We’ve adjusted a position in the Paid-to-Play portfolio today: [Read more…]
[Options Premium] Have Bonds Bottomed?
Yesterday’s trading action in $TLT, the 20-year treasury bond ETF, gives me confidence that it might have been a near-term low.
I’m making the bet that it’ll hold for at least a few weeks. And the elevated options premiums here give us ample ammunition to wait it out. [Read more…]
[Options P2P] New Position: XLU
The next new position in our Paid-to-Play portfolio is: [Read more…]
[Options P2P] Rolled XLY to November
We’ve adjusted a position in the Paid-to-Play portfolio today: [Read more…]
[Options] Uncle Warren Time
We joke that when stock markets get stormy, it’s time to head over to Uncle Warren Buffett’s house to ride out the storm.
Of course, no science or extensively backtested algorithm is at play here that gives us this conviction. But time and time again, we’ve been rewarded for selling naked puts in $BRK/B when stocks slide and $VIX spikes.
If it ain’t broke…
Here’s a recent chart of $BRK/B that shows a level of support around $350 per share:
We’re going to lean against this level for our risk management purposes.
Here’s the Play:
I like selling $BRK/B November3 (weekly) 350 puts for approximately $5.00 per contract. I’m choosing this weekly expiration instead of the regular November monthly options because Berkshire is expected to announce earnings on November 3rd and I’d like to be out of my position (win or lose) before that deadline.
Our risk management is simple: If we see a $BRK/B closing price below $350 per share, putting our short puts in-the-money (ITM), that is my signal to close the trade, book the likely loss, and move on. I won’t be interested in sticking around to see if this is a false breakdown while holding a position that has the potential for unlimited losses.
Meanwhile, I’ll leave a resting good-til-canceled (GTC) limit order to buy these puts back for $2.50 per contract — half of what I collect in premium today. I want to take the “easy” profit and move on to the next trade.
In the unlikely event that we’re still in this position on the eve of expiration day which is also the day Berkshire announces earnings, I’ll close the trade down win or lose. I don’t want to be holding these short puts with their super high gamma into the binary risk event that is earnings announcements.
If you have any questions on this trade, please send them here.
If you missed last week’s video Jam Session, you can catch a replay on Stock Market TV.
P.S. We do trades like this regularly. If you’d like to leverage Best-in-Class technical analysis into smarter directional options trades, try out All Star Options Risk Free! Or give us a call to learn more: 323-421-7991.
[Options P2P] Rolled XLV to November
We’ve adjusted a position in the Paid-to-Play portfolio today: [Read more…]
[Options P2P] Adjustment to XLP Position
We’ve adjusted a position in the Paid-to-Play portfolio today: [Read more…]
[Options Premium] Stocks are Signalling Sideways for Longer
After slowly dipping my toes last week into the idea that it might be time to start getting into some new long exposure, the market’s reaction to the latest Federal Reserve action tells me the direction is still sideways until further notice.
So we’re literally betting on that today with a delta-neutral credit spread in the Russell 2000. [Read more…]
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