CLOSING the $PCLN OptionsAction trade from 4/27/2012 - mike

5/18/2012 - Options action show tonight revisits this trade, here is the video tonights clip. Trade worked out, this put spread for $18 is now worth $45 out of a possible max profit of $50. Mike mentions to take off at least some of it and roll it down.. does not get specific on any new strikes which would have been helpful to viewers. i will just close this spread out all the way on the spreadsheet for a good win.

google docs spreadsheet with all of mikes trades: mikes trades



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4-27/2012 - mike has another trade on priceline tonight. totally not mentioning the other one he had a month ago that is still hanging out there. here is video clip video clip

Buy the Jun 750/700 put spread for $18 ($1800 per one lot)

mike makes an good argument for this..mentioning that it could be either as a hedge against stock or outright bearish thesis. point to note is his comment that "if stock pulls back, you could monetize this spread quickly". i read that as take profits quickly if stock pulls back. although not directly mentioned as an earnings play , this spread will include earnings on may 9th if held to opex. my bigest beef is the price tag.. $1800 is no joke. If looking for some downside hedge on earnings i would look at a put fly or put calender using the weeklies when they come on the board for earnings week.. if you want to go to may opex for the sell in may go away theory, then id look to something cheaper as well. Maybe the May 750/725/700 put fly.. might be able to get that for about $2.75... i would be more inclined to do something like that than pay $1800 to make $3200 at june OPEX..which didnt seem like mikes intent anyway

4/27/2012 Options Action web extra $ARMH $AAPL

scott does a segment answering viewer mail, watch is here web extra scott recommends

July 26/30 call spread for 1.20

as he mentions earnings just came out. i guess you could do this trade. if you have nothing else to invest in. premise was how to invest on aapl pin action. like many say on air, i would agree, that if you want to invest in apple, then invest in apple, dont over think it.. looking at chart, this stock as been in a 4dollar range for over a year... what has apple done in that same time frame. i guess you could say its at the bottom of a channel and you expect up move.. but really.. i would rather spend that 1.20.. say you do a 10 lot.. that $1200 and do something with AAPL instead of this.. seriously slow money and really odd pick as pin action on aaple.. hasnt been so far and what has changed. i thought QCOM or NUAN were better plays ive heard on air.. i prefer to keep it simple..dont look for pin action, look for the bowling ball....you like that? i just thought of it

CLOSING $BRCM Options Action trade (mike) from 4/26/2012

5-18 - mike pretty much top ticked this one...the stock has been down since this trade which will be a total loss. nothing on-air or on twitter from @cnbcoptions (constant trade updates) or from mikes once a month used twitter account as to how to salvage this trade along the way so entering at total loss on may opex day.

google docs spreadsheet for Mikes trades: mikes trades


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4-26   mike has a call spread on tap tonight for broadcom. here is video of clip video clip

May 38/40 call spread for .45

has a gap from 2 days ago, im sure thats the AAPL gap. i dont follow this stock so im not going to give an alternate trade. just an fyi tonight.

CLOSING the $CSTR Options Action trade (mike)

original post at bottom

18 may - as usual no follow up from @cnbcoptions (constant trade updates) or from mike about what to do with this trade since putting it on.. stock is at 57ish today..so way overshot to the downside. with may puts expiring today i will close out this paper trade at about .40 which will be about at .45cent loss.. will be no cool music segment on OptionsAction about this one im sure.

google docs spreadsheet for mikes trades: mikes trades



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25 apr- another odd selection for a trade by mike, Coinstar

Buy the May/Jun 65 put calender for .85 ($85 per lot)

the explanation was that the front month put decays faster than the second month is accurate but i would assume that it is beneficial that the front month is a little more elevated than this.. the may 65 put has IV of 45 and Jun45 has IV of 40.. so that may put is hardly elevated to take advantage of that "vol crush".. you will get some but not much. options are pricing in about a $5 move. either way will put you right at the range limit of profitability according to trademonster analyse tab. payout is in 2-1 range. pretty much nothing about this trade i like. if you have a bearish thesis then i would go with a straight up put spread. if the front month IV was higher this might be more appealing to me

