Apple Earnings Double Calendar

Its' time for an Apple Calendar!

Earnings are due to be released on Jan 19 which is part of Feb expiration cycle. Volatility usually rises until the day of expiration and dropped dramatically after earnings announcement. Current Feb options have volatility of 36.9%, I expect it to increase to ~42%(or more) the day before earnings.

Since Apple is a big mover a double calendar works best for me. It allows price to move around while allowing time and volatility to work in my favor. From looking at the risk graph it may look like a bad trade with little to no chance for profit however vega is +27. Expected volatility picture shows the likely outcome with 5 points increase in volatility and one week before expiration. Picture shows $212 profit. Profit target for this trade is $150.
Adjustment points are at outer breakeven points at 189 and 212.


BTO AAPL Jan/Feb 190 Put
BTO AAPL Jan/Feb 210 Call
Total Debit $9.42

Original Trade


Expected result one week before expiration

Xmas Rally

Christmas rally is currently in progress. Price action should return to normal after the New Year.

TOS Platform Easter Egg

There is a nice Easter Egg hidden in the TOS platform. See if you find it yourself.

Hint: click on the red longer triangles in a counter-clockwise order.

RUT Bearish Divergence Trigger

Momentum on the RUT closed today at 2.24. This is a trigger to go short. Target is $509.14 for the RUT. If you are long have a close stop.

RUT Bearish Divergence

According to Jake Bernstein Momentum method, RUT has a setup for a short play. The trigger would be momentum to close below 11.61 at that point you can go short.
Since the setup is present in the RUT the market as is whole is also showing signs of reversal. However you need to wait for a trigger before going short. The current market can continue to go higher for sometime.

Tom Sosnoff Bearish Market Opinion

Tom from Thinkorswim presented a few bearish trades last week at SF Moneyshow. He's a contrarian trader and expects a pullback before Sept expiration.
Below is a list of some of his trades.

OIH
6-9% lower
Sell Sept 110/115/95/90 IC $2.35

QQQQ
8% lower
Buy Sept 41/39 put $0.85

EEM
8% lower
Buy Sept/ Dec 33 put calendar $1.29

AAPL
7% lower
Buy 150/160/175 call butterfly $0.00

RIMM
2-4% lower
Buy 70/75/80 call butterfly $1.12

IBM Call Assignment

I got called on my IBM 105 calls last week. It was part of my guerrilla calendar strategy that start back in June. IBM had moved steady over the past few weeks but I had collect some premium in July options so I didn't sweat too much on the strong bull run. I covered my short position immediately and was out for very small loss.
Lesson learned, need to adjust sooner once short options are ITM.

Earnings Cycle Calendars

Last month I placed calendars on Apple and Autozone ahead of earnings to capture some IV increase however IV dropped immediately after placing the trade. This was do to the minor rally in the market that dropped IV. IV has slowly climbed higher in the last two weeks. If it keeps climbing I should get a nice ROI for the month.

RUT Iron Condor Hi Prob June Update #2

RUT price has traded in a narrow range so I was able to let my last contract expire worthless. Overall this was a nice trade with little movement.

5/12 STO 3 RUT JUN 570/580 Call $0.80
5/12 STO 3 RUT JUN 410/400 Put $0.85
6/3 BTC 2 RUT JUN 570/580 Call $0.50
6/3 BTC 2 RUT JUN 410/400 Put $0.12
6/19 expire worthless 1 RUT JUN 570/580 Call
6/19 expire worthless 1 RUT JUN 410/400 Put

Total realized profit is $371
Total risk was $2505
14.8% ROI

Triple Calendar on SPY (Circus Calendar) Update #2

SPY trade was great this month. Price has landed very close to the 91 strike.

5/19 BTO 4 SPY Jun/Jul 97 Call for $.70
5/19 BTO 4 SPY Jun/Jul 85 Put for $.94
5/19 BTO 4 SPY Jun/Jul 91 Put for $1.12
6/3 STC 2 SPY Jun/Jul 97 Call for $1.00
6/3 STC 2 SPY Jun/Jul 85 Put for $1.02
6/3 STC 2 SPY Jun/Jul 91 Put for $1.47
6/17 STC 2 SPY Jun/Jul 97 Call for $0.66
6/17 STC 2 SPY Jun/Jul 85 Put for $1.02
6/17 STC 2 SPY Jun/Jul 91 Put for $1.87

Total profit is $304 on $1104 risk for a nice 27.5% ROI

RUT Iron Condor Hi Prob June Update #1

The likelihood of this IC reaching max profit is very high however this time to take some profits and not get too greedy. Original position was a 3 contract IC. Will remove 2 contracts today.

BTC 2 RUT JUN 570/580 Call $0.50
BTC 2 RUT JUN 410/400 Put $0.12

Total realized profit is $203.

