Monday, May 7, 2012
Hi all, With AAPL hitting bottom and finally moving up those of us using them will finally breath a little easier. Also GOOG took a leap forward today. Still in/on my mind is the old saying of ‘Go away in May’. Meaning that the market is usually not bullish and hard to make money. I have many of the aapl Jan calls and I am letting them lose some value but selling calls weekly and putting cash in the bank while waiting.
A decent play might be the SPX. It is trading around 1370 and some great puts or spreads even Iron condors available with lots of cushion on the weeklys. If you still like aapl trading at 570, as I do, you can do spreads with 40 points of cushion or even naked puts and make 1% a week or better. Folks this is free money as good as gold.
Also Goog, trading around 610. The Iron condor using the 565/570 puts and the 645/650 call will make 2% pretty safe. There is lots of money out there so pick your spot and cash in. Cushion – cushion.. the answer to good sleep and good profits
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66 comments:
Comment on the AAPl leaps trades for what its worth. I bought 2 570
leaps on 4/27 with AAPL at 601.72.
In 2 weeks I placed 4 covered call trades rolling from 615 now down to 590 and have recovered 11% of my original leaps cost. I am planning that my leaps will expire worthless and I will profit from the covered calls. There R at least 35 weeks till expirey and at 11% every 2 weeks, well you do the math. Not that the past predicts the future.
Hospital
I don't tweet & I'm not the sharpest tool in the shed when it comes to IT. But I have been trading credits for over 6 yrs and have experienced every possible problem. Lost more times than I gained because i did not have cushion and loved those 5% weekly returns. But as one of our bloggers mentioned, it takes but 1 bad condor to blow up your trade acct. I subscribe to a spread newsletter and have attended 2 of his trade seminars. But I was not born again till I found jerry. It was staring me in the face but couldn't see it. Be happy with the crumbs concept. The market gives you 10-11% a year on average. At 1% a week you R blowing those returns away. Stay the course. Use cushion but also know when to get out. I could post my Mon trades on the blog and let you know the results on Fri. But it will be after I'm finished trading on Mon which is usually 11AM. I have no problem sharing my experiences and hard earned knowledge. But I'm just doing what Jerry writes about.
@Dirk, ihaveoptions and Nicky
AMS EOE Index - FTA Bingo!!!!! thats it.
First Trust Large Cap Value Opportunities AlphaDEX Fund FTA:
On Schwab
@ihaveoption and do you see the daily's?
FTA The investment seeks investment results that correspond generally to the price and yield (before the fund's fees and expenses) of an equity index called the Defined Large Cap Value Opportunities Index. The fund normally invests at least 90% of net assets in common stocks that comprise the index. The index is a modified equal-dollar weighted index designed by S&P to objectively identify and select stocks from the S&P 500(R) Value Index that may generate positive alpha relative to traditional passive-style indices through the use of the AlphaDEX(R) screening methodology. The fund is non-diversified.
No options listed. Still looking....
Jerry--I am a newbie and I have read your book and your extra chapter. I am still confused about your Apple strategy. If I buy a Jan 620 call for about $4200 and then sell a weekly 600 call this will bring me only about $32 minus commission of about $8. This doesn't seem very profitable. Am I missing something or does one need to buy and sell many more calls to make it more worthwhile.
thanks Jerry K
@ihaveoptions i took a look at the site of Charles Schwab but could not find anything on the AEX.
JerryK
Not trying to step on jerry's toes, but have you traded options before? I think you have the AAPl trade reversed. You want to by an ITM leap and sell OTM calls against it. Paper trade first to gain experience because you can really get burned trading options if you're not familiar with the strategies. Read my #1 post above on what I have done with the AAPL leap strategy. Good luck. One good thing, you can get lots of good advice from this blog. Take your time.
Thanks for the advice Taxman. I am obviously trying to learn. I guess I was using Jerry's example of his Jan 620 leaps and todays price for the OTM calls. How would you answer my question about the relatively low price for selling an OTM call compared to the relatively high commission? I use E trade but have just begun trying to learn about options.
