September 4, 2023 - 10:29 am

Today’s Options Insiders Live Trading Room has been canceled.

March 6, 2020 - 3:19 pm

Just a quick heads up, as you many of you have noted, the VXZ order should be “Sell to close” not “Buy to close” – that was my mistake.  I’m used to use closing short positions! Regardless, make sure you close your VXZ today and collect the profits before the weekend.

March 6, 2020 - 11:48 am

Closing Alert:

We have two trades to close today, well our only two trades.  We got the direction right on ROKU but used the wrong type of trade as it blew through our put butterfly (we put it on before the market meltdown, so no real surprise).  We still have to close that ROKU fly because it’s in the money and we don’t want to get assigned on anything after expiration.  We’ll put in a closing order for zero, as seen below.   Second, the VXZ trade was quite a bit more successful than what I would have predicted after just putting on the position earlier in the week.  But, we’ll certainly take it!  Let’s close it out and take profits. (At a closing price of $ 3.50, we’re looking at 367% gains or thereabouts.)

Trade Details (ROKU and VXZ):

March 3, 2020 - 1:17 pm

Trade Alert:

Our normal trades using butterflies or backspreads are not the best types of trades to do in a very high volatility environment.  I want to buy some volatility here as I think the Fed rate cut signifies that there’s more pain ahead and we could have more stock selling to come.  VIX and VXX options are expensive right now so I’m turning to VXZ for the solution. VXZ is the middle part of the VIX term structure as opposed to the front months, so it isn’t as expensive.  We’re doing a simple trade in VXZ, but the product is more complicated, so watch the video linked below if you have questions.

Trade Details:

Buy the iPath VIX Mid-Term Futures ETN (VXZ) March 20th 20 calls for $ 0.75.

This is a simple call buy (and I explain why a spread isn’t necessary in the video). I recommend a 3-lot.

Trade Video Link:

https://content.jwplatform.com/videos/itW6r08u-bK67iJnL.mp4

February 27, 2020 - 1:25 pm

Trade Alert:

Tough call on what do with SMH right now.  The 132 puts were actually in the money this morning.  Tomorrow SMH could be at 125 or 140.  I would easily hold this trade as a hedge overnight, except that the options expire tomorrow.  The 132 puts have  a lot of value today, but tomorrow they will go to zero if they aren’t in the money.  We can’t take a chance that we settle around 132, which is max loss.  As much as I prefer to see if we can make money on this trade, the risk outweighs the benefit.  So, let’s close it here.

Trade Details:

Sell to close the SMH February 28th 139-132 put backspread for around $ 3.12.

Buy back the 139 puts and sell out the 2 132 puts as seen in the trade details below.  Anywhere you can filled is fine, as long as you close by the end of the day.  The market is volatile so you may get filled anywhere from $ 2.50 to $ 3.50 at this stage.  You can hold until the end of the day, but I recommend getting out of this trade before market close.

February 19, 2020 - 1:49 pm

Trade Alert:

The market has been quite exuberant lately, and I feel it’s prudent for us to take at least a small contrarian position.  Roku (ROKU) is a TV streaming service that is trading at quite a lofty valuation. The stock is volatile so we’ll use a put butterfly to keep our costs low.  I discuss the reasoning behind this trade and the payout in the video linked below.

Trade Details:

Buy to open the ROKU March 6th 115-120-125 put butterfly for $ 0.61.

Anywhere around this price is fine. The most you can lose is the premium spent.  The breakeven range is from roughly 115.60 to 124.40.  Max gain is right around $ 4.40 if Roku closes at $ 120 at expiration.

Trade Video Link:

https://content.jwplatform.com/videos/ua1xlb7A-bK67iJnL.mp4

February 14, 2020 - 2:50 pm

Closing Alert:

Our IWM butterfly expires today. It is a winner right now, so let’s go ahead and close it with the end of the day approaching and a three-day weekend ahead.  The trade details are below.  At a closing price of $ 0.87, our return is 27.9%.

Trade Details:

February 14, 2020 - 1:25 pm

Just a heads up that I’ll be closing the IWM position towards the end of the day.  If you don’t think you’ll be available then, make sure you close the position now so you don’t end up getting assigned on anything over the long weekend.

February 13, 2020 - 12:18 pm

Closing Alert:

Let’s go ahead and close our GLD butterfly.  It expires tomorrow and it’s a nice winner right now.  At the closing price of $ 1.28, our return is 156%.  See trade details below for how to enter the closing order.

Trade Details:

February 7, 2020 - 12:28 pm

Trade Alert:

It’s been interesting looking at the potential put backspreads this week, but at the end of the day, the best trade is still our old standby SMH.  See the trade details below with a full discussion of the trade in the video linked at the bottom.

Trade Details:

Buy the SMH February 28th 139-132 put backspread for around 40 cents.  You will be selling the 139 puts and buying double the 132 puts.  I recommend doing 2 spreads.  See the video for the payout/risk discussion.

Trade Video Link:

https://content.jwplatform.com/videos/OoSHBxUT-bK67iJnL.mp4

January 31, 2020 - 12:05 pm

Trade Alert:

We have two open positions to manage and a new call butterfly to trade in IWM.  We are closing the short puts in both of our backspreads to be safe and buying a call butterfly in case IWM reverses higher in the next couple weeks. I discuss the reasoning behind the trades in the 5 minute video linked below.

Trades:

Buy to close the SMH January 31st 136.5 puts for around $ 0.06.

I wouldn’t try to include the 129 puts in this as it will be harder to get filled. You may have to pay up to 10 cents or more… that’s fine. It’s important that you close this short put today just in case.

Buy to close the TLT February 14th 135.5 puts for around $ 0.04.

With a couple weeks to go to expiration and the long 132 puts only worth about a penny or two, we may as well hold the long puts just in case TLT changes course.

Buy to open the IWM February 14th 162.5-165.5-168.5 call butterfly for around $ 0.68.

Anywhere around this price is fine.  I recommend a 3-lot, which means the most we could lose on the trade is around $ 200.  The butterfly will be profitable anywhere between roughly $ 163.20 and and $ 167.80.

Trade Details:

Video Link:

https://content.jwplatform.com/videos/Ng3DP13B-bK67iJnL.mp4

January 21, 2020 - 12:40 pm

Trade Alert:

We’ve got a couple put backspreads on, so let’s mix it up a bit with a butterfly trade.  I’m bullish on precious metals as they tend to see a lot of investor cash when interest rates are low. Moreover, with no rate increase on the horizon, I think investors will continue to park cash in gold on other safe-haven investments.

The easiest way to invest in gold is through SPDR Gold Shares (GLD), which is based on physical gold.  GLD is trading for over $ 146 so it can be expensive to buy calls or even call spreads.  However, we can make a moderately bullish bet on gold without spending a lot in premium by using a call butterfly.  See video below for details.

Trade Details:

Buy the GLD February 14^th 147-150-153 call butterfly for $ 0.50.

We are buying the 147 and 153 calls (outside strikes or wings), while selling double of the 150 calls (middle strike). Anywhere around this price is fine.  I recommend a 3-lot which costs around $ 150 in total premium. That’s the most we can lose on the trade.  However, anywhere between $ 147.50 and $ 152.50 is a profitable range for us at expiration.

Trade Video Link:

https://content.jwplatform.com/videos/XkuRqVhF-bK67iJnL.mp4

January 17, 2020 - 2:38 pm

I don’t see any new trades I want to do this week in Options Profit Engine. Nothing jumps out as me as a trade we must make. I do have a couple stocks I’m following and I think they’ll be a trade there early next week – market permitting.  The market is closed on Monday, so the most likely time for our next trade is Tuesday.

January 10, 2020 - 1:30 pm

Trade Alert:

First off, this is a reminder that we can let the January 10th SMH put backspread expire.  It isn’t close to our short strike of 136 so we can let it expire worthless and collect the full credit.  We still have the January 31st SMH put backspread that has three weeks to go to expiration.  Today, let’s add another put backspread to the mix, this time in TLT.  I talk about the rationale and the payoff for the trade in the video, linked below.

Here’s the trade:

Buy the iShares 20+ Years Bond ETF (TLT) February 14th 135.5-132 put backspread for around a $ 0.28 credit.  (Sell the 135.5 and buy double of the 132 puts.)

I recommend 3 spreads (1 or 2 for beginners) since we haven’t traded TLT before using backspreads, but certainly do what you are most comfortable with. 3 spreads requires around $ 1,000 in margin.  This trade will generate an 8% yield in 35 days if we capture the entire credit.

Trade Details:

Video Link:

https://content.jwplatform.com/videos/BnnXWGXj-bK67iJnL.mp4

January 3, 2020 - 2:48 pm

Trade Alert:

We haven’t had a trade in a while due to the holidays, but also because I haven’t found a put ratio backspread worth doing – until now.  We are going to use SMH again even though we have a trade on in there already.  That trade expires next week and this one won’t expire until January 31st, so there should be very little overlap.  Our spread will be a little wider than normal due to the additional volatility today because of the Iran situation.  That’s okay.  We’ll just do 2 spreads instead of 3 (or 1 for beginners).  Please watch the video for detailed reasoning behind the trade and how the payout/risk works.

Trade Details:

Buy the VanEck Vectors Semiconductor ETF (SMH) January 31st 136.5-129 put ratio backspread for a $ 0.43 credit.  Sell 1 of the 136.5 puts and buy 2 of the 129 puts per spread.

For every $ 750 needed in margin per spread, we can make $ 43 in credit (5.7% yield in 4 weeks).  Remember, this trade can also make money on the downside because of the double long puts.

Trade Video Link:

https://content.jwplatform.com/videos/aGN4tqVz-bK67iJnL.mp4

December 19, 2019 - 1:43 pm

Trade Alert:

Today we are closing our IWM put ratio backspread for near the max credit and opening a new put ratio in SMH.  For details of the trades, please see the video linked below.

Trade Details:

Sell to close the IWM December 27th 156-150 put ratio backspread for around $ 0.02.

Remember, to close the trade we are buying back the short 156 strike and selling out the double long 150 puts.  Closing at 2 cents will results in 4.7% return on cash.  Don’t worry about adjusting the price a bit in order to get filled.

Buy to open the SMH January 10th 136.5 -130.5 put ratio backspread for around a $ 0.35 credit.

As a reminder, you selling the 136.5 strike and buying double of the 130.5 strike.  I did a 3 x 6 spread but you can adjust according to your risk level/account size.  I discuss the pay out scenario in detail in the video.

Video Link:

https://content.jwplatform.com/videos/EOCyAn66-bK67iJnL.mp4

December 13, 2019 - 12:22 pm

Trade Alert:

We’re going to close MU today for about a 59% winner and open up a new call butterfly on Biogen (BIIB).  BIIB volatility has dropped quite a bit and it looks like a good bet to drift higher in the next couple weeks. Because it’s a high priced stock, butterflies are a good choice to use for directional trades as they keep the costs reasonable.  I discuss the trades in detail in the video linked below.

Trade Details:

Buy to open the BIIB December 27th 307.5-315-322.5 call butterfly for around $ 0.85.

You may be able to get closer to $ 0.70 if you are willing to wait.  I’d start there and move the price up 5 cents at a time.  Max loss is whatever we pay for the trade.  Max gain is at 315 at expiration, with the profit range between 307.5 + premium paid and 322.5 – the premium.  Use the screenshot below to set up your trade if you are new to butterflies.

Sell to close the MU December 20th 47-51-55 call butterfly for around $ 1.21.

With earnings coming up next week, MU isn’t as likely to be at this level after the news.  So, let’s not take any chances and close for nearly a 60% gain right now.  Start at the midpoint of the butterfly bid/ask and move down 1 cent at a time until you get filled.

Trade Video Link:

https://content.jwplatform.com/videos/cCk8D5u3-bK67iJnL.mp4

December 5, 2019 - 1:04 pm

Trade Alert:

Let’s close our SMH put ratio (backratio) and then add a new ratio spread on IWM.  First off, closing the SMH spread for $ 0.09 is a 4.2% return on cash on the trade.  We can now open up a new ratio spread on IWM which expires in about 3 weeks.  The added volatility this week makes this an attractive trade over a relatively short period of time.  As a reminder, it will protect us if the market dives in the next couple weeks, but otherwise, we’ll likely earn a credit of 4%-%5 on cash risked.  I discuss the details in the video linked below.

Trade Details:

Buy to open the the IWM December 27th 156-150 put ratio (backratio) spread for a $ 0.29 credit.  (Sell the 156 put and buy double of the 150 put.)

Any price around this level is fine.  I did a 3 x 6, which is my standard recommendation.  Do more or less depending on your comfort level and account size.

The second trade listed is the closing trade for SMH.  Sell to close the SMH December 6th 128.5-123 put ratio spread for around $ 0.09.

Trade Video Link:

https://content.jwplatform.com/videos/G14KWlsv-bK67iJnL.mp4

November 22, 2019 - 2:25 pm

Trade Alert:

First off let’s close that IWM trade.  You should be able to close it for 1 or 2 cents which works out to a 4.5% return on cash at risk.  Here’s what that closing order should look like:

Okay, now let’s open a new trade.  Semiconductors have had a really good earnings season, but one big company doesn’t report earnings until mid-December. That company is Micron (MU).  I believe MU has the ability to jump higher on or before earnings (December 18th), so we’ll buy a call butterfly expiring December 20th.  That gives us some time for it to drift higher or potentially capture a gap after earnings if we hold the trade that long.  I discuss the trade in the video linked below.  Here’s what that trade looks like:

The most you can lose it the $ 76 in premium per butterfly. Max gain then becomes $ 324 if MU closes at $ 51 at December expiration.  More importantly, our profit range is from $ 47.76 to $ 54.24.  I recommend doing 1 or 2 for beginners and 3 to 5 for more experienced traders.  Remember you buy the wings and sell double of the center strike as seen in that above order entry snapshot.

Trade Video Link:

https://content.jwplatform.com/videos/v0u9laZ6-bK67iJnL.mp4

November 13, 2019 - 11:04 am

Closing Alert:

ARW is right around $ 80 which means it’s probably not going to be at $ 80 on Friday.  Let’s close now as this is likely going to be our highest profit point.  Butterflies can filled at all different prices so try to get filled first at the midpoint or higher and slowly move your limit order down until it gets filled. I got $ 1.50 which results in the trade being a 173% winner.

Trade Details:

Sell to close the ARW November 15th 77.5-80-82.5 call butterfly for around $ 1.50.

November 12, 2019 - 12:06 pm

Trade Alert:

I’ve been praising the virtues of the 1 x 2 put ratio spreads we’ve been using in IWM.  Well, I’ve decided we need to expand the use of that strategy.  So, we are doing the same sort of trade in VanEck Vectors Semiconductor ETF (SMH).  SMH is also an index fund and trades at a similar price to IWM. It has slightly higher volatility so we collect a bit larger credit for the trade.  Other than that, the same concepts apply to this trade as the one we’ve been doing in IWM.  For all the details, watch the video linked below.

Trade details:

Buy to open the SMH December 6th 128.5-123 1 x 2 put ratio spread (selling the 128.5 and buying 2 of the 123 puts) for a $ 0.33 credit.  (My screenshot shows a 30-cent credit but the price has now moved up to about 33 cents.)

Your fill price may vary by a few cents. I recommend 1 x 2 up to 5 x 10 depending on your account size and risk appetite. Remember, if SMH stays above 128.5, you collect the credit.  If it drops, the 123 puts will go up faster than the 128.5 puts go down.  This works out to about 6% return on cash risked in 24 days if we collect the entire premium.

Video Link:

https://content.jwplatform.com/videos/ReXETOxv-bK67iJnL.mp4

October 31, 2019 - 2:14 pm

Trade Alert:

Well, this is closest thing to a real down day that I guess we’re going to get so let’s take the opportunity to place my favorite trade, the IWM put ratio.  For those new to the service, be sure to watch the video below where I place the trade and talk about how it works (it’s 11 minutes so there’s a lot of info in there).  In brief, this trade will provide us with a small credit (generally 5%-7% on cash at risk) but has the ability to serve as a hedge if the market sells off sharply.

Trade Details:

Buy the iShares Russell 2000 ETF (IWM) November 29th 150-144 put ratio spread (sell the 150 put, buy double of the 144 put) for around a $ 0.27 CREDIT.

You may need to use a custom order entry on your order screen depending on your broker.  For new traders, I recommend just doing a 1 by 2 or 2 by 4 to start with. I discuss the payout and risk details in the video below.

Video Link:

https://content.jwplatform.com/videos/PQV41E7Z-bK67iJnL.mp4

October 24, 2019 - 2:25 pm

Trade Alert:

Let’s a do another bullish call butterfly trade. The AMP call fly worked out pretty well a week ago, so I found a similar situation with Arrow Electronics (ARW). Like AMP, ARW is undervalued and is setting up for a possible move higher.  The difference is ARW has earnings next week (Oct 31), which I think will be the catalyst for the higher move.  We are doing a call butterfly to keep costs low.  See trade details below.

Trade:

Buy to open the Arrow Electronics (ARW) November 15th 77.50-80-82.50 call butterfly for around $ 0.55.

Any price around this level is fine.  We can only lose the $ 55 in premium per butterfly, while max gain (at $ 80 on expiration) can be $ 195 per butterfly.  We’re looking for ARW to end up in the range of $ 78.05 to $ 81.95.  I recommend doing anywhere from 1 to 5 butterflies depending on your comfort level with the trade.