CLOSING the - $AMZN Options Action trade (mike)

18may - will be a total loss.. mike took a shot, got direction wrong , stock did not rebound, risk less to make more. not even anyway to salvage a trade like this the way the stock ran.

loss of $190 per lot

google docs spreadsheet of Mikes OptionsAction trades: Mike spreadsheet




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24 apr - on tonights show, video here video , mike recommends a put calender on amazon

Sell the Apr weekly 185 put
Buy the May 185 put
total debit $190 per lot

i like the trade , mike said options are pricing in a 14dollar move. i would wait to put this on till thursday before earnings and base strikes on where stock is then..could be 10 bucks higher or lower by then.

CLOSING - $NSC Options Action trade - scott

18 may - this covered call will expire at max profit, so you keep the full $1.30..downside is that the stock is down to $65ish since then. here is scotts tweet today on the trade:

Scott Nations ‏@ScottNations

@CNBCTradeTrackr @CNBCOptions We sold the May 70 call for 1.30, going to expire worthless today with NSC at 66.10. Wouldn't resell today.

google docs spreadsheet of scotts trades: scotts trades




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23apr - on tonights fast money show the options action segment featured scott doing a very simple of just selling a covered call ahead of NSC earnings on 24apr. with stock at 69ish. here is video video clip

Sell the May70 call at $1.30

$130 for every lot. not very interesting trade. i dont follow the rails so i dont have much to say about it..just seems kind of close to at the money but if you are ok selling your shares up at $71.30 then i guess this is ok plus whatever dividend my be coming your way this month.. might have some resistence a bit higher with the 200day

$CVX trade on Options Action Web extra (scott) 4-20

20 apr - on this weeks options action web extra scott recommends a trade on CVX (why can he recommend trades on web extra but not on the regular show??) heres the video tonights videoanyway he recommends:

Sell the May 100/97.5 credit put spread for .60

not to enthused about this trade.. IV is so low on this stock that you have to pick strikes closer to ATM to make decent premium. over the last month the stock has dropped 12 bucks.. with the credit spread only 2.50 away from the short strike does not leave a lot of room if thesis is wrong. not going to be much of a volatility crush since its not highly elevated. trademonster shows earnings on 27apr. so if anything, i would not put this on right now if playing a bullish thesis thru earnings.. would wait till day of or day prior to put this on and base the strikes on where stock is at that time. seems like a odd selection to feature on the web extra with all the other names in the news right now. additionally, the delta of the short strike (100) is about .40 right now.. implying a 40% chance that stock is below 100 at opex... my cut off is 25% or lower... 40% is almost a coin flip. i would not do this trade.

$F Options Action trade and comments 4/20/2012

original post at bottom

4may - Options action revisited this trade tonight, carter worth says its going to stop going down right here and mike is sticking with it because he test drove an electric car.. yup.. theres the rational. dan hammers him again, and i still dont like it.i dont see anything on the chart that makes me say it will go up from here. i actually chuckled, yes i chuckled, not LOL'd, watching the Optionsaction lead in to this trade.. the enthusiastic way melissa lee said you can make money if it goes up , down or sideways... yeah, 20cents for a one lot, thats $20 bucks.. $200 bucks for a 10lot but having to set aside $11000 in buying power till july.

heres the video clip from the show tonight --->>>Called out

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4/20 -another odd selection my mike. with stock at 11.40 a risk reversal, here is the video video clip

Sell the July 11put for .40
Buy the July 13call for .20 for credit of .20 ($20 per onelot)

Dan does a good job of hammering mike about the trade. mike salvages his explanation by including that this is an alternative to just buying the stock here and he is willing to buy the stock at $10.80. My usual comments about risk reversals are the information not presented on-air.. this is not a free trade, you have to set aside buying power to actually buy the stock at 11 , so for every lot you need $1100 buying power. So for 10 lot its $11000. Also comments about "you may get put the stock" or "you may have to buy the stock" if it drops below 11 are misleading... this will happen IN JULY AT OPEX not now.

