Where can it end? Today AAPL received analyst upgrades to between 900 and 1,000 within a year. As Kramer says, ‘that price is not unreasonable, as divided by ten it would be 62 and is it possible it can get to 100, Yes..’ I am a believer and as many of you have also done, I am riding the AAPL train into some great returns. I see some of the regulars on the blog are doing different stocks and they seem to be working also. For a while I am sticking with AAPL and playing the Bullish spread.
I have bought the Jan 2013 580 strike and selling this weeks 625 strike. Today AAPL jumped up around 11 points to 629. So tomorrow as the Time Value leaks out some I will either close or wait until Thursday and roll the 625's into next week’s new strike. The one I choose will be determined by the current stock price when and if I roll.
Glad so see some new faces (names) on the posting. All are welcome and don't be bashful if you have an idea or question. We are always learning and willing to share the little knowledge we have.
125 comments:
Jerry, I am still trying to understand the Bullish Spread. Aren't you concerned about getting Assigned overnight when your Call is 625 and the close was about 628??? Please help me understand.
Jim
Jerry, I'm also curious about the contract size of your trade and how you avoid paying a lot in commission fees. How many contracts do you typically buy and sell in your trades at a time?
-Dave
Hi Jim,
You won't get assigned, as there is still time value left in the short option. Being assigned would actually work in your favor, you get to get the time value left, and your long position will cover the short position.
Dave
I'm feeling pretty nervous now about my GLD position. I'm going to stay the course though. I'll probably try to roll down my short position later today and pull in more premium. This is a good learning experience (could turn out expensive though, we'll see). I will just keep pulling in as much premium as I can. There is a good chance GLD will find some traction soon.
Dave
Dave, Jerry, I think I may be dense on this. Let's try some numbers. Let's say you bought the 580 Jan. '13 Call at 90 and Sold the Weekly 625 Call at 3. AAPL went up to 630 and you were assigned. We'll just use 1 Contract. Because of your bought call, you buy the AAPL stock for 58,000 and then sell it for 62,500, giving you a profit of 4,500. The problem is that you had to pay 9,000 when you bought the 580 Call so you have a loss of 4,500. Please let me know what is wrong with my thinking. Thanks, Jim
Jim, If you were to be assigned for whatever reason, I believe your scenario is true only in non-margin (e.g. IRA) account where you are not allowed to go short. In a margin account, you could temporarily hold the short positions from the assignment (assuming margin requirement is met) without exercising your long leg positions. Immediately you can cover those shorts. I have been assigned early when selling naked call on the ex-dividend date (I did not pay attention to that important date :-). Then I was shorting 100 shares of the same security. If you are really worry about the potential loss of huge time premium in the long leap, you could buy shorter dated options (e.g. two to three months) instead. In the unlikely event of early assignment, your loss is under control.
Hi Jim,
I think I understand your question. If AAPL goes up about 10 points, your long call (assuming no change in IV) will go up about $575. If you are assigned, then you sell your long call for a 575 profit. Buy AAPL at 630 for $63000, sell for the contract price of 625 or $62500 total. You have a $500 loss on that transaction. So you brought in $300 on the short option, gained $575 on the long option, lost $500 on the assignment, and therefore netted $375. You just netted 4% for your trouble (375/9000). If you don't have the cash in your account to purchase the options, your brokerage short lend you the funds. They have no risk in the loan because the contract has a guaranteed price and we know the price of the AAPL stock from the market. You may have to pay a little margin interest to the broker. Check with your broker to be sure what they would do though. Hopefully I got the numbers correct above. By the way, I would not make that particular trade myself, as the short strike is too close to the market price of AAPL. It works for illustration purposes though.
Thanks,
Dave
STO weekly MSFT $31 put for $.12, lets see how this 2 1/2 day trade works out.
I had some interesting experience yesterday with MHS puts. MHS merged with ESRX and my puts were converted to ESRX puts. Same strike, but reduced number of shares in each contract. What bothers me is that my position is now twice as close to ATM as MHS was.
Alex , I had the same thing happen to me. I posted it on the last thread. I was not comfortable with the new position + I was in an all day meeting at work so I set a limit order for .05 and it was filled. I lost $40 overall but combined with the MHS I did ok.
I thought I had seen MHS somewhere. I know ESRX, but not MHS.
I held onto AAPL this week even as I went in the money. We'll see what tomorrow brings, but I plan to roll into the next weekly and try again.
I wanted to roll down GLD, but just couldn't quite make a decision. I roll out tomorrow to next week.
Dave
Dave, what's your GLD position?
Damo
Hi Damo,
I am long 6 Jun 16 162 calls. I am currently short 6 Apr 5 162 calls. I kind of stopped and started this morning thinking of rolling down, but I waited too long to get any kind of decent premium.
One interesting fact I learned yesterday is that in January the Eurozone decreased the bank reserve percentage from 2% to 1%. This has the potential of increasing the bank deposit related money supply of the euro by 73% I believe. They are still printing money.
Thanks,
Dave
Dave
In your response to Jim can you explain the calculation in how the 10 point increase amounted to $575 please.
