11. Added an RCL #Fuzzy Mar 125/125/115 for 3.59 and Dec 29 128 short calls for 1.00
12. Added CSX #Fuzzy May 52.5/52.5/46 for 2.24 and Dec 29 54 short calls for .60
13. Scratched the SPX #bitty in the #FuzzyBear account because this market is nuts and wanted to re-establish as much negative delta as I can
14. LMT #Fuzzy Closed it out! These are not meant to be day-traded, but I put it on at the low and quickly got $773 net profit (20%), so closed it to take off risk. A lot of slippage when these are day-traded.
15. 2 short /NQ for overnight
Author Archives: smasty
12/18 trades
1. DHI (neutral/short skewed IC) needed a little defense, so rolled the short calls from 50 to 52. New upside break even is 53.10.
2. SPX stopped out of the qty 1 BECS 2755/2730, closed for 3.85
3. SPX #FuzzyBear BTC 2625 put hedge for .55 (sold at 3.00) for $2450 profit. STO Dec 27 2625 for .75. New net number: Total profit $5898, Debit basis: 33.50. Also added a Dec 26 #Bitty (in 2 accounts) 2680/2675 for .85 (not included in net numbers).
4. LMT new #Fuzzy on down bar today: Mar 320/320/310 for 6.13, sold Dec 22 322.5c for 1.14, already up nicely.
5. TXN #BUPS hit over 50% target for $470 profit
6. FLIR #ShortPuts hit over 50% target for $700 profit
7. RCL STO #BUPS Jan 123/120 for .73 cr
8. DWDP This is a fun one, I opened a #Fuzzy on this last week but delayed buying protection for a 1% up move, I had an order queued for the move and it hit today, so my protection is cheap cheap at .40 (mar 62.5p)
9. TWTR Rather than roll a DITM Fuzzy I closed the whole thing for $440 profit
10. FAS New #Fuzzy in 2 accounts, I really like the setup. Apr 70/70/60 for 2.08, Dec 22 71c for -.48
12/15 Trades
MNST: STC tight debit spread, cutting it early. BTO @ .50 STC @ .65 for $150
MSFT: I’m always trying to build a stock portfolio w/ MSFT by selling #ShortPuts but I never get assignment. I saw a chance yesterday to sell 1DTE puts for .49, closed this morning for .02 for $470
AFL: Closed a January directional butterfly. When I opened the fly I thought “this is dumb, you’ll never get more than $100” Closed today for $170 profit
COT: Remember this spec trade? Based on upcoming 13f filings, it will go out at full loss -378.00. No more spec trades for me…time to remember my powerhouse trades and renew discipline for what works.
SPX Campaign: I happen to have an account with zero positions this morning, so starting a test of the #SPXCampaign process, I followed Jeff’s trade, but with a onesie. Jan 12 2730/2755 1.50 cr
#Bitties: Had 3 SPX bitties close for 30 contracts, total $1200 profit. One of them (already accounted for in the #FuzzyBear post) was only on for a day, I used the AS-BB indicator for timing placement. I’m currently out of index bitties, would like to see a new oscillator low before placing new ones.
Green open positions: ABBV, ADS, CELG, FLIR, IWM, JPM, LMT, MSFT, NTNX, SPY, TWTR, TXN
Red open positions: AOBC, DHI, DWDP, LKQ, MU, NUE, QQQ, SHAK, ULTA
I have very high cash balances right now, only small % is at work.
I’m probably done trading today, got to do the dreaded post office run. Our post office here is like a 3rd world country. 200 people in line and one person working. I hope everyone has a restful safe weekend. Me? I love a good whiskey in front of the fire on Friday afternoons.
Fuzzy Rolls
LMT #Fuzzy from just 8 days ago was up over $2,000 net today. Rather than roll, I decided to close it all and look for a new opp to reset.
CELG I rolled yesterday locking in $750 for the week and selling another 1.00 for next week, my “Stage One” net debit is now only $0.63.
JPM I rolled on Wed before FOMC locking in $550 for the week and selling .95 for next week. My “Stage One” net debit is now only $1.04
NUE got hit with some bad news this week on guidance, took the stock down yesterday but just beyond the synthetic level. Premium is slow to come out of the short calls today, in latter half of the day I will place new position for next week and just let this week expire. That will bring in $560 for the week.
IWM: Opened yesterday, no roll today
TWTR: Up nicely, but no roll for this week
SPX: #FuzzyBear Rolled earlier this week. I have realized income of $7100 on this in just 8 days. Stage One has gone from $40 to $30. Much more to go! Like @fuzzballl said earlier this week…just keep chipping away at it.
I’m looking at #Fuzzy debit recovery in two stages, Stage One is the trade debit recovery, then Stage Two is the spread risk recovery.
A Tale of Two Hedge Flys
I wanted to put on a QQQ #ButterflyHedge. So I looked at two setups in January. First I checked the lower expected move for Jan expiration and it’s around 149. So I set up a 153/149/142 broken fly, only .25 cents. Positive theta, a nice amount of negative delta, but NEGATIVE VEGA, and downside risk if the fly is blown. When you are already looking for a down move, the negative vega on a hedge fly will fight you all the way. Time is your only friend at that point, and in a crash, your friend moves slowly.
