closed - $VVUS trade from Options Action web extra

10apr -some tweets about VVUS today

-by @scottnations

These FDA decisions get pushed back all the time. I thought May would catch the Qnexa decision but knew April was a problem.

-by me to @scottnations close the May call spread you recommended on air? $VVUS

-scotts reply‏ @marklexus Yes, close May call spread. Knew April was too short, thought May was long enough. Not so much.

scotts spread can be closed for about 2.20 at time of this post so will give him credit for that. trade again was:

Buy the May 21/30 call spread for $3.00
closed today for 2.20
loss of .80 per lot -- here is an updated spreadsheet of all the OptionsActionTrades im tracking Spreadsheet in GoogleDocs
--------------------------------------------------------------------------------------------------
9apr - after hours today i saw that the ruling for their fat boy drug has been delayed until july 17, below is my original post.. i highlighted at the bottom what i posted about only putting this on right before the old apr17 decision day.. what happened today is a perfect reason for doing that. now IV will get crushed and scotts trade will likely lose since the event causing the IV rise is delayed. stock is down under 21 after hours.. i hope scott comes on-air/twitter to suggest closing his trade to salvage the remaining premium since im sure at least one person put on the trade.


------------------------------------------------------------------------------------------------------

mar30,2012 - on the options action web extra scott gave an explanation about some options and a trade. i agree with him that when putting on a trade to pick a direction.. who knows what will happen with this new fat boy drug ruling on apr17. here is the link to the video .. Options Action web extra
he mentioned the:

Buy the May 21 call for 4.50
sell the may 30 call for 1.50
debit for call spread is $3.00 ($300)

here are my assumption.. that i have no clue what will happen AND that whatever will happen will be on schedule for prior to apr opex. basically a guess..could go up could go down.. but scott is willing to commit $300 per one-lot for this guess.. risking $300 to make $600. so if i have to guess i will guess up move but also guess that the option market has it priced just right.. stock at about 22 today. At-the-money options are pricing in about a $7.50 move..gets us to about $30.. so if i am going to guess with $300 i will do this instead:

Buy the Apr 27/30/33 call butterfly

.. bid/ask is .14/.45 so i would enter limit order and try to get for .30 , maybe nudge up a penny or few to get filled if nothing happened. for a 10lot .30fill  ($300) my max profit at 30share price is $2700 instead..but realistically might get a 3x-5x return the next day if its on the button. maybe only do a 5lot to lower cost to $150.

If i was going to enter this trade i would wait until the day prior to the announcement scheduled for 17apr.. to base my strikes on where ever the stock was at this time.

Bottom line i have no idea what can happen and would be guessing.. which is not my style..but if you are going to guess...guess cheap.

comments on $RIMM Options Action Trade

Dan has a trade for $RIMM that is based only on some type of takeout offer:

Buy the Jan2013 20call for $1.05
Sell the Jan2013 27.5 call for .35
total debit for .70 ($70)

Assumptions being made are that if RIMM is bought or taken out that the price will be $20 or higher and that it happens before Jan2013. as mike was alluding to, if an offer is made, lets say at 23bucks per share.. even now before january, most of the premium will come out of the options.. the 20call will be priced near 3bucks, and the 27.5 will drop to maybe a nickel...there will be no time premium because the takeout price is well known and advertised.. this will happen at any time prior to opex with the same result.

so if some offer gets made above $20 then unless you think there is going to be a better competing offer, you should just take your profits on the spread.. no reason to hold longer.. your lotto numbers hit.. cash it in.

This trade is only if you want to speculate on the takeout of RIMM. lets look at profit potential.. lets assume a 30 a share takeout.

Full profit is the $7.50 width of the spread minus what you paid. so $6.80.. so potentially a 9x max return.. 10 lot made you $6800, with $700 max loss.

CLOSING the $TJX trade from Options Action + comments / chart

20july no magic turnaround this week to salvage this, total loss. stair stepped its way up since the trade got put on in march.

