Saturday, March 24, 2012
possible new trades
Hi all, I have been on vacation for a few days. Just golfing and away from wifi. I started the week with the AAPL 550/615 call spread. When AAPL was dropping some I rolled down to the 610's. as Thursday arrived and AAPL was still a little lower I rolled down to the 605 and let them expire. Monday I will see if AAPL is still dropping some. If so I will sell a call 10-15 points over the current stock price. If rising at the opening I will wait to sell the call until I can see what is happening. Ideally I like to sell the call about 15 points over the stock price. For awhile I have been doing just AAPL but I am now looking at GOOG to see if maybe I will split my plays between GOOG and AAPL.
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74 comments:
Is it a good time to invest in Oil? Driving season is coming up and there are crazy people in Iran. USO has built up a floor at 40, so I am looking at the Calendar spreads. I want to keep my risk down and keep the spreads low. If you were to buy the 44 Jul for 130, then you could sell the Mar 30 42 for 14. The delta of the Mar would be about half (and negative) of the Jul, so setting a contigent order to sell both sides at 42 should yield a profit. You would have 17 weeks of weeklies to sell to recoup your investment (118 days left for the July divided by 7 days per week equals 16.86 weeks left). If the price stays at 40.69, then you would get about 14*17=238 in premiums over the course of the July option period. After about week 10, your long call would be paid for. So there seems to be a good chance of profit. The risk is the ETF would tank or it would become too volatile. I'm thinking of buying 10 of these option pairs. I'm also looking at GLD, but I am having a hard time convincing myself it will just keep going up. I am not terribly familar with gold or oil, so I'm trying to learn all I can.
Dave
Hi Jerry, hope you are well. I looking at making a large (for me) AAPL naked put sale for May, taking advantage of the IV vs. simply an April trade. I recommend all AAPL option traders take a look at this chart, simple yet elegant. DAVID http://aaplpain.com/?page_id=8
lots of put open interest at 540/550/560/580, which suggests bullish power
I am enjoying the AAPL ride--selling weekly put spreads and hoping all goes well. Pretty naive, but it is working so far. I just hope I'm not the big sucker out there when the steam runs out...
Dave
What strikes are you using. I just placed 570/565 for .21
I'm much nearer--585/580 and 575/570. Greed has clouded my vision, and last week and the week before, etc., have worked out so well...
Dave
IV has dropped considerably recently. I see May IV as only a couple of points higher.
How do you get IV's? Implied volatility vs. intrinsic value? I can compute intrinsic value from the option chain but don't know where to get Implied vol. Can you help?
OK,
I'll take a stab. If you are out of the money, all of the premium represents implied volatility. If you are in the money, the difference between the strike price and the stock price is intrinsic value, the rest is implied volatility. I think I got that right.
Dave
Not sure I understood your question. I think I gave you time value and intrinsic value. I use the implied volatility percentage computed by the machine. Of course the implied volatility is related to the time value.
Dave
BP, I'd love a lesson on IV. I have seen that a bunch lately and I don't know to what it refers.
Are you saying that May being only a couple of points higher means that May AAPL will be, say, $608ish vs. $595-606ish?
Thanks for the help--I can use all the help I can get!
Dave
henngiss - I have been doing calendar spreads on USO for almost a year. But I am long the 2013 $35s and sell the weeklies just OTM. I have to roll em up and out about 20% of the time. Good trade. I also do the same with the silver ETF AGQ. Good premiums and good liquidity.
Regarding your USO trade idea - I have never heard of having the long side above the sold strike call. Can't quite wrap my head around that but I am always learning.
-Bill
Thank you Bill,
I have been looking at SLV and AGQ as well. Silver has been beat up somewhat lately, but appears to still be in a long term uptrend. This may be a dumb idea, but my proposed trade had the idea of limiting risk with a less expensive OTM long call. This would provide the added benefit of ramping up gamma faster should USO go up. It seemed the long call would have enough positive delta to go up in price fast enough to stay ahead of the short call. I don't know, I've been playing around with all sorts of ideas. I think your approach is a little less bullish than mine, but I like it. I can't seem to make any decisions right now, so I'm staying in AAPL until I figure it out.
