Downloading...
Download

Options-strategy

Options Idea: Sell The September 18, 2020 Put @ $1.3ALRM seems to have stopped its downward trend. It has recovered the EMA 8 and is heading back to EMA 20 territory. I sold a Sep 18 2020 55.0 Put @ 1.3 with the idea that the uptrend will continue over the next few days or weeks. 20-ALRM-01 Opening Date: August 20, 2020 Expiration Date: September 18, 2020 DTE: 29 IV: 44% IV Percentile: 37% Odds of Winning: 68% Win: > 53.70 @ Expiration Loss: < 53.70 @ Expiration Chart Legend The green area represents 100% win zone. The yellow area is a win, but we have to give back some of the initial credit taken in. The red area is loss. 1 SD, 2 SD, 3 SD projections from Opening Date to Expiration Date are included.
NASDAQ:ALRMLong
by OptionsCoach
1
Trader's Guide to Vertical Debit SpreadsThe strategies and ideas presented in this guide have been designed to provide you with a comprehensive program of learning. The goal is to guide you through the learning experience so you may be an independent, educated, confident and successful trader. There are numerous variations of traditional options strategies and each has a desired outcome. Some are very risky strategies and others require a considerable amount of time to find, execute and manage positions. Spreads are a limited risk strategy. Spreads Spreads are simply an option trade that combines two options into one position. The two legs of one spread position could have different expiration dates and/or different strikes. Spreads can be established as bearish or bullish positions. How the spread is constructed will define whether it is bullish (rising bias) or bearish (declining bias). Different types of spreads can be used for the same directional bias of the stock. For example, if the stock has a declining bias, a call credit spread or a put debit spread could be opened to take advantage of the same anticipated move down. In this guide we will be talking about Vertical Debit Spreads, which are a limited risk strategy. Learning how to manage risk is as important as learning the details of a strategy. Vertical Debit Spreads A vertical debit spread is created when an investor simultaneously buys-to-open (BTO) one option and sells-to-open (STO) another option. The premium paid for the BTO is always greater than the premium received for the STO thus, creating a net debit from the trader’s account. Example: BTO a call using the May 180 strike for a debit of $7.57 STO a call using the May 190 strike for a credit of $3.42 Net debit for the spread is $4.15 The proper construction of a vertical debit spread is to BTO an at-the-money (ATM) strike and STO the strike that is 5 – 10 points further out-of-the-money (OTM). When opening a call debit spread, further OTM means a higher strike. When opening a put debit spread, further OTM means a lower strike. Both legs are opened on the same underlying equity and use the same expiration month. The Delta Ratio Delta is a factor in how profitable a debit spread may be. When the underlying stock moves, the value of the options will change at the rate of the Delta. Delta values will be different for different strikes depending on how far out-of-the-money or in-the-money the strike is. Look at an options chain for the current expiration month. Find the Delta of the at-the-money strike and compare it to the Delta of a strike 20 points out-of-the-money. The ATM strike will always have a higher delta than the OTM strike. This means that the value of the ATM strike will change more quickly than the OTM strike, as the underlying stock moves. When properly constructed, a debit spread is designed to take advantage of the Delta relationship between the long and short options. By STO a strike further out-of-the-money than the BTO strike, the long leg will increase in value more rapidly than the short leg. This is referred to as the Delta Ratio. Put debit spreads are used when the stock shows a declining bias. Puts increase in value as the stock decreases in value. In this case, the long put would increase in value creating a profit. The short leg would increase in value creating a loss. However, as we learned earlier, due to the Delta Ratio, the long put is increasing in value faster than the short put is creating a loss. This will create an overall position profit as the stock moves down. Here is an example: Stock trading at 520 and has a declining bias. BTO 520 put STO 510 put This spread creates a debit of $4.80 Stock declines to 510 causing the values of the puts to increase. The position can now be closed for a profit. STC 520 put BTC 510 put The value of the spread has increased to $5.80. Since the stock declined in value, the put options are more expensive. The spread was BTO for a debit of $4.80 and STC for a credit of $5.80 resulting in a $1.00 profit. Call debit