Trade Details:

October 17, 2019 - 2:34 pm

Trade Alert:

Okay, we have a new trade today plus we’re closing AMP as a winner.  In the video I also talk about the NFLX debacle (their guidance was atrocious as I expected, but the stock still went straight up).  In my opinion, volatility is way too cheap here so we’re going to buy a cheap call spread in UVXY. Details and video below.

Buy to open the ProShares Ultra VIX Short-Term Futures ETF (UVXY) November 1st 23.5-27.5 call spread for around $ 0.61.

We are buying the 23.5 calls and selling the 27.5 calls at the same time.  The most we can lose is the premium spent or 61 cents. At max gain, 27.5 or above, we can make $ 3.39.

Also, sell to close the Ameriprise Financial (AMP) October 18th 140-145-150 call butterfly for around $ 1.20.

Anything around this price is fine. We paid 95 cents for this butterfly so we’re looking at around a 25% winner here.

Trade Details:

Trade Video Link:

https://content.jwplatform.com/videos/a1Uoj29z-bK67iJnL.mp4

October 14, 2019 - 6:02 pm

A quick break from options talk so you can take a close look at what petrified wood looks like up close.  Those are all different minerals that make up the “wood” –  it’s really quite amazing to see in person.

October 9, 2019 - 1:26 pm

Trade Alert:

I mentioned in today’s newsletter that I want to move our NFLX trade to include next week’s earnings.  With the down move today in NFLX, and that fact that many brokers aren’t charging commissions now, it actually makes sense to close this week’s put butterfly and then open a new one for next week.

Here are the trades:

SELL to close the NFLX October 11th 250-240-230 put butterfly for around $ 0.13.

Trade setup:

Now the new trade:

BUY to open the NFLX October 18th 250-240-230 put butterfly for around $ 1.12.

Trade setup:

Because the trade costs over $ 100 per butterfly I only recommend doing 1 or 2 of them (either 1-2-1 or 2-4-2).  We are looking for a big down move on NFLX earnings, with $ 240 being the max gain NFLX price and a profit range of roughly $ 249 to $ 231.  You can only lose the money you spend on the premium.  Max gain will generate a little under $ 9 per fly.

October 2, 2019 - 3:01 pm

This text alert may not have come through for everyone the first time, so I’m resending it.  The email should also be coming out shortly.

Trade Alert:

Two new trades today – a downside trade in IWM which can also serve as a hedge and an inexpensive upside play in Ameriprise Financial (AMP).  The IWM trade is a ratio put spread so it will provide a credit if the market recovers but will gain significant value if the market falls off a cliff. The AMP trade is an attempt to take advantage of a good stock that is oversold because of the broad market selloff and the commission battle between online brokerages.  I discuss the trade in much more depth in the video (link below).

Trades:

Buy to open the iShares Russell 2000 ETF (IWM) October 18th 141-135 put ratio spread (sell the 141 put, buy 2 of the 135 put) for around a $ 0.39 credit.

Margin is around $ 600 per spread so I only recommend doing a 2 x 4 or 3 x 6… of course 1 x 2 is fine as well, especially for less experienced traders.  Anywhere around 39 cents if fine but just make sure you are setting this up to get a credit.  Check the trade details box below to see exactly how to enter the trade.   Max gain/max loss are a bit more complex, so check out the video for details.

Buy to open the Ameriprise Financial (AMP) October 18th 140-145-150 call butterfly for around $ 0.95.

Fill prices may fluctuate because the option bid/ask spreads are wider than normal.  I recommend doing 2 or 3 of these call flies. Remember it’s 1 x 2 x 1 as seen in the trade details box below.  Max gain is $ 405 if AMP stock is at $ 145 at expiration, but anywhere from $ 140.95 to $ 149.05 is a winning trade (not including fees).  Max loss is only the $ 95 per spread you pay in premium.

Trade Details:

Video Link:

https://content.jwplatform.com/videos/7D9zz3Fu-bK67iJnL.mp4

October 2, 2019 - 2:30 pm

Trade Alert:

Two new trades today – a downside trade in IWM which can also serve as a hedge and an inexpensive upside play in Ameriprise Financial (AMP).  The IWM trade is a ratio put spread so it will provide a credit if the market recovers but will gain significant value if the market falls off a cliff. The AMP trade is an attempt to take advantage of a good stock that is oversold because of the broad market selloff and the commission battle between online brokerages.  I discuss the trade in much more depth in the video (link below).

Trades:

Buy to open the iShares Russell 2000 ETF (IWM) October 18th 141-135 put ratio spread (sell the 141 put, buy 2 of the 135 put) for around a $ 0.39 credit.

Margin is around $ 600 per spread so I only recommend doing a 2 x 4 or 3 x 6… of course 1 x 2 is fine as well, especially for less experienced traders.  Anywhere around 39 cents if fine but just make sure you are setting this up to get a credit.  Check the trade details box below to see exactly how to enter the trade.   Max gain/max loss are a bit more complex, so check out the video for details.

Buy to open the Ameriprise Financial (AMP) October 18th 140-145-150 call butterfly for around $ 0.95.

Fill prices may fluctuate because the option bid/ask spreads are wider than normal.  I recommend doing 2 or 3 of these call flies. Remember it’s 1 x 2 x 1 as seen in the trade details box below.  Max gain is $ 405 if AMP stock is at $ 145 at expiration, but anywhere from $ 140.95 to $ 149.05 is a winning trade (not including fees).  Max loss is only the $ 95 per spread you pay in premium.

Trade Details:

Video Link:

https://content.jwplatform.com/videos/7D9zz3Fu-bK67iJnL.mp4

October 1, 2019 - 7:30 pm

Just a heads up that we will be doing a couple new trades tomorrow, including renewing the SPY hedge.

September 27, 2019 - 12:28 pm

Closing Alert:

We’re going to close both the TLT and SPY butterflies since it’s possible both could finish in-the-money (and we don’t want to get assigned on any stock).  We didn’t quite get to the profit level I wanted in TLT, but it’s a winner nonetheless.

Sell (to close) the TLT September 27th 137-140-143 for around $ 0. 55.

Sell (to close) the SPY September 27 295-290-285 for around  $ 0.20.

Depending on when you close, you may end up getting moderately different prices because on expiration day, these levels can move quite a bit.  Use your discretion on when you want to close, but just make sure you get filled before the end of the day.

Trade Details:

September 26, 2019 - 1:35 pm

Trade Alert:

We have an opening and closing trade to make today.  I’m not happy with the price action in FedEx (FDX) so we’re going to close it.  My goal at the beginning of this year was to close a credit spread if we spend more than a day in-the-money and I’m going to stick to that with FDX, which is back around $ 145.  On the other hand, I have a fun trade for us to do in Netflix (NFLX) ahead of next earnings.  I believe the stock will sell off ahead of earnings as the crowd expects it to miss due to intense competition in the streaming video space. We’ll use a butterfly so we aren’t spending too much on the trade.  See the video and screenshot for details.

Trade Details:

For NFLX I recommend a 3-lot (3 x 6 x 3). Max loss is what we spend on the trade $ 81 per butterfly in this case.  Max gain is at $ 240 at expiration which would result in $ 919 per butterfly.

Video Link:

https://content.jwplatform.com/videos/Nh54g0qh-bK67iJnL.mp4

September 24, 2019 - 3:03 pm

Closing Alert:

It’s time to close our CAT trades.  We already at max gain on the put ratio spread and now the call butterfly is over a 200% winner. It should help make up for a chunk of the losses we took on the put credit spread a while back.  I don’t want to wait any longer to close these trades since the market is looking pretty volatile at the moment and we could be in a very different spot by the end of the week when these trades expire.

I’m going to just post the screenshot here of what the closing trades look like, but feel free to email me if you have any questions on how to close.

September 19, 2019 - 1:15 pm

Trade Alert:

First off, we are upgrading our video hosting software so I have no way to post my trade video at the moment.  I did make one and then realized there’s nothing I can do with it!  We’ll stick to text/email for now.

I know we haven’t done regular put credit spreads in a while – and it wasn’t my initial intention to do so today – but I found a great trade in FedEx (FDX) that makes selling a put spread worthwhile.  Also, volatility in the market is way down now that the Fed meeting is past, so I think it’s safer to sell some volatility here.  FDX dropped this week on negative earnings, but those earnings were primarily due to the company ending its contract with Amazon (AMZN).  That now appears to be a smart move since AMZN looks to be taking their delivery service fully in house.  I think FDX made a difficult but correct call and is in a decent position over the long-run.  Of course, we’re selling short term put spreads, so we don’t care if the stock rallies over time , we just don’t want it to go lower over the next few weeks.  With the substantial amount of premium in the puts, I think this is a very promising trade to make right now.

SELL TO OPEN the FDX October 11th 146-142 put spread for $ 0.95 (credit). 

See below for details. We are selling the 146 strike and buying the 142.  I recommend a 3-lot for experienced traders and 1 or 2-lots for new traders.  Anywhere you get filled around that price is fine.  We can lose $ 305 per spread at max loss below $ 142 in the share price, but anywhere above $ 146 is max gain of $ 95 per spread (and the stock price is currently close to $ 151).

We’re also going to close our Avis (CAR) butterfly since it expires tomorrow.  We didn’t quite get close enough to $ 28 to get the gains I wanted to see. But, we are still closing it as a winning trade, albeit a small winner.

SELL TO CLOSE the CAR September 20th 26-28-30 call butterfly four around $ 0.52.

You may be able to get a better price than 52 cents if you hold on.  I wouldn’t wait until tomorrow though to be safe.  If you don’t know how to close a butterfly, just look at the screenshot below and copy the exact format.

September 16, 2019 - 2:39 pm

We’ll get back to trading shortly, but first wanted to share with you this pic I took on my jeep tour between Ouray and Telluride in Colorado this past weekend.  This is at the top of Imogen pass, 13,000 feet high.  You can only get there with an off-road vehicle and a very skilled driver.

September 11, 2019 - 5:28 pm

Just a quick note that I’ll be off the grid tomorrow and Friday and likely won’t see any emails until Sunday afternoon at the earliest.  The Thursday strategy session will still come out tomorrow as usual and you’ll receive the link for the video in your inbox.

September 9, 2019 - 1:31 pm

Trade Alert:

We’ve got two trades today – one a bearish bet on bonds and the other placing a new SPY hedge now that our current one is going to expire today.  I was a bit early on our bearish bond trade in TLT a couple weeks ago.  Now it finally looks like bonds are losing steam.  We’ll attempt to take advantage of that with a put butterfly in TLT.  We’ll also use a put butterfly in SPY as a hedge or simply in the event that volatility rears its head once again.  Please see the video for more info about the reasoning and payoff profile of these trades.

BUY TO OPEN the iShares 20+ Year Treasury ETF (TLT) September 27th 143-140-137 put butterfly for around a $ 0.57 debit.

As always, anywhere around that price you can get filled is fine.  If you haven’t traded a butterfly before, simply place the order in your entry screen as you see in the screenshot below, making sure the middle strike is double the contracts of the outer strikes.  I recommend a 3-lot (3x6x3) for this trade.  That gives us roughly a $ 5 profit range with max profit at $ 140 (TLT share price) at expiration.  You can only lose what you spend in premium on the trade.

BUY TO OPEN SPDR S&P 500 ETF (SPY) September 27th 295-290-285 put butterfly for around a $ 0.48 debit.

Everything I said above about TLT applies to this trade.  The difference is we have about a $ 9 profit range with max gain at $ 290 (SPY share price) at expiration. I also recommend a 3-lot for this trade/hedge.

Trade Details:

Video Link:

https://content.jwplatform.com/videos/Y5OeS03x-bK67iJnL.mp4

September 6, 2019 - 2:49 pm

I mentioned doing a TLT trade this week, but I’m going to wait until Monday to send it out.  We’ll also have a new SPY hedge to put on at that time (as our current one expires Monday after close).  There’s a lot of economic news out and I want the markets to have a weekend to digest the data and see how TLT reacts on Monday – I could see it going either way at this point.  Once we see how bonds react Monday morning, we’ll place a new trade – either a butterfly or a ratio put spread depending on the action.

Separately – I’m going to be off the grid on Thursday and Friday of next week, so our monthly webinar will come out on Wednesday.

September 4, 2019 - 3:25 pm

The Options Profit Engine issue is coming out soon via email, but I thought it may be useful to send the link to the online version, which is up and ready to go:

https://www.investorsalley.com/options-profit-engine-weekly-issue-september-4-2019/

August 30, 2019 - 2:58 pm

Trade Alert:

As promised, here is our new CAT trade, well it’s actually two different trades.  What I’m doing is more complex than anything I’ve done before in Options Profit Engine and it does require a bit more margin than normal.  However, I am a huge fan of this strategy.  Please make sure you’re putting in the trades as shown in the Trade Details section.  The video discusses the trade in depth along with my thought process as I work through the execution.  It’s a 20 minute video.

In the interest of time, I’m going to give you some bullet points on this trade and leave the deeper explanation and payout/risk scenarios to the video.

• If CAT climbs higher, the call butterfly will pay off.  There’s probably a cap on how high we can go given the trade war not being close to resolution.
• If CAT stays around where it is, we can only lose the premium paid which is about $ 65 for 1-lot of all strategies combined, $ 130 for 2, etc.
• If CAT plunges, there is no cap on the gains.
• If CAT moves down quickly, the ratio spread will make money due the increase in volatility and put skew.
• If CAT drifts down slowly, we can hit max loss, but “drifting lower” is basically an oxymoron in this market (and in most markets) and is highly improbable.

Basically, we are doing a call butterfly for our upside play and a put ratio credit trade for our downside.  We haven’t used a put ratio trade before but it simply means we are buying double the number of long puts.  You probably want to do no more than 2 or 3 of these spreads due to the margin requirement.  Although the margin is a bit high ($ 600 for each put ratio spread), the risk is actually quite low due the nature of the trade.  If we move down quickly, the long puts will gain in value faster than the short puts.  It’s getting close to the end of the day so I’m going to let you use the trade details screenshot for the trade execution info.  Please watch the video to see about the payoff and risk of the trade as a whole.

Trade Details:

Video Link:

https://content.jwplatform.com/videos/3qTmZEOz-bK67iJnL.mp4

August 27, 2019 - 1:24 pm

Important CAT info:

I’ll send out an official email later today but many of you have emailed me that you’ve gotten assigned on your short 127 puts in CAT.  First off, this is a surprise and totally unexpected.  Normally early exercise is related to ex-dividend dates, but that happened back in July.  Most likely, there was some kind of pricing anomaly in CAT options (perhaps due to a large order) which created a scenario where exercising puts and selling the stock locked in a profit.  This was likely all being done by computer programs (algos) that constantly scan the market for such opportunities.  They rarely happen in this day and age and there’s no way to predict when it may occur.

For most of you who emailed, I’ve already suggested closing the trade by selling out the stock and the long put.  My plan was to roll this trade out next week, but I think that ship has sailed now given this scenario.  However, if you are going to more than $ 1,000 loss on this position, there are some alternative strategies I highlight below:

• Sell the 123 puts out and just hold the stock until it rebounds (there’s obviously risk here that the market tanks and you lose even more)
• Roll the 123 puts out and down below the stock price (for example, the October 18th 110 puts or something like that) and keep the stock.  That way you have the upside potential of a rebound but are hedged against a further selloff
• Close the 123 puts, keep the stock, and turn the trade into a covered call by selling October calls at a higher strike

I can certainly help you with choices 2 or 3 if you want to email me with questions.

August 26, 2019 - 2:45 pm

Trade Alert:

The market has fortunately held up today so it gives us a chance to put on another SPY butterfly hedge.  I don’t buy this rally for a second so I’m very pleased we are getting a chance to get a hedge on at this levels.  We’ll go a bit wider on our put butterfly this time to give us some additional protection  See the video for details of the trade.

BUY TO OPEN the SPDR S&P 500 ETF (SPY) September 9th 282-276-270 Put Butterfly for a $ 0.59 debit.

I recommend a 3-lot or more if you are extra bearish.  Anywhere you get filled around 59 cents is fine.  Remember a butterfly is 1 x 2 x 1 so you sell double of the middle strike, or 3 x 6 x 3 in the case of a 3-lot.  The most you can lose is the premium x the number of butterflies you do.  Max gain is at $ 276 in SPY but the profitable range on expiration is between $ 270.59 and $ 281.41.  That’s a nice wide range of protection for the next two weeks.

Trade Detail:

Video Link:

https://content.jwplatform.com/videos/5EvfSZjE-bK67iJnL.mp4

August 23, 2019 - 12:51 pm

Closing Alert:

Big selloff today on the trade war escalation news. It worked out well for our SPY butterfly hedge as the middle strikes are near worthless but the 287.50 put still has plenty of juice.  There are a couple more news conferences today between the president and the Fed chair, so let’s go ahead and close our hedge for a profit as the whipsawing could get extreme. We’ll add a new put butterfly to our portfolio on Monday.

SELL TO CLOSE the SPY 287.5-282.5-277.5 Put Butterfly for around $ 1.10 (credit).

Anywhere around this price is fine. It could move quite a bit with the volatility today, so just make sure you get it closed by the end of the day.

Trade Details:

August 22, 2019 - 1:44 pm

Trade Alert:

I’m not very comfortable with this market right now. The VIX term structure is still pretty flat which suggests institutional traders are also not comfortable.  We’re going to go with trades for the time being where we are risking very little capital.  Fortunately, there are some really interesting opportunities out there.  I’m looking at Avis Budget Group (CAR) for a bullish call butterfly.  The car rental business is being hurt by the rise of ride sharing and concerns over the economy.  However, CAR recently had a solid earnings report which ordinary would have been bullish had the market not been collapsing at the time.  I think the stock is way oversold and due for a rebound.  See trade video for details.

