$NFLX trade for monday, and a 1 x 2 call ratio

 

24oct

alright meow, put your helmet on for this one. the morning after earnings on the 21st with the stock down 30points i sold a Nov06 455 short Put for $5.00 credit. about 19 delta. 2 trading days have passed with friday being green and i noted a couple of the TA wizards on my stream noting the hammer and being short term bullish. it does seen that the sellers have shot their wad. i have been looking for an entry for a Jan2022 long call in order to get back into diagonal spreads. the short put is at $4.50ish now and the stock is near the bottom of the bollinger band and as you can see just from this small chart below that the stock with a few exceptions, does not stay at the extreme edge for long. on the bottom extreme anyway.

so here is what i will be looking at: 

first will look at buying a Jan2022 long call. id like at least a 70 delta so i will start at the Jan2022 430 call (70 delta meaning option moves about 70% as much as the stock). the 430 call is at $125ish ($12500)

then - im in the nov06 opex week on the put, so staying with that opex with the thesis that the stock starts to rebound and work towards filling the gap. i will look at a Nov06 495/515 call ratio (1x2), thats buy a 495, and sell two 515s for near zero . just the ratio spread profit range at opex is 495-535

will review after market opens on monday 

$LEN trades this week

 

21 oct

alright meow, you cant have it both ways. you cant stroke the housing stocks with headlines (just this week) that new housing permits are best in years and mortgage rates are at all time lows again and then have a 4% selloff on "stimulus worries"

posted previously the current levels im looking at. yesterday with stock near 84 i sold the Nov06 86.50 short call at $2.10. on monday as the stock approached 82 i sold the nov06 79.50 short puts at $2.05... referencing the levels , was looking to get at or below the low of 7oct at 79.72 for the Put sale.

of all the few stocks i follow , todays homebuilder selloff seemed the most odd, i dont buy the stimulus worries excuse but whatever. one of my alerts at <81 hit so added another short Put at Nov05 78.50 level this time to stay below the rising 50 day, also near same time reached 50% of max gain of the short call so closed that out after a one day hold. not much cash but paid for some lunches and fill the tank to the truck for the week. 

followed my levels again that i was looking at. resetting alert at 84 to look at reselling short call near 86ish again.

$TSLA trades for earnings

 

21 oct

-some of you have been following along with my recent selling short term / weekly calls on TSLA and making some good cash. to recap, have 5 jan2022 DITM long calls and selling 5 weekly calls against them. went into todays earnings with short weekly 430, 450 (x3) and 452.50 strikes. two of the450s were added today as they were trading near $10 in premium with stock near 430. 

an up move would be fine, flat would be fine, down a little fine, but down big as in more than the expected move would not be cool. so in order to get some cheap protection i looked at the level that many were looking at near the low at 351ish.. so i bought a 3 lot of weekly 350puts for .58per.. thought was in case a knee jerk selloff, possibly on a odd metric, or conference call off the cuff comment that would trigger the algos that these puts would do a 5x or so spike and can exit quickly in the morning and soften the blow of the selloff. plus .58 is cheap. dont want to pay alot for this asteroid insurance.

also the price action and my twitter stream wasnt outright bearish but lacked the over bullish hype as before. was more focused on the fundamentals of number of deliveries and EPS. a Mike Khouw hit on FM also mentioned significant selling of the weekly 450s for premium. (i already had one and a 452.50) . got the feeling that the big up move had already been priced in (a move less than the expected move) hence my tweet about a flat reaction. 

but to guard against a selloff even more with minutes to go i entered into a weekly 380/360 1x2 put ratio for .03debit. the ratio profit range at friday opex would be 340-380 .. if it drops below 350 then my 350puts from yesterday are gaining. i did not try to figure out a breakeven of the ratio AND the 3 puts if stock broke down AND the near max premium from the 5 short calls. a possible plus to a breakdown was a possible short put entry even lower.

