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BOUGHT TO CLOSE EWZ APRIL 15TH 18/22.5 SHORT PUT VERTICALClosing out the short put side of my iron fly for a .10 ($10), as it's basically nearing worthless, and I'd like to clean up this broken setup here if I can. This left me with the 22/25.5 short call side of the setup to deal with, which I rolled out to the April 23rd expiry 22.5/27 strikes for a .26 ($26) credit. If I'm going to attempt to improve strikes, I do it fairly slowly and incrementally ... . I then proceeded to sell an EWZ short put vertical in the same expiration at the 21/24 strikes for a .29 ($29 credit). This leaves me with a less than ideal setup, since strikes of the short put vert overlap with those of the short call vert ... . Generally speaking, you never want to invert an iron condor/fly .... .
AMEX:EWZ
by NaughtyPines
HOUSEKEEPING: EWZ APRIL 15TH 18.5/22/22/25.5 IRON FLYWith the short put side of my EWZ iron fly nearing worthless (<.10/<$10), I'll be looking to close that out tomorrow (I neglected to notice it today, my usual "housekeeping" day where I clean up trades). Although the short call side at 22/25.5 still has 18 DTE to "work out," I think that is unlikely, so I'll look at rolling that side out for duration a modest improvement of the short put strike. I usually tackle any strike improvement incrementally, rolling out another 30-45 days, improve the spread by at least one strike, see what happens, roll again if it hasn't moved in my favor (lather, rinse, repeat). Fortunately, the implied volatility in EWZ remains high here, so I have a shot a getting an additional dose of premium ... .
AMEX:EWZ
by NaughtyPines
FOMC'S OVER -- WHAT TO DO WITH MY TESTED CREDIT SPREADS -- PT 2(Cont'd from Part I). I then look at selling an oppositional side (in this case, the short put "wing") (1) for at least .10 more in credit than it cost me to roll the tested side; (2) with the highest probability of profit I can do that for; and (3) that does not result in an "inverted" iron condor (trust me, you do not want to try to work an inverted iron condor; an inverted short strangle is a different matter; I'll discuss that in some other post if I'm ever presented with that situation with a live trade I've posted here). In the event that you cannot sell an oppositional side against for at least .10 ($10) more in credit than you received for rolling the tested side, consider (1) not attempting to improve the tested side at that point in time (i.e., rolling it for duration "as is"); (2) other expiries that are farther out in time; or (3) both. Lastly, be mechanical with the way in which you "take off" rolled out setups. You can do one of two things: (a) look to take off the sides (rolled or otherwise) for near worthless as you would with any original setup (doing things this way relieves you of the burden of calculating all the credits collected and debits for a particular setup, rolls, and the sale or oppositional sides against); (b) examine your "options trade chain", total the credits and debits collected, subtract the total debits paid from the credits collected, and determine what your "scratch point" is for the original setup, rolls, etc. (i.e., where debits paid = credits received) (my options platform does this neatly for me, so I can generally determine this with a glance, thank goodness). Naturally, there are other things you can do to "assist" your tested sides, but they usually entail additional risk (e.g., laddering out spreads in time, selling additional spreads in the same expiry, widening your spreads, etc.). I confess that I do some of those things, but I usually confine them to core position trades, such as in the index ETF's where I'm probably going to have positions on anyways, so it's not as though I'm putting on additional risk solely for the sake of working my way out of a tested side (although it can also have that welcome side effect).