16july - with just few day to go and stock at 45ish..this trade will be a total loss if you followed mike into it.

click-->https://twitter.com/Mark_Lexus to follow on twitter
------------------------------------------------------------------------------------------------------

25jun - about a month to go till opex and no "constant trade updates" from Options Action as advertised.. if you followed mike khouw into this trade in march, its sitting near max loss with few weeks to go. mikes on air trades in a google docs spreadsheet

-----------------------------------------------------------------------------------------------------------------------------------------

14may - although have not seen anything on-air/twitter on this trade, im going to add a few comments since i came across it updated my spreadsheet. with stock near $40 now, my alternative trade is at bottom..again i would sell a front month put against it..there is still 20-30cent left on May 37.50 puts...would lower your cost basis on the july Put by 20% at least..and then again for June after this weeks opex.

--------------------------------------------------------------------------------------------------
mar30.mike khouw had a short thesis on TJX along with the always somewhat annoyed by the verbal horseplay carter worth. his trade was:

Buy the July 37.50 put for about $1.00

Again i dont follow this stock and generally dont follow retailers. I would make an assumption that all the viewers that watch and decide to get in on this will not just buy a one lot. (watch the volume on monday for the Jul37.50 to see how many people follow the trade.. traded a whole 11 contracts today). So assume they would buy a 5 or a 10 lot. The desk said if it moves in your direction to make it into a put spread.. ok that might work, but need to get that move in your direction first and spending $500 - $1000 to buy some contracts is not chump change.

If i had to buy this put i would look at making it a calender spread to help reduce the cost:

Buy the July 37.50 put for about $1.00
Sell the Apr 37.50 put for .20

its only .20 you say but its $200 if you are entering a 10lot. stock has to pull back 7%ish at Apr opex to get 37.50. idea is to have apr put expire worthless, lowering the cost of the july put you bought. if it drops further you can just close both legs of this spread. Breakeven using Trademonster Analyse tab at APR OPEX is down near 36. earnings look to be right before May opex so you could sell another put to get another calender spread going for may.

I want some way to lower the cost of that initial put purchase in case the thesis is wrong.

CLOSING THE $DKS Options Action Trade 3-29/12 - mike khouw

15jun - not a peep about this trade of course since optionsaction rarely discusses losers... trade from march is now going to be a full loss. at least it was not an expensive trade. mike caught the exact top on this one when putting on this call spread. this trade and mikes other on air trades in google docs spreadsheet

click -->https://twitter.com/Mark_Lexus to follow on twitter

--------------------------------------------------------------------------------------------------------------------


mar29 -mike layed out the following trade on Dicks sporting goods:

buy the June 50 call for 1.45
sell the June 55 call for .35
total for call spread 1.10 debit

pretty straight forward, stock at 48 now, has a bullish thesis. needs to be at 51.10 at June opex to breakeven. max profit is 3.90.

includes an earnings release in there since its for JUNE.. just need to point out that if stock takes off near term above 55 you do not see that entire 3.90 in profit.. you will see some profit but that max profit is only at opex.

My alternative to this would be to price out a series of calender spreads since he is going way out to June. mike is only taking in .35 by selling that jun55 call. so instead i would look at:

buy the Jun50 call for 1.45
sell the Apr50 call for .30

with this im taking in almost the same amount as mikes jun55.. after APR opex is would then look at either selling a May 50 or 55 depending where stock is and then for June selling the 55 then.. depending on what happens with earnings.

i dont follow this stock at all to make either trade though.

"if you dont have an advantage, dont take the trade"

follow me on twitter @mark_lexus for more free charts , setups, and my trades

she shops at Dicks Sporting goods:

CLOSING the $PCLN OptionsAction trade from 3/28/2012

original post at bottom

5-18-2012 - with no updates from the show / mike im closing this out today at face value. what likely happened is that mike sold another put at some point to "spread it out" but the viewers dont know that. review my alternative trade at bottom..would have come in a max profit.. with stock at 640ish today, will give mikes nontransparent trade a credit of his 670put being worth $30 to salvage this trade with a win.

google docs spreadsheet of mikes trades: mikes trades


------------------------------------------------------------------------------------------------------

5/4/2012 - with earnings coming up next week, this Buy 670 put from 3/28 is now at $9.50..did he spread it out, take profits, who knows. im sure someone out there took the on-air recommendation and is awaiting what to do next. earnings will be the key