2nd setup: 153/146/142. 3x the cost of the first one, but I have 158 negative delta, theta is -5, but vega is now positive 55. In a down move with volatility expanding this will come in much more quickly I think than the first setup.
Hedges–usually wasted money. But I just really want a little something extra on going into the new year. Best to do it while vol is low. So I’m in 153/146/142 for .75 debit. I can sell some shorter-dated put spreads against this if I want.
Looking forward to comments!
Sue
Day Done
Here’s the rest of my trades today:
1. I used the AS-BB indicator to scalp /ES, /NQ, /YM multiple times today, for a net of $625 and no losses. I trade futures really teensy, but love this indicator for keeping me in when I would normally bail.
2 ETFC closed the contrarian short for the green-side-of-scratch
3. DLTR same as ETFC
4. SPX #FuzzyBear I’m kind of running in place with this trade on. I’m making nice money on other positions which are financing the move against me with this position. I’m using the AS-BB indicator to leg in/out on the short put hedge, which got me an extra $300 today in debit reduction. As mentioned before I took off 1 of 10 of my short calls in the synthetic to give me some allowance to the upside. I’m at about -120 deltas. Trying really hard to not over-correct on this.
5. AAPL closed my defended put spread that didn’t need defending. 1/2 of max loss, -$225.00
Profitable open positions: ABBV, ADSK, AFL, CELG, DHI, FLIR, JPM (really smart that I rolled this fuzzy yesterday), LMT, MNST, MSFT, NTNX (picked up 400 shares yesterday), NUE, QQQ, RCII, SPX (bitty, not fuzzy), SPY, TXN
Losing open positions: AOBC, COT, DWDP, LKQ, MU, SHAK, ULTA, SPX Fuzzy
Trying to slow it down now for the rest of the year, only take new positions if really compelling.
DHI
#SkewedIronCondor This is kind of like a #BrokenWingButterfly. I’m working off the assumption that this has topped out for the near future. Jan exp: 49/50/50/55 for 1.73 cr, no downside risk, upside break even is 51.73. Lots of time for defense on this if it heads back up.
DWDP
@vxxkelly did a recent trade on this and it reminded me it’s been on my watch list. There’s a lot of block trades on it today, and some calls being bought. So I did an unprotected #Fuzzy . I did a Mar 70/70 synthetic and sold Dec 22 71.5. I will add protection after an up move, for a better price. In a squeeze right now.
Didn’t capture my trades from yesterday, but a couple highlights:
1. Rolled the JPM Fuzzy hedge into strength to collect more on the next week
2. MAR #JadeLizard closed for 50% target
3. My SPX #FuzzyBear is troublesome. I didn’t set it with correct timing, so now I’m doing battle. I took off one short call on the synthetic turning it into a back ratio like @hcgdavis mentioned yesterday. I’m also using the AS-BB indicator for legging in and out of the hedge puts to get a few extra $$ on it.
#Fuzzies need rolls as Friday approaches: LMT, CELG, NUE. I’ve got substantial net profit on LMT so may close it all rather than roll.
12/11 Trades
Looks like it was a quiet day for a lot of people here.
1. May I please call these “Fuzzy” trades? I love them and I’m doing a lot of them (#SyntheticStock Diagonals w/ protection and hedge income—From now on known as #Fuzzies. To me, the Fuzzies have two stages, stage one is recovering the net debit of the trade; Stage 2 is recovery of the spread risk. I spent time this weekend looking at and scoring candidates. The “score” is basically the number of weeks of hedge income that it takes to accomplish Stage 1. The fewer the number of weeks, the lower the score. I’m looking for Fuzzies with a score of less than 5, less than 4 even better. I have a picture in my head of having a portfolio of 10 Fuzzies, each with $10 spread risk, bringing in 10-15K a week in income. So I’m testing these aggressively.
I have a TOS scan for finding high-return covered calls and puts, and it turns out it’s a good scan for finding Fuzzy candidates with low scores. Here’s the scan http://tos.mx/vKzR27
So back to Trade #1: CELG. I happened to catch a big bullish fund order for a Jan risk reversal, so a CELG #Fuzzy was my first trade of the day: Mar 110c/-110p/+100p, Dec 15 110 c. Net debit: 1.38 with a “Score” of approx 2.38 (2.38 weeks to cover the core debit)
2. Oh…here’s a nod to @hcgdavis for the Alpha Shark indicator. Got it. Love it. So scalped a bunch of /NQ today while taking it for a test run. Ended up +$305 on small-lot scalps. Enough to pay for the indicator 🙂
3. NTES. Now this was a franken-trade. It started as one 10-lot #butterfly. As it dropped added another 10-lot butterfly. Last week added a 3rd 10-lot butterfly. Was finally able to close it all out today for a $157 loss. Believe me, I’m happy with that!
4. #Bitties Closed! SPX x 20 lot, NDX x 10 lot. Got 50% target on all of them. The SPX bitties were 7DTE, so was happy to close them asap given the gamma risk. Net profit $1150.
5. Reset 17DTE SPX #Bitties. The Dec 27 2630/2625 for .85 cr x 20
6. NTNX I’ve been holding 703 shares, took 603 off for about $950 profit. Some day they’ll be acquired so I’ll always keep a hundred on. Great stock for swing trading, so will load back up on any dip. My max size position is 3000 shares, but I never seem to get the opp to add that many on.
