Entries by Dan Sheridan

Live Double Calendar today with 4 step Risk Management Plan

Dan put the below trade on  about an hour ago, live, in a webinar for Ally Invest. Trade: With SPX around 2554 at about 11:40 central,  bought  1 Nov 10  2570 Call  and bought 1  Nov 10  2530 Put, and sold 1  Oct 27  2570 Call and sold 1  Oct 27  2530 Put. Total debit for this live trade,  11.05 . Selling Expiration that expires in 11 Days and buying the expiration that expires in 25 days. Dan’s 4 Step Risk Management Plan for this trade: Step 1– Set up:  Details are up above next to Trade. Step 2– Risk Management: 8% Profit and 10% Max Loss on risk capital of $1105. Will have in order to take off for $11.90 Credit , a profit of about 8%. If spread I paid $11.05 for goes under $9.50 , I would get out of the trade . Note: Beginner Traders would only deal with Step 1 and 2. Once you have done 5-6 Double Calendars and understand them, then I would deal with Step 3 and 4. Step 3-  When to Adjust?  Upside: Short Call strike of 2570 . Downside: Short Put Strike plus 5 points or 2535. Step 4- How […]

Blog Update from Monday

Took off Mondays Live Butterfly today for a profit of around 5% in 3 Days! (You can reference the trade from Monday’s blog using the link below.) https://www.sheridanmentoring.com/butterfly-live-trade-today-risk-management-plan/ Took off the Butterfly for less than my goal of 8-10 % because I am concerned with the narrow range in SPX last 5 trading days and am quick to get out of my short Vega trades a bit early when VIX is so low, today it is at 9.76! We bought the Butterfly  Monday for 12.15 Debit and sold it out today for  12.70 Credit . The Trade was in the Oct 27 expiration. The trade was B 1  2520 C ,  S 2  2550 C ,  B 1  2575 C , $12.15 Debit. Dan Sheridan dan@sheridanmentoring.com

Butterfly Live Trade for today and Risk Management Plan

Earlier today I did a Live Butterfly Trade in a webinar for Ally Invest. Below is my 4 Step Risk Management Plan. Step 1: The Set up:  I did the Butterfly in SPX at about 11:25 am central today, Oct 9, with SPX around $2548. I bought 1   2520 Call,  Sold 2  2550 Calls, and bought 1  2575 Call. I paid $12.15 Debit or $1215 for the entire trade. My beginning position Greeks are: Deltas  -2   Theta 13  and Vega -107. Total Capital and Risk for 1 contract is $1220. The expiration is Oct 27 which is 18 days from expiration.  Why did I do this? For monthly Income. How does this trade make money?  The short options I sold , they decay quicker than the options I bought. ATM options decay faster than ITM or OTM options. Step 2:  Profit Target and Max Loss:  8-10% Profit. If I make around 8% on this trade this week, that’s about $100. So if I paid $12.15 debit, my goal is to sell this out for around $13.15 Debit.  My Max Loss is 10-12% of the cost of the trade. So if I want to exit the trade at 10% […]

Backspread live trade

In today’s Webinar for Ally Invest ( previously Trade King), which we do every Monday at 11 am central, the trade today was a Back spread or Back ratio trade. With SPX at $2472 , I bought 2 Sep 1 expiration  2535 calls and sold 1 Sep 1 Expiration 2510 calls for $1.80 Credit. I like these type of trades when SPX is near all time highs and VIX is 11 or under. Live Trade This was a Live trade. I executed this trade by doing a credit spread and then buying the extra call. I like to keep the position deltas near zero or a little long at the onset to combat the Volatility risk of this long Vega trade on the upside. My position Greeks right now  with SPX at 2473 are: Deltas  -5.46   Theta    .61      Vega  -3. This is an OTM Call back spread  that starts out short Vega but picks up quite a bit of long Vega on the upside from the extra long call. Deltas I would of rather started out position deltas near zero or a tinge long but this is OK for now. I hope to buy this spread in […]

