[Anonymous]

You can use vertical spreads (debit) to buy options that would otherwise be too expensive for your risk tolerance. +

Advantages Neutralizes theta (time) decay if you don’t go too far OTM and IV crush if the spread isn’t too wide (meaning the difference in strikes) Lets you control your risk –

Disadvantages Lower rewards if you are correct about the direction. If you see an exit alert with +100%, you may only get +25% You need margin account and that will be subject to PDT rules unless you have more than a $25k balance As of writing TSLA is trading at about $880. These expire June 5, 2020 (in less than 5 days) so it’s as cheap as you can get ATM. If you are bullish on TSLA, you buy the 880 Call and sell the 885 Call. All debit call spreads are like that. You would pay $2551 per a contract on the 880 Call and collect $2320 on the 885 Call so each spread would be $231. If you were bearish you would be long the higher strike put, and short the lower strike put. For example, long 880 Put, short, 875 Put. Max gain is always the difference between the strike prices. In this case, 885-880.

But that is only if the stock closes above 885 at expiration. You can and probably should sell it before that if you in profit or if you cannot afford assignment. For puts, it’s the same, 880-875 is the max potential gain.

In contrast, if you were to play the single leg and only wanted to risk $231, you would have to buy at least the 1010 Call or maybe even the 1015 Call. Compared to the vertical spread, the far OTM options gains will be much greater if the momentum continues in your favor. But any slow down and theta decay and IV crush will be be devastating. IV crush especially, will be more than single leg ATM option such as 880 Call

[IgorKeymaster]

June 2, 2020

Anya  9:38 AM EDT 
BTO FB June 19 215 CALL @ $17.80 MID DEBIT I have a short term target of 236

Anya  9:48 AM EDT
BTO CHWY JUNE 5 45/47.5 Vertical CALL @ $ 1.21 MID DEBIT> Target a profit of 100%

Anya  9:54 AM EDT
BTO AMBA June 19 60/65/70 Call Butterfly @ 0.70 MID DEBIT (LIMIT order not yet filled) Earnings trade, full risk and this is June 19 so be prepared to hold it until June 17 or 18 at least. BUY +xx BUTTERFLY AMBA 100 19 JUN 20 60/65/70 CALL @.70 LMT ISE CANCEL AT 6/2/20 15:00:44 [TO OPEN/TO OPEN/TO OPEN]

Igor  9:59 AM EDT
BUY TO OPEN $FDX 17JUL 135 CALL MID 6.10 DEBIT

Anya  10:03 AM EDT uploaded this image: image.png
STC AVGO June 5 290 CALL @ $ 10.40 MID CREDIT.

Anya  10:36 AM EDT 
STC TTD June 19 310/315 Vertical CALL @ $2.80 MID CREDIT 21% gain on 1/2 my position for a 21% gain. For those that took this TTD trade please understand that though TTD is at 317.62, you will not hit max gain on this trade until June 19. SOLD -xx VERTICAL TTD 100 19 JUN 20 310/315 CALL @2.80 LMT Net Credit [TO CLOSE/TO CLOSE] This trade has filled. TTD has seen a nice move up and has followed through on the Bullish Divergent Bar on the Weekly Chart. Happy to take profits here considering how long we have on the trade and how TTD can be a bit more difficult on fills.

Frank Boet  1:02 PM EDT
STC AVGO @11.40
STC CHWY @$5.05

Frank Boet  1:03 PM EDT
STC FCEL @.45
STC NIO @.64

Frank Boet  1:04 PM EDT
STC TSLA @$12.30
STC FVRR @$5.90
STC FEYE @.90

Anya  1:12 PM EDT 
BTO DXCM June 19 380/410 Vertical Call @ $10.00 MID DEBIT

Anya  1:18 PM EDT
BTO TSLA x,xxx Shares at $889.14 MID DEBIT
    
Frank Boet  1:28 PM EDT
BTO FOLD July 12 Call @1.75 debit

Frank Boet  1:35 PM EDT
BTO QRVO July $110 Call @ $5 debit

Anya  1:37 PM EDT uploaded this image: image.png
BTO HOG July 17 $23 CALL @ 2.50 MID DEBIT Looking for 50% stop loss and 100% profit. Risking 1 to make 2. I like those odds.
    
