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Using Options for Swing Trading


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Using Options for Swing Trading

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  #41 (permalink)
Market Wizard
Chicago, Illinois
 
Experience: Intermediate
Platform: Tradingview
Broker: ThinkOrSwim
Trading: Forex, Stock & Options
 
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Bermudan Option View Post
Bbry puts sounds kinda good because the stock is so volatile you will pocket some nice change if they expire worthless. Still not a fan of risk outweighing reward but I might grow to like it down the road perhaps. If your losses are $10,000 and your wins are $3,000, you have to be right like 75% of the time just to break even, right? I prefer grinding it out with singles and doubles and getting a home run every now and then instead. To each is own though, sounds like it works for you. AAPL looks like it might be moving sideways for the foreseeable future so credit spreads aren't a bad idea there potentially. I might grab some long term LEAPs for a cheap bull call spread down the road.

Anyways haven't made any short term trades recently. With the profits from my HNZ trade earlier in the thread I opened a Roth IRA account. Everyone should look into those if they get a chance. The best way to describe it is a savings account where you can't take out any of the interest (read: profits) that you earn. I have Dec calls on JASO w/ a $6 strike and a Diagonal bull call spread on the iShares Italy ETF Dec expiration on the longer termed options as well. I think that the euro crisis will rebound this year hopefully.

Sent from my Nexus 4 using Tapatalk 2

JASO up 10% today after like a 3% pullback in the morning. Talk about volatile. Options have increased just under 50% already . Should have bought more lol. Will do some serious DD over the weekend.

Also earlier today I bought Jan 2015 LEAPS in SIRI and CLWR. Outright options, no real spreads to implement at the moment because volatility is extremely low for both of the underlyings. Plus I made a pretty bullish bet that both will double in a year and a half, so selling any options will either bring in a minimal amount of profit, or it will cost me more in margin than it is worth.

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  #42 (permalink)
Market Wizard
Chicago, Illinois
 
Experience: Intermediate
Platform: Tradingview
Broker: ThinkOrSwim
Trading: Forex, Stock & Options
 
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Posts: 538 since May 2011
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I have a few option trades scheduled to give live Monday:

TSO
Strategy: Bullish Calendar Spread
Options Sold: $60 May 2013
Options Bought: $60 June 2013
Implied Volatility This is higher than I would like.
Initial Debit/Margin Requirements: $1.04 x 3 ct ($104 x 3 contracts = $312)
Stop loss @: $200 + commissions
Reasoning: $60 is a key resistance area on the daily that was sold off from 2x already this year. If the stock does break out, I think it will hesistate/consolidate at the $60 first. I think that rules out the stock being above $60 prior to May expiration. I have been waiting for the energy sector to break out and I am hoping that it does before June expiration.
Special Notes: Because this has weekly options. I can also sell weeklies against the position if the May options expire worthless to bring in more capital.
End Goal: I want to be long TSO for a reduced cost


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  #43 (permalink)
Market Wizard
Chicago, Illinois
 
Experience: Intermediate
Platform: Tradingview
Broker: ThinkOrSwim
Trading: Forex, Stock & Options
 
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Posts: 538 since May 2011
Thanks: 544 given, 317 received


PNC
Strategy: DIagonal Bear Call Spread
Options Sold: May 70 calls
Options Bought: August 72.5 calls
Implied Volatility Extremely low.
Initial Debit/Margin Requirements: $682 debit AND $2750 tied up in margin
Stop loss @: $200 + commissions
Reasoning: PNC has been in a steady uptrend as evidenced on the chart. $70.5 is the high time since the recession so I think there might be some short term hesitation if/when it meets that level. Financials are doing well overall, and the PNC long term options are cheap thanks to low IV so I thought it was smarter to buy further out and take advantage of the discounted price. Also, the next Earnings Report will be covered in the August calls.
Special Notes: As you can see, diagonal bear call spreads tie up a LOT of capital. PNC doesn't have any weeklies, so my only real plan is to sit on my hands and/or potentially turn the trade into a calendar spread when the May options expire. It ties up too much capital to create another diagonal bear call spread again more than likely.
End Goal Own the PNC August calls for free or for a severe discount. I want to participate in XLF's rally to $20.


