Yesterday in the Blog I talked about a Live GOOG Pre-Earnings Calendar I did. Today I took off the trade for about a 7% profit in 1 Day. I bought 1 April 28 Expiration 835 Call and Sold 1 April 21 Expiration 835 Call for $10.80 Debit and sold it out today for a Credit of $11.54 . The price of GOOG was 834 yesterday when I bought the Calendar and the price of GOOG today was 835 when I took off the Calendar for a profit. I made $74 for every 1 Calendar, that would be a yield of 6.8% ( $74 divided by $1080).Why did the Calendar do so well in 1 Day? The implied Volatility of the long option went up more than the short option did. What would be an explanation of why that happened? Referring to yesterday’s Blog, we originally bought an expiration that will be affected by Earnings and sold an expiration that would be expiring before earnings comes out. Therefore as each day passes, our long options may increase in Volatility while our short options may do nothing. Dan Sheridan firstname.lastname@example.org
About Dan Sheridan
Dan Sheridan traded in the pits of the CBOE for over twenty years and is still a weekly educator at the Options Institute in Chicago. He opened Sheridan Options Mentoring in 2007, and has since educated thousands of retail traders by relying on the methodologies and strategies that were crafted by current market makers.
Entries by Dan Sheridan
Buy 1 GOOG April 28 835 Call and Sell 1 GOOG April 21 835 Call for $10.80 Debit with price at $834.43. I just executed this order live at 1:17 pm central Chicago Time today, Monday. Why did I do this? Why would I pay 26 implied volatility for my long call and sell my short call at an 12 implied volatility? Because Earnings is coming next week and that will keep the April 28 Expiration Options high while the April 28 Options expiring this Friday will not be affected by next weeks earnings and the Implied Volatility should stay low or go down. How does this benefit me? For this Calendar Trade, I will have very little concern that I will lose money from Volatility decreasing and thus hurting the trade. Will I still have Price Risk? Absolutely. I paid $10.80 Debit or $1080 for this spread for every 1 contract. My goal would be to make 8-10 percent profit on my investment of $1080. So, I will have an order in immediately to sell out this Calendar for around $11.65 Credit for the rest of this week. That would be about an 8% profit on Capital used for this trade. […]
In Monday’s Blog, I talked about a Live GOOG Earnings Calendar I traded. I bought the April 28 Expiration 830 C and sold the Apr 21 Expiration 830 C for $9.55 Debit. GOOG was 828 when I executed the trade. Today, with GOOG around 823, $5 dollars lower, I sold out the spread for $10.05 Credit. That’s a 5.2 % yield in 2 Days! For every 1 contract, the profit was $50 on capital of $955, the initial debit. If you added in Commissions, our Community pays $ 1 per contract, the yield would be 46 divided by 955 = 4.8% yield (Commissions barely affected the yield). Will look to re-enter GOOG for another Earnings Calendar in tomorrow’s Blog. Dan Sheridan ~ email@example.com
As of 12:35 PM central today, SPX is 2361 +6 and VIX is 13.52 +.65. That is unusual for VIX to increase on an up day, why is it happening? Because there is unrest in the world and people want some insurance . With the US bombing the Syrian Air Base last week, and the bombing of the Christian Churches in Egypt, people are a bit nervous. Throw in the fact that the SPX is up about 15% since November, and you can see why folk, especially fund Managers , would want some downside insurance with the VIX, and are willing to pay up. Any Trading Opportunities? With this Friday a Holiday for the market, I am a little lighter in trades this week. In GOOGL, here is an pre-Earnings Calendar Play. Buy 1 April 28 Expiration 830 Call and Sell 1 April 21 Expiration 830 Call . Total Debit $9.55 . I just bought this live at 12:59 pm central today with GOOGL trading at 827.79. Earnings will be the week of Monday April 24. The purpose of this Calendar is to put on a trade that shouldn’t have any Implied Volatility Risk. We are buying the long option […]
Just Bought the Mar 22 expiration 2340-2350-2360 Call Butterfly in SPX for $4.50 Debit at 10:24 am central. This trade expires at the end of day today. Market seems quiet so far after big down move yesterday. Between 2345 and 2355 I do really well. As SPX moves above 2355 or below 2345 we would start to lose money and I would look to get out . The goal is to sell out the trade that I paid $4.50 for $5 credit, could be within an hour, and the profit would be about 10%. If the spread that I paid $4.50 debit goes near $3.75, would get out. Total cost and Risk of trade is $450, the debit.
