Hi all, some great plays and ideas floating around. You guys all seem to ‘get-it’. Safety and good positions can equal some great profits and minimize the risk.
AAPL seem pretty determined to make a run towards its earnings announcement on the 18th. The new 4-S phone is flying off the shelf as usual and later the newer I-pad. So good things coming with them.
I still like the MSFT calendar trade. Make about the same as AAPL without as much volatility. I am buying the Jan 2013 and selling the Oct-22nd at the strike of 27. My plan is to sell each week for around .20 or more. That is times 60 weeks. If that works it will be around 300% ann ROI.
I have been asked what to do if the stock jumps past your sold strike with a calendar spread. If doing weekly options with the stock, here is what has worked for me. First, I am in no hurry to jump to the next strike. Stocks do go up and down so don’t be too anxious to jump up. Second, if moving up one strike a perfect time is the week before the monthly expires. This is that week, so before you would have sold this week’s option you can jump ahead two weeks and get a decent premium. This saves you from having to jump all the way into next month. It doesn’t all ways work but it is the first thing I check when thinking about rolling up one strike.
Keep all the good trades posted so other can continue to learn and find new positions to evaluate.
47 comments:
@All,
Long weekend in Canada was good. Going to look at opening some SPX on Thursday again like I did last week.
I like the ROI on the calendar plays but have not even looked at them or the strtegy yet. I will look at them in about a year or so I think.
Some pumps this week in the market. I have some sources saying there will be a big move down in the market soon. We shall see. Just be aware.
@fulgore - what broker do you use to trade SPX options?
Here's a trade I just put on.
Spread on GMCR 100/110 Oct 21 Calls for a credit of .46
GMCR looks like it's putting in a 2nd leg down with the market rallying.
Fulgore; there has been a lot of 'up' lately but with earns coming for many companies soon, I think more good news than bad. Time will tell us but I have learned that it is ok to guess, just don't bet on it too much.
I did open a trade this morn. A calendar spread with MCD bought the jan 2013 87.5 and sold the 10/22 for a 8.8% ROI for two weeks.
The thought being MCD has dividends, fairly stable price range and offer weekly’s
@jerry, for the calendar spreads what would happen if the stock goes way past the strike price (ie buy out). With vertical spreads you are capped with the higher strike price call, but I'm not clear what happens with the calendar spread.
@Jerry, thanks for the tip on buying in a spread.
MSFT is my first American option/stock i have bought. I was only in European stocks up until now. The thing i like about American options is that there are more choices in weekly's.
Btw on what strike price did you sell the MCD call?
jerry (or others), what about earnings or dividend payments with the calendar/diagonal spreads? anything to watch out for?
DMK; right before the close or sometime during the Friday of expiration you buy to close the sold call and sell the one you select for next week etc etc. So instead of letting it just expire, since it is in-the-money, you will need to close and open a new position and do it in a spread order. I have a lot of AAPL for Oct 21 at the 385 call. So I will be doing that come Friday of the 21. As with all options, the closer the strike you use, to the existing stock price the higher the ‘time’ value. Your question is often asked but an example from real life might help. Assume you had sold the 350 strike and now we find AAPL trading around 400. If it were Friday you would buy back the 350 for this week for approx. $51 and you would sell the next week 350 for maybe $54. So you would have still made 3.00 As there is little ‘time’ value so far from the current stock price that explains the low prem. That is why most will roll up the selling strike somewhat. So in the above example I would probably roll out to either 2 weeks away or maybe a whole month and buy to close the 350 and sell to open the 360 etc.
Pascal; I bought the Jan 2013 @ 87.5 strike and sold the Oct 21 @ the 90 strike
LUX; I take into account those factors and review the rules outlined in book. Basically I want a stock that has an upward bias, dividends are nice and weekly options are a must.
Thanks Jerry.
I sold the 123/125 calls on the Spy today for, closed nicely.
will be looking to add to the 123 Spy call bear spread tomorrow. Should be able to squeeze .10
Hello to everybody...
Jerry thank you for the additional chapter of your book.Really interesting.I try to follow your rules.
I sold the AAPL 350/355 OCT14 spread for 0.18 on Monday.In addition, I tried my first calendar spread with MSFT yesterday Oct12. I bought JAN 2013 MSFT 25 for 4.18 and sold MSFT OCT22 28 for 0.18.This is 4.31% and net 4.13%.I trade with Interactive brokers.
Good luck everyone.
George
@DMK, I just swtiched to Interactive Brokers - cheaper for us Canadians.
Just took a SPX 1140/1145 put spread for .10
51 points for 1.5 days
@fulgore, do you just enter the SPX ticker in optiontrader @ IB? I think I found it but the spreads are really wide...
