final update to Options Action $SPY protection trade

9feb  - Scotts Feb320/300 put spread from below is now at .63 , so about 70%ish loss since entry if you still hold. like I said below, if you buy an "insurance" or "hedge" position, you need to have a plan on when to exit that insurance. I guess hold all the way to opex in case the market crashes is a plan but you can quickly add up the losses on just the insurance plays. I exited mine with a slight win, hopefully your rolled or took profits also along the way. I don't follow Scott Nations on twitter so he may or may not have posted an exit as some point

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1Feb - finally got that selloff everyones been waiting on and the selloff where having "insurance" helps. lets see how the trades are looking from below:

Scott Nations Feb320/300 put spread at $2.90 is at $3.42, up 22 cents since last update. the time decay is eating into the returns. up 18% from entry

MarkLexus Buy Feb320/305 sell 334call at $1.37 is at 2.92 up $1.55 since entry, and a double. the short 340call is a 2delta now and worth couple cents.

full disclosure a couple days after my initial post I entered into my suggested trade minus the short call since im not long the underlying. $2.50debit, I closed that at $2.85 Friday afternoon for some lunch money. was looking like the spread would go out worthless but the down move got it back into the green so I wanted to close it as a win and since only couple weeks left to opex

going forward depends on your thesis, do you expect the market selloff to continue and both trades will gain in value (note that neither spread is in the money as I type so time decay will continue to grind away your profit/protection. or do you expect a rebound in some fashion. You have to have an exit plan on your "insurance" trade too. im thinking we got that big move that insurance is for, granted the market ran past the strikes so the profits on the insurance were not dramatic, also you are running out of days left for these Feb options.

Suggestions:

1. if you absolutely positively need to have an SPY insurance trade, consider rolling out of both of the trades and using that profit and putting on a trade in Mar. , the 320/305 put spread is going for $3.67ish so just a small debit to roll and gain 30 days of protection.

2. take profits. I did

3. hold for further downside. would not be my choice like I said. just be aware that the time decay is working against you. if you decide to hold for an expected further downside move AND you did my trade AND you are long the underlying, consider closing the 340call and selling the 332.50 call for about .75 additional credit. its at 15delta.

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5jan - update to current value of each trade from below with SPY at 322.41:

Scotts Feb320/300 put spread at $2.90 is at $3.20 now for +.30
MarkLexus Buy Feb320/305 sell 334call at $1.37 is at $1.78 for +.41

both have appreciated but both are an "insurance" trade, not a quick scalp. keep holding both in case of IranBoogaloo2020

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27dec - well well well, look whos back on Options Action. Scott Nations, I remember him from years ago being on the desk and rarely having a trade to offer up, just commentary on Mike or Dans trades. Guess he drew the short straw with everyone off for the holiday. so Scott actually comes right out of the gate with a trade on SPY for protection. here is the video clip.... SPY clip

I generally don't have anything against having protection on but I would chose different strikes and still try to minimize the cost even more if you are already long the shares. Scott is buying the Feb320/300 put spread for $2.90 ($290 per one lot). quick math at opex and stock below 300 this trade max profit is $17.10

I am guilty of this many times when selecting strikes by picking nice round numbers, instead for this trade I would reference the chart first. assumption being that on a pullback the 50day near 310 or the low from early Dec at 307ish might offer some support so my downside strike selection would be based on that area. also if the thesis is a possible selloff (and you are already long the shares) I would also sell an upside call to help finance this insurance put spread. selling the Feb 334 call for $1.30. its at 20delta which means 80% chance of profitability on the call sale. you still participate in upside move to 334.

my suggestion:

Buy Feb 320 put
Sell Feb 305 put
Sell Feb 334 call
Total debit is now $1.37 instead of the $2.90. your max profit if stock below 305 is $13.63

im always looking for ways to spend less money putting on a trade since I prefer to be the premium seller most of the time.

exiting the Options Action Walgreens $WBA trade alternative

12 Jan - really think Options Action should have covered this trade this week since the stock got crushed. I don't follow the stock and outside of catching Mikes tweet on 8 jan I haven't looked at until tonight. worst case scenario happened. choice #3 from below would have been the right call. so if you are married to the stock /or are going for the full year of the Dogs of the Dow theory, mikes tweet is my suggestion as well. my alternative trade is also a loser. I take comfort in that per my initial notes below I would not have entered this at all.

Better course of action might be to sell the Feb 55 for $1.20 and hope stock works up a little to either resell something for March for $1 ish or to let the stock get called away for $5620 effective.. or just take your lumps and sell this POS and move on to the next one.