Thanks,
Jay
Hi Jay,
What I like to do, to get a rough estimate of how an option price might change with a given change in the underlying stock price, is to pull up the option chain. For AAPL, I looked at the ask price at 580 and compared that to the ask price at 570. The difference gave me an estimate of the change in the option price if AAPL moved 10 points. This rough estimate works pretty well for stocks like AAPL, but not as well when there is a high volatility skew (the IV for options in one expiration month are not the same). I use this method when scanning option chains to get an idea of how sensitive an option price might be to changes in the stock price. It just helps me understand the potential risks and rewards better. Of course, changes in the stock price are usually met with changes in IV, so this is a rough estimate at best.
Dave
Dave, I think I got it. If you ever get assigned, you offset your loss on the 625 Call by the gain in the value of the 580 Call. I didn't show that in my original calculation. I think in a previous post, Jerry suggests keeping ahead of the 625 Call by Buying that call and Selling the next higher Call so you should never get assigned. That seems to me like sage advice. Thanks guys. Jim
Jim,
You are welcome, doing what Jerrys advises is always a good idea. It is not always bad to go ITM, it depends on what your position is.
It is once again tempting to purchase OTM AAPL weekly calls. The IV has been drying up somewhat today, down to 24%. If it gets near 20%, I'll seriously consider it.
Dave
Well, I dipped my toe into the AAPL
LEAPS/Weeklies arena. After waitng forever for AAPL to correct, I took the plunge with only 1 contract yesterday. I bought the Jan 13 570 and sold this weeks 625 when AAPL was 619. So now its 625 and I'm waitng till this afternoon to roll out to next weeks 630/635. I want to wait for a decent correction to buy somemore, but at least I'm in. Now I await earnings, a miss due to high expectations and a big selloff. Just my luck when I get in this late in the game. Shoulda done it last week at 600. Oh well.
Taxman-Wouldn't count on earning disappointment for AAPL Apr quarter. Looks like a surprise on the upside to me. But what do I know? Just my 'feeling'.
AAPL usually does beat big. Hope so. I wont sell a weekly that week, watch AAPL beat big, rally 40points and sell my 570 LEAP. Since I didn't win the Mega Mill, I can dream right???
Jerry,
It's weekly expiration day. Where are you for the coming week, and what is your game plan?
Aloha,
Mike
Thanks Dave, I learned something new today!
Jay
No problem Jay.
I intended to close my AAPL position and take a break. I couldn't stay out though, so I rolled up and out, banking more profits along the way. The 600 floor is quite solid now. If AAPL falls it is likely to at least pause at 600. There is no sign of slowing down, buying went right into the close today.
Dave
I completely forgot that weeklies expired today, but worked out well, MSFT $31s expired, at the time I sold I thought I was entering a 2 day trade, turned out to be a one day trade, hopefully repeat next week.
Since I like to sit around and worry and market meltdowns, I was playing around with some ideas. What if you used the calendar spread strategy on AAPL, but you are worried about a major correction of say 50 points or more? What if you opended a long protective OTM put. I haven't tested this with the LEAPS, but I did look at this with the Long June, Short Weekly call position I currently have open. If you opened a long put at say half the amount of premium that you received on the short call, you would limit your gains somewhat. But you would be very happy if and when AAPL corrects strongly. The problems are:
1. What if AAPL just fades week after week, you are simply wasting money on the put
2. If IV fades, you will lose on your long call position.
3. You are diluting your gains on the short call.
4. How do you know when to get out of the position in total? As the market corrects, your net theta position will go more and more negative. You need a strategy to get out.
One other good thing about this trade is that IV is likely to skyrocket if AAPL corrects, and the position as a whole will benefit, as the short call will be virtually worthlesss.
I'm just thinking.
Dave
Dave, Don't worry, be happy...Seriously tho, I totally understand that vague, or not so, feeling of discomfort. We all know this can't go on indefinitely. It seems a bit like musical chairs, you don't want to be the last one standing. I just can't get my mind around shifting IV's and such so just keep doing what I'm doing. I have set aside enough cash to keep me even from where I started should the whole thing come tumbling down without warning or time to adjust positions. Helps a little in the sleep department. Also love the LEAPs as I can see AAPL value out that far if given the chance to materialize. Just thinking as well, but maybe not so clearly.
Guys, I have the same concerns. The worst feeling is when you see the Stock either tanking/flying during Overnight Trading and your Options are on the wrong side. All you can do the next morning is "damage control". I saw it happen with NFLX and it wasn't pretty. Fortunately, with AAPL during this time, we haven't seen much of that. I was really a little concerned when Steve Jobs died, thinking there would be a knee-jerk reaction but there wasn't much at all. I think another thing that helps is the Stock Price. It is so high, not everyone can play and the price may keep out some people and also keep in the more "institutional" investors. There have been some "hiccups" lately with the Chinese Factories and some Patent battles but it hasn't seemed to have hurt much. I will definitely be watching (probably from the sidelines) near the middle of the month when the earnings are announced.
Just my thoughts..
