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.

AAPL Earnings Double Diagonal

It's earnings season for Apple once again. Normally the options volatility will increase in the option chain that coincides with the earnings date. Earnings is set to be released on Jan 22.
I decided to place a double diagonal to capture the increase in volatility. The chart looks like I will make only a few dollars at expiration but I have a 9 vega. Meaning that for every point increase in IV, I should see a $9 profit. I expect to see about ~10 point increase in IV by Jan expiration.

Trade
STO JAN 95 CALL
BTO FEB 100 CALL
$1.65

STO JAN 75 PUT
BTO FEB 70 PUT
$1.46

ALK ascending triangle

ALK(Alaska Air) is showing ascending triangle. The stock has been forming a triangle for almost 2 months. It recent broke out of the triangle and heading upwards. I decided to place a bullish calender to capture any movement.



Placed Jan/Feb 30 Put calendar for $1.43. This trade is mostly speculative trade because it may never reach above $30. $27 was the upper band before the breakout. I may look to remove the trade once it reaches 25% profit.