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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You would remember that I have said: "The best time to rollover shorts in a PCCRC is 1 week before expiration". While I stand by that statement, LRCX has presented itself as a special case, because of the earnings report (thursday) and the subsequent strong decline in volatility that usually occurs the day after.
Here is the trade as it currently stands in my portfolio:
I discussed in a previous post that the April shorts were excessively high in I.V. and that this was typical of the pre-earnings. Ironically, yesterday there was a strong decline in I.V. of options with various expirations, so that the volatility of the front month options remains the highest, so buying them back to sell front month options is NOT a good deal. To complicate matters, the movement in Delta was not strong enough to compensate for the drop in Vega. The stock price is slightly out of range to capture Theta gains.
The good news is that we are very close to expiration, and should the stock begin to move sideways, Theta should help the trade, unless the stock continues to rally, in which Delta would be our hero. Thus I was not prepared to leave the trade or make any changes until I see a change in Vega. This is why:
Front month Vega will continue to decline while second month Vega will turn around as investors reposition their trades. Demand for May options will increase while April positions will be closed, once the earnings is out of the way. Go do some back testing in stocks that have high volatility before earnings, and examine what happens subsequently. Once the IV of second month increases, I should be able to do my rollover. Should the stock continue to move sideways, I could also exit the position without much of a loss. If the stock continues to rally strongly, then Delta will facilitate some gains.
2 comments:
Juan,
You were right about the excessive price of the front month sold April options on LRCX.
On Thursday I did the rollover for a $1.40 credit. Today I could have got over $2.00.
Since I have entered the LRCX, SBUX and DNA trades I have lost just over $500. Having been quite relaxed early last week, when I was down approx. $150-$200, this has been quite dramatic, considering that currently I do not have many positions on, in those trades.
LRCX is close to the money now... Too bad for the stock, I thought it looked strong after earnings. This is one of those that may be ATM at expiration, so I could rollover or close the position near break even. My post about earnings is quite clear, fortitude, see how the front month IV declines further and the second month picks up. Earnings is a wild card with these trades, but a couple of days later, IV normalizes and begins to increase again. Since it is still low, a spike on long-term options may still occur and make this a profitable trade. On conventional TA, It looks rather bearish for LRCX now, as it failed to reach new highs. So make money with Delta, you'd have to sell more calls than puts, but be careful with the risk graph, you want to be as neutral as possible. The effect of earnings is something to keep in mind for future reference.
SBUX looks good to me.
DNA is declining now, and my set up will be profitable is the stock continues to decline. I see that happening because earnings are out of the way. This is a perfect example how PCCRC could make money in either direction. I hope you don't lose heart on this one.
We have to realize that no matter what we do, we are going to have losing days. Your apparent loss right now may turn into winnings. BUT only time will tell. I think you are experience dramatic changes in your account because you only have 3 trades. I have good winners appart from these 3 trades. The PCCRC is a way to keep in this volatile markets and not lose your shirt, but rather stay in the game so that when the market cooperates we can take advantage of the strong moves (up or down).
I hope this helps.
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