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As we all know, holding a calendar spread through earnings is an extremely risky strategy. It can work extremely well, if the underlying doesn't move much, but can result in a loss north of 80% quite quickly when the stock is making a major move. Since we can only guess what will be a move in a given quarter, holding a "naked calendar" isn't a good strategy, just a bet that you can sometimes win. At the same time, I believe that in certain conditions, coupled with an additional strategy, holding through earnings may actually be something to consider. LNKD is reporting tomorrow (July 30) after the close. The 3-week spreads that we have been trading have reached ridiculously low values when compared historically. For example, I entered the ATM 3-week spread (P227.5) today for $1.27. In some previous cycles a similar 3-week spread had cost more than $2.00. The reason the spread is so cheap is because the IV on the short leg is around 196 (!!) today, while the IV on the long leg is only 63 or so. Clearly, option players are betting on a large move (maybe given recent moves in AMZN, TWTR, NFLX etc.) and pumping up premiums of the shortest expiration (our July 31 short leg). The historical IV level of LNKD is around 30. Once earnings are announced IV will collapse, but of course won't reach 30 immediately. The short leg will keep IV elevated for a while and it will decrease as the day progresses - note that for the short leg (July 31) there is only one trading day after earnings - Friday, July 31. The long leg (August 21) will see its IV collapsing to at least 40 on Friday morning, and probably continue to decline during the trading day. For my little example, I calculated the theoretical values of the short and long legs after earnings (Friday morning) assuming that the IV in the short leg came down to 50 from 195 (50 is still very high), and to 30 from 63 for the long leg (crushing all the way to 30 in the first day after earnings is unlikely). These are very conservative assumptions, but I want to be conservative. Given these assumptions, see below the value of our 3-week Put spread for different strikes on Friday morning: Strike 3-week Put spread 205 0,46 207,5 0,62 210 0,90 212,5 1,23 215 1,54 217,5 2,01 220 2,52 222,5 2,89 225 3,34 227,5 3,76 230 3,88 232,5 3,90 235 3,92 237,5 3,67 240 3,27 242,5 2,92 245 2,54 247,5 2,08 250 1,63 252,5 1,36 255 1,06 257,5 0,76 260 0,58 Assuming we entered the trade ATM at the current price of $1.30 or so, based on this table as long as the stock is staying in the range 212.50 - 252.50 (about 20 points move in each direction or 9%) we should be fine. If the stock doesn't move at all, the spread value should be worth around $4.00. But if the stock is making a larger move, the position will start losing money quickly. So my proposal is to couple up the spread with two July 31 long spreads - calls and puts. For example, with the stock currently at $232.50, we can buy the July Call 245 (long) - 275 (short) spread for $6.00 and the 220 (long) - 190 (short) spread for $7. Jointly paying $13, which is about 10% of the price of the ATM 3-week, spread. So we will need a ratio of 10:1 between the calendar spreads we have and the long call and put spreads. Under this strategy, the worst points for the stock to open on Friday morning would be the break-even points of the spreads $252.50 and 212.50. In this case, the calendar spreads will break even and the joint value of the long calls and puts will be worth probably around $10-$11 (purchased at $13). So the "soft spot" of the trade is between $252.50-$257.50 and $212.50-$207.50). Any other value will produce nice gains that can be at least 50% if the stock doesn't move much, or if the stock moves a lot. Also, don't forget that I used extremely conservative assumptions for the IV crush, so spreads values should be much higher an hour or two into trading on Friday. My plan is to try to sell the spread I bought today at $1.70 or more tomorrow, and if I can't get this price, pair it up with call and put spreads and hold through earnings. Any comments would be highly appreciated!

I'm in the 4-week P170 & P165 FDX calendar. Long Oct 16, short Sep 18. FDX reports on Sep 16 (not confirmed). Entered both at $0.90-$0.92 during the past week. This is VERY early, but I believe prices are attractive. During the previous cycle, I had a similar trade. 4-week spread (180 strike), entered at $1.14, and prices went all the way up to $1.58 the day before earnings. (I sold at $1.40 or so). Given these prices, I thought starting to build a positions around $0.90 is a good idea, although the stock can move, and IV isn't high. So a 10 points move can do some damage, but at the same time spreads should increase in value. Another nice surprise can be if earnings are pushed after Sep 18.