AAPL is kind of at that point, it has to catch itself or enter a downtrend. So far, I still see this current price as consistent with normal volatility. Just look how far up and the price has gone in the last month. The stock is very likely the take off from somewhere around where it currently is. Hopefully nothing happens to derail it further.
Dave
Hi JerryK,
I think Jerry opened the 600/620 when AAPL was at about 610 or so. Compare a position at say 560 long and 680 short. See how that looks to you. You are right, 620 does not pay out enough at the current stock price to make it worthwhile.
Dave
I meant 580 short, not 680
JerryK
With aapl at 567, I might look at the 535-550 leap pay 8200-7400 per contract. Then sell a May 19 590 or 595 for 3.30/2.40. Even a 585This week is already shot. I'd go for next week which is May expirey. You have 36 weeks till Jan expirey so you can do the math. Worst case is your leap expires worthless and your profit comes from the weeklies.
Someone appears to be buying AAPL pretty strong the last 10 minutes or so. Will we see a strong finish for today?
FTA Top 10 Holdings:
Advanced Micro Devices, Inc. Co AMD 1.08
Western Digital Corporation Com WDC 0.97
Marathon Petroleum Corporation MPC 0.94
Whirlpool Corporation Common St WHR 0.92
Harris Corporation Common Stock HRS 0.91
Teradyne, Inc. Common Stock TER 0.90
Valero Energy Corporation Commo VLO 0.89
Sears Holdings Corporation SHLD 0.88
Molex Incorporated MOLX 0.85
Coventry Health Care, Inc. Comm CVH 0.85
I was sweating my NDX spread today with that break below 2600. Seems to be rallying into the close. 2 more days to go.
Dave seems we're all giving JerryK aapl thoughts.
Tax,
If I wasn't fully into AAPL already, I would dive in now. Still bullish.
@Nicky still looking for the AEX?
Pascal,
I can only find AEX on yahoo finance, and no options are listed.
Wow, You Dutch are hard to pin down. Where do you hide?
Guys--thanks for the clarification. It is making more sense to me now.I think I'll stick to learning and paper trading before risking my money!
Its already been found on interactive brokers as:
AMS EOE Index - FTA
Real time option data is not free i think thats why you can't get it on Yahoo finance or Google finance. i pay €5 a month for the data via interactive brokers.
I do not know which US broker has the AEX besides interactive brokers. Coming Friday I will start a new diagonal spread I don't know yet if it's going to be a put or call spread. I hope you guys will find the AEX because the daily options have a Lotta potential. I guess you just have to call your broker and ask them if they have the Dutch stock exchange.
I'm still waiting to get on the Apple train until it will find its direction again.
@ihaveoptions
LOL!!!!! It's a really small country just 17 million people living on a small space 17 feet below sea level but trading stocks and options since the 17th century.
http://maps.google.nl/maps?hl=nl&tab=wl
Thanks Pascal, I was just being a wisea**. Will look into a IB account tho I'm pretty tied up in AAPL BuPS for conservative gains right now.
Pascal - now that I've found the data, I'm trying to figure out what hours (my time) your market is trading. I'm on the west coast of USA. World Time Zone map says you are 9 hours ahead of me. When it turns Wednesday for you, it is still 3 PM Tuesday for me.
What are the hours your market is open? When you make the post, please indicate what time it is.
Thanks Tax for helping to clear it up.
JerryK; and others trying to wrap their brain around this. Adding to what Tax said..
When doing credit spread, a put spread would be with xyz stock trading at 600 you might sell the 550 and buy the 545. Doing this you might make .05. It cost you 5 in maintenance. If the smoke clears and you net .04 you would make .8% ROI for a week. When doing a credit spread with calls it is just the opposite. You might sell the 650 and buy the 655. Maybe this time you got lucky and received .08. when the smoke clears again you net .07 =1.4% ROI.
Now if you combine these two, you have just opened an Iron Condor. And your net would be higher as commission is lower and you only have maintenance on one side.
By reducing the maintenance you basically get to do double the amount.
Here is an example of a trade I did today. I had 19,500 in available maintenance.