Triple Calendar on SPY (Circus Calendar) Update #1

SPY has stayed in a nice range for the last few weeks. Its time take some profits off the table. The original position was a 4 contract triple calendar. Will only close half the position to capture some profits. Will let the remain contracts earn some more time decay before closing.

STC 2 SPY Jun/Jul 97 Call for $1.00
STC 2 SPY Jun/Jul 85 Put for $1.02
STC 2 SPY Jun/Jul 91 Put for $1.47

Total realized profited so far is $146

Triple Calendar on SPY (Circus Calendar)

Here is a calendar spread on SPY. Its a triple calendar (aka Cirus Calendar). By using a triple calendar I can get a wider breakeven while still maintaining a decent profit. One negative thing about calendars is that it is positive vega (implied volatility). So IV has to increase or stay the same to make money.

BTO 4 SPY Jun/Jul 97 Call for $.70
BTO 4 SPY Jun/Jul 85 Put for $.94
BTO 4 SPY Jun/Jul 91 Put for $1.12

Max loss is $1104
Current breakeven is $83.41-$98.16

First profit target is 12%.

RUT Iron Condor Hi Prob

The market has retraced the last few days from it's incredible bullish run. Maybe it's time to place an Iron Condor for the June expiration.

STO 3 RUT JUN 570/580 Call $0.80
STO 3 RUT JUN 410/400 Put $0.85

Potential Profit = $495
Max Risk = $2505

Current delta of the short strikes are ~10. Once price reaches near ~20 its time to adjust. Also if at anytime the profit reaches $380 its time to take the profit.

Why I love Thinkorswim!

I use the Thinkorswim (TOS) platform exclusively to trade options because it has the best tools to get the job done. The Analysis tab is the best part of the software which allows one to see a profit and loss graph in real time. It also has an awesome charting package that allows for custom indicators. It also recently introduced the backtrader module that is good for testing strategies.

I have also tried Optionvue in the past. It has a great backtrading module that is best around but I felt the yearly subscription fee was not worth the additional benefit.

For those that are interest, I'm conducting a free live demo of Thinkorswim software. I'll go over some tricks and tips on using the software. Contact me for info.

AZO Earnings Calendar

Autozone (AZO) is due to have earnings on 5/26/09. Generally I like to have the earnings in the back month, in this case the June expiration cycle. With that in mind I placed a double calendar on 4/20 to hopefully capture some time decay.

4/20 BTO AZO May/Jun 170 CALL $4.45
4/20 BTO AZO May/Jun 155 CALL $4.15

4/29 STC AZO MAY/JUN 170 CALL $5.35
4/29 STC AZO MAY/JUN 155 CALL $4.40

Total profit = 9.75-8.60= $1.15
ROI = 13.37%

This trade worked out primarily from some good timing. IV in the front month dropped several points since I first placed the trade.

Dan Sheridan VIPES criteria

Dan Sheridan follows the VIPES when placing a trade. They are as follow:

-Volatility – IV in the lower range for last 1-1½ years

-Industry – no energy, biotech or “wacko” industries

-Price – Look for too much speed/movement in the underlying. If yes to any below then wait!
o Last week more than a 5% move in 1 direction
o Last month more than a 10% move in 1 direction
o Last 3 months than a 15% move in 1 direction
o Last 9 months more than a 25-30% move in 1 direction

-Earnings – Do not put on in an earnings month unless it’s a stock with IV is low and the last 3 earnings periods had no gap over 3%.

-Skew – Negative Skew < 2% or NO TRADE
Positive Skew < 6% if above investigate why (earnings?)
If a 4-5 point skew develops after the trade take it off ASAP

SPY Bearish Divergence

The bullish run finally looks like it's running out of steam. CCI is now showing a bearish divergence. It may be a great time to place bear call spreads.

SPY Bearish Diagonal Spread Update #2

As a general rule of thumb for diagonals, I don't like to stay in a trade if if I experience more than 12% loss. Since the total risk was $1031 and P/L shows a $142 loss it was time to get out.

Here is a list of the transactions:
3/26 1 SPY 82 Apr/May Call $1.48 credit
3/26 3 SPY 78/81 Apr/May Call $0.53 debit
3/23 1 SPY 82 Apr/May Call $1.46 debit
3/20 3 SPY 78/81 Apr/May Call $0.05 credit

Total loss was $142.

I admit that 3/20 was not the best time to start the trade because there was no indication that bullish trend was reversing. Luckily I had other trades on that worked much better.

SPY Bearish Diagonal Spread Update #1

I had to adjust the trade on Monday after the continued bullish movement. So I have added a 82 calendar to push the breakeven further away. If price continues to trend higher this week, I'll cry UNCLE and just get.

3/23 STO 1 SPY 82 Apr/May Call $1.46

Total max risk is $1031.

SPY Bearish Diagonal Spread

SPY looks like it reached the top of the bullish run. Its time to place a neutral to bearish diagonal. If price settles below $78 on expiration there will be a minimum profit of $15 due to the credit. Potentially the trade can make up to ~$600 if the price settles at $78.