First my alternative if i was to do this, say for a 10 lot.. instead of getting a .20 credit, ie $200 for a 10lot, which on $11k is chump change to have to wait till July. do a 11/12 risk reversal. (after hours quote is in my favor but ill stick with mikes put price:

Sell the July 11put for .40
buy the July 12 call for .40 for a no cost risk reversal

look at chart below, there is some decent resistence at 13 (mikes call strike) so i dont want to mess with that if i can avoid it. i also dont understand the timing of wanting to go long this stock, even though he said the trade is an alternative to going long. stock lost its 200day today.. maybe some support near 10. A risk reversal would make more sense to me at 10 not today. so if stock gets stuck at 13, mikes call is worthless and just collects the 20cents for 3months vs a 12call from my RR then get a $1 profit on the call.. i wouldnt do either trade, just dont like the sector. if you are interested in sector revisit this closer to 10 if at all.

CLOSING THE update to $AAPL Options Action trade (mike)

20july -  mercifully mike pulls out a big win on this aaple short call, expiring today for max profit if you are still holding it.


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17july - still on track to for a big profit if still holding. went from big profit to getting threatened again after recent strength..should be a good payday.

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26jun - dont seem to say it often, but this trade from mike khouw looking to be a big winner if you followed.. still would rather sell front month short calls though for more flexibility. this short call on track for full profit.

click-->https://twitter.com/Mark_Lexus to follow on twitter
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19apr - another trade im not understanding the logic of this from mike..guy just does not do anything short term.. here is the video video . essentially saying if you own the stock to sell a covered call.

Sell the July 620 call for $33 ($3300)

First off the stock was just 620 YESTERDAY. second, i dont like selling short calls on down days, doing it exactly backwards..sell the calls into up days..get better prices for one..IV moves in your direction. Third, why so far out, July is almost NEXT earnings cycle. from his video seems like he is concerned about a down move because of earnings.. if thats the case then do a trade with THIS earnings options...so many trades to be had in may, june.

Because its a july option it is all time premium, if stock drops you will profit some but leave alot on the table since july opex is still 90days away.

Couple alternatives if you also want protection for downside, with stock at 587 and assuming you own stock or a DITM LEAP..
#1.
Sell a weekly put spread collar:

Sell the weekly 610call for about $13
Buy the weekly 585put for about $22
Sell the weekly 550put for about $9
with limit order you might be able to fill at zero cost

if stock is at 550 or lower at next fridays opex your profit is $3000.. pretty close to mikes sell short call premium... and you keep the stock and can sell other calls against it or do ratio spreads between now and july. if stock moves up you still have participate up to 610..so another $23 of upside.

#2
Sell a May covered call. mikes argument that options premiums are getting bid up is accurate and May's have a higher IV than July

Sell the May590 call for $30

May opex is 29 days away, time decay will be to your advantage and allows you to put on a few more trades..sell more calls, weekly calls, ratios up until july..this is profitable up to 620.

regardless, i would put on a trade the tuesday of earnings to see where stock is then..could be at 540 or could be at 630.

closing Mikes $CMG Options action trade from 4-18-2012 (mike)

20 apr - giving mike credit till EOD today, turned into a profit..

Bought the Apr 425/400 put spread at 4.80 can close at 7.00... gets you a $220 profit per one lot... not a big win with stock down $13 if this spread was a hedge against stock.. like i said below, i thought it was too far out of the money

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18apr -mike again hits CMG with a trade. here is the video 18apr video . he is doing a put spread ahead of earnings.

Buy the Apr425 put for 6.70
Sell the Apr400 put for 1.90
total debit $4.80 ($480 per one lot)

mike mentions this spread is only 1% of the price of the stock. true. now mike just had another trade on options action on 13apr...heres the post on that 13apr CMG trade . options are pricing in about a $20 move with stock near 440. with mikes spread, stock would need to drop below 420 at opex to be profitable.. which is right to where options are priced in for a move.  unless he expects an oversize down move (which options are not pricing in) i think this put spread is too far out of the money. yes it can get a 5-1 payout IF stock is at 400 or lower. to me, $480 is expensive.. needing a move GREATER than current options are pricing in to profit.. it may indeed work but i would look to do something cheaper.. Risk less to make more they say on the show.