spreads are used when the stock shows a rising bias. Calls increase in value as the stock rises. In this case, the long call would increase in value creating a profit. At the same time, the short call would increase in value creating a loss. However, as we learned earlier, due to the Delta Ratio, the long call is increasing in value faster than the short call is creating a loss. Stock trading at 500 and has a rising bias. BTO 500 call STO 510 call This spread creates a debit of $4.80 Stock rises to 510 causing the values of the calls to also rise. The position can now be closed for a profit. STC 500 call BTC 510 call The value of the spread has increased to $5.80. Since the stock increased in value, the call options are more expensive. The spread was BTO for a debit of $4.80 and STC for a credit of $5.80 resulting in a $1.00 profit. Risk and Reward on Vertical Debit Spreads Reward The maximum profit that can be earned from a vertical debit spread is equal to the width of the spread minus the cost of opening the spread. For a vertical debit spread to realize the maximum potential profit, both legs of the spread would need to expire in-the-money which means the position would need to be held until expiration. I do not recommend holding positions until expiration. Short term movements in the stock/index plus limited time value decay provide opportunities to close out positions for a profit of about 10%. If a position is profitable and the trader decides to hold the position hoping for a bigger profit or in an attempt to carry the position to expiration, there is a good chance that the profit will disappear and the position could turn into a losing position. This also will increase the risk of assignment/exercise if trading an American style expiration. A good way to lose money is to wait for a bigger profit Risk The maximum risk, or potential loss, from a vertical debit spread is the net debit (cost basis) of the spread (BTO leg debit minus the STO leg credit). Example: BTO 2765 call for a debit of $11.70 STO 2770 call for a credit of $8.30 Cost basis of the spread is $3.40 $3.40 is the maximum risk. A maximum loss will occur when both strikes are out-of-the-money at expiration. Learning how to properly adjust positions will avoid this. A trader establishes a bullish (call) debit spread when the chart indicates a rising bias. The breakeven point is the lower strike price plus the net debit. Referring to the example above, if the stock was at 2768.40 at expiration, there would be no loss and no profit. Example of breakeven point on above debit spread: Stock settles at 2768.40 at expiration The 2765 strike is $3.40 ITM, the value of the strike has $3.40 of intrinsic value and no time value. The 2770 call expires OTM worthless and you keep the 8.30 of credit as profit. Since you do not want to exercise your right to own the stock, you sell the 2765 back at the price of $3.40. This results in a $8.30 loss. $11.70 BTO – $3.40 STC = $8.30 loss You get to keep the original credit of $8.30 from the 2770 call. This netted against the $8.30 loss results in breaking even on the position. A trader establishes a bearish (put) debit spread when the chart indicates a rising bias. The breakeven point is the BTO (higher) strike price minus the net debit. Calculating the Return The profit percent return is calculated by dividing the profit by the risk. After all, if the trade lost 100% of the risk that is the amount the trader would no longer have. In the example above, the net risk is $3.40. If the debit vertical spread trade resulted in a $1.00 profit, the percentage return would be 29.41% ($1.00 / $3.40). Lower risk drives higher returns relative to capital at risk. American vs European Style Options Most stocks and ETF’s are American style options. This means that if the buyer of an option chooses to exercise or assign their rights they may do so at any time prior to expiration. Indexes such as SPX, NDX, and RUT are European style options. This means that any exercise or assignment may only occur at expiration. Trading spreads on European style options, can alleviate the concern of early exercise/assignment. If both legs are ITM, they can only be exercised or assigned at expiration, which allows flexibility to continue to hold the position rather than take action to avoid assignment/exercise as would be suggested on American style options. Opening a new Put Debit Vertical Spread The following steps should be referred to when opening a new put debit vertical spread position: 1. Review the technical indicators on your chart and confirm there is a consensus between multiple indicators pointing to a declining bias. 2. Select an expiration that is one to three months out. One month is generally the minimum time to expiration you want to use. Building time into the position is advised in case it needs to be managed. The sweet spot for opening new positions is two months to expiration. 