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

$LOW Options Action trade alternative

23feb - mike and carter with the trade on Lowes, earnings Wednesday before the bell. here is the video clip LOW clip  i dont follow Lowes directly but Home Depot is on my watch list. mike essentially with a diagonal spread

Buy the Jun 125 call
Sell the Feb 132 call
net debit of $6.57 for a one lot

thesis was that the weekly option pricing is elevated because of earnings, thus buy the Jun 125 which is at the money. best outcome is that stock moves up to near 132, the Feb options expires worthless and the Jun option gains in value. 132 being about at the expected move. ok, makes sense. then again its just not my style to buy at the money options nor spend $657 for a directional trade. too pricey for me. obviously if stock moves down from earnings or overall market the trade is a loser. so you need an up move.

my preferred trade if going directional is a calendar spread. but the Feb28 /Jun 130 is still over $3 debit. next up is a butterfly, mike chose 132 being near the top of the expected move so i will use that strike as well. again trying to be cheap so if im wrong its just a few bucks, under $100 ideally. so given the assumption that stock moves up and is near the expected move of 132 at end of week the Feb28 129/132/135 call butterly priced out at .36 for a one lot. a 3 lot gets you to $100 max, which is also your max loss, max profit on the 3lot with at 132 pin is near $800.  profit zone at opex is 129-135 , if stock moved up after earnings on Wednesday morning i would exit this at about $1.00-$1.50 if i could and take the 3x-5x win and move on to the next one, if youre going to roll the dice and try for that 132 pin at least sell enough prior to get your initial debit back. I would rather risk .36 vs $657 if im wrong. risk less make more. 3 bags full. note that the stock is near 52week high now so 132 well above . enter this trade Tuesday based on where the stock is trading at that time.

$USO Options Action alternative trade

15 feb - mike with the trade for USO and Carter with the charts. pretty straightforward. Buy the Apr 11.50 call for .30 on a play that oil rebounds a bit. here is the video clip USO clip

as mike said the USO was just over 13 couple weeks ago. this segment got me looking at a couple of different trades. in general its rare that I buy an upside call, preferring to be a premium seller. but also along with most people thinking that oil will rebound at some point after the corona virus has run its course or a geopolitical event.

I first looked at my go to trade of buying a DITM call from jan2022 and selling a nearer month upside call. but not wanting to lay out a lot of cash to do so.

Second trade I looked at was doing a calendar spread based on mikes thesis. as in sell a nearer 11.5 to buy that Apr 11.5. but the IV difference between a Mar and Apr 11.5 is nearly zero so unless the thesis is that USO move up but not over 11.5 at Mar opex to expire worthless but Apr 11.5 increases in value, youre not getting the front month decay as hoped for with calendars.

Lastly looked at a Super Calendar using the Apr / Jan2021 , with the intent of letting the short front month reduce the cost of the long call in Jan2021. example:

(after hours pricing)
Sell the apr 12call at .20
Buy the Jan21 12call at .85 for net debit .65. 
thesis is to let the Apr12 expire worthless and resell a May/Jun 12 or 12.50 to continue to reduce the cost basis of the Jan21 calls for the move back towards 13.

.65 is not much of a debit for a one lot / $650 for 10 lot . my history with calendars is that many times the stock move up faster than expected and thru my front month short strike so I end up closing the entire trade much earlier than expected since im not gaining anymore if the stock goes thru the short call (lose on the front month short call while gaining on the longer term call). point being I first looked at the 11.50 level strikes for this. debit is a few cents more but im agreeing with mikes thesis that it does a rebound short term. but went with 12 strikes. personally think the better rebound comes later in year. Might actually put this trade on. see how it prices out in the morning.