Trading in Luxury

risk reversals....


Risk reversal is an options trading strategy that aims to put on a free options position, which is one where you neither pay nor receive upfront payment (credit), for the purpose of leveraged speculation or stock hedging.

Risk reversal is a little known strategy in the stock options trading scene but a pretty common term in the forex options trading scene and the commodities options trading scene for its hedging power, hence the name "Risk Reversal". Even though the name makes the strategy sound very sophisticated, it really is a very simple options strategy with a very simple underlying logic.



http://www.optiontradingpedia.com/risk_reversal.htm
 
from cnbc options action Fri. 7, JPM ($43.64) with earnings coming on Fri.14,
consider going long weekly calls at 43 strike ($1.21/1.25), or 44strike ($.66/.69)
 
GOOG IC results using a "weekly" option, jan555/-565p and -670/680c (E/R scheduled for thu, jan 20)

trade opened on thu jan 13, with $1.35 cr and closed thu jan20 (puts closed in am and calls closed in pm) with a remaining cr of $0.10. the goal was to keep $1.20.

the call side of the trade was the problem. it was difficult to get out and save some credit. the trade exit was watched all day.

reinforces my view to stay away from these short term credit spreads, and watch out for earnings releases.

did not want to hold over E/R. now looks like it might have been safe to hold over.
 
QQQQ trade with weekly options.

Here is a trade idea that I that got from either ET or Y!, can't remember.
The straddle part came from an idea in a Bernie promo.


Buy calls after several down days that are opposite to trend.

Buy puts after several up days that are opposite to trend.

Trend based on 1 week chart.

Trade weekly options with strke ATM, or 1 strike OTM.

Open trade on thu, fri, mon, or tue.

Close trade after several days.

Cost of option should be about $0.33 to $0.50

Trade could also be placed as a straddle.

Buy option in direction of expected move.

Buy as a hedge, cheaper option in opposite direction.
 
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