update to $GS Options Action trade - dan

23 oct - as dan tweeted and posted at www.riskreversal.com :

3:45 pm EDT - October 23, 2012 By Dan

Trade Update Oct 23rd, 2012 at 3;45pm:  With GS back below 120, and having collected the premium from the October 115 puts that I sold in my original trade, I want to further reduce my premium risk by selling the Nov 110 puts.

Action: Sold to Open GS ($119) Nov 110 Puts at .75

New Position: Long GS Nov 115/110 Put Spread for .65

so as you can figure out..he initially committed $1.40 to this trade, the Oct put expired worthless and now selling a Nov Put to further reduce his cost basis to .65, still needing a down move to get a profit.
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19 oct - show revisiting this trade., heres the video clip tonights GS clip . dan again reiterates what he plans to do by selling a lower put to leg into a spread, going to need a down move to make that worthwhile. Scott again comes off as being confused about calender spread trades, as if he doesnt know about capturing the elevated front month premium.. because the stock moved in the opposite direction of the thesis does not make scott correct.. his explaination is what i have issue with. as you can see below i didnt like the trade either but mainly because of the poor payout ratio and that the stock did not actually have a "pumped" IV like dan said.. pass on those low IV calenders

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12 oct - dan with a put calender on GS for earnings, here is the video clip GS clip . first off, dan says the Oct options IV is elevated, they are "pumped" . lets see, per trademonster, the oct options have 32 iv vs Nov 26... elevated yes, Pumped no.. i would not call a 6 point difference "pumped" .

Buy the Oct / Nov 115 put calender for $1.40 per lot (sell the Oct 115, buy the Nov 115)

dan lays out his strategy of what he wants to happen and what he plans to do. the best part is when scott nations opens his mouth and really gets taking to school by dan and mike. really makes himself look amatuer with comment. traders enter calender spreads to take advantage of the IV difference, not to double thread the needle at one opex and then the other. a classic beatdown. if you look at the options pricing right now, about a $4.50 move is getting priced in. if thats accurate it will take stock right to dans optimum strike. reservation i have is that since the IV difference is only 6 points, even a near perfect pin gets you only about a 50% gain per trademonster analyse tab..in other words not a high enough payout ratio. about a 1:1.63 ratio. ill pass for something juicer. see all of dans on-air trades in this google docs spreadsheet