SPY

oldnemesis · Feb 27, 2016

http://www.marketwatch.com/story/in...ont-use-this-easy-options-strategy-2016-02-26

Nice list but I'll do my own trades on it:

Trade SPY:
http://finance.yahoo.com/echarts?s=SPY+Interactive#{"range":"5y","allowChartStacking":true}
Jan '17 130/125 bull put spread for a net credit of $28
Yield = 28/472 = 5.9% in 328 days or 6.6% annualized
Prob = 99%
Expectation = .99(28) - .01(472) = 27.7 - 4.7 = 23

Trade TLT:
http://finance.yahoo.com/echarts?s=TLT#{"range":"2y","allowChartStacking":true}
Jan '17 105/100 bull put spread for a net credit of $25
Yield = 25/475 = 5.3% in 328 days or 5.8% annualized
Prob = 94%
Expectation = .94(25) - .06(475) = 23.5 - 28.5 = -5

Trade T:
http://finance.yahoo.com/echarts?s=T#{"range":"5y","allowChartStacking":true}
Jan '17 30/25 bull put spread for a net credit of $44
Yield = 44/456 = 9.6% in 328 days or 10.7% annualized
Prob = 93%
Expectation = .93(44) - .07(456) = 40.9 - 31.9 = 9

Trade VZ:
http://finance.yahoo.com/echarts?s=VZ#{"range":"5y","allowChartStacking":true}
Jan '17 38/33 bull put spread for a net credit of $29
Yield = 29/471 = 6.2% in 328 days or 6.8% annualized
Prob = 97%
Expectation = .97(29) - .03(471) = 38.2 - 14.2 = 24

The other symbols in the list have options problems (e.g. negative bids on the spread) so I'll bypass those.

Best trade?

botpro · Feb 27, 2016

oldnemesis said:
Trade T:
http://finance.yahoo.com/echarts?s=T#{"range":"5y","allowChartStacking":true}
Jan '17 30/25 bull put spread for a net credit of $44

Which quotes did you use? Shouldn't the credit be rather $47 or $48?

oldnemesis · Feb 27, 2016

botpro said:
Which quotes did you use? Shouldn't the credit be rather $47 or $48?

The bid on the spread was $44 when I read it (Options Xpress). It's entirely feasible that a higher fill could be obtained.

botpro · Feb 27, 2016

oldnemesis said:
The bid on the spread was $44 when I read it (Options Xpress). It's entirely feasible that a higher fill could be obtained.

Since you gave a link to yahoo I assumed you would have used the options data there. They have:

Code:

AT&T, Inc. (T)
37.13 -0.24(0.64%) NYSE - As of 4:00PM EST
After Hours: 37.12  -0.01 (0.03%) 7:41PM EST

Puts Jan 20, 2017 :

Strike Contract Name    Last    Bid     Ask     Change  %Change Volume  OI      IV
...
25.00  T170120P00025000 0.39    0.35    0.38    0.00    0.00%   604     57352   31.25%
28.00  T170120P00028000 0.61    0.59    0.61    0.00    0.00%   2       24213   27.71%
30.00  T170120P00030000 0.85    0.82    0.87    0.01    1.19%   9       25441   25.90%
...

Yes, correct: 0.82 - 0.38 ==> $44.

I just wonder how you calculated the probability of 93% for the above case?

Update: I think I've found the formula here: http://investexcel.net/probability-of-a-successful-option-trade/
I'm going to try it out...

oldnemesis · Feb 27, 2016

82 -38 = 44 (sell at the bid buy at the ask)

That's what I have.

Spectre2007 · Feb 27, 2016

What are 2 sigma April expiration options selling at..on SPY...

oldnemesis · Feb 28, 2016

Here's a probability calculator that produces numbers that are not significantly different from the data used by OptionsXpress in getting the probabilities I show above.

(the data the calculator is using is a little stale for non-subscribers, but since price behavior is not really log normal anyway, AND we're looking far into the future and ignoring the probability of significant events changing the distribution, it's as good as anything else)

It's a neat little product and gives some good big picture information if you trade spreads:

http://www.optionistics.com/calculators/probability-calculator/SPY

botpro · Feb 28, 2016

oldnemesis said:
http://www.marketwatch.com/story/in...ont-use-this-easy-options-strategy-2016-02-26

Nice list but I'll do my own trades on it:

Trade T:
http://finance.yahoo.com/echarts?s=T#{"range":"5y","allowChartStacking":true}
Jan '17 30/25 bull put spread for a net credit of $44
Yield = 44/456 = 9.6% in 328 days or 10.7% annualized
Prob = 93%
Expectation = .93(44) - .07(456) = 40.9 - 31.9 = 9

I'm trying to learn and understand these figures by calculating them myself.
But I'm getting some significantly different results, so I would like to ask if the above calculations were
done by yourself and their accuracy verified by you, or do these calculation results come from a 3rd party?

Where I got struck is the calculation of the dividend: are you really sure about the 9.6% dividend above?
Isn't that nearly like a "free lunch" then? ;-)
And: how was the number "456" computed? Is it maybe $440 + $16 commission?

I only get an implied dividend of IDIV=2.35% for the K=30 leg, and IDIV=1.04% for the K=25 leg, if that makes any sense.
(I admit I only just recently started learning about IDIV)

This is the data I used for the above case (from yahoo site):

Code:

AT&T, Inc. (T)
37.13 -0.24(0.64%) NYSE - As of 4:00PM EST on 2016-02-26-Fr
After Hours: 37.12  -0.01 (0.03%) 7:41PM EST

Calls Jan 20, 2017:
Strike ContractName     Last    Bid     Ask     Change  %Change Volume  OI      IV
...
25.00  T170120C00025000 12.10   10.75   13.55   0.15    1.26%   10      477     47.51%
28.00  T170120C00028000  9.15    8.90    9.35   0.45    5.17%   1       6134    20.80%
30.00  T170120C00030000  7.17    7.10    7.30  -0.27   -3.63%   10      9298    15.63%
...

Puts  Jan 20, 2017:
Strike ContractName     Last    Bid     Ask     Change  %Change Volume  OI      IV
...
25.00  T170120P00025000  0.39   0.35    0.38    0.00    0.00%   604     57352   31.25%
28.00  T170120P00028000  0.61   0.59    0.61    0.00    0.00%   2       24213   27.71%
30.00  T170120P00030000  0.85   0.82    0.87    0.01    1.19%   9       25441   25.90%
...

Thx.

oldnemesis · Feb 28, 2016

I really can't provide private tutoring. Sorry

To answer my own question above the best trade is VZ:

Prob = 97%
Expectation = 24

botpro · Feb 28, 2016

oldnemesis said:
I really can't provide private tutoring. Sorry

Ok, I understand, wish you well, bye.