mike needs it below 420 to profit, options say move to 420 so i will assume mikes guess is right and it drops below 420.. i would look at a 420/410/400 put butterfly..after hours quotes are .10/1.40... mark of .75 .. so would put in order to try to get a .75 fill.. lets just say we buy for 1.00... now if you had budgeted that 1% of the stock price you can buy 4 of these put flys, your payout ratio would be 9-1 if it pins at 410.. max profit of $3600,

takeaway is that i think mikes spread is too far out of the money and too expensive.. a one lot of my put fly makes as much as mikes spread at 410 pin with 25% of the premium risk.

closing Scotts $INTC Options Action Trade from 4/16

20apr - will give scott credit on this trade because on air he said to "take if off right away"... glanced at it after earnings was at .53 so will give him that. but besides that the usual no followup on air or via twitter. not a big winner but at least not a loss.

tracking spreadsheet: options action trades



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16apr: heres the clip to the video options action  scott just doing a straight forward put buy tonight as an earnings play.

Buy the Apr 28 put for .45

nothing too fancy, i would not do the trade but thats just me.. no alternative tonight. you dont have to trade everything.

$LVS Options Action Web Extra Trade (scott) 4-13-2012

4-13-2012 scott has the duty for the web extra tonight. heres the clip web extra show he recommends the following call spread on LVS

Buy the Sep62.50 call for $5.40
sell the Sep 70 call for $2.60
total debit $280 for a one lot, max profit if stock above 70 at Sep opex is $470.

To go way out to Sep and risk $280 to make $470 doesnt make me jump up and down.. whats that..2 earnings dates in there..alot can happen.

This is a rare time where i will recommend spending more than recommend..only if i had a long term bullish thesis.. i would look at a diagonal spread.

Buy the jan2013 50call for about $1450
Sell the may2012 65 call for about $150
total debit of $1300

if stock is at 65 on may opex, using the Trademonster analyse tab, this diagonal spread would be up $400+ . then sell an upside call for June, then July, Aug, etc... using that front month premium to lower your average cost of the long call.

Again my alternative is only if you are long term bullish. i dont like scotts trade of waiting 5months to get a 2-1 return.

5-12 $CMG Options Action update to the 4-13-2012 trade (mike)

5/12/2012 -  Options Action show covers mikes CMG put spread that is up 50% or so... what did you think, they would cover a trade that is losing money? here is the video. CMG video . not much to add but just note what mike says about when he mike close this out near the end of the clip.

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4-13-2012 - mike sure loves June for all his trades. this clip has his Chipotle trade in at the end. CMG trade
Mike recommends the June 420/390 put spread:

Buy the June420 put for $15
Sell the June 390put sor $7.50

total debit of $750 for a one lot, max profit of $2250 if stock is at 390 or lower at June opex. mike states he wants to capture earnings and some "additional time". Scott mentions that CMG hit all time high at 440ish today. Often mentioned by mike is that you want to give yourself time for the spread to work for you and he does that by going out to june, the flip side of that is that if stock takes a hit on earnings and moves down, you will profit by not as much as you would think, nowhere near that $2250 since the spread is way out to Jun. If that is your thesis, an earnings miss, or a slow grind lower, sell in may go away, whatever, you have keep that in mind when going to june on this.

If your thesis is that stock will drop because of earnings, then i would look to put on something else. something shorter dated, probably april opex, something lower premium than that $750. My first thought would be to look at a April/May put calender. April options are pricing in about at $22 move, so using that i would look at the 415 level.. April IV is only in low 50s as of right now, likely rise into earnings..so that front month premium is not that elevated vs May...making this calender about at $5 debit and only a 2-1 payout ratio at April opex...too high of a debit for a onelot, and too low of a payout ratio.

my bearish thesis is that if it sells off on earnings that it will do so down to the 50day which is at 400, so a low premium trade would be a Apr 390/400/410 put butterfly.. bid/ask after hours is .10/.85 so i would look to get a .50 fill... max risk is $50 per lot with a 19-1 payout with a 400 pin... not really reasonable but if it sells off hard, will get an easy 2x-5x return the next morning... again my thesis differs than mikes, where i am just looking at a hard selloff because of some earnings metric disappointment..stairs up elevator down type selloff..secondly i dont want to commit $750 and i dont want to wait till june.

