6 Jan- as posted on twitter:
closed this Jan-17-20 225 Put @ 1.89 Limit to Close to take the 35% of max profit win from friday entry $LULU. reenter on a pullback
stock traded in 5point range to ending up $2+ at 232ish, the put I sold on Friday was at 35% of max profit after one trading day. good percentage winner for a day, have to take the win on that big of a move on 1-2 days and look to reenter. $1.06 gain , would like to resell another put ideally same opex on a 2-3dollar down move.. still holding the 230short call/diagonal
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3 Jan - my go to trade has always been the diagonal spread. have had good results with those. an even better trade I like putting on is to sell downside put as well making it a strangle. in a strangle you sell a downside put and an upside call. im not comfortable with that naked call sale and many traders do not have that option level approval to sell naked calls. regardless, the point of my diagonal spread is ideally to have a move up towards the short strike, collect the short call premium and repeat with another upside call sale. that's the best case. many times eventually the stock starts moving past the short strike like LULU is now. was at 233 on 3Jan so im waiting for more of the time premium to come out of the short call before rolling to the next time period.
Sold the Jan2020 225 put at $2.95, delta 30
selling a short put with same opex adds more premium to this position and turns it into a strangle (the 225 short put and the short call at 230 from dec19). see what I did there. the stock cant close above 230 and below 225 at the same time. so at opex one of these will expire at max profit. ideally it drifts lower below 230 and I can repeat the sales. I went 225 on the put to get a little more premium because again it cant close both above 230 and below 225 at same time so I can "risk" at higher strike. also consider the premium collected (4.90 from call, 2.95 from the put = $7.85). so really my breakevens are now:
downside of 217.15 (225put - 7.85)
upside of 237.85 (230call +7.85)
scenarios at opex (unlikely I will hold till opex though):
1.stock above 230 - take full profit on the short put and roll up and out the short call to next month
2.stock between 225-230 - take full profit on both the put and call and resell both next month
3. stock below 225 - hold the 2022 long call, take full profit on the short call, resell another short call, roll the short put out or down and out either way for a credit.
scenarios before opex
1. stock goes sideways - take profits on the short put at 50-75%, take profits on the short call at 75% of max profit and resell next month
2. stock moves $4-5 in either direction rapidly -(4 or 5 dollars either way should trigger my % profit targets) if down take profits in call and look to resell on an up move, if up then take profits on the put, and look to resell on a down move.
the base trade of all this is the diagonal spread, the short put is just some added premium till opex. im not trying to thread the needle for an opex closing between 225-230, just playing the percentages and probabilities. because I have the DITM call I don't have undefined risk to the upside. very high probability of making money on this "position". purple lines are the strangles, white lines are an iron condor ive got going for Feb7
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on 19Dec I entered into a diagonal spread on LULU.
Bought the Jan2022 200 call at 61.65
Sold the Jan2020 call at 4.90
stock near 223 at the time. essentially like a covered call but using the Deep In The Money (DITM) call as the base instead of stock. much less buying power needed.
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