3. BTO the at-the-money (ATM) put strike. BTO the strike that is closest to the money. When the stock/index is trading between strikes, BTO the first strike higher than the current price of the stock. 4. STO the strike that is 10 points further out-of-the-money (OTM). With a put spread, further OTM means a lower strike. BTO ATM and STO 10 points further OTM will create a debit. Generally, when properly constructed, the debit will be in the range of $4.00 - $6.00. 5. When placing the order, always use a Limit order. A limit order specifies to the market the amount of the debit you will accept. A limit order will be filled at the specified limit or lower. Market orders should not be used. 6. With some stocks and indexes, the difference between the bid and ask is quite large. The broker will usually give you a quote called the “Mark”. This is the midpoint between the bid and ask. It is the price you should start with when submitting your limit debit order. 7. Calculate the risk of the position. Cost basis of position is risk. So a position with a debit of $4.50 would have a risk of $4.50. 8. Use the risk number to determine the number of contracts to open. Risk x 100 = the investment required for each contract. With $4.50 of risk and one contract, the total investment would be $450 ($4.50 x (1 contract x 100 shares per contract)). 9. Once you know the total investment required per contract, you can decide how many contracts to trade based on the size of your portfolio. Generally, allocating 5% of the total portfolio to each trade is good risk management. Smaller account sizes may require a higher investment per trade but should not exceed 10%. 10. After the trade has been opened, place a Good-til-Canceled (GTC) order to close the position for a $1.00 profit. A GTC order will stay active until market conditions are such that the position can be closed for a $1.00 profit. GTC orders execute automatically and do not require you to be in front of your computer to take advantage of the profit opportunity.
SP:SPXEducation
by NewCycleTrading
9
BataIndia from 14 August 2020The stock has been moving down for the entire june july n august month expecting it to start moving upwards again at 1230 price level a big spike in volume seen ==> personally indicating a investor started buying it. MFI has touched bottom zone waiting for a breakout in it ==( line has been drawn ) for upside movement trading strategy : Calendar Spread: remember it is all option together --> try to adjust premium for good result AUG : SELL 1120 PE BUY 1080 PE SEP: BUY 1400 CE SELL 1500 CE this is giving good return with low risk make sure breakeven is around 1110 on the downside ADJUSTMENT : if stock starts moving further downside ... start adding PE in september month and position of call option on lower strike price ...
NSE:BATAINDIALong
by Trade_with_yash
$BA Massive Breakout | Strap In For Easy LootOPTIONS PLAY OF THE MONTH | Technical Analysis Of BA BA Supporting my page with likes & donations is greatly appreciated and will be used to help promote my ideas to more people like you! The Playyy: - BA $180Call 8/28 @ $670 we should see this get pretty damn deep in the money if we breakout successfully. Watch this breakout very closely, we've been watching this wedge for nearly 3 months. Seriously we have been waiting for 3 months patiently inside the Easy Loot channel, waiting for this bag. None of this is financial advice, just giving you a look inside my plays. Massive Bullish Wedge: Possible Inverse Head & Shoulders Coming Out Of Earnings: May Easy Loot be with you.... DotcomJack
NYSE:BALong
by DotcomJack
JETS ETF Call Options With Bears ProtectionJETS invests in both U.S. and non-U.S. companies involved with the airline industry, including passenger airlines, aircraft manufacturers, airports and terminal services companies. Due to COVID-19 it's one of the weakest sectors and from my observations it seems to fall first and raise last vs the S&P 500. As countries are slowly opening and getting a grip on the virus or at least are forced to push forward to avoid further economic impact, JETS ETF could potentially move up. I am around 70% inclined to this, especially since price seems to have breakthrough a range of 15.79 - 11.28 To protect myself from bearish moves. I loaded up on call contracts at a higher strike. This means that no matter how low price goes I will always get +$875. However my profits are capped at strike 20.99 with my risk being price moving upwards beyond strike 21.45. The plan of course would be to close the trade before. Sell Calls 31 July - Strike 21, 0.3, Qty 45 Buy Calls 31 July - Strike 18, 0.95, Qty 5
AMEX:JETSLong
by Ronin_trader