CLOSING $MS Options Action Trade (Dan) from 4/13/2012

original post at bottom

5/11/2012 -

closing out this trade on the spreadsheet per 2 of Dans tweets:

Risk Reversal ‏ @RiskReversal from 8may

Closing half of the Morgan Stanley (MS) put fly discussed on @optionsaction for a double, other half rides: http://t.co/aeJCkYdk --- closed half at .46

Risk Reversal ‏ @RiskReversal  - from 11may

2nd Trade Update: Morgan Stanley (MS) Closing 2nd Half of May Put Fly 3.5x What I paid. http://t.co/zl1JLtE5 - closed rest at .85

per his original comments, dan took profits on half when this put fly moved in his favor and let the rest run, and took remainder today.

bought MS May 16/14/12 put butterfly for .23

closed at .46 and .85.

Point on this trade management, with butterflys, a system that works well is that if it moves in your favor, take profits on enough lots to get your original money back and let the rest run..you dont have to hold it to opex. a winner by Dan.

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4-13-2012 on tonights show Dan layed out a bearish trade on morgan stanley. he had a bearish thesis that would cover both earnings AND general market conditions. so this is not just an earnings event, although it will be a catalyst. his trade in in this video segment --> video segment . He had a "put butterfly"

Buy one May 16 put for .45
Sell two may 14 puts for .26total
Buy one may 12 put for .04
total debit .23 ($23 for a one lot). max profit at 14 pin at may opex is $1.77 , For a 10lot cost will be $230, with max profit of $1770. max loss is that .23 you paid.

Scott as usual doesnt add anything usefull to the conversation and would probably confuse alot of people but dan brings it home at the end of the segment. emphasizing that if trade moves in his direction to close out half of the lots to get your cost back and let rest of it run.

my comment is that since its a may butterfly even if stock moves down to 14 quickly you will not see that max gain. that max gain is at May opex which is what i think scott was trying to say. I like this trade mainly because its a low cost way to take a directional postion. you can even do this as protection if you are long the stock.

closing Mikes $GS Options Action trade from - 4/12/2012

20apr - with no on air or twitter comments about what hes doing with this i will assume closing today for small gain

buy the Apr/May 115 put calender at 1.90 debit, closed at $2.33 for $215 profit on the assumed 5lot purchase

OptionsAction spreadsheet : spreadsheet

 

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4/12/2012on tonights options action segment Video Clip , mike talks about the following trade for earnings:

Sell the April 115 put for $1.00
Buy the May 115 put for $2.90  -- using his prices
debit of $1.90 ($190) per one lot

this is a "put calender" . i like his explanation as to why to put this on, but i disagree that this is the stock to do that with. the premise that the front month option decays more rapidly than the second month is well known, but i think it is most effective if that front month is VERY elevated.. such as GOOG's today with the weeklies having an IV in the 120s vs 50s for the regular Apr options. with GS the April (front month) is only at 37 with the May's being 31... so will not have a huge IV crush after earnings since its not hugely high. I would expect you would need a move almost right to 115 for this to get you any decent profit.. The Trademonster analyse tab shows this trade with a 10lot to have max profit (115pin) of about $2300 with max loss the $1900... not the usual 10-1 type payout return for calenders.  I would not enter this calender.

second, trademonster shows earnings to be 17apr, before open i believe.. although he mentions the trade on tonights show, if i was going to enter this trade i would do it monday, stock was up $4+.. might be down $4 tomorrow or up $4 more tomorrow and monday... so the 115 strike might not be what you want to do then... always pays to wait till day of or day prior to put on these type of spreads incase it moves significantly in either direction from show date to earnings date.

