TBT (ProShares UltraShort Lehman 20+ YrETF) – Short term Long


This is purely a short term technical play.  The fed chairman is maintaining a dovish stance, so from a macro standpoint, interest rates are not expected to rise any time soon.

Long around the 64.5 area.

TBT_4_13_2014

Posted in ETF, Fibonacci, Fixed Income, Misc. Setups, TBT | Leave a comment

GDXJ (Market Vectors Junior Gold Miners ETF) Short Strangle


GDXJ Implied Volatility @ upper end of range.  Looking to sell premium.
Note: Price down over 16% in the last 2 weeks.
SELL -5 STRANGLE GDXJ 100 MAY 14 44/30 CALL/PUT @1.05 LMT  (# of contracts to be tailored to match desired position size)
Note: Might have to lower the amount of credit collected (possibly .98 to 1.00), since spreads are a bit wide.
Short Strikes =~ 84% or next higher strike OTM
Probability of profit for strangle =~ 78%
Expected return on capital over a 48 day period (if held to expiration) = 510/1,864.50 =~ 27% (using mark value of 1.05 for credit received).
Worst case ROC with current price (0.9 ask) = 435/1,939.50 =~ 22%
GDXJ
Posted in Commodities, GDXJ, Gold, Misc. Underlyings, Options, Short Strangle | Leave a comment

CRM (Salesforce.com) naked (short) put


CRM has fallen around 14% since it’s latest high at the end of Feb – earning were on 2/27.  Implied Volatility is high making premium selling attractive.  Price is also around the 618.8% fib retracement of the AB up move (around 56.5), with another support level around the 38.2% fib retracment of the larger CB up move (around 55).
SELL -5 CRM 100 MAY 14 50 PUT @.84 LMT ( (# of contracts to be tailored to match desired position size)
Return on capital of 16.8% over 55 days.
Note: Generally I wouldn’t hold the trade to expiration.  Would look to take profits earlier.
If CRM continues falling, options include …
(1) Purchasing CRM at 50 if the stock gets put (below 50 at expiration).  Cost basis would be 50-0.84 = 49.16
(2) Rolling the trade to the next expiration cycle if your view around CRM appreciating remains
(3) Closing the trade for a loss
crm
Posted in CRM, Fibonacci, Implied Volatility, Misc. Setups, Misc. Underlyings, Options, Short Put | Leave a comment

TLT (iShares Barclays 20+ Yr Treas.Bond ETF) – Calendar


TLT Implied Volatility @ lower end of range (25%).  Looking to initiate a long calendar with a few embedded rolls.
Note: Looking for price to be somewhat range bound (106 – 109.75).  This is a +ve vega trade – an increase in IV would help.
BUY +10 CALENDAR TLT 100 MAY 14/APR1 14 108 CALL @.61 LMT  (# of contracts to be tailored to match desired position size)

TLT

Posted in Calendar, ETF, Options, TLT | Leave a comment

RSX (Market Vectors Russia) – Short Strangle


RSX Implied Volatility @ upper end of range.  Looking to sell premium.
Note: Price down over 10% in the last 2 weeks, possibly triggered by Ukraine jitters.
SELL -10 STRANGLE RSX 100 APR 14 26/19 CALL/PUT @.45 LMT  (# of contracts to be tailored to match desired position size)
Short Strikes =~ 86% OTM
Probability of profit for strangle =~ 75%
Expected return on capital over a 40 day period (if held to expiration) = 420/2500 =~ 16.8%

RSX

Posted in ETF, Options, Premium Selling, RSX, Short Strangle | Leave a comment

S&P 500 – Broad Market Perspective


The market has proven all doubters wrong repeatedly and conceivably could continue to beat up any bear out there, if the recent or not so recent trend is to serve as a precedent.  Having said that, there is merit to playing the odds, banking on some sort of mean reversion.   The weekly chart of the broad market (S&P500) looks interesting … @ 127.2 Fib extn. of the last significant down move, with a developing bearish divergence.   I’ll probably take a small position banking on a pull back.
Volatility is very low, making premium selling quite tough.  Could look at strategies such as bear put spread (debit spread), or a directional calendar/diagonal (also benefiting form a pop in volatility were it to occur) to the downside.

