Disney trade alternative and comments

 

7 Aug

on the 5 aug show Mike has a trade on Disney by selling the Aug monthly 105/100 credit put spread for $1.63 credit. Carter and Tony add some comments, here is the video clip:

Disney clip

couple points, first as a note that earnings are THIS week and trade is for next weeks options. nothing bad about that but premium is only about 10cents better by going out one more week, slightly better volatility crush by using this weeks.

second, more my taste, the strikes are too close to at the money, with 105 being a 40 delta and stock at 106ish now.. granted Mikes thesis is that stock moves higher or sideways. looking at options pricing right this second, they are pricing in a $7 dollar move by opex. a 40 delta credit put spread is not giving me enough premium for that added risk.. $1.63 credit = $3.37 max loss. more a risk one to make one ratio would be preferable for this delta.

Carter and Tony both have positive comments as well, so going with those thoughts im going to make an assumption that they surprise to the upside. Maybe because of Obi Wan , maybe not and slightly move in excess of the expected move. I will "save" this order and review strikes right before earnings to consider putting some skin in the game. But in order to make the trade i want to pay just a little. 

So my trade would be the Aug12 weekly 112/115/120 broken wing call fly for maybe .15 debit (cheap ass), buy the 112, sell two 115, buy the 120) , profit range at opex is 112-117. 

Stock goes down or sideways or up just a bit, no harm no foul, was just .15 . Mikes trade will work as he discussed, just too much of a coin flip for the oversize risk. 

INTC trade alternative and comments

 

7Aug

on this weeks Options Action show Tony had a trade for Intel INTC , here is the video clip:

Intel video clip

Mike adds some comments, mentions a vertical spread instead. no specifics though. Carters rationale is pretty much only that its so bad its good. Tony has a trade structure i use alot , that being a diagonal spread. Hes buying the Jan2023 35 call and selling a near dated call against , that being the Sep09 38 call, and intends to repeat selling calls. 

my main beef is the stock. i dont see anything on the chart that screams reversal higher. the fundamentals vs AMD are terrible and a lesson i learned early on was that the 52week low list is not the place you look for investments. although tony talks about longer term exposure, thats fine but just seems like a rough place to commit buying power. Also having to go out 33 days in the future to get .40 cents of premium is a little light to me.

Really cant think of an alternative to this trade.. maybe.. and i mean maybe to wait for the stock to actually make a noticeable bottom and move higher.. its trading even lower now than the post earnings selloff.. let the stock make that bottom and begin an uptrend first, sacrifice that first dollar or two before entering. Or call it 38 or higher as it starts to move into the gap to fill. If you are really interested in long term try the JUN 2023 call instead for about $1.20 more for 6 more months

But my recommendation with my money would be NO TRADE HERE , use the buying power elsewhere. "So Bad its Good" might be a valid strategy if the fundamentals where not so bad. a stock is usually down for a reason

Alternative Visa Trade

 5 jun

this fridays Options Action had a trade from Tony on Visa with some commentary from Mike. here is the video clip

Options Action Visa Clip

First off, still being skeptical that technical analysis is more a self fulfilling prophecy than anything else, i dont believe its relevant to pull up a 20 year chart for a trend line. 1 year yes, 2 years ok. 20 is just silly. Tony's 2nd chart has relevance. he notes the 190 level that is now support. Stocks been somewhat rangebound for a while.

Tony proposes a July 210/190 Put spread for $5.16 debit with the thesis of stock returning to 190 area. ok, that supports the direction. what id like to do is find a trade with less initial up front cost. Visa has never been a good options trading stock for me for lack of volatility / low premium.

Using the same thesis that stock returns to test the 190 area, an alternative (cheaper) bearish trade with stock at 212 is:

Buy a Put Calender spread - buy the July 200 put at $4.20 (ask price) and sell the JUN 200 put at $1.46 (bid) for $2.55 mid point debit. Im skipping this weeks 200 put for the following reason... this weeks Put is at .55 vs 2weeks of $1.46 .. i would expect this weeks put to be about .70. this weeks put is under priced or next weeks is overpriced. regardless im getting slightly better premium for that 2nd week of holding it vs two weeks sold individually (all other things being equal).

So now you have the calendar spread at $2.55 . i chose the 200 strike assuming the stock works its way lower to 190 area so eventually the July 200 will be worth near $10. After the JUN 200 expires (best case worthless/max profit) then resell another short put against that Long July Put.. another best case is stock is near 200 and you can sell an even lower strike short put , maybe 195 or 190.