Anya  2:43 PM EDT 
STC TTD June 19 310/315 CALL Vertical @ $3.50 GTC From 2.20 entry. I am happy with 50% gains. Open order to sell the other 1/2 of my TTD position

Frank Boet  3:02 PM EDT
STC July17 SPLK 195 call @ 8.60
STC July17 SNAP 20 Call @1.24

Anya  3:11 PM EDT 
BTO SPCE June 5 $15.5 CALL @ $0.67 MID DEBIT

Anya  3:33 PM EDT
STC TSLA shares at 885.03 MID CREDIT for a loss of $4.11 per share. Sorry. But have to be disciplined enough to take a loss.

Igor  3:39 PM EDT uploaded this image: image.png
SELL TO CLOSE $QCOM JUN/JUL 70/75 PUT DIAGONAL MID 1.40 CREDIT (LOSS)

Frank Boet  3:44 PM EDT
BTO July17 LOCO 14 Call @ 1.35 debit

[Anonymous]

Global markets surged again today, with broad gains out of Europe and U.S. markets. In Europe, the Stoxx 600 hit a multi-month high as Germany and Italy show even more signs of economic reopening.

Economic recovery hopes remain high on these shores despite ongoing protests and some rioting across American cities. New York and Minneapolis extended their curfews as rioters caused widespread destruction overnight, and the president may invoke the Insurrection Act, allowing him to use federal troops to safeguard constitutionally protected civil rights.

There is volatility everywhere but the stock market, which continues to churn higher. The S&P 500 is up 40% from its late March lows, and nearly all sectors are firing. Financial, industrial, and manufacturing stocks continue to move higher, taking the baton from technology and healthcare, which have dominated returns.

All of this is happening in the face of historically bad economic news and projections, and as anxiety creeps higher among investors. This is challenging the natural state of our animal spirits in ways we’ve never dreamed of.

Stock investors are unmoved by the GDP plunge forecast, or just about anything else that would derail this rally under normal circumstances. We’ve shown you a lot of data points to support that, and CNN’s Fear & Greed Index, which tracks money flows, options activity, stocks above their 52-week highs, and other metrics, shows that greed is driving the market, in a sharp shift from a month and year ago.

Since the Fear & Greed Index tracks overall market sentiment through money flows and technical indicators, it is capturing mostly institutional investor sentiment, since the big money moves markets.

On the individual level, our Anxiety Index, which tracks increased search interest around fear-based terms, is at record highs.

Tuesday, June 02, 2020 1. VIX drops to new lows as markets march higher 2. Option volume decline signals buy-write opportunity 3. The consumer stock worth watching now

Market Moves The CBOE Volatility Index (VIX) closed at its lowest reading since the pandemic broke. Naturally the inversely correlated S&P 500 (SPX) closed higher again (see chart below). The dynamic at play here has been repeated many times in the past two months. The decline in both historical and implied volatility leads to higher prices which spurs a virtuous cycle throughout a given week. This cycle follows a simple pattern that goes somewhat like this: (1) good news appears, (2)investors buy stocks, (3) stocks don’t crash to new lows, (4) investors stop buying put option protection, (5) option prices fall, (6) investors feel confident and interpret more (or all) news as good. The cycle then repeats as prices steadily rise. This cycle seems to be in operation now, even though one might conclude, based on headlines, that investing right now could be a frightful thing. Chart
watchers have ample evidence that, currently, investors are looking past the fear and seeing the opportunity.

Option Volume Decline Signals Buy-Write Opportunity Speaking of declining option volume, take a look at the chart below. This chart features a comparison of the CBOE S&P 500 Buy-Write index (BXY) with a chart measuring the 50-day moving average of the total volume of index options traded on the S&P 500 index (OVSPX). The importance of this chart is the reality that option trading volume has fallen back to the level where the year began, implying that option buyers expect the S&P 500 index to continue its upward trend until it makes new highs for the year 2020. A comparison between the two price trends below shows that option volume patterns similar to the current pattern are typically good for investors who like covered call strategies.

The shares of online pet store Chewy Inc (NYSE:CHWY) is seeing a surge in call volume today, with 48,000 contracts traded compared to just 6,000 puts. Most popular is the weekly 6/5 50-strike call, where new positions are being opened. Second is the 45-strike call in the same session, which also happens to be the sixth most popular open interest position. Worth noting, however, is that short interest has skyrocketed 100.8% in the most recent reporting period. These 16.71 million shares sold short now account for 34.5% of the stock’s available float, or a little over four days’ worth of pent-up buying power at CHWY’s average pace of trading. This means that some of this call volume could be shorts hedging against the potential of a further upswing. Following an especially strong rally for the stock after sales quintupled from 2016 through 2019, the equity now marks a 72% gain over the past three months. CHWY is continuing its rally on the charts today, up 6.8% at $48.19 at last check, earlier hitting a fresh record high of $48.90.

