Sharing+Discuss Option Trades/Strategies

I'm considering a credit spread on TOL for Sept.
Buy the $12.50 put.
Sell the $14 put.
Credit of $0.30.

If I did the trade, it would be a strictly technical trade, as its current fundamentals are poor.
The reason I'm considering it, is stated below.
However, I'd need the stock to trade in the $17.50 area to earn the credit I desire.

A credit of $0.30 doesn't seem like much. However, in the "context" of there being a small $1.5 gap between the strikes, my strike being 20% OTM from that $17.50 price, a R/R of 4:1, and the strong downside tech support in the $14 area.... its a trade I'm considering.
My question is, what other strategies might I consider, other than a credit spread?

http://finance.yahoo.com/q/bc?s=TOL&t=1y&l=on&z=m&q=b&c=

Putz Master
 
IV is measured in % and no 200% IV is not common. As mentioned by another poster there is a significant news event which will occure during the life of that option.

You dont collect 3.20 if the stock stays right here since you'll be assigned on the 5 call which is 2 dollars in change in the money and therefore you'll lose that 2 and change on the stock. You only can hope to collect the time premium which works out to be about 85 cents give or take. You should include that loss on the stock as part of your % return.
 
Quote from 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. :D
More...

You need to deduct the stock ITM amount of 2.10 [when assigned] from the option premium of 3.20. You net 1.10 [15.5%] if called. You only keep the extrinsic premium, in this case, 1.10.
 
PM,
I personally wouldn't go that far out, but again, that is a personal thing.
I see about 79% probability and I think you could do better and get more than 10% premium faster, and with the same risk. 3.3% per month is fine.
Beats losing 3.3% per month, and compounded is something like 44% annually.
I think you could do well in a different stock for July or even an index in July.
Or, you could widen your spread.
Again, my opinion only.
The reason I say that is summer is coming and typically slow,....but who really knows.
also, July 4th is coming and has adverse effects on options typically, because most folks are not trading, they are on vacation, etc. so decay is profound during this time of year and is great for this type of trading.
I am right now, looking for rollouts to July for several of my position in the indexes, specifically, NDX and SPX right now,.....just looking for the proper entry.
I prefer to have my money compounding consistently.
This is your money, (I assume), and it is ultimately your call.......good luck :D
 
Quote from travelboysteve:

PM,
I personally wouldn't go that far out, but again, that is a personal thing.
I see about 79% probability and I think you could do better and get more than 10% premium faster, and with the same risk. 3.3% per month is fine.
Beats losing 3.3% per month, and compounded is something like 44% annually.
I think you could do well in a different stock for July or even an index in July.
Or, you could widen your spread.
Again, my opinion only.
The reason I say that is summer is coming and typically slow,....but who really knows.
also, July 4th is coming and has adverse effects on options typically, because most folks are not trading, they are on vacation, etc. so decay is profound during this time of year and is great for this type of trading.
I am right now, looking for rollouts to July for several of my position in the indexes, specifically, NDX and SPX right now,.....just looking for the proper entry.
I prefer to have my money compounding consistently.
This is your money, (I assume), and it is ultimately your call.......good luck :D
More...

You can't handle basic maths, so I question the model which arrived at your 79% figure. Post less, read more.
 
The amount of "trading" people do has no effect on the decay of the option. decay is a function of time and other objective variables.
 
<<< I personally wouldn't go that far out, but again, that is a personal thing.
I see about 79% probability and I think you could do better and get more than 10% premium faster, and with the same risk. 3.3% per month is fine. >>>

I also prefer July. Unfortunately, the strikes I desire are not avaliable for July.
 
Quote from xflat2186:

The amount of "trading" people do has no effect on the decay of the option. decay is a function of time and other objective variables.
More...

Theta is MAGICAL. It's a big purple dinosaur that visits your positions while you sleep.
 
Xflat and Atticus,
Sorry, maybe there is some confusion here.
Maybe I need to mention I own the stock, not the options. Does that make more sense?
For clarification:

I bought, ( in 2 entries), xxx shares with a cost basis of $7.10.

I have received, and will get to keep the option premiums, ($3.20 each) I collected for selling the $5 calls against the stock.
it's not hard to see why I don't care about the options technicals because I don't own them.
So now we are left with only 2 things happening come June 19th, either the stock will be below $5 or it won't.
Again, this is a small position I have that I saw an opportunity.
I am also armed with other management strategies, if, in fact the stock goes wacky on the news.
To me, news is noise and I wouldn't hang my hat on news in this market.
Look what happened a week or so ago,....whoda thought the market would rally on bad news?...:confused:
 
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