7. QQQ #JadeLizard closed for 50% profit, this week’s expiration
8. SPY 266/267 #BuCS closed for 90% profit. This was bought based on #UOA (unusual option activity). SPY trades massive volume in fund flow, obviously—but it’s almost all put hedges. Every once in awhile a big bullish trade hits the tape, and those are ones for my attention.
9. NUE Closed a BuCS for 50% profit, this is another one that was bought on #UOA
10. NUE Opened a #Fuzzy Apr 60/60/50 for 1.87 core debit, Dec 15 62 call short for .56, Score is 3.3. There was a lot of bullish option flow on this today….all the way up to the 70 call line.
11 NUE spec trade based on #UOA bought 100 Jan 70 calls for .16, just looking for .21 as my target
12 MU #EarningsRunUp added two more calls to the trade from last week. Looking for 30% profit on these and must close before earnings announcement.
13 AMC #UOA There was unusual activity on AMC right before the other cinema merger happened last week. Turns out AMC confirms they’ve been approached too, regarding investment options. I’m glad I sold a few puts when I saw the fund flow. Netted 50%, $370.00 on a 10-lot
14. MSFT I like to layer on a lot of different MSFT trades. I love what they’re doing with Azure. However I saw a lot of January put buying today on MSFT, so I cut a trade short (#BuCS) for 28% profit vs. the 50% I was looking for. I still have on a MSFT #Butterfly that I’m watching closely. 80/85/90 for Feb.
15. ALGN This is the last of my trades from the tech crash. I defended it resulting in half what the max loss would have been. All closed now for $1150 loss. Classic case of thinking it would come back. Could have been handled better, but could have been handled much worse. I wouldn’t mind resetting with a #bitty or #PutRatioSpread the problem is that it’s just really thin. The Market Makers are not the worst I’ve dealt with (ISRG, KORS, ULTA are worse) but it’s still a struggle.
16. TWTR Opened a #Fuzzy in a 401K. I again saw some large bullish fund flow on TWTR and it had a good score. Mar 22/22/18 core for .78, sold Dec 22.5 call for .46, score is roughly 2. Not sure how this one will work out, but I’m still developing the perfect candidate profile for the Fuzzies.
@fuzzballl I hope you are ok being the namesake on these trades. It’s cute!
12/8 Happy Friday
1. NVDA: Fully closed the #JadeLizard sold for 3.62, partial cover at 1.62 yesterday, rest covered today at 1.35
2. BA: Closed the contrarian BePS, closed for .66 shy of full loss. Prob of touch is still high enough I should have held, but it’s just continuing to be a train.
3. LRCX: Closed the #PutRatioSpread for over 50% gain, 1.45, $1555.00. Recovery mission on big loss last week.
4. MSFT: #Bitty closed for 50%, this was Jan 80/75 BuPS for .82 cr, covered .41
5. SPX : I’m kind of thinking we see a strong market into next week’s expiration, so rolled the short puts on the #RocketManHedge from 2605 to 2625. Realized $2820 in the roll.
6. SPY: Opened #SpikedLizard for January. Part 1: 264/265/267 for 3.74 cr Part 2 (spike) 260/253 ratio put spread for .05. No upside risk, downside BE is 253 due to the spike. Need SPY price above $260 for meaningful profit. 50% target. I’d like to ladder these every 2 weeks.
7. SPX: Opened 7DTE #Bitty I said I didn’t want to do 7DTE Bitties any more, but betting we see an upside into next week’s expiration. Of course I could be all wrong. Got more credit than usual on these. Dec 15 2630/2625 BuPS for average price of .875 credit, 50% target
8. TXN: Opened BuPS for January 97.5/95 for .72, 50% target
9. TJX: Continued defense. Sold Dec 15 calls to adjust deltas
10. MU: Opened #EarningsRunUp trade based on historical backtesting. Partial position. Dec 22 47.5 call for 1.04.
11. PIR: Closed #EarningsRunUp trade for 28% profit, bought at .35, sold at .45
12. ABBV: Opened #BuPS for January 92.5/90 for .56, target 50%
13. FLIR: Opened #SyntheticCoveredCall for January 47 puts for 1.40, very high historical win rate on short puts for this company
14. BBY: Closed the contrarian BePS for loss, salvaging .60 from max loss
15. AAPL: I already have a BuPS on for next week, used this little upswing today to sell calls converting it to an #IronButterfly.
Imagine This
@fuzzballl —- Imagine a room full of 10 talented beautiful women option traders debating the merits of your #syntheticstock diagonals. Some of the women like the LEAP setups, some don’t (me). My thought is if there’s a melt up move on bullish setups, I’d rather close everything (for profit) than roll short-dated positions for significant debits. If I expect a full close in 3-4 months, why do LEAPs . All of these women say “thank you” by the way for your ideas and posts.
Sue
Opening trades:
:
SPX: #rocketmanhedge thank you @fuzzballl Feb +2635 put, -2635c, +2640c for 40.15 net, -Dec 2605p for $5.40, Basis = 34.62.