[IgorKeymaster]

June 3, 2020

Igor  9:37 AM EDT
SELL TO CLOSE $FDX 17JUL 135 CALL MID 9.05 CREDIT
—
Igor  9:47 AM EDT
SELL TO CLOSE $ADP 21AUG 150 CALL MID 8.60 CREDIT
—
Igor  9:52 AM EDT
BUY TO OPEN $WYNN 18SEP 90/100 CALL SPREAD MID 4.00 DEBIT
—
Anya  10:56 AM EDT
STC AAPL June 5 315 CALL @ 9.25 MID CREDIT
—
Anya  11:07 AM EDT
BTO EA July 17 120/130 CALL VERTICAL @ $3.71 MID DEBIT. 50% risk and 100% plus profit target.
—
Anya  12:09 PM EDT
BTO AMZN JUNE !( 2490/2550/2610 CALL Butterfly @ $ 10.00
—
Anya  12:43 PM EDT
STC SPCE June 5 $ 15.50 CALL @ 0.97 MID CREDIT
—
Igor  2:20 PM EDT
BUY TO OPEN $BA 21AUG 180/200 CALL SPREAD MID 6.60 DEBIT
—
Frank Boet  2:24 PM EDT
BTO JULY17 DIS $125 Call @ 4.15 Debit
—
Frank Boet  2:26 PM EDT
BTO July17 MSFT $185 Call @6.90 debit
—
Frank Boet 2:26 PM EDT
BTO July17 FANG 45 Call @$5.30 debit
—
Igor  2:47 PM EDT
BUY TO OPEN $JPM 18SEP 105 CALL MID 7.90 DEBIT
—
Frank Boet  2:48 PM EDT
BTO July17 BA 185 Call @8.55
—
Anya  3:00 PM EDT
BTO SPCE JUNE 19 $16 CALL @ $ 1.62 MID DEBIT Once again UOA takes precedence over my individual feelings. Action in the 17 and 18 is crazy and Whitney Tilson says he wants to buy all he can under 20. I don’t let my personal feelings about a company affect my trade.
—
Frank Boet  3:03 PM EDT
STC July17 TLRY 12 call @ .48 CREDIT
—
Frank Boet  3:15 PM EDT
BTO July17 WYNN 95 Call @7.70 Debit
—
Frank Boet  3:23 PM EDT
BTO June19 KLAC $190 Call @4.95 debit
—
Anya  3:27 PM EDT
BTO ZM June 5 240 PUT @ $19.10 MID DEBIT
—
Frank Boet  3:47 PM EDT
STC July17 SQ 85 Calls @10.40
—
Frank Boet  3:55 PM EDT
STC July17 QRVO 110 Call @ 8.60

[Anonymous]

Wednesday, June 03, 2020
1. The financial sector shows strength as markets lift
2. Investment banking returns
3. Oil price influences forex markets

Market Moves
The S&P 500 index (SPX) rose 1.36% today while bonds, oil and gold prices all declined slightly. Financial stocks led the way as the sector closed a whopping 3.73% higher. The chart below compares State Street’s financial sector ETF (XLF) with the Utilities sector ETF (XLU), the S&P 500 index ETF (SPY), and Invesco’s Nasdaq 100 index ETF (QQQ). Over the past three weeks banking stocks have surged and outpaced other sectors as financial companies have shown signs that they will recover from the economic effects of the pandemic.

The reemergence of the financial sector is important among professional investors who don’t see a bull market as sustainable unless this sector participates. A more typical rebound from recessionary times follows a sector-rotation script where the financial stocks tend to rebound first, followed by technology stocks. That script is flipped this time around because of the unique nature of the pandemic-driven recession.

Investment Banking Returns
Financial sector stocks showed common patterns of breaking out above recent resistance and confirming upward trending price patterns. In the chart below, Goldman Sachs (GS), J.P. Morgan Chase (JPM), Citigroup (C), and Bank of America (BAC) all show similar upward trends and a breakout from something like a double-bottom price pattern (except for BAC which has yet to break out). Experienced chart watchers recognize that such patterns often represent opportunities for continued upward movement.

