Those of you who want to see an index of my movies, go to this address, from there you can view any of them. They are up to date too:
http://www.pathometrix.com/Movies/
___________________________________________________________________________________________
I entered this PCCRC early this month on of earnings, I sold more shorts, to take advantage of the volatility spike. BUT, it was Delta that made me good profits!
Now, how do we fix this trade?
http://www.pathometrix.com/Movies/BRCM2.mov
Here is the trade today. I am awaiting your recommendations on how to transform it so that we limit the risk, take profits, and benefit from potential Delta gains.
http://platinum.optionetics.com/cgi-bin/platinumv30/op4email.php?trade_name=I|BRCM|Clone™_date=2006-01-11&sym=RCQ&num_legs=6&tra0=-4:B06:55.000:5.200:BRCM:2006-01-26:51.62500000:E8E8E8:0:0&tra1=-15:B06:55.000:4.300:BRCM:2006-01-11:24.59600067:E8E8E8:0:0&tra2=-4:N06:55.000:1.300:BRCM:2006-01-26:50.73899841:E8E8E8:0:0&tra3=-15:N06:55.000:2.050:BRCM:2006-01-11:50.71599960:E8E8E8:0:0&tra4=30:E06:55.000:6.300:BRCM:2006-01-11:27.80100060:99FF66:0:0&tra5=30:Q06:55.000:4.050:BRCM:2006-01-11:44.96300125:66CCFF:0:0
About Me
Subscribe to:
Post Comments (Atom)
21 comments:
Hi, I just tried to listen to the BRCM report but the audio is coming through too low for me to hear it. I don't know if it's a problem with my machine or not.
I closed my BRCM position yesterday, probably way too early, but I had a big profit and feared losing it as I did some other big profits recently. Thought might see a pullback which would allow me to reenter a BRCM position with a higher strike this coming week.
Sorry, I can't hear your commentary. I'm looking around for some speakers to attach.
I'm still having trouble with the audio which is difficult for me to hear; it seems very low. But I managed to get the jist of what you were asking. I don't understand PCCRC's and how you make money from them. You seem to have an equal amount of long/short on the Mays and also an equal amount of long/short on the February's, so if they are balancing each other out completely, where do you make the money?
With such an elementary question as mine, you can see I can't help you with how to best juggle this into a better position, except for this: I can ask you where to see the stock most likely to go now, both very short term and longer term.
If you see it as stalling for a while or dropping back a while then going up a lot more, it would influence your plan.
For my part, this stock was a home run for me yesterday. I would like to start a new position next week. Like you, I was playing the May 55's, but I was just long them this time. I am thinking of assuming a May 70 position next, and maybe as a CRC (May/Feb) if not just straight long.
I have two more questions today!
One is, how do I repair my position in AAPL which is currently long only, the April 80 calls.
The other is, what new position to take with the profits I got from the BRCM call. Half, the original money, will go back into a new BRCM position, the other half, more than half, actually, can go into a new position next week.
So, what would be the best new position to take in BRCM, what new position to take, and how to repair the AAPL position, are my three burning questions.
>Hi, I just tried to listen to the BRCM report but the audio is coming through too low for me to hear it.
The problem with the sound in the BRCM1 video clip is probably my fault. I will do it again. Thanks for the note.
>I closed my BRCM position yesterday, probably way too early, but I had a big profit and feared losing it
At this point, if you are still bullish on BRCM, I would simply recommend that you open a new CRC at a higher strike price, as the stock has triggered the Sarmiento system, by virtue of its earnings. If I had a CRC on the day of earnings, and was concerned about a pullback, this would have been an excellent time to enter a PRC on top, thus converting the position into a PCCRC. I know that you are not confortable yet with this approach, but this would have been a good instance to try it out. You still have all of my videos to look at to understand this approach. If you post the trade you have, I could make a video clip for you on how to do the transformation and why.
>Sorry, I can't hear your commentary. I'm looking around for some speakers to attach.
I you have a Mac, and an iPod, you could use the iPod headphones attached to your computer. But don't worry, I will redo the video clip.