@DMK, I am still new to IB, but I found the online trader easier to use when doing spreads.
Spreads are wide sometimes. Good for entry, bad for exits :)
@fulgore- but for spreads you need to buy one of the legs! I was looking at it earlier and it looks like the ask of the other leg is higher than the bid! What are you seeing on your end on bid/ask?
@ people who do calendar spreads on MSFT
Why do you all use the 2013 when you can get an extra year for only roughly .50$ more?
Has anyone looked at the same trades on INTC?
Any chance you may get called on the long side just prior to an ex-div date?
@Patrick, those are good questions
I want to buy some extra MSFT and 2014 for just .50 extra is not bad.
INTC? no not jet but i'm going to.
getting called on the long side just prior to an ex-div date? HMMM dont know. Jerry?!?!? ;-)
Tomorrow i am going to sell some puts on Allianz.
.35€
16% cushion
8 days trade
I was thinking about doing some calendar spreads on INTC as well...haven't gone for it yet though.
Hi guys, you can look at the time val to see if being assigned is in the cards. Even in the money it still insn't a done deal on getting put to etc.
For those looking at INTC. It doesn't have weekly's if I remember correctly.
Regarding going out to 2014 yes it is a good deal but just to long for me, but a good deal all in all.
Jerry
Jerry,
INTC does have weekly options. I was thinking about buying the Jan 13 22.50 strike for 3.19 and sell Oct 22 24.00 for .32. That's about a 10% return in a little over a week. INTC is currently trading 23.39. Thoughts? I'm a little skeptical with earnings next week.
Here's the official cboe site showing all weeklys available:
http://www.cboe.com/micro/weeklys/availableweeklys.aspx
@MSFT cal spread... I ran some backtesting and starting in Jan 2011 MSFT was trading for about $28. so we would buy the $28 2013 calls for $3.33. At the end of 9/30 you would net $3.26 so you would be close to 100% ROI on the original purchase BUT the calls are now $2.38 and they will continue to fall... So my question is,what would be the benefit to doing this calendar spread vs a normal vertical spread?
I have Intc calender spread buy Jan 13 22.5 and sell Oct 14 2011 23, but I roll it to Oct 21 2011 23 for .40.
@DMK, I don't really look at the bid / ask , i just choose vertical put spread and see what they give me.
I also use ToS plateform to give me some premiums there too (just for reference)
Hi
Unless something ugly happens (or a major rally) in the next few hours:
17 weeks in a row on SPX PUTs (and 1 week selling the Calls for an Iron condor). ROI: 0.78%/week or 3% a month.
Ill try collecting crumbs again next Monday.
Have a good weekend
rhm
Jerry --a question related to the LEAP you buy to sell the short weeklys against. WHEN, do you decide to buys back that LEAP? Do you wait for the accumulated profits from the multiple short weeklys to exceed the cost (usually loss) of the LEAP? OR,----Exactly how do you decide when to do something about the LEAP LOSS. Or, ---do you just take the loss as you continue to sell puts against it? Does it ever expire in your favor???---I'm thinking it does NOT.
Can you give EXAMPLES?
Thanks--Bill N.
This is a test posting
Let me introduce myself. Just bought jerry's book. Been following this blog the last few weeks and decided to start posting. Been trading all sorts of options for the past few years with varying success. Usually trade spreads much closer to the index price than you guys do and have been burned many times because of it. Interesting how far away from the underlying stock/index price you guys get. Don't you find the premium being eaten up by commissions?? Like Jerry's underlying principle of 1-3% per week. I usually trade weekly SPX, SPY, USO, FAS and recently AAPL. So your comments about AAPL are spot on. Have also purchased LEAPS using a covered call program. This is getting long in the tooth so I will sign off. Am on vaca next week so I wont be posting until I get back but interersting reading your comments and trades.
Oh by the way, I am a CPA hence taxman
Welcome Taxman!
I'm looking at my AAPL callendar call spreads which I've had for some time. Have Jan 21 '12 395 long and have been selling calls, now at Oct 22 '11 at 400. As AAPL appreciates, I am incurring an ever increasing neg market value on the short call which will obviously need to be satisfied. Looks like you always have the difference in between strikes as 'money in the bank'. Looking at jumping up a strike (or two) when selling this Fri or...Extending the expiration on the long is expensive. Don't exactly see how these things terminate well. I know it is strange to be trying to figure this out when already invested/committed but that is the situation I find myself in. Any suggestions or comments?
Hi Bill, lol, first you don't have to buy the leap back, you get to sell them!