CLOSING THE $BTU Options Action trade (mike) 4/11/2012

15jun - been 2 months since trade aired with no update..read the original posting below first. with no action you will be "put the stock" at 25..the strangle can be closed for 1.40 so the strangle portion of this is profitable..but doesnt offset the drop in stock price. mikes on-air trades in google docs spreadsheet

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

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11apr -tonight on the fast money segment, here is the clip.. Options Action clip , mike recommended the following on BTU if you owned the stock:

Sell the June31 call for $1.10
Sell the June25 put for $1.10
total credit of $2.20

Stock is at about $28.30. he did mention that you should own this stock and want to buy more. So by "selling this strangle" , you collect that $2.20 if stock closes at June opex between 25-31.. i like selling strangles for this exact reason, you can collect double the premium of just a straight covered call. Downside to this is that if stock drops and closed below 25 at opex and you do not close out the put, you will be "put the stock", ie you will be forced to buy more shares at 25. your net is $22.80 since you already took in the $2.20 in premium.

not mentioned is that you have to set aside margin/buying power to buy that stock at 25.. so figure $2500 in margin needed for every strangle you sell. additionally, you profit on this primarily on time decay, so there is no trading with this.

Again, only do this if you already own the stock, are ok with buying more lower, and are ok with holding this till June opex.

Flip side is that if stock takes off you are capped at $33.30, but that might fit your risk tolerance. I prefer to do this on stocks with greater IV, to get higher premiums. this strategy combines two great strategies of acquiring stock via selling puts and also the covered calls strategy.

CLOSING THE $YHOO Options Action trade (scott)

20 oct - nope, didnt forget about this one.. full loss with stock closing under 16.. dont know why the "pro's" keep messing with this one..look at the trading range for the last year.. unless you have been selling monthly 16 covered calls , not much has happened. going out 6months didnt help this trade either.

14aug - did you forget about this one? if you followed in on this trade is going for about .25 now, so a 75% loss if you are still holding with 2months till opex and stock under 15 today. see all of scott's on-air trades in this -->google docs spreadsheet


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apr 9  - on tonights Fast Money segment for Options Scott recommended the following trade on YHOO essentially as a lotto ticket on a someone buying yahoo for the patents. here is the clip from tonights show: Scotts Options Action hit

Buy the Oct16 call for $1.10

i dont like this stock so first off i would not do this trade.. if i was going to do a lotto ticket trade i would do it on something else. my only suggestion would be to maybe do a call spread to lessen the cost of this and accept a lower potential max gain. will add this trade to the running spreadsheet im keeping.

closing Brians $GOOG Options Action trade from 4/5/2012 and my comments

20 apr -  watch the video again (link below). im sure what happened is brian took profits along the way but despite a cryptic answer on twitter never said to close out ahead of earnings. the read i get from the video is it was a trade FOR earnings.. so if thesis changes or you take profits early i think the right thing to do is at least put that bit of info out there. so not being transparent on exit gets makes me have to take the trade to opex today for a full loss. Transparency is not a bad thing

Buy the April 610/660 call spread for $25
expired today worthless for loss of $2500

13 apr - i sent brian a tweet today to see what he is doing with this trade since i have not seen any tweets from him regarding what to do..ie, hold, take profits.. im sure the loyal CNBC viewers would like some transparency and not be left hanging.. here is the response..i find it kind of odd to put on a trade for earnings but not hold it thru earnings and not say anything on-air or twitter.

Brian Stutland ‏ @BrianStutland

@Mark_Lexus @cnbcoptions I don't normally like holding bull spreads if stock makes move up prior to earnings, i.e. #GOOG.

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5apr-
brian had a trade on fastmoney show tonight for an earnings play for google. here is the video of his segment FM segment . Google reports on 12 apr now, so it looks like a week earlier than the tentative date previously floating out there. as of now the options are pricing in about at 36ish move for the weekly options and about a 40point move for the April options. brians trade is a Call Spread with stock at about 633:

Buy the April 610 call for 36.00
Sell the April 660 call for 11.00
total debit $25 ($2500 for one lot), max profit is $25 ($2500). stock needs to close at 635 or higher to break even at opex.

his comment that it just needs to be above 635 to make money is accurate. flip side that is starts to lose money below 635 is equally true. also said he would be stopped out at 610. also true, another word for that is max loss. Brian has a bullish thesis.

