Welcome to the page that discusses Put Options

I want to start this blog by telling you that I have no 1-800 number, I am not trying to sell you any newsletter with the next great stock idea. I am not inviting you to come to my house and view a cleaning agent. I will not try to sell you plastic bowls or any other ‘can’t miss’ ideas. I do not have any life changing secrets and I cannot promise you a flat stomach.



I am going to share with you my daily option moves and the reasons behind them. My way of trading options are of course not the only way to utilize Put Options. This is a way that I have found to be simple and easy and not as complicated as some make this business. My hope is that you can develop a steady stream of income and continue to enjoy your life.











Sunday, September 23, 2012

Ways to trade

Hi all, Lots of talk regarding instructional ideas. Wow you guys have more time than I do. I have mixed emotions regarding all the info available on the web and in seminars etc. I am glad that so many find the information helpful as nothing beats knowledge and experience. For those of you that find it confusing, the relationship of the IV compared to a rising delta and a dropping stock price and all the other variables that affect the premiums, I’m with you. I have been doing this nearly everyday for fifteen years. I’ve made lots of money and sorry to say lost my fair share. But I have never found any of the tons of info that is available to be of much help. It certainly will spell out a lot of what if’s, but it all changes immediately with the stock price change. You can spend hours researching all the variables but eventually you have to pull the trigger based on plain old common sense. The correct gamma and delta and IV and all the other info won’t help a bit if you don’t pick your stock or index based on common sense. For those of you that don’t have the time to watch all the videos and web cast, just follow some simple rules. Pick a darn good stock Pick one with a decent PE Use options that have a decent premium and plenty of O-I Avoid stocks with coming news i.e; earnings etc. Optionsense; I think you mentioned that you are finding a longer time period safer as you have more time to be correct.. Hmm don’t you also have more time to be wrong? To me time is the biggest enemy of all. I don’t want to be holding a position a month from now when Israel attacks Iran or vise-versa. I want a position that is only a few days long unless I’m doing a bullish call spread such as I have with AAPL. For short term spreads, call or puts, I want my money at risk for just a few days. An example of positions that I will open probably Tuesday assuming all is right with the world.. AAPL trading around 700 Iron Condor (IC) this weeks 630/625 put for a nickel =1% On the call side 750/755 for another nickel=1% for around 2% a week with these two. GOOG trading around 734 put side 680/670 for a nickel and 765/770 on the call side = .05 for another 2%. I have absolutely no idea what the various greeks or other indicators would say about these trades but they are common sense. A long ways from the stock price and 1-2% in a week. Someone show me a mutual fund that makes 100% a year, and they get to use computers as big as your house… For you traders that love ‘more’ information good luck as there are a ton of people selling ideas of how you can make money. To me I fall back on my natural skeptical side and think if it works that good, why don’t they use it and give the information away as they obviously can make all the money they want. I make quite a lot of money from trading and the last thing I want is some of your hard earned money just so you can have me tell you the end all way of trading. For the traders that are just getting started, take it easy. Use common sense. Don’t try to learn too much or you might get paralysis by analysis. There can be too much info out there for some of us. Gbarbs, you mentioned rolling down the sold side of a call spread. Don’t forget when you do that, it takes profit off of total profit at maturity. I also do it at times but generally it is costly if you assume that the stock will come back by expiration of the long side. If you believe the stock will come back, usually you are better off to not roll down. Good luck all and I do enjoy sharing ideas Jerry

65 comments:

Optionsense said...

Jerry, you're right, you do have more time to be wrong.

Since I've been trading this style, every month I've had positions go against me within a week of putting them on – having time on my side I've been able to close those positions for a profit before expiry. If I was using a weekly option they would have been losing positions.

I'm not saying they all come back, some don't and they end up being full losses, others small losses – the point is, if you're using correct position sizing you're able to let them go and see what happens. I'm not worried about losing trades, I expect to have them.

Damo.

Selling Put Options said...

