My Options Play

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Quote from stockdoc:

Hi Iceman:

The PD bull put spread was actually the 140/135 strikes and I put the trade on yesterday. I broke my rules a bit for this trade, because I am very impatient, and I didn't wait for the pullback. I can see a New Year's resolution in there somewhere.

I look for an intraday high, because the underlying usually closes a bit lower on those days, and most of my trading is done at the close.

The big paradox that I am trying to solve is the fact that the higher the stock goes, the lower the put premiums are for that particular day.

Usually, the deltas between the adjacent bought and sold strikes are pretty close, which minimizes the effect on the spread.

Did you get filled on your 80 AAPL Jan call? I see it is trading b/w 1.10 and 1.20.
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:D was wondering how you got 1.15... ?

so depending on what price you sold MG for-- do you/would you ever consider lifting that leg -- on a large pop like @ the open today-- then look to re-enter and narrow spread debit?

ICe
:cool:
 
do you truly feel that this is a paradox? generally speaking, a normal advance in the stock will lead to a lesser IV for the options, and would be the direct reason that the premium on the puts decreases, that and the neg delts.

<Quote><I>The big paradox that I am trying to solve is the fact that the higher the stock goes, the lower the put premiums are for that particular day.</I></Quote>
 
Vols often go up on rallies in individual issues. Skew plays a much smaller role in components than it does in index. Premiums net of vol can increase simply due to a broadening distribution. Obviously, you'd need to see quite a rally for that to occur.

IMO, don't get hung up on skew in component tickers. The bid/ask vol-basis is often much > skew-basis.
 
Quote from stockdoc:

Did you get filled on your 80 AAPL Jan call? I see it is trading b/w 1.10 and 1.20.
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I did not enter AAPL 80c yet - the intent/plan was to thereafter leg into a bear spread -- perhaps at the 75 or 70c -- on any large move in underlying- looking to get, i.e. 4 or so ---on jan75c --- thereby getting as close to neutral as possible- even though I would then plan on taking delivery of AAPL stock @ Jan expiration IF said leg did not close worthless - and rolling into Feb 80c to 'collar' the short. After all my premise or theme is AAPL gets clobbered in 2006 - at least for min. -10-12 points.

I am trying to sell AAPL 67.50p for >1.25 but its not in the cards today.

As for as VLO - will reply later (or PM you)

Right now I am short BBY (4750) puts after closing all my front month calls for peanuts -- the stock is having a fairly decent move which was unexpected -

--- and I'm lookng to re-sell Jan 45c or Feb 4750@ >1.4. or Feb 45c @ > 2.05

Happy Holidays

Ice
:cool:
 
Quote from riskarb:
IMO, don't get hung up on skew in component tickers. The bid/ask vol-basis is often much > skew-basis. [/B]
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Thanks, that makes sense. Not quite sure what is meant by bid/ask vol-basis?
 
Quote from iceman1:

As for as VLO - will reply later (or PM you)
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Whenever you have time bro, no prob...

fyi...I continue to like JBLU heading into next week/new year with the recent pull back in oil prices (one would think continue toward 50). Recently scaled out of some OTM options for ~ 100% return but still holding 50% of the position. Expect a pullback to strong support at 22, but could see a breakout to around 25 from current resistance which I am hoping for. Heavy call activity/inc in open interest with an increase on the MAR 22.5 call IV of 19% on 12/20, suggesting buy and not sell to opens.

sd
 
For Ice--Although the PD underlying gapped open a point at the open, the 140p only got up to 2.70 and the 135 made it to 1.55. Theoretically, I could have improved the spread from 1.15 to maybe 1.50 if I was working from my home system. Due to the fact that I am limited to trading through the functionally challenged IB Webtrader at work, I didn't have a realistic chance of being able to improve the spread.

For Skewed--the paradox is actually self inflicted. If, due to impatience, or that extra cup of coffee, I put the trade on before the pullback, then I "lose" b/w 15 and 45% of the premium on the "good day", and then have the pleasure of losing it again in the short put on the way back down again.

Bot BOL Jan 60 and JBL Jan 35 straddles today. Didn't get filled on the ABS 17.5 straddle. I normally go long the naked calls ATM/ITM if the time premium is relatively small, and a good technical exit point is evident, but I thought I would see if there is any benefit in playing both legs. Does anybody have any experience or tips for playing these?
 
Quote from skeweddude:

Hope you don't mind offering your rationale on entering and your thoughts on exiting the straddle. Are you saying that you see o/i on 52.5 c as overhead resistance and if you have a short term downside directional view why did you prefer to sell the straddle in this instance? If you sold @4.30 you are already looking at a gain of around 1 in a short amt of time so it looks like you are benefiting from a forecasted drop in IV? Seems like a pretty good trade to me being that both of these options are quiet as is the underlying and you've got good theta. Do you see a pin below 52.5 that will allow the call you sold to expire worthless and then sell to close the ITM put prior to expiry keeping almost all of the original premium collected? Or am I off?
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at this time I am looking for a pin <52.50 ---

I am also long Feb 55p after selling Jan 55p for +4 (almost) and then rolling into Feb 55p (which are in the red by $1+ albeit VLO stock is higher). However when I sold said Jan 55p I rolled into 52.50p when VLO was nearing 51. The stock was assigned to me @ Dec expiration for 55 -- the result of the 55 put leg being exercised (I bought Jan 55p/sold Dec55p (110p), but I also was short 55c (110c) in a ratio & they expired worthless making basis in VLO about 51.50.

I almost exited yesterday since my view is VLO is more likely to see 50 before 55. I base this on the triangular chart pattern beginning Oct 20 putting VLO in the 5th reversal of the minor trend which would take it back to 50 +/- and also back to its' 100 day ema --- where it has twice thrust beneath only to find strong support. It is however >50 ema.

Thus I sort of regret not selling all stock @53.70. But I want to be open-minded and watch to see if VLO attracts some buying interest @ these post-split (lower) levels--- and perhaps does move to $55. Since my Feb 55p have sufficient time value- I can keep them open without taking a large hit - or I can sell the stock-- and sell my Feb55 to close/open and buy 50p - i.e. construct a bull spread.

At this moment I favor VLO trading lower before <55.

I will have to manage this position.

A pin @ 52.50 would be ideal- but I don't "think" that is likely unless there is more activity in the 5250 puts in the next few weeks. As always I try to be open-minded about what could or might happen even while entertaining some bias.
 
Ice:

I am confused (which is probably a natural state of events for a realtive beginner in this game).

It sounds as though your AAPL trade is a bear call spread.

Why wouldn't you construct a (delta neutral) put backspread for your AAPL trade and just keeping rolling it over until the forecasted move happens?

Thank you.


:confused:
 
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