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April 17th, 2014 at 11:59 am
Wow, /NG went flying while I was doing those updates – $4.70 now – that's a huge move for them.
Oil/Burr – TOS has already dumped out of the May contracts, now trading /CLM4 ($103.84), /CLK4 is April and that's $104.69 at the moment, way higher than May but will probably squeeze down next week.
AAA/Scott – Why on earth would AAPL not have it? They have more cash than a bank and no debt. I guess it's because they don't borrow any money so they haven't established credit yet.
FAS/Louis – This is a very volatile play where we try to take advantages of the fluctuations in the financials. The theory is that the long-term bull call spread (net $6) and the short puts (net -$10) put $4 in your pocket and protect you against an up to $20 gain in FAS on the short calls you sell. Since the spread is a net credit, whatever you make each month is profit, as long as FAS finishes over $62 in 2016 (now $87). Generally, we're happy picking up about $1,000 a month, which is 5 contracts at $2, so we're selling a 1/2 cover, which means we can do a 2x roll and still not be in too much trouble. HOWEVER, we have had times where FAS shot way up and we got way behind in the position so make sure you are very comfortable going 2x or even 4x on this spread if you have to before you allocate your first 1x (and margin needs to be taken into account if you don't have a PM account – or even if you do!).
SDS/Akad – Keep in mind and adjustment like that is an aggressive play. We have $200,000 worth of positions to protect in the LTP and an uncertain weekend, we don't mind losing $3-5K if we're wrong as the long positions are likely to make $3-5K to balance it out. Make sure you're not over-hedging. Since you were aggressive on one, I'd be less inclined to be aggressive on two. Since it's an insurance cost, I'd consider rolling the May $27 calls ($1.60) to the June $26 calls ($2.60) for $1 as you are buying $1 in position for $1 and getting a month of time as a bonus. Then you can leave the rest and roll the puts if you have to.