COT: Last month there was a day with 4 large block trades totaling over 4 million in shares. It sparked a lot of call activity. I’ve been waiting for closer to 13f releases for Dec to see if call activity picks up again, it sure did today, so I have a little spec play on for COT for next week. 17.5 calls for .34
MAR: #JadeLizard for next week Dec -126p/-130c/+132 c for 1.21 net cr, 50% target
TJX: Added #BECS to #BUPS to convert to iron fly for defense
Closing Trades:
BA #Bitty Closed at 50% target, sold at .50, bought at .25
TTWO #BUCS Bought 2.65 sold 3.10 net .45/contract
FB #shortputs covered for 50% Sold at 1.10, covered at .55
NVDA #JadeLizard from last week is beginning to cover for 50% Sold 185/205/207.5 for 3.62, cover order is partially filled at 1.62
Dec 6th Trades
Pretty quiet trading day for me, thanks again for everyone’s good ideas:
1. Took the HD BePS profit I was expecting this morning (Bought 1.09, sold 1.59)
2. Bought PIR long calls for Earnings run up (closes 1 day before earnings), target 40%
3. SHAK BePS for retracement from extreme up move, .84 debit, target 50%, trade is green
4. BA BePS for retracement from extreme up move, 1.21 debit, 50% target, trade is red
5. ADSK #ShortPuts for Mar, thank you for the idea @jsd501
6. I’m keeping 2 short /ES contracts hedged with short puts, rolled short puts to next week for additional credit. This “Z” contract will run out pretty soon.
7. CVX closed BuCS for 50% loss (I’m testing using “probability of touch” as a stop on debit trades)
8. RCII There was an almost 10,000 contract opening call sale today for Jan 13 calls, so I bought a BePS Jan 13/11 for 1.14 (paid less than intrinsic). Following the “smart money” fund flow on this (I realize this may be Trader setting a hedge vs a spec trade, but it’s limited risk)
9. New NDX #Bitty Dec 29 6125/6120 for .85 cr, 50% target
Active Greens: ADSK, AFL, AMC, BBY, ETFC,FB, LRCX, MNST, MSFT,NDX,NTNX,ORCL, SHAK, TTWO,
Active Reds: AAPL, ALGN, DLTR, JPM, LMT, NUE, PIR, QQQ, SPY, ULTA, /ES, BA (net green)
3% return on capital today
Trade Idea
Here’s an actionable trade idea for today (that I alluded to last night). I’ve been testing this for a little while now and it’s working exceptionally well with the market conditions we’ve got. Tasty Trade did a segment on Nov 29 regarding buying debit spreads for less than the intrinsic value. When applied to parabolic rises with the objective of a tiny pullback, it can be effective. Plus as a bear play it works quickly, I’m out of these trades in just a couple days. Buying a spread for less than intrinsic covers all types of volatility, and almost eliminates theta burn considerations.
Contrarian Candidates (Don Kaufman’s criteria): Stocks within 2% of all time highs, traded up 3% in last 10 days, + a blowout of a recent expected move, over 2x.
Trade: #PutDebitSpread where long strike is ITM, short strike is OTM, 1:1, pay less than intrinsic value, 50% target, around 30DTE, look for liquidity.
I’ve got a couple of these on where it looks like I’ll get more closes today: HD (3 days old), ETFC (1 day), BBY (1 day), DLTR (1 day)
I’ll report on any more additions today. It’s an easy simple trade with limited risk, little management.
p.s. Last night I called these reversion trades, but they really aren’t. A reversion trade would require a very significant pullback for these stocks. This is really just a rest/consolidation/flag trade on a stock that has been a rocket.
Here’s the TT video: https://www.tastytrade.com/tt/daily_recaps/2017-11-29/episodes/buying-spreads-for-less-than-intrinsic-value-11-29-2017
Busy couple days
Been a busy few days with market shenanigans for me. I was feeling a little overwhelmed keeping up with all the really great posts here, plus being an active participant at Simpler. Something needed cut…so I decided to take a little sabbatical from Simpler so I can have a tighter focus on things. Trading is not a hobby for me, it’s big responsibility, and I was getting a little too sidetracked with chat room stuff. I track unusual options activity (fund flow) via Trade Alert, and that was getting neglected too. Just putting focus back on that a little more today has already paid off.
Re trades, I usually have over 20 a day, so that’s too much to recap here, I need to find a way to give broader brush strokes with rare episodes of brilliance huh?
Good trades: The RH earnings run up was great, tested out with a very high win rate and the win rate continues (snagged 40% on long calls). Tomorrow is a PIR earnings run up trade with high historical success. The FAS #SyntheticStock diagonal was closed out for over $1400 profit.
Losers: I finally scratched off LRCX for a reset, saw a $14K loss on it, even after many adjustments. It’s my tax loss sale 🙂 I reset LRCX with a #PutRatioSpread, one of my fav setups on a stock that’s been hit hard. I have a new break even of $165. Losses on NDX/SPX #Bitties, but saved thousands in defense.
Active Trades: Got a lot of defense going on an LMT failed squeeze play. Lots of adjustments and layers added to extend range. It will be really satisfying if I can pull some green out! I’m pretty sure I can.
JPM: Opened a @fuzzballl trade on it this morning. Mar 105/105 #Synthetic with Mar 95 protective puts and a Dec 108 short call for very nice premium. The first round of short term premium covers the protective put cost. Other than that doing some #ReversionToTheMean trades on some parabolic stocks that seem to be working out well, quick profits on BePS on little retracements.
Hope everyone is doing great will catch up on posts tonight. Thanks always for the great ideas.
