jr1221

Really nice analysis. I'm curious about the hedged straddles...if the average gain is only about 1.5% better overall, wouldn't the additional commissions be offsetting all of the upside?

So we all know for next cycle, I entered a Nov/Oct 110P calendar on NFLX on 10/5/15 and exited yesterday at 3.00, for 39.5% return.

mid around 2.15 on this, is that a good entry? these calendars have fluctuated a lot in the past so maybe a trade we can enter and exit a few times before the 14th.

My concern with Iron Condor was that all the legs expire within 1-2 days, so either the credit will be too small to be worthwhile or else the risk too high, not to mention commission costs due to so many legs. I liked the calendar because the long position is a month out, providing less risk. I may do a little backtesting to see if these trades work. Would be curious if Kim has any thoughts on the concept of the "pinning trade".

Kim has posted and tweeted in the past when obvious examples of price pinning has occured. As most of us know, it is not unusual for the big players and market makers to pin the price of stock in order to cause as many options contracts (on both call and put side) to expire worthless, maximizing profits to those who wrote the options. If you look at GLD, it seemed likely yesterday that it would close today somewhere in the 115 range, based on the open interest on both sides of the December expiries. Sure enough, the stock hovered around 115 all day yesterday and all day today, despite its recent volatility. Had you bought a Jan/Dec 115 call calendar early yesterday, you'd have paid about 1.50 and you could've sold it late in today's session for about 2.00. Of course the risk is that we're dealing with trades right up to expiration, which we know is not favored in this forum. However, with the knowledge that price pinning occurs and evidence when it is occurring, I wonder if that makes them reasonably high probability trades that could be done with smaller than average positions. Kim has pointed out price pinning on many occasions, and it tends to play out with high consistency. Would we dare play it with a calendar over a 1-2 day period? You could even do it as a same day trade, open early in the session and let the theta run out of the short leg throughout the day.

If you have the margin, what if you sell the expensive one and buy the cheap one?

in IB it appears someone spent about $1M on call options on AZO this morning. Both the March 540C and the April 550C. I noticed in these most recent earnings cycles that there was strong movements with FB, CMG, and GMCR on the day leading up to the announcement. I think we could take some clues from this big money moving in and out.

I did not. Congrats to anyone who did. I wonder if a similar play might come up with LULU once it finds its bottom.

ever consider adding a calendar trade like that to our portfolio? There are many stocks that fall into a trading range shortly after earnings, and often remain in that range for quite some time. Plus IV is low. Seems pretty good upside and low risk.

Thanks Marco. I looked deeper into this over the weekend and figured out what happened. In this particular account, I only trade options so never really put much thought into the impact of dividends on stocks. However, around May 8th I was in a calendar trade for IBM, and the short legs were early exercised by my broker. So I woke up that day with 1600 shares of IBM in my account, along with 16 long options from the calendar trade. What I didn't realize at the time was that the stock apparently went ex-div that day, because I'm now on the hook for the dividend on 1600 shares -- about $1520. Fortunately IBM rose that day, allowing me to reduce the sting a bit by selling the long options for a nice profit. But nowhere near enough to cover the dividend I'm on the hook for. A pretty painful lesson that I should never be short an option on the ex-div date. Pretty brutal.

IB users: I was looking at my "account" window today, and noticed that it shows a "Dividend Receivables" value in a negative amount. Don't think I've noticed having a number in this field before. To me, this would imply that I have short options on an underlying that is about to go ex-dividend. But I looked at all of our current IB positions and doesn't appear any of them are going ex-div anytime soon. Does anyone know why I might have a negative number in this field? By the way, this dividend receivable amount also reflects a difference between my "market value" of the account and the "liquidation amount" in the account screen. Anyone who knows what this all means, I'd appreciate your words of wisdom. Jim

Great month Kim. Being an original member, I can say that the strategy adjustments you've made have been very effective, helping us make money in all market conditions. 2012 wasn't a great year overall for my SO account but I hung in there and my account is up 40% since January. Ridding ourselves of the occasional big loser has been a key, and I'm personally a huge fan of these calendar trades. Amazing how resilient they are when a company's earnings date approaches. I think of all the traders from the early days of your forum, and they'd be kicking themselves today for being so impatient and cancelling their subscriptions. Keep it up, so I can quit my day job!

I was looking at a trade opportunity in OptionTrader today, and at the time of analysis it showed 400 contracts had been traded so far today. A little bit later, the volume showed 370 contracts. How in the world does the number of contracts traded in a day actually decrease? Do they subtract "sell to open" trades from the contract volume or something?

