Multi-Leg OPTION Trade Ideas --Bull/Bear -- Let's Discuss

R

rayc99

I wanted to get this thread going. Will post within the next day or so.
There was an old thread that disappeared, so let's start a new one.
I do lots of vertical option spreads, both bullish and bearish, trying to keep the
portfolio balanced.

BOT some more SPY PUT SPREADS (bearish) today.

Let's share ideas, protect our portfolios, and let's make some money!
 
this market seems to have started a down-trend. We are past due for a little bit of a correction. When that happens I like to go on a bunch of reverse conversions... My targets yesterday: INTC, MSFT, SLV
 
So here is one of my recent trades:

BAC …. (Bull Put Credit Spread). Filled @ $0.51. (July 6)

BAC Ticker

Key Information:
Trade Rationale/Expectation: Price: Based on Chart, and timeframe, I believe the short strike will NOT be violated. ImplVol: I expect a decline. Trade Risk: My risk management will prevent losses from becoming disproportionate to risk.

$11.90 BAC Current Quote
22-Aug-09 Expiration
47 Days Remaining or Held as of: 6-Jul-09
$11.00 Sell Strike
$9.00 Buy Strike
$0.565 Premium now
$0.510 Target Premium (entered as a "Sell to Open" order -Day only) (see notes)
$10.49 Breakeven (take a look at chart to determine reasonableness)
11.8% Breakeven Protection % (usually seeking ~ 15%; must be strong reason to override)
245.0% Reward: APR (based on Target Premium and number of days remaining, adjusted for commissions) (Target usually ~ 180%)
64% Prob of Success (> B/E) (per ANALYZE TAB/chart) (usually seeking ~ 75%)

Non-essential Information (for those interested):
30 Number of Contracts (info)
$4,470 AT RISK ($ net of premium)
$1,410 REWARD (P&L-after comm, assumed open and close and $1/leg-high/conservative)
31.5% P&L % (info) $1,410 / $4,470 R/R: 3.2 to 1.0 (inverse of P&L %) P&L so far--> $(165)
2.43 Beta (SPY = 1.00) (info)
86% Implied Volatility (info)
19 Delta (per contract) (Target/low ~ 10 - 15) (info) (important for risk management)
Notes: .47/12.00 0.53 (11.70) (Buy on pullback/(close out on a close <11.30) ref: http://www.askstockguru.com/cgi-bin/s?s=bac&SUBMIT=GO


Other: LIQUIDITY: Underlying equity must be liquid (usually trading more than 500,000 shares daily) and, of course, must be optionable.
Other: LIQUIDITY: The Options must have good liquidity as evidenced by BID/ASKED spread, volume, and open interest. Generally, I an looking for trades where the spreads are 10 cents or less.
Other: LIQUIDITY: There are approximately 50-60 issues/options trading in pennywide increments (Penny Increment Options)
Other: Trade Candidates: Identification of bullish and bearish trade candidates. Criteria: Proprietary (combining technical and fundamental factors).
 
Another one, just trying to catch up:

WLT …. (Bear Put Debit Spread Sep B55/S40). Filled @ $11.90 debit. (July 7)…BEARISH

WLT Ticker

Key Information:
Trade Rationale/Expectation: Price: Based on Chart, and timeframe, I believe the short strike will NOT be violated. ImplVol: I expect a decline. Trade Risk: My risk management will prevent losses from becoming disproportionate to risk.

$35.58 WLT Current Quote
19-Sep-09 Expiration
74 Days Remaining as of: 7-Jul-09
$55.00 Sell Strike
$40.00 Buy Strike
$12.450 Premium now
$11.900 Target Premium (entered as a "Sell to Open" order -Day only) (see notes)
$43.10 Breakeven (take a look at chart to determine reasonableness)
21.1% Breakeven Protection % (usually seeking ~ 15%; must be strong reason to override)
126.8% Reward: APR (based on Target Premium and number of days remaining, adjusted for commissions) (Target usually ~ 180%)
73% Prob of Success (> B/E) (per ANALYZE TAB/chart) (usually seeking ~ 75%)

Non-essential Information (for those interested):
3 Number of Contracts (info)
$3,570 AT RISK ($ net of premium)
$918 REWARD (P&L-after comm, assumed open and close and $1/leg-high/conservative)
25.7% P&L % (info) $918 / $3,570 R/R: 3.9 to 1.0 (inverse of P&L %) P&L so far--> $165
1.78 Beta (SPY = 1.00) (info)
76% Implied Volatility (info)
-30 Delta (per contract) (Target/low ~ 10 - 15) (info) (important for risk management)
Notes: BEARISH…. trying to keep portfolio balanced. ref: http://www.askstockguru.com/cgi-bin/s?s=wlt&SUBMIT=GO
 
Last one for now:

OIH …. (Bull Put Credit Spread). Filled @ $1.00. (July 7)

OIH Ticker

Key Information:
Trade Rationale/Expectation: Price: Based on Chart, and timeframe, I believe the short strike will NOT be violated. ImplVol: I expect a decline. Trade Risk: My risk management will prevent losses from becoming disproportionate to risk.

