The big thing I’ll be watching today is AMZN, since I have an ITM naked put on it. Last Friday watching it pin 1600 was a beautiful thing. There is adequate OI on the 1600 line today to support a move back up there again. If I’m going to keep playing AMZN it’s got to be done more safely, with one of our stock replacement structures. If I do take assignment, I’ve designed a “#SharkFinHedge ” that has a max loss of about 1/3 of my next call sale to provide about another $10 downside along w/ the new call sale for next week. Here’s what the hedge looks like: May 25 1565/1555/1550 broken wing put butterfly for about $2.00 debit. Keeping these tight with DTE means they move more quickly with underlying price movement. I also will sell calls near the close in advance of assignment. Stay tuned!
I had a lot of 273 naked puts for today’s expiration (BTW, I love using Wed expiration for assignments so I don’t have to wait for over a weekend to hedge in 401K accounts. In non-401K I will sell calls in advance of assignment but you can’t do that in 401K accts). I was able to cover my puts for 25% profit today, then I flipped them to #BigLizard trades.
SPY May 23 -272.5p/-272.5c/+273.5c for 2.03 cr. Doing a Lizard brought in 25% extra premium vs. doing an ATM put only. Break even is 270.47 on these.
It looks like I will get an assignment on $274 SPY shares. Rather than sell calls-only against that position, I will explore a reverse Jade Lizard to bring in some put revenue, similar to a covered strangle, but less risk. I’ll update this after the close.
Not a ton of activity today, I have on enough ITM naked puts that I need to see what shakes out this week before taking on anymore risk.
LMT: I’m still stalking a share assignment for dividend (2.00 div on 5/31) (you guessed it…for Daddy! The “D-word” makes his old eyes light up). Turns out I’ve made way more than the dividend by stalking the dividend, which is as it should be. I’ve done 3 rounds of ratio spreads now, all closed for 70-80%. After closing a 3×5 spread for this week, I put on a #BigLizard #JadeLizard . A Big Lizard is a Jade Lizard using the same strike short put/calls (straddle) plus the protective call. Like a Jade Lizard, if done for a credit greater than the width of the call spread there is no upside risk. By adding the call credit spread onto the naked put, additional premium is collected pushing down that lower break even. I really wish I’d done more Big Lizards this week on stuff vs. naked puts. Here’s my trade:
May 18 -320p/-320c/+322.5c for net 3.62 cr. Since 3.62 is greater than the $2.50-wide call credit spread, there is guaranteed profit to the upside, no upside risk. The break even is figured by simply subtracting net credit from the put strike: $320 – $3.62 = $316.38. I’m running all my LMT’s with 3 contracts.