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Upwardcalldiagonal

TRADE IDEA: BMY MARCH/APRIL 45/52.5 UPWARD CALL DIAGONALMetrics: Max Loss On Setup: $443/contract Max Profit On Setup: $307/contract; $153/contract at 50% max for 34.5% ROC Break Even on Setup: 49.43 versus 50.18 spot Debit Paid to Spread Width Ratio: 59.1% Theta: 1.22 Delta: 31.54 Notes: With earnings on Thursday before market open and the underlying at the low end of its 52-week range, I'm looking at taking a bullish assumption directional shot without putting a ton of risk on the line to do it (which is why, in part, I'm going March/April instead of my standard split month; longer dated back months cost more, since you'll need to widen out to get a favorable break even and/or a decent debit paid to spread width ratio). That being said, a lot of these look sexier during off hours than when New York opens, so keep that in mind. The setup, after all, is currently bid 4.12/mid 4.43/ask 4.74 (off hours), which is awfully wide ... . The natural alternative is to just short put at the March 45 (paying 1.10 at the mid), but that'll tie up around 8.75 in buying power on margin, with a return on capital of 6.3% at 50% max and invoke a full notional in cash secured of 43.89. This is basically why I like to go defined with a lot of stuff that I'm not interested in buying and holding -- better return on cap, less buying power deployed, similar or better gross profit metrics, particularly in small cash secured accounts where you haven't got a ton of cash sloshing around to do a short put/acquire/cover cycle.
NYSE:BMYLong
by NaughtyPines
TRADE IDEA: MU MARCH/APRIL 31/38 UPWARD CALL DIAGONALMETRICS: Max Loss On Setup: $476/contract Max Profit on Setup: $224/contract; $112 at 50% max with a Return on Capital of 23.5% at 50% max Break Even Versus Spot: 35.76 versus 35.76 Debit Paid to Spread Width Ratio: 68% Delta: 35.47 Theta: .51 Notes: A similar play to the BMY upward call diagonal (See Post Below), but without all the drama around earnings (which are in the rear view mirror by 34 days). Additionally, a bit more liquid, at least as shown in off hours (bid 4.66/mid 4.76/ask 4.87) and without the goofiness of BMY's two and a half wides ... .
NASDAQ:MULong
by NaughtyPines
OPENING: X FEB 22ND/APRIL 18TH 18/22.5 UPWARD CALL DIAGONAL... for a 3.09/contract debit. Metrics: Max Loss/Buying Power Effect on Setup: $309 Max Profit on Setup: $141 Break Even on Setup: 21.09 vs. 20.71 spot Debit Paid to Spread Width Ratio: 68.7 Delta: 37.91 Theta: .61 Notes: The front month short doesn't pay for all of the extrinsic in the back month long (which is generally why you want your break even to be at or below spot), but I'm somewhat fine with that given the debit paid to spread width ratio. On a side note: I'm getting into quite a bit of long delta here, so will have to look for opportunities to add short delta, either on a per instrument basis or via a broad market short delta setup ... .
NYSE:XLong
by NaughtyPines
TRADE IDEA: NIO MAY/AUG 5/7 UPWARD CALL DIAGONALMETRICS: Max Loss/Buying Power Effect on Setup: $112 Max Profit on Setup: $88 Break Even Versus Spot: 6.12 versus 6.50 Debit Paid to Spread Width Ratio: 56% Notes: I'm fairly dubious that I'll get filled at the mid price on this, since that debit paid/spread width ratio is unusual to say the least. Moreover, the setup is bid 1.00/mid 1.12/ask 1.25, and I'm looking for a mid price fill. The other natural option is to just sell the 6 short put out in May, which is paying 1.00 at the mid price with a cost basis of $5/share if assigned; it also has a comparable buying power effect on margin versus the upward call diagonal. If cash secured, however, you'll tie up full notional, so the diagonal would offer you buying power relief in that environment with the option to exercise the 5 later after you've reduced cost basis for any remaining cycles in the setup (i.e., June, July, August).
