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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It seems to me that the RMBS is too good to be true. Only if the stock gets out of a very wide range would I be losing money. Thus, I entered the trade this morning. Here I am sharing the data with you.
First the fills. As you can see, I entered the trades early in the morning, but as the trading progresses and the bid/ask grew tighter I cancel the first entry and changed it into a price I was sure would execute. The butterfly got executed without problem, it was the put calendar that took some correcting.
Here are each leg as they stand in my account right now. Notice that the balance is already $300 positive. I like that!
Ironically, the Platinum risk graph is showing me a loss of $600, which is in contraction to the accounting above. No matter, all of that should change quickly, since there is just above 1 month before May expiration. Anything can happen in the stock market, but in this particular case, the range between breakeven points is $29.02. Is there such a thing as a free lunch?
It would be nice if RMBS ended at $55 by expiration, wouldn't it?
Volaility for RMBS is traditionaly high, and this is perhaps why it has become easy pickings for the LTB trade. I hope I am right on this one.
The RET analysis seems to be quite bullish so RMBS may meet the sweet spot by expiration. However, If it is to rally further, i have worked out a strategy already..... I will tell you if the oportunity presents itself.
A shorter term analysis shows that our goal of $55 by may expiration is quite possible.
9 comments:
I like the graph for RMBS. Ideally Fly should be 55-65-75. This makes the mouth wider. However, sometimes the graph does not work out.
Just some thoughts.
By the way what is the reason if high volatility on the stock
I think this is going to be a good test case. See how high the volatility is. Still we entered the trade. There can be drawbacks, no doubt.
If I do the 55-65-75, it would make my sour spot more sour, and put the sweet spot even higher. Remember, this is due to expire in just a little over a month. We have to live room for a sideways movement and still have profits. We'll see...
The volatilty on RMBS has been traditionally high. BUT there three items that alone may explain the volatility:
1. New CFO
2. Earnings.
3. Court judgment on dispute with Hynix.
http://homepage.mac.com/paperprofit1/.Pictures/RMBS/RMBS7.png
Varun said...
I think this is going to be a good test case. See how high the volatility is. Still we entered the trade. There can be drawbacks, no doubt.
Juan: We will soon find out. No doubt, there is always the risk of a strong move down, below the calendar.
Thanks Juan,
Have loaded the trade on IB and with the mid prices;
+1 May $45C @ $6.65
-2 MAY $55C @ $3.20
+1 MAY $65C @ $1.45
Debit of $1.70
+1 AUG 40P @ $5.60
-1 MAY 40P @ $3.95
Debit of $1.65
Total Debit of $3.35
My guess is that I could get it on for $3.50 per combination.
RE: "However, If it is to rally further, i have worked out a strategy already..... I will tell you if the oportunity presents itself."
It would be interesting to know your game plan here. My guess/hunch is that you close either the Put calendar and (a)move the butterfly up a few strikes or (b) create a call calendar at a higher strike.
Juan,
Here is another configuration;
http://platinum.optionetics.com/cgi-bin/platinumv30/op4email.php?trade_name=RMBS|04-17-06|50-60-70MayCFly|45PAug-45PMay&trade_date=2006-04-17&sym=BNQ&num_legs=5&tra0=-1:Q06:45.000:6.300:RMBS:2006-04-17:121.55999756:FFFFFF:0:0&tra1=1:E06:50.000:4.600:RMBS:2006-04-17:120.44499969:FFFFFF:0:0&tra2=-2:E06:60.000:2.100:RMBS:2006-04-17:117.36199951:FFFFFF:0:0&tra3=1:E06:70.000:1:RMBS:2006-04-17:118.64099884:FFFFFF:0:0&tra4=1:T06:45.000:8.100:RMBS:2006-04-17:82.31099701:FFFFFF:0:0
+1 May $50C @ $4.60
-2 MAY $60C @ $2.10
+1 MAY $70C @ $1.00
Debit of $1.40
+1 AUG 45P @ $8.10
-1 MAY 45P @ $6.30
Debit of $1.80
Total Debit of $3.20
I will e-mail you the comparison.
Point taken and agreed on the fact you have a low sour point considering the 3rd wave on the elliottician software.
My only concern is that even though the volatility is limited (Not planning to put real trade) with LTB, it is not eliminated completely. Technically volatility can drop all the way to around 50, i.e. a good drop. You are going to still make money. However if we choose stocks that are in the mid range not too high or too low volatility it would be ideal based on past history.
Case in point is SPY volatility dropped since 2000s.
Juan: "However, If it is to rally further, i have worked out a strategy already..... I will tell you if the oportunity presents itself."
Fortitude: It would be interesting to know your game plan here. My guess/hunch is that you close either the Put calendar and (a)move the butterfly up a few strikes or (b) create a call calendar at a higher strike.
Juan: well, I am not sure what would happen, but suppose the stock goes to $55 and appears bullish still and only a week has passed. One could take profits on the long calls and buy calls longer term, leaving a bullish ratio. We would leave the put calendar as a hedge.
Fortitude: Here is another configuration;
+1 May $50C @ $4.60
-2 MAY $60C @ $2.10
+1 MAY $70C @ $1.00
Debit of $1.40
+1 AUG 45P @ $8.10
-1 MAY 45P @ $6.30
Debit of $1.80
Total Debit of $3.20
Juan: at $45, the calendar is too high, leaving little protection to the downside, in my opinion. But it looks like RMBS may be rallying today again... BTW, IB does not allow a 5 legged trade in a single ticket so I had to split this trade in two. In this case, IB does not seem to hav an advantage. I wonder if there is a difference in the execution. IB has impressed me with its power, OX in its simplcity.
Varum: Technically volatility can drop all the way to around 50, i.e. a good drop.
Juan: What you are saying is that volatility can drop and change the configuration of the trade. OK, we wil keep that in mind as a negative in this trade. The Butterfly should benefit from such a decrease in volatility, accelerating the gains before expiration, but I don't thing it would alter the results at expiration. The put calendar has a huge IV for the sort puts and a more moderate IV for the long puts, but we have seen that strong declines in IV would affect both long and short term options. Perhaps I am not as well hedged as I think I am. Still, I feel very good about this trade, because even at the sour spot, I don't think I will lose money. We will see.
I just found out from IB that there is a margin on my OIH. A standard long fly. I put a ticket with them as their help desk blamed it on the system.
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