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The Nasdaq 100 is ripping higher on the back of some really good earnings. GOOGL is currently leading the market higher, and I wouldn’t be surprised if next week’s earnings reports provided some additional movement.
But.
We’re overbought already. And if you look at the VXN (the VIX for the Nasdaq), it’s at a floor.
So now is a good time to start scaling into some calendars.
Buy to open QQQ Sep/Oct 112 Put Calendar @0.64 or lower HALF SIZE
If we see a move above 115 or below 109 we will ADD to the trade.
If the market sees additional movement (which would be extreme) then we will roll the losing calendar.
108 has been hit so we’re going to add.
Because we’ve been in this trade for a while, the *add* is going to cost more as the September options don’t have as much premium to sell.
Buy to open QQQ Sep/Oct 108 Put Calendar @0.85 or lower
Now we’re looking to get out at 20% return on our max risk. That will take 10-14 calendar days, and if we see some reversion.
It’s about time to bail here.
The problem is… Because we used put calendars, these spreads have gone pretty deep in the money.
This becomes a problem of liquidity, so make sure you really work the best fills in.
Here is a “fill” chart for the options:
So you should be looking to bail on the 112 put calendar around 0.63, and the 108 put calendar at 1.15. Once you do that, close out the hedges… I’m seeing a fill of around 3.02.
It may take a little work and slippage to exit the trade, there’s no huge hurry as the trade is hedged off pretty well, but it will be easier to exit now compared to if we do have further downside action.
The reason this trade is holding up so well is because it’s a long vega trade. So the fact that VXN pumped up so high actually helped out the trade… but I don’t want to press my bets and I want to work out of this position.
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