> I don't understand PCCRC's and how you make money from them.
It would help to check out all of my video clips. But you are definetly NOT having an equal number of shorts and longs. Think of the position as a PRC and CRC put together. Volatility must be low and IV of the back month must be lower than the IV in the front month when you enter the trade. However, you CAN get it by adding a PRC to a profitable CRC, such as the case in BRCM, as it is the case in your trade.
>I don't understand PCCRC's and how you make money from them.
I will keep adding material to my list of clips, so you have all the details repeated in several forms. In brief, thing of the PCCRC as a money making carrriage which is driven by 3 horses. This horses are the greeks: Delta (vertical movement in the stock price), Vega (increase in the implied volatility) and Theta (time decay in the value of the shorts). This means that instead of depending solely in the price of the stock moving UP, you have also volatility and time in your favor. Here are the conditions.
1. The stock moves UP with a decline in volatility: You make money as the long calls appreciate (this is the Broadcom case) by virtue of DELTA increase.
2. The stock goes UP with an increase in volatility: you make money by increase in DELTA and Vega. This is actually quite powerful. I have shown you the case of my CEPH trade in this series.
3. The stock goes sidewasy with a decrease in volatility: if your volatility decreases in the front month (such as after earnings), and you have a good number of shorts, you make money by virtue of the decline of DELTA in the shorts, as they lose value. Theta helps here too, as expiration approaches, the front month options lose value quicker than the long options. As you can see, Theta and Vega are the two horses that pick up the slack of Delta.
4. If the stock goes sideways with a spike in volatility, you hope that the long options are the ones with the largest increase. I had this happen to me with SNDK last year, when I had a $3000 porfit even though the stock price did not move. Here Vega alone cause the stock gains. Again, you need to be aware of the Vega gains so you close the position in time. A spike in Volatility may be related to news. In that case, it was due to a law suite being settled. After the news was out, Vega declined.
5. If the stock declines, you lose with Theta and Delta, so you are hoping that Vega will jump to pick up the slack. This was the case in EBAY in January last year, when the stock went down from $110 to $80/share. I made $10,000 in one day.
6. Your main risk is a decline in stock price without a jump in volatility. I have experienced this too. I had this happened to me with RIG last year. When this happens, however, it means that the decline is temporary. RIG came back and then exceeded the previous highs. The trade eventually made money on DELTA. I have a position on FDX. The stock declined, recently, with low IV. The stock has been on the rise, and it is now near my $105 strike price.
So you see, it is a trade with Delta, Vega and Theta helping you make money in one way or another. The risk is the decline in stock price with low volatiltiy. The more you learn, however, the more you learn to deal with all this issues. I have been covering most of them in my videoclips, but I will continue to add to them.
>If you see it as stalling for a while or dropping back a while then going up a lot more, it would influence your plan.
I run my Elliott wave analysis, but I only use it as one more consideration in my decisions. Make sure that if you enter a CRC, make sure that you set a stop loss point of some sort, and DO enter it at the higher strike price. A decline in volatility may make BRCM attractive for a new PCCRC. My transformations are meant to take profits and set my trade for any increase or decline in stock price.
>One is, how do I repair my position in AAPL which is currently long only, the April 80 calls.
I never "fix" losing trades, I think that there are outher opportunities. I absolve myself of my mistake and go on with my life. You may remember that I entered a PCCRC in late december, which at first worked very well to the up side, ironically, it is still doing well, to the downside. Volatility has begun to increase.
I will post an Elliott analysis on AAPL for you, and comment about my position. AAPL is not showing reversal yet. At this point your only hope with that trade is that the stock reverses and forms a double top. BUT let me do the Elliott analysis for you. From here on, remember to always put a stop loss, or transform to PCCRC with any jump.
Remember that I do not give financial advice, we are here to discuss some systems for options trading and how to go about taking advantage of opportunities. So I cannot tell you what to do exactly, you can tell ME what you plan to do, and I can tell you the pros and cons of doing it, as I see it, if I were you. I will run Elliott analyses on AAPL and BRCM. Check my other web site for them.
http://www.pathometrix.com/Frames.html
accountholder,
Regarding the audio level, I too sometimes receive it here in the UK on a low volume. Just use the volume control at the bottom of your computer screen. I have SoundMAX Digital Integrated Audio, which is displayed as a white triangle in a blue box. Right click on that icon and then left click on 'Volume' and increase the 'Volume Control' and 'Wave' bars upwards.