• Today’s gap and run in US equities took bond yields to two month highs, with the ten year yield back over 75 bps, while the furious rally in corporate credit continued apace.
• On the equity side, the move was largely a continuation of the advance since May 14th, with the bottom two deciles from that low through yesterday down today versus a nearly double-digit average gain for the 50 stocks which were up most from May 14th to yesterday.
• There are three other consistent drivers of performance we can see from the charts below.
• While margins and analyst ratings don’t do much to explain the performance of stocks versus the market today, the weight of debt in a company’s capital structure, valuation on a P/E ratio basis, and market cap are all major explanations for the rally.
• This surge in stocks has come from stocks with the most debt, the lowest P/E multiples, and the smallest market cap.
• While aggressively-valued, low-debt growth businesses like software have gotten a lot of credit for out performance, price action today was driven by stocks that look like the opposite of that profile.
• Total new orders for manufacturing industries fell 36.7% annualized in the three months ending April versus the prior three months while sales on the same basis fell 15%.
• While new orders for non-durable industries collapsed 31% on that same basis, sales were up over the period even as inventories collapsed.
• Over the last two months, petroleum and coal industry sales shaved 5.5% off total growth in sales for all manufacturing industries versus a 1.4% headwind from all other non-durable industries.
• Durable industries were catastrophically weak across new orders and sales, while inventory growth rose at a slower pace than recently but still climbed.
• As a result, durable goods inventories stood at 2.22 x sales in April versus inventories just 0.92 x sales in non-durable industries.

Investment Banking Returns
Financial sector stocks showed common patterns of breaking out above recent resistance and confirming upward trending price patterns. In the chart below, Goldman Sachs (GS), J.P. Morgan Chase (JPM), Citigroup (C), and Bank of America (BAC) all show similar upward trends and a breakout from something like a double-bottom price pattern (except for BAC which has yet to break out). Experienced chart watchers recognize that such patterns often represent opportunities for continued upward movement.

[IgorKeymaster]

June 4, 2020

Anya  8:50 AM EDT
STC TSLA June 5 840 CALL @ $64.5 MID CREDIT (14% profit) Gap up trade that I had forgot to put in as I did not think anyone had bought this call.
—
STC TSLA June 5 900 CALL @ 13 MID CREDIT Taking the $1 loss as the gap up was not as big as I thought.
—
Anya  9:07 AM EDT
STC CIEN June 5 55 Call @ $3.2 MID CREDIT To close
—
Igor  9:39 AM EDT
KEEP THIS CHANNEL AS READ ONLY PLEASE – POST ALL QUESTIONS IN THE CHAT
—
Anya  9:52 AM EDT
STC TLRY 10/11 CALL Vertical @ $0.17 MID CREDIT that we had for 0 cost (plus profits)
—
Frank Boet  9:53 AM EDT
BTO June5 INTC 62.50 Call @ .57
—
BTO July17 INTC 62.50 Call @ 2.76 Debit
—
Anya  9:56 AM EDT
BTO PTON JUNE 19 45 CALL @ $4.93 MID DEBIT
—
Frank Boet  10:02 AM EDT
STC July17 UBER 35 calls @ 3.45
BTO July17 ETSY 95 Call @ 3.05 debit
—
Anya  10:07 AM EDT
BTO GLUU JULY 17 $11 CALL @ 0.55 MID DEBIT
—
Frank Boet  10:26 AM EDT
STC July17 BA 185 Call @ 14.85
—
Anya  10:31 AM EDT
BTO NVDA JUNE 19 380/400/420 @ $ 1.91
—
Frank Boet  10:40 AM EDT
STC JUNE19 NCR 20 Calls @1.20
—
Anya  10:40 AM EDT
STC CIEN June 5 55 CALL @ 0.8 MID CREDIT
—
Anya  10:51 AM EDT
STC ZM June 5 240 PUT @ $25.20 CREDIT
—
Frank Boet  10:57 AM EDT
BTO July17 ETSY 90 Calls @3.70
—
Igor  11:11 AM EDT
SELL TO CLOSE $BA 21AUG 180/200 CALL SPREAD MID 9.00 CREDIT
—
Frank Boet  11:24 AM EDT
STC July17 WYNN 95 Call @8.60
—
Frank Boet  11:30 AM EDT
STC July17 OLED 160 Call @ 8.8
—
Frank Boet  12:16 PM EDT
BTO July17 GLUU 10 Call @ 1.30
—
Frank Boet  12:34 PM EDT
STC July17 DIS 125 call @ 4.60
STC July17 AAL 13 Call @2.89
—
Anya  1:34 PM EDT
BTO TSLA June 12 900/950/990 CALL Butterfly @ $6.81 MID DEBIT
—
Anya  1:43 PM EDT
BTO VRTX June 19 270/295 CALL VERTICAL @ $9.25 MID DEBIT
—
Anya  1:50 PM EDT
BTO APPN July 17 60 CALL @ $3.70 MID DEBIT
—
Anya  2:10 PM EDT
BTC TSLA JUNE 5 800/795 VERTICAL PUT @0.02 DEBIT
—
Frank Boet  2:33 PM EDT
BTO July17 NCLH 20 Call @2.55 debit
—
Anya  2:36 PM EDT
STC MS June 19 $49 CALL @ 1.36 MID CREDIT
—
Anya  2:53 PM EDT
BTO TSLA June 5 880/885/890 CALL Butterfly @ 0.44 MID DEBIT Risking 44 to make up to $5 on a perfect pin at 885.
—
Frank Boet  3:20 PM EDT
STC July17 FOLD Call @1.75
STC July17 SHAK 60 Call @ 3.60
STC July17 LOCO 14 Call @1.60
STC July17 NUAN 25 Call @.25

