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The Beerish Bull's Great Chronicle of Alcohol and Poor Decisions
- Thread starter beerntrading
- Start date
Shorted MU calls a min before FOMC...back in a few to explain...I gots stuff to watch!
Out of MU and CSCO shorts...good profits on both. I'll pay the figures when I get to work.
Out of the DAL short at .06 (was opened for .47).
MU was .05 (opened for .25)
CSCO was .03 (opened at .32)
So, good day today (for realized gains, at least). I did overlook CSCO's earnings release, but this actually wasn't that bad of a deal for me. Had it gone the other way, I could have closed the whole position and still made money.
MU was .05 (opened for .25)
CSCO was .03 (opened at .32)
So, good day today (for realized gains, at least). I did overlook CSCO's earnings release, but this actually wasn't that bad of a deal for me. Had it gone the other way, I could have closed the whole position and still made money.
Out MSFT short at .06 (opened for .53).
100% winners this week's expiry (though, did take a beating in the longs).
100% winners this week's expiry (though, did take a beating in the longs).
Ok, I know all these live calls get a little messy, so I'll just rehash the whole strategy here. The strategy is a bullish diagonal strategy on CSCO, DAL, JPM, MSFT, and MU.
The positions I have now are all long. Based on the calls here, the shorts I've sold have been winners pretty much across the board (one MSFT was a loser, but still net profit there). The profits shown are a percentage of the long side of the position only. Some of them actually had higher absolute risk (i.e. the net spread), but that's more than I want to explain or you want to read.
The gains on this are lower than if you calculate the spreads I've called on a 1:1 basis because when I have a larger spread, I need to take smaller positions to keep risk level. Meaning, I will only have 60% as many short contracts as long, for example (as was the case with MSFT). MU, conversely since it was a straight calendar this week I could do 1:1, as I did (in error) with CSCO because of only a $1 spread. Basically, when the spread minus short premium is equal to the initial cost of the long, I can do 1:1. If not, I reduce risk so it equal to that in absolute dollar terms.
Positions are (all long currently):
CSCO $33 Dec Call (30.37 currently). 38% realized gain, 58% unrealized loss in the long.
DAL $55 Dec Call (47.53). 72% realized gains, 52% unrealized loss.
JPM $95 Oct Call (90.74). 54% realized gains, 44% unrealized loss.
MSFT $75 Oct Call (72.49). 28% realized gains, 41% unrealized loss.
MU $31 Oct Call (30.38). 15% realized gain, 52% unrealized gains.
Overall, against my initial outlay, I've taken 39% gains on this, and I'm sitting on 26% unrealized losses.
This isn't an uncommon place to be in a diagonals portfolio this early in the play (this will wrap up mid-October, before earnings season and when they will retain much of their earnings volatility value). Usually it takes about 3-6 weeks of shorts to pay off the long side. DAL and JPM have had two rounds on the short side; MSFT has had 3. Just one for CSCO and MU (CSCO is showing high realized gains because I forgot earnings and got lucky). The volatility early in the play wasn't good for me, and it's pushed up realized gains and unrealized losses. Had I held my VIX hedge positions (like I knew better!!!
), the realized gains on this would be somewhere in the neighborhood of 75-90%. Unrealized would be unchanged. But lesson learned and I'm still ahead (I'll just go ahead and say it, I'm a fucking idiot!)
I want to make a note of MSFT. For those playing along at home, I shorted the 72.50 call on 8/11 while it was ATM. That's outside the norm for me, usually I short NTM (slight OTM) or OTM. But see how this one closed exactly ATM today? And see how steep the chart is during the last 10 mins of today? This is a common pattern I see when settlement will likely fall exactly ATM (+/- 0.02-ish); MSFT made a great showing on this front. The charts confirmed it after I was eyeing it the day before I opened it. Obviously, I wasn't confident enough to hold when I could dump it for .06 earlier in the day, but this is a pretty reliable pattern. I actually was doubting myself on MSFT because the chop the last few days, I'm quite pleased to see this came to fruition in such a clear way. SNAP did it today too (and I called it live on @Max E.'s STHH thread). I also thought DAL was going to settle at $50 today, which is why I sold an ITM call at $50--obviously missed that one, but profitable nevertheless.