Are you targeting playing the trade with the 16 strike this time? All of your initial backtesting indicated that 17 works better than 16. If we're worried about the strike being too far OTM, I guess I don't share that concern. Although I think the current rally may still have legs for another week or two, a leg down is definitely going to happen and if it doesn't happen sometime in Feb, it will almost certainly begin by March. The 17 strike worked great for me last time, so I'm going to use it again and wait for a credit of at least .70 before I jump in.

I'm going to be patient and wait for max credit on this. The Feb/Apr 17P calendar went all the way to .80 credit for 2-3 days in January and is back in that range again today. So the Mar/May calendar could see a similar credit. If VIX gets all the way down to 12 over the next several days, we'd probably see that same credit. The 16 strike will have a slightly smaller credit but I still think it can get better before the next volatility spike.

Has anyone been able to set price alerts for combos? Say I want to be alerted if the Mar/Apr VIX 16P calendar mid price hits -.45. I've been playing around with the alerts and it doesn't seem to allow me to work with combos.

that's right...it was the 2 month spread between the long/short that gave the .80 credit. The Mar/April has a mid of .30 credit for 16 strikes and .35 credit for 17 strikes. I'm curious why you aren't interested in having 2 months spread again. What did you see in the first trade that makes you shy away from it? Even thought the trade was down quite a bit before roaring back, it seemed we had an opportunity to roll the short strike forward a month if the trade didn't play out before Feb expiration. Or put it this way, if we get a .80 credit on a trade with 2 month spread, do you fear that the credit has a chance to widen a lot further? Thanks for your thoughts.

experience from the last trade tells us that we could be patient and maybe get a credit as high as .80 or more on this trade. Let's wait for the price to come to us.

You may have to go into the subscription manager and be sure you are subscribed to index options, or something like that. I had this same thing when I first loaded VIX, it had a button I could click if I wanted real time data, and the button took me to the subscription manager.

I can't seem to find a way to set an alert for a combo in IB. Are alerts only allowed for singles? I see I can set an alarm, but that appears to only come up on the desktop and not send you an email. Thanks if anyoen knows.

I meant buy Feb 16 call, sell Jan 16 call. Yesterday it was only .20 debit. Hold it a couple of weeks and, if VIX settles down, you make money. If VIX continues up, you could probably still close for .10. Seemed very low risk way to play either a fiscal cliff deal or the market simply already having factored it in. Today that debit is up to .50, so not so attractive.

for most of yesterday, you could get a VIX Jan/Feb 16 strike calendar for only .20. Seems an awfully low risk play for the possibility of a rally sometime the next 2-3 weeks. Today it's back up around .55 but will keep an eye on it.

I hope I can tap into the advanced expertise of some of our forum's members. I have a sizeable sum in my company's 401(k) plan. What I don't like about the plan is the lack of choices in investments, especially the inability to use options to protect the portfolio (i.e. the methods Chris has shared with us). At any time, I can roll about 50% of my plan's funds into an IRA. However, instead of rolling the money into an IRA like Fidelity, Schwab, etc., I would much rather have more direct control of the funds. So I've heard that one could create an LLC (say "Jim's IRA Holdings, LLC" for instance), which could qualify as an acceptable rollover for IRS purposes. I'd then open a bank account in the name of the LLC and deposit the entire rollover into it. From that point I could direct the funds as I see fit, like putting some money into Interactive Brokers for portfolio protection options trading, maybe depositing some at Everbank in a precious metals or currency CD, or whatever other investments I choose. What I like about this idea is mainly that, come hell or high water, the money would be in my control and not in some company like Bernie Madoff or MF Global where I wake up one day and it's gone. My concern is if I don't do this right, the IRS won't recognize it as a valid rollover and I get hit with taxes and penalties. Anyone who can share words of wisdom about this would be much appreciated. Jim

This BTU straddle saw nice IV rise today. 12% return on a 1 day trade.

One trade I was thinking about...if Romney gets elected, it's a big win for the coal industry. If Obama gets elected, not so good for coal. I could maybe see a straddle play through the election (assuming IV doesn't increase much in the ensuing days), with expectation of a good move depending on who gets elected. Not sure if a coal ETF would be a choice (haven't looked up the ticker on one) or maybe a player in the industry. BTU moved a lot after Romney won the first debate. My only worry with BTU is that the straddle price won't be very high and could be a little commission consuming. Overall I could see option IV's drop across the board after the election is decided, but I'd expect several sectors to move up or down depending upon who wins. I wonder what happens to GLD if Romney wins...would he lobby to end or limit QE?