1. Try clicking on the name of the most recent article in the column on the right. This will remove the "Archives" list.
2. Try right click on the chart itself and open it on a separate window.
I am sorry that I cannot always make the chart small enough to fit neatly on the left column. I want you to be able to see the details I want to point out.
I Hope this helps,
Juan
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As you know, I entered this position on AAPL after the company anounced excelent earnings and volatility declined. Here is the position.
Yesterday I made a transformation that reduced my risk, took some profits and positioned me to benefit from a spike in volatility and/or a strong decline or rally. In any of this circumstances, my profits will increase.
I also have a PCCRC on GOOG, as you'd recall, here is my position as originally entered:
GOOG has also rallied strongly. I waited until GOOG reached $390 until early today, and I made a transformation which is similar to the transformation I did on the AAPL trade, giving me also a good set up:
Your comments please!
13 comments:
Juan,
Interesing, I shall have a look more closely this weekend at your previous articles and this information.
Thanks again.
Juan,
I have come up with a trade on CSC.
High expectations before Earnings Report which did not meet expectations.
http://platinum.optionetics.com/cgi-bin/platinumv30/op4email.php?trade_name=CSC|11-04-05|Mar06-Dec05||$55||PCRCC&trade_date=2005-11-04&sym=CSC&num_legs=4&tra0=-2:L05:55.000:3.300:CSC:2005-11-04:48.49800110:ffffff:0:0&tra1=-3:X05:55.000:3.800:CSC:2005-11-04:47.63800049:ffffff:0:0&tra2=3:C06:55.000:4.600:CSC:2005-11-04:35.40800095:ffffff:0:0&tra3=5:O06:55.000:4.5:CSC:2005-11-04:34.12599945:ffffff:0:0
My first attempt. I made an effort, but it could be wrong.
QCOM is looking good for a bullish move up.
Take a look at PD too. There is a triangular explosive formation forming. The move does look as if it will go up.
AMZN looks to me as if it will fall futher as Juan has indicated.
DRIV looks set to go down, which I am in. Note the doji and 'triangular shaped formation.
DELL is edging up, slowly.
NFLX looks set to turn downwards.
Fortitude:
Try again!!!
CSC is precisely the wrong candidate for a PCCRC. You will see in the days to come how volatility begins to decline (particularly after earnings), causing a volatility crush in your trade. The differential between the IV of short term and long term options will work against you instead than in your favor.
Also critical for those who trade with OptionsXpress is to enter equal number of puts and calls in the long portion of the trade, and about 1/2 the number of shorts in both puts and calls in the short-term.
It is very important that you find candidates with IV close to their lows of the last 2 years (look at the 2yr IV chart for this). Alo choose stocks with IV/SV ratios below 1.
CSC would have been a great candidate a month ago, when its volatility was low.
What to do know? hint: when volatility is low SELL!
http://platinum.optionetics.com/cgi-bin/platinumv30/op4email.php?trade_name=CSC™_date=2005-11-04&sym=CSC&num_legs=4&tra0=-1:K05:45.000:2.850:CSC:2005-10-04:23.56200027:ffffff:0:0&tra1=-1:W05:45.000:0.700:CSC:2005-10-04:24.18499947:ffffff:0:0&tra2=2:C06:45.000:4.700:CSC:2005-10-04:25.75399971:ffffff:0:0&tra3=2:O06:45.000:1.900:CSC:2005-10-04:25.14200020:ffffff:! 0:0
What about the opposite trade. I open up discussion;
http://platinum.optionetics.com/cgi-bin/platinumv30/op4email.php?trade_name=CSCTdate2005-11-04&trade_date=2005-11-04&sym=CSC&num_legs=4&tra0=-1:K05:45.000:2.850:CSC:2005-10-04:23.56200027:ffffff:0:0&tra1=-1:W05:45.000:0.700:CSC:2005-10-04:24.18499947:ffffff:0:0&tra2=2:C06:45.000:4.700:CSC:2005-10-04:25.75399971:ffffff:0:0&tra3=2:O06:45.000:1.900:CSC:2005-10-04:25.14200020:ffffff:0:0
I meant when volatility is HIGH you should sell!
Either get out of the trade or sell front month options. Always keep an eye on the IV of each leg of the trade. Always sell the most expensive (high volatility) portions.
BTW, Fortitude, it looks like you posted back the same trade I posted earlier.
For those with Platinum
Here is a list of the high fliers of the day. These are stocks with the largest % increases over the last 90 days.
SNDK UPL THE NFLX AAPL AMLN SIRF ESRX BTU ENER SWN CELG GRP ACI RIO AOC NTES A
Select the list, copy it and go to platinum.
From the site map, select "Edit Lists" (first column, second block of links)
Paste the list, and save as "Top movers - 90 days"
From the site map, select "Analyze Lists" (first column, second block of links)
The page you see shows every stock in the list and a variety of links for chart of each stock. Go down the list and select "IV" for stock "RIO". You will see a IV chart on RIO for the entire year 2005. Notice that the volatility is in the decline, approaching 35%. This is a reasonably low volatility, but it may go lower. Still, this is a good start.
