B 1 Jun 1 182.5 Call, S 2 Jun 1 187.5 C, B 1 Jun 1 192.5 C, 1.84 Debit. Margin and Risk $184. 11 Day Butterfly Trade. Filled at 12:09 PM CT, with AAPL at 188. Profit Target : 20% or $35 for every 1 contract. Sell out Butterfly at $2.19 Credit. Max Loss is 20% or $35 for every 1 contract. If Butterfly price goes from 1.84 to $1.49, get out. Why am I trying to get 20%? Because 10% Profit target for every 1 contract would be only $18, and after commissions , there wouldn’t be much less. This is a very cheap dollar trade, only an outlay ( debit) of $184 for every 1 contract. Dan Sheridan firstname.lastname@example.org
About Dan Sheridan
Dan Sheridan traded in the pits of the CBOE for over twenty years and is still a weekly educator at the Options Institute in Chicago. He opened Sheridan Options Mentoring in 2007, and has since educated thousands of retail traders by relying on the methodologies and strategies that were crafted by current market makers.
Entries by Dan Sheridan
Double Calendar B 1 Jun 8 2750 C, B 1 Jun 8 2690 P, S 1 May 25 2750 C, S 1 May 25 2690 P 16.30 Debit Profit target: Sell Spread at 17.45 credit for about 7% profit. Max Loss when Spread decreases under 14.80, loss of around 10% Dan, covered the trade in more detail in the video below.
Trading Cash Secured Puts or Covered Writes, basically the same trade, is outrageously expensive in a retirement account. With FB at 165 today, Buying 100 shares at 165 and selling one 170 call at $4.50, expiring in 32 days, cost’s about $16,000 to trade!!! If doing an almost identical strategy called a cash secured Put, selling one 160 P at $4.50, the capital requirement is still going to be near $16,000. How do I do this type of a strategy in a very cost efficient way? Sell a wide put Credit Spread. Using FB as an example today. With FB at $165, I can sell the 160 Put at $4.50. Because the capital requirement is very high to sell the put naked, even if I have the capital too do it, I will look to buy a put against it at 15% the cost of my short put. My short put is going for 4.50, 15% of 4.50 is about $65, so look to hedge the short 160 put with the 140 Put . The May 18 expiration 140 Put is currently trading for .65. Now I have a 20 wide put credit spread, short the 160 Put and long […]
With FB at 159.83 at 11:34 central time today April 9, I did a Live Pre- Earnings Calendar Step 1: Set up: Buy 1 Apr 27 160 Call, Sell 1 Apr 20 160 Call, 2.82 Debit. Implied Volatility of long call is 47.71 and Implied Volatility of short call is 35.98. Step 2: Profit Target and Max Loss: Looking to make $30-$40 for every 1 contract, which would be 10-15% on Capital of $282. Max Loss would be around $50 or about an 18% loss on $282. So for a profit, when the Calendar price goes to the 3.15-3.25 area, would take off . When the price of the Calendar goes to around 2.30 from the initial debit of 2.82, I would get out for a loss. Step 3 is When to Adjust and Step 4 is how to adjust. For today’s trade, I will stick with just step 1 and Step 2 and not get into Adjustments. For people new to this type of a Calendar, let’s learn to walk before we learn to run.
Currently trading at $187, the stock has been in a range between roughly 170 and 200 since Mid August, about 6 months. I put on an Iron Condor today. Sell 1 Apr 6 207.5 Call, Buy 1 Apr 6 212.5 Call, Sell 1 Apr 6 167.5 Put, Buy 1 Apr 6 162.5 Put, Total Credit $85. Margin or risk for 1 contract is $415. The expiration of April 6 is 31 days from today. Looking to buy in the spread around .30 Debit. The profit target would be $55 on capital of $415 for 1 contract, or a yield of 13%. If Baba goes against me price wise, I will close out the Iron Condor if the spread price that I sold for .85 credit, trades over $2. Dan Sheridan email@example.com
18 Day SPX Iron Condor Live Trade put on around 11:30 am central today when SPX was about 2715. S 1 Mar 23 2805 C, B 1 Mar 23 2815 C, S 1 Mar 23 2575 P, B 1 Mar 23 2565 P, $1.70 Credit, Margin $830. Delta of short put and call at trade entry was 12 and 13. Plan is to make 7-8% of $830 and not to lose more than 10% of $830. As of 2:43 central today, SPX has run up to 2727, up 36 for the day. The spread is trading at around $2 right now, we are down 30 divided by 830 or 3.6% now. Would look for possible adjustment when short call delta hits around 19, right now it’s at 16, with SPX at 2726. I might roll up my short calls 5 points at an adjustment point as a possible adjustment. Dan Sheridan firstname.lastname@example.org
Closed High Octane Butterfly from Monday near the close yesterday for a credit of 1.50 Credit. The loss was very small, $5. I originally bought the Butterfly Monday for 1.55 debit. The original Butterfly was B 1 Feb 28 2755 C, S 2 Feb 28 2765 C, B 1 Feb 28 2775 C, $1.55 Debit. Why did I take it off yesterday? Yesterday, SPX traded up to 2789, over 20 points away from our short strike of 2765, not good with a 2 Day Butterfly! When the market backed off strong yesterday towards the close, I had the opportunity to take it for almost Breakeven and did so. Why did I wait till yesterday to get out when my plan on the Blog Monday was not to stay in the trade Monday for over 2 hours? Because I only put 1 contract on, $155, I got sloppy and didn’t follow my strict risk management and stayed in longer than I wanted to , looking for a profit. I got lucky yesterday when SPX backed off but always want to follow my plan! Dan Sheridan email@example.com
At 11 am central today with SPX at 2765, I bought 1 Feb 28 2755 C, S 2 Feb 28 2765 C, B 1 Feb 28 2775 C, for $1.55 Debit ( Margin/Risk = $155 for every 1 contract). Game Plan is to sell it for $1.85 Debit or 20% profit. I will only stay in this trade till 1 central time today or if SPX hits 2755 or 2775, whichever comes first, at that point , will exit trade. Dan Sheridan firstname.lastname@example.org
During a Webinar for Ally Invest Monday, I did an SPX Iron Condor for $1.70 Credit. Details on the trade are in Monday’s Blog titled “Live Iron Condor Trade”. Today I took the trade off for a debit of $1.25. The net profit was $45 for every 1 Iron Condor or a yield of 5.4% in 2 days. With the market relatively stable in the morning today and the VIX dropping almost 4 ½ points , I got the opportunity to take it off for good profit today. Dan Sheridan email@example.com
With SPX at $2659 +40 Points, I did an Iron Condor in the Mar 29 Expiration, 45 Days out. Sell 1 2830 Call, Buy 1 2840 Call, Sell 1 2370 Put, Buy 1 2360 Put. Total Credit $1.70, Maximum Risk and Capital allocated is $830. (Trade was discussed earlier today in a webinar with Ally Invest) 4 Step Risk Management Plan #1 Set Up: Picked Short Strikes by Selling a 12 Delta in the Calls and Puts. Expiration is 45 Days out from Today. #2 Profit Target and Max Loss. Looking to make 8% on Capital or risk of $830, that would be about $65 per every 1 Iron Condor. I would have an order in to buy back the spread at $1.05 Debit. If the market goes against me, don’t want to lose more than 15% of the $830 Capital or about $125. So if the spread expanded to $2.95 from the initial $1.70 credit, would get out. Why am I willing to lose 2X what I am hoping to make? I don’t want to lose more than I make, but to give the probabilities time to work, I have to give myself more room before I adjust. Steps 3 […]
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