Recommendation:

BUY TO OPEN the CAR September 20th 26-28-30 Call Butterfly for a $ 0.44 debit.

Remember to buy the outside strikes and sell double of the inside strike.  Max loss is only what we pay for the butterfly.  Max gain occurs at $ 28 at expiration, but anywhere between $ 26.44 and $ 29.56 is profitable for this trade.  I did a 3-lot but feel free to adjust volume based on your account size.  Don’t worry if you can’t filled right at 44 cents – anywhere around this price level is fine.

Trade Details:

Video Link:

https://content.jwplatform.com/videos/MFwriPRK-bK67iJnL.mp4

August 19, 2019 - 5:37 pm

In case you didn’t see this – I’m presenting for the Options Industry Council on Wednesday as part of their free regular webinar series. My topic is “Options Strategies for Higher Volatility” and it runs for an hour starting at 3:30 CST on Wednesday.  Here’s the link if you are interested in signing up:

https://event.on24.com/eventRegistration/EventLobbyServlet?target=reg20.jsp&partnerref=oicwebsite&eventid=2016662&sessionid=1&key=7A237DB985772438EA24DFA77916D465&regTag=&sourcepage=register

August 16, 2019 - 1:11 pm

Trade Alert:

A lot going on today, so I’m going to be brief in my explanations.  I discuss the trades in detail in the 17 minute video I linked below.  The only thing I’ll mention here is that the new trade is a TLT put butterfly because I believe the parabolic move in bonds has to mean revert to some extent in the very near future.  It’s just not how bonds tend to move and I think normalcy will eventually prevail.  Beyond that, please watch my video for details.

Trades:

BUY TO OPEN the iShares 20+ Treasury Bond ETF (TLT) August 30th 144-141-138 put spread for a $ 0.50 debit.

Anywhere around 50 cents is fine for a fill. Remember, we are buying the 144 and 138 puts and selling double of the 141.  I did a 3-lot so that’s +3 x -6 x +3 for example.  Max gain is at 141, but we are profitable anywhere between 143.50 and 138.50.  We can only lose what we spend on the trade, so around $ 150 for a 3-lot.

ROLL the iShares US Real Estate ETF (IYR) from August 16th to October 18th.

SELL TO CLOSE the IYR August 16th 89 put and BUY TO OPEN the IYR October 18th 87 put for $ 1.09 net debit. 

Once again, anywhere around this price is fine.  My trade got split into a 2-lot and 1-lot in the screenshot below but they are both the exact same.

Finally,

BUY TO CLOSE the Disney (DIS) August 16th 140-138 put spread for $ 2.00.

Closing is cheaper than letting it get exercised.  Anywhere at $ 2 or below is a reasonable place to close the trade.

Trade Details:

Video Link:

https://content.jwplatform.com/videos/wY8o3xch-bK67iJnL.mp4

August 15, 2019 - 4:24 pm

For tomorrow:

We’ll have a new trade, almost certainly going to be a directional butterfly. We will close DIS, because as a shrewd subscriber pointed out, costs to exercise the options are actually more than commissions to close the trade.  Finally, we’ll roll out IYR for a couple more months.  Keep an eye out in the morning for a trade alert.

August 14, 2019 - 5:37 pm

Just to clarify, I mistakenly said in the newsletter today that the DIS trade would expire worthless (I have been thinking of it as a debit trade because of the narrow spread).  That’s obviously not the case. It will (very likely) expire in-the-money at max loss.  There should be no assignment risk at expiration however as the short and long puts will cancel each other out.  There is a small early exercise risk, but it should be close zero. If for some reason we have a sharp really over the next two days, we’ll try to close for better than max loss, but I don’t expect that to occur.

August 13, 2019 - 2:35 pm

I mentioned last week that I wanted to do a trade today, or at least early in the week.  Frankly though,  I don’t like this market.  It’s not conducive to trading credit put spreads because of the high intraday volatility (that and the overnight gap risk).  I think we need to stick to very low risk trades for the time being.  I’d like to expand our usage of butterflies.  Right now, we are using them as only market hedges – but  making some directional trades with call and put flies is a smart move in this higher volatility environment.  I’m going to look at a few different trade ideas for later in the week.  Regardless, the theme for now is going to be reducing risk.

On a separate note, I plan to roll out IYR as it’s a debit trade and it fits the “safety” theme.  I don’t plan on rolling DIS though, and we’ll look to close it soon – especially if the stock keeps moving higher.

August 8, 2019 - 1:15 pm

Trade Alert:

I wanted to sell a put spread and place a put butterfly on the SPY today, but I really don’t like the market action for selling a put spread.  We are back up too much, too fast in my opinion.  I think we need to let the dust settle a bit before adding another credit spread to our portfolio.  In the meantime, I very much want us to have a butterfly in SPY puts to protect us if we move back down over the next two weeks. See video for details.

BUY TO OPEN the SPDR S&P 500 ETF (SPY) August 23rd 287.5-282.5-277.5 Put Butterfly for a $ 0.32 Debit.

Any price around this level is fine.  Remember, you can only lose what you spend on this trade since it is a debit trade.  The butterfly means we buy the outer strikes and sell double of the inner strike, so a 3-lot would look like +3 x -6 x +3.  I recommend a 3-lot butterfly as it will cost us about $ 100.  Max gain is right at the middle of the spread, or $ 282.50.  We make money on the trade at expiration anywhere between $ 287.18 and $ 277.82.

Trade Details:

Trade Video:

https://content.jwplatform.com/videos/ZjYjELtB-bK67iJnL.mp4

August 5, 2019 - 1:45 pm

This is what a true selloff and legit spike in volatility look like.  We don’t have a lot on right now, so not much to do but wait to see where we bottom… and then there should be ample opportunities to sell to fantastically juicy put spreads.  Regarding CAT, it’s a September 6th expiration so plenty of time for that stock to rebound (which I think it will – it’s not some high valuation stock that was just waiting to get pummeled).  For DIS, that’s an earnings play, and if earnings are as good as I expect, the stock will recover in a hurry.

Just want to reiterate that when VIX was at 12 not much more than a week ago, I thought it was entirely too low.  Now that it’s at 22, I think we’re a bit high, but it very much depends on how the White House responds to the China currency devaluation.  Expect a lot of action this week in the markets and new trade or two once the we settle down somewhat.

August 2, 2019 - 1:14 pm

I’m having second thoughts on UVXY and I’ve decided we should close it.  We are just about breaking even between the two trades right here.  However, with two weeks to go, there’s a lot of time left on the trade and I think the White House may try to salvage the market with positive tweets.  I’d rather not take the risk of holding and instead move into a more traditional debit hedge (like a butterfly or vertical spread) which has less capital risk for us.

If we close the UVXY trade here, I’m showing a $ 23 loss on both trades combined (per spread), which I think is a reasonable place to exit given how low UVXY likes to go when the market rallies. I think this time around it’s better to be safe.

BUY TO CLOSE the UVXY August 16th 26-22 put spread for a $ 0.65 debit.

Lower is better, but anywhere you can filled around this price is fine.

Trade Details:

August 2, 2019 - 12:11 pm

Well, I haven’t quite been pounding the table saying the market needs to sell off (and volatility needs to go higher), but I definitely have been strongly suggesting as much.  It’s finally happening, with yesterday and today sending the VIX over 19.  Our UVXY and SQQQ trades are looking very good right here.  Let’s close SQQQ today and we’ll close UVXY next week. I got 22 cents for my closing price of SQQQ.  We sold it for 75 cents, so that makes it a $ 53 winner per spread (or 23.6% return on cash).

BUY TO CLOSE the SQQQ August 16th 31-28 Put Spread for $ 0.22.

Anywhere you can get filled around this price is fine.

Trade Details:

August 1, 2019 - 2:02 pm

Trade Alert:

Disney (DIS) is up 30% year-to-date in what may be one of the company’s best years ever.  But as good as the year has been, I wouldn’t be surprised to see the stock go even higher after earnings next week.  More importantly, I don’t see the company coming close to missing earnings expectations, so I think a near-to-the-money put spread is a safe bet. I want to do what we did with NVDA a couple months back and do a narrow credit spread (2 strikes) but closer to the money than what we normally do.  Keep in mind, after earnings next week (on the 6th), implied volatility will also take a dive.  We’re also closing our USO puts.  See the video for additional details.

SELL TO OPEN the DIS August 16th 140-138 put spread for a $ 0.61 credit or higher.

Market is moving quite a bit so you may be able to get a better price.  Do this trade anywhere above 55 cents.  We are only risking about $ 140 on the trade because it’s only 2-strikes wide.  Anywhere above $ 140 share price at expiration and we collect 61 cents per spread. I recommend 1 lot for beginners up to 5 for bigger accounts.

SELL TO CLOSE the USO August 2nd 12 Put for $ 0.63 or higher.

USO has been tanking so you may be able to get closer to 70 cents. Close anywhere around this level as this trade will likely expire in the money tomorrow.  Don’t worry about the call, we’ll let it expire worthless unless there’s a huge rally in oil tomorrow in which case we’ll close the trade then (not likely).

Trade Details:

Trade Video:

https://content.jwplatform.com/videos/l8NQTcBx-bK67iJnL.mp4

July 26, 2019 - 12:54 pm

For those of you in the UVXY trade (you can ignore this if you don’t already have the UVXY credit spread in your portfolio):

Let’s roll out the UVXY credit spread for a few more weeks.  I still strongly believe volatility will rebound, and we just need to buy some more time for this trade to work out.  We won’t quite do a straight roll, we’ll drop the spread down one strike.  In order to compensate though, we’ll widen out the spread from 3 strikes to 4 strikes.  That means we’ll only have to pay about 30 cents extra to make this trade.  Here are the details:

So we are closing the 27-24 UVXY put credit spread expiring today and opening the 26-22 put credit spread expiring on August 16th.  It should cost around $ 0.31, as you can see above.  Anywhere you can filled around that price is fine.  Your broker should allow you to roll out trades like this as one transaction.

July 25, 2019 - 1:07 pm

Trade Alert:

Quite a bit going on today, we have two closing trades and a new credit spread to place.  We are closing BIDU for a 27 cents which makes it a 16.2% winner.  Earnings are next week so getting under 30 cents on the trade was our goal – and it worked out exactly as intended.  We’ll also close the front month put on our IYR calendar.  We are making money on that trade due to our back month put going up in value more than the front month put.  After we close this week’s put, we’ll be long the August 16th put straight up.  Finally, we are going to add a credit put spread in Caterpillar (CAT).  CAT’s earnings weren’t great but they weren’t unexpected either.  The stock should stabilize now and volatility is falling.  It’s a good scenario for a short put.  I go over more details in the video below.  Tomorrow we’ll roll out the UVXY trade.

Trade Details:

Sell (to open) the CAT September 6th 127-123 put spread for a $ 0.65 credit.

Buy (to close) the IYR July 26th 89 put for $ 0.80.

Buy (to close) the BIDU August 2nd 108-104 put spread for $ 0.27.

For BIDU and IYR, closing anywhere around the price I got is perfectly fine.  For CAT, try not to go below 60 cents if possible.  I did a 2-lot (selling the 127, buying the 123 each two times) and I recommend 1 or 2 for beginners and up to 5 for bigger accounts.  At 65 cents, we can make a max gain of $ 65 per spread if CAT stays above $ 127 by expiration, with max risk of $ 335 if the stock drops below $ 123.  Remember though, this is a high probability trade in our favor.

Video Link:

https://content.jwplatform.com/videos/dKyml1aw-bK67iJnL.mp4

July 18, 2019 - 2:47 pm

Just a quick correction from the text alert.  At one point I say “just over 0 risk on the spread” and then later I say max loss is $ 225.  The second part is correct.  That should have read “just over $ 200 risk on the spread”.  This blogging software doesn’t like the $ in front of numbers so it will set it to “0” unless I put a space after the $.  Sorry if that caused any confusion.  I wish we could have zero risk spreads!  Although I feel this SQQQ trade is overall a low risk trade, but not quite at the zero level.

July 18, 2019 - 1:28 pm

Trade Alert:

I’m growing increasingly convinced that the market needs to sell off, even if it’s slow and steady in nature.  I don’t think we have enough risk on at the moment that we need to place an outright hedge, so I came up with something where we can protect against a selloff and collect a credit (similar to the UVXY trade).  The ProShares Ultrapro Short QQQ (SQQQ) is a leverages, inverse ETF on the Nasdaq-100 (or the QQQ ETF).  That is, it moves -3x the Nasdaq-100 index.  The inverse portion means we can sell a put spread on the ETF which profits if QQQ sells off.  3x leverage may seem risky, and generally it is, but due to the nature of the options chain, we can do a 3-strike wide spread and we’d only be risking just over $ 200 per spread.  Plus, QQQ is at all-time highs and a major component (NFLX) just got hammered on earnings.  Moreover, volatility for SQQQ is dropping, which favors selling options.  See the video for details.

Here’s the trade:

SELL TO OPEN the ProShares Ultrapro Short QQQ (SQQQ) August 16th 31-28 put spread for a $ 0.75 credit.

Sell the 31 put and buy the 28 put (at the same time).  Anywhere above 65-70 cents is fine.  I’m doing a 2-lot, but I recommend 1 for beginners and up to 5 for bigger accounts.  Max gain is $ 75 per spread if SQQQ is above 31 at August expiration.  Max loss is $ 225 if SQQQ falls below 28 and stays there (very unlikely).

Trade Details:

Trade Video:

https://content.jwplatform.com/videos/2IbJY05G-bK67iJnL.mp4

July 12, 2019 - 1:18 pm

Trade Alert:

The interest rate and economic uncertainty, along with how the Fed will react at the FOMC meeting at the end of July, lends itself well to a calendar trade.  Rather than play interest rates themselves, I have decided to use real estate as a proxy.  If you look at iShares US Real Estate ETF (IYR), it is close to 52-week highs.  However, it is my belief that real estate (along with stocks in general) are set to pull back after the upcoming FOMC meeting.  I think the Fed will be less dovish on rates as people expect and it will have a negative impact on real estate.  I also believe the slowing economy means a slowdown in real estate as well.  However,  July may be quiet as investors await the Fed meeting.  This describes a situation where using a put calendar trade may be perfect.  We’ll sell a put that expires before the Fed meeting and end up long a put which expires in mid August.  We’re also closing short straddle part of our USO trade.  Please watch the video for details.

Here’s the trade:

BUY TO OPEN the IYR August 16th 89 put for $ 1.10 and SELL TO OPEN the IYR July 26th 89 put for $ 0.54.  The total debit should be around $ 0.56.  This is a calendar spread. 

Anywhere around this price is fine.  You should be able to execute this trade all at one time, but if you have to do separate transactions because of your broker, you’ll need to buy the August 16th option first and sell the July 26th option afterwards.  I’m doing a 3-lot as this is a low risk debit trade.  I still recommend just 1 or 2 for beginners and up to 5 for more experienced trades.  Profit and loss is difficult to calculate because of what we end up doing with the trade, but we can only lose what we spend on the debit at this juncture.

For USO:

BUY TO CLOSE the USO July 12th 12 straddle (12 call and 12 put) for $ 0.56.

Anywhere you can get filled around this price is fine.  We are closing the short straddle but we’ll be leaving the long August 2nd straddle on for a longer period.

Trade Details:

Trade Video:

https://content.jwplatform.com/videos/DmnX8vwu-bK67iJnL.mp4

July 11, 2019 - 4:21 pm

I’m recording our monthly webinar this afternoon and it will be available tomorrow.  We’ll also be closing the front month straddle portion of our USO trade tomorrow and making a new trade, so keep an eye out for texts and emails.

July 5, 2019 - 5:38 pm

Just a note that the OPE issue should be coming out shortly.  There was an error with our publishing software and it should have come out early this morning.  I apologize for the delay.  I also think that’s the reason why the trade email came out so much later than my text.  To make it up to you, I’m including a couple nice beach pics from my vacation this week!

July 5, 2019 - 2:44 pm

Trade Alert:

I’m back from vacation so let’s get back to trading!  We only have two positions on right now, so it makes sense to start building up our credit spread exposure again.  I chose Baidu (BIDU) for this purpose because it has been very stable outside of earnings periods (which we will avoid), but tends to have a nice gap between implied volatility and historical volatility.  I discuss the trade in detail along with the impact to our portfolio in the video below.

SELL TO OPEN Baidu (BIDU) August 2nd 108-104 put spread for a $ 0.79 credit.

Sell the 108 and buy the 104 put – anywhere around this price is fine but don’t go below 70 cents.  I did a 2-lot, but I recommend 1 for new traders and up to 5 for bigger accounts.  Max gain is $ 79 per contract while max risk is $ 321.

Trade Details:

Trade Video:

https://content.jwplatform.com/videos/CgD74WG6-bK67iJnL.mp4

June 28, 2019 - 2:14 pm

Trade Alert:

One more trade before I go on vacation next week. I’ll be back at the end of the week and our next issue will come out Friday July 5th.  By the way, the SPY hedge looks like it will expire worthless so no action needed.  I like the UVXY trade we just closed yesterday, so we’re going to do it again except we’ll use lower strikes. I think there’s still a floor on how far volatility can fall.  Using UVXY will allow us to get a decent credit on a 3-strike wide spread (so lower risk), while also being a trade that does really well during a market selloff.  I discuss more details in the video below.

SELL TO OPEN the ProShares Ultra VIX Short-term Futures ETF (UVXY) July 26th 27-24 put spread for a $ 0.73 credit.

