am
With oil rally fizzling and a long run north for the /ES, it looks like he really will be chopping around $205 +/- $5, I'd bet that it will take /CL turning up again to make it easy for /ES bulls....
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"If The Fool persists in his Folly he will become wise." - William Blake
  • #12,570
  • Apr 4, 2016 1:00am Apr 4, 2016 1:00am
Quoting The Fool
With oil rally fizzling and a long run north for the /ES, it looks like he really will be chopping around $205 +/- $5, I'd bet that it will take /CL turning up again to make it easy for /ES bulls....
45dte to May....SPY $212/$215 bear calls might get ya $0.80+ tomorrow....maybe hold out for $213 short, but May might be a good spot to catch a pre-summer sell-off if that are coming
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"If The Fool persists in his Folly he will become wise." - William Blake
  • #12,571
  • Apr 4, 2016 2:38am Apr 4, 2016 2:38am
Quoting The Fool
With oil rally fizzling and a long run north for the /ES, it looks like he really will be chopping around $205 +/- $5,
...lots loaded, will take a chance on the weekly SPY bear puts, $205/$204.5 for a dime
"If The Fool persists in his Folly he will become wise." - William Blake
  • #12,572
  • Apr 4, 2016 12:13pm Apr 4, 2016 12:13pm
Quoting The Fool
...lots loaded, will take a chance on the weekly SPY bear puts, $205/$204.5 for a dime
skipped weekly puts but filled SPY May $212/215 bear calls for 72c credit - looking for a bit of pullback and will take a quick net ~$0.30 if I can get it.
"If The Fool persists in his Folly he will become wise." - William Blake
  • #12,573
  • Apr 4, 2016 12:15pm Apr 4, 2016 12:15pm
Quoting The Fool
so, RIG....May/Aug diag gets you in some Aug long calls with a bit of May discount.....might be worth a 14c risk
filled May/Aug RIG $14/$15 calls diag for 15c
"If The Fool persists in his Folly he will become wise." - William Blake
  • #12,574
  • Edited 2:01pm Apr 4, 2016 1:31pm | Edited 2:01pm
Quoting The Fool
filled May/Aug RIG $14/$15 calls diag for 15c
...filled some $13/$15 same months for 12c
"If The Fool persists in his Folly he will become wise." - William Blake
  • #12,575
  • Apr 4, 2016 1:32pm Apr 4, 2016 1:32pm
trying fill Sep UVXY $27/$30 bull calls for 40c (will it still be around?)
"If The Fool persists in his Folly he will become wise." - William Blake
  • #12,576
  • Apr 4, 2016 7:10pm Apr 4, 2016 7:10pm
Bought to Close LULU April 15th 63.5/68.5 short strangle

With this little dip we had today, bought this rolled out setup back for a small profit ... .

Here's the whole chain:

Sold to Open: April 8th 54/68 short strangle for $130 credit
Bought to Close: April 54 short put for a $2 debit (short put near worthless)
Rolled: April 8th 68 short call to April 15th 68.5 short call for a $17 credit (price testing $68)
Sold to Open: April 15th 63.5 short put for a $32 credit (sold to delta balance/hedge the call side)
Bought to Close: April 15th 63.5/68.5 short strangle for a $143 debit

Gross Profit: $34/per contract
Net (After Fees/Comm's): $26/contract

Naturally, it would have been nice if I coulda taken 50% max profit out of the original $130/contract credit I received to put the setup on (love those inzee outzees where you take 50% max profit on the volatility crush), but the important thing is that it isn't a loser and that I got out of it quickly for scratch or better so that I can redeploy on another high probability setup ... .
Fireworks are fun ... as long as you don't blow your fingers off.
  • #12,577
  • Apr 4, 2016 7:18pm Apr 4, 2016 7:18pm
Quoting The Fool
{quote} 45dte to May....SPY $212/$215 bear calls might get ya $0.80+ tomorrow....maybe hold out for $213 short, but May might be a good spot to catch a pre-summer sell-off if that are coming {image}
Danke. That's in my wheelhouse. Usually, I set these up at the edge of the expected move for the expiry (the short call at about the 75% prob OTM strike), but that would be at 213, and the 213/216 will only get you $50 in credit for the May 20th expiry -- ain't totally horrible, but I'd rather have the $80 ... .
Fireworks are fun ... as long as you don't blow your fingers off.
  • #12,578
  • Apr 4, 2016 7:29pm Apr 4, 2016 7:29pm
Premium selling plays are, well, "at a premium." I'm already in EWZ (which is one of the only >70 IVR/>50 IV plays out there at the moment), so I have to resort to earnings.

The only one I can see this week that is of relatively high option quality is MON, which isn't saying much. Here are the two plays:

April 15th 76.5/81/93.5/98 Iron Condor
Probability of Profit: 69%
Max Profit: $69/contract
Buying Power Effect/Max Loss: $387/contract

April 15th 81/93.5 Short Strangle
Probability of Profit: 72%
Max Profit/Buying Power Effect: $99/contract; $1140/contract (ugh)

If I put it on, I'll probably go the IC, even though it doesn't pass my usual $100 credit test. I want to manage my power power a little efficiently here, since I'm largely hand sitting waiting for a VIX +15 volatility pop to wade back into index ETF IC's and such and don't want to be in some broken earnings play that is occupying oversized BP. Then again, I just may pass ... . Darn thing isn't the most liquid underlying in the world ... .
Fireworks are fun ... as long as you don't blow your fingers off.
  • #12,579
  • Apr 4, 2016 10:45pm Apr 4, 2016 10:45pm
Quoting ZebraSquirl
{quote} Danke. That's in my wheelhouse. Usually, I set these up at the edge of the expected move for the expiry (the short call at about the 75% prob OTM strike), but that would be at 213, and the 213/216 will only get you $50 in credit for the May 20th expiry -- ain't totally horrible, but I'd rather have the $80 ... .
I got 72c for the $212/$215 ... hoping for a quick pullback
"If The Fool persists in his Folly he will become wise." - William Blake
  • #12,580
  • Apr 4, 2016 11:59pm Apr 4, 2016 11:59pm
Quoting The Fool
trying fill Sep UVXY $27/$30 bull calls for 40c (will it still be around?)
filled, risk $0.40 to net $2.50+, if UVXY can't pop $27 between now and Sept well I will be gobsmacked
"If The Fool persists in his Folly he will become wise." - William Blake
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