How to get paid to own calls

BY ANDREW GIOVINAZZI

January 19, 2024

Yo Pit Crazies,

If you want to learn how to get calls for a credit, join the Easy Trade Button. If you want to see how I did it, keep reading on.

One thing about reading order flow is that I don’t have to do exactly what the paper is doing. Paper is just a floor term for non-market maker orders. Basically the whole world that wants to trade. I do not know why someone would buy IBM Jan19 172.5 calls that are outside of the expected move. The 1 day move as evident from the straddle is $1.30 so the 172.5s are a bridge too far. Options outside the straddle have less than 25% of finishing in the money.

Yet, someone loves them and has for many days.

What we have is a range set up by the staddle and some very excited call buyers. That is not how I played it in Easy Trade Button on Tuesday. I got paid to own the IBM Jan19 167.5 calls. I am still holding them. I want to see if the call buying crazies are right.

Now I will show you how I did it. Hint: Remember the straddle value today is $1.35.

The option market wants to give information, the question is do you listen

35 years and counting since my first option trade. I was a floor trader for 15 of those years. Did I learn anything before I retired? A few things and one of them is the straddle is the best guess the market is giving you for the time to expiration. That is what the paper thinks. Paper is everyone not a market maker. Market Makers react to order flow.

On Tuesday in my Easy Trade Button class I knew paper was coming after upside calls. The problem is the market looked ugly. So I bought the IBM Jan19 167.5 calls and the IBM Jan19 165 puts for $1.30. That was on Tuesday with 3 days to expiration which funny enough is the value of the straddle with 1 day to expiration. On a quick rally I sold ⅔ of the calls for $1.10 and sold all of the puts at .70 on the drop in IBM when stocks got sad. So I collected $430 on a $390 entry cost and left ⅓ of my calls open.

The alert time stamps with our OP APP are near instant. Does anyone else put trades on live and then exit them via instant alert? Let me know.

My $2.50 GTC is still out there unfilled. An option trade is an opinion and an edge. The strangle for IBM was priced too cheap because IBM only needed to move 1% in a day for the strangle to pay. I chose to manage the risk by holding time. Learn that in the Easy Trade Button.

This is what my students in the Easy Trade Button saw in my trading notes. Join the class and learn to get your calls for free. It is a bit more work than what Dire Straits said, but they were rock stars.