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Ratio

Call Ratio Spread DebitThe ratio call spread for debit is the same strategy as ratio call spread credit. But now, the upper and lower strike price are farther apart. This change, give different mathematical results as you can see on the chart. If you didn’t read the previous post, please do. In the chart we see a ratio spread of 2:1, in this case, the options that were sold are now worth less than the call that was bought. So this position is now with debit. Inputs: MA (Mastercard) Debit paid -> 3.8 (-$380 for one position) Stock price -> 338 Upper strike -> 350 , 2 calls sold Lower strike -> 330 , 1 call bought Days to expire -> 36 Implied Volatility -> 0.309 (30.9%) Date -> 12/11/2020 The Debit paid is $380, the maximum profit is $1620 with less than 1% probability, the maximum loss is theoretically unlimited. In this example, one call was bought at 330 strike price for 12.7 and two calls were sold at 350 strike price for 4.45 each, in total 8.9. The debit = 8.9-12.7 = (-3.8) If at expiration the stock price will be below the lower strike (330), all of the options will be worthless and the loss will be only (-$380). Maximum profit = Difference between strike – debit paid = 350-330 – 3.8 = 16.2 This position is neutral. At the expiration: Between 333.8 to 366.2 the position will be with a profit. $0 - $1620 Under 330.17 the position will lose (-$380) no matter what price. Above 369.80 the risk is getting bigger.
NYSE:MAEducation
by ZoharCho
1
Call Ratio Spread CreditA ratio call spread is a neutral strategy in which we buy several calls at a lower strike and sells more calls at a higher strike. In a ratio call spread with credit, there is no downside risk. The ratio spread that we see on the chart has a ratio of 2:1. We can see from the chart the non-linear behavior of options. Inputs: MA (Mastercard) Credit received -> 3.1 ($310 for one position) Stock price -> 332 Upper strike -> 340 , 2 calls sold Lower strike -> 330 , 1 call bought Days to expire -> 37 Implied Volatility -> 0.291 (29.1%) Date -> 11/11/2020 The credit received is $310, the maximum profit is $1310 with less than 1% probability, the maximum loss is theoretically unlimited. In this example, one call was bought at 330 strike price for 14.2 and two calls were sold at 340 strike price for 8.65 each, in total 17.3. The credit = 17.3-14.2 = 3.1 If at expiration the stock price will be below the lower strike (330), all of the options will be worthless and all the credit will be received. The maximum profit at expiration for a ratio spread occurs if the stock is exactly at the striking price of the sold options. The reason is that the call that was bought has some profit (stock price above strike price) and the sold options are worthless. Maximum profit = The spread (340-330=10) + Credit received (17.3) – Debit paid (14.2) = 13.1 => $1310 (mulitpling by 100 shers per option contract) The risk in this position is to the upside. The calculation for the break-even at expiration. Break-even point = Upper strike price + the points of max profit = 340+13.1=353.1 This strategy has a high probability in general and even more so when used correctly. The example that has been used could profit the most in the blue zone, where the profit is greater than 50% of the maximum profit, but it will take 34 days out of 37 to reach there. How implied volatility affect this position? In a ratio spread, there are more options sold than bought, in the previous posts we saw that volatility increase is harming sold options and benefits bought options, this example is no different. 10% increase in implied volatility, the lines are now in a worse location compare to the original position. 10% decrease in implied volatility, the lines are now in a better location compare to the original position. The position can now reach the 50% max profit zone in 30 days. The next post will be on ratio spread debit, that looks different from the ratio spread credit, the solution to the partial differential equations of the Black-Scholes model can be seen.
NYSE:MAEducation
by ZoharCho
1
FLIR, somewhat undervalued technology stock on trend line watchFLIR Systems makes high-tech imaging systems. The stock has been selling off since its last earnings report, despite the fact that earnings and guidance both beat analyst estimates. Perhaps the selloff was because the company failed to issue forward guidance, or perhaps it was because free cash flow took an 18% hit last quarter and FLIR announced a 2.5% debt issuance in July. Regardless, FLIR now looks cheap, and sentiment has been improving lately. Valuation I expect that FLIR's dividend will yield 1.9% in the next 12 months. Its PEG is about 17, so not great, but not terrible. PSG ratio is 2.72. Again, not great, but not terrible. The real case for the stock being undervalued is that it's near the bottom of its three-year valuation range in P/E, P/S, and P/D terms. Despite the decrease in free cash flow, the company has a 77/100 financial health score from S&P Global. S&P Global also rates the stock 72/100 for its valuation, meaning the stock is solidly, but not extremely, undervalued. One reason I like FLIR is its patent portfolio. Patents granted are a leading indicator of earnings growth, and over the last three years, FLIR has been granted and average of 16 patents per billion dollars of current market cap. That very respectable number puts its patents-to-market cap ratio in the same league as Intel, which ranked 4th in the nation for total patents granted in 2019. In short, FLIR is a leading innovator for its market cap size. Sentiment and Technicals Analysts have been steadily upgrading FLIR, and it currently has an 8/10 Equity Starmine Summary Score. Options traders are quite bullish on the stock, with a put/call ratio of just 0.29. The technicals on FLIR are still negative, but improved slightly today to "sell" from yesterday's "strong sell" reading on both the daily and weekly charts. I'll be watching for a bullish cross of the trend line FLIR has formed since February as my buying signal.
