small win $UNP Options Action Trade alternative- closing

Jan25 stock at 186ish at opex so the you collect the full value of the short put and short call if you held all the way and the May 190 call is nearly unchanged. so about a $200 winner on mikes trade. im sticking with my suggestion #1 from below since the may190 call is unchanged... sell either the May 195 for $4+ or May 200 call for nearly $3 still, to bring in more premium and lower the cost basis. or sell the Feb 190 short call for about $2 in premium turning this into a calendar. don't let this $200 winner turn into a loser. point being the trade is not over just because 2 of the 3 options are not on the board anymore. you have to manage that may190call. you need stock at 196ish at may opex to just be flat with todays results. consider that. im by nature a premium seller so im always trying to limit my debits or bring in credits on trades.

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Jan20 - haven't seen this trade structure on air before. the sell strangle/buy longer dated call or the sell calendar/ sell put trade. don't follow and have never traded UNP but some comments on the trade. here is the video clip from the show UNP clip

using after hours data on MLK day. stock at 185ish. expected earnings move is $6,  Mike is :

Selling the Jan 24 177.50 put (collecting .78)
Selling the Jan 24 190 call (selling the put and call makes is "selling a strangle") - collecting $2.25 total
using that money to Buy the May 190 call for $6.70 (total outlay is $4.45 debit)

$445 is not exactly cheap for a bullish upside call. risk less make more. also discussed by tony was you can consider this selling a calendar(sell the jan24 190 call/buy the may190 call) and selling a put. as I type the IV for the jan24 call is higher than May which is should be but not super elevated. IV for Jan is in the 30's, likely be higher on earnings date. the difference of Jan IV to May IV is less than 20points. does not make me interested in selling premium at all on this stock. for example, NFLX IV is 60+ for the earnings week and 30+ difference to the Apr option.

suggestions:

1. if you absolutely positively have to do this trade, consider also selling the May 200 call for $3 turning that May position into a call spread and reduces the total debit to about $1.45, max profit above 200 in may is $8.55 ($10 from the spread - the 1.45 from debit). you can also sell additional 190 short calls for Feb, Mar for further credits if you get a move higher. remember since you are selling at put, you need that buying power/margin to do that.

2. if you absolutely positively have to do something similar, consider just selling the strangle (if you have the buying power/margin to sell naked calls). don't buy the May call option. Collect the $2.25 premium. your breakeven at opex is 175.25 downside (177.50 put-2.25premium) and 192.25 upside (190call +2.25 premium). you profit in that range. no ifs and or buts, close this strangle the day after earnings. Then if there are compelling results or commentary look to put on something for May opex

3. if you don't have much buying power (enough to sell that put), consider just doing the calendar portion. delete the 177.50 put sale, but will raise your debit to $5.23

4. No trade(my choice). nothing compelling here, not enough premium. Spending $445 per lot does not get my attention. I prefer to be a premium seller or spend minimal dollars for a directional trade. lets see how it works out

$NFLX Options Action trade alternative-closed

25Jan - first off im going to maintain that I had the right trade. although all trades below were winners im putting an asterick behind mikes. again my focus is to minimize the cost of the trade so a $1100 trade for a one lot is not what im looking at. the general consensus in the "industry" for risk management/capital preservation is that if your long option loses 50% of value you close it out. like a having a stop with stock. that's the discipline. I did a call butterfly very similar to my recommendation below and sold a cash secured put/sold call spread so I had skin in the game as well. thought is saw the 340call at $3-$4 at one point when stock was near 325 after earnings. if you didn't cash out at some point and held to the very end of the week you had profits. my call spread suggestion below had more. my suggested call fly was at +350% at one point as I was trying to milk for more. ended up closing for chump change in the last hour. the expected move was about $26. that's 26 either way up until opex, not immediately after earnings. so for this instance the move was less than priced. ie the premium sellers were the winners. stock was near 353 at close so will credit mikes trade with a $300 win. the high was 359ish so its close enough to say its a gap fill. that 360 area functioned as resistance as expected

here is the link for the NFLX clip NFLX 24jan

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18Jan - on the 17Jan show Mike Khouw with a trade for Netflix ahead of Tuesday earnings. here is the video clip NFLX clip

I haven't traded NFLX in ages but have had good trades on ROKU. both stocks move together. Netflix is hanging in despite all the competition coming online. is NFLX at the point where it doesn't go down on bad news? to the trade... hard to swallow that $1100 for a call option. stock at 340ish now. for earnings I generally assume that the options market has everything priced correctly. meaning the expected move is about accurate. not always but its something to base off of. the expected move for NFLX is about 23bucks now (add the 340put and the 340call together). so that gets you to about 315ish and 365ish. note on the chart and as Tony mentioned in the clip that there is a gap at 360.

so with a bullish thesis, the expected move, and the gap fill/resistence at 360 instead of spending $1100 on the

Mikes trade:

Buy Jan24 340 call for $11 (its 12.70 now after hours) - need 351 or higher at opex to be profitable. seems exactly opposite of what the show has been preaching previously.. the risk less, make more... the buy call spreads vs just calls when premium is high.

My alternative to Mikes trade:

Buy the Jan 340 call for $12.70 and sell the 365 call for $4.30 = $6.70 debit instead. - breakeven at 346.70 . max profit at 18.30 if at 365 or higher at opex

MarkLexus trade suggestion bullish:
if bullish, if expecting the expected move to be generally accurate, if expecting the 360gap fill and resistance at 360 then instead:

Buy the Jan 24 350/360/370 call butterfly (buy 350call,sell two 360calls, buy 370 call) - can probably get a fill for $1.00. heres the reasoning... mike needs at least 351 to be at breakeven, my call fly needs 351 for breakeven. the center of the call fly is at 360 which is the resistance mentioned. my profit range is 350-370ish. yes at 370 I make zero and mike has big win but that initial $1100 price is the dealbreaker for me. I will gladly sacrifice the "big winner" for a 1/10th cost bullish position. my call fly has max profit of $900 if at 360pin. I guess you could do an 11 lot if you have to absolutely spend $1100. that would be $9900 for a 360 pin.

point being for a directional trade i want to commit minimal dollars.
my call fly - $1.00
my mike alternative - $6.70
mikes - $11

lets see what happens at the end of the week.

$AAPL Options Action trade alternative

3 Jan Options Action show has Mike essentially selling a covered call on stock you own. here is the clip AAPL clip

Selling the Feb 315 call for $6.00 stock at 298-300ish

what mike is saying is all correct. where I differ in strategy is that this call expires in 47 days. so you will have time decay during that period. BUT earnings are on Jan28 and as we all know IV increases into earnings mainly on the weekly options of that earnings week and not as much for the time periods after it. point being the increase in IV (the price) of this call will offset much of the time decay. as in you are not getting much decay between now and Jan 28 if stock is sideways

I would prefer to sell the Jan24 short call either 315 or 312.50 to get $1-$2. get some premium and or allow the stock to work higher, THEN sell another short call for the Jan31 opex based on where the stock is at the time. Mike went to a 30delta on this one so go with that as well. THEN sell something in Feb.

bottom line I feel like im not getting the decay in selling a Feb option right now. both will work im sure but I want to take advantage of the IV increase on that Jan 31 options. selling a Feb now feels like im leaving money on the table for 2months.

for the purpose of this alternative against long stock:

Sell the Jan 24 312.50 for $2.00 (midpoint price after hours) 20delta, 19days till opex