AAPL trading around 565 this morn when I opened. With 19.4k divided by 5 = 38 options can be done.
I bought the 515 put and sold the 520 put for this week. I received .04
I bought the 605 and sold the 600 call, I also received .04 If I were just doing a single side spread (non-iron condor) I would have only netted .04. But by doing both sides I received .08 I netted around .07 This is a ROI of 1.4% in a 3- ½ day trade. I feel I have plenty of cushion on both sides. As said by Taxman, cushion is the key to success. I could have used the 540/535 and received .15 and the 580/585 and received another .15 for a net of .29. that would have been a 5.8% in the 3.5 day trade. Tempting as AAPL has been in a trading range that allows this trade. However, one news item good or bad and CaCa just hit the fan. Don’t talk yourself in to risking your capital for an extra gain. When picking the strikes I will use I start by looking at how far can I get from the current stock price and still receive around .05…. CUSHION is king…
When doing a diagonal spread also called calendar etc, as pointed out you buy a options far in the future, maybe the Jan. I try to buy around 20 point below the current stock price. I sell a near term strike for this week at maybe 15 points above the current stock price. This is a debit spread. You can now sell calls each week against the bought call. Just as with a covered call with a stock purchase. The main difference is that the bought call has a lot of time value TV in the options price. That TV will go away and the option will drop to parity. Meaning that if you bought the Jan-580 call from the example above and it cost you 50 you had 30 in time value in the bought call. In Jan if the stock was still at 600 you could sell you bought call for maybe 21 as there is no TV left to speak of. If the stock was below 580 the options would be worthless. If the stock went to 700 the option would be worth around 121. But no matter what the bought call is worth, you want to make a weekly income that hopefully combined with the appreciation in the bought call will equal a very big return.
Long explanation but I know many are confused, hope this helps. i will be out of town until Saturday so you guys and gals keep the thread going.
Jerry
@Dirk
The AEX starts at 00:00 (your time) till 08:30 (your time) 9:00 till 17:30 local time (i'll keep on talking in you time)
The weeklies go from friday 00:00 till the next friday 07:00
i usually start the weekly on friday around 02:00/02;30 and buy the daily the same time. Around 06:30 i close the daily because most TV is gone and buy a new one for the coming monday and keep on selling and closing daily's around 6:30am until i hit the target.
I see that the time scale is very inconvenient for you, it would be easier if you where living on the east coast ;-)
if you want i'll post my trades here.
I like how the market keeps buying the dips. They still see bargains in the pullbacks. The more I look at the AAPL chart, the more I see a stock ready to go up, up, up. Hopefully I am right, but if not I'm still looking to sell calls against my long call to bring in cash. Regarding sell in may, there have been plenty of times when the market bought in may as well. Will this be one of them?
Dave
i always enjoy a good amusement park especially the roller coaster.
APPL is giving me the same thrill but I wish it wasn't with my finances.
Tax,
AAPL really punched through the short term downtrend, and the 560 floor has been holding well. I'm looking to see it take off again. I am getting optimistic now.
Dave
TTWO down 5%, ouch, next Tues the come back starts, our stock will rise high!
http://www.youtube.com/watch?v=nN8V6SYm164
Tax and Dave, Feel the same about AAPL. Makes selling the calls a little tricky tho if in fact it takes off. Have a few 595 for Friday which should be ok but...
i got the 590's, already drooling to roll into next week, but I'm keeping my finger OFF the trigger hoping the 590 will xpire and AAPL rally to 589 by Fri and 600 next Mon when I sell short again. As I said above, I'm only in for 2, but in the 4 trades I've made the past 2 weeks, I've recovered 11% of my investment. Pretty lucrative.
I have NDX put spreads with the shorts at 2550, 2500 & 2475. Last two days been giving me heartburn. Problem is its my bosses account with 50 contracts short at 2550. I DO have an understanding with him. Known him for 30 years. But still!!
Yeah,
I plan to wait at least one more day, to see if AAPL can gain some traction here. If not, I'll pick a short spot and bank the cash.
Dave
Taxman, your boss' 2550 puts for NDX should be ok.