that was the thought process. get a gain on the ratio and puts if a selloff happens but for cheap cheap.

now that earnings have hit, looks like good metrics across the board and stock was between 430-440 after hours. i will close out either just one of the short 360puts to regain my buying power and leave the 380/360 debit spread as a lotto or close the whole Put ratio likely for pennies in the morning. leave the 350puts as lottos since likely just worth pennies and see how all the short calls price out, best case mainstream Joe SixPack who is not trading after hours will buy in the morning and a couple analysts stroking each other to get the first and or the street high upgrade and get the stock to near 450 in order to get a better roll.. will see how the pricing looks tomorrow. would like to roll at or slightly above the 460 area as a minimum. will look at next weeks opex first. goal is to get at least $10 credit per contract for a roll out, if i can gain a strike or two that would be gravy.

will also look at :

-at least one short call 2 weeks out

-possibly one short call 45or so days out per some recent tweets ive mentioned about where the sweet spot is for premium decay

hope you guys made some coin too. it works till it doesnt

$NFLX trade for earnings

  

21 oct 

interesting if you read my entry from below.. get me thinking about something that i will share at the end. compare this chart to the one at the bottom and my commentary. over the course of a couple days the stock pulled back from 570ish to 525ish prior to earnings. monday of this week i entered a 520/500 put 1x2 ratio for slight credit with stock at 536. stock went down another 10points after and i ended up closing the ratio right before closing on tuesday. was still positive but not the point. i have a rule that my gut feeling over rules any strategy or trade i have and i got an odd feeling that the ratio was too tight (a 20point spread/40point wide profit range) as in it might go lower than 480

turns out i got the direction correct and could have exited at $5.00ish in the first 30min today and stock closed at 489ish today. no regrets , but instead after the selloff and in the 490s i sold a Nov06 short put at the 455 level at $5.00 credit. the strategy i had in the first note was to stay at or below the 460ish low from end of september. so im proud of myself for sticking to the levels.

secondly, rereading my post below gets me thinking.. the levels i was looking at for the put ratio ..the 500/475 would have been pretty good for the actual move. the spread is wider at 25points and 50point profit range. gets me thinking that maybe instead of waiting until the day of or day prior to the earnings AND THEN putting on the trade to instead in order to utilize the added time premium to put the trade on week or so earlier to get that wider profit range. wider profit range might keep me from getting shaken out. can always close it out and or adjust the strikes if its significantly different. something to think about

so now my only netflix position is 

Short Put Nov06 455 strike at $5.00 credit, was about 18delta, 16days to opex . target profit of 50%

10 oct 

earnings are still 10 days away, i will revise the strike levels to where the stock is trading the day prior but this is the idea. a couple of you that follow my trades have seen me do call ratio spreads. buying 1 call and selling 2 calls at a higher strike for near zero or slight credit. that being on top of existing long Jan2022 calls. the call ratios have a high probability of success. for netflix i have alerts set for the stock way lower and an on the lookout to get back long via Jan2022 long calls deep in the money. the 400 strike would be where i would look first. ive also been occasionally selling short puts on days where the stock sells off. the target level for a potential put sale would be at/below the 460ish level but granted thats a long way off and with earnings on oct 20 it limits which opexs i can choose from.

so the setup is, and i dont have any special insight, that the stock pulls back after earnings. sells off on great numbers, the child porn movie, subs growth.. whatever. , im hoping for a selloff so i can either go long via Leaps or via short put sales so a trade setup to profit on that selloff but also not outlay alot of money for the trade. under $1.00 ideal.

i mentioned the call ratio spreads.. this is a Put ratio spread... using after hours pricing on 10oct with stock at 540. the expected earnings move is about $55 (add the at the money 540 put and call together gets you the expected move). so a downside expected move is about 485. the trade is:

buy a Oct23 500 put at $10.75 and sell two Oct23 475 puts at about $5.25 each. whole thing cost under $1.00 debit. profit range at Oct23 opex is 500-450 with max of $2500 with a magical pin at 475. getting about 50-60% of the max profit has been a consistent exit for me. not a free trade. you are buying a 500/475 put spread and then selling an additional 475 put. so that additional put will require margin or be cash secured.