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  #44 (permalink)
Market Wizard
Chicago, Illinois
 
Experience: Intermediate
Platform: Tradingview
Broker: ThinkOrSwim
Trading: Forex, Stock & Options
 
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Posts: 538 since May 2011
Thanks: 544 given, 317 received

AAPL
Strategy: Double Diagonal aka Diagonal Iron Condor aka man this seems complicated
Options Sold: $440 Put & $460 call (Both expire 5/10/13)
Options Bought: $430 Put & $470 call (Both expire 5/24/13)
Implied Volatility For Apple, these volatility levels are very low, which is a prerequisite for calendar spreads. I am betting that volatility levels will increase during a big move lower (which will inflate the price of the options) or stay relatively the same as the underlying pushes higher (which works against my position but to a minimal degree)
Initial Debit/Margin Requirements: $233 debit AND $1000 in margin
Stop loss @: $200 + commissions
Reasoning: As I mentioned here, I believe that AAPL is at a pivotal price level right now, testing its intraday VWAP. I think that institutional buyers are gonna be hitting the bid/ask pretty hard in the near future which will lead to a big price swing. I have no idea which direction and given the low volatility, a double diagonal appears to be a safe bet.
Special Notes: This should be interesting... lol
End Goal: There are two other ways to think of this trade that help understand the end goal:
1.) I have a short strangle in the near term and a long strangle in the longer term or...
2.) I have a diagonal bear call spread and a diagonal bull put spread.

In both instances, I am betting that the underlying does nothing for a week, in the next two weeks, I am hoping that price action picks up in a major way, and it would be a win-win situation if Implied volatility spiked as well.


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  #45 (permalink)
Market Wizard
Chicago, Illinois
 
Experience: Intermediate
Platform: Tradingview
Broker: ThinkOrSwim
Trading: Forex, Stock & Options
 
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Posts: 538 since May 2011
Thanks: 544 given, 317 received

Filled and stopped out of my AAPL double diagonal. Not sure if I set my trigger order wrong, or if I was just lucky. Lost only about $80.

No fill on PNC or TSO. TSO is running without me so I might have to yank that off the table. PNC I might turn into a GTC order.

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  #46 (permalink)
Market Wizard
Chicago, Illinois
 
Experience: Intermediate
Platform: Tradingview
Broker: ThinkOrSwim
Trading: Forex, Stock & Options
 
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Posts: 538 since May 2011
Thanks: 544 given, 317 received

Filled on PNC and stopped out. Set my OTO order wrong.

Re-entered my position like Thursday. Also entered a few other trades. Will update later this evening

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  #47 (permalink)
Market Wizard
Chicago, Illinois
 
Experience: Intermediate
Platform: Tradingview
Broker: ThinkOrSwim
Trading: Forex, Stock & Options
 
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Posts: 538 since May 2011
Thanks: 544 given, 317 received


Bermudan Option View Post
PNC
Strategy: DIagonal Bear Call Spread
Options Sold: May 70 calls
Options Bought: August 72.5 calls
Implied Volatility Extremely low.
Initial Debit/Margin Requirements: $682 debit AND $2750 tied up in margin
Stop loss @: $200 + commissions
Reasoning: PNC has been in a steady uptrend as evidenced on the chart. $70.5 is the high time since the recession so I think there might be some short term hesitation if/when it meets that level. Financials are doing well overall, and the PNC long term options are cheap thanks to low IV so I thought it was smarter to buy further out and take advantage of the discounted price. Also, the next Earnings Report will be covered in the August calls.
Special Notes: As you can see, diagonal bear call spreads tie up a LOT of capital. PNC doesn't have any weeklies, so my only real plan is to sit on my hands and/or potentially turn the trade into a calendar spread when the May options expire. It ties up too much capital to create another diagonal bear call spread again more than likely.
End Goal Own the PNC August calls for free or for a severe discount. I want to participate in XLF's rally to $20.


I am in this trade right now, it was going good but the move higher today hasn't been met with open arms by me 100%.

Here is an interesting thing about this spread. An options delta shows how much money I am likely to make if the stock moves $1. Gamma on the other hand shows the rate at which the delta changes. The PNC short calls are set to expire soon and so the gamma can really get moving in a hurry in as extrinsic value evaporates. The long calls that expire in August on the other hand are full of extrinsic value, so the gamma is low. What this means is that for every $1 above the $70 strike, the short option will lose close to a $1, while the long option might only gain $0.6. That means the I will lose $0.40 for every $1 that the stock goes up.

As a result, I currently have a move in the direction I guessed, but because the gamma is so high for the short calls, I am now losing money slightly faster than I am making it if PNC continues to push higher. Hopefully the $70 level acts as resistance as it was the 2010 high. If not, I will have to buy back the short calls for a loss and decide whether I want to hold onto the Long $72.5 Calls or not.

It makes sense when you think about it, but I can explain it a bit more if anyone is interested in learning more.

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  #48 (permalink)
Market Wizard
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Experience: Intermediate
Platform: Tradingview
Broker: ThinkOrSwim
Trading: Forex, Stock & Options
 
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Posts: 538 since May 2011
Thanks: 544 given, 317 received

Market Overview
Overall Market
I feel like the SPY is due for a pullback so I am hesitant on creating any more outright call purchases for now. I am leaning towards more calendar and diagonal spreads so that my positions have (some) built-in downside protection. I have also moved stops higher for profitable trades.