There has been really no conviction selling like last year in July-August.Everytime market goes low, bulls come back and defend it. I believe this is a good time to do iron condors as premiums are juicy and you can get far away strikes.
Today I sold NDX 2525/2500 for 29 cents, (was in flight otherwise could have gotten far better premium) and sold call spread 2700/2725 for 15 cents. 1.6% ROI for 2 days and 1 hour. Lets see!!
btw when is the sell off in Oil going to end, hurting my naked puts which are now getting close to the money in OXY and SLB.
Thanks again Jerry for your guidance.
To All
I sent an email to by broker asking him to verify settlement days for weekly SPX, RUT & NDX. I know the SPX stops trade and settle every Fri. I also know RUT & NDX stop trade at Thurs close but I'm not sure when they settle.
Monthlies all stop trade at thurs close and settle at Fri open. I have been burned badly with an overnight futurs rally and the Fri AM settle for SPX was actually 12 points higher than the highes trade for the day. All because of the way they calc settlement. With NDX so volatile, it would be nice if it also settled on Thurs
Hi Tax, Interested in what you find out from your broker re close of trade vs. settlement day for SPX RUT and NDX. Also as Hosp says, think your 2550 is safe...as safe as anything could be in this environment.
Jerry, I like your trade but it is now Wed. night so 1 day more is gone. I changed your AAPL play to 530/535 590/595 with 38 contracts. Here is the result.
Best Worst Last
266.00 (76.00) 152.00 PUT
684.00 266.00 418.00 CALL
950.00 190.00 570.00 Total
Not as much cushion but only 2 days left.
By the way, someone on this board was looking for an Excel spreadsheet to extract Options prices. I have created one and am looking for someone to test it. At this point, it only works for Iron Condors but it could be adapted for any Spread strategy. If that person sends me an E-Mail, I will send them the test code so far. As a caveat, it extracts data from finance.yahoo.com so is only as good as that data. It is also slow (about 2 mins. per I-C extract) so it shouldn't be used in real-time trading where real money is at stake. It also has a historical feature where it keeps the data from each extract and shows how the Iron Condor is doing.
Jim Joiner
Taxman, trading someone else's money must raise the stress levels!
A couple of the trades I did today my broker (IB) actually paid me the brokerage, 0.15c & 0.07c. I'm sure it's some kind of glitch and they will take it back but it would be nice if this happened with every trade.
Damo
Taxman,
This is the official CBOE page that lists the available Weekly options and the settlement time. NDX and RUT are both Friday am-settled.
http://www.cboe.com/micro/weeklys/availableweeklys.aspx
Cocoa
Checked the site and I see where SPX is Fri PM but RUT & NDX stop trade on Thurs and settle Fri AM.
Not what I wanted to see. Hate AM settlements. Will have to keep a closer eye on those spreads as Thurs close approaches. Now I know why my last weeks RUT call spread had such a high premiem on the short call at Thurs close. Thanks
To IHO and Dave, there's your answer on RUT & NDX. Hopital, liked your recent NDX IC. I will be revisiting my strategy on NDX IC's. Won't open them so early since they hold there prmiums longer. No sense taking on the added risk like I did.
Damo - Made lots of money for the boss last 2 years. Evrything OK
Tax. Think there is a distinction between weekly and monthly SPX expiry/settlement. Need to check further but no time right now. Be careful. Next week is monthly?
IHO
Yes there is. ALL regular monthly cycle index options stop trading at Thurs close and settle Fri AM. I know cause I've been burned enough times. Gives you a headache remembering this stuff.
GO AAPL!!! Yeah
Think twice before shorting AAPL. Check out what's coming.
http://www.ritholtz.com/blog/2012/05/iphone-5-concept-features/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+TheBigPicture+%28The+Big+Picture%29
Dividend burn - Got burned on INTC dividend last week. Was short 28 weekly calls (against July 24's). Got assigned overnight. Had to cover. Come monday saw dividend payment taken out of the account !! :(. Be careful. Next up - MSFT ex-div date is 5/15. Is anyone trading these stocks here ? Only see AAPL mentioned all the time.
