Jeff Augen Weekly Strats

[Tradervic 0]

Marco,yes, I understand what you are saying and agree with you....... but look at Jeff's presentation.....when he talks about the short butterfly, he is selling the middle strike...and buying the outer strikes, getting the credit. In the presentation, he shows that credit rising, which would mean he is losing money. Thats the part I don't get.

[Marco 223]

Ah sorry, you talk about the SHORT butterfly that Augen suggest to do on Fridays with just a couple of hours to go (so the opposite of the Long butterfly I described earlier).

In above slide he doesn't enter the trade at 13:00 @ 3.54 but says wait til 15:00 (one hour before the close) when the credit is 4.15 and your max downside is 0.85 but a small move away from 620 in that example will lower the credit and make you a profit. Your breakeven move is 0.85 in that example - if it move more than that away from 620 you make money, If it stays pinned at 620 the credit will go further up (to max of 5.00$) and you lose money.

Edited September 1, 2012 by Marco

[Tradervic 0]

Ok, thanks. I didn't get that part....wait till last hour to enter. Looks like a gamble!

[ykotowitz 20]

A GENRAL POINT: These trades are not as rigid interms of times of entry as suggested by some of the posts above..(see Augens articles on SFO).

Report on AMZN and GOOG Trades.

Strategy 1.. (see Augens articles on SFO):On Thursday morning, When the share price is at ( or close to) an option point, Buy weekly fly centered at the relevant share price. Sell shortly before the close on Friday.

On Sep. 30, AMZN price was closest to 250 at 10:00 AM, so buy 245/-2*250/255 @1.02. Sell @ 1.20. near close Friday.

GOOG: price was closest to 685 at 9:55. Buy 675/-2*685/695 @2.48. Sell @2.67.

Both trades were potentially profitable IF you could buy and sell @ midpoint. However, bid/ask spreads were quite wide for all trades, so a considerable slippage was likely, reducing the profit.

Strategy 2: On Friday, when share prices are at (or close to) an option point price, SELL the weekly expiring fly centered at the relevant price. Buy back close to expiration, or when the price approaches the next option point.

AMZN: at 10:10 SELL 240/-2*245/250 @ 2.80. Buy at the close @1.60 . Could sell earlier @1.15.

GOOG: 10:35 SELL 675/-2*685/695 @6.65. Buy at the close @8.50. Could get out @6.50 earlier.

Clearly, AMZN trade very profitable, but GOOG very unprofitable, although the loss could be small if you are very nimble.

[Tradervic 0]

Thanks so much for your comments. I didn't realize Jeff wrote in SFO Weekly. I am digging out all his articles!

[dwilliams8649 4]

Well

A GENRAL POINT: These trades are not as rigid interms of times of entry as suggested by some of the posts above..(see Augens articles on SFO).

Report on AMZN and GOOG Trades.

Strategy 1.. (see Augens articles on SFO):On Thursday morning, When the share price is at ( or close to) an option point, Buy weekly fly centered at the relevant share price. Sell shortly before the close on Friday.

On Sep. 30, AMZN price was closest to 250 at 10:00 AM, so buy 245/-2*250/255 @1.02. Sell @ 1.20. near close Friday.

GOOG: price was closest to 685 at 9:55. Buy 675/-2*685/695 @2.48. Sell @2.67.

Both trades were potentially profitable IF you could buy and sell @ midpoint. However, bid/ask spreads were quite wide for all trades, so a considerable slippage was likely, reducing the profit.

Strategy 2: On Friday, when share prices are at (or close to) an option point price, SELL the weekly expiring fly centered at the relevant price. Buy back close to expiration, or when the price approaches the next option point.

AMZN: at 10:10 SELL 240/-2*245/250 @ 2.80. Buy at the close @1.60 . Could sell earlier @1.15.

GOOG: 10:35 SELL 675/-2*685/695 @6.65. Buy at the close @8.50. Could get out @6.50 earlier.

