RRCS – the Risk Reversal Call Spread

I frequently use an Option trade called a Risk Reversal. However, I define it more precisely when I use a Call Spread as the Bullish piece: Risk Reversal Call Spread (RRCS).

I have several of these currently in the Swing account and thought I would provide a brief breakdown of each:

  • $CHL I own the September 52.5/60/52.5 RRCS. This means I have a 52.5/60 Call Spread and I am short the 52.5 Puts. The CS is currently capped
  • $DRC I own the September 70/75/60 RRCS. This means I have a 70/75 Call Spread and I am short the 60 Puts
  • $PCYC I own the September 115/125/105 RRCS. This means I have a 115/125 Call Spread and I am short the 105 Puts. The CS is currently ITM (in the money) and very close to being capped

 

Positions Update

I wrote a mid-week update here - and only a few changes/adjustments since:

  • $IRF I took some $ out of the trade by moving the Long Calls up to the $35 strike for September. Options Net now: $4.11
  • $VXX I adjusted the short Option pieces to September 05 weekly $28 Straddle (Calls are covered)
  • $VIPS was exited from the long-term account on 08/27
  • $PBR I added short September 12 weekly $19 Calls on 8/28 (covered calls, IRA)
  • $SLCA I adjusted the short Calls to March 2015 $65 strike on 08/28
  • $WDAY I added long stock at $86 on 08/29. I later added short September 05 weekly $93 Calls for $.95 credit. Submarine Basket
  • $GRMN a Stop on the long September $55 Calls hit at $1.70 on 08/27. Submarine Basket, leaves a short Strangle
  • $BBY I exited the Earnings trade (personal & the client trade)
  • $GCO post-Earnings trade, exited
  • $AVGO Earnings trade
  • $DGLY 50/50 Basket, exited

Here is the Summary:

Positions_08302014

A look at Options protection starring Williams Sonoma

This is what the Daily chart of $WSM looks like post-Earnings:

WSM_B

Yikes!

I noted that I had an existing trade for $WSM that I was taking into Earnings and here are the specifics (for some clients):

  • Long stock since 08/25
  • Own a January/October 80/75/67.5 Collar Put Spread: I am short the January 80 Calls and long the October 75/67.5 Put Spread

So now what? Well let’s take a look to see how the Collar PS helped in the price “flush” post-Earnings:

  • October 75 Puts last traded at: $8.25
  • October 67.5 Puts last traded at: $2.53
  • January 80 Calls have no volume today, bid/ask at:  .25/.60

A few potential next steps:

1) Sell to Close the long $75 Puts and leave the short $67.5 Puts for now (expect some recovery)

2) Do nothing

3) Adjust the short $67.5 Puts down a strike (could even consider a different expiration)

4) Adjust the short $80 Calls to a nearer expiration – and down a strike or 2 – to build a credit

Another perspective on the Daily chart:

WSM_C

50/50 Basket update

I have been more active with this Basket in August as more tickers hit the scan. Here are current positions:

  • $DGLY I am short stock at $15.90 (since 08/26) with a Stop at $14.05
  • $DRL I am short stock at $8.42 (since 08/25)
  • $GLUU I am short at $7.00 (since 07/30) with a Stop at 5.50
  • $JRJC I have a September 11/10/7.5/6 Collar PS, long stock at $8.07 (since 08/20)
  • $LEJU I am short stock at $18.35
  • $PBYI I am short the September/September 05 weekly $240 Put Calendar
  • $TKMR I am short at $25.04 (since 08/11) with a December/September 17.5/17.5/30 Bear Collar CS
  • $VJET I am short at $26.40 (since 07/01) with a September 17/18 Bear Collar

 

Position Update (mid-week)

A brief review of newly added, exited, and adjusted positions for this week:

  • $IBN I adjusted the short Calls to the October $50 strike (covered calls)
  • $MS I was long stock at $33.75 and sold at $34.35 on 8/26 (newly added and exit)
  • $QIHU I am short the September 05 weekly 93/90 Strangle (short August 29 weekly 94 Calls remain as well). Newly added, the long stock piece hit a Stop on 08/26
  • $TAN I adjusted the September short Calls up to the $46 strike
  • $ACHN I am long the January 12.5/20 Call Spread (newly added, IRA)
  • $PBR I am long stock at $17.50 (newly added, IRA)
  • $TSCO I adjusted the short Calls to the October $65 strike (Submarine Basket)
  • $BBY (Earnings, position for personal account and some clients)
  • $SAFM (Earnings, position for personal account and some clients)
  • $TSL (Earnings, for some clients)
  • $MOV (Earnings, for some clients)
  • $BMO (Earnings, for some clients)
  • $ARUN (Earnings)
  • $TIF (Earnings)
  • $SWHC (Earnings, newly added and exit)
  • $INTU (Earnings, exit)
  • $DRL (50/50 Basket)
  • $DGLY (50/50 Basket)