My option trades

Quote from falconview:

Ryan

Do you do STRANGLES on those earnings days? If so, is it your standard strangle, or do you go OTM two or three strikes?
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It appears to be Long Calls or Puts, and Debt Spreads. I don't think he has posted a strangle yet.




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ForexForex
Under new management
 
Ryan

A Saturday morning.

I was trying to figure out how you were using the debit spread on the earnings pops.

I ran both the debit spread and the strangle through the calculator and it doesn´t look like either one makes much sense?

The strangle less so, because the underlying would have to move so far, to become profitable.


The debit spread, is pure directional, in which case you might as well buy straight options, is my thinking. Since I´m new at this I´m not at all sure of any conclusions I´m making here.


Comments from the peanut gallery appreciated.
 
Quote from falconview:

Babu

I didn´t get your comment on the vertical? Can you explain a bit in more intricate detail please?
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You mean the vertical that I entered into?
 
This morning I entered the following mechanical system trade:
SPY March 136 Call
Buy 1 Entry= 1.70 (filled) If only B1 fills then
Sell limit: 2.21 (1.7 X 1.3 =2.21)
If the options drop lower before hitting B1 Sell Limit then enter
Buy 2 at 1.40 x 1.4 = New Sell Limit 1.82
Stop: 1.25
 
Quote from falconview:

Ryan

A Saturday morning.

I was trying to figure out how you were using the debit spread on the earnings pops.

I ran both the debit spread and the strangle through the calculator and it doesn´t look like either one makes much sense?

The strangle less so, because the underlying would have to move so far, to become profitable.


The debit spread, is pure directional, in which case you might as well buy straight options, is my thinking. Since I´m new at this I´m not at all sure of any conclusions I´m making here.


Comments from the peanut gallery appreciated.
More...

Sure I'll try to explain why the spread has started working nicely for me.

I'll give you the trades I took to show for. Starting with NFLX. The cost on the options were up the roof, and at that time, if I had bought say a 100 call on NFLX with NFLX at $93 or so, I would not have made a 100% return if NFLX had jumped by 10% in my diretion. I knew that.....so enter the debit spread (in this case I did a strangle too). I knew from trading NFLX before that it had the tendency to continue the trend after the earnings pop. With that in mind, I felt the right trade would be a spread (to limit initial cost), but in both direction to create sort of a spread and strangle (sorry just recently learned that the strategy is called a condor I think, correct me if I'm wrong). Reason for that: spread limits initial risk, and putting it into a strangle because history shows NFLX makes a big move (about 20% swing). I could have been straight out wrong and NFLX just there at $95. The only thing I had on my side was history, and from the history classes that I took in elementary all through college, history repeats itself many times lol. And so did NFLX giving me a gain even though I had set up all that strategy.

The debit spread on FOSL is where I felt I needed such a strategy. I knew FOSL was coming off two weak price action following earning reports. I felt it may be time for FOSL to notch that reversal gap on earnings, but just in case FOSL did one of those open lower and then rally throughout the day, I opened the play with the spread. I have seen stocks do that many times before (GRMN used to do it alot opening higher at +4% gain, then closing out day at -10%). In such a case, I waited for FOSL to open lower as it was going to do with premarket at $100 vs. previous day close at $103 or so. Then I tracked FOSL for that first 15 minutes, and anyone with experience in earnings could tell FOSL was going to perform one of these reversal trades. I immediately closed out the FOSL short calls when it opened at $100 and traded back to break even around $103....and simply allowed the long to run. I had all intentions of closing the long call at the end of the day as I did, and could have made more if I held onto it until the following day. But my precursor for a spread is when the 1 deviation out of the money calls do not return 100% if the underlying stock moves in the direction by 10%. One reason I love Optionsxpress, is that their price tool allows me to see what happens to the calls when the underlying stock is at a certain price point. I can change the IV on the tool to adjust to IV crush too and get a feel of the final option price once everything is priced into the options. The commission is pricey at OX, which is why I also have TD Ameritrade (old account I used to have with Datek then bought out by Ameritrade, and then bought out by TD Bank lol), and recent accounts opened with tradeking and Scottrade just to test out tools and their commission rates. I haven't tested IB yet, but I'd love feedback from anyone who has an account there.
 
Quote from scottandmo:

In for 10 May 17.5 calls on CTB. Hope earnings kickstart it's momentum again.
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Looks nice just checked the charts on CTB....wouldn't it have been better with a short term maybe March 15 calls? Just wondering because, I just feel a looming correction coming.
 
As for today, I like my old pal, Priceline.com.....been friends with PCLN since its current uptrend back in the $50 range, had a nice gap up at $173 to $210, then played a nice one from $244 to $280-$290, and it just keeps going. This one's kind of like AAPL, trading at $500, but the P/E is only 25, and forward P/E is more like 20 based on FY12 estimates at $29.75. Can't imagine the gap up if PCLN guides FY12 above $30. I wonder if it can hit $650? With this one, I'm definitely going with spread too....so that I can get as close to at the money options as possible.
 
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