sp500weekly_1122014

Posted in Calendar, Diagonal, Divergence, Fibonacci, Indices, Misc. Setups, Options, SPX, Vertical Spread | Leave a comment

TBT Diagonal


Over the past couple of months, bond prices have fallen steadily as a result of higher yields.  While in the short term the trend might reverse, I share the wider view that long term bond yields will rise further.
TBT-7_10_2013
Initiating a diagonal spread – synthetic covered write – Long far dated ITM calls, Short near dated OTM calls.
BUY +10 1/-1 CUSTOM TBT 100 JAN 15/AUG 13 70/80 CALL/CALL @12.61 LMT
TBT_PL-7_10_2013
There are numerous embedded rolls & would look to sell calls periodically to reduce/eliminate the overall cost.
The eventual idea is to own TBT at $70/share plus the cost of the spread (which hopefully can be reduced significantly by selling calls as indicated above), unless TBT closes lower than $70 at expiration.
Posted in Diagonal, ETF, Fixed Income, Options, TBT | Leave a comment

SLV – Short Naked Put


Precious metals have been hammered pretty bad over the past 9 months or so as evidenced by the chart below.

SLV-6_26_2013

There is certainly an argument to be made about not catching a falling knife.  However, I see some support coming around the 16.80 – 18 level, which also confluences with the 78.6% Fib Retracement of the last significant move up.
Looking to sell some naked puts.  If price rallies or stays at current levels you can pocket the premium.  With a premium of 32c, the BE point is 16.68 (if prices decline, you can own SLV at that price).  The other option is to close out the position.

SLV-PL-6_26_2013

Posted in Commodities, ETF, Options, Short Put, Silver | Leave a comment

VIX Bull Call Spread


The broader market continues to rise and burn traders looking to short it.  The SPX closed at it’s all time highs.
However, at some point in time there will be a pull back.  One way to play this is by going long the VIX which has been hovering around the 12.50 to 13.50 range for the past several trading sessions (towards the lower end of the yearly range: 11.30 – 26.66).  Basically looking at a mean reversion scenario.

VIXChart_5-12-2013

A bull call debit spread is one way to trade this.  The June 13 13/15 call vertical (37 days to expiration) is currently priced at 90c.  For a 10x vertical, we’re looking at a max loss of $900 and a max gain of $1,100.  The BE is at 13.90.  The current probabilities indicate a 30.64% chance of VIX moving north of 13.90 by June expiration.  However, keeping the mean reversion theory in mind, I am not too uncomfortable with the scenario.  Look to get around 15% of max risk.

VIX_PL_Greeks_5-12-2013

Posted in Bull Call Spread, Indices, Options, Vertical Spread, VIX | Leave a comment

SPX Directional Butterfly


Click here to view a chart of the underlying, overall position, P&L graph and Greeks.
SPX closed around 1582.  Expecting a pull back in the market.   Price making a reversal candle around the median line of the APF.  We also see decreasing momentum on the oscillator.
Using the ATM straddle using weekly options (expiring May 3) to gauge what sort of movement traders are expecting over the next week.  Traders are currently pricing around a 20 point (straddle is priced at 19.50).
Playing this via a directional butterfly centered around 20 points below where SPX is trading currently, with 20 point wings, using options expiring next week.
+3 x May1 13 1540 puts, -6 x May1 13 1560 puts, +3 x May1 1580 puts
Max risk = $945, Max gain = $5,050 based on the expiration PL graph.  Might not stay in the trade till expiration.  The position has -ve delta (gains from a drop in price).  The position starts off gaining from a  passage of time (+ve theta), with the theta increasing if price drops.
Posted in Butterfly, Indices, Options, SPX | Leave a comment