Option Trading Strategies - Q4 2017 Results

quarterly results have zero effect on my option trading strategies

I'm waiting for the VIX to spike above $15, when it does I will buy PUT's out 3 mths

Because .... the VIX has this historical habit of not staying 'spiked' longer than it does at or below the $12 mark, I reckon there is some chump change in this

Simple trade should net 100% return within 90 days.

Rinse & repeat when the VIX spikes again as it has done in the past not less than 2x a year

https://finance.yahoo.com/quote/%5EVIX/ ... JfWSJ9fV19

other than that, I will trade options on SVXY, or maybe buy 100 shares, sell a long 'deep in the money covered calls' at least to June (hedge my bet), then buy back the contracts when there is zero extra premium between the option strike price & the stock price.

Thanks for the reply. In this case, if the put stays out of the money, won't you lose your entire investment? I was more interested in option trading strategies with no risk independent of the movement of the underlying security.

jimmyho56 wrote: ↑

Jan 10th, 2018 12:38 pm

I have seen some posts on this site where RF members mention option trading strategies where they can make money whether the underlying stocks goes up or down in value using straddles, etc.. With the upcoming Q4 results being made public starting in the next few weeks, what option strategies are you using to benefit from the volatility in certain shares (facebook, Netflix, Amazon, Twitter, etc.)? Any specific option strategies you like for the upcoming quarter?

I usually buy straight calls or puts due to restrictions within my trading accounts. But I be interested to learn more about specific strategies. Thanks.

Those strategies you are thinking of, require the right conditions (price, IV, etc) and to work out, you still need to have a good sense of the direction you think the stock will go.

then with those perfect conditions, you'd use like a iron condor or butterfly, something with multiple legs. Those are not easy to do (compared to long puts/calls) and depends on your brokerage fees, just commissions alone will eat you up. Get in and out.

And from my education, even after you put those "fail proof" strategies on, you still need to monitor it and modify if conditions change (eg. IV changes, price gaps). If you don't modify, then you'd get into worse situations.

If you are smart enough to put on options strategies that are set it and forget it, then a) i doubt you'd earn a lot of money per trade or b) the time used to plan and set it up isn't worth the returns.

Buy a call at demand or put at supply will get you soooo much more profits if you know when and where to do it.

Even just using AAPL to do options, you'd already make lots.

porticoman wrote: ↑

Jan 10th, 2018 1:01 pm

quarterly results have zero effect on my option trading strategies

I'm waiting for the VIX to spike above $15, when it does I will buy PUT's out 3 mths

Because .... the VIX has this historical habit of not staying 'spiked' longer than it does at or below the $12 mark, I reckon there is some chump change in this

Simple trade should net 100% return within 90 days.

Rinse & repeat when the VIX spikes again as it has done in the past not less than 2x a year

https://finance.yahoo.com/quote/%5EVIX/ ... JfWSJ9fV19

other than that, I will trade options on SVXY, or maybe buy 100 shares, sell a long 'deep in the money covered calls' at least to June (hedge my bet), then buy back the contracts when there is zero extra premium between the option strike price & the stock price.

I didn't know we can buy options on VIX. Interesting. I'm learning new things everyday.

So any platform is good enough for these infrequent trading? I only had some experience buying call options before and nothing on those spreads strategies.

@rfdrfd I noticed you have a TD Sink or Swim, isn't that US only? Is that one of the better platforms when you do your options trading?

Thank you.

alanbrenton wrote: ↑

Jan 10th, 2018 9:10 pm

@rfdrfd I noticed you have a TD Sink or Swim, isn't that US only? Is that one of the better platforms when you do your options trading?

better - yes, but more costly than IB
I am waiting for TT to come to Canada

alanbrenton wrote: ↑

Jan 10th, 2018 9:09 pm

I didn't know we can buy options on VIX. Interesting. I'm learning new things everyday.