STO 3 SPY 78 April Call $3.70
BTO 3 SPY 81 May Call $3.65
Credit of $.05

Max risk is $885

Adjustment point will be when price reaches $79.5.

Bullish Divergence Update

The CCI divergence came true. The major indexes have been going up for the last 3 days. It seems like the market can't handle this bullish trend without a minor pullback. The SPY is almost at the 30day SMA so that will be next likely target for a pullback.

Bullish Divergence?

SPY is showing a bullish divergence on the CCI indicator. Could this mean that the market will move higher in the weeks to come. Maybe, I think we have reached a temporary bottom and head higher or channel for a few weeks before heading south once again.
The Russell and the Dow are both showing the same divergence. Only time will tell if this divergence is true.

The "3 Rules" for Consistent Monthly Return with Credit Spreads

1. NEVER EVER do a credit spread when that stock has earnings during that option cycle.

2. NEVER EVER play FDA or other government agency announcements.

3. If a credit spread has an unusually high return for a little risk - DON'T TAKE IT, Trust me there IS a reason for the increased volatility... Someone somewhere knows something, Just move on to a more "normal" return trade.

Walmart Calendar

Walmart is a great shopping alternative in the current economy. It should outperform other retailers in the coming months. So lets try a bullish calendar to capture some upward movement.

BTO 3 WMT Mar/Jun 57.5 Call for $.90

The plan is wait till March expiration to buy back the March short and then sell April and then hopefully the May.

AZO Earnings Calendar Exit

Autozone has not stayed flat like I hoped. It has trended higher and ascending triangle has formed. I looked at making adjustments to the trade but it doesn't like I can get a favorable risk to reward. So its time to get out. One of the things that went wrong was the fast moving price action that didn't allow for time decay to work in my favor.

STC 2 AZO Feb/Mar 135 Call for $4.30
for a loss of $110 or 12.8%

IWM Iron Condor Result Followup

WOW, IWM made a awesome rally this week. It's time to take the trade of the table so we can lock in on the profits.

2/6 BTC 2 Feb 39/37 put for $0.08
2/6 BTC 5 Feb 59/61 call spread credit $0.02
1/30 BTC 3 Feb 39/37 put for $0.20
1/7 STO 5 Feb 39/37 put spread credit $0.20
1/7 STO 5 Feb 59/61 call spread credit $0.21

Total profit was $119 on $795 risk for a ROI of 14.9%

IWM Iron Condor Result

I'm worried that IWM can continue to move south so I have removed some of the risk on the put side. The call side does not look threatened so I just leave it there.

BTC 3 Feb 39/37 put for $0.20

With this adjust, I can let price move to $40 before I start losing money. Also, I placed a GTC order to buy back the remaining 2 contract for $0.10.

AZO Earnings Calendar

Earnings on AutoZone is due out on March 3. Volatility will stay inflated or slightly trend higher the next few weeks, which is perfect for a calendar. My first profit target is 15% and I expect to be completely out of the short position by Feb 17. Breakeven is roughly $130 and $141. If price reaches these points, I will adjust the position.

BTO 2 AZO Feb/Mar 135 Call for $4.85

ALK followup trade

Alaska Air hit my target projection of $30 twice! The first time was last week then price reversed. Today, it moved $1.78 to close at $29.78. Unfortunately for me, I was out of my calendar on Wednesday for a profit of $.44 on $1.43 risk. If I stayed in until today then my profit could have been $1.10. But a win is a win.
One thing I noticed is the earning is due out the last week of Jan which should have increased the Feb IV. However, IV has stayed very neutral this month. One of the reasons I choose this trade was using the IV increase as a way to profit on the trade.

AAPL Trade Results

Apple did not turn out like I expected. The stock price began to move aggressively the first week of January. It actually touched my short strike and I was worried it might go further so I decide to close my put side (for a loss). The very next day, price retraced and never looked back. Overall, I still made a profit. But I would have made more if I kept the put side in place.

Trade log:
1/13 STC Jan/Feb 95/100 CALL $2.74
1/6 STC Jan/Feb 75/70 PUT $.90

12/30 BTO Jan/Feb 75/70 PUT $1.46
12/29 BTO Jan/Feb 95/100 CALL $1.65

Profit of $.53. Not too bad for a trade that went wrong.

IWM Iron Condor

On Dec 31, placed a IWM iron condor.
STO 5 Feb 39/37 put spread credit $0.20
STO 5 Feb 59/61 call spread credit $0.21
Potential 25% return on risk

With todays down action it made the iron condor centered almost perfectly. Just now have to sit back and wait for time to diminish away.

Santa Claus Rally (late)

Happy New Year!
Rally finally happened. One week late but still showed up at the party. The futures Thursday night indicate that the market will open lower. Its hard to tell if the market will continue the mini rally for January.