Yo Pit Crazies,
My skew call from the Trading Legion event/OP Markets Show yesterday was pretty, pretty good.
Here it is for those who missed it:
- Buy 3 VIX Aug. 18 19-strike puts for $1.15 (now trading $1.50, up $105 this side).
- Buy 2 VIX Aug.18 22/30/37 $.5-strike call butterflies for $0.95 (now trading $0.75, down $40 this side).
It’s already up 10% and I expect the Aug. 18 19-strike puts to trade $2 by the end of the week, which should be an easy 25% return.
Meanwhile, VIX is collapsing as I write this and all of a sudden tech earnings are coming.
This is a sign of good expectations and a move up for tech stocks en masse into earnings, with a drop in VIX post-earnings.
Sometimes I see an idea I like and want to change it a little bit and try to reduce the directional delta.
Instead of just holding the direction, I want to manage a RANGE! A little up now with a drop in vol later.
Check out some of our trade ideas from the Trading Legion session/OP Markets Show yesterday:
Mark: Buy VIX July 21 19-strike puts for $4.10 as a cheap flyer into VIX expiration.
Mark: Buy NVDA Aug. 13 135/155/175 put flies for $2.55.
Mark: Buy XLE Aug. 20 48.5-strike calls for $1.61.
Mark: Buy RCL Sept. 17 75/90 call spreads for $3.60.
One of Mark’s ideas really got me going — and I cheated a bit …
I had my Edge Hunter VBS sheets handy, and off camera I took a peek at the Aug. 13 cycle for a long gamma hold.
The fly was so cheap I figured I could buy some stock and the flies — this was one of my students’ ideas, actually — and just trade the gamma/range for a few days:
- Buy NVDA Aug. 13 135/155/175 put flies for $2.55.
- Buy 80 shares of NVDA for $184.94.
The numbers look like this:
Edge Hunter VBS sheet looking at NVDA straddles for the Aug. 13 cycle.
Note the straddle value on Tuesday was $15.40.
I can hold that straddle for four days at the current realized vol and the full straddle should just break even.
However if NVDA moves more like the intra-day range ATR (average true range), in the top circle, I should have an easy close for money.
This became a “Pro Trade” because I bought shares against the butterfly on an 80 shares-to-five butterfly ratio.
I used a little margin and there is risk below $135, but that seems an OK risk …
I would have plenty of time to dump the shares by then AND THE FLIES WILL KILL IT.
I like the thesis on NVDA selling off after the split, but the market rally had me spooked short term.
The Lesson: You can trade direction, the range — or both.
Power Moves Portfolio w/ Frank Gregory
Option Pit DC and Wall Street insider Frank Gregory and I run a portfolio approach to trading options with stocks that have good long-term prospects based on Frank’s K Street knowledge and my options expertise.
Ford (Ticker: F) just bounced off of $13 like a rubber biscuit. I am looking at selling five F Aug. 20 11/13.5 put spreads at $.45 or better.
F is down from $16 and I still like the green energy play, which remains on the front pages. F is cheap enough with our dollars to make a nice wheel trade should we have to. If F rips into earnings we can close the puts early.
With the current selloff I am looking to sell a bit away from the market and lean on the puts we have in Palantir (Ticker: PLTR) in case the selloff continues, though I think it will be short lived.
I made a small adjustment to my PLTR trade idea …
The July 23 23-strike calls went to $.10, so I closed my short leg for $.10. I took the credit from those calls and bought five PLTR July 30 20-strike puts for .32.
My plan if the market sells off is to close the puts. PLTR can have steep drawdowns and I want to be ready. If PLTR rockets, I am naked long the Aug. 06 21-strike calls. Those calls are almost back to even.
Sen. Elizabeth Warren (D-Mass.) is talking about regulating crypto exchanges, which has been weighing on C. At best, we were up about .70 per butterfly and now I am down .70 each. I might cut the position in half or close if COIN does not bounce.
Expiration Updates …
- Net we own some calls in GE, Coinbase (Ticker: COIN) and the above PLTR position.
- I added two COIN Aug. 20 250/270/290 call butterflies for $2.55. Right now I am down around $80 per fly as COIN is off $25 from the time we put this on.
- GE is a play on green energy. We own two GE Sept. 17 14-strike calls for a credit.
To Your Trading Success,