Options Safari: SPY Calendar and SLV Butterfly
Dan’s two shows for CBOE TV Options Safari this week are:
SPY Calendar Spread
SLV Bearish Put Butterfly Spread
Dan’s two shows for CBOE TV Options Safari this week are:
SPY Calendar Spread
SLV Bearish Put Butterfly Spread
Dan is presenting Covered Writes today (Tuesday, Sep 11, 2012) at 3:30 PM Central (Chicago) Time. Today’s webcast is titled:
Weeklys(SM) Strategies for Income Generation
Dan will go through several Weekly Trade ideas and adjustments and explain why you should be trading weeklys in this presentation.
The presentation is today at 3:30 PM Central at CBOE.com.
Register for this webcast here.
Dan’s two shows for CBOE TV Options Safari this week are:
GLD Bullish Butterfly
SPY Long Put
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Dan’s three shows for CBOE TV Options Safari this week are:
CLH Short Put
DISCA Long Put
HOG Look back at an Iron Butterfly
And please see our options trading for beginners page.
Dan’s three shows for CBOE TV Options Safari this week are:
NAV Put Credit Spread
SPY Put Debit Spread
And please see our options trading strategies for beginners page.
Dan’s three shows for CBOE TV Options Safari this week and next week are:
**NOTE** CBOE had a technical glitch so Dan had to re-record these shows on 7/25. AAPL’s earnings came out last night so Dan added an IBM trade.
AAPL Iron Condor for Earnings (Today!)
AMZN Bullish Butterfly for Earnings (In 2 Days!)
IBM Double Diagonal
FB Short Put from June – Look Back Show
And please see our options trading strategies for beginners page.
Dan taught a webinar yesterday on Monthly Income Trades in this Low Volatility Environment.
Dan went over:
And please see our options trading strategy for beginners page.
Dan’s two shows for CBOE TV Options Safari this week and next week are:
PNRA Iron Condor
FB Short Put
And please see our options trading strategies for beginners page.
This strategy can be employed in many vehicles, will use AAPL as an example today. AAPL is at $604 as I write this.
Here is my idea
Buy 1 August 605 call and sell 1 July 605 call (about 9 days from option expiration). The spread is going for around $15.60 ($1560 for 1 spread, expensive because of high price of AAPL). This idea can be used in cheaper stocks. It’s the same principle. The option volatility is around 33 for August option and 26 for July option.
Why the disparity?
Earnings will be reported in AAPL after expiration of July options so July options won’t be affected and consequently will trade lower. August options will be front and center when earnings arrive and so the option volatility is higher and will continue to climb because AAPL can really move during earnings.
What does this mean to me as a retail options trader?
It means one of the two foes you face as a calendar trader, price and implied volatility, will probably not be a foe during the length of the trade. Option Volatility risk (also call implied volatility) will be minimal at best, in my opinion, because August option volatility will stay pumped and July option volatility will stay low?
Does this mean I will make money?
Not necessarily. You still have one more foe to deal with: price movement. AAPL doesn’t usually make big moves before earnings, but it can! If a stock is channeling and on relatively good behavior for one to two weeks before earnings, then this AAPL trade makes sense to me.
What would my plan be?
Put the trade on now and keep it on until the latest, next Thursday July 19, the day before expiration. If the trade is still on, take off the entire trade.
What is the risk management plan while trade is on?
If I paid around $1560 for the trade, I would be looking for around 10% profit, or $156 on 1 contract.
What would I do if the trade went against me?
If I didn’t want to fiddle with adjustments, I would simply take off the spread if the price moved outside the expiration breakeven points of around $590 and $620. This would give me almost 15 points either way before I would have to exit the trade.
What adjustment might I use if I was contemplating adjustments?
I might move the entire calendar I initiated at the 605 strike to the 620 calendar in the calls on the upside if AAPL reached $620. On the downside would take off the original $605 calendar and move it to the 590 strike in the puts if AAPL reached $590. There are other calendar adjustments, but this was merely one example of what I might to.
How long am I looking to stay in this trade?
About 1 week. I would take the trade off at latest on July expiration Thursday.
Keep working on the craft! Put this on as a paper trade for next week to see how this trade works and e-mail me your feedback or questions, that’s how you get better!
Thanks!
Dan Sheridan
dan@sheridanmentoring.com
And please see our options trading strategies for beginners page.
Dan’s two shows for CBOE TV Options Safari this week and next week are:
IBM Calendar with Weekly Options
GLD Short Strangle
And please see our options trading strategies for beginners page.