AMEX:SPY
by NaughtyPines
2
FOMC'S OVER -- WHAT TO DO WITH MY "TESTED" CREDIT SPREADS? PT 1(I have to do this in two posts since I'm verbose, and can't fit it into one ... ). Now that March FOMC is over, I'm ready to wait back in ... in a bit. Before Draghi, I rolled my March 18th expiry SPY short call verticals out to the April 1st expiry to buy some more time, selling short put credit spreads to finance a slight strike improvement of those to 196/200, after which I proceeded to peel off the short put spreads, because, well, they were worthless after this upmove ("worthless" is a good thing for a premium seller). Now, those puppies are sitting out there "naked," unprotected by any short put wings. A couple of things to consider: first, there's only 18 DTE in those April Fool's spreads; second, they're in "max loss" territory, because current price is above 200, so it's not like I'll experience any greater loss if I just leave them hanging out there for a bit; third, they've still got some extrinsic value left in them that will still decay; and fourth, VIX broke 15 today, which is not good for premium selling in broad-based market indices. So, then, what to do? First, be mechanical ... always. Naturally, sometimes it's painful to be mechanical (like, um, right here with those April Fool's credit spreads). As a general matter, wait until shortly before expiry (4-7 DTE) or when there is iittle or no extrinsic value left in the spread (your platform should tell you how much is left) and then look at it to see what you can do with it in terms of rolling, improving strikes, selling an oppositional side against to finance the roll and such, but not before. For the vast majority of setups that started as 45 DTE plays, resist the urge to start "repairing" tested sides that have less than 25 DTE in them when you've peeled off the opposing side because it was "near worthless" ($5 for a naked; $10 for a spread). (With earnings plays, which are intended to be extremely short duration (<14 DTE) plays, I will fairly immediately attempt to start working the play back to scratch if there is a test of a side. However, I still approach any rolling of the tested side mechanically, waiting until about 4 DTE to do that, since so many of these earnings are pop and drop or drop and pop affairs, which means that they have the potential to work out fairly immediately without a roll, which is why you want to be just as "paintfully patient" with those as with any 45 DTE setup). Second, while being mechanical, watch for opportunities to roll for a cheaper debit. For example, my SPY spreads are 196/200 and current price is 203. It will be more expensive for me to roll here than if SPY is at 202 or 201 or 200. None of those bring my spread into profit, but it makes the roll cheaper such that when I go to sell an oppositional side to finance the roll of the tested side, my job is that much easier ... . A lot of crap can happen in the 18 days remaining until expiry, so it pays to be attentive. Third, not only be mechanical with how long you wait before rolling, but to a consideration of the expiries you roll to. With setups that started out as 45 DTE arrangements, I generally start out by looking to roll out to an expiry that's 45 DTE. A little short or longer is fine as starting point. With iron condors in particular, I first start looking at how much it will cost to roll the spread and improve the strikes by just one (e.g., improving my 196/200 to 197/201). I look at the cost of improving the strikes by a mere "1" at the outset because if that proves too pricey, well, there's absolutely no point in trying to improve the spread by 2 strikes to 198/202, is there? I write that number down (for the sake of argument, let's say it's a .50 debit to roll the April 1st 196/200 to the May 20th expiry). (Continued in Part 2)
AMEX:SPY
by NaughtyPines
ROLLING IUX/RUT MAR 24TH 1040/1050 SHORT CALL VERT TO 1070/1080Another housekeeping trade. As with the QQQ roll, I'm rolling the March 24 1040/1050 short call vertical up to the 1070/1080 to "merge" it with another spread I've got at those strikes. Filled for a 1.66 debit. Sold the March 24 1050/1060 short put vertical for a 1.82 credit to finance the roll, as well as to balance the number of units I now have on the call side. The result is a March 24th 1050/1060/1070/1080 iron condor. As with QQQ, I'm keeping this trade on a short leash expiry wise ... .
I
by NaughtyPines
ROLLING MARCH 11TH QQQ 106/109 TO THE MARCH 11TH 107/110This is a housekeeping trade. I'm rolling up the 106/109 to "merge" it with a 107/110 spread I've got on the same expiry; they'll be easier to manage going forward as a single unit as opposed to managing tons of different spreads (I've got those on in spades in SPY). Filled for a .34 debit. Sold Mar 11th QQQ 99/102 for a .37 credit, which covered the cost of the roll and matched the number of units on the put side to the number on the call side. The result is a March 99/102/107/110 QQQ Iron Condor. I want to keep a "short leash" on this trade expiry wise, so that I can flatten out a bit here if I get a chance.
NASDAQ:QQQ
by NaughtyPines
GLD -- ROLLING OF SHORT CALL SPREADSSeveral weeks ago, I iron condored GLD on the notion that we would see some resistance around the 111 area. The short call spread of that original iron condor was 111/114. I stripped off the short put side at near worthless and also added to the position with a GLD 115/118 short call spread. Needless to say, 111 provided scant short-term resistance and now GLD is flirting with breaking 120. So currently I'm left with two troublesome short call spreads in the March 18th expiry -- a short 111/114 and a short 115/118. While there is still some time for these spreads to work out, I am not hopeful, particularly with the 111/114, so I figured I'd attempt to do some house keeping here ... . (Naturally, the ideal situation would be to wait for a substantial dip in price, since I will be rolling the short call spreads out and selling a short put side against for a credit that exceeds the cost of the roll ... ). What to do? The answer is to "putz with setups." So I proceeded to (a) look at what it would cost to roll out both of these spreads, improving each of them by a single strike (i.e., rolling the 111/114 to 112/115 and the 115/118 to the 116/119) in various expiries; (b) look at what it would cost to roll both spreads out, but improving only the strikes of the 111/114, also in various expiries; and (c) what I can get for credit for the sale of an oppositional short put credit spread against the rolled out positions. So, here's the plan I came up with after looking at all the possibilities: I'm looking to roll out the 111/114 up and out to the June 17th expiry 115/118 for a 1.07 debit and the 115/118 "sideways" or "as is" and out to the June 17th expiry for a .57 debit. This will essentially "merge" the two spreads into a single June 17th 115/118 short call spread. The total cost to roll these two spreads is 1.64 (assuming I can get a fill of both at these prices), which means that I will want to sell a short credit spread against these rolled out positions for something in excess of 1.64. The June 17th 111/114 (rather ironically, since this is what the short call side of my iron condor started out at) fits this bill, as it will bring in an .82 credit/contract. (Keep in mind that the 115/118 is now "times 2," since I'm going to be merging the March 18th 111/114 with the 115/118). The result will be a June 17th 111/114/115/118 GLD iron condor. Naturally, were this to be an "original" setup, it would be low probability and probably qualify as "horrible." The only way it completely works out at expiry is for price to magically settle between 114 and 115 (the short put and short call strikes, respectively). However, we these broken setups, the goal isn't to roll into an ideal 70%+ probability of profit setup, but rather to gradually mitigate loss and to slowly work it into a state where you an exit one side of the trade at or near max profit, and then to exit the other in the same state ... . Of course, sometimes it takes longer than you'd like. (A Side Note: I considered adding risk here on this up move with an additional short call spread above current price (e.g., an April 15th 129/130 GLD short call spread currently goes for a .35/contract credit), but thought the better of it, since the jury's still out as to whether it will break 120 ... ).