Hi Fededito, I really cannot believe I am providing an answer on this forum Anyhow to respond to your question, there is no minimum balance needed at IB to have Paper Trading access. However, if you deposit less than $2K, they will charge you $20/mo fee which can be offset by commissions. If you deposit between $2K-$100K, they will charge you $10/mo fee which can be offset by commissions (ie. if you generate $2 in commissions, then their fee is $8). If you deposit $100K+, then there are no monthly fees. Now to begin trading, you will need $10K or your trades will not execute but you can still enter them. Unless you are younger than 25 years of age, then there is only a $3K requirement. More details are on this URL: http://www.interactivebrokers.com/en/index.php?f=4969&ns=T Hope this helps. And thank you for asking this question as I learned as well because I had to do research to find this answer. Thanks, Praveen

"Sometimes They Do Ring The Bell At The Top" Submitted by Tyler Durden on 07/28/2015 10:49 -0400 http://www.zerohedge.com/news/2015-07-28/sometimes-they-do-ring-bell-top

"'Investors' Panic-Buy Stocks After Confidence Collapse Sparks Biggest Short-Squeeze In 6 Months" Submitted by Tyler Durden on 07/28/2015 16:03 -0400 http://www.zerohedge.com/news/2015-07-28/investors-panic-buy-stocks-after-confidence-collapse-sparks-biggest-short-squeeze-6-

Answers to the various questions: 1) I always try to close as one order at first, but if I don't get fills, change it to legs. 2) TOS does not have fees for canceling orders or changing orders (and as much as I do that, its part of the reason I use them -- particularly as, despite them using a per trade and per contract fee, they are not THAT much off IB) 3) I don't care what their algorithm does, if that's what they're doing they are violating half a dozen laws and trading rules. (610 and 611 jump to mind, but there's half a dozen others). It also violates their own stated policies. Just so you know, when I confronted them with it, and went fairly high up in management chain, I was assured OVER AND OVER that this never happens, and I just must be reading the order screens wrong. (Which is why I'm compiling a log, with actual trades). The one time I sent in statements showing where it had happened, I got a letter back, they apologized, said it must be a one time glitch, they are looking into it, and they refunded the difference in the execution prices. I too have had it where I change an order .01 or .02 and it immediately gets filled. That's not what I have issues with, what should NEVER happen is: a. You have an order to buy option XYZ at $1.00, that is not getting filled in account A b. You then put an order to buy option XYZ at $0.98 in Account B that immediately gets filled. That simply cannot happen.-- they are open to big time fines if it does. 4) I typically only trade day orders unless I have a reason to have one on the books at open 5) I have my day order back up at $3.00 to get the calendar closed off. I'm glad I closed the straddle on the weekly yesterday -- even though the price has moved another $2.00, it's down further. I won't be trading LNKD on the straddle weeklies again.

I think how this happens is as follows: I think brokers get charged by exchanges for 'traffic' i.e. resting orders in their order books then changing the limit etc. This can amount to quite a bit if you have a smart order routing system placing orders at exchange A then pulling it and placing it exchange B because it now has a better bid vs. your offer then moving the order to exchange C and then back to A ... So what their 'smart' order routing does is to evaluate whether your limit has any chance of getting filled (your guess how it does that but I suppose it has to be near mid) if it has a good chance of getting filled it is actually resting the order in an order book. Presumably the exchange with the best bid. If the algo for whatever reason thinks the order is not worth resting somewhere it is just held on the internal order book and 'monitored' until the algo decides it's now worth placing the order. So what might have happened in above example is that you place your first oder and the algo decides to only rest it internally. When you placed the second order the price has moved enough for the algo to place it directly in the order book where it is filled instantly but it is slow to realize that the other order is also executable now. This is 50% speculation and 50% talking to IB (which as we know is not always THAT fruitful and you get different answers if you talk to different people) This is why changing the order by one cent forth and back sometimes works - this seems to trigger the 'revaluation' of the algo and the order gets placed at the exchange rather then just being kept internally. As I said quite a bit of speculation on that issue on my side...