Another covered short "combo" setup (see Post Below) with the delta metrics of a covered put sans the buying power effect of short stock and plenty of time to work out and/or reduce cost basis ... . Metrics: Max Loss/Buying Power Effect: Undefined/~$1234 Max Profit: $514/contract (realized on finish below the short put) Break Evens: 46.14/no downside risk Delta:...
... for a 29.39/debit per one lot. Metrics: Max Loss: 29.39 per contract on setup Max Profit: 1.61 per contract on setup (5.48% ROC) Break Even: 29.39 on setup Delta: 37.54 Theta: 1.40 Notes: Roll the short call out on significant loss of value,* to maintain the desired net delta of the position, and/or to defend the break even. I would note a couple of...
A "combo" is a two-legged option setup with a "long combo" consisting of a short put and long call sold at the same strike and in the same expiry, and a "short combo" consisting of the inverse -- a short call and a long put sold at the same strike. The short combo emulates a short stock position with static* -100 delta; a long, a long stock position with +100...
On occasion, I like to take small directional shots without hanging myself too far out there from a buying power perspective because I lack directional conviction or (more often), I'm working a small account where going full on covered call just isn't an option due to buying power effect. FXI has come quite far off off highs and doesn't appear hugely inclined to...
... for a 1.89/contract debit. Metrics: Max Loss on Setup: $189/contract Max Profit on Setup: $61/contract Break Even: 14.89 versus 14.93 spot Debit Paid/Spread Width Ratio: 75.6% Notes: Taking a directional shot on SLV weakness here. Will look to take profit at 20% of what I put the trade on for ... .
... for a 2.36/contract credit. Metrics: Probability of Profit: 55% Max Profit: $236/contact Max Loss/Buying Power Effect On Margin: Undefined/$525/contract Break Evens: 23.64/28.36 Delta: -9.37 Theta: 2.1 Notes: Did this from my phone on Friday ... . Although I like to see >35% background implied volatility when pulling the trigger on these, at 30.3%, this...
While I'm waiting for my August monthly premium selling plays to grind out, I'm pounding the pavement for potential directional plays to get in on. Late last week, I shorted TLT at the 122 horizontal resistance level I alerted last week via the inverse TBT, (See TBT Upward Call Diagonal Post Below), so I'm looking for fun in other places, one of which is in USO,...
This is a continuation of a trade started out as a double diagonal. I've made various adjustments to the short straddle body and to the long strangle "shell" to demonstrate how to manage these trades. (See Previous Post). Currently, it has a scratch point of 2.27, and I've got an order to take it off at 1.47, since I was shooting to originally get...
... for a 2.62/contract debit. Metrics: Max Profit on Setup: $138/contract Max Loss on Setup: $262/contract Break Even: 35.62 vs. 35.69 spot Debit Paid/Spread Width Ratio: 65.5% Notes: Basically, shorting treasury strength with the inverse instrument ... . Here, I'll look to take profit somewhat quickly, since I've only got one roll opportunity with this setup....
Short on strength/horizontal resistance ... . Metrics: Max Profit on Setup: $208/contract Max Loss on Setup: $489/contract Break Even: 122.08 vs. 122.11 spot Debit Paid to Spread Width Ratio: 489/700 = 69.9% Notes: This assumes that this level (122) sticks around or is available at NY open. Ideal profit would be ~20% of what you put it on for (.20 x 4.89 =...
... for a 1.40/contract debit. Metrics: Probability of Profit: 61% Max Profit: $60/contract Max Loss: $140/contract Break Even: 39.60 Notes: Putting on a smidge of short volatility here in VXX on this pop ... .
This week: three candidates for directionals and one nondirectional premium selling play ... . CPB: Although timing could have been better to catch the absolute bottom in this, implied volatility rank and background implied volatility remain quite high in this underlying (61/35). Given price weakness coupled with high implied volatility rank, I would think that...
... for a 4.83/contract debit. Fading the treasuries move higher ... again. Here are the metrics: Max Loss On Setup: $483 Max Profit On Setup: $217 Break Even on Setup: 121.17 Debit Paid/Spread Width Ratio: 69% Theta: .32 Delta: -42.26 Notes: Will look to take profit at 20% max. Ordinarily, I like to do these skip month (e.g., Aug/Oct) to give me an...
With volatility at somewhat of an ebb here, I'm eyeing exchange-traded funds for directional plays in lieu of just hand sitting. The setup pictured here is of a XLU diagonal with the long dated option out in Dec, the front month in August. I would prefer setting this up as a skip month (Aug/Oct), but an Oct expiry isn't available yet. Here are the metrics:...
With various things Brazilian in implosion mode, it's no surprise that PBR and EWZ have high implied volatility here. PBR: Bullish Assumption Setups: The July 20th 30 delta 9 put is paying .43/contract, resulting in an 8.57 break even, which isn't very compelling, but might appeal to some smaller account holders who are willing to hold the short put until near...
... for a .77/contract credit. Truth be told, I kind of hate USO, with XOP being my go-to for petro-based plays. That being said, with its high implied volatility rank (65) and its decent background volatility (31%), I figured I'd throw a "can't hurt much" trade on here as a demo trade for a "safety tape" setup. The basic notion of a "safety tape" trade is to...
With this quarter's earnings pretty much in the rear view mirror, there isn't much single name to play here, particularly since we start right back up again with earnings around the July monthly. Consequently, if you're going to play single name, you may get caught in a volatility expansion running into earnings, so if you absolutely can't resist the urge to pay...
... for a 3.22/contract credit ... . Metrics: Probability of Profit: 50% Max Profit: $322/contract Max Loss: $278/contract Theta: 1.71/contract Delta: -7.06/contract Break Evens: 35.78/42.22 Notes: With a background implied of around 31%, it's the highest vol exchange-traded fund out there. As with a short straddle, I'll look to manage the trade early (25%...