I would not short VIX in 2018. it worked really well in 2017, but there is no such thing as free insurance. VIX has theoretical floor and we are near it.
Also, VIX historically has been around 16, don't listen to 15 spike tales... in 2008 it spiked to 90. Many volatility shorts lost everythig

jimmyho56 wrote: ↑

Jan 10th, 2018 12:38 pm

With the upcoming Q4 results being made public starting in the next few weeks, what option strategies are you using to benefit from the volatility in certain shares (facebook, Netflix, Amazon, Twitter, etc.)? Any specific option strategies you like for the upcoming quarter?

stocks you mentioned are at all time highs. if you look at consensus estimates, good things are baked in. FB, AMZN, NFLX are not going to massively benefit from tax reform, 5-8% at best to the bottom line.
I will probably play with directional spreads to the downside. At least if the company misses, it will get spanked big time.
Other alternatives could be calendars and broken wing butterflies for free.

dlhunter wrote: ↑

Jan 10th, 2018 11:00 pm

I would not short VIX in 2018. it worked really well in 2017, but there is no such thing as free insurance. VIX has theoretical floor and we are near it.
Also, VIX historically has been around 16, don't listen to 15 spike tales... in 2008 it spiked to 90. Many volatility shorts lost everythig

Actually I was also thinking that mid 2016 through to 2017, US markets just kept moving up.

dlhunter wrote: ↑

Jan 10th, 2018 11:08 pm

stocks you mentioned are at all time highs. if you look at consensus estimates, good things are baked in. FB, AMZN, NFLX are not going to massively benefit from tax reform, 5-8% at best to the bottom line.
I will probably play with directional spreads to the downside. At least if the company misses, it will get spanked big time.
Other alternatives could be calendars and broken wing butterflies for free.

Thanks for the replies. Could you give some actual examples of directional spreads using current prices? I am very interested in learning about option strategies that are 'free' as mentioned.

Another question, isn't it always better to own in the money calls during earning season than the underlying stock? That way you limit your downside risk and some in the money calls have very little premium attached to them. Assuming the shares are held in your registered account so there is no gain on sale and purchase of the corresponding call.

For example, the Netflix $200 Jan 12 Calls have a current ask of $16.15 versus a stock price of $215.95. So it cost you $0.20 premium to limit your downside exposure past $200 versus holding the stock outright with unlimited downside risk. I know this is not a great example as the calls expire tomorrow so the time premium is marginal. But I don't think the time premiums are very high the day before earnings are released with the in the money calls.

jimmyho56 wrote: ↑

Jan 11th, 2018 7:43 am

Thanks for the replies. Could you give some actual examples of directional spreads using current prices? I am very interested in learning about option strategies that are 'free' as mentioned.

free ratio spread on SPX
buy 1x Mar 2700P, sell 2x Mar 2600P and 1x 2300P - $1 CR

free broken wing butterfly
buy 1x Mar 2700P, sell 2x Mar 2650P, buy 1x Mar 2550P - $0

obviously, they are free, but not risk free. At least, if you're wrong, you don't lose anything. And assumption is that any down move will be measured and not black swan event.

In case of black swan, ratio is not defined spread, but I don't mind SPX 2300 and there is always time to react by shorting futures

dlhunter wrote: ↑

Jan 11th, 2018 12:58 pm

free ratio spread on SPX
buy 1x Mar 2700P, sell 2x Mar 2600P and 1x 2300P - $1 CR

Thanks for the example. Looking at the current ask price for the Mar. 16 calls:

2700 $21.60
2600 ($10.40) x 2
2300 ($2.30)

The net profit initially of setting up this spread appears to be $1.50 [($10.40 x 2) + $2.30 - $21.60]. Is that right? Then during the period, if SPX decreases from the current 2762 to 2700, you will make $1.50. If it decreases to 2600, you will make a profit on the 2700 put but the other sold puts will be out of the money. Is your exposure only when the SPX goes down below 2600 as you only have 1 long 2700 call to offset this decrease?

dlhunter wrote: ↑

Jan 11th, 2018 12:58 pm

free broken wing butterfly
buy 1x Mar 2700P, sell 2x Mar 2650P, buy 1x Mar 2550P - $0

The pricing on this based on the March 16 puts appears to be a marginal profit of $0.10. In this case, are you really making your money if the SPX goes down to 2650, but after this point, you have exposure from 2650 to 2550 as you second buy isn't until 2550?

alanbrenton wrote: ↑

Jan 10th, 2018 9:10 pm

@rfdrfd I noticed you have a TD Sink or Swim, isn't that US only? Is that one of the better platforms when you do your options trading?

Thank you.

Yes, for Canadians too. You open a TD webbroker account, then ask them to change it to Think or Swim.

Better for options, yes. But it's not as user friendly and you can easily make mistakes fast. But TOS is not for beginners anyways. Good commissions but you need a high balance to avoid monthly fees or trade lots.

Oh ya, you have to pass a verbal on phone test before they grant your higher level options access. I think most brokerage asks this.

For simpler Options, use Questrade. Higher fees, but lower balance for no monthly fee.