Dave
Dave - you are sort of doing what Jerry does except Jerry seems to buy 10% in the money LEAP calls. My method is to buy a LEAP call DIM with a delta of .80 or more therefore this will emulate a covered call on the upside. You are right that your approach limits risk and is more bullish but I would only use that approach to sell weekly and not monthly calls.
I always use a chart before entering the long LEAP and USO is neutral to bullish IMO.
http://stockcharts.com/h-sc/ui?s=USO&p=D&b=5&g=0&id=p27669125670
AAPL still clearly in an uptrend:
http://stockcharts.com/h-sc/ui?s=AAPL&p=D&b=5&g=0&id=p50225285358
Thanks Dave. I get it now, you should be fine on the upside, but you will get killed on the downside. However, the cost of that call is pretty cheap limiting risk. I believe the USO risk is almost 100% upside at this point. I may try this with my current USO trade by adding some cheap higher calls. Thanks.
I must say that you fellas sound kind of intoxicated by whats happening with APPL...
Reminds me of a quote from an E Book that i read recently...
"Do not get greedy. This is rule #1 of option trading. That sounds simple. Do not get greedy. Because of the large potential profits with option trading, it becomes easy to start bending the rules and forget the basics. I have been doing daily option trading for over ten years and still fall into the trap of stretching the envelope. I know how easy it is to fudge a little here and there to try to pick up a better return. When i do this, it usually comes back to haunt me."
I believe that the end of the quarter is ripe for profit taking after this run... you guys have been doing this alot longer than I have and I dont claim to know squat... just a freindly reminder for everyone to be careful...
I totally agree with Homebx.
When it all goes too well then thats the time to watch-out ! I've had the experience a couple of times last year and it blows all your profit for a few months and the stress is not worth it. Now I stick by 1.5 to 2.5% return per months (that's 18% to 30% per year!!! already huge !). Remember : CRUMBS !
I was just watching Bloomberg and this famous analyst "Marc Faber" was stating that the start of 2012 was similar to 1987 ! some of you may remember what happened in 1987.... and he staed that we could see a sharp pull back from May to June..
Thank you Bill,
My main hesitation with going OTM on the long side is if the market goes down. As the stock goes down, I must use more and more margin to cover the distance between the two strikes. I have been keeping a large amount of cash on hand to handle this situation. I also like the flexibility excess cash gives me if an opportunity arises. The other issue with having the long strike higher than the short strike is that your net delta is not as positive as the other way around. I overcome this by using short strikes with somewhat lower deltas. I agree this tactic is best for bullish positions. Just to be clear, I take a little longer term approach. If the stock drops, I keep the long position open, and sell more calls against it in the next expiration period.
Another tactic I am looking into, that is even more bullish, is selling only half as many calls as were purchased. If your short delta is about 25% of your long delta, then you could let the position ride as far up as you want, Your net delta should always remain positive. The problem with this is, since I want to keep my long position, I have to use cash to buy back ITM calls at expiration. This effectively converts safe cash to at risk cash. One thought was to wait to expiration and close both positions. Then roll up the long position for the next expiration period. I like this strategy because you don't have to monitor your position closely, you just close any ITM shorts at expiration. (more time for golf, although that doesn't matter for me as I golf like charles barkley)
Thanks for the info,
Dave
Been very unsuccessful with the purchase of AAPL puts, trading AAPL options has become an addiction, I have to stop, I keep saying no more but end up buying them again, this time I'm done for good, cold turkey, I will stick with naked puts, which have never let me down, STO some more TTWO $15 puts today only got $.15 premium today, got $.20 the other day, I will put in another order tomorrow but will not settle for less than $.20, I should have sold more MSFT Apr $31s, I got $.43 for them last week, now they are going for $.16.
Last paragraph of chapter 10, and i quote..."So let's finish this chapter with the most important rule to remember while trading options with the "crumb method."DO NOT GET GREEDY! If you look at a position and, WOW, it has a return of 8.5%, don't do it! You are getting greedy. Drop down one strike price and look again.. You might have to drop down two strike prices. Get back into the 3 or 4% profit range to open a position."
Are we throwing away the basis of our system because we have found the motherload and its all of the sudden paying 5% per week?? Many of us have seen this movie, and it does not end well.