Here's the MSFT post, and the purchase is the post that follows it.
The positions I have now are all long. Based on the calls here, the shorts I've sold have been winners pretty much across the board (one MSFT was a loser, but still net profit there). The profits shown are a percentage of the long side of the position only. Some of them actually had higher absolute risk (i.e. the net spread), but that's more than I want to explain or you want to read.
The gains on this are lower than if you calculate the spreads I've called on a 1:1 basis because when I have a larger spread, I need to take smaller positions to keep risk level. Meaning, I will only have 60% as many short contracts as long, for example (as was the case with MSFT). MU, conversely since it was a straight calendar this week I could do 1:1, as I did (in error) with CSCO because of only a $1 spread. Basically, when the spread minus short premium is equal to the initial cost of the long, I can do 1:1. If not, I reduce risk so it equal to that in absolute dollar terms.
Positions are (all long currently):
CSCO $33 Dec Call (30.37 currently). 38% realized gain, 58% unrealized loss in the long.
DAL $55 Dec Call (47.53). 72% realized gains, 52% unrealized loss.
JPM $95 Oct Call (90.74). 54% realized gains, 44% unrealized loss.
MSFT $75 Oct Call (72.49). 28% realized gains, 41% unrealized loss.
MU $31 Oct Call (30.38). 15% realized gain, 52% unrealized gains.
Overall, against my initial outlay, I've taken 39% gains on this, and I'm sitting on 26% unrealized losses.
This isn't an uncommon place to be in a diagonals portfolio this early in the play (this will wrap up mid-October, before earnings season and when they will retain much of their earnings volatility value). Usually it takes about 3-6 weeks of shorts to pay off the long side. DAL and JPM have had two rounds on the short side; MSFT has had 3. Just one for CSCO and MU (CSCO is showing high realized gains because I forgot earnings and got lucky). The volatility early in the play wasn't good for me, and it's pushed up realized gains and unrealized losses. Had I held my VIX hedge positions (like I knew better!!!
), the realized gains on this would be somewhere in the neighborhood of 75-90%. Unrealized would be unchanged. But lesson learned and I'm still ahead (I'll just go ahead and say it, I'm a fucking idiot!)I want to make a note of MSFT. For those playing along at home, I shorted the 72.50 call on 8/11 while it was ATM. That's outside the norm for me, usually I short NTM (slight OTM) or OTM. But see how this one closed exactly ATM today? And see how steep the chart is during the last 10 mins of today? This is a common pattern I see when settlement will likely fall exactly ATM (+/- 0.02-ish); MSFT made a great showing on this front. The charts confirmed it after I was eyeing it the day before I opened it. Obviously, I wasn't confident enough to hold when I could dump it for .06 earlier in the day, but this is a pretty reliable pattern. I actually was doubting myself on MSFT because the chop the last few days, I'm quite pleased to see this came to fruition in such a clear way. SNAP did it today too (and I called it live on @Max E.'s STHH thread). I also thought DAL was going to settle at $50 today, which is why I sold an ITM call at $50--obviously missed that one, but profitable nevertheless.
Here's the MSFT post, and the purchase is the post that follows it.
Oops, missed a live call here--sold MU $30 Friday calls today. I got .37 on my fill, but if you want, you can hold me to the close of 0.30--still a trade I would have taken.
Look at the FAANG and draw lines on your charts at:
FB 170
AAPL 160
AMZN 975
NFLX 170
GOOG 925
And while we're at it, NASDAQ 6300
Do you see it? The price loves to approach these levels, but hates to stay there. AMZN is the biggest outlier here, but tacitly showing the same pattern.
FB and NFLX show it best, but AAPL gets a good mention here. Look at the 150 price action on all three. And 160 on NFLX (and to a lesser extent on FB). See the same patterns?