HI Damo, I can only speak of my experience. Letting losses run with the assumption that they will or even might come back is asking for major losses. Imagine someone thinking that with RIMM or pick a stock… In years past I also had some come back and that reinforced a dangerous pattern. When they do it is cool. When they just keep dropping the leverage of options can eat up a lot of money real quick. Do be careful, this is coming someone who let his losses run because I was sure they would come back as they had in the past. Within a little over a year, and one and a half million later I decided that there was no rule that a stock has to turn around. The market and the stock does what it does without regard for the heartbreak that is happening.
So trade careful and you will continue to trade. Good luck
Jerry

ihaveoptions said...

Jerry, You mention longer term BuCall Sprds. These are of course debits upfront. What levels are you looking at for Jan and/or Apr. And thanks for bringing us back to reality. These short term trades really do work and more than 1 to 2% per week seems greedy.

Taxman said...

Hi all, I'm back. Went on our first cruise. Went to Bermuda. Nice island. We usually do time share exchanges. I think i like them more. Gives you more time at the location to scout things out, find out the interesting things about the locale and veg out a bit. On the cruise, everything seems rushed trying to do everything that is available. Also not crazy about being herded around like cattle. 3,000 people all trying to do the same thing at the same time. Shows were nice, food???? Will probably give it another try. Alaska maybe next.

Got to catch up on what Mr Market has been doing. Also have to pay for the next vacation. That 1% per week is SWEEEEET!!! Caught up on blog postings. Did monthly spreads for years and was never able to close out a losing trade in time. Keep telling myself I have 2-3 weeks left and the market will turn around. Well it never did. I like trading weeklies. 2-3 days of exposure, 1% per week. NICE.

Hey whatever floats your boat. As I tell evryone, that is why they make vanilla AND chocolate ice cream. Take which ever one you like.

Hannah said...

Jerry,
Long time no hear!
Two years since your tradeking blog and sales of your book.
Still trading for crumbs. 615/625 & a little naked put Oct aapl.

Selling Put Options said...

Hi Hannah, Good to hear from you. A good trade and it should make you some money.
TAX, I agree regarding a cruise. We go to many places all over to world and rent homes. You get to know the area and restaurants and place to see. When in the Carib etc and we see a cruise ship come into port we are amazed at the cattle that come pouring off. They rush to and fro trying to see all the tourists stuff they can in 5 or 6 hours. We have never been on a cruise but many do and really love the carefree way? As you say, whatever floats your boat. (excuse the pun..)
I have reread my posting and I want to mention that I am certainly not against knowledge just saying that there is so much and so many ways to incorporate all that info that it gets confusing to most of us and especially new traders. That is my goal, to try and teach the KISS method with some guidelines to help with safety.
Jerry

Optionsense said...

Key to being able to let trades run is position sizing, I'm risking under 1% of total portfolio on any one position so no problem if the position goes to total loss.

The other aspect I didn't mention is keeping your portfolio balanced, if all your positions are long and there's a market crash you will get hurt, even with small position size.

At them moment with the market at these highs I'm expecting a pull back so I have a slight bias to the down side, but it's only slight as there is a chance we keep grinding higher.

This type of trading is probably not for everyone as it's reasonably active, I've averaged 45 trades per month over the last three months. Stats for those 3 months have been very consistent, 75% winners - 25% losers and over 2% return per month. The best bit is I never had more then 35% of my total portfolio used as margin, this makes it very easy to sleep at night.

Damo.

Brian said...

on the AAPL spread mentioned above 615/625 for about .10 so you make $10 per $1000margin minus commissions so maybe $8 profit per spread that is about 12% OTM ? I wish volatility would increase as 1% return for only 12% OTM

Selling Put Options said...