My concern is that if there is a selloff, and it goes institutional, it will be a stinger the likes of which Tiger Woods has never even dreamt of, since AAPL is over 70% institutionally owned.
I should also say that whenever I have been worried about something like this happening in the past, it never has! The market is a woman... and I can't figure her out! Still, I'd rather be safe than sorry.
Have a great weekend everyone. Going on a little golf trip to play in the Old North State Senior Open in New London, N.C. with some good old friends. Cheers!
Three things we need to be aware of possibly happening in the near future. Quarter undressing starting next week, sell in May and go away, (remember we have had a years worth of ROR just YTD) and Isreal or somebody has got to bomb Iran sooner or later. That should create a major selloff.
homebx
I agree. I got burned with NFLX and went back to the basics. I am doing well with ESI and MHS. The tempation to make a quick 5% a week is great but I will paper trade any wacky desire, it helps the urge.
Homebx, you said it well...
Nicky, there is another rule that usually pays off and that is ..don't fight the tape.. that of course is trying to guess when aapl will fall. I have done quite well letting aapl run but i, like many are starting to get yancy knowing that one morning some computer on the 100th floor of a company will issue the 'sell aapl'
A lot of computer talk will say things like OMG, WTF and other such things. An Iran crisis is coming. It has to! So instead of pushing too close to the big money strikes, use caution. We want all of us to still be here trading and not jumping out of windows.
With aapl i have bought the 550 and try to sell when opening about 15 points above the current stock price. As i mentioned months ago, i also try to avoid the itch to roll up. Most of my losses come from good positions that rolled up to soon. This morning was a classic example of why to hold back some. AAPL was over 620 and i had the
615's I really wanted to roll but let common sense rule and here it is back to 615ish. I have over 50 of these so it would have been a
10k made on a whim. When ca ca
hits the fan, and it will, we want to the the options traders here to pick up the pieces..
Hey Jer, nice to hear from you again, everything you say is right, I guess I'm just stubborn in my way of trading, STO some more TTWO Apr $15s for $.20, might look to sell more today I like that $15 strike, I guess it would make sense to just do 1 big trade, another idiosyncrasy in my way of trading.
Sold 10 more, $.20 again, I want a heart with the letters TTWO on my tombstone.
Any idea why DEER (Deer Products, a Chinese company) has $2.50 increments instead of $1 increments?
It is currently $3.20. 52-week high is just over $10. What am I missing?
Dave,
I think 2.5 is generally the increment for stocks trading between 5 and 25. If volume is heavy, then you will see smaller increments. DEER is not very heavily traded.
Dave
Volume--that's the deal.
Good dividend, great PE, DEER seems like a winner...and I am pretty sure it's a real company. Just kidding, it's legit, and pays a smokin' hot dividend.
There were some questions earlier on volatilty. You can get all the free volitilty history that I find useful at http://www.ivolatility.com/. Yes you have to sign up, but it's painless. They offer Historical, Delta, and IV on stocks and most of their key put/call strikes.
I came upon your blog by accident but I have read your book about 3 times. Each time I understood your trading procedure a little better. Anyway, I would like you to put AAPL in historical context based on your many years of trading since I have only been doing it less than a year. Also, please tell us what signs you would look for to tell that AAPL was cooling off.
Re: Concerns about AAPL,
I have the same concerns, and we would be wise to properly manage our risk. That said, I look far and wide and cannot current find any stock that can match the valuation of AAPL. The chart does look like one that is ready to snap back. Time will tell, but I feel strongly that any pullback will not be terribly violent and will not be long lasting. Anything can happen, and bad news could be around the cornet. That is true for any stock though. AAPL has barely priced in the increased earnings from last quarter, and the stock was undervalued before that. We are watching the perfect combination of valuation and momentum working together. Do be careful though, please don't assume the stock will only rise indefinitely! I currently have only 12% of my account at risk in AAPL, so I don't worry too much. And I have the potential for very nice gains as well.