4/27/2012 - lets take a look at this trade again, been almost a month since it was presented on air. despite cnbc saying follow @cnbcoptions for "constant trade updates" , mike khouw having a twitter handle (but barely used) and appearing on air multiple times there has been no peep about what to do with this trade..did he spread it out when stock was below 700, did he close for a gain, still holding...who knows. transparency is not a bad thing so lacking that i will assume he is still holding. could have made a comment on tonights show about it while giving a NEW trade on priceline especially since stock is 40points higher than last show. original trade was Buying the May 670 put for $20. as of tonight that put is now worth 6.60..getting close to 70% paper loss. Risk less to make more.

-------------------------------------------------------------------------------------------------------------------------------
4- 7-2012 - alright now, lets see how this trade is doing, been about 10days or so, have not seen an update from CNBCOptionsAction on twitter or anything onair despite their constant on-air promos that say they give updates to their trades and of course mikekhouw doesnt twitter but once a month. the orginal trade is below.. mike bought a may 670 put for $20. today the price is near $10... so pretty much a 50% loss so right now. "Risk less to make more" the show says. will see what i looks like in 2 more weeks. didnt mention a stop / stoploss but will assume a hold until there is an on-air meaculpa.

-----------------------------------------------------------------------------------------------------------
3-28-2012 mike provided a trade on Priceline during Fast Money today and boy..do i have some thoughts.. discussion transitioned for the insider selling segment to mikes trade. his trade seemed to just be a short thesis vs putting this on if you are long the stock for protection. if you are long 100 shares, kudos to you and your bank account. he recommended the ultra simple "buying a put":

heres the link the his clip on the show: PCLN trade on FM
Buying the May 670 put for $20 ($2000)

he mentioned that you could "spread it out".  Im going to assume its a short thesis outright. Stock closed today pretty close to 720. if you held this option all the way thru may opex (which includes earnings), the stock would have to drop all the way to 650 just for the option to breakeven..thats a 10% drop just to break even. plus you have no clue what could happen with earnings. The only way this makes sense to me is to do what mike says, to "spread it out".. which means that if stock pulls back then sell a may put lower in strike..like the may 650 that makes it a put spread and potentially locks in some profit. could you be right, maybe, maybe not. This does not seem like a position to hold all the way to opex.

But what if you want to hold to opex and just had to commit that $2000 that mike is paying, then i would do a put spread instead:

Buy the May 730 put for about $46 ($4600)
Sell the May 690 put for about $27 ($2700)
total debit of $1900 pretty close to mikes trade.

But at May opex if stock is at 670.. mikes trade has lost $2000, my trade makes $2100. with mine i start profiting if stock drops below 711..just 10points from now instead of 50.. all this is the assumption you hold to opex.

i would not put on mikes trade. but thats just me.
follow me on twitter @mark_lexus by clicking in the right column for more free trades, charts, and setups

CLOSING this trade - $BRCM "Options Action" trade from 3/27/2012

original post at bottom

18may - read the postings from the bottom first.. stock was at $39 at time of trade, now at $31 ish. mikes no cost collar is worth about $4.70..so he made 4.70..ie his hedge gained him $470 per lot vs a stock loss of $800ish... stock actually dropped so far that his collar rebounded and turned out better than my alternative trade.

google docs spreadsheet on mikes trades: mikes spreadsheet

------------------------------------------------------------------------------------------------------
4may - stock at 34.75 today so the collar is working as expected. that no cost collar is now about $1.70.. so from airing date the stock is down $4 but you only had $1.70 of protection. my alternative put spread collar is going for about $2.62..so a dollar more in protection you received. two more weeks to go till opex. revisit them

---------------------------------------------------------------------------------------------------
3/27 -Mike khouw recommended a no cost collar on $BRCM on todays Fast Money show.. although is not from the friday optionsaction show melissa lee prefaced the segment as Options Action so i will include it on this blog.. mike saw some unusual options activity in the name and made the following recommendation for a trade.. a no cost collar:

Sell the May 42 call at .90
Buy the May 36 put for .90
total price is zero.. just commissions.