We are selling the 27 puts and buying the 24 puts.  Anywhere you can get filled around this price is fine, down to about $ 0.63.  I did a 4-lot because we just freed up a bunch of capital and because it’s only a 3-strike wide spread.  I still recommend 1 or 2 lots for beginners though.  We can earn $ 73 per spread with max risk being $ 227 if UVXY goes below $ 24 by expiration (not likely).

Trade Details:

Trade Video:

https://content.jwplatform.com/videos/GEok7lqH-bK67iJnL.mp4

June 27, 2019 - 2:03 pm

Closing Alert:

We have several positions to close right now.  Three of them are no-brainers (below 20 cents).  The only one I debated on was UVXY, but since it expires tomorrow and we’re at the short-strike, I think it’s better to be safe.  Plus, it’s still a 17.9% winner even closing at 56 cents.  The only position we may have left to close tomorrow is the SPY hedge.  If the market drops, we’ll be able to cash it in.  Otherwise, we’ll probably let is expire worthless (at this point, it’s not worth closing by the time you factor in commissions).

Here are the trades:

All trades below are BUY TO CLOSE:

UVXY June 28th 32-29 put spread for $ 0.56 debit.

NVDA July 5th 142-140 put spread for a $ 0.05 debit.

LYFT July 12th 54.5-50.5 put spread for a $ 0.13 debit.

XLNX July 5th 103-98 put spread for a $ 0.10 debit.

For more concise details, see the trade details screenshot below.  Anywhere around these prices are fine for closing.  Remember, we are buying back the higher strike to close and selling out the lower, long strike to close.   UVXY is a 17.9% winner.  NVDA is a 53.5% winner (less cash risk means it’s a higher percentage winner).  LYFT is a 19.1% winner.  XLNX is part of a series of trades which we aren’t finished with yet, so I’ll wait to calculate the return.

I don’t normally intend to have so many trades to close at once, but the holiday week next week means a lot of premium is coming out of trades early.

Trade Details:

June 25, 2019 - 6:44 pm

We have our OPE issue coming out tomorrow where we’ll look at open trades including the two new ones from the previous week (SPY, USO).  Next week, I’ll be out of town on Wednesday, so the issue will come out Friday (July 5th).

We’ll definitely have some closing trades this week, maybe as many as 3.  I’m not sure about a new trade yet, but at the moment I am planning to put on another credit spread before I leave town this weekend.  Stay tuned.

June 24, 2019 - 2:19 pm

Trade Alert:

We’re doing a brand new type of trade today, the calendar straddle or straddle swap (or double calendar/double diagonal)… there are lots of names for it.  You may have to use the “Custom” setting in your trade software to enter this trade if you aren’t using Think Or Swim.  It sounds like a complex trade, but it should make a lot of sense once you see how it works.  I highly recommend watching the video as it would take several pages of text to cover what I talk about in the 11 minute video below!  Basically, we are betting on a short-term drop in oil volatility, but we are preparing for a big move in oil in either direction in early August.  We are using the United States Oil Fund (USO) for the trade.

Here’s the trade –  you have to do the whole thing at once or you won’t be able to execute it due to margin requirements on short straddles:

BUY TO OPEN the USO August 2nd 12 straddle (call and put) 

SELL TO OPEN the USO July 12th 12 straddle (call and put)

The total should cost you $ 0.34 DEBIT, give or take a couple cents.

I did 3 of these since we can only lose what we spend on the trade.  The payoff is complicated because it depends on if we hold the back month straddle once the short trade is closed (which is the current plan).  For more about the payoff and trade management scenarios, please watch the video.

Trade Details:

Trade Video:

https://content.jwplatform.com/videos/0ph56FnP-bK67iJnL.mp4

June 21, 2019 - 1:59 pm

Closing Alert:

I’m a little bit worried about weekend risk (a large gap down on Monday) just because of Iran.  The only trade we have expiring next week that would be hurt by a big down move is EA.  I has originally planned on closing EA when it was at $ 0.30 or below.  Well, we’re pretty much there – so let’s close it!

Here’s the trade – no video today as it’s just this one closing trade.

BUY TO CLOSE the Electronic Arts (EA) June 28th 90-85 put spread for around $ 0.33.

We are buying back the 90 puts and selling out the 85 puts.  Anywhere around this price is fine.

Trade Details:

June 19, 2019 - 1:03 pm

Trade Alert:

It’s FOMC day so let’s add a hedge to our portfolio in case we have a negative reaction to the news.  We’ll stick with a put butterfly in SPY, but we’ll only do a short-term trade so we can get closer to the money without having to spend a fortune. Once the dust settles on the Fed news, we can add a longer term put fly to the mix.  Try to get this trade on today even if you can’t get it done before the FOMC results; there may be a delayed reaction by the markets.

BUY TO OPEN the SPDR S&P 500 ETF (SPY) June 28th 290-285-280 put butterfly for a $ 0.73 DEBIT.  (Buy the 290 and 280 puts, sell double of the 285 puts)

See the video for details, but remember we are buying the outsides strikes and selling double the middle strike, so a 2-lot would look like 2 by -4 by 2 for example.  You can only lose what you spend and max gain is at the short middle strike.  I recommend doing the same number of butterflies as you do for your typical credit spread, so if you normally do 2-lots, stick to a 2-lot here.

Trade Details:

Trade Video:

https://content.jwplatform.com/videos/N3KWMnHv-bK67iJnL.mp4

June 14, 2019 - 2:06 pm

Trade Alert:

Market conditions have remained calm enough to that I feel comfortable closing our CAT spread and putting on a new trade in LYFT.  The idea behind the LYFT trade is pretty simple – basically implied volatility is dropping at a very rapid rate but is high enough that we can get a solid credit at a lower delta spread.  See the video below for details.

SELL TO OPEN the LYFT (LYFT) July 12th 54.5-50.5 put spread for a $ 0.75 credit.

Sell the 54.5 put and buy the 50.5 put to open.  I got filled right away so you may be able to get a higher credit than 75 cents.  Anywhere around this level is fine though.  I only did a 1-lot in my small account, but I recommend doing a 2-lot to as much as a 5-lot for bigger accounts. With a 75-cent credit, our max risk is $ 325 per spread.

BUY TO CLOSE the Caterpillar (CAT) July 5th 116-113 put spread for a $ 0.19 debit.

Anywhere around this price is fine. We are buying back the 116 strike and selling the 113 strike to close.  At this price, we are earning a 13.7% return in just 2 weeks.

Trade Details:

Trade Video:

https://content.jwplatform.com/videos/JwltVgSk-bK67iJnL.mp4

June 13, 2019 - 2:29 pm

Just some quick notes:

• No new trades today, but I’m looking at something for tomorrow – but I’m only adding a new trade if I can close an existing position because I don’t want to have more than 5 credits spreads on at one time.  With 5, it starts to get harder to manage everything in case we have roll out any spreads.
• Most likely our SPY put butterfly will expire worthless tomorrow and requires no action on our part
• We’ll place a new butterfly at some point next week – almost certainly before the FOMC meeting results come out.

June 12, 2019 - 4:31 pm

Just a heads up that I recorded a video not that long ago with my friends at marketchameleon.com – a great options analytics site. This particular video is basically a Q&A on calendar and diagonal spreads.  If you’re interested, check it out here:

https://www.youtube.com/watch?v=iQz7BT8kvac

June 10, 2019 - 2:15 pm

I’m not a fan of this current stock market rally.  Judging by the VIX – which is still at elevated levels – neither are volatility traders.  That’s not to say that we can’t have several more days or weeks of bullish stock activity.  However, unless the economic fundamentals change, I would be cautious about going all in right now.  We are on the verge of another recession and the only thing propping up the market right now is the promise of lower interest rates.  I don’t believe that’s a sustainable environment for stocks to reach new all-time highs and keep going.  At the very least, I think it makes sense to hedge your portfolio with index/ETF puts (SPY, QQQ) or long VIX ETF calls (VXX, UVXY).

June 7, 2019 - 1:03 pm

Trade Alert:

I’m happy the market is going up, but I don’t trust this rally.  Sometime in the coming weeks (or maybe months) the market will realize that a recession is not a good thing even with interest rates going lower.   We’re going to take a more cautious approach with our portfolio in case the market decides to fall off a cliff.  One thing we can do which is good for collecting income and protecting against the downside is selling a put spread in a volatility fund like VXX or UVXY.  For today, I picked UVXY.  I believe there is a floor on how far market volatility will fall given the macroeconomic environment.  We’re also closing SQ as it is below 20 cents and we can free up some additional capital. I get into details in the 10 minute video below.

BUY TO CLOSE the Square (SQ) June 14th 59-63 put spread for a $ 0.14 debit.

Anywhere around this price is fine to close.

SELL TO OPEN the ProShares Ultra VIX Short-term Futures ETF (UVXY) June 28th 32-29 put spread for a $ 0.93 credit.

You can sell down to $ 0.80.  We are selling the 32 put and buying the 29 put.  For a 1-lot trade, you can generate $ 93 profit versus $ 207 max loss. I suggest a 1 or 2 lot for beginners and 3 to 5 for more experienced traders.

Trade Details:

Video Link:

https://content.jwplatform.com/videos/8dE6oK6s-bK67iJnL.mp4

June 6, 2019 - 2:35 pm

I just sent out the XLNX roll trade. We’ll probably do more related to XLNX in the coming weeks – but this trade buys us more time.

I’m still looking at adding to our portfolio with a new trade, but would like to trim our number of positions a bit first.  This may happen tomorrow, or it could be early next week.  I’ll keep you posted through texts.

June 6, 2019 - 2:25 pm

For XLNX holders only:

I’ve been debating on the best way to do this and settled on rolling the trade out to July 5th and setting the strikes slightly below the stock price of around $ 105.  If XLNX stays where it is or goes higher over the next month, we will earn back about half of what we lost on the 108-112 spread.  We could be more aggressive, but I’m feeling a bit more risk averse given the current market environment.  We could also add to this trade down the line, but for now, let’s keep it simple and roll it out and down.

We are buying to close the June 7th 108-112 put spread (buying back the 112, selling the 108) and then selling to open the July 5th 103-98 put spread (selling the 103 and buying the 98 puts).  The total cost should be anywhere from around $ 2.25 to $ 2.50.  I’d start low and work your way up until you get filled.  We are extending to spread to 5 strikes wide for the July trade in order to bring in a bit more premium.

Trade Details:

June 5, 2019 - 3:51 pm

Just a quick heads up if you haven’t read through the weekly issue yet – we will be making a XLNX trade tomorrow for those of you who are in the trade.   Besides rolling XLNX, I’m not yet sure if we’ll also initiate a new position in a different stock , but I’m leaning towards yes at the moment.

May 31, 2019 - 1:13 pm

For those holding the EA 89-94 put spread (you can ignore this if you aren’t in the EA position):

I was hoping we’d get a chance to close EA today for good, but we need another $ 1 rally in the stock for that.  Considering the share price seems to have a strong floor above $ 90, I think the best course of action is to roll out another four weeks. If we roll to the 85-90 put spread expiring on June 28th, we only add about $ 0.50 to our tab – and we can close on pretty much the first big rally in the stock.

Here’s what that trade looks like:

BUY TO CLOSE the EA May 31st 89-94 put spread and SELL TO OPEN the June 29th 90-85 put spread for around $ 0.50 DEBIT.

It may be easier to look at the screenshot below to look at the entire roll trade by its components.  The price will fluctuate quite a bit, but you definitely want to execute the trade by the end of the day so as not to get assigned on shares. Remember, for a trade like this, the lower the debit the better.

Trade Details:

May 30, 2019 - 2:13 pm

Trade Alert:

We have two trades to do today: one new put credit spread and one debit put spread for a market hedge.  The credit spread is in CAT, which I like because options traders don’t seem too concerned about the stock’s down move (as seen by the lack of movement in implied volatility).  It’s also a good company that has recently posted strong numbers but has dropped on trade war concerns – which should mostly be built in by now.  The hedge is a put spread in SPY, which we’re adding because the market is making me a bit nervous lately.  I discuss these trades in detail in the 15 minute video below, along with the impact on our portfolio.

Trades:

SELL TO OPEN the Caterpillar (CAT) July 5th 116-113 put spread for a $ 0.65 credit (or higher).

Do this trade down to about 60 cents or so. We are selling the 116 and buying the 113.  I did a 2-lot, which can make $ 130 and has max risk of $ 470 but with roughly a 75% probability of success.

BUY TO OPEN the SPY June 21st 268-272 put spread for $ 0.88 debit (or lower).

This is a hedge trade, so get filled wherever you can – no limit on the price.  It’s a debit spread so we are buying the 272 and selling the 268.  I did a 2-lot, but you can increase the volume if you tend to trade more than 2 contracts on our credit spreads.

Trade Details:

Trade Video:

https://content.jwplatform.com/videos/QcleOZf7-bK67iJnL.mp4

May 24, 2019 - 2:13 pm

Trade Alert:

We have a lot of stuff going on today, so I recorded about a 20 minute video. It’s really just me streaming my thoughts aloud as I make trades, but hopefully you’ll find it useful in terms of how I go through making trading decisions.  We are going to do three different trades today. I closed TWLO because I’m working with a $ 3,000 account and I need to free up capital.  However, if you have more capital available, you can hold TWLO for a bit longer if you want to get a higher return.  There isn’t much risk left in that particular trade. I also closed the XLNX hedge because we don’t want to exercise our long puts into shares if the stock closes below $ 102.  Finally, we do a brand new trade in NVIDIA (NVDA).  It’s closer to the money than what I normally do but only a 2-strike wide spread so our risk is much lower in terms of what we could lose.  Once again, there’s a lot going on so I highly recommend watching the video for more details.

Trades:

SELL TO OPEN the NVDA July 5th 142-140 put spread for $ 0.73 CREDIT or higher.

Try to get this trade above $ 0.70.  Do up to 3 contracts. We are selling the 142 and buying the 140. Max risk is only $ 127 per spread, with max gain at $ 73 – so not a lot of dollar risk.

BUY TO CLOSE the TWLO June 7th 119-115 put spread for $ 0.33 DEBIT or lower.

Anywhere you can filled around this price is fine.  You can hold this trade until next week if you want to make a little bit more because the trade is very low risk at this point. I needed to free up capital but you may not have to the same.

SELL TO CLOSE the XLNX May 24th 97-102 put spread for $ 0.20 CREDIT or higher.

We have to close this hedge trade in order to make sure we don’t exercise the 102 strike if XLNX closes lower on the day  Close anywhere around this level.

Trade Details:

Trade Video:

Click here to watch (opens new window).

May 23, 2019 - 1:59 pm

A few thoughts on our portfolio:

I was planning on doing a new trade today but market conditions are not conducive.  We’ll try again tomorrow.  I’d also like to close TWLO before adding something new to free up some capital.

Regarding XLNX, we’ll close the put spread hedge tomorrow if it has any value. However, we don’t need to roll out the credit spread right away since it doesn’t expire for another couple weeks.

The SPY put fly hedge is paying off right now but we may also want to add another butterfly at lower strikes in case the selloff escalates. We’ll look at that tomorrow or next week.

May 17, 2019 - 3:58 pm

I’m glad we put on the SPY and XLNX hedges early as the market looks like it may close towards the lows.  I didn’t mention this in the video, but no need to make that XLNX trade unless you have the credit spreads from a couple weeks ago in your portfolio.  However, you certainly can do the trade if you want to purely speculate on XLNX downside.  Speaking of XLNX, just saw someone wrote 2,000 covered calls for June at the 110 strike.  Could suggest there isn’t much short-term upside in this stock.  We’ll try to cash in on our debit put spread next week, but I’m guessing the credit spread may need to be rolled out and down.  We’ll give it another look next week.

May 17, 2019 - 1:25 pm

Trade Alert:

We are hedging both our overall portfolio with a SPY put butterfly and hedging XLNX with a long put spread for the next week. I get into a lot of detail in the video, so please watch it for information on both trades and commentary on portfolio and trade management in general.  It’s an 18 minute video so chalked full of good info!

Trades:

BUY TO OPEN the XLNX May 24th 97-102 put spread for a $ 0.52 debit or lower.

This is a debit trade so we are buying the 102 and selling the 97.  Anywhere around this price is fine (the market may be volatile so get whatever price you can).  I’d use a 1-lot spread for every 2 credit spreads you have on in XLNX.

BUY TO OPEN the SPY June 14th 275-280-285 put butterfly for $ 0.43 debit or lower.

Anywhere around this price is also fine. Remember to make the butterfly look like in the trade details below in terms of structure.

Trade Details:

Video:

May 16, 2019 - 2:18 pm

Trade Alert:

We’ll look at adding a market hedge tomorrow, for now let’s add to our credit spread portfolio by selling a put spread in SQ.  I spend a while talking about my reasoning for this trade in the video below.  Just briefly, I think there is a floor in SQ at around and I think options traders are suggesting the stock is going to go up or sideways in the coming weeks judging by the divergence between implied volatility and historical volatility.  There are far more details in the video, so please check it out.

Here’s the trade:

SELL TO OPEN the Square (SQ) June 14th 63-59 put spread for $ 0.70 credit or higher.

I’m good with this trade down to about $ 0.65.  I executed a 2-lot but I recommend anywhere from 1 to 5 depending on your comfort level with the trade.  We are selling the 63 puts and buying the 59 puts.

Trade Details:

Trade Video:

May 16, 2019 - 12:50 pm

The US just put Huawei on a blacklist of sorts, restricting the company’s access to components made by US companies.  XLNX is one of its suppliers, so that stock has dropped 5% today as a result.  With the fundamentals now changing, it makes sense for us to close this trade.  However, the initial reaction to bad news tends to be an overreaction, so I plan on waiting until tomorrow to close the trade at what I expect to be a better price.  I also think XLNX will make a good credit spread opportunity after the dust settles from the Huawei situation.  First things first though, look for a closing trade on XLNX tomorrow.

