8.7 C
New York
Thursday, March 28, 2024

Comment by phil

View Single Comment

  1. phil

    Leap strangles/Winston – Yes, great topic.  So we want to find a stock that goes up and down a lot but kind of in a channel like KO ($37.52), and we buy the 2016 $25 calls for $12.50 and the 2016 $45 puts for $10.45 and we've spent $22.95 for a $20 spread.  NO MATTER WHERE KO finishes, we get at least $20 back and we make more if it's higher or lower than $20 off our strikes in the end.  So, we essentially have covered both puts and calls that we can now sell along the way and, once we sell $2.95 worth of puts and calls, we can't possibly lose.  

    It's important to understand rolling, etc.  but you can sell the March $35 puts for .33 and the March $39 calls for .30 so that's .63 collected in the first month and we look to the 2015 even rolls ($25 puts are .24 and $45 calls are .35) so we know we are already outside (good outside) our safe range with a year to roll.  

    You have to think of it like you are risking $2.95 to make .63 (21%) in 46 days, though you are tying up the $20 as well.  If you assume you are 50% successful then you have 12 of those to sell for 12 x .63 = $7.56, which is a very attractive return against $20 (you work off the $2.95, of course and the other $5 drops your net to $15 over time and that too becomes your profit).  

    So, from that, we look for things that are more attractive to sell than KO like GE, where the 2016 $20 calls are $5.10 and the $30 puts are $7.45 for $12.55 on the $10 spread and March $23 puts can be sold for .30 and the March $25 calls can be sold for .40 which is .70 back on $2.55 at risk (27%). 

    F 2016 $10 calls are $4.70 and $20 puts are $6.60 for net $11.30 on the $10 spread and we can sell March $14 puts for .35 and March $15 calls for .37 for .72 back on the $1.30 risk (55%) – that one is great as we have almost no risk by sale #2.  

    What destroys you in this strategy is buyouts or crashes, where the short puts or calls you sold go so far in the money that you can't roll them so we stick to large caps,where that's not very likely to happen.  

    We'll keep an eye out and discuss more this week.  

    Still very ugly-looking! 

    AAPL/Angel – Can't hold up the whole Nasdaq by itself.  Very strong today despite 2.5% Nas sell-off.  Makes me thing $500 is a good bottom.  

    Productive/ZZ – Since when is savings non-productive?  The idea is people earn money, save it for retirement in banks that, in turn, lend it out to people who want to build things of value.  Somewhere along the line – we have completely F'd that system up, haven't we?  What we have now is a system that robs ordinary savers from getting fair returns on their capital, which instead accrues directly to the Banksters, who no longer need savers to make money since they get it directly from the Fed.  The banks then go out and compete to buy commodities and businesses with the citizens, driving up the cost of everything and depriving citizens of the ability to save and, later, the GOP blames the citizens for not planning their retirement better!  

    EWJ/490 – Rule #1: ALWAYS sell into the initial excitement.  Rule #2:  When in doubt, sell half.  Rule #3:  If you ignored Rule #1 AND Rule #2, why the Hell are you even bothering to read Rule #3 you greedy friggin' bastard! 

    TZA/Wombat – See above.  I don't know what month but let's say it's March and TZA is $19.90 and the $17s are $3.45 and the $23s are $1.20 so net $2.25 vs I have no idea what you bought it for but I'd cash 1/2 of the $17s and add that many July $20/26 bull call spreads at $1.40 so you pull $2 out clean and now you are covering your 1/2x naked March $23s with the July spread, as well as the $6 advantage of the 1/2x March $17s.  If the RUT falls further tomorrow, then you can start to stop out some of the remaining $23 calls. 

    AAPL/Wombat – I'd invest in rolling down to the 2015 $450s for $26 and those are $70.50 and, if AAPL falls further, the 2016 $400s are currently $116 so another $45 drops you $50 more and buys you a year so figure at about $35-40 it's a good deal and the 2015 $550s are $26.70 and the 2016 $500s are $63, and that's net $37 so figure if AAPL drops $100 on you, that's what your next roll would cost.  If you are not HAPPY to do that, you shouldn't even get started.    

    EWJ/Wombat – It depends on the day and situation.   As noted above, I had said hold on but then, at .10, I made a general call to DD.  Ideally, we would have liked to see 0.08 but we weren't getting it on the 2nd spike.  You were miles too early on 11/22 on a trade we had entered 2 days earlier but,  6 weeks later – we had more facts and the situation changed.  

    GTFO/Pharm – Yep, this is why we go to cash at the tops – very painful for people who are looking for exits now. 

    Finishing down at the 2.5% line is a strong indicator that we'll be down at least another 1.25% tomorrow and that's if the drop is slowing.  It could accelerate at this point as we've been gathering downhill steam and both China and Japan are going to have awful opens and then Europe will be playing catch-up.  



Stay Connected

157,450FansLike
396,312FollowersFollow
2,280SubscribersSubscribe

Latest Articles