See this trade and the others from this blog in google docs spreadsheet --> spreadsheet

it was implied that this trade be put on if you are long the stock. lets look at the chart below.. stock closed at 38.95 and with this trade you will benefit from upside up to 42 at may opex. if you do nothing at opex and stock is at 42 or higher your stock will be called away (sold by broker at 42).. not bad.. about 10% upside. the other half is that you are buying a 36 put, your put gains as stock goes below 36..so about 8% away. i wouldnt say its a bad trade but if i was going to cap my upside (by selling a call) i would want almost immediate downside protection.. not protection after already losing 8%... i would accept the trade off of capping my downside protection vs having to eat an 8% loss first.

so my alternative to this would be to make it a "put spread collar".. i will use closing prices off yahoo..

Sell the May 42 call at .76
Buy the May 39 put at 2.09
Sell the May 36 put at .96
total debit .37 per 1lot

So with this position i will start getting downside protection at 38.63 ... just about 30cents lower vs having to eat a loss down to 36 first.. yes my max gain on the put spread portion is the $3 wide put spread. but i prefer the near immediate protection.. thats just me, i dont follow this stock at all, you might have some insight that would make you want to take mikes trade.. just an alternative to think about.

follow me on twitter by clicking at the right @mark_lexus for more free charts and setups

CNBC Options Action Trade Spreadsheet

Dec 28 2019 
Going to make an effort and try to get this going again every weekend, see the link at the bottom. had more leisure time years ago before returning to the homebuilding field so I will do this on the weekend. might miss an exiting trade if its tweeted. send me a note If I missed it. I don't follow all the CNBC on air talent on twitter since im really only interested in market commentary or trades, not their political views, what their eating, their kids, etc. so unless I see a tweet from Options Action or its mentioned on air during the show I will assume its held to opex. Point of this is to show that the on air "professionals" really don't generate a higher win percentage as many retail traders. plus putting many of their trades on paper gets me thinking about alternatives and makes me a better trader and might give us some more tools for the trading toolbox to make some coin. I will start adding trades to the spreadsheet going forward. some older stuff is still there with some links.


this has nothing to do with Options Action, just a hot picture of Seema Mody , my CNBC crush

march 2012
-started a google docs spreadsheet to track the trades from CNBC Options Action that i am following and have posted. I will assume they hold till opex until they come on air and say they are closing the trade, get fast fired, or post something via twitter. feel free to bookmark this post blog. i will assume that you and I, the Joe sixpack trader, commits about $1000 to a trade or a 10 lot whichever seems to make sense.

The reason i started this blog is that most TV traders rarely mention their losers (pulling a Cortes), human nature i guess, and that is a disservice to many viewers. Many folks tune in are not smart on options trading or are trying to learn and deserve a little bit better transparency on what to do if trade goes bad or when to take profits and not have on-air traders hide behind the "i got you in, its up to you to decide when to get out". Also the show wouldnt get ratings if their traders had losers so thats why they highlight those winning trades with the music, graphics, big smiles. Trying to help you see thru the B.S.

click here --->>> Options Action Trade spreadsheet in Google Docs

closing Mikes $LGF Options Action Trade from 3/23/2012

20 apr - watch the video segments again, links below.. per mike he wanted to let this trade go till today to get that time value..getting that time value will make it a loser since stock continued to move down.. no additional comments on air or his never used twitter handle were seen about getting out of this trade earlier.. so with calender at .15/.35 i will give credit to a .15 exit to close.
was:
Sell the Apr 13 put for about .60
buy the May 13 put for about .90
for total debit of about .30 ($30 for one lot)
closed today at .15 credit for 50% loss

optionsaction spreadsheet here: spreadsheet of trades
-----------------------------------------------------------------------------------------
13 apr - on tonights options action show, with the usual big overpromise underdeliver enthusiasm.. the "ooohh, ahhh" tone of melissa lees voice, saying this trade turned time into money, they revisit an ealier mike khouw trade.. my original comments are at bottom. and here is the clip from tonights show LGF segment

Mikes trade of the Apr/May 13 put calender for .30 can now be sold for .40... not exactly a huge winner, even with a 10 lot. At least they had the sense to talk about this trade since one leg expires next friday. i give mike credit for explaining why he is holding this to next friday to collect that .25 time value still left in the april put. so i will revisit this next friday to close it out. here is the blog entry that has the Google Docs spreadsheet of all the Options Action trade i catch on air. Options Action Spreadsheet
on friday will also compare how my alternative trade would have worked out.