I hope that helps.
Juan,
I can't actually see the positions you have place on this trade in your video clip, so it is difficult to comment as to your suggestions box. **Smiles**
Juan Sarmiento said... 8:51 AM
An excellent posting of information.
Juan,
You mentioned in the video that you are posting the platinum trade of BRCM. Where can I find it ?
HK - I have posted the Platinum trade in the BRCM blog article, check it out.
Account holder - I have made a new BRCM video with more details on the greeks.
http://www.pathometrix.com/Movies/BRCM2.mov
Account Holder, I have updated the AAPL ELLiott wave site, and entered a video, check it out.
http://www.pathometrix.com/Frames.html
Fortitude: I had inceased the volume on the computer to maximum but still the audio was very low. This new version is better. I use a Mac so the controls are different than yours, but the concept of increasing volume is the same.
Juan: Okay, I think your description is elegant but I also think that kind of trade is over my head. When I look at what you did, on the back month there's an equal amount of calls and puts, and on the front month there's an equal amount of calls and puts. Calls are long and Puts are short. To my simplistic way of thinking these positions balance each other out.
So let's for the time being, set aside the subject of that kind of trade. You asked about my BRCM postion. I was so bullish I didn't hedge with my more recent BCRM positions. So I made a lot of money but I closed them Friday, the day after earnings. At first I had a CRC, that was opened on 12/1 and closed on 1/10, but then I moved to just long call positions.
On 1/11 I bought May 55 at 6.3, and closed it on 1/19 at 8.30. On 1/20 I took a larger position in the same May 55 calls, average price 7.17, and I closed the position on 1/27 at 16.60.
I will take a long call May 70 this time, I think, depending on how the stock looks on Monday, and may make it a CRC again. Given the actual news, where there's a stock split and a stock buyback as well as great earnings I think the stock should continue to do very well. I was thinking though in view of the large move on Friday we might see a pullback a bit, some volatility to bring the stock down a little, so I could take the position more advantageously next week.
In the case of your position, well, you did fine, but would have done better with a CRC or a long position alone. That doesn't mean that THIS isn't the time to be more cautious however! So that your very hedged position might start to make more sense in the future, considering the big move it has had??
Also wouldn't you be better off raising your strike prices, too? Since you're so far into the money? Doesn't that cost you in one of those Greek horses?
Finally, I wonder what your Elliot Wave shows for the stock potential taking into account the action on this past Friday. Does that raise the targets for the stock very greatly?
hi,
this is my attempt to adjust the BRCM trade.
the rationale is to lock in some profits (the trade is now risk free) by selling the remaining 55 PUTS and opening another 20 65 PUTS, so that i'm hedged against correction of the stock, but still in line for possible uptrend.