[Vamsidhar GParticipant]

Hi Anish,

When we sell a PUT at 50$ in your example, does brokerage take out 5000$ from the account as a secured PUT, where this amount is not usable ?

Thanks,
Vamsi

[Anonymous]

Thursday’s Headlines
1. US markets mixed as tech stocks drag
2. ECB launches a new round of stimulus
3. US weekly jobless claims decline, but they remain sky high
4. Unemployment by race reveals massive inequality
5. Why Europe has a relatively low jobless rate

Dow 26,281.82 +11.93 (+0.05%)
S&P 3,112.35 −10.52 (-0.34%)
Nasdaq 9,615.81 −67.10 (-0.69%)
VIX 25.81 +0.15 (+0.58%)
Bitcoin $9,787.56 +$133.03 (+1.38%)
US 10-Yr Yield 0.82 +0.059 (+7.75%)

Markets Today

U.S. markets ended the day mixed as the DJIA rallied at the close with financial stocks continuing to lead the charge. Tech stocks sold off again in what has been a recent rotation, and they have a tendency of bringing the entire market up or down with them, as they did today with the S&P 500 and Nasdaq both losing ground. Airline stocks were in extreme rally mode as American Airlines increased the capacity of planes it plans to fly next month.

U.S. weekly jobless claims continue to decline week-over-week, but 1.9 million Americans filed for first-time unemployment claims in the week that ended yesterday. Continuing claims have been stubbornly high, which means rehiring is very slow.

The ECB launched a new stimulus program today, but it left interest rates unchanged. Unemployment has been more manageable in most European countries as the different approaches to stemming the crisis become more apparent.

Meanwhile, in Las Vegas, where casinos reopened at midnight.

Headlines:
• The European Central Bank announced it will be expanding its Pandemic Emergency Purchase Programme (PEPP) by €600 billion to a total of €1,350 billion and kept interest rates unchanged.
• American airlines said flights would increase 74% in July month-over-month, signaling a faster return to air travel than expected. The busiest days next month will have about 4,000 flights, up from 2,300 in June, the company said.
• Costco’s net sales rose 7.5% in May year-over-year to $12.55 billion, it said yesterday. Comparable sales rose 5.4% and e-commerce comp sales were up 106.2% for this period. For the thirty-nine weeks ended May 31, net sales were up 7.7% and comparable sales were up 6.1%.
• Adidas says its Greater China business returned to revenue growth in May.
• Amazon is expanding its aircraft fleet as it sees phenomenal demand during the pandemic. The company yesterday announced it is leasing an additional 12 Boeing 767-300 converted cargo aircrafts from Air Transport Services Group (ATSG). They will join the 70 aircrafts currently in the fleet. Amazon Air is also opening three new Regional Air Hubs this year and in 2021.
• The U.S. Department of Labor issued important new guidance for 401k plan investment committees on June 3 that want to include private equity as a component of a target date fund (TDF) or other diversified investment fund offered within a 401k plan.
• Shares of Slack (WORK) are down 17% after-hours following the company’s earning results that showed a 50% rise in sales last quarter. Sales grew 49% in the prior quarter, and analysts may have been looking for more robust growth.

View post on imgur.com

Weekly Jobless Claims Trend Lower
Another 1.9 million Americans filed for first time unemployment insurance last week, the first week in ten with claims under 2 million. Continuing claims, those people out of work for several weeks, climbed to 21.5 million people, a 675,000 jump from last week. That’s almost 15% of the working population, and nearly three times higher than any of the most recent recessions.

Tomorrow we’ll get the May nonfarm payrolls report, which will likely tell us that the U.S. unemployment rate is at 19% or higher, the highest since the Great Depression.