Hi Brian, the aapl spread mentioned above (on the post) was a two part trade in an IC. And it was for the 630/625 put side. A 5 point spread not 10. But yes after commiss you will average around
.048 ea and div by 5 (maint) it would be a .96% ROI for three days. But combined with a call spread with another .05 and no maint as it is a condor - brings in around 9.8 and div by the 5 maint is a roi of around 1.9% for a three day trade. Hard to beat that. Also on Tuesday morn you can adjust the different strikes to what aapl is doing that day. If you can get an AAPL trade that last 2.5 days and 50 points of cush on ea side...my advice...take it.
Jerry

ihaveoptions said...

Jerry, interested in your Jan plays. I have 645/650 put spreads for Jan (about 45% ROI for 120 days) and some more conservative 600/605s (35%ROI). Haven't gone that far out before but am attracted to 'set it and go sailing' nature of these trades.

Selling Put Options said...

Hi ihave o's. Those are great returns. We often forget that anything over 10% a year equals bragging rights. So your ROI is great. Yes there are certainly many ways to make money with options. I do weekly’s with AAPL and GOOG. But for longer term plays I have a lot of AAPL. I have the long Jan from strikes of 545 to 650 I sell calls against most of those but for many, I now have sold a Jan call usually 45 to 60 points above those. I just let those sit and concentrate on the weekly’s.
You mention sailing. I raced for years and then went cruising in a 35’ Cat. A full queen and full head plus to doubles (sort-of) We loved it but the damn golf bug bit and only time for one real hobby. :-) Judging by my scores I should have kept sailing.. lol.
I hope all of you traders that are younger than me, have a full and happy life like I have had. Options made so much possible that at times I forget to thank them. Options offer plenty of reward for those patient and careful. Limit your losses and don’t be greedy and it will come. When I see traders asking questions and they are in their 20 etc it is fun to see. With care and vision they (you) will be wealthy and use your money for fun and helping others. For those looking for a great charity check out both Smile Train and Compassion. To great ways to pay it forward.
Jerry

John Surdi said...

Question for the experts here:
Looks like my weekly 685/680 put spread may go ITM by weeks end. What is the best way to handle this situation? When to roll and how far out? Any suggestions would be greatly appreciated.

Brian said...

question....commissions sure can be an issue for small credits. I pay $1.25flat fee per contract(no other fees) so getting $5 per contract for that 630/625 AAPL put spread for 10spreads means I pay $25 commissions for net $25credit($50spread credit-$25commissions)

so commissions are 50% of credit so .5% return on margin

gbarbs said...

Brian
The broker topic was thoroughly discussed so you could go back through the blog and read those posts. I am in the process of switching to Optionshouse but Tradeking is where I'm at now and that would cost me $25 for 15 spreads. So, you can do better.

You may also try using a 10 pt spread which would reduce your number of contracts? Even if the credit is less it might work out better at your rate.

Brian said...

Thanks. Im at Eoption and TOS but optionhouse sure looks cheap

Taxman said...

John Surdi
you were way too close to the price of aapl to be placing a 685/680 put spread. Best you can do is close at a loss or try rolling out and down or out at the same strikes and hope aapl rallies.
You need cushion.

John Surdi said...

Thanks Taxman. I will be rolling on Thursday or Friday. Might be stuck at that strike for a while....

Nev said...

Jerry, thanks a lot for your blog and ideas. excellent stuff.

my thoughts on credit spreads

1. like brian mentioned above when you are opening deep out of the money credit spreads for pennies and use many contracts, commissions can take away half of your return 2. in case of a freak decline they are more difficult and annoying to roll and if you do have to roll, again you will be paying out of the anus in commissions. 3. with credit spreads you are dealing with two options so two bid ask spreads eating away at your profits, whereas naked put is only one bid-ask. 4. let's say your netting 1.5% a week. if you go 65 weeks without a hitch and then the 66th week the stock blows though both your strikes, you just lost all your profits for over a year. Not saying im not a proponent of Jerry's strategies because I am. just not a huge fan of vertical spreads in general.

BTO jan 14 aapl 600 call and Jan14 goog 660 call today before the selloff and STO calls against them. if only i could have predicted the spanish riots coming ha.

gbarbs said...