AMEX:GLD
by NaughtyPines
UPDATE: YUM BROKEN IRON CONDORThese earnings plays gone awry usually involve long stories, since it frequently takes a bit of time with rolling, massaging strikes, and such to get the thing into a state where you can exit for at least a scratch. On October 6th, I played earnings via a 2 contract 72/75/90/93 iron condor, for which I received a .94 credit. Price proceeded to breach the short side, but I closed out the call side for a .16 debit, and then proceeded to roll out the 72/75 short put wing to the Nov 27th expiry for a 1.25 debit, which I matched with an opposition call side slightly above the short put side (same expiry; 73/76) for a 1.74 credit. On Nov 24th, I closed out the call side for .64 debit, rolled out the short put side to the Dec 31st expiry for a 1.78 debit, and again matched it with an oppositional call side (Dec 31 75/78 for 1.66 credit) (so for the last two rolls I've basically been treading water, with debit received for the short put side roll about equal to that for the credit spread ). Truth be told, I had an opportunity to improve the short put side in early December when price broke 76, but wasn't paying attention ... . In any event, with 10 DTE, I'm looking to close out the short call side here while I can for a profit, as I don't really want to be short call YUM at 75, since I'm generally bullish on the underlying, given the fact that it's their intent to spin off the Chinese business which, last earnings, was a drag on price ... . I'll then proceed to deal with the short put side of the setup as we get closer to expiration ... .
NYSE:YUM
by NaughtyPines
DYNAMIC IRON CONDOR MANAGEMENTSeveral days ago (before we had this downmove/volatility pop), I set up a long-term SPY iron condor, my intent being to manage it "dynamically" over time, rolling my options intratrade as price moved either toward my short put wing or toward my short call wing. The original setup was a March 18th 166/169/219/222 SPY iron condor, for which I originally received a fairly paltry .71 in credit. In my earlier post, I discussed various options for managing the setup intratrade: (1) rolling the wings as a unit toward current price; (2) leaving the long options alone and moving only the short options toward current price; and (3) moving both the long options away from current price and the short options toward current price. I pointed out the pluses and minuses of each of these methodologies, with the preference being toward moving the wings as a unit toward current price. In the interest of experimentation (and also to capture greater credit than that offered by merely rolling the call side wing down three strikes), I'm going to opt to roll the short call toward current price and the long put away from current price at the same time and by the same number of strikes to capture credit generated by this down move (i.e., I am going to roll the 219 short call to the 216 and the 166 long put to 163 and will look to get a fill for an additional .77 credit/contract to do this). I chose the 216 short call strike, since that is currently at the edge of the current expected move for SPY for the March 18th expiration. Should I get filled, the new iron condor will be a Mar 18 SPY 163/169/216/222 iron condor, so I will be widening the wings to six strikes wide by rolling the short call/long put in this manner. The upside is that I received .77 in credit for the intratrade roll (on top of the .71 I originally received); the downside is that widening the spreads requires some additional margin and could potentially give me a headache if I need to roll one of those 6-wides out for duration on the back end of the trade. Consequently, I naturally want to exercise caution going forward as to how many times I roll intratrade, keeping an eye on the width of the wings, the overall margin used, and whether I am getting too aggressive by bringing in the wings too tightly to current price.