Sue
The 94 year old options trader
Here’s a short weekend story that you might find interesting at least, inspirational at best. About a month ago I was walking the dog during the Wall St. lunch hour when a neighbor a few blocks away came blowing out of house running up to me. “Sue, Sue, you’re an options trader right?” I’m surprised she knew this, I keep a low profile in real life, and since no one even knows what an option is, no one usually has a clue what I do. “My 94 year old dad just died suddenly, he has accounts with options in them and none of us know what to do!” I assured her that that was no one better in the neighborhood to help her family sort through everything. But I told her we needed to do a risk assessment very quickly, knowing how options can go awry so fast.
The next day she came to my house with piles of account statements. Listen to this, this 94 year old man had $3 million in naked puts, diagonals, and covered calls. He was a player! At 94! He knew exactly how to make risk work in his favor. He died doing the thing he loved most…selling premium. Luckily he was a TDA trader, so it was very easy to log in with the family and unwind all the risk for them. I think about this man a lot. I think about how much I would have loved to have met him before he died. But most of all I’m encouraged that what I love doing so much I’ll still be able to do when I’m 94. I hope to die with a mouse in my hand clicking “confirm and send.”
NTNX
Closed nice trade. 15 contracts sold at $3.30 (ave) bought back at .75, $3825. I had to be away from the desk this morning so I had to guess on a close order. Until NTNX gets weeklies, it is a marvelous stock for swing trading.
Sue
Trade Recap
Here’s trades not already mentioned today:
CVX: Closed #JadeLizard for $230 profit before it “slid down the slope” on the right-side P/L graph
QQQ: Opened #SharkfinHedge (as coined by Bruce Marshall) before market direction became solidified today. Dec 8 153/148/146 put fly for .53 (called sharkfin because of the P/L picture). Wanted just a bit of tech protection in case sell off continued.
NDX: Managed BeCS hedge, took 1/2 off, rolled other half to new strikes.
RH: Opened long calls (Dec 8 106) for earnings run up trade, will be closed day before earnings, high historical win rate
BA: Bitty hit profit target for $276, rolled to new expiration (Dec 15 270/267 for .50)
SPX: Rolled BeCS to new strikes for extra range
IWM: Closed JadeLizard early for $25.00 scratch (it was kind of a hedgie jade lizard, no longer needed)
NTNX: Added last tranche of short puts before earnings, trade is up very nicely after hours
PLAY: Closed long calls on Earnings run up trade for $165 (40%) profit, trade based on historical win rate.
Net Liq repair project still underway, but nice progress today
Sue
#LongVega I was looking at…
#LongVega
I was looking at my net vega today, it was over -1140. That seemed a little high to me as far as volatility exposure. So I took the opportunity today to add an SPX #Calendar for over 400 long vega to balance things out a little.
Jan: Short Jan 2560 put
Feb: Long Feb 2560 put net debit 11.60
On Calendars I always open at 1/2 size, then when price movement heads me a little more than half-way down the slope of the P/L graph, then I’ll add on the 2nd Calendar for a double, that then leaves me with a very wide profit range for the trade.
LMT #SuperBull The folks at…
LMT #SuperBull
The folks at CMLViz (geniuses) have done a big rework of the Squeeze. They use different settings, which I’ve come really close to replicating on charts (change your “length to 12, nk to 1.9”). They also have all new rules for entering trades on bull fires (day one green dot needs to close 1% above last red-dot day or no entry). Using the new settings there is an entry today for an LMT long. See the study link below. This is a way more directional trade than I usually take, and also the first time I’m testing their new entry parameters. I call anything that is long/long a SuperBull (Pete from TT coined it I think). But could also consider it a #RiskReversal.
Dec 15 BuCS 320/322.5 for 1.20 debit
Dec 15 BuPS 315/310 for .87 credit
Target and Stop both at 40%
http://tm.cmlviz.com/index.php?share_key=20171130172847_Z37vl0JWrWrxl44g
LRCX #Overhedge Defense is a…
LRCX #Overhedge
Defense is a little like luring in a squirrel to take a nut from your hand. Sudden moves and the plan goes awry. But #Defense usually needs to be done boldly with confidence. Knowing what to do in advance helps with that confidence. Does that sound like conflicting thoughts? Defense is just as much art as skill, and I don’t always get it right. Bruce Marshall says it GREAT…when not done carefully, defense turns your trade into a Three Stooges trade. Perfect picture there. I have #ShortPuts on LRCX and put on some hedges yesterday. I woke up this morning realizing I had overhedged.
I have short Dec 8 210 puts, so you see the trouble I was in yesterday.
I sold Dec 15 200/205 BeCS against my position, in a size that cut deltas too much on my puts. So I rolled back half that hedge this morning (for a loss) just to put the deltas back to where I want them on the long side.
LRCX definitely my problem child right now, but I’m always ready to take assignment and work it through on the other side.