Nev
I am relatively new and had the same thoughts as you. First that 1.5% can double in about 48 weeks if you reinvest it - due to compounding returns.
Second - put rules in place so you close out the trade before it goes all the way through your spread. If you're trading options with high liquidity (high OI) you shouldn't have a problem doing that.
Tax had a rule on his index spreads that he opens them around a 5 delta and considers closing them if they get to 25 delta. So you don't lose it all....if its a condor you can also roll the opposite side for more credit and offset a potential catastrophe. FInally, keep each position sized so that any one loss doesn't take too much of your principal.

Nev said...

good thoughts on risk management. definitely puts you in better position to profit. all else equal though, when you add the extra comission required and the extra bid-ask spread, in the long run if you can limit the amount of contracts traded by using naked puts instead of credit spreads you should be saving some money. just my opinion.

Selling Put Options said...

Hi traders, for traders that worry that credit spreads and their gains can be wiped out, just like naked puts or any trades you have to be somewhat flexible.
I open on Tuesday but if the stock I am using is down on Tuesday (AAPL down and Goog up) I might wait until Wednesday. If things have not settled down I don’t use that stock. When you can go 40 or 50 points below/above the current stock price and get around 1% that will nearly always make you money. There are many ways to make money and there is no ‘one’ way. But be aware of the different ways and evaluate which is for you and don’t hesitate to interchange ideas.
No offense to traders that use deltas etc. on when to enter a trade, but yesterday at the close the delta on an AAPL trade with the strike in the 650 range was one thing and you were happy and decided to use that strike. Today the delta says don’t use that strike?? So how did that delta from yesterday help you today now that the trade is open.
When opening a position in my opinion, if the stock/index is falling don’t open a put side. If rising don’t open a call side. Don’t try to out-guess a stock…it can’t fall any lower or go any higher?? These are common sense items that many traders ignore. Again for me the KISS idea. For newer traders that want it simple, it really doesn’t matter what the gamma, delta and beta are. Those items will take care of themselves if you use common sense. Make a list of the known things that can ruin a trade, if your stock passes that test… open it and be happy.
Regarding longer term trades. Two days ago a long term trade on AAPL for OCT or NOV might have looked pretty good. Now with AAPL down 20 points or so you are probably sweating it out. For me and the short term traders, I have not opened one and might not unless it turns around tomorrow. The unknown of long term scares me. There is always something just over the horizon.. elections, war with Iran, you pick it. To much can happen in two weeks or 6 days or one month.. I want a two or three day trade. And even that is scary…lol
Good luck all and it is fun to exchange ideas

b1llmoo said...

Nev I totally agree. I am new to this world of options. I have used spreads condors and naked calls and puts. I have had the most trouble with the condor and spreads. I think the biggest key to success is size of position. If you read my post about AAPL i got tasted on a 635/690 naked strangle I rolled up the the puts and was able to profit. Im far from an expert. I am planning to do an experiment. Sell 5 delta naked strangles on the Weekly or monthly SPX. max of 2 on each side. Background on me. Im 32 no kids and have a good paying job.Nice savings acct. Not a greedy person at all no debt. It would really suck to blow out my acct. Way under 40k But it would not change my lifestyle right now. I have 5k profit( I have never taken a dime out) for the year. So thats my break even point. I really look at this as chance to achieve a goal of trying a different way to invest and not just buy stocks and hope. If I posted a video for every trade hopefully you guys would watch, and provide feedback. I think this only place that I can get true feedback and understanding on what i am doing. I just felt like sharing and Just having an itch to prove to myself that i can succeed in this business... Thanks listening to my rant...

Nev said...

Good luck on the SPX strangles. Im kind of in your boat as well. im 24, good paying job, got into this stuff over the past year but before then i had the theory down as a finance major. you're right though, when i look at my losses and gains almost all of my losses have come from just bad performing stocks that i should have avoided in the first place and all my gains have come from naked puts, covered calls, calendars etc. if i cut all plain vanilla long stocks from my portfolio id be in much better shape. looks like thats where im transitioning.