-----------------------------------------------------------------------------------------------------
9apr- original post is below

-as of this morning Mikes Apr/May13 put calender is B/A .25/.45 -- so not much change with stock being down 10%.
- my alternative trade was the "put spread collar" if you owned the stock -- put on for zero is now 1.35/1.65

---------------------------------------------------------------------------------------------------
23mar2012 - mike khouw had the following put calender trade on LGF:

Sell the Apr 13 put for about .60
buy the May 13 put for about .90
for total debit of about .30 ($30 for one lot)

he is making this a directional trade. i like the trade mainly that you only risk the .30 . have to admit i dont know much about the stock outside of the constant cnbc Hunger Games blabber and Mad Men. I have another suggestion if you want to do this for protection, as in you hold the stock and dont want to sell just yet and expect a near term pullback.. a "put spread collar":

Sell the Apr 15call for about .95 credit
Buy the Apr 15put for about 1.45
sell the Apr 13 put for about .50 credit
If you enter as a 3leg trade you may get this filled for zero. do a lot for every 100shares you own

Your max gain is the $2 wide put spread, so $200 for every lot. You can see the put spread is already in-the-money.  Looking at the chart you can see all the volume this week thanks to cnbc, with corresponding spike and pullback. Also $13 seems to be some support from prior to the cnbc plugs, $13 being the bottom of our put spread / and our max profit target.

So again, for zero cost you can put on a $200 protection trade while giving you a little more upside up to $15 level. I would put this on if i was long stock and wanted to hold it.

CNBC Options Action Spreadsheet
follow me on twitter @mark_lexus by clicking on the right side of page for more setups and trades

CLOSING this - $BAC OptionsAction Risk Reversal 3/23/2012

original post at bottom:

you really need to read the whole entry from the bottom up to make sense of this:

18may - another tweet from brian, A+ for tweeting but again as i said below i think hes assuming that we have been "put the stock" weeks ago or are already long some stock so his comments the last few times have not been helpful..todays tweet:

Brian Stutland ‏@BrianStutland

Time to roll down BAC Aug 9 call to Aug 7 $.60 cred vs long stock. Tweets and 3/23 trade gets out for -$.90 above $7. Beats buy&hold -$2.65

so instead im going to assume we have not been "put the stock" and just buy back the puts for the loss in the spreadsheet. also since there was not information that brian was "put the stock" along the way to warrant his comments. not saying his comments are inaccurate but just based on an assumption i cant confirm

google docs spreadsheet for Brians trades: brians trades

----------------------------------------------------------------------------------------------

8may - two tweets from brian today:

Brian Stutland ‏ @BrianStutland

#BAC Aug 9/Aug 10 call spread could be sold for $.26 today. Collect income & roll calls vs. bull position on my 3/23 trade and 28d ago tweet

Brian Stutland ‏ @BrianStutland

Correction: in conjunction to trade #BAC, Aug 9/June10 call spread could be sold for $.26 yesterday. Those strikes correlate to prior tweet

so now the comments are to sell the Aug 9 call/ buy the Jun10 call for .26 .. again i think brian is assuming the we either got put the stock from the risk reversal or are long some stock. not really helpfull since I am assuming we dont own the stock yet..the choice most would be making now is do i do nothing and let broker "put the stock to me", be forced to buy at 9, or do i buy back the put for a big loss.  if you followed brian into this trade, consider your tax situation before making decision

-------------------------------------------------------------------------------------------------

4 may Update #2 kudos to brian for responding to my tweet asking for an update, here is his tweet from 9april that i missed,