May 14, 2019 - 1:17 pm

Closing trade alert:

Of course the week that I’m in Vegas is when the market goes crazy.  On the other hand, it’s not the worst thing to wait until some of the volatility dies down to place a new trade.  In the meantime, our butterfly hedge has performed admirably and I think it’s time we cash it in.  Later in the week, when we add a new credit spread to our portfolio, we’ll also place a new hedge.  For now though, let’s take our profits off the table for the current hedge.

Here’s the closing trade:

SELL TO CLOSE the May 17th SPY 280-285-290 put butterfly for $ 1.90 or higher.

You can close anywhere around this level.  Remember the middle strike will have twice as many contracts as the outside strikes.  If for some reason your broker won’t let you execute this trade all at once, close the middle strike first and then the outside strikes after.  We bought this hedge for 44 cents, so closing at $ 1.90 is a very nice way to monetize this hedge!

Trade Details:

May 9, 2019 - 5:30 pm

Just a last reminder that I’m presenting twice at the MoneyShow in Vegas next week.  Stop by and say hi if you happen to be in town!

Here’s the link to my topics:

https://conferences.moneyshow.com/moneyshow-las-vegas/speakers/408799f6f7ff4b71a9ed4d6913a01173/jay-soloff/?scode=047379

May 7, 2019 - 2:43 pm

Trade Alert:

The market is selling off due to China trade war fears and it’s providing an opportunity to get into some attractive credit spreads.  Twilio (TWLO) is a cloud software company that shouldn’t see any negative impact from the trade war, yet is down today simply because the market is down.  Unlike some of my other picks, TWLO is definitely a growth stock and not a value play.  However, with strong earnings already released, I don’t feel there’s much downside in the short-term in this name.  The growth picture is just too strong.  Plus, we have a spike in implied volatility without a matching spike in historical volatility. That’s often a good time to sell options as it could suggest overpricing.  I get into a lot more details in my video below.  Also, the refresh feature on the Options Ticker is turned off now, so you shouldn’t have any issues watching this full video without interruptions.

Trade Recommendation:

SELL TO OPEN the Twilio (TWLO) June 7th 115-119 put spread for $ 1.01 CREDIT or higher.

Do this trade down to about a $ 0.90 credit.  We are selling the 119 puts and buying the 115 puts at the same time.  I did a 3-lot but I recommend a 1-lot for beginners.

Trade Details: 

Video:

May 2, 2019 - 5:14 pm

Just a quick reminder that VXXB is now VXX as of today.  We closed our VXX position for a winner earlier in the day, but I”m sure we’ll be using this product again in the near future – so make sure you change your watch lists to reflect the new symbol.

April 30, 2019 - 12:59 pm

Trade Alert:

First off, thanks for new subscriber Jonathan for pointing out XLNX to me, as it turns out it makes for the perfect credit spread trade.  The stock dropped 17% last week after earnings didn’t meet expectations but has since stabilized.  Meanwhile, earnings really weren’t bad at all, maybe just not enough to support the company’s lofty valuation.  It’s now trading at a more reasonable price.  However, put volatility is still a bit jacked up due to the recent plunge.  Since the stock has seemingly found a floor, volatility should now retreat.  That gives us a very good entry point for a credit put spread.  We’re also closing TTWO for those who have the trade on still. I give more details in the video below, which is about 13 minutes long.

Here are the trades:

SELL TO OPEN the Xilinx (XLNX) June 7th 108-112 put spread for a $ 0.76 CREDIT or higher.

The market may move a bit, so remember higher is better for the credit.  Also, since not everyone is in the text alert system yet, I’m giving a wide buy range for this trade.  You can sell this spread down to $ 0.60 and it will still be good.  Remember, we are selling the 112 puts and buying the 108 puts.  I recommend up to a 3-lot for most traders, and a 1-lot is good to start with for beginners. Max gain is $ 76 per spread and max loss is $ 324, but keep in mind  this is a very high probability trade.

For those holding TTWO;

BUY TO CLOSE the Take Two Interactive (TTWO) May 3rd 85-89 put spread for a $ 0.05 DEBIT.

Anywhere around this price is fine to close.

Trade Details:

Trade Video:

April 29, 2019 - 3:11 pm

Just a quick note – I mentioned I planned on doing a trade today.  That trade will happen tomorrow instead of today.  I will likely close out the TTWO position at that time as well.

April 26, 2019 - 2:46 pm

Closing Trade:

Let’s go ahead and close Deere (DE) here and free up some capital for a new trade on Monday.  Anywhere  you can get filled around this price is fine.  Closing at 12 cents, we’re looking at a 16.9% return on cash.

BUY TO CLOSE the Deere (DE) May 10th 146-150 put spread for a $ 0.12 debit.

Trade Details:

April 25, 2019 - 4:01 pm

Okay, so I could use some feedback from all of you regarding Options Profit Engine.  Generally speaking, I”m happy with how the service has been working this year (despite what EA is currently doing).  It’s essentially functioning as intended.  However, I can’t help but feel we are giving too much back on hedging.  I don’t want to give up the hedge though, since we’re only doing credit put spreads, we will have a seriously correlation problem if the market sells off sharply.  Our hedge is our only protection if/when that happens.

That being said, I’d like to add back another trade strategy to help increase our returns without fundamentally changing the nature of the product.  We use to do 4-5 different strategies in this service, but I felt a bit too much scope creep taking was place (i.e. I was losing focus by doing too many things).  Now that we have the put credit spread part basically on lock down, I feel like we can add back one more strategy.

So my question to you is which strategy?

Personally, I’d like to add back calendar spreads as they can be great in a low volatility environment.  They will require more management and are more complex than many other strategies, but I love that you get to be short theta and long vega at the same time (collect time decay but are long volatility).  I also have a video on calendar spreads that I made as part of the Options Mastery Course that I can send to everyone for teaching purposes.

Another choice is long/debit vertical spreads.  That would be a way to get some occasional big returns mixed in with our regular income stream.  I like that debit verticals are low risk/high return, but they are also low probability.  Plus, we now have the Options Floor Trader Pro which is a long-only service, so I think that basically scratches that itch, so to speak.

Another choice would be to add back iron condors.  This service was originally founded on using iron condors, but the market conditions have changed to make them not nearly as worthwhile.  We could still use condors on high priced stocks though.  There aren’t as many opportunities out there, but they do exist.

So what do you think? Calendar spreads, debit verticals, iron condors, or something else entirely?  I’d love to hear your thoughts.  You can use my email to respond, [email protected]. Thanks!

April 23, 2019 - 1:49 pm

Trade Alert:

Try as I may, I can’t find a good credit put spread to trade.  This is mostly due to so many stocks not reporting earnings yet.  But, there’s also a lot of overbought names at the moment as well.  So, for now we’re just going to place our SPY put butterfly hedge.  In this case, I think the hedge is very much needed as we  appear to be due for a pullback (see my video for more details).  We’re going to keep our hedge cheap, like we normally do – but because volatility is so low, we are able to get a close to the money butterfly for a very reasonable price.

Here’s the trade:

BUY TO OPEN the May 17th SPDR S&P 500 ETF (SPY) 280-285-290 put butterfly for a $ 0.44 DEBIT or lower.

Do this trade up to about $ 0.50.  Remember we are buying the 280 and 290 puts and selling double the 285 puts.  You can see what a 3-lot looks like in my screenshot below.  I discuss the payout of the butterfly in the video below.  You can only lose what you pay in premium since this is a debit trade.

Screenshot:

Video:

April 10, 2019 - 1:03 pm

Trade Alert:

As I mentioned earlier in the week, we are doing a new trade today in honor of our new subscribers.  I don’t often do new trades on Wednesdays as that is when our weekly issue comes out – but it does happen on occasion.  Regardless, I found a very promising put credit spread trade in Deere & Company (DE) which meets all of our usual criteria.  Because of the trade war with China, DE has become undervalued.  Meanwhile volatility is trending down in the stock and options.  Earnings aren’t until May 16th, so we’ll use options that expire on May 10th.  I believe the stock has a reasonable floor ahead of earnings given the current low valuation. For more details on the trade, please see the video below.

Here’s the trade:

SELL TO OPEN the Deere (DE) May 10th 146-150 put spread for a $ 0.68 CREDIT or higher.

We are selling the 150 puts and buying the 146 puts, as you can see in the screenshot below.  You can do this trade down to about $ 0.60.  I recommend a 1-lot for new traders and 2 or 3 for those more experienced.  We are risking $ 332 per spread to make $ 68 – but it’s clearly a high probability trade in our favor.

Screenshot:

Video:

April 8, 2019 - 1:26 pm

Trade Alert:

As promised, we are closing the UVXY credit spread as a winner and putting on a new, similar trade.  We will be using VXXB this time, which is the same as UVXY (long short-term VIX futures) except without the leverage.  This is essentially an inverse trade as VXXB will go up when the market goes down (usually), so it can be considered a type of hedge.  I’m not worried about VXXB going down too quickly since volatility gets compressed at these lower levels and it can’t move as fast.  I explain all of this in more detail along with the payout scenarios in the video below.  Also, we will be doing another new trade on Wednesday morning, so stay tuned.

First, closing UVXY:

BUY TO CLOSE the UVXY April 12th 30-33.5 put spread for a $ 0.16 DEBIT or lower.

Remember, we are closing so this is a debit trade, the lower the better – but anywhere around this level is fine.  We are buying back the 33.5 puts and selling out the 30 puts.  At this level, we’re looking at a 20.6% winner (return on cash risked).

Next, the new VXXB trade:

SELL TO OPEN the VXXB May 10th 23-26 put spread for a $ 0.70 CREDIT or higher.

We are selling the 26 and buying the 23 strike (puts).  Do this trade down to a $ 0.63 credit. I recommend a 1-lot for beginners and up to 3 or so for experienced traders.  Because it’s a 3-strike gap, the risk is only $ 230 per spread.

Screenshot:

Video:

April 4, 2019 - 2:41 pm

Trade Alert:

With the jobs report tomorrow and the amount of SPX put buying this week, I want to make sure we have a hedge on in the SPY.  I also think the market is due for a bit of a pullback so I’d like to make money if that happens.  As such, we’ll be putting on a cheap SPY butterfly that expires in two weeks.  We are using a shorter term butterfly than normal so we can keep it relatively inexpensive.  See the video below for details on how to place a butterfly and what the payout looks like.  Also, we are closing the CAT trade for a profit.

First, close CAT for a 15.6% gain.

BUY TO CLOSE the Caterpillar (CAT) April 12th 120-124 put spread for a $ 0.03 DEBIT.  

You should be able to close right around that price.  We are buying back the 124 puts and selling out the 120 puts.

Okay, here’s the SPY put butterfly:

BUY TO OPEN the SPDR S&P 500 ETF (SPY) April 18th 274-279-284 put butterfly for a $ 0.44 DEBIT or lower.

Remember we are buying this put butterfly so it is a debit trade.  You can do this trade up to about $ 0.50.  We are selling the middle strike of 279 twice and buying the 274 and 284 strikes.  So for a 3-lot which I recommend that would be 3 of the wings and 6 of the middle strike, all puts.

Screenshot:

Video:

April 1, 2019 - 2:16 pm

Trade Alert:

We’re sticking with the gaming industry again as it continues to be a good place for our trading strategy.  This time we’re selling put spreads in Electronic Arts (EA).  The trade thesis is virtually the same as TTWO and ATVI.  The industry is expanding, the stocks have a floor, the valuations are reasonable, and volatility is trending lower.  EA doesn’t have earnings until May 7th, so we’ll do a trade that expires May 3rd.  We won’t add a hedge again this trade, but I’ll consider a hedge  later this week depending on market conditions.  See video below for trade details.

SELL TO OPEN the Electronic Arts (EA) May 3rd 92.5-96.5 put spread for a $ 0.74 CREDIT or higher.

You can sell this spread down to $ 0.65.  Do a 1, 2, or 3-lot depending on your experience level.  As a reminder, we are selling the 96.5 and buying the 92.5.

Screenshot:

Video:

March 29, 2019 - 1:13 pm

I was looking at either MU or WDC (same industry) for a credit put spread today but they are both up about 5% on the day.  That pretty much eliminates the trade possibility for the time being. I’m going to research a few other ideas I have and we’ll make a decision on the next trade on Monday (unless the market is really crazy).

March 25, 2019 - 12:41 pm

Trade Alert:

The  markets have stabilized so let’s get back to trading.  I love video game stocks with the announcement of Google’s new streaming platform called Stadia.  Take-Two Interactive Software (TTWO) is a stock I’ve watched for some time.  It has fallen to where it has a reasonable valuation and now has a pretty solid floor due to the new Google platform.  Volatility has ticked up because of the selloff last Friday but the overall volatility trend is down.  In general, it meets all the criteria we are looking for in regard to a put credit spread.  It’s a little more aggressive than normal but I think market conditions warrant a bit more assertiveness at this point. We also won’t be adding anything to our hedge at this time.  Please watch the video for more trade details.

Trade Recommendation:

SELL TO OPEN the TTWO May 3rd 85-89 Put Spread for an $ 0.85 CREDIT or higher. 

Make this trade down to about 75 cents.  I recommend a 1, 2, or 3 lot depending on your level of comfort.  Remember, we are selling the 89 put and buying the 85 put.  Max loss is 5 per spread. There are 39 days to expiration.

Screenshot:

Video:

March 22, 2019 - 1:37 pm

It’s funny that I spent much of the issue this week talking about how low volatility has been, only to see the VIX jump to as high as 17 today.  That being said, I’m not going to recommend a new trade today as I want to see what the follow through will be to this selloff come Monday.  Assuming somewhat stable markets on Monday and we’ll add a new credit put spread then.

March 21, 2019 - 1:38 pm

Closing Alert:

As I mentioned in the issue yesterday, we have two trades at just about max gain, so let’s close them both here.

BUY TO CLOSE the ATVI March 29th 36-39.5 put spread for a $ 0.02 DEBIT.

BUY TO CLOSE the NVDA March 29th 138-142 put spread for a $ 0.01 DEBIT.

Remember, when closing credit put spreads, we will be buying back the higher strike and selling out the lower strike.  ATVI is an 11.7% winner and NVDA is a 16% winner at these levels (not including commissions).

Screenshot:

March 14, 2019 - 1:41 pm

Trade Alert:

I mostly plan on sticking to equities for our credit put spreads, but the opportunity in UVXY popped up that works well with our portfolio this week.  UVXY is the 1.5x long volatility fund.  By selling a put spread in it, we are essentially taking a long volatility position, which is good if the market drops.  As such, I’m not going to attach a SPY hedge to this particular trade.  Plus, we can do a 3.5-strike wide spread, which means our risk is going to be lower than normal.  I discuss the trade in more depth in the video.

Here’s the trade:

SELL TO OPEN the ProShares Ultra VIX Short-term Futures ETF (UVXY) April 12th 30-33.5 for a $ 0.73 CREDIT or higher.

Do this trade down to $ 0.65.  I recommend a 2-lot but adjust according to your risk tolerance.  Remember, we are selling the 33.5 strike and buying the 30 strike.

Screenshot:

Video:

March 13, 2019 - 1:56 pm

Closing Alert:

I don’t like how WYNN has been behaving.  The market has mostly recovered from the selloff last week but WYNN has barely budged (and is in fact down 5% from where it was at this time last week).  With us essentially adding a new credit put spread each week, I don’t want to sit on positions that aren’t performing as expected.  So, let’s close our WYNN trade and take a small loss.

BUY TO CLOSE the Wynn Resorts (WYNN) March 22nd 113-117 for a $ 1.19 DEBIT or lower.  

We are buying back the 117 puts and selling the 113 puts.  Closing the spread anywhere around the current level is fine. At the price I was filled, the trade ended up as a 14.4% loss not including commissions.

Screenshot:

March 8, 2019 - 12:16 pm

Trade Alert:

We just closed our last CAT trade for a 12% winner, but the factors which made that trade attractive are still in place.  In fact, with the market selloff, it may be an even better environment to sell another credit put spread.  CAT is a good value at these levels so I believe the stock has a floor – plus, implied volatility continues to trend downward.  We’re going to add an April 12th put credit spread in CAT.  We’re also going to add a March 29th SPY put butterfly but make it a bit wider because of the added volatility on this pullback.  See my video for detailed explanations of these trades.

SELL TO OPEN the April 12th Caterpillar (CAT) 120-124 put spread for a $ 0.70 CREDIT or higher. 

Do this trade down to a $ 0.60 credit.  We are selling the 124 put and buying the 120 put.  I recommend 1-lot spread for beginners and up to 3 for more experienced traders.  We make $ 70 per spread if CAT remains above $ 124 by April 12th. Max loss is $ 330 per spread but we’d close the spread if the stock closes at any point below our short strike of 124.

BUY TO OPEN the March 29th SPY 252-260-268 put butterfly for a $ 0.77 DEBIT or lower.

Do this trade up to $ 0.87.  Remember, we are buying the 252 and 268 puts and selling double the 260 puts.  Max gain is at $ 260 but the trade is profitable between roughly $ 253 and $ 267.  Do up to 3-lots of this spread.

Screenshot:

Video:

March 8, 2019 - 11:23 am

Just a quick heads up – we’ll be doing a new credit put spread today and adding to our hedge.  Regarding WYNN which briefly moved below our short strike, we’re not going to exit the trade unless it closes below 7 (the short strike).  The new trade will be coming out soon – within the next hour.