$90.21 OIH Current Quote
22-Aug-09 Expiration
46 Days Remaining as of: 7-Jul-09
$80.00 Sell Strike
$75.00 Buy Strike
$1.020 Premium now
$1.000 Target Premium (entered as a "Sell to Open" order -Day only) (see notes)
$79.00 Breakeven (take a look at chart to determine reasonableness)
12.4% Breakeven Protection % (usually seeking ~ 15%; must be strong reason to override)
190.4% Reward: APR (based on Target Premium and number of days remaining, adjusted for commissions) (Target usually ~ 180%)
78% Prob of Success (> B/E) (per ANALYZE TAB/chart) (usually seeking ~ 75%)

Non-essential Information (for those interested):
15 Number of Contracts (info)
$6,000 AT RISK ($ net of premium)
$1,440 REWARD (P&L-after comm, assumed open and close and $1/leg-high/conservative)
24.0% P&L % (info) $1,440 / $6,000 R/R: 4.2 to 1.0 (inverse of P&L %) P&L so far--> $(30)
1.60 Beta (SPY = 1.00) (info)
52% Implied Volatility (info)
9 Delta (per contract) (Target/low ~ 10 - 15) (info) (important for risk management)
Notes: I like ETFs a bit more for many reasons. ref:
 
Final Thoughts for this evening.

I generally and primarily will do a number of Vertical BULLISH PUT CREDIT SPREADS. I also will put on some ICs and Butterfly's. I will offset my long DELTAs, as deemed appropriate, with SPY bearish spreads and/or puts, so as to adjust my portfolio to either delta-neutral, or leaning slightly bullish/bearish depending on my market analysis. This is all very general, but it allows me to manage each trade individually without having to overly worry about portfolio risk.

I am currently watching the following tickers (but this is a very dynamic list) for possible vertical spreads:

MO, INTC, SMH, QQQQ, EEM, XLE, PBR, EWZ, POT, AAPL, BP, MSFT.

Please feel free to share any trades you have or might be considering.
 
Quote from rayc99:

Final Thoughts for this evening.

Please feel free to share any trades you have or might be considering.
More...


Okay. An earnings event play. INFY on Friday. Unbalanced double calendars at the 35 strike. Makes little sense trying to execute the spreads because of the wide b/a. Must leg in. You're looking for a spread differential of 80 cts or less between months. Can also do the trade as a single unbalanced calendar with stock. Looking for IV drop in the 43% - 45% range.
 
New trade just filled:

POT …. (Bull Put Credit Spread). Filled @ $2.25. (July 10)

POT.spr Ticker Time of Data: 2:09:17 PM Friday, July 10, 2009

Key Information:
Trade Rationale/Expectation: Price: Based on Chart, and timeframe, I believe the short strike will NOT be violated. ImplVol: I expect a decline.

$85.71 POT.spr Current Quote
22-Aug-09 Expiration
42 Days Remaining as of: 10-Jul-09
$75.00 Sell Strike
$65.00 Buy Strike
$2.075 Premium now
$2.250 Target Premium (entered as a "Sell to Open" order -Day only) (see notes)
$72.75 Breakeven (take a look at chart to determine reasonableness)
15.1% Breakeven Protection % (usually seeking ~ 15%; must be strong reason to override)
245.4% Reward: APR (based on Target Premium and number of days remaining, adjusted for commissions) (Target usually ~ 180%)
69% Prob of Success (> B/E) (per ANALYZE TAB/chart) (usually seeking ~ 75%)

Non-essential Information (for those interested):
6 Number of Contracts (info)
$4,650 AT RISK ($ net of premium)
$1,326 REWARD (P&L-after comm, assumed open and close and $1/leg-high/conservative)
28.5% P&L % (info) $1,326 / $4,650 R/R: 3.5 to 1.0 (inverse of P&L %) P&L so far--> $105
1.23 Beta (SPY = 1.00) (info)
73% Implied Volatility (info)
14 Delta (per contract) (Target/low ~ 10 - 15) (info) (important for risk management)
Notes: I Put this trade on after a big move down(8.0%-10.0%) ref:
 
Quick Update on just the trades I posted here (these are actual trades that filled):

BAC.Vspr.bullish 6-Jul-09 Open 570 <--P&L (cum) Anticipate positive Friday earnings/may hold into earnings
WLT.Vspr.bearish 7-Jul-09 Open 90 <--P&L (cum) Holding/bearish
OIH.Vspr.bullish 7-Jul-09 Closed 450 <--P&L (cum) Quick hit, will likely re-enter (closed July13)
POT.Vspr.bullish 13-Jul-09 Open 165 <--P&L (cum) Holding; but watching (volatile)!

I did not want to close the OIH trade, but I felt that discipline dictated some action as this was a decent move in a short time. This is always a difficult decision, because it's very easy to take profits and harder to take losses. I have to remind myself to let the winners run, and to cut my losses. As strange as it seems, anyone who trades knows it is easier to do the opposite! It's a psychological battle. Also, another factor in all of this is patience and allowing these "high prob" trades to work over time. The theory is easy, the practice is "not so much."

Maybe this is what I am trying to say.... http://dailyswim.optionszone.com/2009/04/the_hardest_thing_about_tradin.html

Have a good evening .........
 
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