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Optionsstrategy

TRADE IDEA: VXX JUNE 17TH 17/27/37 LONG CALL BUTTERFLYWith low volatility having drained premium not only out of the broader market, but individual underlyings as well, I continue to look at VIX and VXX derivatives to go "long volatility" in lieu of opting for low vol strategies like debit spreads, calendars, and diagonals. In this particular case, I'm opting to use a long call butterfly given its high risk/return ratio, its relative cheapness to put on, as well as the large profit zone the setup generates. Here are the metrics for the setup: Probability of Profit: 54% Max Profit: $910/contract Max Risk/Buying Power Effect: $90/contract Notes: There are a couple of different ways to manage this intratrade, one of which merely involves taking the whole setup off in profit. The alternative way is to strip off the long call vertical portion of the setup (the 17/27 wing) first as price moves up, after which you would look to exit the short call vertical wing (27/37) as VXX mean reverts (as it is want to do).
CBOE:VXXLong
by NaughtyPines
2
COVERING VXX SEPT 16TH 13/MAY 6TH 17.5 SHORT CALL DIAGONALI put this on on April 1st, thinking it might be a while before I could take it off, but covered it today on this pop, freeing up the buying power for another go should be strike $17 again. I put it on for $373/contract, and took it off today for a $419 credit, yielding a $42.93/contract profit in six days. Naturally, this isn't hugely earth shattering profit-wise, it's always best to take off a VXX setup of this type as soon as possible. The contango helps your short call in the long run, but also eats away at the value of your long over time ... .
CBOE:VXXLong
by NaughtyPines
SOLD APRIL 8TH GME SHORT STRANGLESorry I didn't get to post this before NY close ... . Filled for a $94 credit. I usually like to see a $100/contract out of these setups, but I figured it was close enough ... . I'm looking for price to stay between my short strikes between now and expiration and for volatility to contract post-earnings announcement. Post-announcement, price is down about $2 to $28.38, so it looks good at this point .... . I'll look to take it off at 50% max profit or for about $47 (a .47 debit).
NYSE:GME
by NaughtyPines
WFT COVERED CALL IDEAWith covered calls, I look for cheap underlyings with high implied volatility rank/high implied volatility and setups that will produce at least a 10% return if called away at the short call strike. WFT fits the bill, with a rank of 72, an implied of 84, and a 13.06% return if called away at the nearest out of the money strike. Here's the setup: Buy 100 shares WFT at 8.52 Sell 1 Feb 19 9 short call Entire Package: 7.94 ($794) Max Profit: (If Called Away at 9) $106
WLong
by NaughtyPines
TLT LONG-DATED DYNAMIC IRON CONDORHaving gone somewhat "covered call" crazy last month and being somewhat ball and chained to those for the near future (most are Feb 19th expiry setups), I figured I'd turn my attention to old bread and butter standbys while I work through those particular trades, looking for setups that I can put on fairly cheaply from a buying power perspective. One of these is in TLT, which I haven't worked in a while. Because near term expirations have little volatility (current implied volatility rank is 4), I figured what I would do is go out further in time for my setup, as I did with my SPY setups when there was no volatility in near-term months in that instrument and manage the setup dynamically over time, rolling the call/put sides toward current price as time passed and the short option decayed and/or price moved. Here's the basic setup: April 15th 108/111/136/139 iron condor Probability of Profit: 83% Max Profit: $36 Buying Power Effect: ~$285 Break Evens: 110.64/136.36 Notes: As with the SPY dynamic iron condor, the notion is to roll the call or put side toward current price when it is profitable to do so to capture additional credit during the life of the setup while at the same time paying close attention to the 1 standard deviation line (basically the 84% out of the money/16% in the money line) for the expiry. The easiest thing to do in the vast majority of cases is to watch the short options price and if it is approaching worthless, check to see whether you can roll the side toward current price while staying clear of the 1 standard deviation line in light of the time remaining ... . My general rule of thumb is don't bother rolling unless you can get at least a .25 credit for doing so.
T
by NaughtyPines