Jim
Thanks IHO and Jim for your comments,
I am thinking more and more that I want to put that insurance policy in place. The calendar strategy works very well well the stock is rising, works well well the stock goes sideways, and works when the stock drifts lower, but it doesn't work when the stock drops too much. I think I will start trying to put in a protective put at about 25% of my short call price. That way I will still keep 75% of my premiums received. I should still be able to bring in enough premium to cover the time decay loss on my long positions. If the stock tanks hard, I will make money as well. Then I can get back in at a better price, or move on if appropriate. It just seems like a cheap and reasonable addition to the strategy. Seems that way to me anyhow.
Thanks again,
Dave
Regarding hedging AAPL - I would buy two LEAPs, sell two weeklies, and buy 1 put for hedging. But I would not buy the put until we see some negative crossovers on the APPL chart.
http://stockcharts.com/h-sc/ui?s=AAPL&p=D&b=5&g=0&id=p96941645898
Have a great Easter holiday everyone!
I forgot a couple of points,
1. We have some people declaring how dangerous AAPL has become, because it is about to violently snap back. Using protective puts will allow you to continue to ride the wave as far up as it will go, and then profit again when/if this violent correction happens.
2. If you are like me, then you are terrible at judging when a stock is going up, when it will correct, what does a breakout look like versus a fake out, when is a good pullback entry point versus a time to go short. My thought is, find a good stock that will go up, have a backup plan if the stock tanks instead.
Dave
Thanks Bill for the suggestion, and I meant to tell you before thanks for reminding me about stockcharts.com. I forgoten how nice that site is.
Dave
Well gang, with todays jobs report, you might get to test your theories next week. The futures closed down 120 points today. Unless something good happens over the weekend, Monday should be a downer. Not that 120-150 Dow points signifies a turn. I'm going stir crazy with the market closed. I have a bad enough time over a weekend. Earnigs also start next week. Taking AAPL out of the mix, the call is for low single digit earnings growth. Not good for the run we have had. Good spike in the VIX makes for good option premiums. Hurry up Monday.
I can understand your concerns with calendars. Its like buying the stock, only cheaper, with a built in time decay if the underlying starts to drop. You are using the sale of weeklies to help reduce your cost basis and give you an ROI. I trade mostly front month credit spreads, iron condors and in a rising market naked puts. I also try to maintain as much cushion as possible. I got burned on the MSFT calendars and ended up closing them at a loss. I just got into 1 AAPL leap last week and am going through the same what if's as you. What if AAPL crashes to 500 and I have a 570 LEAP. Major hurt.
Giving it a second thought.
Thanks Tax,
I'm glad I'm not the only one sweating here. I do believe strongly in AAPL, but things happen you know? I don't want to get carried away with excitement about AAPL going up and up and up. I also don't want to get pessimistic and try to pick the top for AAPL either.
Dave
Diversity man. I trade spreads, puts,etc on AAPL, NFLX, RUT, SPX, TNA, RIG, VIX. Cant all be wrong at the same time.
My diversity right now is within AAPL....calendar spreads, IC's, DIM calls, OTM calls. all bull. Hope its not all bs. One more earnings cycle that hopefully works. If not, its back to the 'crumbs".
Apple is probably already studied at Harvard and other business schools, but 10 years down the road it will be even more interesting case. Because I believe the history will repeat itself. Over the next 10 years the company will become another Dell - still super efficient operations, but nothing else. Other companies will catch up and overcome it. Over the long run I still believe the model of splitting software and hardware to be superior to the Apple's model. Tim Cook was probably the worst choice as a CEO. A brilliant CEO and a brilliant COO are on the opposite ends of the skills and talents spectrum. And to ask a guy obsessed with the efficiencies of the manufacturing process to come up or even recognize the next breakthrough product is like asking a turtle to fly.
There's been a lot of talk about company's culture and that it will live after Steve Jobs. I've lived through this. A CEO with wrong ideas will dismantle company's culture in no time.
But, since we need to trade now, and not in 10 year, I think Apple will continue to be a great trading vehicle until the next recession hits sometime in 2013-2014.
Wow, I take a couple of days off and you guys have been working.
I closed all of my aapl spreads on Wednesday as there were plenty of profits and I thought with this long weekend coming I would sit out all plays. I missed some profits by doing so but still safe.
Regarding a correction with aapl. I feel the same as most of you. Just how high can this monster go. I saw Kramer saying that if you divided by 10 it would be a 63 stock and can it go to 100 in a year or so... Easy!
The IV is down to 24 from 26 = good
The PE is 18 = fantastic for computer/tech stock.
Inst. ownership is only 67% so plenty room for big players to jump on.
But again, it certainly has gone a long ways. I will not hold over the earnings..period. Again, I am happy to give up possible profit and relax and watch. If the stock goes up after earns, jump on board. Don't worry about lost profits or worry about losing a big chunk of your bankroll. One problem with aapl earnings is that the bar is set high and when they beat it, some will say, sure but they didn't beat it enough..lol If that happens give it a day or two to settle and down and then jump aboard the aapl express. Earns are expected 4/20 so still a week to go. Monday I will be jumping in assuming no big news etc.
In these times I am always leery of holding over a weekend.
Have a great Easter holiday.
Jerry,
I agree that the market is expecting something big. Just meeting the current high estimate is likely to be viewed as a big disappointment. I imagine I will follow your advice and stay clear of AAPL during earnings. I think AAPL will continue the typical rise until the earnings announcment.