Selling Put Options said...

Hi all, a spread I opened today with AAPL. An IC (iron condor) The 635/630Put Also the 705/710 call side I did 39 of them and made 377.56 and used 19,500 maint. This comes to a 2.5 day trade and make 1.93% roi
There are trades out there that do not require a long time frame and pays pretty good ROI.
i DIDN' TLOOK AT GOOG but I imagine there are plenty of more for tomorrow. For the traders that say just $377. for investing 19,500 is not much... folks that is over 100% annual return on investment. And pretty darn safe. These are available every week. Good luck all

Taxman said...

Amen Jerry. I'll take a 2-3 day exposure with a 1-1.5% roi every day.

Artelly said...

Hi Jerry and all,

I am having fun experimenting with the 2-3 day trades and the condors. I'm an 80% naked put guy at heart, but I see the value in spreads and will be using a small portion of my portfolio to collect 1-2% per week! I'd like to change the topic a bit and talk about margin on naked put selling!! Without a doubt, so far e*trade seems to offer the best margin and maintenance margin. Here's why ...etrade uses the basic 10%/20% formula and for stocks that require special margin (I know Jerry would probably say avoid those, however, I go much further out of the money!) the etrade formula is 10%/ special margin firgure (25%-35%). I love the commission schedules at optionshouse and eoption and on normal margin stocks they use the 10%/20% formula, HOWEVER, their margin on special margin stocks is outrageous!! Sometimes, 30%/60% ... sometimes 100%!!! So, the danger there is that a stock can flip into special margin requirements at any time and suddenly, you have a margin call. Anyone else have experience with this?

Taxman said...

For you weeklies out there.
Just placed a NDX IC for .60 @ 2787

2825/2850 call
2725/2700 put
Settles Fri AM

b1llmoo said...

Now the problem I see is you have to have 39 contracts and a 20 point move which is possible would hurt and adjusting would be tough. Taxman I am interested on how you handled the move to the upside. Roll or close out. I am so new to this and am just tring to find the right path for me. Thanks for all your knowledge BTW.

Taxman said...

I will be closing out. No guatantdd on a rollout the NDX won't keep going UP.
Another fry on a CALL Spread. When will I ever learn!!!!!!

ihaveoptions said...

AAPL IC at 635/645 put and 695/705 call side. Should be safe but with AAPL, one never knows, do one!

Brian said...

Jerry what is you loss rule credit spreads if stocks moves against you? Do you do 2x the credit

Tony said...

Had a scary experience with the AAPL 645/650 and 725/730 IC this week. Opened it Tues morning with the stock at 690, watched the stock tank for the past two days and nearly fall below 660. Fine now after today's rally but I'd like to know Jerry's thoughts on a "proper" cushion for a 4 day position (so I can sleep at night!)

Tony

b1llmoo said...

Tony I would like to know when you would have adjusted the 645/650...

Tony said...

Unfortunately I let it ride much later than I should have before closing out the put side. The value of the IC had increased about 8-9x by the time the stock fell to the mid 660s. AAPL rallied on Thursday which put my position back at parity (and the options expired worthless).

I think that opening the position with too little cushion made for some extremely volatile price action. If I would have had 50-60 points on the put side, the volatility of the position would have been far less.

Still would appreciate some guidance from Jerry or others on a proper cushion for an IC.

gbarbs said...

jerry mentioned above 40-50 pts cushion on AAPL opened on tuesday. he also mentions the cushion in his book - for spreads ideally 5 pts/day...."if opening tuesday ideally 20 pts of cushion". that is of course in conjunction with the other filters he's got.

i think many of us question when to exit those weekly spreads if they're going against you. i try my best to have a rule in mind before placing the trade so when it happens there's no emotional reaction. last week i had BPS on AAPL set up at 630/640 and was watching the support area at 655. if it broke below 655 i was going to close, assuming there was still some time left.
personally, i'm not seasoned enough to have a set rule that i've figured out.

ihaveoptions said...