Also this is a very useful comment stream but its turning into a bit of a yahoo msg board - " I think X is going up ! I'm gonna buy !". How about just posting your trades instead of opinions. just my 10 c.
amrit--Those of us who have been here awhile remember well INTC divy problems. Think it best to avoid earnings altogether tho some say as long as you have .10 value over and above divie, you are safe. (Think it was Jerry). Id like to see more actual trades as well tho I think this board is a long way from the yahoos on Yahoo. My 5c.
I disagree that X is going up, but you never know. I heard they cause noise pollution in Canada.
So Henn, are you gonna buy a put?
Yeah, just got my RUT & NDX maintenace released. Another successful week of spreads. NDX
2475/2450 puts, 2725/2750 calls
for a total of .90 and RUT 760/750 puts for .86. RUT was a little close.
Just placed May NDX 2425/2400 put for .30 @ 2610.
You guys want trades!
SPX May 1285/1260 put for .45
SPX @ 1355, delta on the short put 5%
IHO,
I just couldn't resist that comment. AAPL is looking up so far today. I don't really have anything else to share, but I will if I come across something. Starting the weekend early.
Here is how I am trading AAPL right now. I would like to give it a little more time to see if the stock has found a temporary resting point before going higher. If the big players are continuing to quietly buy, then the traders may jump aboard again somewhere over 600. There seems to be a fairly good likely hood of getting back into the up trend, and pricing in the very strong earnings report. That is my opinion, but a trade is an implied opinion anyhow. I am trading very bullishly now. You won't see me posting on yahoo.
Dave
Taxman,
You might be interested in checking out ticker SPXPM. These are SPX options that settle at end of day (PM)of Friday instead of AM and can be traded on Friday before expiration.
No weekly options on SPXPM.
Damo
Damo,
That is right. But regular SPX Weekly options are PM settled and do trade on Fridays. Bottom line if you want to trade SPX Monthly PM settled options you trade SPXPM and if you want to trade weekly PM settled options you trade SPX.
@ amrit we can post anything we want, we got a good group here, this ain't Yahoo, how about those Mets? Too late to buy puts on JPM?
i like the weeklies. Only have 4-5 days risk, more control and can get the cushion I feel comfortable with along with a 1-1.5% roi. Meets my targets. So I will continue to trade SPX, RUT & NDX weekly spreads. Through in a VIX spread with 2 weeks or less and that is a plan
Here is my trade for the coming week (done today): buy INTC Aug 24 calls, sell May 28 calls for $3.81 net. Hope to sell weekly 28 for the next few weeks. Was making good money on this last two months until got burned by the dividend payment.
@Nicky - I was just commenting on people posting stuff like - "I think XYZ will go down, then I wlll buy calls, wait for it go up then sell calls". Its just meaningless commentary that you can find in a thousand internet forums. I really don't care about anybody's bullish or bearish bias. Just give me some numbers to chew on.
Amri-Guess we are a little thin skinned here, but you gotta admit that comaring us to Yahoo board was a low blow. Anyway, you are welcome here and posting your trades is great. I currently think AAPL will go sideways...lol, at least for a while. I'm basically selling July call spreads from 500 to 540 hoping to pocket the premium as AAPL rises toward earnings. I am intrigued by Tax's index spreads, like the idea of spreading the volatility risk over an entire index vs one volatile stock so when I get some maintenance freed up, we'll see. Stuck with 570/575 long dated calls, sold calls against them this week for 1.05 which expired this afternoon. Will sell again next week if we can get an 'up' day. Have a good weekend all.
Sold APL calls at 595. Never threatened this week.
IHO,
Yeah, AAPL could definitely be stuck in this sideways range for a little while. I need to pay for some time value that is wasting, so I opened 540/530 spreads for the week. I just don't feel good about opening a short yet. We'll see what next week brings.
Dave
hi hospitalist can u pm me at drali1974@hotmail.com..want to discuss something about our profession
(hospitalist).
pascal did u buy puts or call..thanks
Thanks sharpCocoa, all these different settlement times are confusing!
Damo.
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