Hi all, I hope some money is being made this week. What a run by AAPL. I did pretty well with a wide calendar [vertical] spread. I had bought the Jan 2013 450’s and sold this weeks 485’s/ The goal is to have each week expire and then move out 25 points from the stock and sell the next weeks. Well AAPL ran right on past my 485’s but I made good $ anyway. I closed the spread as I want to open another tomorrow and it will be the Jan 2013-485 and sell the next week 510. If AAPL continues up I will do this weekly. For me it has seemed to be the least stress and most profit for the time being. The goal next week is for AAPL to run to 505 etc and expire and I make not only the premium that I sold the previous week but the bought one for Jan ’13 goes up a bunch also.
One negative is you need an account over about 5800 per option The downside is AAPL might pull back some but if you take the long term approach and just keep selling calls around 25 pts above the stock you should be fine. AAPL could drop down to 460 and you sell the next weeks 485 and you are still making money. It is somewhat like the traders that sell puts and figure if the stock gets assigned, they will sell covered calls until the stock come back.
This wide spread has been good to me with AAPL and GOOG also.
Keep all the great suggestions you traders have been bringing forward. We all learn and develop new ideas and ways to trade.
Thanks for sharing.
Jerry
62 comments:
Hey Jerry, you a mind reader or what? I have some AAPL LEAPS, 420, 430 and 500. Have been just letting them appreciate (WOW) but really planned to sell calls against them. Good to see how far out to go. In the past I have had a difficult time watching the short position diminish the long. But this has got to slow down soon(?) and then I'll be back to selling against them. Have some debit spreads buying the 490's selling the 495's for a net debit of under $1 with a max prem accrual of approx $5, net $400/contract. These are for Apr earnings expiry. This worked great at 420/424 at Jan earnings and it is screaming right now. Could lose all the upfront premium but not really that much invested. Not really within 'the rules' but.... Comments anyone?
VIX is up a bit...we need another move up to be back in business selling naked puts with enough cushion to get needed premium. I thought the Iran news, then the Greece news, would have done it, but the market is complacent. When is the correction coming? It wouldn't be a bad thing, however, to keep it going until next Friday...
Maybe there is no correction coming, according to this guy The Dow will hit 20,000 by the end of this year:
http://video.cnbc.com/gallery/?video=3000026039
Haveoptions.
Try this into AAPL earnings. Into Jan earnings, I placed an AAPL 420/430 debit spread for net 5.75 then sold a naked 365 for 5.80 to pay for it. No money into the trade only had to hope AAPl didn't tank below 365 like it did on the Oct miss. Netted 3.95 when I closed it after the earnings announcement. Gotta love it. More dead presidents
Hi Jerry, Just finished reading your book and ran into this site from an Amazon link. For your AAPL 485/510 calender spread, I wonder if you have stop order in place when you enter the trade. It's not a big deal if AAPL drops to 460. What if it continues to drop to 450, 440, etc. At what point would you consider to close the trade for a loss?
Hi fusion, glad to have you aboard. I don’t have nor do I expect to put in place a stop on the AAPL position. Reasons, AAPL is still probably undervalued. A low PE, probably coming dividends, new I-Pad coming, new phone coming, an I-TV etc. In the past it has dropped some, last year it dropped 70 points or so and could do it again. But in the last 6 months it is up around 100 pts. I will just keep selling calls against the long ones.
So the long and short is I will keep AAPL and follow it down if necessary and then back up..lol
I like the fact that the mkt is down and aapl is up?
Hi Jerry, Thanks for your thoughts on AAPL. What about non-AAPL positions? I was looking for some "rules" you might have such as taking loss when naked put premium doubles in your book. I got burned many times without stop orders in the past.
Nicky, that guy is a freak. I've seen him three times on CNBC. He's called for AAPL to hit 1,000, GOOG to hit 2,000, and yes, the DOW to hit 20,000. I think he is full of it. But, CNBC keeps giving him air time. BTW, I was watching CNBC when they gave those shout-outs to TTWO (I thought about you when they did because I know you are big into that stock).