February 28, 2019 - 12:47 pm

Trade Alert:

First off, go ahead and close CAT.  I was able to close it today for $ 0.04 – so we are nearly able to get full value for it at this point.  No reason to hold any longer.

BUY TO CLOSE the CAT March 8th 119-123 put spread for a $ 0.04 debit or anywhere around there.

That’s a 12% gain on the trade not including commissions.  Screenshot below.

Next, we’re going to open a new put spread in Wynn Resorts (NASDAQ: WYNN).  WYNN has been punished by bad news for months now but has finally settled into a sideways trend.  The bad news is now fully known and built into the price and earnings have already been released as well.  The stock has reached the point where its forward P/E is attractive.  Plus, there’s a decent gap between implied volatility and historical volatility which we can take advantage of by selling puts.

Here’s the trade:

SELL TO OPEN the WYNN March 22nd 113-117 put spread for a $ 0.55 CREDIT or higher. 

Try to get filled above 50 cents if possible.  We are selling the 117 put and buying the 113 put.  Do up to a 3-lot of the spread, but beginners should start with a 1-lot.  See the screenshot and video below for more details.

Finally, let’s add to our hedge.  We’re going to go out an extra week and add a couple butterflies to cover the range between 265 and 275.  See the video for details on why I chose those strikes and how to execute the butterfly.

BUY TO OPEN the SPY March 22nd 265-270-275 put butterfly for a $ 0.44 DEBIT or lower. 

I only did a 2-lot of this trade, but feel free to do more (or less) based on your risk tolerance.  You should be able to get this trade below 50 cents or so.  Remember, you are buying the outside strikes (265/275) and selling double of the middle strike (270).  See the screenshot and video more info.

Screenshot:

Video:

February 21, 2019 - 2:08 pm

Trade Alert:

Long-time subscribers know how much I love NVIDIA (NVDA).  After dropping quite a bit during the tech selloff last year, NVDA has stabilized and is trading at a more reasonable valuation.  The company has also raised guidance for the second half of the year suggesting the exposure to the cryptocurrency market is no longer driving the earnings cycle.  Implied and historical volatility are also heading lower which is a good setup for selling put spreads.  We can get a nice credit on a 4-strike wide spread starting at the 20 delta strike.  I discuss the trade in more depth in the video below.

SELL TO OPEN the NVIDIA (NVDA) March 29th 138-142 put spread for a $ 0.70 CREDIT or higher.  You can sell all the way down to $ 0.60 and I’d trade up to a 3-lot.  Beginners can stick to 1-lots.  Remember, we are selling the 142 strike and buying the 138 strike.  There are 36 days to expiration and the stock is around $ 157 per share.

We won’t be adding to our market hedge this time.  For new traders, you can do this trade without having the market hedge on.

Screenshot:

Video:

February 13, 2019 - 1:13 pm

Trade Alert:

We’re doing a credit put spread trade on Activision Blizzard (ATVI) and also adding a put butterfly hedge in SPY.  I’m using ATVI because earnings just came out and the company is restructuring, which caused the stock to rally off its lows. I think the downside is pretty safe at this point.  Plus, we were able to keep risk lower with a spread that has a 3.5-strike width.  I’m using the butterfly for the SPY hedge  because it’s only 30 cents per spread so we can keep our costs low.  Please see the video for information on how to place the butterfly and credit put spread.

SELL TO OPEN the Activision Blizzard (ATVI) March 29th 36-39.5 put spread for around a $ 0.50 CREDIT or higher.

You may need to wait on the spread to get over 50 cents, but I got 54 cents with the stock right around here.  Anything above 45 cents is fine though.  Remember, we are selling the 39.5 strike and buying the 36 strike.  Do a 1,2, or 3 lot depending on your risk appetite.

BUY TO OPEN the SPDR S&P 500 ETF (SPY) March 15th 256-261-266 put butterfly for $ 0.30 DEBIT or lower.

You can do this trade anywhere around this level.  You are buying the 256 and 266 puts and selling two of the 256 puts.  So a 5-lot would look like 5 x 10 x 5 where you are buying the outside and selling the inside.  Max gain is at 261 but anything between 256.30 and 265.70 is a winner.  Max loss is only 30 cents per spread. I did a 5-lot but you can alter that amount as needed.

Screenshots:

Video:

February 6, 2019 - 1:04 pm

Closing Alert:

The market is a bit too calm and bullish for my tastes given the amount of risk still on the table.  But rather than add to our hedge, which I plan to do next week, let’s instead close out our GS position.  It’s under 20 cents so there’s not much more we can gain from it.  Plus, it’s a 5-wide strike spread, which is a bit riskier than I want to have on this year if at all possible.  One thing we learned last year – it’s better to be too early closing a trade than too late.

So here it is:

BUY TO CLOSE the Goldman Sachs (GS) February 15th 180-185 Put Spread for an 0.18 DEBIT or higher.

We are buying back the 185 put and selling the 180 put to close. Any price you can get around this level is fine – it’s a winning trade no matter what at this stage (+7.8% currently).  We’ll look to add a new put credit spread to our portfolio next week and add to our hedge as well.

Screenshot:

February 4, 2019 - 12:46 pm

Trade Alert:

We’re down to one open put credit spread (GS), which we may close soon – so it’s time for a new trade.  What I like about Caterpillar (CAT) is it has already had earnings and they weren’t good, but the crowd has had plenty of time to digest the bad news.  The stock is now trading at a very reasonable valuation so I don’t think there’s much company-specific downside risk (and out SPY hedge covers market risk).  We can go all the way to the 21 delta strike for our short strike on a 4-wide strike spread and still get a credit over 50 cents.

Here’s the trade:

SELL TO OPEN the Caterpillar (CAT) March 8th 119-123 put spread for a 0.57 CREDIT or higher. 

We are selling the 123 put and buying the 119 put at the same time.  Do this trade down to 0.50.  I recommend a 3-lot for most, 1-lot for beginners.  On a 3-lot, we are pulling in 170 not including fees.  Max risk is around 1,000 on 3 spreads, but don’t forget we have a market hedge on with the SPY trade and we’d close early if it’s a slow down move.  Watch the video for more details.

Screenshot:

Video:

February 1, 2019 - 2:19 pm

Closing Trades Alert:

Okay, our SQ position is near worthless as expected so we can take our profits on it.  If you close at 6 cents, you’ll lock in over 10% gains.  Conversely, I think it’s time to close ARNC as I don’t feel there’s much upside left now that the acquisition is off.  You should be able to close for around 60 cents, which is about a 25% loss.  Once we close ARNC, we’ll only be left with our new strategy positions and we can focus on that fully moving forward.

Here are the trades:

BUY TO CLOSE the SQ February 8th 54.5-58.5 put spread for .06 or lower.  

Anything around 6 cents is fine.  We are buying back the 58.5 puts and selling out the 54.5 puts to close this trade.

SELL TO CLOSE the ARNC February 15th 19-23 call spread for .57 or higher. 

You may be able to get a better price than I did, but just make sure you close the trade as time decay will eat away at what’s left of the premium after this weekend. We are selling the 19 calls and buying back the 23 calls to close the trade.

Screenshot:

February 1, 2019 - 11:14 am

Just a quick note on the plan for today:

I have a new trade in mind which I plan to send out on Monday.  For later today, we’ll be looking to close SQ and ARNC so keep an eye out for that closing alert this afternoon.

January 24, 2019 - 1:22 pm

Trade Alert:

Let’s add to our SPY hedge. We don’t have a lot of positive portfolio deltas on right now but VIX term-structure is still flat, and that suggests that the market is still worried about downside risk.  I also want to have a SPY vertical that’s a bit closer to the money and doesn’t expire until March.  So here’s the trade:

BUY TO OPEN the March 15th SPY 250-255 Put Spread for 1.09 DEBIT or lower. 

In this trade we are buying the 255 put and selling the 250 put at the same time.  Remember, this is a hedge so it’s a debit trade where our max risk is only what we pay for the trade.  Buy this spread up to 1.20.  Because we don’t have a lot of risk on right now, I’m only buying a 2-lot of this spread – but feel free to buy more if you are more risk averse.  Max gain is 3.91 per spread if the market sells off.

Because we are just adding to our hedge, I’m not posting a video of this trade, but the screenshot is below:

January 22, 2019 - 12:51 pm

Trade Alert:

Adding a new put credit spread to our portfolio.  Bank stocks are mostly done with earnings so there’s some opportunity to sell put spreads in that space.  GS beat earnings and the stock jumped higher, but it still looks cheap from a valuation perspective. I had to do a 5-wide vertical due to the price of the stock but I normally plan to use narrower spreads whenever possible. Here’s the trade:

SELL TO OPEN the Goldman Sachs (GS) February 15th 180-185 put spread for a 0.53 CREDIT or higher.

We are selling the 185 puts and buying the 180 puts.  You can make this trade down to 45 cents or so.  There are 24 days to expiration.  I recommend a 3-lot for most of our credit put spreads but a 1-lot is a reasonable place to start for beginners.  Please see the video for more details.

Screenshot:

Video:

January 18, 2019 - 12:15 pm

Just a quick heads up because I often make trades at the end of the week – there won’t be a new trade today.  Our next trade will be early next week.  I want to see how some of these earnings play out before deciding on our next credit put spread.  Also, we’ll likely add to and/or roll up our SPY hedge at that time.

January 17, 2019 - 2:34 pm

Trade Alert:

Okay, let’s close UTX here (for those who have the position still open).  We’ll book our losses for now, but after earnings we can enter a new put spread position that will help cut the losses substantially, or generate gains for those who didn’t make the original trade.  I still think UTX will be a good put spread writing stock, but we definitely need to see earnings before doing anything else.

Here’s the closing trade:

BUY TO CLOSE the January 18th UTX 110-115 put spread for a 3.32 DEBIT or lower. 

Close this spread wherever you can get filled.  Remember we are buying back the 115 puts and selling the 110 puts.

Screenshot:

January 17, 2019 - 1:40 pm

Thoughts on UTX:

I’m leaning towards closing UTX instead of rolling it and taking the loss for now.  The reason I don’t want to roll is earnings are next week which could present gap risk.  If we take a 60% – 70% loss now we could write a new put spread on UTX after earnings and try to earn another to .50 back at that point more safely.

The stock is currently rallying so I’m going to give it about another hour and then send out an action item.  Keep your eye out for the next message.

January 11, 2019 - 2:34 pm

Trade Alert:

Choices for credit trades are a bit limited with earnings coming up, plus I want to keep our credit put spreads more conservative for the time being.  I like Square (SQ) as a market leader in the payment space.  We can make a trade that brings in over 50 cents in premium prior to earnings and keep the spread 4 strikes wide to lower risk somewhat. Please watch the video for more details and reasoning behind the trade.

SELL TO OPEN the Square (SQ) February 8th 54.5-58.5 put spread (selling the 58.5 puts, buying the 54.5 puts) for 0.52 or higher.  You can do this trade down to about 45 cents.  I recommend a 3-lot and there are 28 days to expiration.

Screenshot:

Video:

January 11, 2019 - 1:47 pm

Trade Alert:

SELL TO CLOSE the Marvell (MRVL) January 18th 16 call for 1.35 or higher (or best price available). 

Let’s go ahead and close this trade out ahead of the weekend.  The call trade is a 116% winner on its own, but if you did this trade and the original 15-16 strangle from the previous month, it’s a small loser.  Either way, I don’t see much more upside prior to next week’s expiration, so closing here makes the most sense to me.

January 4, 2019 - 12:54 pm

Trade Alert:

This is the first official new trade of our updated strategy.  As a reminder, our goal is to mostly sell put spreads while offsetting risk with a long index/ETF put spread hedge.  Since our current portfolio is already long delta overall (makes money when the market goes up), we’ll kick off the new strategy with the hedge portion.  A SPY put spread will have negative delta (makes money as the market declines), so it will help protect against our other long delta positions.  I’ll discuss the math of delta hedging in more detail in the video below, so I highly recommend you check it out when you get the chance.  Here’s the trade:

BUY TO OPEN the February 15th SPDR S&P 500 ETF (SPY) 235-240 put spread (buying the 240 put, selling the 235 put) for 87 cents or lower.

You can buy this spread up to about 1.00.  I recommend doing a 3-lot as that number will add about -20 delta to our portfolio.  I’ll show how the delta aspect works in the video below.

Screenshot:

Video:

January 4, 2019 - 10:26 am

Trade Alert:

Finally, we have a trade that is actually working fully as intended!  Let’s close our RUT butterfly now as it expires at the end of the day.

SELL TO CLOSE the Russell 2000 January 4th 1345-1370-1395 call butterfly for around a 14.00 DEBIT or higher.

It may not get filled right away as the market is jumping around a bit but somewhere around this price should get hit at some point.  If you get filled at 14 or thereabouts, we’ve gone a long way towards reversing the losses on the RUT iron condor, as every 1 butterfly contract is over a 1,000 winner, not including trading costs.

Screenshot:

December 31, 2018 - 12:47 pm

Some end of the year thoughts:

• First off, we’ll wait until later in the week to do another trade. We already have six trades right now and I’d like to trim the portfolio a bit before implementing our new strategy.  The IWM trade will fall off after today and we may be able to close the RUT fly and the MRVL call for profits later in the week.
• Volatility trading was very difficult for pros and part-time traders alike in 2018.  While both long and short volatility funds lost money (on average) this year, it doesn’t mean I should accept the poor performance of my trades as market driven.  I could have made better decisions, without a doubt. I intend to improve our trading strategy in 2019 by instituting a more holistic approach.  All of our trades will be tied together (somewhat) instead of going trade by trade.  There’s going to be more of a hedge fund approach to the service moving forward.
• In fact, the strategy I plan on implementing is something I first saw being used by a hedge fund. I have taken it and tweaked it to fit a more casual approach, but the theory is essentially the same.  It’s not all that different from what we have been doing in terms of credit spreads and hedges, but there will certainly be a more systematic approach to the endeavor.
• Iron condors will be shelved for now.  Not only are they a tough trade in this market environment, but the index condors (which are all that have been feasible lately) are an extremely crowded trade right now.  For the time being, condors are taking a back seat in our strategy.
• Instead, we will be focusing on put spread spreads in high volatility, oversold/underpriced stocks.  For the most part, these will be single stocks instead of ETFs or indices.  I plan on using narrower spreads if possible, 3 to 4 wide instead of 5 in order to lower risk, but it may not always be possible.  We’ll look at collecting smaller credits, but doing more trades to compensate.
• In order to protect our downside risk, we’ll also be using a robust market hedge.  This hedge will most likely take the form of a major index put spread, probably SPY.  We’ll put enough capital into this hedge so that if the market sells of sharply, we can make money on our portfolio despite being short put spreads.  We’ll do this by using a more mathematical approach to delta hedging our put spreads.
• At the same time, there is going to be a strict exit point on our short put spreads based on strikes.  Currently, my plan is to automatically close any short put spreads we have if we hit our short strike – regardless of the price of the spread.  We want to avoid 100% losses at all times.
• I believe in a higher volatility environment, which we should have for at least the first part of the year, this strategy is going to work really well.  I want us to make money regardless of market conditions, even if it’s just small gains.  2018 is in the rear view mirror, so it’s time to look ahead to a far more lucrative 2019!

As always, feel free to email me with any questions or comments – and have a very happy New Year!

December 21, 2018 - 1:47 pm

Trade Alert:

Let’s roll out the Arconic (ARNC) call spread to February.  For those of you not in this trade, feel free to establish the February call spread as a new trade.  The good news about ARNC dropping is that we can make more on the call spread if it goes to the expected buyout price of around 23.  We’re buying a little extra time by going to February with the hope that markets will be calmer by then, or calm enough for the acquisition to be announced.

Roll the December 21st ARNC 21-23 call spread to the February 15th 19-23 call spread for a 0.78 DEBIT or lower.  (For the new position, you are buying the 19 calls and selling the 23 calls.)  Make this trade up to 0.85 or so. For those opening the trade from scratch, it will probably still be around 80 cents to establish.

Note: you don’t have to roll this trade, you can just let the December position expire and do the new trade separately.  Commissions should be the same in either case.

Trade Screenshot:

December 20, 2018 - 1:20 pm

Trade Alert:

Okay, so here are the RUT trades I made.  If you already closed the RUT condor you can ignore these, unless you want to try out the long call butterfly for speculative purposes.  I closed the put spread and the call spread of the condor.  You can definitely let the call spread expire worthless but I wanted to free up some margin money for other trades. I put on a wide call butterfly for the first week of January because I still think there will be some end of the year buying.  We’re only doing a 1-lot of the butterfly because it’s going to be expensive… but it does have a lot of upside.

So first off, close the 1355-1360 RUT put spread at whatever price you can get.  I got 4.45.  I sold the RUT 1620-1625 call spread for 5 cents in order to free up some money in my trading account – most of you can ignore that.  Finally, I bought the January 4th RUT 1345-1370-1395 call spread for 3.13.  See the screenshot for all the trade details.

The RUT fly is maximized at 1370 where we can make about 22 dollars at max gain.  Max loss is the premium paid.

December 20, 2018 - 12:56 pm

Market conditions right now are simply brutal.  I hope many of you didn’t listen to me and closed your RUT condor early.  Trying to get to that 0.20 level that I use as my closing point was obviously a terrible decision on my part now that we are well below the short strikes.   I also completely whiffed on both the Fed decision and the market reaction.