Cash Secured Put in IBM

Trade: IBM currently at $153.40 Sell 1 IBM July 28 Expiration 150 Put at $2.00 (Short Put is 34 Delta and IV 22) Analysis: Stock has been in a range over the last 12 months of 147.79 and 182.79. By selling the 150 Put at $2, you are committing to buy the stock at expiration at $148, if the stock is under $150. Earnings You would be buying the stock at about the lows over the last 12 months. Because IBM Earnings are coming during the week of July 17, we get a little more premium than usual for selling a 21 Day Put that is about 3 ½ dollars out-of-the money. Expiration The 34 Delta of the short put simply means that there is only a 34% probability we will be below $150 in IBM at expiration. What if you don’t want to buy the stock at expiration under $150 because of the big capital outlay of owning the stock? Then I would just have an order  in to buy the put back for $ 4 ½  if IBM has big down move. Since my credit is $2, I would be trying to limit my loss to not much […]

Live Trade for today: Call Credit Spread in SPX

With SPX currently at $2393, about 12 points from the all time highs, I am looking at a Call Credit Spread. I am looking at a 24 day trade in the June 16 expiration. Sell 1  2430 Call and Buy 1  2440 Call for an $1.90 Credit.  Just filled this trade   live at 11:35 am central time with SPX at 2393. The Delta of the short call is 20, that means there is only a 20% probability that SPX will finish over the short strike of 2430 in 24 Days. The margin or risk on this trade is $810. Credit Spread I am looking at making around 10% or around $80 on my risk capital of $810 for every 1 contract. I will have an order in to buy back the credit spread at $1.10 Debit as a profit target. If SPX continues up, I will have an order in to buy back the spread at 2 times my profit target of $80. So I will buy the credit spread back for a loss if the credit goes from the initial $1.90 credit to $1.90 plus $1.60 or $3.50. Always have a Plan before you start each trade! The position […]

What is Implied Volatility and How Can it Help Me?

AAPL is at $155 today. The at-the-money 31  Day Call in the June 16 Expiration is trading at $3.30 with an Implied Volatility of 17.41. What is Implied Volatility? In the above example, the market price is $3.30. The 17.41 Implied Volatility is the input you put in the Options Pricing pricing model that spits out the market price of $3.30. If I put in 15 into my pricing model, it might spit out a price of $2.00. That wouldn’t be the Implied Volatility. Remember, Implied Volatility is the input you put in the pricing model that equals the current market price. How can knowing Implied Volatility help me? Now that I have the implied volatility number as a metric of the current option price, if I can compare the number to Historical numbers ,  it will mean something useful. The Historical Implied Volatility Range in AAPL over the last year is around 11-29. Now having some Historical perspective, historically, I can see 17 is in the lower end of the range. A Practical application is this: If I am bullish , buying a Call at around 17 volatility isn’t a bad buy from a Volatility perspective. Analogy: It’s like […]

VIX at 10, time for a Back spread!

When VIX is at 10 and SPX is near all time highs, I like Call out-of-the-money  Back spreads .  Here is the trade in SPX at the $2390 price: Buy 2  June 19  2450 Call and Sell 1  June 19  2420 Calls  for $3.40 Credit. Position Greeks: Deltas -3   Gamma  .21  Theta  -4.70   Vega  71. Total Risk or Margin $2600. Total potential  Yield  if SPX under 2420 at Expiration in 38 Days is 14% ( credit divided by Risk or Margin). Vega and Time Decay Risk Because of the Vega and Time Decay Risk, would only stay in this trade till next Thursday or Friday. Looking  for about 6% profit on risk of $ 2420 or about $145. Just executed this trade live at 2:11 pm central time on Friday ( today)  May 12. Watch Blog next week for updates on this trade.

Covered Write for the Downside (Long Diagonal)

With SPX at  2398 Buy 1  Jun 16  2430 Put    Sell 1  Jun 2  2400 Put.    27.60 Debit Greeks:  Deltas  -15,  Gamma  -.29,  Theta 5, Vega  32,  Margin or Risk  $2760 5 Step Trade Plan: #1   Why am I doing this? Market near All time highs and hedging IRA or individual trades to the downside. #2   Set up:  I am Buying my Long Put Option in SPX about 30 points in-the-money and selling my Short Put option about at-the-money. I have no risk on the downside. #3   Risk Management:   Profit Target about 7-10% of initial debit. Max Loss is about 10% of initial Debit. #4  When to Adjust on Upside?  If SPX hits 2410-2415 area #5  How to Adjust on Upside?  Buy 1 2400 P  and Sell 1 2410 P (Put Vertical). If SPX continue up, Buy 2410 P and Sell 2420 P. (All Adjustments in the June 2 Expiration). Dan Sheridan dan@sheridanmentoring.com