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.

alternative to Mikes $TSLA trade

 

31 oct 2021 - lets to a quick update to mikes trade idea and my alternative... big win for mikes trade. give credit where its due.. the sell Jan650 put and buy Jan 850/900 for near zero is going for $30ish now ($3000) .. that short put still has near $10 in value to decay and like i said below even though the stock has blown thru the top end of the call spread, the max value will not be realized till near opex in Jan as the short put and short call have to decay away.. but $3000 is a good win if you are taking profits here.

My alternative trade below was sell the Jan750 put and buy Jan 850/940 call spread for slight credit.. thats going for $53ish now ($5300).. another grand slam.. same comments, even though stock is 200 points higher the short put and call need to decay away to get that max profit. max profit is $9000 on this and $5000 on mikes... if stock trades sideways for 2 months both trades will go out at max profit... good win/ win here.. you decide if you want to exit all 3 legs or typical thing is to buy back the short put.. your call .. buying back the put frees up alot of buying power.

16 oct 2021

been a while since ive posted on this blog.. when i wasnt working around 2010 after financial crisis layoff i was commenting on the weekly trade suggestions from the Options Action crew. just no time outside of catching their hits on twitter. 

This week Mike and crew discuss TSLA which im 95% all in via in the money leaps from 2022-2024 at 650 -750 strikes and then selling short calls against for premium. the occasional short put selling, etc also

With earnings coming on oct 20 after market and stock up 40points to 843 or so the last few days, Mike suggests a risk reversal call spread for Jan 2022:

Sell the 650 put at $21.10 credit and use that to buy the 850/900 call spread for near $21 debit .. all for zero. i like the idea and Mike and Tony mention all the other points that often get overlooked. by selling that short put you have to commit buying power for the duration of the trade and as tony mentions that by buying a way lower put you turn it into a sell put spread to buy call spread trade with reduces the buying power needed. 

the max profit is not realized until opex even if stock moves past 900 and even on a slight down move the trade will show a mark to market loss until eventually the short call (800) and short put (650) decay away.

Note that you would have to hold this trade for 3 months, check me on this, might include the next earnings in Jan. 

I have an alternate based on mikes trade. the thesis being that if stock moves to 900 its going to overcome that resistance and keep on going. regardless of reason, deliveries next quarter, yearly deliveries, improvement in ramping up production at other plants or cyber truck.. whatever, if you are bullish then id expect maybe a pause at 900ish then all those cup and handle people come in, etc .. point being im going to give the upside more room to run but still for free. here we go: instead of selling that Jan650 im going to assume more bullish stance going forward or at least less bearish after earnings....

Sell the Jan 750 for $35ish credit and use that to buy the 850/940 call spread. all for about slight credit. max profit capped at $9000 per vs mikes $5000 . downside of 750 is 26delta. again if it breaks 900 also the "to the moon, next stop 1000" will be out in force

i will "save my trade on etrade, what i really want is a decent down day in order to ramp up the Put premiums.. that would be the day to put this trade on... adjust the call strikes though. i will keep my eye on this .. 

here is the CNBC clip im referencing

TSLA video clip