For those of you still holding the short RUT put spread, we’re going to close it today because rolling is too risky in this environment.  However, at the same time, I think stocks are way oversold here.  We’re going to put on a short-term, very wide call butterfly in RUT to try to make some money back on a snap back in stocks.  I’ll send out the new trade shortly.

December 18, 2018 - 12:01 pm

Trade Alert:

As I mentioned yesterday, I think stocks are oversold here.  I believe the Fed decision and/or statement coming out tomorrow will have a positive effect on stocks.  I want to do something bullish on small caps, which have gotten hit really hard lately, but I also don’t want us to spend a lot.  As such, we’re looking at doing a bullish call butterfly on IWM, the Russell 2000 ETF.  For those of you who haven’t traded a butterfly, please watch the trade video as I talk about the trade in more depth.

BUY TO OPEN the IWM December 31st 141-145-149 call butterfly for a 0.62 DEBIT or lower.

With the market moving higher, it’s okay to do this trade up to a 0.75 debit.  Remember with a butterfly you are buying the 141 and 149 calls and selling 2 of the 145 calls.  I recommend doing a 3-lot (or a 1-lot for beginners) which means you are buying 3 of the 141 and 149 calls and selling 6 of the 145 calls.  The trade should cost about 190 not including fees.  That’s also the max loss potential on the trade. We can make as much as around 1,000 max gain on the trade if we settle at 145 at expiration.

Trade Screenshot:

Trade Video:

December 17, 2018 - 3:16 pm

Some thoughts on the market and our portfolio:

1. I generally don’t like picking market direction but I think stocks have reached oversold levels.  I’ll be looking at doing an inexpensive bullish index/ETF trade, possibly tomorrow – maybe something a like a SPY call butterfly or IWM call spread.
2. I think a positive catalyst will be the Fed announcement where I expect they raise rates but then put in language that suggests rates aren’t going up for the foreseeable future. (Fed funds futures don’t expect another rate higher until September 2019.) FOMC results will be announced Wednesday during market hours.
3. The RUT condor is making me nervous, so if we don’t rally/stabilize tomorrow, we may have to close it early.  Yes, I should have pulled the trigger last week.  Still, expiration is this week and time decay is strongly on our side.
4. We’ll have to roll ARNC at the end of the week most likely as I don’t expect an acquisition announcement to be made during this market turmoil. We’ll probably roll out to February and double our position size as we need to make up for our roll costs and stock upside in probably only 23-24.

December 14, 2018 - 1:58 pm

We’ll wait until next week to close the RUT iron condor.  We’re still far away from our short strikes and we can collect a lot more time decay if wait through the weekend to close.  We’ll revisit on Monday to see if it the trade is at a more attractive closing price.  I’d like to close at 0.20 or below.

December 12, 2018 - 12:57 pm

Trade Alert:

I don’t trust this market and I want to have at least one type of hedge on at all times.  With the SPY butterfly expiring, I want to buy a straight long (debit) put spread on in an index ETF.  I like EEM (Emerging Market ETF) because it’s a lower priced ETF so the options are also inexpensive. I don’t want to spend too much on hedging but I think it’s important we allocate at least a portion of our portfolio to it in this environment. I would not be shocked if the market fully melts down in the coming weeks.  If that does happen emerging markets will also get hit and thus our hedge will kick in.

BUY TO OPEN the  iShares MSCI Emerging Markets ETF (NYSE: EEM) January 18th 36-39 Put spread (buying the 39 puts, selling the 36 puts) for a 0.53 DEBIT or lower.  Buy this spread up to 0.60. I recommend at least  a 3-lot, which will cost us about 160 but pays off 740 on a market collapse.

Screenshot:

Video:

December 7, 2018 - 1:23 pm

Closing Alert:

Okay, let’s go ahead and close our SPY butterfly here for a profit.  Here’s the trade:

SELL TO CLOSE the SPY December 7th 255-260-265 put butterfly for a 0.70 credit or higher.  You can sell down to wherever you get filled since today is expiration.  Remember, you are selling the 255 and 265 puts and buying back twice that many 260 puts.  At 0.70 we’re looking at profits of 79% – not bad for a hedge.

December 7, 2018 - 12:28 pm

Trade Alert:

Our MRVL strangle doesn’t have any value left so there’s no reason to roll the calls. Instead, we’ll just open a new trade for January.  We actually don’t need to do a call spread because the 16 calls are cheap enough as is.  So here’s the trade:

BUY TO OPEN the Marvell Technologies (MRVL) January 18th 16 calls for a 0.63 DEBIT or lower.  You can buy up to 0.70 if the market moves before you get a chance to make the trade.  I recommend a 1 or 2-lot for beginners and a 3 or 4-lot for everyone else.  For our existing MRVL call and put, we can let them expire worthless.

December 7, 2018 - 12:09 pm

The Plan For Today:

The more I search for a trade to do, the more I realize that there’s nothing I like in this environment.  There’s no reason to force a trade when the deck is stacked against you… so we’ll wait until there are better opportunities.  On the other hand, we have some expiring positions in our portfolio to address.

For MRVL, I continue to believe the stock would be substantially higher in a more even keel environment. The earnings news was extremely positive.  We’ll roll out our calls into a call spread or something similar later today.

Our SPY put fly also has value so we’ll want to close it as well.  Let’s see if the market continues selling off before we pull the trigger.

Stay tuned as closing/roll alerts will be forthcoming.

December 6, 2018 - 4:43 pm

The market has been schizophrenic lately.  Yet, the concern isn’t necessarily the high level of volatility.  As you can see from the chart below, we’re definitely seeing higher VIX levels today (green line) than last year (black line), but we’re not far off from 2015 (orange) or 2016 (blue) at all.  The anomaly in this picture is how low volatility was in 2017, not so much how high it is today.  However, you can see this year’s VIX term structure is extremely flat.  That’s what is more troubling in my opinion.  The market doesn’t have any idea which way things are going.  Certainly a tough environment to trade in!

December 6, 2018 - 2:22 pm

Open Positions and New Trade Update:

MRVL is up despite the meltdown in stocks. If this was a “normal” day in the market we’d likely be able to close our 16 call for a profit.  Instead, the best course of action may be to roll out the call another month. We don’t have to decide until tomorrow.

The SPY butterfly is certainly doing its part as a hedge during this selloff.  It expires tomorrow so we’ll take action on it one way or another tomorrow during trading hours.

Regarding a new trade – I want the markets to calm down a bit before jumping into a new position.  I intend to do a new trade tomorrow, but if the market is still in full meltdown, we may sit on our hands. Stay tuned.

November 30, 2018 - 12:29 pm

Correction:

The date on that UTX trade alert should be January 18th. My apologies for the typo.  Here’s how it should look in full:

SELL TO OPEN the January 18th UTX 110-115 put spread (selling the 115 put, buying the 110 put) for a 0.97 credit or higher.

November 30, 2018 - 12:00 pm

Trade Alert:

United Technologies (NYSE: UTX) is a massive conglomerate and part of the DJIA 30.  Just this week, the company announced it will be splitting into 3 different companies – all publicly traded.  The stock dropped on the news on concerns over cash flow issues and a drop in credit rating.  However, all my research points to this being a very shrewd move for the company.  After all, what synergies do an aerospace company (United Technologies), an elevator company (Otis), and an air conditioner business (Carrier) have that they needed to be under on roof?  One Morningstar study I read in particular predicts impressive gains for all three new companies due to the breakup. I think there’s a solid floor on UTX and it’s a great opportunity to sell a put spread.  We’re going to go all the way out until January expiration because there’s a limit to how low the stock can go given the future prospects of the 3 new companies.

SELL TO OPEN the January 18th UTX 110-115 put spread (selling the 115 put, buying the 110 put) for a 0.97 credit or higher.

Feel free to make this trade down to 0.87.  We have 49 days to expiration, with anything above 115 in the stock price producing max gain.  Max loss would occur below 110 on expiration.  I recommend a 1-lot spread for beginners and a 3-lot for everyone else.

Trade Video:

Trade screenshot:

November 29, 2018 - 2:53 pm

Just a quick note on our next trade:  I found something I like quite a bit, but just doing some additional research.  I’ll send it out tomorrow morning assuming no market collapse or alien invasion.

November 27, 2018 - 1:38 pm

Closing Alert:

No reason to take any more chances with ADBE. Let’s close our condor now that it’s a clear winner (17.7% gains).

BUY TO CLOSE the Adobe (ADBE) November 30th 215-220-227.5-282.5 Iron Condor for 0.42 or lower.

If you can’t get 42 cents then move up by one cent at a time until you get filled.  See screenshot below for details.

November 20, 2018 - 2:15 pm

Officially:

BUY TO CLOSE the NVIDIA (NVDA) November 23rd 195-200 put spread (buy back the 200 put, sell out the 195 put) for 5.  You should get filled at 5 since that’s the max loss value on the trade.  We are closing this instead of letting it expire because people are (unjustifiably) early exercising their puts and we are getting assigned on shares.

We will open a new put credit spread on NVDA once I feel like we’ve hit a bottom for more than a couple days.

November 20, 2018 - 2:06 pm

Go ahead and close any open NVDA put spreads right now. I’ll send out a more formal closing alert later on, but as several subscribers have informed me that they are getting assigned shares, let’s get those put spreads out of our portfolio as soon as possible.

There is virtually no benefit to the people who are early exercising their long NVDA puts, and my mistake was assuming that people would realize that.  I guess more options traders out there than I realized don’t fully understand the point of early exercise.  When NVDA hits a bottom for more than a couple days, we’ll look at reopening a put credit spread.

November 20, 2018 - 1:05 pm

Trade Alert:

So much action in the market lately, especially in tech stocks, and it’s about time we take advantage of it.  It’s been tough to find a strangle worth buying (they’ve been very expensive) but I believe I finally found the answer in Marvell Technology (MRVL), a chip stock with earnings on December 4th.  We’re going to get into a position where movement in either direction benefits us – a nice change of pace for our portfolio considering what the market has been doing.

BUY TO OPEN the Marvell Technology (MRVL) December 7th 15-16 strangle (buy the 15 put and 16 call) for a 1.06 DEBIT or lower.

Buy this strangle up to 1.15.  Breakeven points are roughly 14 and 17 in the stock, and we have earnings coming out during our holding period which could spark a big move.  I recommend a 1-lot for beginners and a 3-lot for everyone else.  Remember, you can only lose what you spend on premium on a debit trade.  You should be able to place the entire strangle trade at once (both the call and the put) with your broker.

Video of the trade:

November 16, 2018 - 3:20 pm

The action in NVDA has been soul crushing.  Clearly, I could have not been more wrong about earnings being a bullish event for the stock.  In fact, this is the worst move in the stock after earnings since 2004.  The culprit – lower Q4 guidance.  Analysts expected guidance to be lowered by 300-350 million.  Instead, NVDA lowered it by 700 million.  Yes, that’s a big number.  However, is it really worth a 20% drop in the stock?

Let’s put it this way – the stock has lost about 23 billion in market cap today all due to an additional 350 million in lowered guidance (over what was expected).  I firmly believe this is a massive overreaction for the far-and-away best-in-class company in this space.  However, it’s going to take time for the stock to recover, possibly multiple quarters, as many analysts have lowered price targets.

Unfortunately, that means we probably won’t be able to quickly make money off a long trade (like a call butterfly).  However, the stock looks like it could be ideal for selling put spreads.  As such, next week, we’ll roll out our losing put spread to lower strikes and a further out expiration.  After that, I imagine NVDA will continue to provide excellent put selling opportunities since the downside is now a known quantity.  I believe with patience and persistence, we will have a string of winning trades ahead of us in this stock.

November 16, 2018 - 12:45 pm

Sell Alert:

SELL TO CLOSE the November 16th SMH 86-91-96 Put Butterfly for around 2.30.  If you’re still holding this position, make sure you close it today for a profit.  If you have any questions on how to close this trade, feel free to email me directly.

November 15, 2018 - 6:10 pm

NVDA beat on earnings but missed on revenue and Q4 guidance, with the Q4 guidance miss causing and after-hours selling frenzy (down 15% as I write this).  As always, after-hour investors are vastly overreacting to the news.  Guidance was lowered because the boom in cryptocurrency-related sales is over, but that was to be expected and not what I consider to be a key growth driver for the company.  Management doesn’t appear concerned in the least about the company’s other target markets and in fact is increasing its dividend by a penny and share buyback program by billion.

Unless there’s a massive reversal in the morning, our current NVDA positions are bound to get ravaged tomorrow.  However, the news is out, and this could be an incredible entry point into new trades.  We don’t have to roll our trades out right away as we may want to see if buyers step in first (and we have a week until expiration).  Let’s see how things look tomorrow but we may make at least one move before the weekend.

November 15, 2018 - 1:58 pm

Trade Alert:

Two new trades today as promised.  One short iron condor in the Russell 2000  and one butterfly put hedge in SPY.  I spend a lot of time explaining these trades in the video (which runs 17 minutes!) so please watch it if you get the chance.

SELL TO OPEN the December 21st Russell 2000 Index (^RUT) 1355-1360-1620-1625 Iron Condor (sell the 1360 put and 1620 call, buy the 1355 put and 1625 call) for a 0.95 CREDIT or higher.  I recommend a 1-lot for beginners and a 3-lot for everyone else.  Keep in mind, you should be able to execute this trade all at once in your brokerage account.  We’re looking for the Russell 2000 to stay in the range roughly between 1360 and 1620.

BUY TO OPEN the December 7th SPDR S&P 500 ETF (SPY) 255-260-265 Put Butterfly (buying the 255 and 265 puts, selling double of the 260 puts) for a 0.39 DEBIT or lower.  The butterfly takes the form of a 1 by 2 by 1, so a 3-lot will be 3x6x3, for example – buying the 255 and 265 puts 3 times each and selling 6 of the 260 puts. I recommend doing a 3 or 4 lot.  The trade is profitable roughly between 255 and 265, with the max profit at 260 on expiration.  This trade is meant to be a cheap hedge in case of another major selloff in stocks.

Video:

November 9, 2018 - 4:10 pm

Regarding the trades from earlier today, even if you weren’t in the original VXX or ARNC trades, feel free to establish the trades as new positions.  In terms of a new iron condor, I was originally planning on doing one today but I’d like to see volatility stop rising before we commit.  There’s still some market risk out there and I prefer to be cautious at this time.  Next week, we’ll probably do two trades at once around mid-week. I’m thinking of an index iron condor (unless volatility explodes higher) and possibly a cheap index put hedge or some type of cheap debit trade.  Let’s see how the market looks though, and we’ll go from there.

November 9, 2018 - 12:53 pm

Trade/Roll Alert:

1. First off, no action on the SMH put fly today.  The trade is in the money but I want to see if the weakness in tech extends into next week – so just hold for now.
2. We’ll let the VXX 25-28-31 put butterfly expire worthless and establish a new trade – this time a simple long put spread.  Trade details below.
3. We’re going to roll out the ARNC call spread to December and lower the strikes.  Trade details below.

VXX Trade:

Buy the November 23rd VXX 30-32.5 put spread (buying the 32.5 put, selling the 30 put) for 0.90 DEBIT or lower.  Max gain for this trade is at 30 or below in VXX by expiration.

ARNC Trade:

Roll the November 16th ARNC 23-26 call spread to the December 21st 21-23 call spread for a 0.60 DEBIT or lower.  You should be able to roll out this trade as seen in the screenshot all in one trade order.

November 9, 2018 - 12:32 pm

I’m going to send out the actual trades soon, but as a heads up, my current plan is to roll out the ARNC trade, establish a new VXX trade (letting today’s put fly expire), and hold SMH until next week. Keep an eye out for the trade details coming soon.

November 5, 2018 - 4:21 pm

With elections and the FOMC meeting this week, we’re going to wait until after all the news hits before placing a new trade (unless it’s some adjustment or closing to an existing position).  No reason to take extra risks given the gravity of this week – and as important as elections are, it may be the FOMC results that really make the biggest difference.  That means Thursday afternoon or more likely, Friday morning,  is when I plan to do another trade, probably another short iron condor to take advantage of what I assume will be a volatility meltdown.  Of course, that could change in a hurry if something crazy happens.

Thinking a bit longer-term, I want to get another market or volatility hedge back on once the VIX curve is back into a more obvious contango situation (i.e. a sign of risk abating).  Probably by Thanksgiving I’d like to do a 2 or 3-month hedge in SPY, QQQ, VXX, or UVXY or some combination – but not until options get much cheaper.  In the meantime, the rest of the year could set up very well for iron condors and the stuff I like to do the most.  Stay tuned!

November 2, 2018 - 12:46 pm

Trade Alert:

Okay, let’s take care of our remaining NVDA position. Rather than roll the 235-240 put spread and have to deal with confusing prices, we’ll just let that one expire.  We’ll initiate a new 195-200 put spread for November 23rd and also add a call butterfly.  We’re going out to the 23rd so we can have some extra time for the stock to react to earnings (on the 15th), which I think will be a bullish event for the stock considering how much it has sold off already.

SELL TO OPEN the NVIDIA (NVDA) November 23rd 195-200 put spread (selling the 200 puts, buying the 195 puts) for a 1.47 CREDIT or higher.

BUY TO OPEN the NVIDIA (NVDA) November 23rd 225-235-245 call butterfly (buying the 225 and 245 calls, selling double the 235 calls) for 1.10 DEBIT or lower.

I recommend doing the same number of credit put spreads as you had on for the 235-240 put spread that expires today, or increase the volume if you feel like taking on a bit more risk.  For the butterfly, do 2 butterflies if you sold a 3 lot of put spreads, and increase to a 3-lot if you did 4 or 5 put spreads.  If you didn’t do the original trade, feel free to put these trades on anyhow, but stick to 1 or 2 lots on both trades.  See screenshot below for details.