My take is risking $2500 to make $2500 is not a good risk reward. who knows what will happen with earnings, options market expects a move 36bucks in either direction so risking 2500 to make 2500 seems like a coin flip. i also say that if you are going to guess, then guess cheap. $2500 is not a cheap guess if it disappoints and trades down that full 36 to 600.

instead with a bullish thesis and an assumption that the options market has it priced correctly i would look for a lower cost bet. using my amateur fibonacci, looks like the 127 extension gets us to about 675ish, options pricing in move up to about 668 as of today and there is some resistence at 670 from jan.
i would look at a weekly monthly call calender

Sell the Weekly 670 call for 6.80
Buy the Apr 670 call for about 8.30
total debit about 1.50 . trademonster analyse tab shows about a profit of $900 if closes at 660 (brians max profit level) or a $1300 profit if 670 close on weekly opex. thats best guess right now. and thats just for a one lot $150 risk.. so you could buy a few lots. i would look to put this on day of earnings so ideally the weekly options gain in value from IV increase and can make this spread a bit cheaper.

brian defines his risk and so does mine, but i prefer to guess cheaper by getting 2-3 of these calender spreads vs paying $2500 for a call spread.

a twofer tonight..if you think options have an upside move priced correctly to about 668, look at:

Weekly 660/670/680 call butterfly.. quotes after hours show bid/ask at 0/1.20 so i would try to get for .75 to start.. close at 670 gets you max profit of over $900.

CLOSING THE $SPY Options Action trade 4/4/2012 (mike) and comments

15jun -  no updates since for a month on this, given the market action in May, they should have revisited this..take profits, keep holding, dont know... but since no update was given and mike is alergic to giving updates on twitter this trade will be booked as a total loss since the spread on todays opex is worth zero. mikes on air trades google docs spreadsheet


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apr10,2012 - mike revisited this trade and essentially said you can still use this strike but make it a put spread instead of put only, here is the 10apr optionsaction segment 10apr optionsaction segment. recommending:

Buy the Jun133 put for $4.00
Sell the Jun 120 put for $1.40
debit of $2.60 ($260 per onelot)

lets see how his trade from last week looks tonight:

4apr was buy the Jun133 put at $2.15, today worth about $3.45 so about $130 gain per onelot.. so with the SPY down about $400 (100share)..his "hedge" gained $130. The hedge will increase in value the closer it gets to opex which is still a ways away.

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original post
apr4,2012 mike once again came up with a trade i do not agree with, neither did Pete. here is the video clip from fast money tonight Options action segment  .  mike recommended this as a portfolio hedge:

Buy the June 133put on SPY at $2.15..ill use the closing price.

Pete said the same thing i was thinking..its too far away and costs too much and too far out. mike noted that if SPY drops this put will increase in value and would increase in value as volatility increased. true enough. But using Trademonster analyse Tab http://www.trademonster.com/ , i show that as of today, for every $1 drop in SPY this put will increase in value by $26..ie if you have 100 shares of SPY, it drops $1 you lose $100 but make $26 by put increase for every lot. not exactly a good hedge to me.. only 25% of your loss is hedged.

this is likely a trade but at June opex SPY would have to drop to under 131 to break even. long way to go.

When i put on a hedge i want it to start working right away and be as close to dollar for dollar in protection. so instead of paying $2.15 ($215 per lot) i would look at something closer time wise and a put spread to reduce cost. I would go with May opex.. catches the sell in may go away mantra, also catches earnings season if your thesis is that earnings will disappoint. if you have budgeted the $215 from mikes trade i would instead look at the:

Buy the May 141 put for about $3.40
Sell the May 135 put for about $1.40
net cost is $2.00, max gain $4.00 so with SPY at 140ish today, i make $4 if its at 136 or lower at may opex. better hedge i think

if your thesis that we may have a top in, you can make this a put spread collar by also:

Selling the May 143 call for about $1.30 bring the total debit down to .80ish ($80)

i dont trade the SPY, i focus on individual stocks but this is an alternative to mikes trade.