View post on imgur.com

Unemployment Wave Impacted Black Workers Most
While job cuts hurt everyone, the degree of the layoffs has had a particularly hard impact on the black workforce. Even when unemployment was 3% just a few months ago, it was double that for black people in the workfoarce, who also earn, save, and invest less than other Americans. The rampant layoffs across industries, but particularly the service, administrative, and hospitality industries, where the largest percentage of black workers are employed, has led to more than half of that group out of work in the past three months, according to the Labor Dept

Airline stocks took off today…
Shares of airline stocks, including American (36.5%), United (over 14.5%), and Delta (over 13%), are up following surging demand as global quarantining begins to ease. Cruise line stocks, such as Norwegian (over 8.5%) and Carnival (over 7%), have risen on investor optimism over the industry soon returning to normal.

View post on imgur.com

——————————————————————————-

The Nasdaq 100 index (NDX) fell .77% today even as oil and gold prices rose slightly. But the pattern created by the price action on the index is a bit of a warning sign. This does not bode well going into tomorrow’s NonFarm Payroll report.

The chart below reveals that the tech-heavy index, as tracked by Invesco’s Nasdaq 100 index ETF (QQQ), is running into resistance. Yesterday’s high price for this ETF matched the exact high previously recorded on February 19th. It recorded that price late in the session yesterday. Today’s high pushed a few cents higher in the first 90 minutes of trading, but sellers took over and the ETF closed lower on the day. This created a 3-day candlestick formation known as an Evening Star.

This pattern has a higher-than-average predictive quality, especially if the pattern occurs on previous resistance and is followed up by a lower opening on the next day after the formation completes. If tomorrow’s jobs news disappoints investors, that could easily play out and a multi-day downward trend could easily follow.

View post on imgur.com

The Bottom Line
Stock market indexes paused today as the Nasdaq 100 hit resistance at its former high price. Oil and natural gas prices may be reaching a point of relative equilibrium, which could temporarily diminish the strength of oil’s upward move. Shares of GPS have been strongly bullish, but that may change after today’s double bad news (poor earnings news and a lawsuit from Simon Property Group). If not, the unusually strong optimism investors are showing will likely contribute to higher prices in weeks to come.

“The slope of the Nasdaq’s 50-DMA is rising at a rate rarely seen in its history.”

“Following a record decline last week, continuing claims rose to 21.49 million”

“Fauci says it’s time to think about reopening schools – CNN”

[IgorKeymaster]

@Vamsidhar G

That is correct. Your broker will hold the capital required to take delivery of stock in the event that it expires below the strike price of the sold put option.

However, in a margin account, your broker may only hold a part of what is required to take the assignment and keeping track of Notional Leverage is key.

More on Notional Value and to measure leverage: https://www.tastytrade.com/tt/shows/best-practices/episodes/calculating-portfolio-leverage-07-18-2016

-Igor

[Anonymous]

How to lock-in profits without violating PDT for Margin accounts under $25k

Short answer: Wwitch to a cash account

Long answer: open a debit spread, 1 strike away from what you are holding

Debit call spread means higher strike price option, same expiration, as the option you are holding.

For example, you have TSLA 890 Call. Sell 895 Call, the next higher strike option on the options chain.

Debit put spread means sell lower strike option, same expiration, as the option you are holding.

For example, you have TSLA 890 Put. Sell 885 Put, the next lower strike option on the options chain.
The amount of profit you lock in will be equal to how much credit you collect from selling (STO/sell to open) the option.

+ Advantages
Locks in profit without PDT in margin account

If the stock moves against you, there will be minimal lost profits.
Vertical debit spreads take a much bigger move in the underlying stock than single leg options to make any gains/losses.

-Disadvantages
– Any multi-leg option trades have the risk of assignment (which may cause some temporary outage to your account depending on how good your broker is)
-You cap your gains if the stock continues to move in your favor to the difference between the two options.

For example, 890 Call – 895 Call = $5 max gain (but realistically this is only if you hold until expiration)

-The hidden fee of paying to close additional options especially if the option chain has a wide bid-ask spread
Example
You bought TSLA 890 Call expiring June 5, 2020. These are all the same expiration date options.
885 Call = $10.60
890 Call = $8.60
895 Call = $7.00

TSLA moves up $5. Now everything shifts.
890 Call = $10.60 (where the 885 Call was previously)
895 Call = $8.60 (where the 890 Call was previously)

You sell the 895 Call for $8.60. Your 890 Call will always be worth the same or more than the 895 Call. So, if your 890 Call goes to 0, the 895 Call will also be at 0 but you will still have collected $8.60 in premium. It would take a huge move down for these options to drop that much in value but there is that risk.
Realistically if you are closing tomorrow, it is unlikely to happen. Plus, now there is potential for upside because 10.60 – 8.60 = $2 but the max potential for debit spread is $5 because 895 Call – 890 Call = $5.

