How to view the entire chart:
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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I have entered a PCCRC on ANF.
Right after earnings, volatility tends to decrease while Delta increases. When a stock has good earnings and the company gives good guidance, it should not matter that the stock originally jumps excessively. If the market has a bullish sentiment, we can make further delta gains in the next few days. How do I know that we are in a bull run? You know that I have been bearish for months now. A simple way to call it a bull/bear market is to compare the 200dMA with the 50dMA. in bull markets 50dMA>200dMA in bear markets 200dMA>50dMA. Watch out for undefined markets. In sideways markets, the moving averages tend to interlace. No matter, the PCCRC should take advantage of those markets too, if only volatiltiy cooperates.
Take a look at this chart to check those moving averages. This is is a weekly chart do the 200dMA=40wMA, and 50dMA=10wMa. Visit stockcharts.com and save this format for future use (it is free):
http://stockcharts.com/h-sc/ui?c=$SPX,uu[w,a]waclyyay[df][pb10!b40!f][vc60][iul14!lp14,3,3]
Here is the trade entered.
I intended to fill 4 more combinations, but they would not fill at a good price. I will keep an eye on the trade tomorrow, for a decline in the price. The advantage of Interactive Brokers is that it allows the combination to be entered as in a single ticket. This allows me to progressively increase my bid until it fills. Doing this with a portion of the total trade, results in various prices, but I can be sure that I did not overpaid. Here is the confirmation. Please focus on the average price:
Note also the fill time, then you will get an idea as to how I accomplished this. I entered the trade in the middle of the day at a low price. By 2pm, I knew what I had a good chance to fill the trade at a good price, so I started to increase the bid until they filled at 2:44, 2:47 and 2:57. By 3pm, volatility begun to pick up and the filling stopped. The professional hour does increase I.V.
Here are my positions on Interactive Brokers:
Here is the activity in the stock. My signal to get in was the spike in volume and % change in the stock. Let's say 10%!
4 comments:
Hi Bryan, nice to see that you are still with me.
I did not think too hard on about this. IB allows me to display the IV of each leg of the trade in one spreadsheet. Volatility was more or less the same for Sept, Nov and Dec (all in the mid to low 30's).
My gut feeling is that Nov. is too close. Remember my RIG trade could have made good money if I had gone to Nov. rather than Jan, but then that trade was enter a month or two ago, so I think that this time Jan looks good.
If I go to Nov. I fear, time would not be enough for a strong move. So give yourself >3 months between shorts and longs but not too much so that the cost of your longs far outweights any strong move in the stock price, thus losing the effect of Delta.
In the case of RIG, I wanted to take advantage of an IV skew, so I picked the expiration with the lowest IV. Instead it was DELTA who changed the most.
Bryan, I can't go any further than what I have said. I use my instinct. You can check all of the trades I have shown you and figure out the difference in time between front and back month, and still get it wrong or actually miss an oppotunity by staying out. So the more you do these the more you create your own bias. So TRY IT!!!
Juan,
You could have made at least $0.50 per contract the next day on this trade. So with 8 contracts, at least $400 in one day.
Bryan, I have exited this trade in good profit. The reason being that I intend to close my IB account. You can always take profit (sell calls) and be sure that the resulting trade looks like a straddle. If the IV is begining to decline, it may be a good time to close the position. If the IV is below 40% and on the rise, stay in the trade.
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