Clearly, AMZN trade very profitable, but GOOG very unprofitable, although the loss could be small if you are very nimble.

Well, this does put a bit of a turn on things. For the GOOG fly I would've used a 5 point strike spacing though.

[ykotowitz 20]

Well

Well, this does put a bit of a turn on things. For the GOOG fly I would've used a 5 point strike spacing though.

I tried to keep the spacings approximately equal in relation to the share price. In any case, the results would have been very similar for a $5 spacing.

[Dawajmeister 43]

Entered the AAPL fly last Friday for 655/665/675 for 2.24 sold for 2.53 this am for 13%.. This includes commissions, so w/o comm (I am on TOS) probably another 2-3% gain.

[Dawajmeister 43]

Did the calculations lost .07 on commission each way.. Would have been less on IB.

[Dawajmeister 43]

Entered this afternoon on the 670/680/690 long bfly for 1.63, wanted to wait till after the jobs report and took a while to get filled

Underlying was 680.

Edited September 7, 2012 by Dawajmeister

[Tradervic 0]

Volley, when are you thinking of exiting? I tracked a similar trade today on AAPL and there didn't seem to be any profits at the close.

[Dawajmeister 43]

There was a short period the trade was up very minimally. I'll hold as long as Tuesday close. I lower my profit target as monday and Tuesday roll along

[fieldydwb 31]

I tested AMZN since Feb until present using the long butterfly strategy. I used Option Vue backtesting to get prices every half hour. It showed that the most profitable was to enter at 930 on Thurs and exit at 3:00-3:30 pm on Friday. I omitted earnings week as well as the week prior and the week after. I also removed any week where the price of the butterfly/volatility was significantly higher than normal. The outcome to date was 12.14% and $25k profit assuming $10k played each week.

I attached a screen shot of the results. Perhaps Chad or someone that has Option Vue can verify a few of my prices. I used market pricing so that takes care of slippage but this does not include commissions.

[Tradervic 0]

fieldy, are you saying that 12.14% was the average return per trade, and that you have a 250% profit from using $10K? Thats a very good return if one can tolerate the $2K losses every now and then.

[fieldydwb 31]

Yeah, that's what AMZN shows since Feb. Going to do the same test for AAPL, GOOG and a few others.

[Guest DShaver]

Well I saw how volatile AMZN was today and decided to do the long butterfly, sell the mid buy the outside, hoping for movement. Didn't realize until now that I actually scalped the trade. Sold for 3.04 credit at 12.26.18 EST, bought back for 2.50 debit at 1228.38EST For a 17.8% return, awesome, even if it was probably luck.

[fieldydwb 31]

I did the same thing for AAPL from Feb 2 to Aug 30.

Rules:

-I did not play the three weeks around earnings.

-I cashed out as soon as I hit 17.5% ROE

-I did not trade when the price of the butterfly was 20% of the preceding 5 weeks

The results were good.

-An average ROE of 8.14% with a net of $17,095 assuming 10k a play.

-I entered 21 weeks of 30 possible.

-Of the 9 non entered, 7 were around earnings and 2 were to highly priced

Generally the best time to exit was at 15:30 on Friday.

[fieldydwb 31]

I did the same thing for NFLX from Feb 2 to Sep 06.

Rules:

-I did not play the three weeks around earnings.

-I cashed out as soon as I hit 17.5% ROE

-I did not trade when the price of the butterfly was 20% of the preceding 5 weeks

The results were again good.

-An average ROE of 11.02% with a net of $27,553 assuming 10k a play.

-I entered 25 weeks of 31 possible.

-Of the 6 non entered, 5 were around earnings and 1 didn't have the available strikes needed.

-There was one anomaly on Mar 1 where we purchased a butterfly for 1.71 and it could be sold for 3.78 3pm on Friday. I don't know if this is some sort of mistake in the data or not.

-The last 15 plays only produced 3.1% average return or $310 per 10k before commissions. However, the last 6 plays returned 6.36% or 636 on $10k.