$20 on AAPL is not enough for me. If you look at percentage swings, you will see that often daily ocillations are this big. Don't know what the magic number is

Ed K said...
This comment has been removed by the author.
Ed K said...

Any thoughts on this trade for tomorrow morning:

Goog Weekly IC at 695/705 put and 815/805 call side. Net Credit of .20
or
Appl Weekly IC at 585/595 put and 730/720 Call side - Net credit of .20

Not sure any of these will setup but used the mid-point.

Taxman said...

Ed K - Not familiar with GOOG volitility. AAPL looks OK with 60 points cushion and 4 days exposure.
I can't imagine aapl moving 60 points in four days, but it is a very volitile stock.

My plan for aapl thru year end. I have read many articles on aapl movement and I'm hoping aapl sells off to low 600's thru end of Oct due to 1) earnings miss on postponing I-4s to I-5 phones, and 2) Mutual Fund selling to lock in profits prior to their year ends for bonus purposes.

Then, anticipating a great holiday season and an aapl rally into January eps, purchase long calls with a weekly covered call program and also bull call spreads with potential 30-40% roi thru Jan expirey.

Sounds good doesn't it?? That and 3.50 gets you coffee at Starbucks.
But its a plan.

ihaveoptions said...

Tax, Looks good if we get a good entry point in low 600's but as with all things AAPL, you never know. Have really come to appreciate the 'covered call' program tho. Generating income while you wait for the underlying call to go DITM. Best of both worlds. I also like that the sold calls seem bulletproof, just roll 'em and bank the credit. What am I missing? Have done it but aborted the program a couple of times for various reasons only to wish I just had more long calls to methodically sell against.

Also like the BuCS. Pay upfront, no maintenance issues. Haven't tried to manage them tho if they look dicy. Have you?

Taxman said...

Have Ops - I was doing covered calls but then aapl got away from me, so I just rolled the shorts to create bull credit spreads. I have 4 maturing in Oct and 2 in Jan. Looks like they will work. Jerry likes 'em.
Been looking at Jan bull spreads of
40 & 50 points. My calcs show potential 20-25% roi with DITM calls. With 15-16 weeks till Jan expirey, getting my target weekly roi. My primary income still comes from weekly index credit spreads.
Just placed some NDX 2700/2675 puts today for .35

ihaveoptions said...

Tax, Have the Jan 685/700 and some Feb 705/710 BuCS. (Febs incase blowout earnings run the stock up after announcement). Only a couple of long calls at this time but I'd love to see another opportunity for good entry. I'll go as deep ITM and long dated as I can afford, then chip away at the basis for as long as I can. That seems very similar to your plan.

Also doing weekly BuPSs on AAPL, sometimes converting to ICs when it looks good for income. Haven't gotten into the indexes but might have to start.

Taxman said...

My appl plan is working!!!!

Just placed an "aapl beat the bank"
April 2013 490/480 BPS for 1.32.
170 points of cushion with a 12.9%
roi for 7 months. Safe as a CD??
with better roi.

Taxman said...

Nice recovery from the abyss for aapl

ihaveoptions said...

Tax, Like your 'beat the bank' trade. We get so accustomed to the outsized 1-2% per week ROIs that we forget the kind of yields available elsewhere and how easy it seems to beat the heck out of them for ROI.

gbarbs said...

last friday with AAPL down the premium to stay at 690 was under 3 pts. i decided to roll up to 695 for 1.5 pts with the idea that i've added 6.5 pts total. since we're shooting for 3 pts/week that gives me 2 weeks for it to recover and stay on track.

i think it'll need to be around 680 by next friday. i have a choice today to move the 695 out to oct 20th for maybe another 5.5? that'd be 11.5 pts total in 3 weeks.

gonna start looking for opportunities to roll on thursday rather than waiting til friday afternoon

ihaveoptions said...

gbarbs, I've noticed that the new premiums on a Thurs AM are often very good. Of course, you don't get the benefit of the total time decay on the old week but it seems often worth it to roll early. I still like going just one week at a time tho, maybe skipping a week next week and going right to earnings. Difficult to guess where we'll be then tho in PPS.

gbarbs said...

yeah - i noticed that the last 2 thursdays....after looking at possible rolls on thursday was surprised to see such a big difference friday, and wished i just rolled when the opportunity was there.

my account is finally being transferred so can't go out to next friday. need to roll to the 20th or skip a week. not sure which yet.

ihaveoptions said...