[IgorKeymaster]

One question we get often is: Should I sell or let it ride?

Let’s take a trade example shared by one of our group members.

He picked up (3) Calls at $3.70 per contract in 29MAY expiration cycle (10 days until expiration) and now they’re trading at $6.40

$GD 29MAY 135 CALL WITH STOCK TRADING AT 139.48

With 10 days until expiration, there isn’t a whole lot of time to deal with this trade and every day counts as this position becomes very sensitive to price change. If the underlying continues to rally, this option will continue to increase in value as it goes deeper In The Money (ITM).

On the flip side, if the underlying falls back to 130 level then this option will lose all of its intrinsic value and will only have some time value left until this contract expires. If the stock is below 135 at expiration, this option will expire worthless and the entire investment will be lost.
The good news is, We Got Options! Literally.

Now we know that leaving it untouched could be Win Big or Go Bust.

One topic that we cover often with our members is How To Manage Winners.

We can also consider the following adjustment.

This trade has a total capital at risk of $1,110 (3.70 x 3 x 100 shares). Now that this option is trading at $6.40 (+72.97%), I would consider selling 2 of 3 calls, taking back $1,280 to bring home my initial investment of $1,110 and leaving 1 of 3 calls open anticipating further upside with no risk left in the trade.

As a matter of fact, this trade would make a small profit if everything went to $0 after this adjustment. Here’s why. I spent $1,110 to buy 3 calls and collected $1,280 selling 2 of them. This leaves me with a NET +$170 credit to hold the remaining 1 call until expiration.

If the stock is at 130 at expiration, the remaining 1 call is worth $0 and I get to keep the $170 credit. If the stock is at 160 at expiration, the remaining 1 call is worth $2,500 and this trade is a $2,670 winner (2500+170).

Similarly, we can consider selling calls at a higher strike price to turn this trade into a Bull Call spread or a Debit Call Vertical to reduce the amount of capital that is at risk while remaining in the trade.

Another idea would be to sell call options with less time until expiration, converting this trade into a Call Diagonal spread, removing some or all of the capital tied up in the trade, and leaving a riskless trade on for the remainder of the time until expiration.

In conclusion, there is no limit to potential adjustments that can be made in order to protect the profits in the trade. We teach our members to find a solution that works best for them and I hope you found this piece of information useful.

Thank you for taking the time to read this post.

[IgorKeymaster]

[Anonymous]

Jobs Report: Coronavirus Comeback Adds 2.5 Million Jobs, Unemployment Rate Falls; Dow Jones Futures Soar

Stock futures traded in split-screen fashion early Friday as the Dow and S&P 500 rallied hard after May payrolls data from the Labor Department was far less dire than expected. The Nasdaq once again lagged, turning negative shortly after the payrolsl data. Airline stocks blasted higher for a second day, and Boeing staked out another easy lead on the Dow Jones today.

Dow Jones futures punched up a 2.5% advance, S&P 500 futures swept 1.6% above fair value, tracking a global rally started in Hong Kong on Friday, with European benchmarks all sharply higher in afternoon trade.

Gains for Nasdaq 100 futures shrivled into a 0.1% loss on the stock market today. Zoom Video Communications (ZM) traded at the bottom of the Nasdaq 100, down 3.5%. Netflix (NFLX)dropped 1.8%, as the FANG stock tech leaders traded generally lower.

Airline stocks positioned to extend Thursday’s rally, which followed plans by American Airlines and United Airlines (UAL) to further revive service shut down by the coronavirus pandemic. American Airlines (AAL) soared 26% in premarket action. United shares rallied nearly 21%. Delta Air Lines (DAL) hammered out a 15.5% premarket advance. Southwest (LUV) jumped 7.8, Alaska Air Group (ALK) sailed ahead 12% and JetBlue (JBLU) bolted 11% higher. The U.S. Global Jets ETF (JETS) popped more than 13% in early action.

Ford (F) stock spiked more than 8%, as investors began to anticipate demand recovery in auto sales. Automakers on Tuesday reported May U.S. auto sales were down 29% for the year, but still well above analyst expectations. Fiat Chrysler (FCAU) rallied 5.5%. General Motors (GM) climbed 5.6% gain.

[IgorKeymaster]

SPX AT 3194

With a massive rally in the market, we’re hitting our pre-determined stop loss and now we have to follow our plan.