Just started our new 2 week online class, “The Double Barrel Calendar”, and wanted to share the class trade we put on live yesterday. SPX was around 2370. B 1 Apr 5 2390 C and Sell 1 Mar 22 2390 C. B 1 Apr 5 2350 P and S 1 Mar 22 2350 P .Debit of $14.05 and Margin or Risk of $1405. Join us in tomorrow’s Class as we analyze this trade and cover more on this interesting strategy that serves as an alternative to the Iron Condor when Implied Volatility levels are low, which they are now. VIX is currently at 11.74. The foundation of this strategy as well as an Iron Condor is the short strangle. In this trade, we are selling the 2390 C and 2350 P in the Mar 22 expiration. Unlike the Iron Condor, which will buy the long hedges in the same expiration, we buy our long hedges in the Double Barrel Calendar in a further out expiration and the same strikes as the shorts. In this trade, our longs are in the Apr 5 expiration. In a low Implied Volatility environment, this strategy gives us wider room or Breakevens than a single Calendar Trade. […]
Today on Sheridan Mentoring TV, I put on a Live TSLA Pre-Earnings Calendar. Sheridan Mentoring TV airs Tuesday’s and Thursday’s at 1 pm central and I usually will put on a live trade every class and also explain and track every trade for educational purposes. TSLA at time of the trade was $228.46. Today’s trade I bought the Feb 10 expiration 230 Calls and sold the Jan 20 Expiration 230 calls for a debit of $5.60. The idea here is that Calendars have 2 risks, price and the Implied Volatility decreasing, and we are trying to eliminate Volatility risk. I do that by buying the expiration that will be affected by earnings and sell an expiration that will not be affected by earnings. I am looking to make around 10% for every 1 Calendar I buy, about $55 0r $60 (10% of $560). If TSLA breaks under 224 or 237 in next few days, I will instruct what to do in the blog. My short options expire in 10 days and my longs in 20 days. I will be out of this trade in 7 days, avoiding the price risk of earnings. Tomorrow we launch our 1st online class of the year, How to […]
Can you do an Iron Condor when VIX is 13.5 and the SPX is 30 points away from the all time highs? Yes, it depends on how you structure and manage the trade. This is the trade I just put on for SOM TV with SPX around $2247. Sell 1 Feb 3 2315 Call and Buy 1 Feb 3 2325 Call. Sell 1 Feb 3 2150 Put and Buy 1 Feb 3 2140 Put. Total Credit $2.20 credit. The deltas of the short options were around 15. The goal on the trade is to make 10% and not lose more than 12% of the risk or margin of the trade, $780. If the delta of the short call or put gets to 23 this week. I will look to either buy a call on the upside or put on the downside to cut my position deltas 1/2 or 2/3. I sold the Credit Spread for $2.20 credit, if it goes to around $1.40, I would buy back the Iron Condor for $1.40 debit, making around 10% on my capital. Join us tomorrow, January 4, for a free webinar at 1 pm central titled: How to Manage a $10K Weekly Portfolio. […]
Tuesday on SOM TV, I put on a live BWB and am talking about the trade today after big move in SPX yesterday.The trade is in Jan 6 expiration and was done with SPX around 2209. Buy 1 Jan 2200 put Sell 2 Jan 2170 puts and Buy 1 Jan 2130 put. The debit was 2.05 and the margin or risk for this 1 unit trade is $1205 dollars, which is the risk on the downside. The risk on the upside is about $205 .I started the trade 1.75 deltas short on this $1200 trade. During SOM TV Tuesday, I mentioned if SPX hit 2223 yesterday, I would look at the trade and probably sell a put credit spread to narrow the upside of the Broken Wing Butterfly. The original Butterfly width was 30 on the upside and 40 on the downside. By adjusting with a put credit spread, selling the 2190-2200 put credit spread in January, we would be decreasing the upside width to 20 and reducing the short delta exposure on the upside. If you didn’t do anything to the trade, the price is now around $1.35 with SPX at 2243 as of 10:09 am central today Dec […]
Most of the live Income Trades (delta neutral, positive theta, selling strategies) that students in our community and myself had on today did much better than expected, and in some cases did great. lets discuss at least 2 of the trades I had on as examples. Trade #1 did absolutely great today, and it was a basic non-Directional trade that made 20% today with the market going drastically against us. The trade was a balanced Butterfly trade in SPX in the August 19 expiration, and the width of the Butterfly was 40.The trade was put on yesterday when SPX was around 2105.The trade was put on using all Calls. Here is the trade using a 1 contract example. Buy 1 2065 and sell 2 2105’s and Buy 1 2145. I bought some units at $5.40, $5.30, and $5.20. A unit could be 1-2-1 or 2-4-2 or 3-6-3, whatever size you are trading at. In this trade, we want the price of SPX to be near the short strike of 2105. Today at around 9:45 am central time, SPX was around $2059 and I got out of my entire trade that I bought around $5.30 and sold it for a $6.40 Credit, a […]
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