I'm trying something different this week. I stopped out of my 620/655 combo at 620. This made money but was actually not wise. I should have put my stop in more at 630. As the price went up, time value would be more and more at play, with the short option's theta ever increasing. 630 would have been very profitable, even 635 would probably have been fine. A higher stop would have filtered out that move up to 622 or whatever it went up to temporarily. This week I sold the 625 Weekly and bought the 615 June call. The June delta is 52 and the weekly is -26. It seems to work very well when the short delta is about half of the long delta. The June option will decay faster than the LEAPs, but the decay is half that of the weekly, and the vega risk is much lower. I'll still get postive Theta, just not as positive. I think I will benefit from the other greeks being smoothed out more, and I have less capital at risk. I also like the smaller spreads on the June option chain, as I have a good chance of getting stopped out again (stopped out in a good way, with profits). My stop will be around 640, I should be just fine up to there. Notice I have used no maintenance on this trade, only the capital invested is at risk.
I'm still looking for NFLX to make a move down, I imagine I'll leave that one open until/if it is profitable. I do like the looks of GLD, SLV, and USO, but I'm not ready to go in just yet.
Dave
AAPL looks 'toppy' for sure but then again, its looked that way for months. Being conservative, selling calls against some LEAPs and a small bull spread into Apr earnings. Back to credit spreads on the usual suspects next week? Its worked well for me.
So it finally dawned on me how Jerry does so well on his calendar spreads. You gotta sell the weeklies. Maybe he can comment on this but he seems to buy the long leap about 10% ITM. Then he sells the slightly OTM ($ dependent on the equity obviously, he has stated +$15 on AAPL). I was losing money with this approach (example, MSFT) when selling the monthlies. The only way I could control it without getting out of hand on the long side was to buy a DIM LEAP call with a delta > .80. But if you are just selling the weeklies, they generally don't have enough time to get out of control on the long side. Therefore, selling the weeklies allows a smaller LEAP investment and less risk and even better ROI. I felt like an idiot when I finally figured this out. Hope this helps someone.
Hi Jim Joiner, welcome aboard, As you know I am not into resistance levels and the technical side of most equations. A better measurement for me is the level that I fand myself worrying...Regarding AAPL today and what I think.
I closed all sides of my various trades in 4 different accounts. When AAPL started down around 4 points and couldn't really break out to the up side in fact as time started moving along it slowly sand lower. For me when it hit 611 that was thde line in the sand. I didn't have that in my mind before opening, just the gut feeling that this is not quite right. I have leasrned that watching missed profits is almost funny. But having a stock drop lower and lower starts a chaine reaction that is hard to stop. The lower it goes the more you want to hold on as "it just has to turn any minute and if I close I will miss the turn" Well, that line of thinking cost me ovr a million within 4 months. There is no script that any chart can predict or any technical analysis that can tell you what is going to happen in 5 minutes. It can certainly tell you what happened 5 minutes ago and give an idea for the future but again there is no script. ow Monday if AAPT starts up again I will jump right back on board. Also the clock is ticking on the Israel/Iran situation. For some of the traders that have Jun positions, be careful---It is like holding a stick of dynamite and waiting to thorw it only when the burning fuse gets close to the boom part.
So with AAPT they have a low PE, giant market share, fantastic customer loyalty, a ton of cash, maybe the best company in the world. But earnings are coming in a few weeks and I would not hold over at that time. Regarding when it might be cooling off, look for earnings to be slowing, institutional ownership dropping, insider selling, one of the product starts underperforming and not meeting expectation. My guess, it will be a thousand dollar stock within a year or two, but I don't have the nerve to buy and hold. Like most of us on this board, we enjoy "trading" and trying to out-guess the other guessers.
I hope that helps some, the bottom line is I go by news and gut feelings.
Hi Bill, yes it is as simple as you say. Although i closed all today, I expect to reopen on Monday or maybe Tuesday depending on the mkt. I do go around 10% below the current stock price and buy that call and then sell the current weeks call (depending on time left) somewhere around 10-15 points above the current price. One thing to remeber if your stock runs past your sold call, all is not lost. you can just let it ride until Friday afternoon and then close or you can roll on friday afternoon as the time-value has mostly leaked out. Even if it has ran past your strike both side will go up and the TV (time value) still leaks out faster from the sold one. (somewhere in the greek language i'm sure there is a word for that, I have forgotten all of those)
I have 4 accounts that I manage and all have been in just AAPL. I hate to admit that as it is not for all traders. But this situation is a once every decade or so. A stock with hi prem's, hi-volume, low PE, not a fad stock, nothing but good things with their product line that is wanted world-wide. When you see a stock that kids and grown-ups sleep outside for a day or two before the new product comes on line. you can bank on it.. Doing this simple trade I have ROI of over 100% in the last three months. But it will end, so use caution.