FB #Defense I’ve got #ShortPuts…
FB #Defense
I’ve got #ShortPuts on FB (sized for assignment–always), at the time they were delta-19, the 177.5 for .71 cr. With this little upswing I sold a BeCS against those puts to create a #JadeLizard type setup. I sold the Dec 15 182.5/185 for .56 cr. This gives me a new break even of 176.23. I accomplished the following: 1. extended profit range 2. increased max profit 3. flattened deltas 4. added risk to the upside
Yesterday Musing
Yesterday, rough day for me. Saw a drawdown of $39K at the worst (but you don’t know my %). Recovered half that at one point, but it fell back down a little. So the message is…I’m hoping that it makes some folks feel better if their hit wasn’t as bad. If you were in the right stocks, you barely saw a blip, I was definitely overweighted in tech, it’s quite amazing how the accounts fared that were better diversified.
Anyway, the point of this post really, is that these are days of #refinement for traders. How do you develop control-of-self when there’s no testing? Managing violence in the market is an absolute necessity on the road to becoming a successful trader for the decades. There’s no way to gain the experience other than in the storm. No simulations, no shortcuts. So if you took a hit yesterday, and was able to sleep the night and live to trade today, then congratulate yourself. I’ll let y’all know when I’m back to all time highs.
Sue
LMT and FAS
Promised Daddy for two weeks I’d get him shares for the $2.00 dividend tomorrow. It kept running away from me though! But Dad loves free things. Free Big Macs when the Broncos win (yeah, been awhile), free ipads from TD Ameritrade (despite that he’s too old to use them), and perceived free money that are dividends. Had to cave.
200 Shares at $320.45, Sold Dec 22 325 calls for 1.45
FAS
This is a @fuzzballl trade, kind of. #Diagonal using #syntheticstock
BTO Feb 65 Call, STO Feb 65 (net .35 cr), STO Dec 66 call 1.32 cr
BE 63.44, Max profit $2600
Will watch for opp to add some put protection in Feb
NDX, PYPL, MOMO, ALGN, BA, NVDA, KORS, SPX
NDX: Rolled BeCS from 6460/70 to 6360/70, took profit, reset for delta control against BuPS
PYPL: Covered short calls (Covered Call) and reset on upswing
MOMO: Closed defended earnings trade for net $97.00 profit, used #Inversion defense
ALGN: Added a BeCS to my BuPS for delta management
BA: Bruce Marshall did a class last night at ST, I bought the #Butterfly setup from the class, it’s a directional Butterfly: Jan 18 265/275/285 10×20 for 2.55 debit, target 3.06
NVDA: Fuzzball reminded me to get an NVDA position open, put on a #JadeLizard Dec 15 short 185 put, short 205 call, long 207.5 call for net credit of 3.23, up nicely now, target cover 1.62.
KORS: This started as a post-earnings Iron Condor with good backtest history, but it has gone through SO much defense. Very happy to take it off today. I show a profit after many adjustments, but I don’t quite trust that I have the right baseline number.
SPX: I closed 3 of 4 #Bitty for a +$50 scratch. I added a BeCS to the 4th 2650/2655 for 1.45 cr for delta management.
I know these posts are lacking proper detail, but it’s been a very challenging day for me, trying to get the cows back into the corral!
Sue
ADSK, NFLX, NTNX
This is a whackadoodle day for me, lots of trades, not much time for detailed math:
ADSK Defense Trades:
1. Sold to open Dec 1 110 calls at the open for $3.90
2. Rolled 1/2 of my Dec 1 120 short puts to Dec 15 for .45 credit
3. Closed the other 1/2 of my Dec 1 120 short puts for big loss
4. Waited for further drop and closed my Dec 1 121 long puts for big gain
5. Sold 5 Dec 15 113 calls
6. Waited for turn signal and covered the 110 calls (from above) for 1.41
7. At a spot now w/ ADSK where I can let the dust settle. Net loss right now is about $2800.00
NTNX
1. Sold an additional 5 Dec 35 puts for earnings (portfolio-build strategy)
NFLX
I had a modified #JadeLizard from 2 days ago, the put side of that trade is the 190/180 spread. I #Butterfly (butterflied) that put spread for defense.
STO 4 Dec 15 190 put
BTO 4 Dec 15 200 put net debit 6.29
I love butterflying spreads for defense, it accomplishes 4 things: 1. Flatten deltas 2. Raise max loss 3. Widen profit range 4. Raise max profit
NDX #Bitty Conversion 2 more…
NDX #Bitty Conversion
2 more orders slipped in before the close. I have a special indicator I’ll share with everyone soon, but it gave me a flag on QQQ, so I quickly layered on a BeCS onto my NDX Bitty from yesterday to flatten deltas, extend range, raise max loss, and increase max profit:
On already from yesterday: Dec 8 6330/6325 BuPS for .80 cr x10
Added: Dec 8 6460/6470 BeCS for 3.26 cr x 5 (half size due to 10-wide)
Also added QQQ #JadeLizard due to backtest study I’ve run for timing.
Dec 15 Short 154 put/ Short 158 call/long 159 call for net credit of .90 x 5 BE 153.07 to down side, there’s .10 of upside risk.
BA #Bitty roll You guys…
BA #Bitty roll
You guys are probably ready to boot me? Sorry I’m a very active trader, will try to consolidate more. Rolled a Boeing Bitty (that’s fun to say). Closed a Dec 8 260/257 bitty for $220 profit, opened a new one: Dec 15 262.5/260 BuPS for .45 x 12.