So, do we gap up, stall down, or open at S/R and drive up on a nice long green candle? If I was in a position on one of these (actually I am...and more than one, long), I'd be looking at the broader market for evidence of either bullish or bearish sentiment. I'll let you wander the forums in search of that sentiment, but enjoy the show tomorrow.
FB 170
AAPL 160
AMZN 975
NFLX 170
GOOG 925
And while we're at it, NASDAQ 6300
Do you see it? The price loves to approach these levels, but hates to stay there. AMZN is the biggest outlier here, but tacitly showing the same pattern.
FB and NFLX show it best, but AAPL gets a good mention here. Look at the 150 price action on all three. And 160 on NFLX (and to a lesser extent on FB). See the same patterns?
So, do we gap up, stall down, or open at S/R and drive up on a nice long green candle? If I was in a position on one of these (actually I am...and more than one, long), I'd be looking at the broader market for evidence of either bullish or bearish sentiment. I'll let you wander the forums in search of that sentiment, but enjoy the show tomorrow.
This was a cool trade. Obviously not for me, I'm getting slaughtered in it. But for what it demonstrates about the value of mid-term (2.5-3 month) diagonal play.
So, let's take the context out. Shorted a call for .37 (or .30, I hope you trust me on .37 after how this one went). It's now .68 and a massive loser by any tally. Stand alone, a spec short like that is stupid anyway, so it was a bad trade from jump, and a bad trade in hind sight.
Add in a little more context, my position was a diagonal with the long side being the Oct 20 $31 call. This too would be a foolish trade to open on 8/21 when I opened the short. When the trade was opened, the long side of this would have been about 1.50. That would have given a debit of 1.13. If we look at the upside of these, they have stayed in lock-step (more or less) on about a $1 advance on the underlying. So, there was no upside to this position between about 29.70 and 31 on the underlying. There was a downside under 29.70 because the long would have lost value quite a bit quicker than the short.
Now, full context, and why this was in fact a good trade (in spite of hindsight evidence that directly contradicts that). I opened the long side of the trade on 8/7 when MU was hovering around 28.30 and paid a debit of 1.28. That went pretty quickly in my favor, and if you scroll up the page, you'll see I pulled another .20 out on a quick overnight play. So effective cost basis is 1.08. Then the short when underlying was at around 29.80. Price opens Tuesday, slaughters my short and moves against me. But compare the price of the Oct 20 and 8/25 positions I have open. They moved in lock-step with each other, so I lost nothing in unrealized gains. I still had the full .37 upside, and this would have been good for anything down to about 28.80 (which would have kept my long call equal to it's opening price with the two shorts intervening for a good profit). But, the downside on the other side doesn't really start to kick in until around 30.90 when the short gets near a 1:1 delta, while the long is about half that, plus that's offset by the premium (which is factored into the 30.90 point just mentioned). So, no change in account balance, the only difference is I'll have to realize this loss.
Now, the worst that can happen is the price stays propped up and I need to close the whole position because the increased value of the long means I have a lot of potential to lose in that, while the shorts have pushed down the whole position's realized gain. So, no real downside between 29.80 and 30.90. If we go much above 31, I stop out, and still win on the position. If we go much below 29.30, I consider stopping out, and take a win on the position. If we're under between 29.63 and 30.37, the short turns out to be a winner because the long lost less value than the short did (or the long even gained). So in reality, the full position has no downside between 29.50-ish and 31-ish, but a .37 upside. The downside to me is that I have to close the position early because the imbalance in realized vs. unrealized.
That is to say, the worst I can do on this is having to realize my long term gains (that I could otherwise continue shorting against through September). The upside is .37 plus the still unrealized gains.
I was totally wrong on MU's price movement (maybe, we still have two days), but the short was still a good trade. And that's why I like diagonals. That said, this brief bear is beating the hell out of my other positions. I think I'm sitting about even if you add back in realized gains to the unrealized positions overall.
Missed the MU closing call (again!!!)...still profitable though--even if just a few pennies.