Jerry
Good to be reminded that one can sell, then re enter. Seems obvious but coming from a buy and hold mentality 9mos ago, I still resist getting out. AAPL has been so good to me and maybe on Monday it will be again!
Jerry, thanks for the welcome. I have been trading since Aug. 2011 and have done Covered Calls, Owning Stock and Selling Puts. The one thing I didn't like about Selling Puts is that if by the extreme remote chance the Stock went to 0 (Enron comes to mind), you could lose not only what you had in your account, they could also go after any of your other assets (house, car, etc.). I actually watched back in October when NFLX went from 116 to 75 in overnight trading. Fortunately, I only had 100 shares that I had done a secured Put at 100 on but it scared the living daylights out of me. I am very wary of overnight trading now and try to stay out of the market as much as possible.
Anyway, here are some questions about your Calendar Spread play. Let's make some assumptions. AAPL stands at 605. You buy the Jan '13 600 Call for 70 and sell the Apr 5 '12 625 Weekly call for 3. AAPL goes down to 590. The weekly will expire for the 3 but, in the meantime the 600 call went down to 65 so if you sell both sides, you have a net loss of 2. You can also hold on to the Jan '13 Call with the assumption that AAPL is going to go back up but if it doesn't, you may be in worse trouble. Please let me know if I am analyzing the play correctly.
Also, have you developed any "rules of thumb" regarding when to get out of a position like you did on Selling Puts in the book. Your strategy has saved me a couple of times (Premium doubles, etc) and I would like to hear any suggestions.
Finally, please consider writing an updated book which includes the calendar spreads and other strategies that you have found that work. I would buy it in a nanosecond.
Jim
I'm pretty much in the same boat as Jim - trying to get my brain around more complex trades that have two legs. Question for Dave. How would you manage your 625/615 position if APPL decides tomorrow to consolidate for the next 6 months, similar to what it did in Q3-Q4 of 2011.
Hi Alex,
A consoolidation period like that should work out fine. My position would continue to make money in a sideways market, as long as I keep my net theta (time decay) positive. If APPL drops, my long delta (change in option price/change in stock price) would decrease. I would then be required to reduce my short deltas to compensate, so my premium receipts would be reduced. That kind of consolidation may actually help IV go up though (not sure about this however). It is a heavy selloff that will hurt me the most. but I can rest easy knowing that a straight long stock position would hurt even more. My large percentage of safe cash will attest to that.
Hi Jim,
I have the same recurring nightmare as you, that all hell will break loose in the market. This is exactly why I prefer to keep large amounts of cash, so I can weather any storm. We all have different things we worry about though, and different ways to protect ourselves. I feel safer with cash, although I'm starting to worry more and more about inflation. That is why I am looking more into gold, what with our Federal debt increasing exponentially.
Thanks,
Dave
Hi Jerry:
Thanks for the update. You have mentioned several times about the Israel-Iran issue recently, and I have been thinking about it a lot. There are lots of different scenarios and viewpoints about what could happen if Israel attacks Iran.
Regardless of what the Iranian response is, I can see the marketing tanking in the first day of trading after Israel attacks, before the smoke has cleared.
Just wondering what your strategy is in this situation. I wasn't really trading much when 9/11 happened, so I don't have a handle on exactly what happened, but I do remember the markets got hit hard.
Aloha,
Mike
TIMBER THERE GOES AAPL.
Buy op or time to worry.
If the options were cheaper, I would buy an OTM weekly call. Wait for the option to double, roll up to lock in your earnings, and see if it does it again. They are not terribly expensive though.
Dave
Just for amusement, let's say I bought a 630 April 7 call right now for $125. Let's just see what happens to it.