ADT OPTIONS | How To Play The Gap UpSimple Technical Analysis On ADT, Plus This Weeks Options Plays. With both of these plays, it will be up to you to secure profit. Do not trade this though, you will lose money :) Long ($16 Breakout): Premiums will be extremely expensive on the call side, important that we wait for confirmation or else we will get clapped quick from a rip down The Call: $12.5 Call 8/21 @ $330 avg Short ($13.26 Level): Premiums on the put side are extremely cheap for mainly one reason, the gap up. If played correctly, times like this can provide an amazing day trade opportunity. The Short: $7.5 Put 9/18 @ $12 Strictly educational purposes only DotcomJack
NYSE:ADTLong
by DotcomJack
What Is Options Assignment Risk?What is the options assignment risk? Trading options is a very lucrative way to make money in the stock market. Using the same methods that I teach in my trading PowerX Trading Strategy, I was able to turn a 25k account into a 45k account in 2 months! 25K to 45K in 2 months? This sounds too good to be true… and I would like to tell you that it is NOT too good to be true, but there are some inherent risks associated with options trading. ONE of the biggest risks, and possibly the MOST common risk associated with trading options are options assignment risks. As you may know by now, options contracts expire. When you purchase an options contract you have the right to exercise the contract, and buy or sell the underlying asset for the agreed-upon price. If you allow the contract to expire in the money (ITM) you run the risk of being assigned the 100 shares of the underlying stock. This is known as an options assignment risk. Specific Examples of Options With Different Expiration Dates In the example we’re going to discuss today, we’re going to look at how options expiration or the length of time to expiration can affect your options assignment risk. To illustrate the relationship between options assignment risk and options expiration, we’re going to look at trading a 315 call options contract on Apple (AAPL) with 7 days left until expiration. The current strike price of AAPL is 318. This options contract is currently trading for $6 , but only has $3 of intrinsic value. If you were to exercise the option, you would be able to purchase the AAPL stock for $315, and you would capture $3 of profit. If you sell the option, you’ll earn twice that, because the options contract is selling for $6. The difference in the cost of the intrinsic value ($3) of the option and actual value ($6) of the option has to do with time decay. As the option contract gets closer to its expiration date, time decay erodes the value of the options contract. In our next example, we’ll look at trading the same options contract with a $315 strike price, but with 0 days to expiration. As you can see in this image, the same contract with zero days until expiration has only $3 of value. Time decay, otherwise known as theta, has slowly eaten away the value of the contract so that now there is only the intrinsic value of the option left. On a side note: Selling Theta is a very powerful way to make money while trading. I have taught thousands of traders to use Theta, or the time decay of options, to produce income while trading options. Options Expiration As an options contract nears expiration, the risk of options assignment increases exponentially. When an options contract has been purchased, it can usually be sold before expiration to prevent an assignment. However, options contracts that have been sold pose the opposite risk. If you have sold a put contract for example, and the options contract is in the money at expiration, you must either buy back the contract BEFORE expiration, or risk options assignment. In this next example, we will look at selling a put contract on Herts (HTZ) . The current price strike price of HTZ is $2.87. If you were to SELL a $3 put option on HTZ , the option would have the intrinsic value of .13 cents! Meaning if you chose to exercise the option, you would only make .13 cents per share. If we look at this option with 1 week out until expiration we can see that it has more value because time decay has not eroded the value. To Exercise or to Sell, That Is The Question As you can see, there’s WAY more profit when selling a contract vs exercising a contract when there is time to expiration. In summary, it’s very unlikely that someone will exercise an options contract when there is time remaining before expiration. There is usually more profitability when there is less time decay or Theta decay in the contract. When should you worry about options assignment risk? Some traders are under the impression that IF the stock price moves below or above your strike price (depending on whether you sold a put or call) you risk assignment immediately. This is NOT true. You risk assignment the closer your contract gets to expiration.