Dave
Any suggestions, should buy back, roll or just sit tight on my june 690 apple naked call and 515 naked put???
Just stopping by to say hi to my uncle, the most popular blogger in the family. It was fun to see you guys today.
Hugs,
Mareth (aka LimeRiot, aka the not quite as popular blogger in the family ;))
luvtpa27,
What I am concerned about is that IV will continue to rise until earnings on the 24th. I think you need to decide if you are going to hold on until then. I haven't looked at the specifics for your position, but I have concerns. Be sure to have an exit point to limit your losses. If AAPL goes to 650 or more, I would not want to hold into the earnings announcement. I'm sorry I cannot be of more help.
Dave
Went out into May to give things time to settle down, STO May $15 TTWO puts for $.50.
henngiss,
Appreciate your insight.
I still only sell naked puts. I am still on AAPL monthlies. Today is the first day in 2 years that AAPL stock is up but the value of the puts I sold is down. IV is rising!
HI all, Luvpa27. I agree if i had profits I would [and did] take them.
You are never wrong 'never' to take profits. You can get back into a position at any time no need to hold and hope or wonder. Today with aapl down at the opening but showing a trend to come back i bought to open 30 of the Jan 2013 590 with the intention of then selling this weeks 640? But aapl went up before i opened the the short side. It had gone up from where I bought .. so i closed it all and made 2.7 in an hour ( a little over 8000) the point, is be flexible and willing to change ideas and take profits. It is that easy.
Today I also opened a PCLN spread; I bought the April 21 PCLN 740 and sold the april 13 770. the position is now up 2400 so i will close them tomorrow and take profits.
Again you do not have to hold until expiration. You can close, take profits and reevaluate and do another. When in doubt, either with profits or losses, close and move on. When i see comments regarding what if the IV moves up/down or ?? or the delta is moving from Greece to France, etc I suggest to all that get caught in a quandry to take profits. When you start worrying that shows that your gut is telliing you something and you are not listening. Usually the answer is to take profits. Sit back free of worry and then reopen if you want to. Your vision will be clearer. It is not like you get only one chance to make a decision.
Lime; Hi from your best uncle..
Ray (luv2pta),
I would seriously consider following Jerry's advice and cut your losses now. If I am right, then you sold your 690 call for $870, and it is now worth $2,225. All AAPL has to do is stay on its current trajectory, and it will be at 690 in a few weeks let alone by June. Increasing IV will only compound the problem. Cut your losses now, if you haven't already, is the best advice I can give you. You position is too close to the current stock price, and AAPL is rolling with no end in sight right now.
Dave
Meanwhile,
Will NFLX break through the floor at $105, or is it too oversold now? Of course, I am hopefull it will break through, but I'll stay short for a while either way. I think investors are nervous about what might be reported, on the 23rd (I think).
Dave
Henngiss, Jerry
Where I am now down 1,000 II am leaning towards the idea of buying aapl if it reaches the 680-685 range there by covering the call and selling it after expiration, welcome your thoughts.
luvtpa27,
I'll have to give that some thought, may not have time today, it is an interesting idea, nothing off the top of my head of any value.
Dave
BTO AAPL weekly $625 put for $6.15, rest assured with my luck AAPL will now sky rocket up.
luvt2pa,
I don't quite understand, but here is what I am thinking. If you hold your position until 680, then purchase stock to cover at 680, you will convert a bearish position into a bullish one. Your current position is bearish, in that if AAPL stays under 690, you will make money. Your losses may continue to mount if AAPL keeps going up. At the point that AAPL reaches 680, you purchase AAPL and your position becomes bullish, but only slightly bullish. What I worry about is if AAPL zooms to 680, and then comes back down, you may suffer losses on the way up and on the way back down again. Maybe Jerry will have something better to say about it.
Thanks,
Dave
Sold @ $7.60, finally a gain.
I rolled my short AAPL position down to 640. I am trying to keep my short delta at about 50-75% of my long delta. That seems to work well. My idea is that is AAPL goes sideways or down, I will follow it, keeping my delta as listed above. This seems reasonable right now, we'll see how it works out.
Dave
IV is really getting high for AAPL, from weeklys to LEAPS. I am wondering if I should get out now, while I can sell high, and wait for the dust to settle after earnings. Not sure, I'll have to give it some thought.
Dave
Here is what I am looking into doing. goog reports after the close tomorrow. The IV difference between the weekly and the apr monthly is very high. You can sell the 650 weekly for 1150. You can purchase the 655 monthly for 1170. You will have a net debit of 20. If goog closes friday below 650, you can sell your 655 for whatever it is worth, anything over 20 is profit. if goog gaps over 650, you may take a loss, max loss is 520. If goog tanks, your max loss is 20. If goog ends the week near 650 the gain could be substantial, although IV will plummet. I'm looking at some other ideas, but I want to send this now so I don't lose it.