The loss or possible loss comes from the time val of the leap being eaten up. But all of my aapl leaps are in the money. Regarding do I just take the loss. I assume you mean if there is a loss. It is not a sure loss but generally the long leap is a substitute for owning the stock. There can be some loss with that part of the spread. The idea is that by selling each week or month you can recoup any cost of the leap and the rest of the sold calls are money in the bank.
That is one point of the purchase of the longer (far out) leap. It gives you time to make that back and more. I have some MSFT and they have such a lower cost than AAPL that you can make back the cost of the leap pretty quick. I am looking at some more MCD and also some INTC (yes they do have weeklys..lol) AAPL leaps are expensive but then the call prem’s are high..
I-HAVE-OPTIONS;
Not sure what you mean by ever increasing negative? Maye more than you paid for them but you can always sell next weeks for more than they are now priced at? Every week you can make money. I have some AAPL 385’s that I have sold and yes they cost more if I buy them back but I will do it in a spread and sell next weeks for more than they cost.
But all that said, I will probably buy them back and sell the 380 leap as I have some profit in them as well as what I have made selling the previous ones. I think I have a better use for the money.
One problem with these stocks that move so fast is that they can run away from you. (aapl) Things I can do are go out to the nov and sell the 395 etc and make less but gain it in difference between the bought ones and sold ones. A danger in that is that then the stock drops back and you wasted a roll up..lol. No one said this is easy !
I now have a bunch of AAPL, MSFT, MCD and INTC come Monday morn.
Never forget that plain puts and Vert put spreads are a viable way to make 2%+ pre week.
Welcome aboard Taxman...
Jerry
Question until what time can I buy or sell options for example on Microsoft on expiration day?
Hello all
I've opened some new positions this week on:
1. MSFT (calendar spreads)
2. MCD (calendar spreads)
3. Allianz (sold puts)
4. AEX (sold puts)
I'm also looking into INTC and BMW not sure about Intel though.why are you guys buying Intel?
Opened 1090/1070 SPX weekly for 0.20. Will watch very closely as cushion is at 11% from open and expires as per that stupid Friday AM rule this week.
good luck all
rhm
Friday am???
For those doing SPX and other index plays, do be careful and add extra cushion. This is a major earnings week. The news could certainly go either way. Of the things that can happen with earns, two out of three can equal bad news, or good if naked calls are used.
1.Earnings blow by the analyst – stock up
2.Earnings are big but not to analyst expectations – down
3.Earnings don’t meet analyst --very down
Extra caution this week is the by-word
@DMK
Yes. SPX monthly trades "european" styles, SPX weekly "american". On the third week of every month the weekly IS the monthly contract and they trade European.
European basically means the OPTIONS stop trading end of day Thursday but the final closing price is what the SPX OPENs on Friday AM. The risk is that all hell breaks loose overnight (thur-friday) and it GAPS on open and you are ITM (and cant do a thing about it). Its rare but it means needing solkid cushion into the close on Thursday.
All other weeks it expires Friday like other options.
The CBOE website explains it in detail
regards
RHM
@Jerry, Good point on the index and earnings this week.
@Rhoptions - wish I could join you on the 20 point spreads but I am not there yet with my capital. But if I was I would be doing many of the moves you have.
As for your most recent play I definetly would watch it closely. I feel as though we will have a couple of bad earnings and will see the market for SPX drop 40-50 points.
I will wait till WED or THURS to open again probably.
@Jerry
On what day do you usually sell or roll new call options on Microsoft, Thursdays or Fridays?
A quick update to rhmoptions post on SPX options:
ALL SPX options (whether weeklys, monthlies, or quarterlys) are European style options. There are NO American style SPX options traded at the CBOE. "European style" has nothing to do with whether options are settled AM or PM, but rather everything to do with how they are (or can be) exercised. American style options can be exercised at any time before they expire whereas European style options can only be exercised the day before they expire for the monthlies or on their expiration date for the weeklys and quarterlys.
Hi fair enough. ( I thought I had read the headline lime sox weeklies move to American style expiry a year or so ago ) my mistake in any event the info about Thursday vs Friday for value is as I said more or less.
Rhm
Has anyone given any thoughts to doing calendar spreads with the SPX?
Has anyone done calendar spreads with puts (long deep in the money put on which you sell a weekly put ATM)? Would it require margin or if as long as the sold strike is lower than the long, you're ok?
Patrick
Pascal. the thing that make the final decision is how much time value is left. If on a Thur there is only pennies left i roll them. If by Thur afternoon there is still .25 or so i let it ride over till Friday.but when in doubt Roll 'em.
Patrick; i don't trust the index's for calendar's, but I have never done them so maybe?
Jerry
Thanks Jerry
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