http://platinum.optionetics.com/cgi-bin/platinumv30/op4email.ph! p?trade_name=Juans|BRCM|PCCRC™_date=2006-01-27&sym=RCQ&num_legs=8&tra0=-4:B06:55.000:5.200:BRCM:2006-01-26:51.55400085:E8E8E8:0:0&tra1=-15:B06:55.000:4.300:BRCM:2006-01-11:24.46199989:E8E8E8:0:0&tra2=-4:N06:55.000:1.300:BRCM:2006-01-26:50.77099991:E8E8E8:0:0&tra3=-15:N06:55.000:2.050:BRCM:2006-01-11:50.76100159:E8E8E8:0:0&tra4=30:E06:55.000:6.300:BRCM:2006-01-11:27.64399910:99FF66:0:0&tra5=30:Q06:55.000:4.050:BRCM:2006-01-11:45.05099869:66CCFF:0:0&tra6=-11:Q06:55.000:0.900:BRCM:2006-01-27:40.54600143:FFFFFF:0:0&tra7=20:Q06:65.000:3.600:BRCM:2006-01-27:40.76599884:FFFFFF:0:0
alternative adjustment:
http://platinum.optionetics.com/cgi-bin/plati! numv30/op4email.php?trade_name=Juans|BRCM|PCCRC|Clone™_date=2006-01-27&sym=RCQ&num_legs=8&tra0=-4:B06:55.000:5.200:BRCM:2006-01-26:51.55400085:E8E8E8:0:0&tra1=-15:B06:55.000:4.300:BRCM:2006-01-11:24.46199989:E8E8E8:0:0&tra2=-4:N06:55.000:1.300:BRCM:2006-01-26:50.77099991:E8E8E8:0:0&tra3=-15:N06:55.000:2.050:BRCM:2006-01-11:50.76100159:E8E8E8:0:0&tra4=30:E06:55.000:6.300:BRCM:2006-01-11:27.64399910:99FF66:0:0&tra5=30:Q06:55.000:4.050:BRCM:2006-01-11:45.05099869:66CCFF:0:0&tra6=-11:Q06:55.000:0.900:BRCM:2006-01-27:40.54600143:FFFFFF:0:0&tra7=20:Q06:65.000:3.600:BRCM:2006-01-27:40.76599884:FFFFFF:0:0
rgds,
calvin
Hi Calvin. There was a gitch in you trade. I happens often when one e-mails trades. here is the corrected version. Actually, both trades you send back seem to be the same.
http://platinum.optionetics.com/cgi-bin/platinumv30/op4email.php?trade_name=Juans|BRCM|PCCRC|Clone™_date=2006-01-27&sym=RCQ&num_legs=8&tra0=-4:B06:55.000:5.200:BRCM:2006-01-26:51.55400085:E8E8E8:0:0&tra1=-15:B06:55.000:4.300:BRCM:2006-01-11:24.46199989:E8E8E8:0:0&tra2=-4:N06:55.000:1.300:BRCM:2006-01-26:50.77099991:E8E8E8:0:0&tra3=-15:N06:55.000:2.050:BRCM:2006-01-11:50.76100159:E8E8E8:0:0&tra4=30:E06:55.000:6.300:BRCM:2006-01-11:27.64399910:99FF66:0:0&tra5=30:Q06:55.000:4.050:BRCM:2006-01-11:45.05099869:66CCFF:0:0&tra6=-11:Q06:55.000:0.900:BRCM:2006-01-27:40.54600143:FFFFFF:0:0&tra7=20:Q06:65.000:3.600:BRCM:2006-01-27:40.76599884:FFFFFF:0:0
Here are my observations:
You sold 11 of the May 55 puts, leaving the remaining ones to protect your shorts. This is a way to recover what is left of value of the puts, but you left a put calendar at 55 on the table. That move in itself would leave some protection to the downside, I would think, while reducing your cost significantly. Buying additional puts at $65 will increase your cost too much (upt to $25,000). What we want is to reduce our costs, or take profits in other words.
Another thing to consider is that Vega will probably decline from here. Keep that in mind, let us see what others come up with, and then I tell you all what I did.
> on the back month there's an equal amount of calls and puts, and on the front month there's an equal amount of calls and puts. Calls are long and Puts are short. To my simplistic way of thinking these positions balance each other out.
Of course there is more to it than that. Front month options are at the mercy of the time decay more than the long term options. This is the pressure called Theta decay or time decay. When you sell front month options while holding long term options, you benefit from that theta decay. That principle applies to CRC’s, PRC’s and PCCPC’s. Instead of simply buying calls, we protect against time decay in our long calls and/or puts by selling front month options, even if it is only 1/2 the number of long options.
>I will take a long call May 70 this time, I think, depending on how the stock looks on Monday, and may make it a CRC again. Given the actual news, where there's a stock split and a stock buyback as well as great earnings I think the stock should continue to do very well. I was thinking though in view of the large move on Friday we might see a pullback a bit, some volatility to bring the stock down a little, so I could take the position more advantageously next week.