Dave
Word of caution on AAPL & GOOG run into earnings. Market makers pump up option premiums into earnings of volitile stocks. A few years ago, I bought calls into AAPL earnings. AAPL had a decent beat, I thought I was going to make a decent profit, but when the market opened the day after, option premiums deflated even though AAPL popped. I actually lost money on the closing. In Jan, I bought a call debit spread into AAPL earnings and actually made out OK. With a debit spread on say 10 points as long as your net cost is less than 10 and IF AAPL pops your max gain is 10 less the net cost of the spread. Get a bit daring and sell a naked put to pay for the debit spread. As Dave indicated the IV's are rising which is inflating the premiums.
Don't hold thru earnings. A rule not to be broken!
Tax and IHO,
Thanks for the words of caution, maybe I'll paper trade something, just to see what might happens, and get a feel for it.
Dave
BTO AAPL $625 put for $5.75.
What do you think about this one?:
sell the goog weekly call 665 for $720, buy the June call 695 for $890, for a net debit of $170.
The IV for the short is 100, the IV for the long is 26. The short IV will plummet after earnings, but the long should hold pretty well. The breakeven points are about 582 and 694, or 8% down and 10% up. I don't think goog has ever gapped more than 10%, and I don't imagine it could gap up higher than that since earnings are estimated to grow pretty well. If it gaps down, the maximum loss is the initial debit of $170. You still could probably sell weekly for the next two months and wait for a rise in the stock price as well. The ultimate risk is if goog should somehow gap say 20%, then the losses would loom. So if goog did gap to 760, losses would be around $2k. How likely is that?
Dave
Does anyone know the date of AAPL earnings?? I think it is 4/20. What is the concensus, will everyone be flat over earnings, watch for the reaction and then place your bets???
as per earningswhisper.com AAPL earnings are confirmed at 4/24/12 after close.
consensus $9.80
whisper @ $11.31
Dave
Your analysis on GOOG is interesting. Here is what I found during the last 3 earnings.
QTR Est Actual Price Change
2-11 7.85 8.74 +68 12.8%
3-11 8.74 9.72 +44 8%
4-11 10.49 9.50 -53 -8.3%
Might be a good lottery play. As long as GOOG stays below 665 the short call expires. Any pop helps the June long. The lottery is that if a disappointment you lose your net debit. A pop above 672.50
(665 short call + 7.50 premium) gets you into trouble but you have the increase in the 695 long to help you.
Filed my taxes already!! Now I receive this email from TK:
---------------------
Dear TradeKing Customer,
As you may already know, changes in tax reporting rules from the IRS, which are taking effect for the first time this year, have presented new challenges in reporting cost basis, resulting in delays. Every effort is being made by our clearing firm, Penson Financial, to deliver the necessary forms by April 17th, however, it is possible that they will not meet that deadline.
According to our contacts at Penson, you will be receiving a Corrected form 1099 for tax year 2011 for your account. Unfortunately, Penson cannot tell us the exact date and time for when the form will be available online. You will receive an email from us as soon as forms are available. Please review all forms for accuracy and contact us with any questions.
-----------------------------
Seriously??? Unacceptable.
Nicky, etc
I am a CPA specializing in taxation and have been cursing this new brokerage requirement since Jan 1. All because of Obamacare. A lot of my clients with broker accounts did not even receive their 1099's until 2/15. That now leaves me 60 days to prepare tax returns. Add to that the almost 100% possiblility that the client receives an "ammended" 1099 by 3/15 and that narrows me down to 30 days. I actually had 3 clients receive amended 1099 this past Monday. ONE BLEEPING WEEK. I and a bunch of my collegues are livid. Be sure that i will be complaining to the AICPA to get their lobbyist moving in congress to do something about this. I am pulling out what little hair I have left. Try to tell a client that has already filed that now I have to prepare an amended 1040 and oh by the way bill you extra for the additional tax returns. And oh by the way I won't be able to get to it until AFTER 4/15. They scream.
Have you had a case where someone has not amended, because the corrected form did not have big changes on it?
On a positive note sold my AAPL put for $7.
I try to explain to them that if the changes are not material it won't affect the tax liability that much, but everyone is so afraid of the big bad IRS that all want to amend. They think the IRS is allknowing and I try to tell them the IRS has NO clue what is going on aside from third party W-2 and 1099 info that is filed.
So I opened a long may goog 665 call and short april 13 665 call for a net debit of $620. Since the strikes are the same, my maximum loss is limited to the debit of $620. The breakeven range is still very large, I don't have as much downside protection. If goog falls, I will likely try to sell weeklies against my long call to recover what I can from it. I chose to take a smaller risk on a big upside move, in exchange for a larger risk on a downside move, but at least my maximum loss is set. This is bullish trade with maximum profit at 665. I liked that number at about a 5% move up. I am hoping to close tomorrow morning, but we'll see.
Re: AAPL, I will likely roll down and try to get stopped out, to hopefully stay out until after earnings on the 24th.
Dave
Oops, I think the call is tomorrow after the close, so I will hold until Friday if all works out.
Dave
I didn't want to leave you out on that limb by yourself so I jumped in with your original idea. 2 contracts only. I have a net of 400at risk. If a miss 665 expires and I sell weeklies till June. A beat and i fgure with the short 665 and 7.00 in prmium and a pop of 9.00 in my June 695, I should be good for a pop to 682-685 or 7.5%.