I’m buying back this Iron Condor $2.00 higher than where it was sold.

 

Order Ticket
Type	Asset	Duration	Strike	C/P
Sell To Close	SPX	17JUL	3145	Call
Buy To Close	SPX	17JUL	3135	Call
Buy To Close	SPX	17JUL	2865	Put
Sell To Close	SPX	17JUL	2855	Put
Total Debit:			7.90

 

[Anonymous]

Kushal Mehta:
@igor @Anya Sheth @Frank Boet. Guys can you help with some strategies on how can we hedge our portfolio? Should we buy some 60-90 days -> 30-40 Delta SPY / SPX Puts? (edited)

Igor: Hedging is one of those topics that will never give you the exact answer you might be looking for.

However, we can discuss certain guidelines you may want to follow when you’re looking to protect your portfolio.

The first thing you want to understand is WHAT exactly are you hedging. If you’re holding a bunch of OTM calls that expire in couple of weeks will need a different hedge than a long stock position that you’d like to hold for 5+ years.

Igor: The short answer to beta weight your long position to SPY and that will tell you “how many SPY shares you’re long”. In other words, what’s your exposure in SPY terms. From there you may look at different hedging strategies and decide how much SPY exposure you need to remove.

Igor: If let’s say I beta weight my positions to SPY and I get 400 SPY delta. Delta simply means how much your portfolio will gain or lose based on $1 move in the price of the underlying. A 400 SPY delta portfolio will make or lose with $1 move in the price of SPY.

Igor: If I felt that I need to remove 1/2 of my portfolio exposure without actually selling any of my holdings then I need to figure out how to reduce my SPY delta from 400 to 200 (removing 1/2)
I can short 200 shares of SPY and this will take my portfolio delta from +400 to +200

Igor: Another way to do it is to buy (4) 50 delta puts in SPY
Puts are negative delta options. An ATM put is about -50 delta. Adding 4 of those will add -200 delta to my +400 delta portfolio and will NET my delta from +400 to +200

lively2019: @igor what’s your opinion on DTEs for these hedges? At what point does the theta burn negate the delta hedge?

Tom King: My 2c. I echo what @igor is saying. For DTE, you need to look at what you are trying to hedge as Igor mentioned and WHEN do they expire? If your portfolio is made up of 30 DTE swing trades, then there’s your answer on DTE. If you want to hedge your 45 DTE portfolio, then add that DTE hedge. Maybe you have 60 DTE holdings and swing trades. But your swing/active trades are all-or-nothing and you just want to hedge your long term portfolio which is 300 delta. Then add 300 negative delta at 60 DTE.

Tom King: Buying SPY protective puts (either single puts or debit spreads) is the easiest way. But you can also add negative delta in many other ways. Buying UVXY can also be a way to hedge your portfolio.

Igor: The worst possible that can happen is buying far OTM puts to hedge far OTM calls (strangle) and the market chips around to burn off premium in both.

Knowing your timeframe and what you’re protecting is key

Kushal Mehta: @igor this is amazing. Thanks a lot. I just calculated the SPY Delta of my portfolio which is expiring over the 90 days. It comes to 545.

Igor: When I buy options, I size trades giving them room to fall. This way I don’t need to worry about hedging them and if I don’t thing the stock is going to play out I can just cut it and move on.

Kushal Mehta: thats what i am thinking as well. As i have just started, the portfolio at hand is a small percentage of my capital. Hence even if it fails 100%, I can easily manage my capital. Buying puts seem to be expensive in compared to the market value of the portfolio.

Igor: @Kushal Mehta so now you know how much exposure you have. Finding a way to structure protection around it is what you need to figure out.

Kushal Mehta: @Tom King UVXY seems to be going in the opposite direction of SPY? So is this used instead of PUTS on SPY?

Tom King: It can. They are not interchangeable, you just need a plan. As Igor said, it matters WHAT you are hedging. UVXY Would be best for a long term portfolio hedge and only when it’s at lows. I may add it when SPX drops below the 20 EMA as a disaster hedge. But usually, I add a put spread. But I have longer term holdings in addition to my active trades. As Igor said, size your active trades properly so you don’t have to hedge. Hedging is best for longer term trades or portfolios.

Some links for further Information

https://www.schwab.com/resource-center/insights/content/spreading-your-hedge-strategy-volatile-markets

https://www.tastytrade.com/tt/shows/options-jive/episodes/how-to-use-beta-weighted-delta-09-05-2017

https://www.reddit.com/r/options/comments/8pp3d3/beta_weighted_delta_for_short_premium_portfolio/

[Author]

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