Dave, I here you on the VIX thing, but I'm not waiting for another down day to sell puts, I'm doing some now on this move down today. I already sold puts on the SPY today on this move down and am trying to get filled on T and IBM puts...no fills yet on those. I think this is going to be a very bullish year and pullbacks are going to be short and shallow. If the market goes down again on Monday, I'll sell more puts into that down move also and the same for Tuesday etc. I'm only selling puts on stock I'm willing to own and will play the WOF on that stock if assigned. My two exceptions are AAPL and SPX (cannot take possession of SPX). I trade AAPL more for trading purposes than WOF trades. I made 110 AAPL trades last year (all naked puts) and was a winner on all of them. I've made 13 AAPL trades so far this year (I’ve been slowed down due to the low VIX) and will be winners on all of them if AAPL closes above 475 today. I'm short several AAPL strikes for options that expire today with 475 being the highest. AAPL has gone parabolic, so selling puts on it is more dangerous now than usual, but it is Apple and AAPL is in a league by itself. But, you know what eventually happens to stock that goes parabolic (check out SLV...April/May of last year). But, I'm still trading it (naked puts)...with caution, now more than ever. GO AAPL!!!
@ Dave, You know it, got my order in for the Feb $16 puts, sitting there @ .45, I might just change it to .40, that should get it done, stock is at $15.88.
Some good premium on NFLX Feb 17 Calls 145 strike, 15% cushion for a week and you can get about 0.30.
I might jump on this near the close today.
Damo
Damo,
Did you jump on NFLX? I'm also looking at MSFT MAR VPS 26/28 paying about 4.5% for 34 days.
Mike
STO TTWO Feb $16 puts for .40, should have left my order alone could have gotten .45, oh well.
Rolled MSFT Feb $27s to Oct $28s, this trade soured me on spreads.
Not yet Mike, I've got an order in at the moment but not filled yet.
Nicky:
I hear you on that. I'm stuck with the Oct. 28's too. I've been playing both sides of this one to try and make some of the $$ back. A couple of weeks ago sold the 29 PUT, now I'm holding the March 30/31 bear CALL spread.
Just went with WYNN 105 weekly for .36.
Thanks for the update Damo.
Jumped on NFLX 165 & 160 while it was @$132
Aapl 470/440 for 1.5 days 16c 1.5 days. ToS wouldn't fill though spread was at 19c/20c, had to buy long then sell short separately. It dropped fast.
Tried wynn call = failed. Stop loss hit. It fell further since.
Tried Bidu call before it ran up = failed. Hit Stoploss. Since then up $13.Grrr
Honing my "long" entry skill at great pain. Won't give up.
Good weekend.
Filled on NFLX 145 call at .25, not sure I like the strong close though.
Had AAPL 485/475 spread for 3 hours at .06.
I've also been playing with day trading SPY – today I BTO SPY March 16 135 Put at 3.40 and sold it at 3.60 35 mins later. Plus I BTO March 16 133 Call at 3.55 and sold it at 3.65 1 hour 15mins later. So 0.30 for 2 hours.
Did the same on Wednesday but just with a call for 0.10. Still playing with this and trying to develop some rules – I think I've been lucky so far. I got the idea from fullyinformed.
Damo
So what happens if you are short calls against the Jan AAPL LEAPs and a big special divy is announced at the shareholder meeting on Feb 23rd? Is $25 a big enough cushion? If equity price jumps past the short position or even near enough to net cash, seems the calls could be assigned for the divy. Would you then have to pay the divy? Just thinkin' and hopin' and plannin' and dreamin'. What do you think?
Just received this email:
This email is to inform you of the potential dividend risk associated with your spread position in Microsoft Corp (MSFT), which is trading ex-dividend tomorrow, February 14, 2012. If assigned on the short side of the spread, you will be short stock as of February 13th, and therefore responsible to PAY the dividend on the dividend pay date.
This email was sent to you as a courtesy.
Nicky, Which broker are you using. That is pretty good service. Haven't ever received any such warning from Schwab or TK.
@ ihaveoptions, I'm using Tradeking, first time I ever received such an email, I have MSFT Oct $28s open on the short side, would someone actually exercise with so much time remaining?
@Nicky
I have the same position. Talked to my broker, he said shouldn't be a problem with so much time left. Not worth it for the buyer. I think if it were the March, and especially the Feb 28's, it would be a different story.
Jerry, any thoughts on this?
Rumour has it that AAPL are announcing the iPad 3 on the 7th March. Anyone have experience trading AAPL over product announcements? Would you consider it as risky as trading over earnings?
Damo
Kauai, No I have not had that problem if it is even a problem. Usually it is TV (time value) that determines if assignment is possible. If close, then it can happen as the dividend can tip the scales into possible assignment.