point of the trade is that if im going to get the pullback im hoping for in order to go long i might as well make some money on that selloff. off course stock could blow thru the bottom range or go up. the consensus online seems positive on the stock and future. 

etrade show earnings after hours on the 20th so best case i put this on the same day and revise the strikes to where the stock is at that time. the profits wont kick in right away even if a down move and might show a mark to market loss because the two short puts have to decay enough so be prepared to wait until opex friday to see the biggest gains. the bid/ask will be bouncing around as usual but will try to get for as close to zero or slight credit. no more than $1.00 debit though

will tweet if i enter

$ROKU level for short put sale

 

3 oct

very tradeable range for a few months now has held the breakout for 10days. i dont follow the daily news about the company as to why it has large moves. had a Roku desktop device from years ago myself that stopped working years ago..just threw it in the trash few days back.. anyway. the only level im comfortable with is the bottom of the previous range near 140/145 .. long way from where it is now, a pullback to the old top of the range and near the 50day might put that into play. will set alert for <180 , see what happens

downside to this name is that options are not that liquid, especially in the weekly ones.. just not much volume. its no TSLA or AAPL. some bid/asks are upwards of .40 wide 

$LEN level for short put sales

 

3 oct

homebuilders have been holding up well. Lennar seems to be holding the breakout from the recent range. i have a Jan2022 long call and now a Oct09 82 short call that i just rolled to for credit. been having good results selling short Puts on this name. now that stock is above 80 my level is a bit higher. near the 75 area. the bottom of the previous range. earnings were 2 weeks ago and they just raised the dividend. will be looking at 75 strikes 3 weeks out or so. lot size between 1-5 usually.. never said i was big time like the twitter furus .. will set alert for <80 to price things out.. a rapid selloff to under 80 will spike the Put premiums nicely

$FB level for short put sale

 

3 oct

really going to need a good selloff to get near to a level im interested in.. the 210 area . chart very similar to AAPL with that gap staring at you. took my losses on friday on some iron condors ive been defending for months seemed like so no current position. will enter alert for <233 .. 233 will indicate that the gap has been filled. premiums have never really been juicy for FB compared to some others

not expecting this to play out but never know. doesnt hurt to set an alert

$NFLX level for short put sale

 

3oct

stock had a big up day on thursday and equally big down day on friday. had alert set for <500 but didnt drop that low. levels im looking at for short put sale are the 460level and 435ish level. earnings are included in the Oct23 options so any sale will be using the monthly Oct strikes. will adjust my alert to <495 to get my head up. i have the Oct455 Put on my watchlist.. would like at least $5.00+ for it

for earnings depending on where the stock is just prior will be looking at the $430 level for short put sale. midpoint is near $5 now with stock at 503. likely increase closer to earnings.

on a personal note i am a netflix subscriber and dont care at all about the one video with the young girls everyone is all freaked out about. im not into young girls so i wont watch it but will not be cancelling the service either. you do what you want, i need to watch something while i ride my cardio bike. if some people cancelling the service makes for a tradeable move then i will react accordingly. the movie The Outpost just became available on netflix. the book is better

also if for some reason a short term earnings selloff takes it down to near 430 but the metrics are positive.. as in sells off on good news i will look at adding a Jan2022 or Jan2023 in the money call 

TSLA short calls, diagonal spreads, and ratio spreads

 

I've received a few messages and DMs asking specifics about my recent short call selling and diagonal spreads on TSLA so in the interest of being thorough and not repeating myself i will lay it out here

the below explanation will be using the after hours pricing on saturday 3oct

Short Calls -first im not selling short calls "naked", i have Jan2022 long calls (LEAPS) as the base... if youre unfamiliar refer to a standard covered call. where you buy 100 shares of the stock and then sell a short call against it. for instance, buying 100 shares of TSLA costs $41500 and then you could sell the Oct09 expiring 430strike call for $10.50 credit ($1050) .. not bad, nice $1000 bucks for one week if the stock stays under 430 at expiration you keep that $1000 and mentally subtract it from the cost basis of your stock.