Mikes 8jan response to a viewer:

Carter can update his thesis on $WBA stock, however for the options piece one can cover/buy back the short January 60 calls for .06. If CBW suggests holding $WBA, may also consider "rolling"- selling Feb $57.5 covered calls @ 1.10

@OptionsAction

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3 Jan - Options Action with an update on this trade, here is their clip Walgreens 3Jan . essentially said to keep holding. since the initial show the stock is up 70cents to 59ish. current values of the trades:

Mikes/Carters Buy 100shares and sell Jan2020 60 call at $1.10 for $5729, current value $5830 midpoint

MarkLexus alternative Buy 4 Jan2021 45 calls/sell 4 Jan2020 60 calls at $5428, current value $5600 midpoint

not much premium has decayed on the short calls since earnings are on 8Jan (that's why I rarely SELL premium weeks out that includes an earnings release) and 2weeks to go so both trades should appreciate as Jan opex gets closer. my thesis again was you are actually going to follow the dogs of the dow theory and hold the position all year not just for Jan opex. so let Jan short calls expire then resell Feb calls

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22Dec - mike khouw with a piece on Walgreens. this might be a first that the show recommends buying the stock first. going to suggest my go-to trade being a diagonal spread using deep in the money call. Carter Worth talked the dogs of the dow. so lets say you have $5800 ish in cash burning a hole in your pocket and you want to try the dogs of the dow method for 2020, instead of buying 100 shares and selling an upside call:

Buy 4 Jan21 45 calls for $14.67 (14.67 was midpoint as I typed) and Then
Sell 4 Jan2020 60 calls for $1.10 , assuming fills for $1357 per and $5428 total

keeping in mind earnings are before the Jan2020 opex. with this trade you are bringing in $440 in premium with breakeven at Jan opex at 61ish just like long stock/covered call but you also gain on the 4 long calls. can repeat the short sale process repeatedly.

given the following choices:

1- buy stock and sell Jan 60call
2- my buy 4 diagonal spreads
3- make no trade

I would chose number 3 and look to deploy that buying power elsewhere. I wouldn't look to enter a position on a stock that is in the red for the year with SPY being up so much. its in the red for a reason.

here is the video clip Walgreens clip

final update - Options Action $GS trade alternative

9Feb - again I don't follow GS so final update on this, im sure you get the drift of the previous notes. the takeaway from this if you followed Dan and Bonawyn is take some profits along the way, at least get your initial investment back since as of right now the stock is 238 and the spread is $5.55 at midpoint after hours. the decay is starting to work against you now. Ive been more successful recently by taking profits sooner for 25-50% winners vs looking for home runs. Good trade by Dan and B , my paper trade alternative as well. hope you rung the register as some point, take your lady to dinner, move on to the next one

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12Jan- if I followed GS I would have adjusted this paper trade on Friday opex so I will go with some after hours pricing so assume some slippage. stock at 242.11 :

Dan/Fresh Meat Bonawyn trade - Mar240/270 call spread - entry 4.60 debit, current value $9.20 midpoint . nice gain so far. if you followed and have multiple lots Id recommend you sell enough to make back your initial investment and let the rest go thru earnings.

Mark Lexus alternative - assuming I rolled the Jan10 240 perfectly at $2.11 (242.11 stock price - 240call) and rolled to the Jan 240 (Jan240 price at $5.20 - the 2.11) = $3.09 credit.. the new Jan240/Mar240 spread is valued at $4.90 +the 3.09 credit = $7.99

lets see how earnings shape up

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5Jan- update to this using after hour midpoint pricing with stock at 231:

Dan / Fresh Meat Bonawyn trade - Mar 240/270 call spread - entry $4.60 debit, current value $4.97 midpoint

Mark Lexus alternative - Buy Mar 240/Sell Jan10 240 - entry $4.32, current value $5.17 midpoint. going forward let the Jan 10 240 expire worthless this week and day prior to earnings sell the Jan240 call


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22Dec - have to say this trade had me giving it a hard pass right away. not exactly risk less make more. Dan Nathan and Fresh Meat Bonawyn Eison for the setup. Can someone get with Bonawyn and get him into the 21st century to get a twitter account. as I type the stock is at 228ish. the boys are recommending buying the Mar 240 call for $5.03 and sell the 270call for .43 for a $4.60debit.

first thing im not liking is selling that upside call for only .43. for 43 cents might as well just buy the 240 call outright, not mitigating the cost of the spread by much. I don't like laying out so much cash on a directional bet. Instead if you are going to buy that Mar240 call (assuming you are buying March to "give it time to work", make is a calendar spread. earnings are Jan15, you can sell the Jan10 240 call for about .55 credit... you are collecting more than that 270call right there. let that call expire and let the IV increase up until earnings and then sell the Jan 240 call (that's going for $1.45ish now).. the goal if you are determined to buy that 240 call to at least work down the cost basis.