NYSE:NIOLong
by NaughtyPines
TRADE IDEA: XOP FEB/MARCH 25/30 UPWARD CALL DIAGONALMetrics: Max Loss/Buying Power Effect on Setup: $338/contract Max Profit on Setup: $162/contract Break Even: $28.38 versus $28.63 spot Debit Paid to Spread Width Ratio: 67.6% Delta: 39.2 Theta: .61 Notes: A bullish assumption shot at the low end of the range. Ordinarily, I like to go split month with these to give me more time to reduce cost basis, but there isn't an April expiry available yet, so going shorter duration (and therefore cheaper). Shooting for 50% max (.81/$81). I'll adjust the trade or cancel it in the a.m. pre-NY open if /CL price is substantially different from where it was at Friday close (48.31).
AMEX:XOPLong
by NaughtyPines
TRADE IDEA: TBT FEB/JUNE 31/37 UPWARD CALL DIAGONALMETRICS: Max Loss on Setup: $422 Max Profit on Setup: $178 Break Even Versus Spot: 35.22 versus 35.37 Debit Paid to Spread Width Ratio: 70.3% Delta: 50.2 Theta: .6 Notes: Tomorrow's the last day on which 2018 tax losses can be realized, so I can foresee some additional, last minute dumpage, followed by the Big Dicks buying the dip on Wednesday to position long anew on this weakness. I would ordinarily position straight up short in TLT, but want the mark left to be as small as possible in the event I'm dead ass wrong, and we continue in risk off mode (which will send TLT higher/TBT lower). I would note that the markets in the back month show somewhat wide at the moment, so the setup may require some fiddling at NY open either with the strikes or the fill price ... .
AMEX:TBTLong
by NaughtyPines
TRADE IDEA: X FEB/APR 15/19 UPWARD CALL DIAGONALMetrics: Max Profit on Setup: $108 Max Loss/Buying Power Effect on Setup: $292 Break Even vs. Spot: 17.92 vs. 18.25 Debit Paid to Spread Width Ratio: 73% Delta: 30.35 Theta: .82 Notes: With high implied volatility rank/30-day implied (82/67) and fairly long-term weakness, putting on some bullish assumption here without hanging a ton of buying power out there if it goes south with the flexibility to work the setup long-term as a cost basis reduction play or synthetic covered call with the option to exercise the back month long if things go my way. Other Possible Plays: Short Strangle/Straddle: Earnings are 31 days out, so you may want to consider straight nondirectional premium selling closer to the announcement instead: the February 15th 16/21 short strangle is currently paying 1.39 with a 50% max metric of .69; the 18 short straddle in the same cycle: 3.26 with a 25% max metric of .82. Iron Condor/Fly: The February 15th 13/16/20/23 is paying 1.15 (greater than one-third the width of the wings); the 13/18/18/23 fly, 2.73 (greater than one-fourth the width of the longs). Short Put: If you're into "wheeling" (short put, acquire, cover), the February 18 short put is paying 1.50 in the February cycle a cost basis of 16.50 if assigned on the 18's, an 8.3% discount over current price.
NYSE:XLong
by NaughtyPines
TRADE IDEA: XLF JUNE 21ST/FEB 15TH 21/24 UPWARD CALL DIAGONALMetrics: Max Loss/Buying Power Effect on Setup: 2.18/contract Max Profit on Setup: .82/contract Break Even: 23.18 vs. 22.81 spot Debit Paid to Spread Width Ratio: 72.7% Theta: .26 Delta: 37.46 Notes: Here, I'm just shopping around for particularly weak sectors in which to put on bullish assumption plays that will have plenty of time to work out and/or reduce cost basis in. Typically, I shoot for a break even at or below where the underlying is currently trading, but am settling for a <75% debit paid to spread width ratio with a less than ideal break even here than what I typically do. Consequently, I'm paying less at the door than I ordinarily would, but still have a shot at getting a 27.3% return on cap invested in the event price finishes below the short call.
AMEX:XLFLong
by NaughtyPines