Tax,
I think both methods have a high chance of working, and you have more protection on the down side. I kind of went back and forth trying to figure out where to get in. I chose to close the gap on my two positions to limit that very small chance of a huge gap up hurting me. I also wanted to be able to use less maintenance for selling weeklys if it comes to that. The June position gives you more time to recover than my May position does. I shyed away from the June as it looked like IV was creeping up. I feel good about both strategies though.
Good luck,
Dave
Dave & Tax,
Here is another way to play GOOG earnings
http://seekingalpha.com/article/487151-trading-google-s-earnings-release
No chance of recovery with that strategy though as it's weekly options, you either win or lose.
Damo
Hi Damo,
I often overlook the reverse condor, as I have never used one. May have a mental block, but I am averse to opening a position that must move a lot for me to even break even. I am partial to bullish and neutral positions, as I dislike losing money when a stock rises. I make exceptions for stocks like NFLX, but my position is small there, and NFLX appears ready to fall hard.
Thank you,
Dave
I didn't like how GOOG is going up today (I get nervous easy). I was able to close my GOOG position for a small profit, so I did. I will get back in this afternoon, adjusting my position according to the stock price at that time.
Dave
I closed my gld position and rolled it up. I am still down overall, but gld is coming back nicely for now. Still hoping AAPL will stop me out, otherwise I may roll into next week. I know, I should just close it myself if I want out, we'll see. Still waiting to see if nflx will drop down to 90, then I will roll my option down pulling out all my original capital in the process.
Dave
Dave, I did my first RIC on GLD and VXX last Thursday with weeklies. Both closed on Tuesday for around 15% profit, if I held on till today with GLD I could have made 40%. Will probably do these every week and slowly ramp up the number of contracts.
I'm watching the GOOG RIC, it's a little pricey to just play wit this one, $700 for just 1 and a chance of losing most of it.
Damo
BTO AAPL $630 calls for $2.45.
Dave/Damo
Give me an example of an RIC using AAPL, GLD or even GOOG. Include strikes. I can't picture an RIC.
And of course AAPL goes down.
I am dense, please define RIC, is that what I call a calendar spread?
Thank you,
Dave
The fog suddenly lifted:
Reverse Iron Condor
Tax,
I'll let Damo respond, I don't know enough to be of any help with that.
Dave
Tax, here is the trade I did on GLD last week.
GLD Price 158.30 (When trade entered)
Sell 1 161 call
Buy 1 160 call
Sell 1 156 put
Buy 1 157 put
It's a debit to enter and this trade cost 0.55
So for 1 contract it cost $55 with a max profit potential of 81.8% – $45
The trade will make it's max profit with gold either at or below 156.00 & at or above 161.00
So it's opposite to the iron condor, you want the price to end up outside your strikes, not inside.
Damo
Nicky, what 's the expiry on your APPL calls?
Tommorow.
I'm thinking I'll get back into GOOG at about 685 short weekly call and 685 long may call. This makes the trade bullish, as 645 will be about my breakeven point of the downside. I feel like I need to stay bullish right now. Might as well figure goog will go up, if not I will salvage what I can out of my long call. I think I will wait until the last half hour to put my trade on. I think the earnings call is 30 minutes after the close today. My best guess is the long call will lose about 5% of IV based upon HV and the LEAP IV.
Dave
You might be in luck Nicky, here goes AAPL now!
Strong finish for AAPL? I want to supplement my naked put income, with small bets on AAPL, just want to make $100-200 a day, I want to limit myself to one trade a day, and I don't want to hold overnight, it's not looking good today.
I could not resist the juicy premiums in GOOG. Just sold some puts in GOOG @ 550 for .30 premium. That's 95+ points of cushion for the earnings call later today. It's basically a 1 day trade and I'm betting that GOOG is not going to drop to 550 on an earnings miss...we'll see, can't wait to find out! I was willing to sell those puts @ a .25 premium, but when the premiums went to .30 as the stock was going higher, I could not turn down that trade. Go GOOG!!! Also sold some AAPL 550 puts that expire next Friday. AAPL seems to have lost its MOJO (at least for now). But will it drop to 550...we'll see. No matter what, all my AAPL positions (several of them) will be closed out by the time AAPL reports earnings on the 24th.
Nicky, I got to say, if nothing else, your posts are interesting to follow. Dude, you got a bigger pair on you than I do. I could never do what you're doing.
Damn you AAPL, damn you! At least MSFT made a nice comeback today, my Apr $31 puts are looking better than yesterday, TTWO is below my $15 strike by $.20, I have 38 April $15 contracts open, 10 more May $15s, I trust TTWO will come back by next week.
GOOG positions, short weekly 665, long June 695, net debit 2.00, 2 contracts. Feel like someone is getting cold feet into the close. Also feels like the first climb on a BIG rollercoaster waitng for the apex and the adrenaline rush on the drop back down. Figure with the June delta, that my break even on an earning beat is somewhere around 690. On a miss, I sell weeklies for 8 weeks to get my 400 back.
Tax,
I got back in at 690. The results will be set in about 40 minutes...
