This is a neutral to bullish assumption "skip month" call diagonal that very nearly approaches the metrics of a "proper" Poor Man's Covered Call where the credit received for the short call is equal to or greater than the extrinsic in the long option, the break even on setup is at or below where the stock is trading, and where the price paid is less than 75% of...
... for a 2.05/contract debit (82% of the width of the spread). Another defined risk, neutral to bullish assumption setup in the April cycle ... . The natural alternative would be to just sell short puts here (the April 20th 48's are paying .66; 32 delta), but the premium in those just didn't seem that worth it relative to buying power effect. For example,...
... for a 1.35/contract debit. I seem to be taking quite a few directional shots lately. Here's a neutral to bearish one in the Euro proxy (FXE) where I paid 1.35 for a two-wide (67.5% the width of the spread).
... for a 3.14/contract debit (78.5% width of spread). Another neutral to bullish assumption setup with plenty of time to reduce cost basis. Currently, it looks like you could get a better fill than I did (mid currently at 3.00, 75% of the width of the spread, which is what you're looking for in these setups). Here, I'm shooting for 20% of what I put the trade...
... for a 1.55/contract debit. Another directional shot with a small "hurt" factor and plenty of time to reduce cost basis ... .
... for a .03/contract credit. Another small, defined risk neutral to bullish assumption directional a la the XOP diagonal I just put on. (See Post Below). As with the XOP trade, shooting for the long maintaining at least 50% of its value at expiry of the shortie at or near worthless or (alternatively) its value exceeding the value of the shortie by .32/contract...
This is a long-dated trade I re-up on a quarterly basis and with the March quarterly approaching (I've still got a June quarterlies setup on), it's time to consider a setup using the September quarterlies. I generally don't post these, because they have the pace of a covered call, and most aren't interested in basically watching paint dry or grass grow, opting...
With the VIX dropping hard below 15, some of the juice has poured out of the cup ... . Even so, there remain a few plays in the market. ADBE announces earnings on the 15th (Thursday) after market close. The volatility metrics don't quite meet my criteria for a volatility contraction play (56/32), but the March 23rd 210/323.5 short strangle is paying 3.80 at the...
... for a 2.49/contract debit. Metrics: Max Profit: $51/contract* (20.5% ROC) Max Loss: $249/contract** Notes: As with any diagonal, there aren't many metrics to look at. If you just leave the setup alone, however, your max loss is $249/contract, and your max profit is $51/contract. Max profit is realized with a finish above the 35 strike at expiry; max...
... for a .20/contract credit. As a diagonal, there aren't many metrics to talk about, since outcome is almost wholly dependent on price action and how much you can get in credit on roll of the short aspect of the setup. However, the setup was 9.18 delta long and had a positive theta metric of 3.09 on fill ... . Here are the possible scenarios: 1) Price rips...
A trio of retail names, TGT, ANF, and COST announce next week ... . TGT announces on 3/6 before market open. Preliminarily, the March 16th, 11-day, 20-delta 69.5/81 short strangle pays 1.54 at the mid, with its defined risk counterpart, the 66.5/69/81/84 iron condor paying under 1/3rd the width of the wings at .83/contract, slightly shy of the credit I like to...
This is a Poor Man's Covered Call, with the 90 delta July long call standing in as your stock, and the April 20th 26 short call functioning as it would in a covered call situation. Your max loss is the difference between what you paid for the long (currently 6.28 at the mid) minus what you received for the short call (currently .69 at the mid). Consequently, you...
EARNINGS ANNOUNCEMENT/VOL CONTRACTION PLAYS: M announces earnings on 2/27 before market open. Preliminarily, the March 24/30 short strangle is paying .84 at the mid, which isn't very juicy. Given the size of the underlying, it may be more amenable to a short straddle or iron fly, with the March 9th 27 short straddle paying 2.95 and the 23/27/27/31 iron fly...
... for a .15/contract credit. As with any diagonal, there aren't many metrics to provide, since max profit is dependent on the number of rolls undertaken, the credit received for each, as well as whether the long maintains value. However, the max loss is the width of the spread (3) minus the credit received for the setup (.15) or 2.85. This is the max I can...
... for a .97/contract credit. Metrics: Probability of Profit: 62% Max Profit: $97/contract Max Loss: $2303 Break Even: 23.03 * -- Assuming price goes to zero and you do no rolls or take other loss mitigation measures (e.g., sell short call verts against, etc.). Notes: With background implied volatility greater than 35% and with the recent sell-off in both oil...
P announces earnings on 2/21 after market close; HLF on 2/22 after market. Any vol contraction plays you choose to pull the trigger on should be put on shortly before the close before which earnings are announced, when the background implied volatility is likely to be at its highest. With background implied volatility over 100%, the obvious play in P is a...
... for a 1.66/contract credit. Metrics: Probability of Profit: 49% Max Profit: 1.66 ($166/contract) Max Loss: 14.34 (which equals the cost basis in any stock I'm assigned) Break Even: 14.34 Notes: Put on at the 70 delta strike, this is a synthetic covered call with a buying power effect that is far smaller (~20% of the max loss or $246/contract) as compared to...
Although earnings season continues to drag on here, a small financial media theme has emerged in this sell-off and that's that "Earnings don't matter" ... at least, at the moment. In keeping with that mini-theme, I'm looking at putting on plays in sector exchange-traded funds, and two of the ones that have been battered the most in this market have been OIH and...