Regarding dividends, there is a lot of confusion in the option trading world. You will not owe dividends if you are long or short a position. You will if you are assigned the option, but that is usually something you can figure if the possibility is out there. TV minus the dividends should show you if the possibility is there. EX; if there is .20 in TV and the dividend is .25, you will probably get assigned. That is one reason I closed all of my MSFT. Just not enough premium available when you can only roll out for a nickel or so. But a dividend can and will affect the premium of an option so you need to be aware when they are coming.
AAPL has been a gold mine for the accounts that I manage. I like to buy a strike or two below the current price when I open the longs for Jan 2013. And I sell the 15 to 20 points above the current stock price. An example is today with AAPL up 9 the 485 for Jan 2013 went up around 5+ and this weeks 520 only went up 1.50 or so. You not only make the premium when opening, but the added of the rise with the long side. This makes for some outrageous ROI.
Jerry
Get a load of this guy!!!!WOW!!!
http://community.tradeking.com/forum/categories/general/topics/8196-my-ledger-for-those-interested/forum_posts
Regarding the post above, I still can't get over it, I thought my chump change every month was good, this guy has turned $77 into over $9,000 in less than a month!!!! And his goal is half a million by the summer, 1 million by the end of the year, ambitious young fella, good luck to him, buying options is all he's doing, no job, I'm jealous, not in a -hope to see him fail way-, but in a -I'm in awe way-.
@Optionsense
If you are interested in the idea of day-trading options check out this fellow. He has a pretty amazing system that I have benefited from many times now. (this is all just free advice, not trying to sell anything!)
http://seekingalpha.com/author/kevin-m-o-brien
This alone will make TTWO stock - RISE!
http://www.youtube.com/watch?v=X22lzaE9KeM
hi gremjun,for letting us know about this book.How much on average do u gain per month is it better than our jerrys 3-4% per month.Thanks for sharing
ali
Premium will probably die tomorrow, one could have STO Mar $15 puts on RIMM for $1.29, I might look into buying calls now, after reading how that guy is making a killing.
Thanks for the link Gremjun, I'll have to read the book. I've been enjoying my SPY trades, today I traded the April 134 call 3 times for a profit of 0.10, 0.14 and 0.14 – 0.38 total in one day, seems like easy crumbs and with a stop loss in place the losses wont run away on you.
Damo
Damo
If you are still trading dailies, YOU GOTTA LOVE THIS VOLATILITY TODAY!!!!
Taxman,
Might be looking at my first loss today, jumped in to soon. My SL has not been hit yet but I'll get out before the end of the day regardless.
Funny thing is I started reading the book recommended by Gremjun and if I had followed the rules from that I would have already closed for a profit.
Hopefully volatility keeps increasing for the rest of the week so we can get some good premiums for March nakeds.
Damo
I’m new to options trading and I’m realizing that I’m greedy to the core. Yesterday placed the weekly put spread for AAPL, selling the Feb12 480 put ($0.35 premium) and buying the 475 ($0.24). At one point this morning when Apple was up about 14 points I could have bought to close the 480 with an overall 1.8% gain. Now Apple’s down 11 points and I’m down 2%. If I had closed the short when I had a gain I could have closed the long for another gain and been up a total of 4.6% in one day. Similar thing happened to me last week with NFLX, took a loss on that one. I just need to take my 1% gain as soon as it happens. Hopefully the rest of the week will give me the opportunity. Thanks Jerry and everyone for the guidance on this blog.
Dutch
Sounds like the GIGO method would be good for you, *get in get out* - with a profit.
Grejun,
What chart platform do you use that has the IMI indicator he mentions?
Ed
Finally AAPL is taking a little break. Once the speculators are out, will it keep going up? It seems there are still large players buying for the long term. Nobody wants to take the short side right now. I'm glad to see the most valuable company is something other than Exxon.
Dave
What an investment that MSFT LEAP has been, up over 14% today, almost 100% from my purchase price, too bad the short call will kill off the profit, while I will stay away from spreads, I will look to get into purchasing LEAPS, as a good move in the stock equals an unbelievable move in the LEAP.
@Nicky
Post here if you make a move on those MSFT Oct 28 Puts. I'm still riding this one, trying to make up for the potential loss by playing weekly and monthly puts/calls on MSFT. After watching this stock so closely for so long, I kind of feel like I know it better than any other I follow.