Dave
Here is my plan:
If goog goes over 690 tomorrow, I'll close both sides. Otherwise, will sell weeklies off my long position.
Dave
Stuck holding over night, hopefully a big move up tomorrow, max pain is $630, does anyone put any stock into this max pain thing, good article here:
http://www.nytimes.com/2006/05/07/business/yourmoney/07stra.html?_r=2
So far the reaction is "Oh, GOOG had earnings?" We will see what happens later and tomorrow. I guess earnings were up but cost per click or whatever was down.
Dave
Wow Tax, we'll see what happens in the morning, but your position is sure looking pretty right now. What a cool trade that turned out to be, IMHO.
Dave
I just got out of a meeting. Saw the ho hum response in after hours. I guess based upon the respnse, the 665 expires worthless and I sell the June 695 for a bit less than I paid for it. Have to crunch the numbers. Home for dinner right now.
Tax,
I think you may be surprised to see the value of your long has gone up. I bet the stock has gone up enough to cover any losses from decreased IV.
Dave
I use max pain as just another metric. I also use support and resistance on charts. If the stock has a low float, max pain targets usually have a better chance of being hit. Since I like liquidity, that limits its usefulness. You can find max pain for any stock here:
http://www.optionpain.com/OptionPain/Option-Pain.php
Taxman - Isn't the IRS going to have an avalanche of amended returns? And those with extensive investment income have already filed based on prior 1099s from their broker. I JUST received another statement from my broker and I received my refund two weeks ago!
Ok, I've got a rather significant amount of margin money tied up in the following short put positions (all of which expire tomorrow):
SPX 1280 and 1290
AAPL 570
GOOG 550 (opened this position today)
Hoping for a nice quiet day tomorrow so them puts can safely expire worthless and I will experience no stress from tomorrow's market activity (it doesn't always work out that way though). I had no desire to enter the GOOG trade (as I usually don't trade earnings), but with other posters talking about "GOOG this and GOOG that", I decided to look at the option chain (for put premiums) and if the market is giving .30 for a nearly ~100 point OTM option, 1 day trade...well, I'll take that trade every time. So, thank you to those posting GOOG comments for what is right now looking like a winning trade.
Nicky, I use to use max pain off and on a couple years back when I was trading GOOG options quite frequently. I have not used it at all since. It represents the strike price that the stock will pin itself either above for puts or below for calls such that the greatest amount of loss will be experienced by buyers of option premiums. The monthly options info is free, but I think you have to be a paid subscriber for the weeklys info. I only looked at it for purposes of curiosity...not as anything else. I put more emphasis in the technicals like support/resistance, fibs, BB's, and MA's. It's supposed to become more accurate the closer you get to the actual expiration date. I would use it with caution and not as a definitive metric upon with which to place a trade.
Obviously GOOG did not impress, earnings nor split. I closed my 2
4/13 665 short and June 695 long for a nice 100% ROI overnight. I must thank Dave for his ideas on this trade. I only hope you made as well. I sure do OWE you one. If in Wilm DE anytime soon, call me and we'll grab a beer. Thanks.
Tax,
I'm glad you got out ok. I'm stuck in, but I don't want to react too quickly. I'll probably wait until Monday to decide what to do.
Have a nice weekend,
Dave
Holding the AAPL 610/605 Put spread...ugh! Any good news looming on the horizon, and by horizon I mean "next 3 hours?"
Anyone know whats ailing AAPL??
Its down 30+ points in the past 5
days. Can't beleive its that bogus
Fed lawsuit. Cold feet on earnings??? Anyone getting back into leaps yet??
AAPL call is worthless now, I'm done with everything, I'm going to stick with the title of this blog: "Selling Put Options My Way" and maybe buying leaps if the market really tanks, with that being said: STO TTWO May $14 puts for $.35, I can't believe this stock is even in the $14s, manipulation I tell you!
Interesting article on whether AAPL is a bubble. Remember, this article was written before today's price action. They make a pretty compelling case for why AAPL could be a bubble.
http://www.bigtrends.com/technical-analysis/is-apple-aapl-a-bubble-ready-to-pop/?utm_source=DTW&utm_medium=email&utm_term=FA&utm_content=L+1&utm_campaign=DTWL
If you don't read the article (it's pretty technical reading) here is a quote from it "If Apple begins to falter and moves out of its parabolic state, its selloff will be ugly. Most folks believe Apple can do no wrong. It is a dangerous stock to hold for which nothing less than perfection is expected. Parabolic moves are unhealthy and always end badly".
Look, I trade AAPL probably as much as anyone on this blog. I'm currently short the following strikes that all expire next Friday: 395, 450, 480, 495, 550 and I added the May 420's today. I had reasons for selecting 420...all technical. So, talk of AAPL being a bubble is not comforting to my state-of-mind, but one should not ignore how AAPL has gotten to these levels of price action. History has shown this is not healthy for a stock to go up this much, this fast. The small pullback that AAPL has had so far (~5.5%) is really "small potatoes" compared to the parabolic move that AAPL has had. Come earnings, the only position I will be holding is the May 420's and I'm looking to add to them if the premiums appreciate significantly. I'm not certain AAPL can hold 550 by next Friday if it does do a parabolic move down. The other strikes I feel pretty safe with. This is a dangerous stock to be playing with right now (IMHO) and I'm keeping a very, very close watch on it.