FLong
by ChristopherCarrollSmith
1
Advanced Tradingview CalculationsThis is a tutorial on how to get the most out of Tradingview by using advanced price calculations. The focus will be on crypto, and more specifically bitcoin. Nevertheless these tricks can be applied to other assets as well. Let's say you want to look at the current bitcoin price. The problem is that there are a lot of different exchanges and they all have different prices. Sure they're all around the same price level, but there's still a difference. So it would be quite useful if we could just look at an average price of all the most relevant markets. Here's how you can make that happen... Average price calculation First you click on the ticker on the top left, which will open the ticker tab. Open the parenthesis by typing: "(". Next you look for the markets you're interested in. In the example on the chart (bottom left line chart) I made an average for Coinbase, Bitstamp, Bitfinex and Binance. So you start typing "BTCUSD" and then with the up/down arrow keys on your keyboard you can select the exchanges you want. Each time you select an exchange you type: "+". Then type "BTCUSD" again and select another exchange. The binance pair is versus USDT instead of USD. So to easily find that market type "BTCUSDT". Once you're done selecting markets you close the parenthesis and divide the whole thing by the amount of markets you've chosen. In my example I took 4 markets so I divided it by 4. Finally press enter. Now you have a price chart that's an average of all the markets you selected. Converted currency price chart On the top left you see a red line chart. This is the Bitflyer spot market. There's an issue though, it's a Japanese Yen pair. I would like to be able to compare it to USD markets. So let's convert it and make a price chart with USD values. Just like last time, open the ticker tab. Look for "BTCJPY" and select the Bitflyer market. Now type "*". We're going to multiply it with a forex pair. Type "JPYUSD" and select a forex pair. When that's done you press enter and your price chart will be in USD instead of JPY! Making ratio's There's so much possible with these types of calculations, but I'll share one more trick to give you some inspiration. Let's compare certain markets with each other and create ratios. To the chart on the right you can see in green a ratio of some of the top USD markets in relation to the top USDT markets. This way we can see which markets have a premium or a discount. It always starts the same way: open the ticker tab. First open the parenthesis: "(". Just like with the average price calculation you're going to select a few USD markets of your liking. I used Coinbase, Bitstamp and Bitfinex for this example. Don't forget to type "+" in between each market. Then close the parenthesis and divide the selected USD markets by 3 (because I'm using 3 markets here). Now type "-" and open the parenthesis again. We're going to add a few USDT markets just like we did for USD. I used Binance, Huobi and Poloniex. Again close the parenthesis and divide by 3. And finally press enter of course. The price chart will be replaced by the ratio and it'll look kind of messy. Let's make it look like a nice indicator. You can do this by clicking on the "compare" button and doing the entire calculation there. It'll add a big fat orange line on top of your price chart. By clicking on the three dots you can click on "new pane below". Then go to the style settings and change it to your liking. I made it green and decided to use a line chart with markers. Looks pretty nice. Interesting ratio too... The blue ratio on the top of the chart is a simple Coinbase/Bitfinex comparison. Click the "compare" button again and type the following formula: COINBASE:BTCUSD-BITFINEX:BTCUSD This way you can see which exchange is more bullish/bearish. That's all I have for you today. Hopefully you found it interesting.
Editors' picks
COINBASE:BTCUSDEducation
by UnknownUnicorn2188849
23
Northop Grumman a buy near trend line supportDefense contractor Northop Grumman fell hard toward trend line support both before and after its earnings report last Friday, despite a solid beat of analyst expectations. The fall has occurred as analysts adjusted forward estimates of earnings and sales downward for the next two years. Despite the downward revisions, Northop Grumman remains a growth company, with PEG ratio of 1.8. The share price has fallen much faster than earnings expectations, making NOC a very attractive buy as it approaches support. Let's look at NOC's current price ratios compared to its three-year median price ratios on earnings dates. Here is the implied upside from the current price ratio to the median price ratios on earnings dates over the last three years: P/E: 21% Fwd P/E: 18% P/S: 17% Fwd P/S: 21% P/D: 17% Fwd P/D: 23% P/B: 31% P/FCF: 81% Sentiment on NOC is positive, with an 8.3/10 analyst summary score (average rating Buy). The news environment for the company is good, thanks to several US government contracts recently signed, and several others recently successfully completed. Open interest on NOC is about evenly split between bulls and bears, but the 30-day average of trading volume favors the bulls. NOC is nearing support from July lows and a seven-month trend line. I will look to make a buy around 287.