@BrianStutland

@bearcat124 if you're in $BAC on my trade, I'd look to sell June 10 call; start to overlay potentially being put to stock. I'll keep updates

an odd step to take, BAC was right near $9 on april 9. remember this trade was a risk reversal (buy call, sell put). the selling of the put requires buying power to be able to buy the stock at 9 at opex in may. his advice to "sell a Jun 10 call" seems odd since as of 9april if you entered this trade after watching the show, you dont own any stock yet. there is still time value left in the may9put. so you would not have been "put the stock" yet. Selling the jun10 call im pretty sure would be considerd by your broker to be selling a naked call(with no underlying stock owned), requiring additional margin/buying power pretty close to what you have to put up for that put sale. which makes me think that most traders will not be able to do this unless they have a big cash position built up ahead of time.

brians response to me on 4may:

‏ @BrianStutland

@Mark_Lexus @cnbcoptions I tweeted to sell June 10 call to lower BREAKEVEN on$BAC. I'd roll it to sell Aug 9 call if stock rally on Mon.

ok, again i appreciate the response but i think he proceeding on the assumption that we are long the stock already or have been put the stock already, which we are not and as of april 9tweet we would not have been, selling the aug 9 call would bring in some more income and lower the cost basis. A+ for trying, but D- for usefull info

4may - original post is at bottom. trade not looking too good. absent any comments from the Options action crew, if no action was taking on this trade its a big loser. Closing the put portion of this risk reversal will now cost about $1.25 per lot, delta is near 1.00 so you may get "put the stock" ie, forced to buy the stock at $9. stock has been in a good downtrend since this trade was aired. my alternative trade faired no better but if you put on risk reversals with the explanation that you are ok owning the stock lower, you cant change your mind if it actually does go lower.

9apr2012 -  heres how they look as of this morning:
- brians may9/10 risk reversal for .15 debit is now a .35 debit..so .20 loss if you wanted to close out
- my call spread risk reversal for .02 debit shows a similar loss if you wanted to close it today


----------------------------------------------------------------------------------------------
mar23,2012 Options Action show Brian layed out the following Risk Reversal trade for BAC:

Sell the May 9Put for about .40 (credit)
Buy the May10call for about .55 (debit)
Total for a one lot is a .15 debit ($15)

As usual the comments of "you might be put the stock" get thrown out there. Ive posted this previously, You will be "put the stock" at OPEX, not sooner unless it plummets. so close out the puts portion if it looks like that will happen. Also, they didnt mention that for every one-lot of this you need to have $900 in margin/buying power which is to buy the stock at $9 (because of that put you are selling).. so a 10lot costs will require $9000 in margin for as long as you hold those puts.

Brian emphasized that any moves above $10 is all profit. Mike mentioned that if stock moves up you can buy back the put and then "spread it out" which means to sell a higher strike call like the may 11 or 12.. All true. For this spread to be profitable at opex the stock needs to be at $10.15 or higher.

I like risk reversals since they are a way to commit a low amount of capital to the trade. but here is a suggestion on how i would do it a bit differently. I would initiate this as a "call spread risk reversal".. as in sell that higher strike call now. looking at option prices at closing the:
   May 11call is going for about .25
   May 12call is going for about .13

I would go with the may12 strike and my trade would look like this:

Sell the May 9Put for about .40 (credit)
Buy the May10call for about .55 (debit)
Sell the May 12call for about .13 (credit)
Total for a one lot is a .02 debit ($2 debit)

so for a 10lot i will pay $20 buck. still have to have the $9000 in buying power set aside. My gain is capped at 12 because of the may12 calls im selling. Max profit is $2000 on the trade, max loss is the 20bucks from entry. If it closes below$9 your (Brians) thesis was they wanted to own it anyway. so you took a shot at $2000 gain for only $20. this is an excellant trade if youve had that buying power set aside waiting to get a position on BAC

CNBC Options Action Trade Spreadsheet
will keep track of this trade to see how it did at opex. click on the right to follow me on twitter @mark_lexus for more free setups and trades.