The idea going forward is selling those short Puts continues to chip away at the cost basis of the trade, maybe even making it free if stock cooperates.

both trades will be profitable at 190 at July opex, im just looking to pay less money up front / lose less if im wrong

 

Selling Covered Calls comments

 

4 Jun

going to take the other side to a couple of comments about covered calls as seen in this clip on Options Action

Options Action Clip

The portion referencing to avoid selling covered calls around catalysts.. because stocks can move alot from earnings. thats not untrue. but if you follow TSLA weve seen 10% daily moves unrelated to earnings. 

using the 20delta for your short call is not bad level.. a 16 delta is about a 1 standard deviation move. but why should that metric be any different during an earnings catalyst. the options market is pricing in a 20 delta move there as well and the premium is likely considerably juicer than a normal opex period. I look forward to those catalyst weeks. Flip side your thesis might be bearish but dont want to sell your stock so that juicier premium might be your downside hedge, especially if you sell closer to the money. all depends on your thesis going forward. 

Back to TSLA, ive been following several long time bulls and naturally during the volatile movements the consideration of just "selling everything" comes up. ok, no problem, but think thru any tax implications first and an alternative strategy might be to sell at the money calls instead of sell the stock. TSLA again for instance.. the Jun at the money 700 call could sell for $43ish ($4300) per 100 shares...for 2 weeks. never know what will happen. stock might be flat, might go down so you pick up $43 of downside hedge, might go up so you essentially sell at 743 vs "selling everything" at 700. Is that worth 2 weeks? maybe maybe not.

Point being, i'd continue the covered call selling thru catalysts, adjust your delta if worried. sell a 10delta instead. you will kick yourself if the stock actually goes down and you didnt capture some easy premium

NFLX alternate trade

 

27 May

on options action tonight , Tony has a trade on NFLX . here is the link for the video clip

NFLX video clip

first off, im 50/50 that technical analysis even works. seems to have as many false positives as correct ones or at best a self fulfilling prophecy.. since TA is putting human nature into a graphical picture, IMO the time frame you are referencing should make sense. ie.. going back 5 years on a chart looking for resistance i dont think makes sense.. in other words , is the expectation that a crowd of people bought 5 years ago.. held all the way higher and now after all that time will sell at 240 to get their money back? seems unlikely

my timeframe does not paint such an optimistic picture . i see 2 big gaps down from earnings and still in general downtrend. if your thesis is its-so-bad-its-good, or you just want to take a shot thats something else. Tony comes up with in my opinion and overly complicated partially in the money credit put spread, collecting about $7 ($700).. as stock moves higher that amount decreases and you take profits by buying back cheaper. 

Instead, if for some reason you "wanted to take a shot" here id go with something more straight forward while allow for an additional 30 points of downside if you get the direction wrong... a call spread risk reversal.. using same July Opex:

Sell the July 160 Put to help pay for:

Buy the 195/205 call spread -- midpoint now is debit about $1.00 .

max profit is $10, the width of the call spread, max loss the $1 debit if stock is above 160 at opex. below 160 at opex and without trade management you will be "put the stock"

note that at 160, Tonys trade is at max loss 

i picked the 160 level for it being below even the low on 12may

Alternative to Tony's $TSLA trade

 

22may

below is the video clip from Options Action from Tony on TSLA :

TSLA trade 

Tony is offering a Jun 620/600 put spread for about $7.80 but acknowledging that could get lower based on where stock closed near 665

Two ways to look at this trade. first as a straight up stand alone trade that stock moving lower or second that its a downside hedge.

keeping in mind that the stock does not actually need to get to 600 for the spread to be profitable but also the stock DOES need to get to 600 or lower at opex to get that max profit. 

with stock at 665 and the implication that its moving lower my issue with the trade is that at opex the stock could be 5% + lower but this put spread has not gained. as in if it closes above 620 the spread will expire worthless and you have not made money as a directional trade nor has it giving you anything it it was a hedge. 

My suggestion if you are using this trade as a hedge to further downside is to adjust the strikes higher to get the protection right away vs waiting for a further 5% down move before it kicks in. using tony's percentages.. its a 20point wide spread and paying between $6-$7 is about 30% of the cost of the width.. give or take.

instead, buy the Jun 660/600 put spread. mid point is about $22.50.. nearly 1/3rd the price of spread for the 60point wide spread. But the protection kicks in right away if stock moves lower.

downside of course is the higher price but compare if you entered the 620/600 you would lose 45points before any protection kicked in. 

Both spreads will make money if the stock is below 600 but id rather have some protection between 665 and 620 also. 

If you are an advanced trader and have enough buying power, in order to reduce some of the cost of that protection (the $2250) , consider selling some upside call spreads to help offset. The Jun 800/810 is midpoint $1.60 credit now, selling a 5 lot there brings in $800 to help pay for the protection.