Sunday, October 28, 2012

$RL Options Action trade - Enis

26 oct - Enis on the desk this week trying to break his Options Action cherry with a winning trade. been all bricks so far, heres the video clip RL clip , has a bearish trade on RL

Buy the Dec 145/135 put spread for $2.80

pretty straight forward with a bearish thesis he is buying a put spread ahead of earnings. i dont follow retailers so cant offer up an alternative. see all of Enis's on-air trades in this spreadsheet

$AAPL Options action trade - mike

26 oct - mike with a ratio spread to recoup a loss on aaple, heres the video aapl clip . first off as you know from following me, what melissa says is incorrect, "since you are short that extra call you should always do this against stock" ..wrong... you can do this if you have an ITM call also. most viewers are not going to buy a couple hundred shares of aaple. you CAN do this ratio naked if you want but keep in mind that it will require margin because of that second short call...just like when you do a ratio PUT spread...you need margin because of that extra short put...check with your broker on how much margin you need

DEC 600 / 630 call ratio spread (buy one 600 / sell two 630 calls) for $2.00 credit

as usual i prefer to not go out that far on ratio spreads, i would do a Nov ratio spread first.. then do a DEC after Nov expires. historically the issues i have with ratio spreads is i dont take the strikes up high enough, in other words i am right but the stock takes off and goes through the upper strike. mikes is already a bit in the money, if sticking with the DEC options i would look at the 610/640 spread or the 620/650 ..for a move into holidays i would lean towards a thesis that stock moves higher than expected. BUT FIRST, i would do a NOV 605/625 ratio spread for flat.. profit range on that is 605-645.. if its at 645 or higher at Nov opex then reevaluate what levels look good for dec. you need that time decay to chip away at the short calls for ratios to work in your favor so if you go to Dec right away a short term up move will look like a loss until the time decay kicks in vs being able to profit via a Nov ratio spread. dont misinterpret mikes comments that come Dec opex you are out of the stock.. you dont have to sell the underlying..just keep trading these ratio spreads every month instead. you can have a nice income stream every month on just trading ratio spreads , especially if against multiple DITM Leaps like me. say mike gets that 630 pin and pockets a cool $3000...do it again for the next month, mentally lower your cost basis of the stock or Leaps underlying. lots of ways to chop down that money tree. and of course the overemphasizing talk of being "called away" at 660.. tell you what.. at 660 you are closing this ratio for zero, your stock at gained 60 points, and you are looking for another options way to bring in more coin..not selling and walking away... dont you think it will move higher if it moved from 600 to 660 by christmas? see all of mikes on-air trades in this spreadsheet

$GOOG Options Action trade - scott

26 oct - scott on the web extra talking a trade repair for a viewer, here is the clip web extra . a good example of what not to do is what this viewer did, bought Nov 650 calls for $107 ($10700 each) ahead of earnings. not many expected this big down move but when entering a DITM call like that its alway better to go out way into the future in case your thesis is wrong. gives you more time to use other strategies to make some money back. like scotts ratio spread or weekly / monthly calenders. see by buying a front month call this viewers $21000 position is worth $6600 now, going to be difficult to recoup alot of that money in the 3 weeks till opex.. not a good position to be in.
   second, viewer committed huge amount of capital to make a bullish trade, sure if stock moves up then youre a hero. like i always say, if you are going to guess on a direction, then guess cheap... calenders , wide call flys would have been my method.. as a minimum sell some of those juiced up weekly OTM calls at least to reduce the cost basis and make it a calender spread. good example of how to blow out your account..not any risk managment that i can see.
  but on to the trade.. in order to make back some of the money scott recommending  the :

Nov 680/700 call ratio spread (buy one 680 / sell two 700's) for .50 credit

i like the trade setup, but be clear that even if the stock magically pins at 700 to get the max profit of $4000 for the viewer plus the $10000 that the call options will be worth, it will still be a big loser... so best case viewer is down only $8000 vs current $13000 . cnbc does the usual over emphasizing of that your stock "will be called away" at the 700 level.. thats only if you dont do anything and just let this ratio spread go into opex instead of doing what 99% of traders will do and close it out for a profit. tough spot to be in...tails i lose big, heads i lose really big. scott also adds he is not a fan of buying DITM calls because it makes you long the stock..lets see how long it will be before he says the opposite thing . but for scotts spreadsheet / track record it will be good since the only way this ratio spread can "lose" money is if stock is above 720 on Nov opex. see all of scotts on-air trades in this spreadsheet

the other thing about ratio spreads..you dont have to wait for your long postion to lose money to put it on..you can initiate a new long position right now with stock or DITM calls AND ALSO put on a ratio spread at the same time and get a double leveraged upside position with no added buying power needed..so if monday you decided to go long you could add this ratio on top of it for free..free trades are good.