Now instead of using that $41500 to buy the stock, buy LEAPs. which are just options expiring over a year from now.. lets look all the way to Jan2022 (the Jan2023 Leaps are available too). Look at the Jan2022 350 call. it is priced at about $170 ($17000) per contract. so if you had that $41000 available to invest you could buy Two of the Jan2022 350 calls. as we all know a standard option contract controls 100shares. so you would be controlling 200 shares. Now look at the "delta" of that option.. its at about 75. which means as the common stock moves up or down , these options will move up or down about 75% as much.. stock goes up $10 , option goes up about $7.50 

Now since you have 2 contracts you can sell those same Oct09 430 short calls against them. your broker considers it a spread and will not require additional margin, specifically a diagonal spread since the expiration dates are different.. are you seeing this ... buy the Jan 2022 long 350 calls at $17000 each (x2) and sell the Oct09 430 short call for $1050 credit (x2) . you are bringing in $2100 in credit with the long 2022 calls as "the base" like i like to say.

So i currently have 4 Jan2022 long calls on TSLA , a 300strike, two 350 strikes, a 400 strike . bought at separate times. the 300 strike when TSLA was selling off after the split. having four calls lets me SELL 4 short calls to bring in income.

thats the breakdown of WHAT im doing , the other questions ive received are what strikes to pick and which opex. couple factors i consider.. we have all seen how much TSLA can move up or down so the challenge is picking a strike that will not just get blown thru but then again also collecting enough premium to make it worthwhile. i mentioned "delta" before, delta is also a reference to the probability of the stock making it to that strike price...lets look at the Oct09 485. if you sold 2 of those to go with the Jan2022 long calls from above you would collect $2.00ish ($200 each), the delta is about 6. meaning only a 6% probability the stock makes it to 485 by friday opex... pretty safe if you dont want your stock called away if you had a standard covered call but is that $200 ($400) worthwhile to you personally based on your circumstances and based on the amount you have invested and also for one weeks worth of effort. a good generic level to sell short calls is about the 30 delta. a 16delta is about a one standard deviation move for reference

i am personally starting my selection process looking to collect $1000 per contract. nothing magical about it besides its easy math and $1000 per looks sweet on the confirmation. the premiums of the options increase or decrease based on the movement of the stock of course and also the volatility of the stock. i call it "juiced" . if the stock rips higher the calls increase in price so best case is to sell the short calls on positive days. you get better premium and for that $1000 goal i have i can chose a higher strike price.. maybe the 450 level vs the 430 level. 

if the pricing im looking to collect lines up with some technical analysis level then even better. like below there seems to be some resistance near 455/460area so if i can sell the short call at that level or higher AND make that goal premium that would be ideal. i am currently focusing on weekly options assuming i can be more nimble if a quick move takes place but last week did sell one of my four for the week after (2weeks out) to as an experiment

be mindful of when earnings are. they are upcoming for TSLA. the premiums of the options expiring immediately after earnings will be alot higher than normal because of the uncertainty of which way will the stock move so if the opex includes earnings i will wait until the day of / day before to sell since the IV (volatility) will increase going into the earnings event. if there is alot of hype about something that increases the IV as well. use the Battery Day as an example..the premiums got juiced running up to that event almost as much as an earnings date. weve all seen some stocks move up to 100points running into a hyped earnings date so by waiting till the last day i will base my short sale strike selection on the most current levels vs having sold the week prior when the previous weeks options expired.

