Trading in Luxury

i did some reverse engineering of a promo-teaser email i got awhile back, few details were given but i managed to figure out the following:
the stock was AAPL and the trade was put on in mar at a pps of about $600.

the position was a 450/480 bull call debit spread using the apr options, bto apr 450 call, and sto apr 480 call, for a $27 debit.

the position was about 20% ITM.

at apr opx the trade was closed for its max value of $30, AAPL @ about $573, for a return of 11% for the month.

going forward i looked at the next months spread,
on mon apr 23, (pps@ $571) an AAPL may 470/500 bull call debit spread was going for about $25, return about 20% if AAPL stays above $500 going into opx. (about 12% ITM)

AAPL did get down to about $530 at opx.
 
i was on a webinar from john ondercin. it was informative. here are a few hi-lites, as i interpreted them.


diversify your trades by sector, strategy, and time.

get good at three option strategies, and only three. any more takes away from your focus.

start with one strat until you get it down cold and then move to the next.

he recommends these three strats,
collars
vertical credit spreads
calendar spreads

he also likes LEAPS for straight puts or calls

straddles? NO, hard to beat the vig you fight going in and out.

debit spreads? NO, time decay works against you.
 
i was on a webinar with aj brown talking about trading long straddles. here are some hi-lites as i interpreted them.

pattern recognition and pattern utilization are key, in other words know the charts and look for repeating patterns and how best to trade them.

option price changes follow three important aspects

price movement of underlying
volatility changes
movement of time

straddle trading uses the following considerations

bell curve of time value, centered at the ATM strike

time decay curve, greater decay rate at end of option life

implied volatility vs historical

movement of implied vol in response to upcoming events

reversion to mean of implied vol

look for upcoming events

enter the straddlle when things are quiet

look for IV at or below historical and/or below mean

use ATM puts and calls, just out in time

target gains at 10-20% for exit prior to event

not all will be winners
 
the spy-dicator doesnt normally look like this with the price so far below the option volatility weighted value....

http://stockcharts.com/h-sc/ui?s=SPY:VXZ&p=D&yr=0&mn=6&dy=0&id=p41914154310



Quote from traderlux:

Modified SPY long/short indicator

i have modified the "kevindicator" to make it more intuitive for my own understanding. you can read about the original (thanks to kevin) at link to stockfetcher forums, (you can read without sign up), look for
"Interesting - VXX:SPY ratio accurately calls recent tops and..."

http://forums.stockfetcher.com/sfforums/?qrid=1276483044&fid=1002

one problem i have with the original indicator is that the vxx has a built in negative decay due to rolling futures contracts. i have recently tried using vxz instead, it looks a little cleaner. also, with the ratio being vxx to spy, it was just backwards of how i would look at it.
so here is my version, using vxz and reversing the ratio. realize the roc reads opposite the original now also. you want to be long spy with a positive roc.
http://stockcharts.com/h-sc/ui?s=SPY:VXZ&p=D&yr=0&mn=6&dy=0&id=p41914154310

note both the original and the modified indicators turned long late aug and remain on a long signal.
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