Now the LEAP is at $7.05, my purchase price was $3.49, #$$%$^^&*!!!!!!!
Lets say Oct rolls around, MSFT is at $31, do you buy back the $28s or do you exercise the LEAP and let the stock get called?
I don't know about you Nicky, but I can't afford to exercise the options. I've got 55 contracts, which would be about $165k.
I'm hoping for a pull back, then to BTC some of my shorts before it rises again. I think MSFT is headed up, not down. As the stock rises, if I play it right and if it goes up enough, the value of the longs will override the losses on my shorts and I can come close to break even.
I haven't run the numbers yet to come up with scenarios where this can happen, but the concept should work if I can get the stock on a low enough dip, buy out enough shares, then let it rise.
Another idea is just to buy more LEAPS on a dip, then play the run up.
Analysts are all over this stock, and there is likely to be a reweighting of it as an S&P component that should result in a lot of institutions needing to buy more to rebalance their S&P derivative funds to match the S&P weighting. That comes later in the year, Sept. I think.
Also, Windows 8 beta comes out next week. That could cause a lift or a drop, depending on how it is received.
Grejung, thanks again for the link to Kevin O'Brians page. His system is pretty much what I was doing with the SPY only I was just using the ultimate oscillator to time my entries. His system gives less signals but they are a lot more reliable.
Ed, I trade with Interactive Brokers and they don't have the IMI indicator so I've replaced it with the Ultimate Oscillator. So far it has worked OK, every signal has been sucsessful but it has only been a handfull of signals so will need to see how it goes with more time.
Damo
Anybody have any good naked puts they are looking at for March?
Damo
Time for a little bragging, knowing full well that pride comes before the fall...
This has been my best month ever! I have been trading options only since November, 2011, so I'm learning. That said, I am delighted with my earnings this month--just over $4,000 with $32,000 in option buying power.
I sure didn't intend to hit so well--one trade was over $1300 of it, selling 5 GS 85 Puts on December 23rd for $2.75. That one worked very well for me, as did several AAPL spreads. I also sold puts on EXC, RIO, AVP and WHR, and I have some DEER puts sold for March.
So, I'm with you, Damo. I'm looking for new trades, and would love some weeklies to build up cash in one of the accounts so if/when the DEER is put to me I can buy the shares outright and play Nicky's WOF instead of borrowing on margin against some long term securities I hold.
Any ideas? What effect will the iPad 3 have on AAPL? Can it continue its run up, or will we see a repeat of what happened with AAPL just a few days ago?
How did everyone else do?
Hi all,
I am surprised that none of you seem worried with AAPL. I live here in HK and there is a lot of talk about their trademark issue in China. It was published a couple of days ago that some authorities removed the sales of the IPAD in several shops in different cities as there is a Taiwan company that registered the trademark rights to "IPAD" in 2000. furthermore, Amazon just stopped selling the IPAD in China. in addition, Foxconn is undergoing some audit checks on its factories to check working conditions... seems like a lot of potential risk for some bad news !! don't you guys hear about this in the US ?
cheers
Francois
I'm not too worried about AAPL, Amazon china stopped selling iPads at the request of Apple as they are not an authorised reseller, nothing to do with the trade mark case.
As far as the trade mark case, Apple won a court case in Hong Kong last year on the issue. You can read more about both here
http://www.macrumors.com/2012/02/16/ipad-issues-in-china-amazon-not-an-authorized-retailer-apples-victory-in-hong-kong-trademark-case/
In saying that you would think AAPL would have some kind of pullback soon, a lot of people looking to take profits?
AAPL has been good to me over the last couple of months with spreads, I've only been playing small but they have all been winners. I'm not going to trade them any more though, getting way better results day trading SPY. Only down side is time in front of the screen waiting for an entry.
Damo
Damo,
Are you day trading selling naked SPY puts or have you been using Kevin O'Briens method trading them?
I've been reading up on his methods. Looks very interesting.
Ed, I'm using Kevin O'Briens method.
I just recently started day trading SPY after getting the idea from the fully informed website (http://www.fullyinformed.com/) she trades SPY puts when she is bearish – after reading this I thought why not turn it around and do calls as well. I was just using the Ultimate Oscillator and getting good results. Probably a lot of luck involved also!
I've now read Kevin's book so have incorporated his system, I get less entry signals now but they seem more reliable. It's only early days but I'm excited about the results.