Put Sales - lets switch to the other side. selling short Puts. based on your broker and the stock, figure you needing about 20% of the stock price on hand to sell a Put. thats the price of the stock at the strike price you want to sell. if trying to sell a short put this time i look at the chart first to get an idea of where to select my strikes. so looking at the same chart below. the best case for me and my style would be to be at or below the low near Sep8 around 330 ish. thats best case, 2nd best is at or below the low near 350. what gets my attention for Put selling is when a stock sells off. for TSLA that would be 5% or more. when a stock sells off quickly the IV spikes and the premium of the puts increases short term. you can sell a Put at anytime of course but what im trying to do is capture that short term premium juice AND a strike level that matches my amateur chart work. for me the chart levels come first for put sales. so friday TSLA sold off $30+, i have a defined level im looking at (350 level) , but the premium for the standard Oct350 Put was only in the $3-$4 range... not enough of a spike..so no trade. another selloff like that and it gets interesting and possibly puts the 330level in play. if i went out further in time that would include earnings. if the opex includes earnings the value of the Put might even increase as time goes by even if stock goes sideways or up since the IV increases also.to the point of increasing more than the time decay. i have a post-it note on my desktop at home that says "wait until a big down day to sell a put" 

dont overdue it selling puts. they are not free trades. i mentioned earlier to figure on having at least 20% of the stock price available to sell the put. during the selloff in march TSLA margin requirement was increased i believe to 70% at one point. meaning you now needed to have 70% of the cost of the stock available. i ended up taking a loss on TSLA short puts to not have to sell other positions to increase my available margin. my short strike never did get breached and if i would have had more buying power it would have expired with a profit. it takes events like that to learn your lesson and hone your strategy

Ratio Spreads - lets reverse course and switch back to calls. Ratio Spreads are probably my favorite trade. super high probability for profit. Ratio Spreads are also called Catch Up trades. It is buying one call, and selling two higher calls. TSLA pulled back 30 friday and you dont want to sell short calls for some reason or dont want to limit your upside near the short call. Again you have the Jan2022 350 long calls from above. with stock at 415 from closing... the Oct 415 call is at $25ish, the Oct 450call is at $12.50 ish. you could buy one 415 ($2500) and sell 2 of the 450s for ($2500total) bringing the total trade to near zero. you can move the strikes around to even bring in a credit or debit if you want. in the case of having the 2 long 2022 calls already, you could buy two Oct415 calls and sell four Oct450 calls for also near flat. each 1x2 per long Jan2022 contract. again this is not a free trade. the long 2022 call is the base so your broker treats the added 1x2 as two spreads... (a long 2022 350 call and short 450call and long 415 call short 450call) 

at Oct opex your profit range for the ratio is 415-485,with a max profit of $3500 at 450 if it pinned there. in reality i look for about 70% of max profit on the ratio to take profits and move to the next opex with new positions. note that this is just the ratio spread. the long Jan2022 call is gaining in value as stock increases. you gain on the Leap and gain on the ratio so you make more than just an outright long position with no added risk. my experience is that i undershoot the strikes i select and the stock blows thru the top range. at that point i adjust the ratio, close it and sell short calls or just exit all legs and start over. but its not a bad problem to have

so lets bring it back to me. currently have 4 Leaps and one next weeks short 435 call(at near 50% of max profit). so i have 3 short calls to sell or i could do my ratio trade on the remaining three. if i had to enter ratio spreads right hear right now with a gun to my head i would go with the Oct420/450 1x2 (3 lots) so buying 3 selling 6.. midpoint pricing after hours is $2.42 credit (thats per lot so $700+credit) . my profit range at opex in 2 weeks would be 420-480.. yes you can add the credit received to that range but i keep it simple. so in a nutshell , the ratio cant lose money (because i put it on for a credit) and legit makes a profit anywhere between 420-480 at opex. flip side if stock closes at 419 on opex the ratio expires and all i have to show for it is the original $2.42 credit received. and flip side #2 is that i could have sold 3 short calls at $1000 each times 2 weeks... lots of ways to play it

hope this helps