ADSK Fill Got a fill…
ADSK Fill
Got a fill on ADSK. This is a 2 part trade. Screen shot is below if you want to load it in to the analyze tab (see caution below)
Part 1: #PutRatioSpread Bought to open 5x Dec 1 121 put, Sold to open 10x 120 put for net credit of .80
Part 2: #CallDiagonal Sold to open 138 call x 5 for 1.06, Bought to open Dec 29 145 call for .91, net credit of .15
A lot of people don’t realize that with #TimeSpreads (like diagonals and calendars) it’s impossible to know what the max profit will be. You cannot trust your blue P/L line in TOS…that line will move up and down based on volatility, and with the long call out in the future–the best you can do is to model an x% vol crush in TOS (15-25% usually) to make sure your trade isn’t killed by lower vol. In the morning, that blue line will have contracted, so what can look like a great trade the day before earnings, can get very deflated upon market open, and many people don’t understand why it’s tricky to work time spreads around a known vol crush. But I’ve found credit diagonals, particularly, to be wonderful add-ons for earnings for increasing range, max profit, and balancing deltas.
The Put Ratio Spread is one of my all time favorite trades. It is a net long-delta trade that can provide a wonderful profit range. Really, the put ratio spread is identical to a Jade Lizard. If you put the two graphs side by side, they are the same. In fact the Jade Lizard creators at Tasty Trade have started doing JL’s using all one side of the option chain; puts for regular, calls for reversed. Put ratio spreads, since they are sold for a net credit, have no upside risk.
The Call Diagonal is a nod to all the bearish fund flow I’ve been watching on ADSK. There are a lot of Dec 120 puts being bought by funds, and the Dec 130 and 140 calls are being sold. So I designed the call diagonal spread around that 140 line.
There is risk on both sides of this trade. TOS is showing break even at 117.88/145.64. In reality that upper break even number will come in quite a bit in the morning. I prefer to consider the risk of a naked put as “long stock assignment”–I never consider it to be undefined risk. The upside of this trade is defined risk, but it’s wide, there will be pain if ADSK jumps over 140.00. Once again, pre-market defense (on a run up) will be buying some shares in after hours.
NTNX #SyntheticCoveredCall I love NTNX….
NTNX
#SyntheticCoveredCall I love NTNX. I love their story. I love their technology. I loved them at IPO. I loved them at $45. I loved them at $14 (yes I held and hedged all the way down). The stock is nice for swing trading. Options are monthlies only (hoping for weeklies soon!). They have earnings on Thursday. Selling an in-the-money put is pretty identical to a #CoveredCalls (without having to buy stock). I would like to get about 15 short puts lined up before earnings, the thought being that stock assignment would give me a 1/2 size position, leaving room for more put selling after the report.
STO tranche #1: Dec 35 puts x 5 at 2.80 Will look to add 10 more over the next 2 days.
#Earnings I’ve been a big…
I’ve been a big earnings trader for a long time. Everyone says “oh earnings, it’s just a crapshoot!” Well, yes and no. My 3rd Quarter track record was 74.4% wins with 5-digit net gains on earnings trades. I backed off on doing a lot of earnings in Q4 just because I needed a rest. Earnings, done right, is hard work. You are up at 4am to watch reports, you don’t stop working until after 6pm. But I’m now rested up and ready to do some earnings trades into the end of the year. I thought I’d share my process here before showing you my ADSK trade. I do this on every earnings setup as my analysis design process:
1. I begin by looking at historical standard deviation moves and comparing them to what market makers are pricing in. This is “real math” standard deviations, not the “standard deviations” that some people like to toss out. I pay particular attention to black swan events in the last 2 years.
2. Then I look at average % moves over the last year
3. Then I look at the MM expected move
4. I note the expected report results for eps/whisper/revenue
5. I look back in my trade journal to see how I traded previous quarters and how it worked out
6. I do an extensive technical chart analysis
7. I use the CMLViz backtester to see what trades have historically worked for earnings (i.e. it will show if 30 delta naked puts have a 100% historical win rate for the 1 day of an earnings trade).
8. I subscribe to “Trade Alert” which shows where “smart money” (large funds) is placing their earnings bets. So I do a sentiment and options chain analysis going back a week.
9. Then I’ll begin design work. Some stocks tend to have a mini vol crush before the close (before report), so I’ll put those trades on earlier. Stocks where vol stays bid before the close I’ll wait later in the day for opening trades. My style is to be much less directional and more about wide profit ranges. Naked calls don’t bother me when I know I’ll be able to buy stock after hours. I never seem to be able to short stock after hours, there’s never any to borrow. I size everything for my risk tolerance.
I’ve got an ADSK design I’m working up that I’ll report on when filled. I’m looking at a #PutRatio coupled with a #CallDiagonal. There is a lot of bearish sentiment by funds in ADSK this week, which is surprising given the strength of the chart–but clearly holders are nervous going into this report.
Sue
SPX #bitty Bought to close…
SPX #bitty
Bought to close Bitties in 4 accounts, originally placed on Nov 21. 2565/2560 #BuPS and 2570/2565 BuPS, all were sold for .70-.75 net credit, all covered today for .40 net debit, net profit $1200.00
December 18 Reload in 4 accounts:
Sold to open 2580/2575 Bitty (BuPS) for .70 x 40 total contracts. Target close 50% .35.
