Update – April 5th, 2018
Start scaling out into this gap higher.
Update: April 11th, 2018
Close out rest of spreads.
Become a Great Options Trader
By Steven Place
By Steven Place
We’re starting today off with a look at the Nasdaq 100 index, which was hardest hit today on the back of bad Facebook news.
There has been technical deterioration in the market, but from my view it’s not that we’ve gone from an uptrend to a downtrend– we’ve moved from an uptrend to a distribution phase of the market.
Distribution is marked by larger selloff days, more volume traded, and much more reversion to the mean.
In other words, rangebound priceaction.
Given the breadth thrust we saw two weeks ago, it does make sense for some reversion to come in… yet this is not the exact kind of price action you want to see if you expect the market to rip absolutely higher.
I’m still expecting higher market prices, or at least not a retest of the low. My strategy for spread sales here is to enter into put spread sales onto pullbacks of stocks that haven’t seen much technical deterioration… and if I do want to “buy the blood” I have to make sure that the stocks I play are very liquid, name-brand stocks.
Looking for a pullback to its 20 day moving average.
Trade Setup
Expected Price: 121
Sell to Open CRM Apr 114/111 Put Spread
Tier 1: Enter at 0.39, Exit at 0.09
Tier 2: Enter at 0.59, Exit at 0.29
Tier 3: Enter at 0.79, Exit at 0.49
News catalyst play… I never fade the first day. Instead I’m looking for a break underneath the lows and a fast move to 165. Odds are selling will slow as we head into earnings.
Trade Setup
Expected Price: 165
Sell to Open FB Apr 150/145 Put Spread
Tier 1: Enter at 0.60, Exit at 0.10
Tier 2: Enter at 0.90, Exit at 0.40
Tier 3: Enter at 1.20, Exit at 0.70
Trade #3: NFLX
You’d probably be OK selling some spreads here, but I want to look for a pull into 290, given how fast the stock has risen over the past few months. 290 is the previous pivot level from late January.
Trade Setup
Expected Price: 290
Sell to Open NFLX Apr 250/245 Put Spread
Tier 1: Enter at 0.70, Exit at 0.20
Tier 2: Enter at 1.00, Exit at 0.50
Tier 3: Enter at 1.30, Exit at 0.80
By Steven Place
By Steven Place
Going to close out the fly and roll it down to lower strikes.
Taking profits here and moving on. Didn’t like how this trade played out.
Margin And P/L Calculations
Lower Spread Width: 5
Initial Credit: 0.23
Margin: 4.77
Roll Cost: 0.11
New Credit: 0.12
Closing Credit: 0.09
Total Credit: 0.21 Per Spread
4.4% Return on Risk
By Steven Place
By Steven Place
Closing out the call spreads.
Rolling the put spreads lower and adding bear call spreads.
Closing out the put spreads.
Rolling up and out and adding new put spreads.
Closing out the rest of the iron condor.
Margin and P/L Calculations
Trade #1
Sell to Open 1470/1480 Put Spread
Sell to Open 1670/1680 Call Spread
Credit 1.70
Max Credit: 1700
Max Risk: 8300
Trade #2
Buy to Close Apr 1670/1680 Call Spread
Debit 0.30
Max Credit: 1400
Max Risk: 8600
Trade #3
Roll Put Spreads Down to 1455/1445
Debit: 1.00
Sell Apr 1585/1595 Call Spread
Credit: 0.70
Max Credit: 1100
Max Risk: 8900
Trade #4
Buy to Close Apr 1455/1445 Put Spread
Debit: 0.30
Max Credit: 800
Max Risk: 9200
Trade #5
Buy to Close Apr 1585/1595 Call Spread @6.70
Sell to Open May 1610/1620 Call Spread @4.00
Debit: 2.70
Sell to Open Half Size May 1550/1540 Put Spread
Credit: 1.60 (0.80 size adjusted)
Net Debit: 1.90
Max Credit: -1,100
Max Risk: 10,300
Trade #6
Buy to Close May 1550/1540 Put Spread @0.20
Buy to Close May 1610/1620 Call Spread @2.00
Original Iron Condor (1470/1480 1670/1680)
Opened for 1.70 Credit
Call Spread Closed For 0.30
Put Spread Rolled For 1.00
Put Spread Closed For 0.30
Net Profit: 0.10
Apr 1585/1595 Call Spread
Opened for 0.70 Credit
Rolled for 2.70
Closed for 2.00
Net Loss: -4.00
May 1550/1540 Put Spread
Opened 1.60
Closed 0.20
Net Profit: 0.80 (0.40 Size Adjusted)
Total Net Loss: -3.50