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

CLOSING THE $STD trade from Options Action 4/3/2012

15jun - mikes buy call recommendation will be a total loss, but his recommendation to sell the stock turned out to be accurate with it at about 6.10 right now. read my alternative trade at bottom..still not profitable but would have been less of a loss.
mikes on-air trades in a google docs spreadsheet

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3apr - mike khouw briefly covered STD in the options action segment of fast money tonight. here is the clips.. Options Action clip . i dont follow this stock but lets pull up the chart. mike casually said if you own the stock you should sell it and instead:

Buy the June 8 call for .25

This seems to be a proxy for the hubbub going on in spain. pretty low tech, low premium trade. Stock rebounds you can get a quick double. Im going to assume that you own the stock, would like to keep owning it and are considering mikes trade. Instead do a "risk reversal"

Sell the Jun 6 call for .15
Buy the Jun 8 call for .20
you might get a lucky fill and fill for zero if you try.. but assume a .05 debit.

Remember my premise is you would like to still own the stock..so you sell like mike says and with this risk reversal you can own the stock lower at 6 vs where is is now.. if it rebounds then you profit quicker since you are only paying 5 cents for the 8strike call vs the call only for .25.  You have to have the margin/buying power to buy the shares at 6, but that should not be a problem since you just sold the shares like mike said.

with mikes trade you risk only .25 ($25 per lot), with mine you risk only .05 ($5 per lot)

closing Scotts $KMX Options Action trade from 4/2/2012

4-20-2012 - since i did not see scott nations come on air or via his twitter stream mention any closing action i will go to opex on this one.. if held to opex today will be a full profit winner. i still would not have done the trade based on the original post below.

Sell the Apr34/36 call credit spread at 1.00
Expired today at max profit at 0.00

assumed a 10lot in spreadsheet for $1000 profit . spreadsheet

4/5/2012 - trade looks to be profitable by about 30% today. will book a profit in my spreadsheet when i see scott closing it out on-air or via twitter. otherwise will monitor till opex



4/2/2012 on tonights fast money, scott nations recommended selling a call credit spread..."he loves selling credit spreads ahead of earnings" i believe were his exact words. ive got a couple of issues with this. if you have been following me you know that i rarely sell / hold credit spreads into earnings. mainly because you have no clue what will happen. although its a valid strategy, i just dont do it often, i am wrong as much as i am right, but when im wrong i tend to be wrong big time..not just a couple cents. scott recommended:

Selling the Apr 34/36 call credit spread for $1.00 ($100 credit per one-lot)

Max profit if on opex stock closes below 34, max loss if it is above 36..like he said, risking $100 to make $100. As of tonight, the Trademonster analyse tab shows this spread to be at 44% probability of max profit, so that puts it even below a coin toss of 50-50.. with stock currently at $34.50.

Secondly, (i dont follow this stock), looking at IV, its only in 45 range..nothing really huge.. pricing in about 1.50 ish move. there will be some volitilty crush but not alot since its not extremely elevated to begin with. just seems like an odd stock to do this spread with.. if you look at chart there is no "run up into earnings" that you would expect to see if you do this strategy. been sideways for 2 weeks

Third, earnings.com shows earnings to be on thursday. you would assume many (more than 1) viewer will see the show and run right out and put on this spread in the morning.. i dont know why cnbc / scott decided to mention this stock tonight.. 3 days away. if you were going to put on this spread as an earnings play because of a bearish thesis, it would be prudent to wait either to the day prior or day of the earnings report.. the stock might be up by then..crazier shit has happened...so those people that put trade on in the morning would be sucking if stock was at 37 on thursday...already near max paper loss.. point being wait till right before earnings to put on a credit spread in order to base your strikes on where the stock actually is.

you could put this on and stock drops but with a spread showing less than 50-50 chance of max profit i would not do this trade.. there are other low premium strategies you can put on instead of risking $100 if you are bearish... would be a no-trade event for me ... "if you dont have an advantage, dont make the trade"

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