Sell Jan 10 240 call at .53 credit
Buy Mar 240 call (priced at $4.85 now for debit) = $4.32 debit

Can repeat the short 240 sales after the Jan opex if you are going to hold the march call

here is the Options Action clip:

GS Trade  

$BA Options Action trade -update

27dec  - odd that of all the open trades that Options Action revisits this one after only a week, stock at 330ish now. see the original comments below. my quick thoughts on the comments are brought to you by Captain Obvious I think.. the thesis from below was to sell an upside call nearly two months in the future to generate some income and some protection with the uncertainties surrounding the stock. whole point of selling the call.. ie some insurance is to actually let it play out as in let it decay via time decay or just reduction in value if the stock drops so despite some more headlines the stock is actually UP 2 bucks since last weeks show and the short call up 50cents ish (mark to market loss). so unless the thesis changes (which it didn't on the show) there is no point in messing with this after just a week.
heres this weeks Options Action clip on Boeing Boeing clip . even my suggested alternate strike is up slightly. my consistent targets for selling premium is if I get a move after a 1-3 days where I show a 50ish percent of max profit I close it out since I have made the meat of the premium and then look to reenter something again on a rebound. many times can resell the same strike as the stock bounces around. sometimes doing nothing is the best thing when selling premium. like I said below youre not going to get much decay on mikes short call since its after earnings.





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22 Dec - quick segment on Options Action this week mentioning selling an upside call at Feb 345( going for $8.40, delta 35, IV 27, stock at 328 as I type)... here is the video clip

Options Action BA clip

I currently have an iron condor and also a diagonal spread on Boeing. my short call for the diagonal spread is the Jan10 340

Mike mentioned a client was short the Mar 350s but was recommending the Feb 345s instead. If I was long the stock I would not do either of those months. main reason is that earnings are on Jan29, so the Feb and Mar options are not going to get much decay until after. Plus IV tends to increase going into earnings so instead the last expiration prior to earnings is the Jan 24. so if you like the 345 level that short call is about $3.75 as I type. THEN sell the Feb short call right before earnings to get max premium

have 3 more weeks on my Jan10 340 short call and will be looking to sell something in the Jan24 expiration. will wait till right before earnings for the Jan31 expir to let that IV max out and get a juicier premium for my short call sale. also with earnings in 30days it keeps me from entering a new iron condor since the IV increase leading up to earnings will more than offset any time decay.

will see where the stock is after earnings. at some point Boeing/ FAA will clear the plans to fly. I expect some rumors to hit the markets prior to the official Phil Lebeau breaking news segment. if im able will try to sell upside calls on that rumor. the meat of the downside move for the halting of 737 production came during market hours with the rumors vs after hours and the official announcement. will assume the same happens for the upside.

purple in chart are my iron condor levels

Dan Nathans Options Action Trade alternative 1 nov

Been ages since ive posted but with more leisure time at work can get back at it....

on todays Options Action Dan Nathan layed out a Risk Reversal for Disney. here is the link to his video segment Nathan Disney trade . dan suggested you SELL the Jan 120 put for $1.20 and BUY the Jan 140 call for $2.20 for about $1 total debit.. the put premium offsetting some of the cost of the call. I don't follow Disney closely but did some put sales few months back. in general I prefer Call Spread risk reversals in order to have near zero cash outlay for the trade. so using Dans strikes and thesis I instead would do (after hours etrade prices):

Sell Jan 120 put for $1.12 credit
Buy the Jan 140/150 call spread for $1.55 debit
Total cost would be 47cents or so for the 3legs... at January expiration you have profits from 140-150ish and only risking .47 if stock is 120-140 at Jan opex

Mark to market dans setup profits right away if the stock moves up after earnings and loses if move down vs my call spread risk reversal that will show profits closer to opex.

my gut says to not enter this trade. dans thesis seems legit once the streaming service gets going but again my gut says to wait until that gap fills. would assume that if the earnings are poorly received and the stock breaks 128ish then 120 seems to be a foregone conclusion. if that happens the put premiums will be juiced and THEN could put on a call spread risk reversal. especially if the stock tanks in one big whoosh. I will keep on watch list for that event. the whoosh to low 120s brings the defenders onto CNBC with the but...but...the streaming service..the Mandalorian ...etc

the trade goes out a bit far out for my taste based on the next weeks earnings. not mentioned on air is you should have the buying power to buy the stock at 120 since you are selling a put. a pullback to fill that gap would get me looking to reenter somehow though.

If you are really determined to enter dans trade and agree with the thesis and strikes, consider also selling the Nov8 weekly 140call for about .40credit turning it into a calender spread as well for earnings. brings your cost basis down further. I don't wish bad things on stocks but a whoosh down would be a higher probability entry for my current trading style.