FX:SPX500
by NaughtyPines
1
IBM IRON CONDOR (UPDATE ON BROKEN EARNINGS SETUP)This is becoming somewhat of an epic, post-earnings work-off setup. Without boring you with all the details (which are outlined in the post below), my post-earnings setup, after rolling and such is currently a Dec 7 140/143/140/143 iron condor. The 140/143 is the put wing and, yes, the 140/143 is the call wing (so it's basically inverted, with the call wing below the put wing; in short, it's an f'd-up setup). In any event, the 143 long call of that setup is nearly worthless, has done its job, so I'm going to take it off here for a .05 credit. The short call I will take off for as much I can get for it. Thereafter, I will have to roll the put side, most likely no later than Tuesday of next week, since I don't see IBM pounding above 143 (my short put strike) in short order. What I'm going to do is look to roll it out 45 DTE, but I'm going to first see what I can get for a 1 SD short call vertical at that expiry (it will be some kind of credit). Once I know what that credit is, I will look to see how much I can improve the short put side in terms of its strikes, because I don't want to pay more to roll/improve the short put side that I can receive in credit for the short call side. The unfortunate thing is that a 45 DTE will most likely be beyond IBM's next earnings announcement, so I will have to watch to see if I can take advantage of price movement/volatility around that event in order to improve the put strikes further ... .
NYSE:IBM
by NaughtyPines
ROLLING TESTED IRON CONDORS -- SOME TIPS (PART I)If you've got a few index ETF (SPY, IWM, DIA, or QQQ) iron condor trades on like I do, well, sadly, it is likely that your short call sides have been breached by this recent up move. So, what do you do? 1. Don't panic. These were defined risk trades when you put them on, and they remain defined risk, which means that your max loss is limited on the call side even if SPY keeps shooting to the moon. 2. Take off the untested side when it no longer provides any meaningful protection to the set up or roll it in the direction of the tested side. In this particular case (where the call side has been tested), look at your short put wing side. If it is now worth less than .20 ($20), consider locking in profit here and covering it or rolling it up toward the tested side, keeping the expiry the same, assuming there is sufficient time for the rolled up spread to work, and you can get sufficient credit to make it worthwhile. I generally will roll in the same expiry if the untested side is worth <.20 and there are 25 days or more until the expiration of the tested side. If you are at or near expiry (3-5 DTE), consider saving yourself some cash in commissions and fees and letting the untested side expire worthless. 3. Near expiry of the tested side (3-5 DTE), attempt to roll the tested side for duration and credit. If you can get a credit that is at least the cost of the roll and you can improve your strike prices, fantastic. Proceed to do that and sell an oppositional wing set up at or near the 1 SD. I generally like to go another 45 DTE or so with a roll or as close as possible to that to allow the trade additional time to work out. 4. If you cannot roll for duration and credit, it isn't ideal, but all is not lost. You can do one of several things: (1) close it out and take the loss; or (2) attempt to work the tested side back to scratch or profit. I generally choose the latter. I have done quite a bit of reading and video watching regarding traders' various approaches to breached iron condor setups where you cannot roll the tested side for duration and credit (i.e., generally where the tested side is not "on the dance floor"). The best idea I have found comes courtesy of TastyTrade, which advises you to roll out the tested side for duration without changing the strikes and then proceeding to sell the oppositional side against the tested side such that the end result is an iron butterfly or "iron fly." I will post an example of that separately.
AMEX:SPY
by NaughtyPines
Delta Airlines -DAL - Weekly -Touched 1x's sales in 2014Delta is just off of an extreme level of valuation as it backs down to $43.36 today, May 22, 2015. If you look at the Total Revenue chart, you can see that revenue gains were steady and have increased by 42% since 5 years ago in May. Over the same time frame, however, the stock price has risen by 267%. After-tax margins went from losses to profits and margins briefly climbed over 20% (after-tax). Next questions: Did DAL use up all of their tax-loss carry forwards? Will the drop in oil prices lead consumers to spend more on travel? Will people fly on vacations more or will driving still be the best choice. DAL has been a monster winner for any portfolio up until now, but Airlines are a cyclical business and the business cycle hasn't been outlawed. Consolidation and efficiencies have driven up profitability, and shareholders have been richly rewarded. It looks like there are more "shareholders" than "share-buyers" at this level and the recent price action is alerting us to sellers unloading shares. $46 seems to be the common price where the sellers are unloading shares and the strong buyers are down at $34-$30. So, from $43.30 here, the upside seems less than the risk to the downside. Here's hoping you look at the fundamentals too when you examine a chart and not just the "technimentals".... Cheers, Tim 5/22/2015 2:02 PM EST 43.31 last DAL PS - Note - I have been picking a top in DAL over the past year +. Check out my charts.
NYSE:DALShort
by timwest
3