Dave
Hi Kauai and all. Regarding a strategy for the doomsday deal? I have none. As once it happens the damage will be done. If the attack happens during our nighttime, the mkts will drop sharply before the opening. So not much can be done other than keep lots of cushion in your positions, I have mentioned it several times as I really believe it will happen someday. But the other side of
that is there is always something looming on the horizon. If not a real hazard the talking heads seem to pull one out of their hat? Y2K comes to mind...a non event. Greece default etc.
So if that kind of thing scares you, you would never be in the mkt.
You must pay attention and take it all in an keep an open mind. But still go with good trades and try to relax.. lol I was fully inthe mkt during the 9-11 and shutting down the mkt until things settled down was the right choice.
I am still out of AAPL and will be until i see it as a time to jump in. What indicators will iI use?? the 'gut feeling' is the only one i trust anymore..
Jerry preaching.. so forgive if it is getting old.
Yesterday morning with aapl moving upward, Can anyone tell me an indicator that said by the afternoon it will drop and the next day go below resistance levels etc. When things don't look right..close, no matter if at a loss or profit. Don't ride the slow train of financial death.
Jim J. you asked about positions.
1. I would not be in a 600-615 etc trade. It was and will be something more like 550-615. If you believe in a the stock you are using and decide to hold in a drop period, then you can roll down to the 610's for a credit and then the 605's for a credit and then the 600's etc all the way to 550 if necessary, When(and if) the stock turns around you can reverse the moves.. The beauty of weeklys when you stay 10-15 ponts above the current stock price is that hopefully the one will exppire and you can then follow the upward trend?
PS; out of the mkt fully and going golfing...
Jerry
Jerry,
Thanks for the advice regarding rolling options. I often don't think of this, as I don't entirely understand it, and it seems like kicking the can to me. But rolling can be beneficial to turn a trade around, when used properly. I certainly respect Jerry's gut feeling about AAPL, but I am going to stand my ground anyhow. AAPL has setup a nice floor at 600, and successfully met the challenge this morning. There is a good possibility the floor will hold now. With quarterly window dressing done today though, what will happen on Monday? If the floor doesn't hold, I will just keep selling weeklies. If I have time, I will open a position in GLD later today.
Thank you,
Dave
STO more TTWO Apr $15 this time got $.25., I'm sticking with what works, big game release due out in May, don't think TTWO will go down much.
Hi Henngiss, the qtr window dressing didn't lift aapl as i also hoped that it would do. vol increased to over 3 times normal during the last hour and still dropping. We will see Monday but don't be stubborn, if it is still falling i would reccomend bailing. As I have mentioned a mind-set happens to most owners of a falling position. Your brain begs you to hold on as (pick one of these)
a floor is building..
resistance level is being hit..
buyers will flock in at this price
it is a super company..
earnings are coming and expected
big numbers..
etc etc
For me I try to eliminate the brain and go with the gut. My gut says the stock is up a hundred points and many like Jerry have made a hundred thou or so and want to keep it.. Traders are getting out in droves. Pay attention don't try to out guess the falling knife. AAPL will come back and strong but that is when to jump in and make profit, not ride it all the way back up to just get even.
But all traders are different and have different goals. I just want the best for my group of trading buddies. Maybe as Nicky says TTWO?
TTWO will pop either before their big release in May or right after, guaranteed, I'm also looking at another game maker EA, it closed today at $16.49, 52 week low is $16.05, it's big release (Madden 13) is due out Aug 28th, I might look to buy the Sept calls.
Hi Jerry, If you think AAPL is going down, why not completely flip around your diagonal spread strategy? AAPL is around 600 today. Instead of doing 550/615 call spread, why not buy 650(leap) / sell 585(weekly) put spread? This way you can ride it all the way down and make a fortune again.
Thanks Jerry for the sage advise about AAPL. My entire portfolio is up about 2.25 times given recent rise and I couldn't be happier but....Got out yesterday to all cash for the weekend and to let the dust settle. Feels great to be in cash. Haven't been there in years. and there seems to be little nagging feeling of impending 'whatever'. on the horizon. I'm sure AAPL will rise again but how do you catch the up trend when it starts? Guess I'll just have to work that one out. Thanks again for the blog. Its been an eye opener.
fushion; that would certainly be the play if you were in a stock such as RIMM 6 months ago. However i believe that aapl will turn any day and start back up . I don't think this is a long enough trend to try and ride it down. I will probably do some iron condors or just call or put spreads with a few diff stocks until I see what seems like the new trend upward.