NYSE:NOCLong
by ChristopherCarrollSmith
7
RISK 2 REWARD ratio is the key I know almost every trader has asked themselves these questions: How come I keep losing?! WHY?! Why do I keep getting stopped out?! Why is it taking so long? ! Is it even possible?! !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! Today I have some good news for you maybe you already know this maybe you don't, but this is for those folks who do not know the power of a good Risk to Reward ratio. Let me tell something real quick you do not have a 80% winning rate not 70% I am going to say not even a 50% winning rate to be profitable ( Hold ON A MINUTE man HOLD the bus man... serious) dead serious. With a risk to reward ratio of 1:2.5 you only need to win 30% of your trades to be profitable ( see below ) SAY YOU execute 10 trades and you only win 3 so essentially 30% LOST:7 WON:3 Total loss: Total profit: 7 * 1 = 7 3 *2.5 = 7.5 Total profit - Total loss = +0.5 Now even though 0.5 is not a lot at least it's not a loss. But there are a few things extra to keep in mind : 1) Your risk to reward has to stay the same for the period of the 10 trades 2) Your lot size needs to stay the same 3) AND as possible try to keep the amount of pips the same for your ratio because it does not help if you win 3 trades and you decided to set one of your positions SL as 100 pips and its TP as 250 pips and the rest of the positions SL as 20 pips and TP as 50 pips. If you lose the the big trade and hit the SL of a 100 pips its gonna through everything out of wack. So be sure to try and keep everything as consistent as possible and it will be a matter of time before you see profits. Trade with H
by Trade_with_H
BTC/XAU gold adjusted BTC price shows gap closedThe BTC price divided by the gold price reveals a gap equivalent in position to the 9.5k gap on the CME. Chart shows that this gap was wicked into during the initial drop from 11k. There is no other gaps left open on the chart. Furthermore the price action retested the trendline of the multi years triangle from ATH. This chart shows that a move upward is more likely then down since there is nothing left to do down. It also means that BTC will outperform gold in the near future.
COINBASE:BTCUSDLong
by nagihatoum
8
HPE sentiment is changingLast week I put up a post titled "HPE sentiment may change for the better," but the post got blocked because I had a link in there that the mods felt constituted advertising. Well, HPE sentiment has begun to change for the better, as I predicted, so I think this is worth an update and repost with the offending link removed. I track metrics of both value and sentiment, and I usually only buy a stock if measures of both value and sentiment are aligned. I've noticed, though, that there's more money to be made if you can pick a stock with good value and poor sentiment that's about to improve. HPE may be a candidate for just such a positive change in sentiment. Value I've struggled with how to calculate PEG ratios post-Covid. I generally take my earnings growth rate from an approximately five-year linear regression line (three years past actuals, two years future estimates). But when you've got a black swan event right in the middle of your time series, what do you do with that? Do you use a continuous function that makes the growth rate look negative? Or do you use a piecewise function that makes it look positive? I've settled on taking the average of the two. So, keep that in mind when I tell you that I've calculated HPE's PEG ratio at 3.39 and PSG ratio at 0.36. I typically multiply the two values together to get a composite PEG*PSG ratio, in this case 1.23. Of the stocks I track, the only one with a better PEG*PSG than this is $HPQ. HPE is also trading near the bottom of its 3-year valuation range in terms of forward P/E and forward P/S. It has generally traded at about .75 forward P/S. Right now it's about .47. Implicitly, there's about 59% upside from here. Do the same calculation with forward P/E, and the numbers imply about 40% upside from here. Another thing I really like about HPE is how innovative it is. Over the last three years, HPE has averaged 50 patents granted per billion dollars of current market cap, making it more innovative for its size than any other company I watch save IBM. Throw in the fact that HPE is expected to pay 4.8% in dividends over the next 12 months, and you've got a stock that combines both shareholder returns and growth potential. That's rare. Sentiment HPE's Equity Starmine Summary Score improved from 1.6/10 to 3.7/10 in the last 24 hours, meaning that analysts are growing more positive on the stock. The upgrade caused a nice spike in the stock price today. The sentiment change comes after HPE reported 3Q results and not only beat analyst expectations on earnings and revenue, but also beat analyst expectations on 4Q guidance. Analysts sharply increased earnings estimates for the next couple years after the earnings report. Perhaps even more importantly, HPE dramatically improved its financial health from the year-ago quarter. From the conference call: "Our Q3 free cash flow of $924 million was up $276 million year over year, driven by a record cash flow from operations as a result of our improved execution this quarter. . . . We generated cash flow from operations of approximately $1.5 billion. This is the highest level for the past 11 quarters, as we improved our operational execution." The company does expect cash flow to be sequentially lower next quarter due to restructuring, but the company is still in stellar shape financially, with an $8.5 billion cash reserve. Given HPE's strong results, I expect continued analyst upgrades. And I'm not alone in thinking so; HPE now has a bullish put/call ratio of 0.51. Technicals HPE's technicals are neutral at the moment, with the stock in a triangle. A couple ways to play it would be to buy near the bottom of the triangle or wait for an upside breakout. I do think there's a good chance HPE will make an upside breakout in the coming weeks, overall market conditions permitting.