When doing weekly spreads I was getting around 0.10 and was generally putting them on around Wednesday or Thursday, I can easily get that on the SPY every day and when you move to companies like AAPL your looking at 0.60 - 1.00 per trade.
It seems a little too good at the moment so I'm playing small, I started on the 10th have done 11 trades and have generated 1.59 in profit. Multiply that by 10 contracts and it's $1,590. Not bad for a weeks work and the highest premium used was around 4.50 so only $4,500 in funds needed to play!
35% return in a week and I only had one position open over night because I forgot to put my buy order in.
Again, it seems too good so I'm being careful.
Damo
Gremjun, Nicky & Optionsense---What Charting System works for that Strategy from Kevin O'Brien on Seeking Alpha? Are you able to set up the 5 Indicators he suggests and are you able to do that with the correct timing??
Thanks,
Bill N.
I don't use a charting system, I just keep an eye on stocks I like, when I get a good idea of how the stock moves, support & resistance, I make my move, selling puts has never let me down, when the market took a down turn I was able to keep rolling, take assignment on some, the shares I was "put on" eventually came back, the ones I rolled eventually expired, it's calls that always screw me, I will try to stick with selling puts and if the market goes down big, I will buy LEAPS.
STO EPI Mar 17 $21 Put for $0.40
Damo
Read Kevin Obrien's book and have set up the charts, but watched today as much as I could toward the end of the session and didn't really see anything that hit all the parameters.
You mentioned that you had made some trades with SPY. Just wondering how often you see the signals. I did see one positive buy sign for a call on BIDU, but then the stock just tanked right after, despite all the signals being right. They recently reported earnings, so thinking this was the reason.
I'm interested to hear your input.
Mike
Mike, it's worth reading the five articles on Kevins' page regarding his strategy, he talks about when not to enter and it's based on the Bollinger Bands. I actually asked him about BIDU today, this was his response.
"Of course, I was watching BIDU and CRM all day. I had my trade ticket ready to place the BIDU trade, but it never materialized. The reason being is that while the other 4 indicators showed a "buy", there was much more to the story of what was going on, and this is related to the Bollinger Bands. Not once did I see the stock hit a level below the band where I saw a good entry. Believe me, I was waiting for it and would have done it in a second if it did. The downslope and constant freefall is always something to be aware of. More importantly, the Bollinger Bands were constricted the entire time. This should always raise a red flag. Always avoid trades when the Bollinger Bands are looking like that. It's a bad trade, and the chances of you getting out early are severely diminished."
I was just using the Ultimate Osc. with SPY. Now I'm using Kevin's system I'm not getting as many entries, which is probably good. I got no entries today.
Bill, I use Interactive Brokers, I just realised today that I have an old Optionsxpress account which is what Kevin recommends, I did some comparisons and there is definitely different readings with the indicators.I'll use OX from now on.
Damo
Jerry, How about an update on your weeklies trades other than AAPL calendar call spreads?
Thanks..Jim
Should have stayed on the sidelines, pre market does not look good, huge move down today??
Nicky,
Am keeping an eye on EPI.hmm interesting one.
Shorted Bidu a couple minutes for some quick $$(learned from my enormous pain of being long..)
Apple credit spreads and iron condors have been great.
Hi all, been busy but catching up on the blog. Wow, many of you seem interested in the technical side and reading buy/sell signals. That certainly is what the bigger boys do so there must be something to it. For me I still don’t get it. Any knowledge gives an edge but years ago when I also tried to learn them and use them I was constantly confused with receiving opposite signals. Good luck and keep sharing the ideas.
Regarding my recent plays. I must confess that I, for the time being have ignored diversification as I am riding the AAPL coattails. I am long the Jan 490’s and some 495’s and selling the weeklies usually around 20 points over the stock price when I open the position. Right now I am doing the 520’s.
AAPL has been cooperating just fine as it has so much going for it, new I-Pad coming, new I-Phone etc. This now diversity is not for all but in this particular place in time I like it. It is returning around 5% a week. There are some great spread positions in plain vertical or Iron condors with aapl which of course gives a floor to your possible losses.
Regarding the general market I do want to caution all regarding the possible Israel attacking Iran. If that happens and I am pretty sure it will, who knows what will be next. Iran will try to shut down the straights and oil will go to super hi? So do be aware of these world events as the market will dive as soon as the word is out. Will we get into it also? I see no way that we can avoid it? But who knows.
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