-ihaveopitons; Don't worry about hitting the bottom or theearly trend upward. One of these days aapl will jump up 10-15 points and that will make believers (like me) jump back in and off the train goes.. While waiting there are pleny of stocks to use in various ways.
Jerry, why not get involved in selling naked calls. I sold a june 690 call for 8.70 last week. Welcome any input as I am fairly new in this game. Ray
luvtpa; What might be a better idea is to sell a spread with the weeklys. Use 650/655 and make 1%. The strikes might change depending on the opening of aapl on Monday. If flat i will do a spread and maybe turn it into a condor with a put spread also.
For those that are not aware of how condors work, it is just a spread on each side of a current stock price. the great thing with a condor is that you are only charged maintenance on one side, as only one side can end in the money.
If up i might jump in with the AAPL Jan 2013 560's and sell the 615's for this week. If an up mkt you will get around 3 for the 615's and the cost for the 560 will be around 90 = 3+% in a week.
Ray, By Selling a 690 AAPL Call for June, you are assuming that AAPL will stay below 690 for 78 Days. Most of us do NOT think 690 is unreasonable and AAPL will eventually go to 1000. I just looked and you would have to pay 9.25 to buy it back so you are already "under water" and if you decided to hold on, you would be tying up your maintenance for another 78 days. My suggestion to you is to try to get back to even and then get out. You broke one of Jerry's cardinal rules "Only Sell Options for the near month". You may escape with your 8.70 but it is going to be painful in the near term watching the value of your Call going up and up (as AAPL goes up and up) and not being able to do anything about it without paying a heavy penalty. Also, don't forget a second Jerry cardinal rule, "If the premium doubles, get OUT". So, if your 690 gets up to 17.40, don't even hesitate, get OUT. If AAPL doesn't do much in the next month, you may also escape because the Time Value will leak out but it is going to be like Chines Water Torture watching it.
The beauty of the system is that, in the end, it is all your choice and you may do whatever you want. If AAPL continues going down, you may be the wisest of us all and get to keep your 8.70 but most of us doubt it.
NFLX naked calls still working well for me.
Hi Optionsense; yes that is a good play. You can sell the 130 call for this week and make better than 1%
Another way would be to do an iron condor spread with the 130/135calls and 100/95 puts and make better than 2% net. Many ways to skin and option.
Thanks Jerry,
I don't have the intuitive ability that you do. My gut only ever tells me when I am hungry, nothing more. If I try to predict when AAPL is going down and when it is going up, I will fail miserably. I just believe that in general AAPL will goup. That is why I have a low percentage of capital at risk, so I can ride out most ups and downs, and catastrophy won't kill me. Far be it for me to say my way is superior by any means, it just works for me now. Thank you for the advice though, and I certainly will take it into consideration on Monday. As of now, I don't feel like I am stubbornly holding on to a losing position. However, history very well may prove me to be stubbornly foolish in the end. My intention though, is to follow the principle of letting your winners run. I have now locked in a guaranteed profit, and I want to squeeze any remaining profits out as well. Anyhow, that is just what I am thinking today. I did pile into GLD on Friday, and that should hedge my position in AAPL, to a degree that is.
Thanks again,
Dave
Jerry, Jim
Regarding the 690 June call option, what's wrong with the idea of buying apple at the 680 range if it gets there and then getting called or selling it if not called? Ray
Ray, That is an OK Strategy. The problem is that if AAPL continues to go up, the value of your Call is going to go up and up, which means that it will be more and more expensive to buy it back. I prefer to always be in the "black", i.e. my Call/Put is less expensive than when I bought it. That way, if I decide that I have had enough, I can always exit the position at a profit and I don't have to wait for Expiration Day.