CLOSING the $AAPL OptionsAction trade from Mike Khouw 3/16/12

6/15 - holding on on this trade saved it for mike, the credit spread will expire today at max profit. although a good profit, i still stick with my reasoning below for why i would not have entered. this trade and mikes other on-air trades in a google docs spreadsheet

click -->https://twitter.com/Mark_Lexus to follow on twitter

----------------------------------------------------------------------------------------------------------------------------------


4/28/2012 - on fridays show they review mikes apple trade from 3/16 -- here is the video clip video clip , mike and scott do a decent job of shooting it down. as of today they said this spread is a $300 paper loser. mikes staying with it

--------------------------------------------------------------------------------------------------

4/8/2012 - been about 3weeks since this trade, have not seen any on-air comments about it during fastmoney or options action nor any mike khouw tweets about it so will assume its still on. original trade below...  Trade was to sell the Jun610/630 call credit spread for about $1000.. today that spread would have to be bought back for about $1800..so about an $800 paper loss, still have long way to opex, have earnings. will keep watching.

 ---------------------------------------------------------------------------------------------------------

3/16/2012 - Comments on Mikes $AAPL Options Action trade

as usual i have some comments about a trade on options action and why i would not take it. mike khouw recommended:

Sell Jun 600/630 call credit spread for about $1000 credit for each lot

for every one lot you will need about $2000 of buying power. if youve followed my past trades / blogs / setups etc you will know i  have certain guidelines i use to enter credit spreads. nothing magical about them its just what ive used to get my system. lets go step by step:

1. Call credit spreads: I dont like and rarely enter into credit call spreads. have had a poor track record getting winners, dont like rooting for stocks to not go up and when im wrong i seem to be wrong big time where the stock takes off and i have to take a loss vs rolling to following months. red light for this rule

2. Probabilities : using the Trademonster analyse tab. it shows that this trade as of todays pricing has a 56% probability of max profit. that is almost a coin flip. thats almost like guessing. anything could happen of course but when given a choice i would prefer to enter a trade that has a 75% + probability of max profit vs 50%.. red light for this rule

3. Time to expiration: this is a Jun spread which is 92days away. this will give you plenty of time to let the stock recover if it moves against you if you have the discipline to hold to near expiration. (like mikes trade from Jan on GOOG..would have been a winner if held). I am going to assume i never have picked the exact top or bottom and stock will move against me, so i need at least several weeks of time left before opex for stock to recover. this is the main reason i do not sell weekly credit spreads. you might be comfortable with it but i have to go with what my trade history shows (which means you should be keeping track). Green light for this one

4. Does earnings impact the spread (ie, does company report prior to opex). Several issues with this. AAPL reports right after Apr opex. Anything could happen, either blowout earnings again and stock rallies or a miss and it drops. no one knows, i dont know, mike doesnt know. so we are back to a coin flip for the earnings event. for every spread i have on before earnings that profits ive had one that was big loser..so back to 50-50. Secondly, earnings will spike the volitility of the options (price). though this will mainly be focused on the weekly options for that week, this increase will still affect this June spreads against you enough that it will wipe out alot if not all of the time decay. Red light on this one.

5. Simplicity - honestly i dont know how easy it would be to adjust a $30 wide spread if i had to. i would assume that the bid/ask when rolling would be wide which would make is harder to get split the bidask to get a decent fill. Instead compare it to the Jun625/630 credit call spread.. selling 7lots gets you $1100 premium, need $2300 of buying power and has 64% probability of max profit ... with that i get an easier ability to adjust the position if needed to a following month. Also look at the breakevens on mikes spread vs my example one.. his 600/630 with $10 premium .. loses money at 610 or higher at opex.. my example 625/630 with $1.60 premium starts to lose money if stock is 626 or higher.. so my example trade makes almost the same amount, risks almost the same amount, has a higher probability of max profit and has a breakeven $15 higher. Yellow light on this one

6. Technicals - i prefer to use support / resistence / moving averages to base my short strikes on.. AAPL just hit 600 yesterday so this call spread would be right at that resistence. if i had too i would use a higher strike for more cushion but thats just me. Marginal green light for this

bottom line is i would not enter this trade, mainly because i dont like call credit spreads, the probability of max profit is far too low, the spread will be affected by earnings in april. alot can happen at Apple and in market by June so if i had a short thesis like mike did i would go for a shorter term trade, Apr opex to start like Dan Nathan was getting at. I will paper trade this spread because im curious as to how it will look if i try to roll it.

Options Action Trade Spreadsheet click here

what does Nikki have to do with this trade???? nothing at all.. not even a little bit.. its your treat for reading