Gbarbs, Wudda, cudda, shudda sold those calls Thurs AM.

Selling Put Options said...

Hi all, Well AAPL’s drop probably broke some hearts today. When a stock is trading downward don't try to jump in and guess. I have a bunch of long plays with AAPL vert call spreads. But I didn't open any weekly spreads this week. For my long term spreads I have incrementally rolled down the sold one every few days. They started at 700 and now I have the 670’s. every time I roll down I get a cash bump but the down side is when AAPL starts up I have to be nimble and keep raising the sold strike.
Tax; I like your beat the bank play. We sometimes forget that earning 25% a year is pretty damn good!
I have opened quite a few of the GOOG vert call spreads. It just seems tuff to keep GOOG down. I have the Jan – 725 / this weeks 76 Selling weekly’s on these.
Later in Oct with AAPL earns and the new I-pad coming on line I look for good things. As the reports of the great phone sales come in, buyers will start buying AAPL again. But don’t bet the farm on it until proof is in front of you.

gbarbs said...

haaa. my old man used to say that to me all the time.
guess i never learned.
i ended up not doing anything so just am long the jan 650 call for now.
the bulk of my AAPL spreads are january verticals with the short side at 630. have a couple at 665. down to 1 that i'm trading the weekly against - the jan 650. gonna sit on that for now.

been doing a similar strategy with BP and collecting weekly premiums. i'm doing well on that one because BP has been predictable so i've been able to pick strikes close to the market and get a little ahead of it on reversals.

ORI said...

Jerry
Can you recommend an exit strategy for the Jan call spread you recommended a couple of months ago? Thanks

gbarbs said...

with AAPL under some pressure i am thinking about maybe buying back 1 or 2 of the short calls i have on the january spreads. maybe start with 1 and buy more back the lower it goes.

Taxman said...

Is anybody going to try and catch the aapl falling knife?????

Sai I said...

I was in the Oct 595/590 put spread and didnt want to take the risk and so exited the position right after opening bell losing $320 bucks. I then got into a Jan 15 400/410 spread and am waiting for the stock to bounce after ipad mini and earnings on the 25th. I think aapl will crush estimates and then looking to recoup some of my losses in the next few months. gotta say that i was pretty happy when i exited - I was sweating it the last couple of days!

Taxman said...

Sai
If you want to play aapl as safe as possible (is that an oxymoron when it apples to option trading??)
try my "aapl beat the bank" shown above. Look out to Feb/Apr about 150 points lower. You might get
10-12% for a 7 month position. I did an Apr 490/480 credit spread for 1.32 12% roi after commish.

I think aapl will miss eps this quarter due to peeps delaying purchases of I-5's. I am expecting a blow out final qtr due to holiday shopping, I-5 rollout and Mini.

gbarbs said...

tax, if you're right about the earnings, im thinking that 4th qtr blowout will be announced late january after the jan options expire.

didn't try to catch the knife on the weekly but i set up more jan spreads this morning and am sitting here wondering if i should have set them up out a little further to gain exposure to that earnings announcement.

ihaveoptions said...

I have a few 610 Feb AAPL calls against which I am selling weekly for income. Don't know if I have the stuff to hold thru Jan earning tho I do believe that earnings will be good. And that's why I bot the extra month out. Now all I need is the strength of my conviction. What a couple of weeks for apple!

ihaveoptions said...

