21sep - the beauty of ratio spreads..almost a perfect pin..the .90 ratio can be closed for about 5.00 when i looked at it this afternoon and the stock is at 41ish... so big profit on the ratio plus the gain on your stock/Leaps you had underlying. would still prefer to do a series of monthly ratios vs going out so far..but trade worked out nicely..you need to close it out or else your long stock will get called away. see all of mikes on-air trades in this google docs spreadsheet
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2sep - youre not going to see this updated on Options Action since it was from the Optionsaction hit on Fast money but if you followed it and are still holding you have a decent profit as most ratio spreads tend to have..stock has recovered to about 37ish with 3 weeks till opex..the 40calls are going for about 10cents each now..i would keep holding those and let them expire worthless. like i said below, a series of monthly ratio spreads might have been better vs just one ratio spread going out 4months..pretty much locked into the position for 4months that way.
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29 may - not exactly a new trade, but more a possible way to repair a long stock trade youve had on previously... thought for a moment they might revisit Mike's own JPM trade featured on-air just a week ago MIkes other JPM trade , but then again they set it and forget it for mikes trades. so thesis is you are long the stock and have a paper loss. mike recommends a ratio spread
Buy the Sep 34/40 ratio spread (buy one 34, sell two 40's) for a debit of .90 ($90 per every 100shares you own)
i like the concept, those that follow me know ratio spreads are one of my favorites. but the issue i have is twofold.. karen hits on it at the tail end of the segment, mike really doesnt answer her question, tonights clip..tonights clip . I call ratio spreads "free trades" many times, ie you can put it on for free.. so that is my first beef, that since he is going way out to sept there is no reason like karen was hitting on that you can not do this trade for free instead of paying another .90... such as the Sep 35/38 ratio can be put on for about a nickel. this ratio then has a profit range of 35-41. secondly i dont like his timeframe as usual..going way out to sep for a spread, i would try shorter term ratio spreads first. you then have the ability to do that 2-3 times till sep. , possibly making a profit each time. first one i would look at is the July 34/36 ratio for zero.. profit range is 34-38 on just this ratio spread.. say it gets to 38, then the ratio is worth zero but your stock is up 5points from today..so your "position" is profitable..maybe enough to swing your position to profit or breakeven. you max profit on the ratio is at a 36pin on july opex with a 2point gain plus the 2points from the stock move up. then you might be able to do another ratio for Aug using the current strikes. if stock moves above 38..then you can close ratio and sell short call for the next month for credit.. not a bad problem to have
with mikes, you have to wait all the way to Sep opex to realize any gain.. if stock jumps to 40 tomorrow that ratio will usually be a paper loss since the 40's increase in value as well.. more so than the 34call is gaining. so with this spread you are pretty much locked into the trade till then. bottom line i like ratios but would stick with short term ones instead of 3-4 months out..can take advantage of near term movment that way.
mikes on air trade in google docs spreadsheet -->> mikes trades
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