All you needed to do was to sell short term options to both take profit and moderate time decay. I would have sold ATM calls, just enough to take some profit off the table. Doing this would appear as a credit spread because of the difference between 55 and 70. If you had a CRC at 55, I would recommend changing some of the 55 long calls into 70 long calls. I will illustrate in my next clip.
>In the case of your position, well, you did fine, but would have done better with a CRC or a long position alone. That doesn't mean that THIS isn't the time to be more cautious however! So that your very hedged position might start to make more sense in the future, considering the big move it has had??
If you think you can make money with long calls, that is just fine. However, jumps like BRCM’s are the exception rather than the rule. You are benefiting only from DELTA gains. Yet you are losing money in the AAPL trade. I am making money with both. I only DARE to put large sums of money because I know my positions are low risk. I want to be consistent in my gains and not depend on the occasional jump like that in BRCM. I am not interested in occasional large gains, I care about consistent gains. The PCCRC facilitates gains in several ways, not just big jumps. You took a big chance when you held your position through earnings. If BRCM had dropped in high vol. I would have made money too.
>Also wouldn't you be better off raising your strike prices, too? Since you're so far into the money? Doesn't that cost you in one of those Greek horses?
This is what I have asked of you, make suggestions on what to do to change the position, with the idea of taking process while leaving the upside (and downside) potential gains.
>Finally, I wonder what your Elliot Wave shows for the stock potential taking into account the action on this past Friday. Does that raise the targets for the stock very greatly?
I am not satisfied with what the RET Elliott wave count is showing for BRCM, we will wait a little for my forecast. I will report back.
sorry, this is the alterantive adjustment.
http://platinum.optionetics.com/cgi-bin/platinumv30/op4email.php?trade_name=Juans|BRCM|PCCRC-1&trade_date=2006-01-27&sym=RCQ&num_legs=10&tra0=-4:B06:55.000:5.200:BRCM:2006-01-26:51.55400085:E8E8E8:0:0&tra1=-15:B06:55.000:4.300:BRCM:2006-01-11:24.46199989:E8E8E8:0:0&tra2=-4:N06:55.000:1.300:BRCM:2006-01-26:50.77099991:E8E8E8:0:0&tra3=-15:N06:55.000:2.050:BRCM:2006-01-11:50.76100159:E8E8E8:0:0&tra4=30:E06:55.000:6.300:BRCM:2006-01-11:27.64399910:99FF66:0:0&tra5=-11:E06:55.000:16.400:BRCM:2006-01-27:39.18000031:FFFFFF:0:0&tra6=30:Q06:55.000:4.050:BRCM:2006-01-11:45.05099869:66CCFF:0:0&tra7=-11:Q06:55.000:0.900:BRCM:2006-01-27:40.54600143:FFFFFF:0:0&tra8=5:Q06:65.000:3.600:BRCM:2006-01-27:40.76599884:FFFFFF:0:0&tra9=10:E06:70.000:6.5:BRCM:2006-01-27:39.78799820:FFFFFF:0:0
for comments pls.
calvin
Hi Calvin.
Do you still need to BUY 65 puts? perhaps you are dealing with the problem appropriately, and reduce your cost even further.
Juan
i get what u are trying to say, if i don't buy 65 puts, i can reduce the cost further and yet still be protected if stock price were to drop to the fifties region and have a decent amount of delta to gain from potential uptrend. is there any more ways to protect against volitility drop?
calvni
I've taken a position in BRCM May 70 calls, early in the pullback. Gould have gotten a better price. I'll add the front month short when the stock gets a little higher.
I've also taken a position in Exxon: XOMGZ July 62.5 calls. Again, i think I paid a little high for these, but will average down and also will add front month short if the stock goes up a bit.
You were going to bring us up to date on what you did to solve your BRCM problem, but if you posted it, I didn't see it. Of course, if you posted a link to the solution in Platinum I couldn't see it, and that would be why I missed it.
You were going to bring us up to date on what you did to solve your BRCM problem, but if you posted it, I didn't see it. Of course, if you posted a link to the solution in Platinum I couldn't see it, and that would be why I missed it.
Post a Comment