Jerry, I'm still a little uncertain of how or where to roll the next weeks short call. I seem remember you saying that the sweet spot is one or two strikes ITM but I am uncomfortable with the stock 'getting away' from me, especially during earnings week. AAPL doesn't seem to be acting quite normal tho for a pre-earnings run. Your thots?

Sai I said...

Thanks Taxman. I'm starting to lean your way of thinking about this qtr's earnings. Migth come in low, but sets up for year end earnings, which I think you're right. aapl would have fixed its foxconn and other supply issues by holiday time to have a record 4th qtr earnings.

Ed K said...

@Taxman - I think it was you a few weeks ago you posted about Spreads. That you use the S&P, because it's not directly influenced on 1 company.
Can you share what ticker you use? And the rules you run by.


Example:


SPY - Sell on Weekly on Tuesday/Wednesday with a 10% spread, etc.


Thanks

Taxman said...

Ed K
I use the following indeces and spreads.
SPX - 15 points - Fri PM settle
NDX - 25 points - Fri AM settle
RUT - 10-15 points - Fri AM settle

I try to do the following:
1. Place trades on Tues PM or Wed.
I have also placed them Thurs AM
2. Keep opening deltas at 5 or lower.
3. Shoot for 1% roi on the spread.
4. Keep enough cushion based upon recent market volatility.
5. Consider closing if deltas get into the 20's, cushions get tight or the market gets volatile. This is the hardest. There is NO hard/fast rule for this. Its gut feel.

Can't think of anything else.

I was in an NDX trade from Mon AM shorted the 2700 with 100+ points cush at the time when NDX/aapl started tanking. By Thurs close I was down to 19 points of cush with Fri AM settlement. I was hoping there would be no major selloff into todays open. I lucked out. Gets a bit hairy when you feel OK at 100+ points only to watch it melt away. I won't be placing spreads on Mon any more.

Dave G said...

"YES, YES, YES" - that use to be the moniker for a WWE wrestler (now he goes with NO, NO, NO). Anyways, the first "YES" is for TGIF, the second "YES" is for being thankful that the markets have closed and the 10/12 weeklys have expired, and the third "YES" is for AAPL closing above 600. I was short weeklys 10/12 AAPL puts at the following strikes: 560, 580, 585, 590, 600. For a while it looked like AAPL was going to test the 600 level, but it didn't and all my weeklys puts expired worthless. Where else can the word "worthless" be worth so much as when referencing sold options that expire, well, "worthless".


I'm currently short the following AAPL puts for next week (i.e. the normal monthlies): 485, 510, 520, 525, 545, 555, 560. I would have added more to this list but I have heard so much talk of further selling pressure in AAPL next week that I have held back a little waiting to see what happens. Whatever happens, I do not see AAPL dropping below 560 next week. But, with a stock like AAPL it is certainly possible, but my money is on the line that it won't...it won't take long to find out. Bring on next week baby and AAPL stay above 560 and I'll be another "winner, winner chicken dinner".

Selling Put Options said...

Dave G. Congrat’s, your positions expiring worthless results from leaving lots of cushion when you opened it. Some questions regarding a stock moving past you and 'running' away. That happened to me with some of my AAPL and I was stuck with the 630's while AAPL was in the 700's. Now that AAPL has dropped back they now look pretty good and prem's are up again for them. At that time prem’s were not much but the long side does continues to go up in value.
Every now and then you might want to jump up a strike on the sold side to capture the upside of the long. To do that you usually have to go out a few weeks or even a month.
Other questions that seem to come up are closing and rolling a long term spread. Several times I have totally closed a spread and then opened one with new strikes. Sometimes at a loss and sometimes not. Example if you have an AAPL spread with maybe the Jan 650 and selling weekly’s. You can keep doing that if you think the stock will come back or close it all and open a new one for maybe the Jan 600 and sell weekly’s.

Taxman said...

Got my feet wet this AM with an NDX
2575/2550 put spread for .30 @ 2714

139 points cush at the time. NDX now 2727.