My option trades

ryanpatrick · Feb 28, 2012

Quote from scottandmo:

For SODA, would you ever consider buying 1 Mar 50 and selling 2 Mar 55's? Then your cost is less than $.50 and it wouldn't starting going negative until SODA headed north of $60.

That caught my eyes and is interesting....but my option account can't do that type of naked call trading just yet....My equity account does not have option trading so can't go there too.....let me know how it goes.

ryanpatrick · Feb 28, 2012

Quote from TraderBoy23:

Falcon looked at the implied VOL. that's why it's so expensive. It's over 100 for most/all front month options. you're paying a ton for vol which is why it seems so expensive to you

That's true, and expect at least some type of volatility crush back to about 70 from above 100. So price in that too before making a trade. But do try that paper trade and let me know how it turns out.....I'd always love to see other trades be it paper trade on the trade I'm in to get a different perspective. If you decide to jump into it with real cash, keep it cool lol....I got 2 47.5/55 at 2.50 so $512.95 risk only for now.

scottandmo · Feb 28, 2012

Quote from ryanpatrick:

That caught my eyes and is interesting....but my option account can't do that type of naked call trading just yet....My equity account does not have option trading so can't go there too.....let me know how it goes.

Looks like there was $600 Margin requirement per "set" and I was able to get a set for $.30, I'll let you know how it goes...

falconview · Feb 28, 2012

yUP! wILL SEE TOMORROW

Got two paper trades on SODA in CALLS

Buy 50 @ 2.90
sell 52.50 @ 2,00
For -$90

Buy 47.50 @ $4.40
Sell 55 @ 3.00
For - $140

See how it goes tomorrow.

atticus · Feb 28, 2012

Quote from ryanpatrick:

If I did a vertical, it'd have to be worth the price....I wouldn't even touch the 45, I'd have to look at 47.5/55 for about 2.50-2.60 and see what the odds are of SODA holding above $50. I would close the trade out together, and would probably have to leg out to make it worth the troubles. These options are expensive up the roof. At $51 tomorrow morning, the 47.5 jumps to 5.5, and 55 calls jump to 1.50, for about $4 points. In the little time that SODA has traded, it does gap open and then follow the gap by at least 2-3%, the big drop back in July was a gap down by -9.8% and then a follow through of -40% at the bottom of the intraday move. Even in its latest quarter, SODA gapped by 13% and maxed out at 15.8% before closing out at 5%. I'd expect a 10% gap from 46 to 50.60, and then maybe a quick move to at least $51.50-$52.00. Beyond that its anyone guess.

I looked at that drop in July/August 2011, and the report was solid with strong guidance too. This leads me to think that the drop was more of a Eurozone related fear. Since that fear of a Euro breakdown has decreased, if SODA beats with strong guidance, then there's a powerful move ahead. Short interest was at 3M or 25% float back in August and with SODA's average of 1.1M shares, I think we could see +5M with about 1M in pure short covering.

At $50 the fly earns $2 at the open. 2.50 by end of the day.

scottandmo · Feb 28, 2012

Quote from scottandmo:

For SODA, would you ever consider buying 1 Mar 50 and selling 2 Mar 55's? Then your cost is less than $.50 and it wouldn't starting going negative until SODA headed north of $60.

It would appear that what I suggested is almost a fly, just like atticus has been suggesting except that mine doesn't have the top end cap (which could be suicide). I suppose instead of the 40/50/60 like atticus suggests mine would be basically the same thing at 50/55/60, where the 50/55/60's max profit is around 55 and the 40/50/60's max profit is around 50.

I'm very interested in the fly now, I didn't know how it worked until reading up on it just now.

ryanpatrick · Feb 28, 2012

Quote from scottandmo:

It would appear that what I suggested is almost a fly, just like atticus has been suggesting except that mine doesn't have the top end cap (which could be suicide). I suppose instead of the 40/50/60 like atticus suggests mine would be basically the same thing at 50/55/60, where the 50/55/60's max profit is around 55 and the 40/50/60's max profit is around 50.

I'm very interested in the fly now, I didn't know how it worked until reading up on it just now.

Yeah, the fly basically states that you think SODA hangs at $49-$51 area. I felt it would hang around there too this morning when I expected SODA to close out around $45-$46, but closing out at $47.50, this is now a different dog. A gap lower pushes it back to about $41-$43, but the gap up has legs to push through $50, possibly test $55. Almost felt like I saw some short covering heading into the close today with strong volume in 2 steps around 2:30PM and 3:30PM EST. I could understand the end of day volume at 35K per minute, but that 2:30PM spike with volume at 30K per minute for 2-3 minutes suggest big institutional buyer in or short covering going out. SODA reports tomorrow morning so we'll see how it plays out tomorrow.

atticus · Feb 28, 2012

Quote from scottandmo:

It would appear that what I suggested is almost a fly, just like atticus has been suggesting except that mine doesn't have the top end cap (which could be suicide). I suppose instead of the 40/50/60 like atticus suggests mine would be basically the same thing at 50/55/60, where the 50/55/60's max profit is around 55 and the 40/50/60's max profit is around 50.

I'm very interested in the fly now, I didn't know how it worked until reading up on it just now.

You suggested a short backspread at $0.50 which has unbounded upside risk. Regardless he can't trade a short backspread in a cash account. I really don't understand knocking a fly's wing hedge as suicide when you're suggesting unlimited risk in a short backspread. That's a bit nutty.

Pick a fly that is neutral to the strike you like.

falconview · Feb 28, 2012

Huuuuh! Lemme learn debit spreads first.

Fly indeed.

babutime · Feb 28, 2012

SODA has the tenacity to do extremely disturbing things to your account if you're net short puts or calls - especially at expiration.

Anybody with a position with unlimited upside or downside risk might get hurt tomorrow.

I personally have a butterfly but looks like I wont do that much better if it really shoots tomorrow- especially on the upside.

If it tanks, I'll take a small hit.

P.S.

I read backspreads. Big no no if you're new (like I am- unlimited loss in one direction is not a good thing for anyone actually)... Not if the stock moves like a mother! Youll lose more as you panic and send market orders and get terrible fills with wide bid/ask spreads...