Oct 072014

– SOLD STRANGLE IBM 100 OCT 14 192.5/180 CALL/PUT @.61
I wanted to throw on a strangle trade for you guys. It’s almost delta neutral which is nice when saving margin buying power meaning that I’m playing both the upside and downside. Basically I want both legs of the trade to expire worthless, regardless of upward or downward movement, after 10 days from now. Below you can see the free online app “Dough” which is great for calculating “probability of profit” or “POP”. As you can see I’m looking at a %77 chance that I will win on this trade. If they expire worthless then I make %100 profit which is what I sold the option trade for. If I can make %50 of profit at any time then there’s a good chance that I will close the trade.

As long as the stock price stays in the blue zone below, I win!  This trade expires right before the earnings report so the volatility of the stock will increase and make my trade more valuable allowing me to pull the trade off early and with nice profit. I am looking at the stock moving down a little bit when looking at the cyclical movements and market conditions. If something happens and 1 of the legs gets tested then I can roll it out to extend duration and not take a big loss.

10/15/14 – SOLD DIAGONAL IBM 100 (Weeklys) NOV1 14/OCT 14 167.5/180 PUT @.02
Rolled my tested side for basically a scratch.  Gonna look for a small rally and will probably hold through the earnings. I may roll my calls for a credit and use this trade as an earnings play. It may actually work out nicely even though it wasn’t looking good before my roll.

10-20-14 – BOT IBM 100 (Weeklys) NOV1 14 167.5 PUT @2.81
Well this trade fucking sucks. Like an idiot I held it through earnings and got majorly hosed. I have to stop doing such dumb things. Right now being long in this market is really dumb for options traders. Everything seems very over valued and Big Blue wasn’t looking good to begin with. Make sure with strangles that you play for upside stocks because the market usually takes the stairs up and the elevator down. Learned a hard lesson here. My loss was around %127 after commissions.