Now click on IV/SV for RIO, the IV/SV chart shows up. Here you should make some changes: Look at the pop up menues and select:
7-149 day for the IV numerator, and 6 day SV for the denominator. Then click UPDATE.
The resulting chart shows the IV/SV ratio well above 1. So this is not a good candidate yet. We want IV/SV to be on the increase, but below 1.
Try the other candidates, see which one fits our needs.
After examination of the IV for 2005 on each of these stocks, I have reduced my list to these 5 candidates
AAPL CELG RIO AOC A
I have looked also at their IV/SV ratios.
None of the candidates is perfect yet, but I will keep my list and may take action on the next few days. Some may actually be taken out.
Juan,
The IV of AOC has dropped. It looks like its about time to take action. I am not too sure whether the risk graph looks right. Should the red line be nearer the zero line ?
Would you pls take a look at the risk graph below:
http://platinum.optionetics.com/cgi-bin/platinumv30/op4email.php?trade_name=AOC|Nov05-Jan06|35|Call|Put&trade_date=2005-11-07&sym=AOC&num_legs=4&tra0=-5:K05:35.000:0.950:AOC:2005-11-04:0.00000000:FFFFFF:0:0&tra1=-5:W05:35.000:0.350:AOC:2005-11-04:26.36199951:FFFFFF:0:0&tra2=10:A06:35.000:2:AOC:2005-11-04:20.45000076:FFFFFF:0:0&tra3=10:M06:35.000:1.150:AOC:2005-11-04:25.86000061:FFFFFF:0:0
Since PCCRCs are still over my head I did something different with my AAPL Calendar Ratio Spread. I cashed in the 55's and reinstituted a position at 65. I had a big profit in the 55's at the point the stock was around 59 and I had found that my position was difficult to close because it was an uneven amount. For some reason OptionsXpress makes it easy for you as long as you have a 2:1 ratio on your spread but I had a slightly uneven number and it seemed like I was having trouble closing it, so I closed it out when the stock was around 59 thinking I'd wait for a pullback, but time passed that day and there was no pullback so I bought back higher. This time I took an even 2:1 ratio calls long to calls short, and took March 2006 long and December 2006 short. I'd wanted to add some to the position but with the stock going up and up I just took a positiion that was essentially the same quantity of calls as before, just one different, to make it even. This was like taking money off the table because I closed a position that was worth more money than the one I opened. I thought I'd add more in a pullback but then I used the money and I didn't, so essentially I have less money on the table than I took off but the same quantity of calls long and short.
With a little cash today I was thinking of Pixar. I should have gone in yesterday before earnings when I was thinking of it, missed a nice little move. But still might be a good play. Let me know what you think, Juan!
PCCRC's are a specific situation, and you'd need Optionetic's platinum software, not only to understand it fully, but also to follow it in time.
Let's talk about the ratio on AAPL. Let's suppose that I had entered a 10:5 call ratio calendar on AAPL at $55, and the stock is now $60. Let's suppose further that I had entered the position when the stock was at $50, so it was ATM at the time of entry. As the stock went up to $60, my gains are substantial and I just want to take profits, although AAPL is still in rally mode. The best approach for me would be to short more front month calls, 2 for example for a 10:7 ratio. On a pull back, close to november expiration, the 7 calls will lose fast, while the long-term would tend to hold their value.
Trading out of this 10:7 CRC is not that difficult if you have an OptionsXPress account. Here is what you do: go to Account>Positions.
There is an "Action" column to the right of the page. Go down to the AAPL Long call position and click the hypertext "Sprd" under in the "Action" colon. Be sure to select the "Sprd" from the row of the long call (10 contracts). This will bring the Option Spread Order screen, ready to close your 10:7 CRC. To the right you will see the BID/ASK quote. IF you are ready to exit the position ASAP, just enter a market order. If your numbers are even (2:1 ratio for example) go for the BID with 5 or 10¢ more for good measure. If your numbers are odd (10:7 CRC), your bid and ask will be wildly spread out, something like 24.9 to 26.8. I have actually found that with these odd numbers you can shave something like 50¢. The results have been unexpected but never bad at all.
Rolling to a higher number carries risks of their own. You can lose all of the money you invested in a $65 CRC if AAPL does not go close to that number. Of course you already have taken your profits for the $55 position, so you may be braking even or get a small loss or gain.
Keep in mind also, that stocks like AAPL become highly volatily towards earnings, so it is a good idea to BUY calls (or puts) with expiration on an earnings month. JAN, APRIL, JUL and OCT for AAPL, and sell the other months. You will find that your long options appreciate because of volatility.
I hope this help, but please DO ask more questions if you want on this subject.
About AAPL... If you keep the Fibonacci exit strategy and a 2:1 ratio with your exit order, you can just forget about it and enjoy the ride. Take some profits along the way, when the stock takes big jumps, but only exit if there is a large retracement from the last rally or a double top.
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