To do that, I Sell the Call when I think the Stock is going to go down and Sell the Put when I think the Stock is going to go up. Since I think AAPL still has some headroom, I would sell the Put (I did it last week at 555 and made about $2400 when it went up to 617 on Wednesday. The Sold Premium was about 4.60 and when I bought it back, it was about 2.40. The other rule I have is that if the Premium halves, I Buy it back. I am not sure why it works but it seems to work better than just waiting for the Premium to go to 0.
So far, this morning, Monday, AAPL has been acting pretty Schizophrenic. It start at 602, was down to 597 and now is back to 601 and that was all between 7:00 AM and 9:15 AM ET. We'll see what happens when the Market opens.
Hope that helps..
Jim
I'm tempted to do the 120/125 weekly call spread on NFLX. I don't think I will though, as I'm not confident enough it will stay under 120. I might look at it a little more closely later though. That may be too close to the stock price also, and the payout is too high at 6% for 5 days. If I did go in, I would limit my position size.
Dave
Jim
Thanks for helpful insight. Ray
Rememer...market closed Friday so takes a day off the exposure. Sell some calls?
Thanks, I didn't realize that, I need to pay better attention.
Dave
Luvtpa; another problem that Jim skirted around is that with that plan of the naked call, the maintenance is continually going up as the stock rises. So to open that June position now is now at 72 but if the stock went way up forcing you to 'cover' by buying the stock the maintenance will go up to well over 100 for each one or 10,000 for each option. So soon all of your cash can be tied up in maint. and if you had done 10 of them you would need around 700,000 stock buying power to cover. The point is to never let the position run away from you as you just get deeper and deeper in the hole. Either cover sooner (much) or close when the prem doubles or sooner.
Today I was tempted to buy $615 puts on AAPL, then I remembered what Jerry said, "don't fight the tape".
Jerry, Did your thing (the naked PUT thing) with AAPL. Sold Apr 21 '12 575 PUT for 5, now it's down to 3. Waiting for it to go to 2.5 to Buy. I guess I don't have the guts to do the Call Spread with it going up 20 points in a day.
In your experience, have you seen anything like it? Sky-high activity (most days 15M-20M trades), 52-week high almost every other week. What does your gut tell you is driving it?? Love to hear your insight..
Jim
Nicky, good call..lol
Jim Joiner; No in 15+ years of trading every day i have never seen a stock do this. Several force (my view) are at work.
1.One of the best run business in America
2. fantastic long range product planning.
3. loyal base (cult almost)
4. earnings that will explode each qtr
5. Great PE, great premiums
6. Not owned enough by institutions, meaning more big time buying coming.
7. The hint of a split coming some day probably 10 for 1
8. Not a fad stock ie; crocs, panara bread etc, these are things people feel they can not live without. The products are like autos or televisions etc.
9. a baby generation that thinks AAPL is the only way to go.
10. a corner on the market share, world wide.
That's about it. Look out 1000. There may be ups and downs along the way, but don't get in the way. It is a once in a generation stock.
I closed my paper trade AAPL position at $545. I would have rolled it, but a 336% gain was enough, also the IV had jumped up and it was a good time to sell. I still wouldn't have opened this position for real, as the beginning IV was just too high.
Dave
I'm holding on to my real AAPL position even though it is now ITM. I should be OK until 640, where I set a stop. The problem when the stock jumps up like that is the IV of the short option jumps much faster than the IV of the long option.
Dave
AAPL--OMG! Bot the 560 calls for the calendar but waited on the short side for a better idea on EOW price to sell. Up 12k before breakfast naked. Know this can't go on but boy. it is sure fun. What's a safe strike to sell for Thurs (no trading on Fri)?
STO MSFT Jul $27s puts for the bid price of $.24, I still have Oct $28 short calls open, so I thought why not sell these??
I'm getting hit pretty good by GLD. The bottom fell out a bit when Bernanke said there are no plans for further quantitative easing. I rolled down to 162 to bring in more premium and protect a little against further losses.
Dave
I sure can pick them (sarcastic) I mentioned MHS, it was bought today by ESRX. It looks like my MHS shares were BTC and the new ones BTO. Not sure how I did. Made a little. I am thinking of closing the position and using the cash for the SPX weekly spreads till I go back to 30 day expiration for a new stock.
Hi all, just a heads up that I am starting a new Posting
Jerry
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