DJ:DJIEducation
by rockwelltrading
1
Earnings Play for TGTI grabbed in the money options before the breakout. weekly close above 123 confirms move. Target $132. In the money options help against theta decay but cost more up front. This is an earnings play. options that expire August 21 or 28 have lowest theta. Risk/Reward is 3.00 stop loss is low 119's. So long as weekly close is above 123, the 119 stop loss is reasonable. if this falls back into the wedge you can add another call around 116 and set a different stop loss, but the safer play is playing the breakout with confirmation. there were 2 hourly candles that close above the resistance along with strong bull volume on the last 2 hour candle.
NYSE:TGTLong
by UncleBeeB
Bajaj Finserv from 17 July 2020The stock is showing bullish sign in 4h Timeframe ... positional long can be taken. There is consolidation zone present right above the 6403 level ..which might result in some high wick candles MFI is showing sign of increasing .. though RSI and MACD in -ve zone --> consolidation zone very problematical Targets --> 6664 -> 6905 (tough) Trade setup : Safe Setup : ( Sell 5700 PE + Sell 5600 PE ) + ( BUY 4800 PE * 2 ) to decrease margin total profit : 10K margin 160K Nerves of Steel Setup : 1. Sell 5700 PE + Sell 5600 PE 2. Buy 6300 CE use appropriate hedging to decrease margin :: assumption taking 4800 PE *2 and 7200 CE total profit : 90K margin: 180K very risky : 48% success probability
NSE:BAJAJFINSVLong
by Trade_with_yash
Bull Put spread on spike in volatility - The Anty strategy I think with the slightly over-cooked sell-off into an area with high volume trading activity should be price stabilize. This is a strong company with good projected income potential over the next few years. If I was forced to buy it via exercised then I could live with that. In the meantime - I can pick up a credit at close to 'at-the money' and see what happens....it just has to expire in 3 weeks above 18.00 before I'd need to consider 'rolling down & out ' etc The volatility spiked up about 7 % which means the options premiums will be slightly fatter, and there is only 15 trading days left before expires for time-decay to work it away... This is "the Anty" strategy - adopted a bit longer for options
ASX:A2M
by Aussie-scalper
$GOOGL Options play of the month | New ATH!Technical look on $GOOGL with a huge potential options play through earnings Throughout Covid, Netflix has performed rather well since the first wave down, pushing 46% from lows. We are looking for Google to either retest previous ATH or straight rip, will probably play it safe and wait for the retest. If the setup doesn't look good enough for entry, we will simply sit on our hands and wait for the right time. The Play: GOOGL $1,600 Call 7/17 Estimated Time: 7-13 Days - Bullish - Breakout on the upside to make even more ATHs, looking to retest the previous channel resistance. This play will payout stupid but takes quite a bit of capital, congrats if you made a bag on this :) This is not financial advice nor am I a financial advisor DotcomJack (View other option plays below)
NASDAQ:GOOGL
by DotcomJack
BSL Bull Put spread - Aug expires with strikes 10.76/ 10.51 technical reasons - there seems to be a recover in price by rallying past previous low, and after completing corrective legs fundamental - Goldman Sachs have a BUY rating with target of $14.95 over 12 months ( +37%) good probability of this credit spread- with 5 weeks until expiry there is 'time-decay' on side - the implied volatility is high for the past 30 days in upper range 42-47% - European style option cannot be exercised before expiry date - plenty of time to manage on table risk eg. 27/02 payoff diagram shows only -$250 if price down to 10.81, with reward of $1000 this is a good Risk reward if exit in two weeks - Price merely has to stay above the upper sold strike of 10.76 to win - if price rallies a lot can exit the trade for a substantial profit early - if price drops a lot, at a few weeks before expiry can roll down and out to recover loss next month - if decide to own the stock, its better to wait until after dividend payment in September as no tax imputations allowable and best not to have an options trade on during this time.....
ASX:XMJ
by Aussie-scalper