Sharing+Discuss Option Trades/Strategies

[spindr0]

>> In terms of evaluating "probability of profit", I think one should also consider the downside tech support CB has demonstrated in the $35 area,... per the 1 year chart below. You need to go back 5 years to see the last time CB tested the $35 area. <<

Quote from xflat2186:

CB traded below 35 in March so you need not waste time looking back 5 years to see when the last time traded there was.

Well Jim with a J, CB traded in the high 33''s last fall so that categorically proves that it was 5 years ago when CB last tested the $35 area.

Details, details, details

Yep, the circus is back in town. ROFL

 

[spindr0]

Quote from Put_Master:

Since atticus and xlfat have decided to change and twist the issue, formulas, context, ect... being discussed, I'll just leave it there. Lets consider the discussion over.

Putz Master

I always enjoy how posters show you to be the option ignorant fool that you are and then you dismiss them and come right back for more.

But you know, you're not quite yourself today. How about a good rant? Ya know, the things others call diatribbles? I know atticus likes the BETA white paper that you authored. That's a good one. But one of my favorites is the one when you went ape sh*t on Mark because you claimed that when he cut and pasted a post of yours into his reply, he omitted a comma and that changed the entire context of what you said. ROFLMAO! You're insanely funny!

Come to think of it, I also liked the one where you proposed using calendar spreads to obtain a 4% annual yield thereby hedging 2/3 of a portfolio for 1/3 of the time. Or was that 1/3 of a portfolio 2/3 of the time? Sorry for my confusion... sometimes it's tough to follow your fractional thoughts.

So quit slacking off. Or whatever "off" thing you're doing. Get with the program and Show Us The Ranty!

 

[travelboysteve]

PM,
Just wondering if you have thought about using nearer month calls and puts and have time decay work in your favor.
I have used credit spreads very effectively on the indexes over the last few months, sometimes converting to IC's mid to later in the month when clearer signals, (for me) are achieved.
I've been achieving 15-30% on the indexes with that method since March.
The CS you are discussing is a 15% spread correct?
I'm guessing it is for around a 2 month hold? ie: July?
why not do 8-10% in the near month and then again in July.
That would increase your overall return a bit, and also give you the luxury of staying on the right side of the trend if it goes against you by shooting it out to the next month, or 2 tops usually with little or no more cash outlay, just so the position can correct itself.....
your thoughts?

 

[RobtF]

Quote from Put_Master:

Given that the IV on CB has dropped by 2/3 since mid Nov,... dropped by 1/2 since Dec,... and has been in an obvious down trend for the past several months, can you define what number you used for "average IV"?
Given that it was only an 8 week initial contract, with only 45 days now remaining until expiration, I'm wondering if you may have selected a higher "average IV" than might be relevant for this down trending IV stock.

Putz Master

Sorry, I've been working 12 hours a day dealing with recession hit business loans. I used 100 day hv, not current IV (sorry, I misled in a reply). HV on Monday was 58, Current IV on Tuesday and after a pop up in the stock was 45 and would have shown an 80% PP. There is a bias in time period chosen, 100 day includes the drop below 35. If you want to project an end point 49 days out based only on current IV thats a choice, I would not. Yes such a calculation is a tool along with technical and fundamental factors.

 

[Putz Master]

<<< PM,
Just wondering if you have thought about using nearer month calls and puts and have time decay work in your favor. >>>

Good advice.
I had been running most of my credit spreads 2 - 4 months over the past year.
The past few months I've been averaging 1 - 3 months.
The only downside I've been experiencing doing 1 - 2 months, is it creates R/R ratios wider than I'm comfortable with.
I can compensate for that by selecting higher strikes, but that comes with its own issues as well.
Bottom line.... I gotta find the right "blend" of shorter contracts and reasonable R/R.
The new blend is do-able. It just means I won't be doing as many trades, since there will be fewer stocks that meet my new stricter criteria.

As for selling covered calls.
The time frame I select has a lot to do with the VIX.
When the VIX was trading between 40 - 80, I was going out 4 - 6 months on new covered calls, when the old ones expired.
Now that the VIX is under 30, I'll probably go back to 1 - 2 month contracts.
Naturally there are other variables to consider. But the VIX was a big one when it was super high.

Thanks for your input. I'll be sharing other trades as they occur, as I did with CB.
I think sharing and discussing actual real time trades, is a great way to learn. I've learned a lot from various responses to my trades and strategies over the years. Hopefully others new to options benefited from the discussions as well.