Been reading your comments.
I have Appl 605/600 bear put spread open, May 12.
I bought it for 1.7, when apple was trading around $635. If apple goes below 595, what should I close it at. I mean what limit price should I set to sell the spread, I understand the max profit is $5 but I dont see that order being filled no matter what the price of apple is due to bid and ask spread. Should I settle for $3.5 which would be doubling my money, what price apple has to drop down to in order to meet that order.
I also sold 10 April 21 puts strike 555 for $1.04. Have bought 585/580 put spread for buffer although I just bought one hehe.
just a check!
just a password check!
Hi,
Does anyone use, or have an opinion about, Zacks? Are their rankings worthwhile or helpful at all? I have been using a trial subscription to thier basic service. I'm not sure I trust the 26% returns they claim though. However, I do like some of the in depth company analysis they put out.
Thanks,
Dave
Hospital,
When I open a position that requires a stock price to move in a certain direction and time value is not in my favor, then I like to take profits as quickly as possible. The stock may move in your direction and give you a chance to profit, then move against you taking any profit away. Seems like your idea of taking a profit when your return doubles, is reasonable for your position. That is what I think.
Dave
Friday was a tough day for all of my positions. I rolled AAPL to next week, looking for a sideways move until earnings provides a catalyst.
Still rolling gld weeklies.
Waiting for monday to sell a goog weekly. I will need goog to recover smoothly in the next month to pull out a gain. Goog closed the earnings gap down last quarter, and maybe it will recover again.
I'm considering selling a nflx put to recover some of my cost in my long put. I'm mostly waiting for earnings to possibly push it down though.
Dave
What do people think of doing a long straddle on AAPL, is there a down side? Seems like one can make money if AAPL goes up or down big??
Nicky
I did one of those a few years ago and lost lots of money because market makers inflate the premiums going into earnings, then the day after earnings they get crushed and unless AAPL moves big time, you never get your money back. In Jan with AAPl at 429 I did a 420/430 Apr bull call spread for net 5.75 and paid for it by selling a naked Apr 365 for 5.80. APPL beat earnings and popped, but I made most of my profits by closing the naked put, not from the call spread.
Dave had a great idea on GOOG this time around. With it at 633 he suggestd BTO June 695 and STO weekly 665. As you know GOOG beat but didn't move due to the split. I closed both positions at the open. The weekly was almost worthless and I lost a little money on selling the June 695 but made a ton closing the weekly. It was a great trade. Point is I don't know which way to go on AAPL.
The GOOG trade could have expoded if it popped bigtime. Dave is still into his GOOG trade and I don't think its working for him.
What's with AAPL!! I just read that the NASD100 is replacing First Soalr with Tex Inst as of 4/23. Since TI is a much larger company than First, everyone needs to do the reshuffle and since AAPL is the 800lb gorilla, index funds need to drop AAPL, GOOG, PCLN and the other 700lb gorillas to make room for TI.
Buying op anyone??????
It doesn't look good, but I am hanging in there. The short positions are happy today! The more it drops, the more apt I will be to hold through earnings.
Dave
$610 straddle would have been great today.
Tax,
You are right, I was much more bullish with my position in GOOG. I will lose on that one, unless GOOG recovers in the next month. I may have gone too bullish, but I still liked the trade, because the potential payoff was much larger than the risk I was taking, plus it still has the potentail to payoff.
Nicky,
That straddle would have paid off today, but it was expensive and not dependable imo. Going into earnings it makes more sense to me to find a way to sell expensive options and buy them back cheap after earnings. The trick is to not risk your shirt if earnings moves big.
Dave
"The trick is to not risk your shirt if earnings moves big."
I don't get that statement, for a straddle, you want a big movement, you don't care which way, just as long as it's big, and after earnings, there is likely to be a big move, I think rather than guessing which way, a straddle is a good play it will pay off if AAPL goes up big or down big.
Hi Nicky,
Sorry for the confusion. You are right about the straddle. I am just not sure that a straddle is the best way to work an earnings announcement, due to the high cost of the options and the overnight IV evaporation Tax was talking about.
I am suggesting that, in the long run, a strategy involving selling options may work better due to the large premiums received and the overnight drop in IV. You may do well selling options into earnings, but only if you can protect yourself from big moves. That is what I meant before.
I think most people are buying options into earnings, and then selling them right after earnings. This is why the IV gets pumped up so high and later deflates so low before leveling off again.
Thanks,
Dave
Nicky
What Dave is talking about is that MM's will drive up the premiums on volitile options into earnings then the day after earnings announcement, crash the premiums, so that the underlying stock needs to move big time just to make a buck. I had it done to me one year on AAPL earnings. If you do it AAPL will have to move big time.
Yeah, that's right. I consider selling naked otm puts to be a contrarian trading strategy. Most people are buying options to maximize the potential reward and minimize risk. If you sell options your risk is high and reward is limited, but if you can control the risk then you may be better off. Likewise, if you can control the risk at earnings, you may do better. Or you may be better off just avoiding earnings, not sure right now.
Dave
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