NYSE:HPELong
by ChristopherCarrollSmith
4
Copper/Gold RatioWe might start to see longer term US bond weakness as the copper/gold ratio rebounds off the lower extreme of it's descending channel. In this example I'm using TLT, an ETF. These two have an inverse relationship and also correlate with the US dollar. Long term US bonds and the USD tend to have a positive correlation giving both a bearish outlook. This is more for analysis than trading and can provide another piece to the USD bear picture. Over the coming months or year we may see USD continue it's bearish trajectory, keeping it weak against it's major counterparts. My relative analysis says USD is currently weak and stronger currencies to pair against are AUD, CAD and NZD.
FX:COPPERLong
by Aperna
6
The myth of hyperinflation series- #3. Fed's effectivenessHow effective are Fed's monetary policies and tools? Fed has three simple goals- Grow GDP, keep inflation rate steady and keep the unemployment rate low. Some argue that Fed's perceived power over the market was exposed during several occasions- #1. During the 2008 in the midst of sub-prime mortgage crisis, the market continued to plunge despite the Fed's efforts to bail out Fannie & Freddie and other financial institutions, implement the Troubled Asset Relief Program (TARP) and issue $800b stimulus package. The market finally stopped the bleeding in early March 2009. #2. When Fed ended the QE3 in 2014 by announcing its attention to raise the interest rate and slash the Fed balance sheet, many people believed market would crash. Instead, market shot up to ATH in 2015. #3. This year during the onset of the Covid-19 crisis, Fed started out by cutting the rate by half percentage to no avail. Afterwards, Fed intensified its intervention effort by reducing Fed fund rate to zero. Nonetheless, the market tanked another 15% before it hit the bottom. One can point to the Fed-induced booming housing market in early 2000 as the major factor for the fast economic recovery after the Dot.com bubble and uses it as the counter example. Market is driven by crowd sentiment, but crowd sentiment, which in turns, is partially driven by Fed's decision. It is a chicken and egg conundrum. They both influence each other, but the degree to which each influences one another is impossible to discern. The safe conclusion to draw is that it would be overly optimistic to rely on Fed to get us out of the next financial crisis unscathed as it will take more and more stimulus package to get the job done. The best it can do is to mitigate the severity of damage. Next, let's examine some of the conditions and criteria that are related to inflation.
FRED:GFDEBTNEducation
by Libratus
1
Allstate should make a bullish trend line breakAllstate is one of my top picks in terms of both value and sentiment. In terms of technicals, it's a classic potential trend line breakout play. Value After a significant selloff this year, Allstate is still trading near the bottom of its 3-year valuation range in P/E, P/S, and P/D terms. The company is financially healthy, with a 78/100 score for financial health from S&P Global. It pays a solid, but sustainable dividend; I estimate 2.37% dividend return in the next 12 months, assuming the dividend gets bumped up to 58 cents in the first quarter of next year. In the last 12 months, the dividend was only 16% of GAAP EPS, which is a very comfortable level. The PEG ratio of 2.77 is pretty good, and the PSG ratio of 0.25 is extremely good. (Admittedly, analyst coverage is a little thin, so we're not working with very many different estimates of future earnings and sales.) In fact, the only value metrics by which Allstate looks a little lackluster are its ESG score and earnings surprise history, both a little below the market average. Sentiment Sentiment on Allstate has been improving over the last month, with a large increase in the Equity Starmine Summary Score to its current rating of 9.7/10. Allstate got a hefty settlement from PG&E last month, so the news environment looks good. The put/call ratio on Allstate is bullish, but not strongly bullish, at 0.69. (A put/call ratio under 1 is bullish; a put/call ratio over 1 is bearish.) Technicals Technicals are somewhat negative for now, but given the improvement in analyst ratings, I expect that Allstate will soon make a bullish trend line cross. For a swing trade, I am setting my profit target in the 105-106 range. I will go ahead and buy ahead of the trend line cross, but another way to play this would be to wait for a confirmed cross to place a buy.
NYSE:ALLLong
by ChristopherCarrollSmith