November 1, 2018 - 3:26 pm

Sell Alert:

Okay, let’s go ahead and close our 210-215 NVDA put spread.  If we wait until tomorrow, we could possibly pull in a decent profit, but then we run the risk of having to roll it if NVDA/tech stocks/overall market sells off.  Given the volatility lately, I think it’s better to be safe.  Also, we’ll have some work to do to roll out and adjust our other NVDA position.

BUY TO CLOSE the November 2nd NVDA 210-215 put spread (buying back the 215 puts, selling the 210 puts) for 1.25 or lower.

November 1, 2018 - 1:44 pm

We’re closing in on breakeven for the 210-215 NVDA put spread that expires tomorrow.  I think it’s best that we close it by the end of the day today in case we have a Friday selloff . I’ll send out a sell alert, but I want to wait another hour or so to collect as much time decay as possible.  By closing the 210-215 spread today, tomorrow we can focus on rolling out the 235-240 put spread while initiating a long position for earnings (probably through a call butterfly).  Certainly nice to see NVDA finally catch a bid!

October 29, 2018 - 1:19 pm

Trade Alert:

SELL TO OPEN the November 30th Adobe (ADBE) 215-220-277.5-282.5 Iron Condor (selling the 220 puts and 277.5 calls, buying the 215 puts and 282.5 calls) for a 1.11 CREDIT.

ADBE has been relatively stable despite the tech selloff as its valuation wasn’t as high as other tech giants and earnings aren’t until December.  The scenario makes for a good short iron condor, which I discuss in more detail in the video below.  Do this trade down to a 1.00 credit. I recommend a 3-lot of iron condors, or a 1-lot if you’re newer to the service.

October 26, 2018 - 12:19 pm

Sell Alert:

Okay, LRCX is running higher and almost at 141.  Let’s not take any chances that the market changes its mind and reverses lower.  Time to close this position.

SELL TO CLOSE the October 26th Lam Research (LRCX) 135-140 Put Spread (buying back the 140 put, selling the 135 put) for 0.55 or lower.  We aren’t going to quite break even between both LRCX trades (this one and the one we rolled it out from) but given the volatility of the market and the chip industry, I think it’s best we close this trade and focus on making money back in NVDA next week.  We don’t need more than one chip stock in our portfolio after this week!  The market is moving quite a bit so if you can’t get 0.55 or lower, that’s okay – just make sure you close it while LRCX is above 140.

October 26, 2018 - 12:03 pm

I’ve been trading options for 21 years, but it doesn’t stop the market from making me look like a fool every now and then.  Being a trader can be a humbling experience, whether you’ve traded 20 years or 2 months.  When it comes to trading, the best thing we can do is have short memory and use the volatility to look for really good opportunities.

1. Speaking of opportunities, I’m going to wait until Monday to make any new trades.  There’s too much volatility right now and we already have existing positions to look after.  I’d rather the market settle down before doing a new trade.  I still plan on selling an iron condor and there are a few really solid candidates – but let’s not rush into anything in these conditions.
2. AMZN and GOOGL earnings misses are weighing heavily on the market, but GDP was very good.  Unless the market is concerned that strong consumer spending is going to lead to inflation (and higher rates), I believe the good macroeconomic news should help counter the negative earnings news.
3. We’ve already bounced quite a from the bottom this morning, so let’s hope that’s a sign we actually hit a bottom.
4. The LRCX position will be closed today, probably very soon.  I don’t want to roll it out given market conditions.  We’ve already gone from 7 to 1 this morning, so we should be able to get out a decent price.
5. NVDA is brutal but we have another week to decide what to do.  If it rallies next week, it will gives us more choices on how to adjust it (if necessary).
6. I’m going to drink lots of coffee today, which helps me focus when the market is crazy.  If you’re a coffee drinker, make it extra strong today.

October 24, 2018 - 4:53 pm

Mixed earnings after close so far.  MSFT and TSLA crushed earnings, could mean tech rally tomorrow.  However, AMD missed badly on earnings and that will hurt chip stocks.  As NVDA’s closest competitor, AMD’s earning miss is problematic for our positions. However, AMD was a lot more expensive than NVDA on a relative basis.  At a 25x forward P/E, NVDA is trading way below it’s 5-year trailing P/E average of 35x.  With as bad as AMD earnings are though, we may have to roll out our positions well beyond November 15th earnings.  We have a lot of skin in the game in regard to NVDA, so we may have to take a longer term view on this stock in order to make back (or profit) on our trades.  My initial thoughts are to sell a December or January put spread maybe closer to the money than usual and use it to finance call spreads or a wide call butterfly.  We won’t do anything until closer to expiration however.

October 24, 2018 - 3:00 pm

It’s tempting to give into fear in this type of market, but this is no time to give up on sound analysis.  The chart below of the VIX term structure does not look like panic to me.  The futures think the VIX is coming down and 20 historical volatility is still well below the current spot price of the VIX.  While we’re in backwardation, the entire futures curve is well below the spot price of the VIX.  I don’t know if a bottom is in, but I don’t feel like we’re on the cusp of an even bigger meltdown.  Stay patient.  If you can’t sleep at night, add cheap hedges (like SPY put spreads/QQQ put spreads).  There will be great opportunities to make money once volatility settles down.

October 23, 2018 - 12:58 pm

Don’t stress about NVDA. It’s down about 4% today (already off the lows) after UBS lowered its target price from 5 to 0… which is still way above where we are now.  NVDA is probably my favorite tech growth company and has not released one iota of news to suggest November 15th earnings are going to disappoint.  If we need to roll out our Nov. 2 put spreads then I’m more than willing to do so.  Plus, we can always add a cheap upside trade (like a call butterfly) to shoot for higher returns.  As of right now, the thesis has not changed on NVDA.

October 19, 2018 - 1:55 pm

Just a quick reminder for those holding the GOOGL iron condor that you can let it expire worthless. Full profit coming on this trade!

October 15, 2018 - 3:14 pm

Trade Alert:

Wasn’t planning on trading today but volatility indicators are suggesting that front month volatility is coming down.  Let’s put on a VXX put butterfly to take advantage of mean reversion in the VIX (market volatility).  We’re going out longer than normal with this strategy (about 4 weeks) so that if the trade doesn’t work right away, we get another chance at a volatility selloff after elections/November FOMC meeting.

BUY TO OPEN the iPath S&P 500 VIX Short-Term Futures ETN (VXX) November 9th 25-28-31 Put Spread for a 0.72 DEBIT or lower.  Remember, we’re selling double of the 28 strike so you should be buying 1 25 put, 1 31 put and selling 2 28 puts.  I recommend up to 5 spreads (5 x 10 x 5).  This is a debit trade so you can only lose what you spend on premium.  Max gain is 2.28 per butterfly if VXX closes at 28 on November 9.

Here’s the video:

October 12, 2018 - 1:28 pm

For those interested in watching my presentation from the Dallas MoneyShow, here’s the link:

https://www.moneyshow.com/video/ccd7bb914250417f82364c08ea5d72a91/5-secrets-to-trading-options-just-like-a-professional-trader/

Also, here’s the link from last night’s live webinar where I discuss the explosion in volatility, our portfolio, and tail risk hedging:

Live Strategy Session Replay

October 12, 2018 - 1:07 pm

Trade (Roll) Alert:

We’re going to roll out our LRCX positions a couple weeks.  Earnings are next week, but I believe the bad news has been priced in – and even if earnings are a non-event, volatility will come out of the options which will help us.

Roll the October 12th Lam Research (LRCX) 139-144 put spread to the October 26th 135-140 put spread for a 0.70 DEBIT.   So, you are buying back the Oct. 12th 144 put and selling the 139 put and subsequently selling the Oct. 26th 140 put and buying the 135 put and it should cost you around 0.70.  This spread could move around a lot today, so just keep in mind as the stock moves higher from about 142 the cost will get cheaper, and vice versa.

October 11, 2018 - 1:33 pm

Correction!

I’m asleep at the wheel.  I did that November 205-210 put spread in the November 16th options chain by mistake.  Here’s what the trade should be:

SELL TO OPEN the November 2nd NVIDIA (NVDA) 210-215 put spread (selling the 215 puts, buying the 210 puts) for a 0.65 credit or higher.  Please note we are moving the spread up to the 210-215 strikes.  I don’t want to use the November 16th chain because we have gap risk from earnings.   This trade is good down to 0.60.

October 11, 2018 - 1:11 pm

Trade Alert:

As promised we’re doing a new trade and a new hedge today.  For the trade I’m sticking with NVDA because it’s one of the best tech stocks on the planet and it’s worth doubling down on with the spike in implied volatility.  We’re going to hedge our exposure to chip stocks (NVDA and LRCX) by purchasing a put butterfly on SMH, a heavily traded semiconductors ETF.  Let’s go ahead and close SQ while we’re at it.

SELL TO OPEN the November 2nd NVDIA (NVDA) 205-210 Put Spread (selling the 210 puts, buying the 205 puts) for an 0.85 CREDIT or higher.  Feel free to work this order a bit if you can’t get filled right away but go no lower than 0.75.

BUY TO OPEN the November 16th VanEck Vectors Semiconductor ETF (SMH) 86-91-96 Put Butterfly (buying the 86 and 96 puts, selling double of the 91 puts) for 0.70 DEBIT or lower.  Remember it’s a 1x2x1 spread where we are selling 2 of the middle strike.  Do at least a 2 or 3 lot of this trade.  I did 4.

BUY TO CLOSE the October 19th Square (SQ) 100-105 Call Spread for 0.03.  A 14.8% winner excluding commissions.

Here’s the video:

October 10, 2018 - 4:07 pm

This is what he VIX term structure looks like when investors are scared.  I have a couple trades in mind for tomorrow depending on how the market opens.  One hedge in case we keep falling and one credit trade to take advantage of the explosion of implied volatility.  Also, I’m not yet worried about NVDA or LRCX.  In fact, both may be double-down candidates as long as the market stabilizes in the next day or so.

October 10, 2018 - 12:34 pm

Take a look at the VIX term structure.  Big time backwardation as short-term volatility spikes.  But… the entire curve is below the spot price (the actual VIX index) of around 18.  Basically, the futures markets don’t think the VIX should be this high.  I think this selloff tapers off soon.  However, as long as the curve looks like this, we need to be careful about selling options.

October 8, 2018 - 3:03 pm

There’s a lot we can do (in terms of trading opportunities) with the VIX up at 16, so we’ll definitely have at least one more trade this week plus a possible hedge.  The hedge will depend a lot on what the VIX term structure looks like in the next couple days.  Below is the current structure where you can see that the VIX futures curve has been in backwardation and is now pretty flat. This is a sign that there’s still plenty of concern in the markets but it has been easing from the highs.  It may be a reasonable time to buy a VXX hedge (buying a call or call spread in the front month volatility ETF, although I’m not yet ready to pull that trigger).

October 8, 2018 - 2:47 pm

Trade Alert:

SELL TO OPEN the NVDIA (NVDA) November 2nd 235-240 put spread (selling the 240 puts, buying the 235 puts) for a 0.63 CREDIT or higher.

I don’t have internet access at my home office so I’m working from a coffee shop and thus I can’t do a video of this trade.  Tech selloff is a bit overextended at this point with earnings coming up in most major tech names, and of course implied volatility is up across the board in the tech sector.  We’re selling a put spread below the 200-day moving average in NVDA which should hold up with Nov. 7th earnings approaching (we’re selling the 16 delta strike).  Our options expire the week before earnings.  Market is moving around a bit so this trade is okay down to a 0.58 credit.

October 5, 2018 - 4:37 pm

Okay – interesting day for volatility.  I sent out this chart when VIX was basically at the highs and the term structure was at the purple line.  Look at where we closed (blue line) compared to the low (red line).  VIX spot also down below 15.  Won’t be surprised to see us open higher on Monday – assuming no major news comes out over the weekend.

October 5, 2018 - 2:04 pm

Front of VIX term-structure is in backwardation, something we need to keep an eye on.  If the curve continues to flatten out we are going to want to place a long volatility trade or downside index position next week – or both. Stay tuned.

October 5, 2018 - 1:16 pm

Closing Alerts:

We are closing both hedges today for profits.  We may put on a new hedge next week depending on market conditions (that would be separate from the two other trades on plan on doing).

SELL TO CLOSE the S&P 500 (SPX) October 5th 2820-2845-2870 Put Butterfly for 3.15 or higher.   Keep in mind you will be selling the 2820 and 2870 puts and buying back the 2845 puts if you are still holding this position.

SELL TO CLOSE the Invesco QQQ Trust ETF (QQQ) October 19th 174-180 (selling the 180 put, buying the 174 put) Put Spread for 1.92 or higher.  

Price may be moving quite a bit on a more volatile day like today so just use my prices as guidelines.

October 5, 2018 - 1:05 pm

I’m going to wait until Monday for our next new trade so we can get a little more time to see what the market/volatility is going to do.  As such, I’m planning on doing two trades next week.  The added volatility should give us plenty of opportunities.  We’re also going to close one or both of our hedges today, so stay tuned for the closing alert.

October 2, 2018 - 2:21 pm

We’ll be sending out the Options Profit Engine issue later today instead of tomorrow since I’ll be at the MoneyShow in Dallas from tonight through Thursday.  In addition, our next new trade won’t be until Friday.  Markets have been pretty quiet lately, so we’ll see if the action picks up later in the week.

September 28, 2018 - 12:21 pm

Sell Alert:

BUY TO CLOSE Netflix (NFLX) October 12th 335-340 put spread (buying back the 340 puts, selling the 335 puts) for 0.22 or lower. 

That’s a 15.2% return in 8 days.  We’ll take that any time we can get it.

September 27, 2018 - 2:45 pm

Trade Alert:

Buy the Arconic (ARNC) November 16th 23-26 Call Spread (buying the 23 call, selling the 26 call) for a 0.65 DEBIT or lower

This is a debit trade so you will paying premium, not collecting it.  I recommend a 1 or 2-lot for beginners, and a 3 to 5-lot for more experienced traders.

We are betting on either a possible acquisition announcement or better than expected earnings results.

Here’s the video link to the trade:

September 20, 2018 - 1:37 pm

Trade Alert:

SELL TO OPEN the Netflix (NFLX) October 12th 335-340 Put Spread (selling the 340 puts, buying the 335 puts) for an 0.85 credit or higher (stock at 365 for reference).

I’m okay with doing this trade down to a 75 cent credit.

Video link to trade:

September 19, 2018 - 12:24 pm

To see what crazy volatility looks like, check out the options chain on Tilray (TLRY).  The ATM straddle which expires in less than 3 days it trading for about 60 bucks or about 400% IV.  Funny thing is, that’s probably too cheap – as I write this the stock has gone from 240 to 210 and back up to 230.  Generally speaking, I don’t recommend trading options on something this crazy.  It appears the crypto traders have moved into the cannabis industry.

September 14, 2018 - 7:08 pm

If you get a chance over the weekend, take a look at this massive VIX trade that happened this week.  Click here to read about it.  Email me if you want to discuss.

September 14, 2018 - 1:52 pm

Trade Adjustments:

Roll the PowerShares QQQ (QQQ) September 21st 171-177 put spread to the October 19th 174-180 put spread for a total cost of 0.98.   You should be able to do this all in one trade (closing the September spread and opening the new one in October).  The entire trade should cost under 1 dollar.  As a reminder, you should be long the 180 put and short the 174 put.

Buy to open the S&P 500 (SPX) October 5th 2820-2845-2870 put butterfly for around a 1.45 debit.  You’ll be buying the 2820 and 2870 puts and selling 2 of the 2845 puts.  We’re adding an extra week of time on this butterfly hedge.  I’m using 2845 as the center strike because that’s roughly in line with the 50-day moving average.  I’m using 2870 as the high strike because I want to keep the cost of this trade at 1.50 or under and anything closer would have exceed that price limit.

You can let this week’s SPX butterfly expire.

Keep in mind, both these trades are downside hedges.  You don’t have to do either of these hedges as they aren’t part of our “normal” strategy.  However, I recommend doing at least one of the trades as I do believe the market is ripe for a pullback.

September 14, 2018 - 1:31 pm

Here’s the link to last night’s webinar for those unable to attend:

Live Strategy Session Replay

September 13, 2018 - 12:59 pm

Trade Alert:

SELL TO OPEN the October 12^th Lam Research (NASDAQ: LRCX) 139-144 put spread (sell the 144 puts, buy the 139 puts) for a 0.78 CREDIT or higher.

See trade video here:

September 7, 2018 - 12:12 pm

Closing Alert:

SELL TO CLOSE the September 21^st Freeport-McMoran (FCX) 14 Put for 0.89 or higher

(No need to close the 15 call, which doesn’t expire for two weeks.)

September 6, 2018 - 3:10 pm

Trade Alert:

SELL TO OPEN the October 19th Alphabet (GOOGL) 1040-1050-1310-1320 Iron Condor for 1.65 or higher.  (You should be short the 1050 puts and 1310 calls, long the 1040 puts and 1320 calls).

Beginners should do a 1-lot, everyone else I recommend just doing a 2-lot.

Here’s the video link to the trade:  http://content.jwplatform.com/videos/FEuOIvTh-bK67iJnL.mp4

September 5, 2018 - 2:35 pm

Nice move down in SQ today.  Good news for our short 100-105 call spread.

September 5, 2018 - 1:26 pm

I’m looking at doing a new trade tomorrow (Thursday) – probably a longer-term index iron condor.  If you’re not in the US, please send me an email and let me know if you received this message.