Exponential growth

Quote from Neoxx:

I meant to say buying a deep ITM LEAP, then selling an ATM weekly/monthly, every single week/month.

I called this a diagonal calendar spread in the original post, but another way to think about it would be as a covered call strategy.

Didn't have any particular stock in mind, but if I do, I'll post specifics.
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Yes, I noticed that before. That is why I made my second statement. Because your strategy is pretty much a leveraged covered call, you are susceptible to the risks involved in covered call writing. That said, covered calls aren't the most popular form of options trading for nothing. If the right equity is chosen, you could as I said in my first post, make consistent returns.

Long stock always has a delta of 100, while the options (leaps) might not. Stock price is not affected directly by IV. There is no time decay with stock, so there's one more thing to worry about with the options method. But, you are leveraged, and are therefore capable of faster returns. Always a give/take scenario.

That is why I said you need to find a situation where the delta of the LEAP was 98+ and still liquid. It would also help if the LEAP value was only intrinsic value (i.e. no time decay). You might check out WM for this kind of play. Just glancing at them, they might work out ok for it. Not as high volume as I would like, but maybe ok.
 
Quote from Cache Landing:

Yes, I noticed that before. That is why I made my second statement. Because your strategy is pretty much a leveraged covered call, you are susceptible to the risks involved in covered call writing. That said, covered calls aren't the most popular form of options trading for nothing. If the right equity is chosen, you could as I said in my first post, make consistent returns.

Long stock always has a delta of 100, while the options (leaps) might not. Stock price is not affected directly by IV. There is no time decay with stock, so there's one more thing to worry about with the options method. But, you are leveraged, and are therefore capable of faster returns. Always a give/take scenario.

That is why I said you need to find a situation where the delta of the LEAP was 98+ and still liquid. It would also help if the LEAP value was only intrinsic value (i.e. no time decay). You might check out WM for this kind of play. Just glancing at them, they might work out ok for it. Not as high volume as I would like, but maybe ok.
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Ah, reread your original post; I see now what I overlooked.

I'm also beginning to see what you meant when you said that certain strategies that are great in theory take on added layers of complexity and aren't always so great when it comes to practice.

As far as implementing this strategy, it was purely a hypothetical.

Have resolved to become a half-decent straight-up directional trader before I spice things up.

Also got that Turner book today. At first glance, looks promising.
 
Yeah, it's a pretty good read. Not difficult be any means, but I like her writing style.

On a different note. SHLD found resistance again today at 126 so I got in on a bear call spread. The chart has me a bit worried about upside momentum, but that was in fact the decision maker. If the resistance holds I will make a heafty profit. If it breaks, we should see a good size run which will allow me to buy back the short leg and still make some money on the move.

My DJX and COF plays are just outside the profitable range right now. I'm not in a hurry to get rid of them just yet.
 
Probably explained myself incorrectly as I typed that post quickly. There isn't much about the chart that suggests that it will LIKELY break resistance. That is why I decided to make the trade. I am nervous about the fact that the market is making a very strong rally. SHLD is currently above both the 20- & 50-day MA and the upside move was really quick.

When I am in a bearish position I usually like to be below the MA's. On this one, the range has been so influential that the MA's are not an indication of either support or resistence. I got some comfort from the fact that this rallly the last few days really wasn't accompanied by big volume.

What I am nervous about is that it might just be pausing at the resistence ($126) to rally the troops for the breakout. I think that most people wanting to trade this stock are waiting for a breakout to occur before they jump in. Best case scenario, it stalls at 126 and retreats back to 114 again. At which time I will probably play a bull put spread.

Anyway, my nervousness is speculation about the market. Not necessarily about SHLD.
 
Quote from DonnaV:

What Turner book? I'd love to read a book on options written by a woman:p
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Not an options book. Called "Short term trading in the new market". I found it an interesting read (especially for beginners) because it adresses different styles of short term trading and the personality associated with each. It doesn't discuss options strategies really, but focusses on how to locate short term setups. Mostly about day/swing trading. These setups can be used for various options strategies with much success. Also introduces candlestick patterns to those who are unfamiliar with them.
 
Thanks Cache...
Quote from Cache Landing:

Not an options book. Called "Short term trading in the new market". I found it an interesting read (especially for beginners) because it adresses different styles of short term trading and the personality associated with each. It doesn't discuss options strategies really, but focusses on how to locate short term setups. Mostly about day/swing trading. These setups can be used for various options strategies with much success. Also introduces candlestick patterns to those who are unfamiliar with them.
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SURE!

Sorry if in my posts I am frequently a little bit too long winded, but I think there are many people that view these threads looking for some quick info that don't really want to participate in the discussion. I try to be as informative as possible.

I also apologize if an answer to someone's question is really dumbed down. I don't mean to treat someone as if they were an idiot. Just want to cover all the basics for those that might not know. This sight has a lot of beginners.
 
Looking over the charts for RIMM and SHLD, I think I've extracted some of the salient points for your credit spread strategy.

1) Channeling stock

2) Long term neutrality

2) Entry on a pivot point with directional bias.

3) A $10 range on each side of the S/R level, so that if you're correct about direction, your $5 target will be a very high probability one, and if you're wrong, there's ample leeway to benefit from a move in the opposite direction.

4) By virtue of the necessary range, this is confined to higher priced stocks

I have a stock on my radar that might be suitable for this treatment. Range is a little smaller, but hopefully still adequate.

GME.

So I would wait for it to test support, if it falls through, buy the 40-35 bear call spread, and if it bounces off support, buy the 35-30 bull put spread.

Is that correct?
 
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