Putz Master

 

[travelboysteve]

PM,
I agree that how you trade is how you trade.
Everyone is different when it comes to their own blend of strategies.
I usually do credit spreads and perhaps leg in to IC's on the indexes. I have found stocks to be too volatile and need more management.
The reason I prefer nearer month CS's, is that time decay is a big factor and the last 2 weeks of the month, time decay is a major factor for them. If they do expire wortheless which is the chosen method, I am back in cash at the end of the month.
I prefer to roll out my positions, (CS's / IC's, etc.) in the final weeks to the next month so I can keep my money working for me.
When I do covered calls, I prefer the near month for the first trade, and if I am not called out, I will look to obtain a minimum of 4-5% on the closest month possible.
If that is not possible, I may wait until the price enters the upper portion of the current tranding channel, and shoot it out to Dec / Jan for a minimum of 10%.
That way I can easily buy back the CC with a gain of around 4-6% within a month. This method also cycles my money and keeps it working.
This is just my .02 and is in no way meant for anyone to think I am preaching gospel.
It just works well for me as I am only trying to achieve CONSISTENT return, and not shoot for the moon.
One of my CC's right now, SVNT, is just silly, Bought stock @ 7.10, sold June 5 call for 3.20. That's 45% uncalled, and 20.5% if called. Sort of a no brainer in my humble opinion. There are a few of these out there,..you just have to look.
I also like being in a position, then not having to mess with it much.
I'll take consistency over headache most of the time.

 

[xflat2186]

According to call put parity the SVNT 5 call only has about 85 cents worth of time premium in it so that would be your max profit on the covered call. Not sure where you're gettting your return %'s from.

SVNT IV is also over 200% so there is obviously a significant event pending. You now have a negative gamma position and have collected in reality only 85 cents.

 

[RobtF]

Quote from travelboysteve:

PM,

One of my CC's right now, SVNT, is just silly, Bought stock @ 7.10, sold June 5 call for 3.20. That's 45% uncalled, and 20.5% if called. Sort of a no brainer in my humble opinion. There are a few of these out there,..you just have to look.

May not be that silly, SVNT is a biotech with an FDA decision due this month. Fasten your seatbelt.

Savient Pharmaceuticals, Inc. (SVNT) today announced that its biologics license application (BLA) for KRYSTEXXA(TM) (pegloticase), a novel biological drug for treatment failure gout (TFG) patients, will be reviewed by the Arthritis Advisory Committee appointed by the U.S. Food and Drug Administration (FDA) on June 16, 2009.

 

[xflat2186]

Quote from RobtF:

May not be that silly, SVNT is a biotech with an FDA decision due this month. Fasten your seatbelt.

Savient Pharmaceuticals, Inc. (SVNT) today announced that its biologics license application (BLA) for KRYSTEXXA(TM) (pegloticase), a novel biological drug for treatment failure gout (TFG) patients, will be reviewed by the Arthritis Advisory Committee appointed by the U.S. Food and Drug Administration (FDA) on June 16, 2009.

There is your answer!

 

[travelboysteve]

Quote from xflat2186:

According to call put parity the SVNT 5 call only has about 85 cents worth of time premium in it so that would be your max profit on the covered call. Not sure where you're gettting your return %'s from.



SVNT IV is also over 200% so there is obviously a significant event pending. You now have a negative gamma position and have collected in reality only 85 cents.

Well, I always let them run their course and don't care as much about the Gamma, etc. I'm not looking at trading the options as much as collecting "rent"
I use price, charting, and fundamentals etc. to acquire and then calculate.
Has worked great for me for quite some time.
called return gives me $5 on $3.90 a share, or 1.1 / 3.9 = 28.2% cash
Uncalled is 3.2 / 7.1 = 45% cash

200% of what? it's March low?
So are many stocks.
SVNT has traded much higher.
Minus the recent downturn in the overall market, you would have to go back 3 years to find it trading at it's current level.
I won't try and convince anyone about any trade I do.
Please keep in mind, everyone has a different idea of what they are looking to do.
And since most of us have actual skin in the game, it's really a personal thing and I wouldn't try and convince anyone of anything myself.
it's simply irresponsible and selfish.
I appreciate the responses to this particular position, but rest assured, I am spread across many sectors and industries as we all should be.
This is just one I found, and yes they have an announcement coming out, but they do quite a bit of business in the UK as well.
This is just a position I liked.
I also let it go until expiration which is why I don't care about the technicals of the chosen options more so than the price return for my initial investment. Of course along with other research, etc.

peace and Hair Grease