NFLX #Bitty Bought to close…
NFLX #Bitty
Bought to close at 50% target. Nov 21 sold the Dec 8 190/180 #BuPS for $1.20, covered today at .60. 10 contracts = $600.00
After reviewing the chart I have decided to re-load with a modified #JadeLizard or #SkewedIronCondor . New trade entered: Dec 15 long 180 put/short 190 put/short 202.5 call/long 205 call x 10 for 1.68 credit. Break even 188.33/204.19. Target is 50% .84 for cover. My modified Jade Lizard uses 25/5 deltas for the put side, 35/30 deltas for the call side.
STO $FB Dec 15 delta…
STO $FB Dec 15 delta 19 puts 177.5 at .71, 50% target
STC $VMW Dec 1 127 long call (pre ER), bought at $2.30 sold at $3.20
MOMO Earnings
I do a lot of earnings event trades using a very specific analysis process. I did a short #ratio-strangle yesterday, sold 3×1 dec 1 34 calls/28.5 puts. Closed the calls at the open for 89% profit. The lower break even was blown this morning so I sold inverted calls as defense. Extended downside range by another .95, upside range is wide due to taking the short call profit.
Hey everyone, I’ve enjoyed reading…
Hey everyone, I’ve enjoyed reading everyone’s posts, and wanted to thank Jeff for inviting me to be a contributor. I’m Sue (AxeCap-Sue at Simpler Trading), live in Colorado, been trading for 38 years. I’ve been a full time options trader for 20 years. You can count on me to be completely transparent with my trades; totally honest on fills, wins, losses. My core skills are income trading, complex setups, defense, earnings events, and CMLViz (backtesting). Here’s my contribution for you: #Bitties. Anyone whose been hanging out at ST has heard over and over again about Bitties. Here’s the bitty story that I wrote recently for the ST Forum:
In May 2017 CMLViz was delivered to many of us in Simpler Options. Everyone started racing to find the high-return plays, 600%, 800% 1000%. A few of us though took the opposite route and began searching for the high win-rates. Trades that win over 90% of the time, with lather-rinse-repeat characteristics. EVERYONE (including me) was skeptical about these trades because the risk/reward is upside down. A LOT of risk for little reward.
It turns out that 25 Delta, either naked put or as the short anchor of a put spread, is a real sweet spot for these high win-rate trades. I call the 25-delta my “Jeep Wrangler” of deltas, because it can get very smacked around, up hills, down hills, stuck in ruts, and usually can always land on its tires.
I started doing the trades (all naked puts or put credit spreads) on SPY, LMT, MSFT, FB, QQQ, IWM, SPX, NDX in May—not sure at all how this little experiment would work out (because like most of you, risk:reward has been pounded into my head). I always size trades for risk and assignment assumptions, so the trades (with high risk) remained small. After a few days the close orders started hitting, for $150.00, $170.00, $300.00 profit, over and over and over. That’s how they got the name “Bitties”…because the profits are “Bitty”….but it’s like picking up money off the sidewalk. Within just a few weeks the profits (in multiple accounts) were adding up into the thousands, with close orders hitting every couple days.
Flash forward to November 2017, I’d like to say I have not had a single loser or assignment since starting this in May, that is almost true. 2 weeks ago I closed an LMT put spread early for a $170 loss (that is the only loss I’ve taken on Bitties since starting). Profits in just the above-mentioned tickers will hit $100K this year Not quite all of that is Bitties, but Bitties are definitely the majority.
Bitty strategy is fluid and always evolving. Those of us doing Bitties are always looking for ways to limit risk, gain more profit, foresee vulnerabilities, dial in time frames and profit targets.
I’ve found the sweet spot for Bitty expirations are 20DTE. Short timeframes provide more events/year with accompanying payoff. Although even tighter timeframes (19-7 DTE) test out well historically, they really don’t provide enough range to absorb normal market volatility.
In the past my favorite bitty was naked SPY puts, 20DTE, 25 Delta, with a mutli-year 98% win rate (at an 80% cover). With the end of the year here though, a great trading year in my book, I’m definitely focusing more on spreads for risk protection. The SPX $5-wide spreads give a really nice risk reward setup for a #Bitty, much better than SPY (roughly double the premium for the half the risk in SPY (25/5 spread), with no assignment/div risk).
As of right now the SPX 25/23 delta put spread, 20DTE, 50% cover, no stop, is backtesting at a 97.1% win rate over 3 years. A 25/23 is such to capture a $5-wide spread in the backtester.
One last thing everyone always asks….what about when the market rolls over. For me, that’s easy, the bitties flip to #Jade Lizards (or skewed iron condors) with additional premium collected on both sides of the trade: higher premium on the put side and the call credit spread kicker extend the downside range. The Jade Lizards are modified for risk using a 25/5 delta put spread coupled with a 35/30 delta call spread.
The Bitty trades I have on right now:
NDX Dec 8 (only way to get a $5-wide), 6330/6325 .80 cr placed today 11/27/17
SPX Dec 8 2570/2565 .70 cr, getting close to target, trade is in multiple accounts
SPX Dec 11 2565/2560 .70 cr, getting close to target, trade is in multiple accounts
Listen I totally get it if you don’t understand the rationale behind these risk:reward setups. I was there too. But I will just point to the win rate and say….it’s been an awesome year. I’ll keep reporting on Bitty trades here, but wanted to give some thorough background about them in the first post.
Sue
Options Bistro 