Semiconductors
I want to give QCOM another shot. It has rebounded nicely from its E.R. sell-off. It is directly/indirectly related to the semiconductors industry which I am bullish on as well. I think QCOM has some real upside potential and I want some type of exposure to the Semiconductors rally that is taking place.

Energy Sector
Energy is starting to break out in my opinion. No super heavy volume yet, but if you pull up a weekly chart, it just broke through a key resistance area. It might pull back this week and push higher the following week or something, but long story short, I want to be overweight the Energy sector in 2013. I will looking to establish positions in my main trading account as well as my Roth IRA account (link in signature)

Materials Sector
This sector looks like it is on the verge of really breaking out on the monthly timeframe. The weird thing is, half the sector is full of dogs (X, FCX, NEM and other companies with metal exposure) and then the other half are high flying and on a tear. There are about three potential trades I am contemplating.


Account Related
Day Trade Limits
I am out of day trades in my regular account (I am not used to using a margin account for option trading). I have a trade I want to establish in CF which is low risk and high reward, but because of the potential for being stopped out the day I put the trade on, I don't want to risk putting the trade on in my main account and exceeding three day trades, so I will used my IRA account even though the trade will only last like a month. I have four trading accounts, but the IRA account is the only other one with the clearance to do vertical spreads.

HLF adjustment
I have an existing position (2 Oct $40 Puts @ $3.40) and these puts have been slowly losing money as HLF drifts higher. I know there are a large short interest in this positions so it definitely has short squeeze potential but I have a somewhat tight stop in place. It is at a key resistance point right now and may take off next week. I have been sitting here, twiddling my thumbs, when I could sell some weekly $43 puts against my long Oct $43 puts. This will turn my outright puts into a bear calendar spread. That way I will be making money while I wait, and reducing my costs overall if the market does push higher and the long option is stopped out.

Commission fees
I managed to negotiate a lower price with ToS/TD Ameritrade but I am still paying a lot in commission. I am definitely not overtrading, but I want to cut costs wherever I can if I plan to do this full-time in the future. I have two cash accounts with the discount broker Choicetrade but I am looking to turn one into a margin account. A 4 legged position on ToS costs me around $23, but on Choicetrade, it will literally cost me $5.60. That is 75% cheaper! If Choicetrade gives me Lvl 4 clearance, then I will move almost all of my trading to the discount broker.

Option selling
For the multi-leg ToS option traders and/or option sellers out there, when you open a sell-to-open position, also set it to trigger a good-until-canceled order to buy the option back at a limit of $0.05. This is because if a contract is valued at $5 or less, ToS does not charge any commission on the trade.

I tried it with success earlier this week on LULU. It will save you money and encourages you to get out of the low-reward high-risk position ASAP.

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  #49 (permalink)
Market Wizard
Chicago, Illinois
 
Experience: Intermediate
Platform: Tradingview
Broker: ThinkOrSwim
Trading: Forex, Stock & Options
 
Bermudan Option's Avatar
 
Posts: 538 since May 2011
Thanks: 544 given, 317 received


Bermudan Option View Post
I am in this trade right now, it was going good but the move higher today hasn't been met with open arms by me 100%.

Here is an interesting thing about this spread. An options delta shows how much money I am likely to make if the stock moves $1. Gamma on the other hand shows the rate at which the delta changes. The PNC short calls are set to expire soon and so the gamma can really get moving in a hurry in as extrinsic value evaporates. The long calls that expire in August on the other hand are full of extrinsic value, so the gamma is low. What this means is that for every $1 above the $70 strike, the short option will lose close to a $1, while the long option might only gain $0.6. That means the I will lose $0.40 for every $1 that the stock goes up.

As a result, I currently have a move in the direction I guessed, but because the gamma is so high for the short calls, I am now losing money slightly faster than I am making it if PNC continues to push higher. Hopefully the $70 level acts as resistance as it was the 2010 high. If not, I will have to buy back the short calls for a loss and decide whether I want to hold onto the Long $72.5 Calls or not.

It makes sense when you think about it, but I can explain it a bit more if anyone is interested in learning more.

Just a quick update on this position, I lucked out and bought back the short calls on the sell off we had Thursday afternoon, and so now I am naked long the August $72.5 calls. Got a nice little chunk of change on Friday's rally as a result.

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  #50 (permalink)
Market Wizard
Chicago, Illinois
 
Experience: Intermediate
Platform: Tradingview
Broker: ThinkOrSwim
Trading: Forex, Stock & Options
 
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Posts: 538 since May 2011
Thanks: 544 given, 317 received


Gonna be posting my tradervue stats this week. I've been trading but haven't updated this journal in a while. Looking to get back in the swing of things on futures.io (formerly BMT).

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