One of the Option strategies I utilize for protecting a position short-term is the Collar Put Ratio (CPR). Here is what a CPR looks like using the Fab 5 position ($100 Roll) for $FB as an example:
I am long stock at $90.33 (since 7/16)
Here is the CPR:
I am short the August 07 weekly $95 Calls
I am long the August 07 weekly 95/87.5 1×2 Put Ratio (for every 1 contract that I am long the $95 Put I am short 2 $87.5 Puts). This takes margin
So let’s look at a Daily chart to see how this trade looks post-Earnings:
The black horizontal line represents the $95 level which is key for the Option portion of my trade. The long $95 Puts are ITM (in the money) so the long stock is protected well so far.
– DM 9:30 AM CST
I do all my short-term trading off of a 5-minute chart. I keep it simple though with just Accumulation/Distribution and Volume turned on. No moving averages. The above is a “zoomed” view to show just today so far.
– DM 10:00 AM CST
An important chart to watch at all times is the NYSE New Highs-New Lows. This chart will give you a quick view of the overall price activity for the NYSE and will clearly make visible the extremes for which the market moves.
We are at an extreme now:
If you believe that history repeats – more accurately rhymes – then now is the time to create a Buy list.
– DM 9:40 AM CST
If I were long $SKX I would be focused on protecting the gains from this April move. There are going to be a lot of weak hands in this one now – chasers too – that won’t hang around once the Bear Raid begins.
At least buy Puts if long.
– DM 11:40 AM CST
I often receive inquiries on what a RRCS is so I thought I would use a current position in $PCLN to illustrate what it is. The acronym of RRCS stands for:
Risk Reversal Call Spread
The typical structure for this trade:
- Long a Call Spread
- Short Puts
Here is what I have for $PCLN in the submarine basket:
– DM 1:00 PM CST
part of the Simple Approach series
I reviewed numerous charts this weekend that have a similar characteristic with $PCLN: intensified buying or selling when RSI hits 30 or 70 respectively. Here is a daily chart on priceline.com to illustrate:
If you are of the camp that history will rhyme for price then $PCLN is at a Buy signal today. If you are not of that camp, what keeps you from believing that this is a high probability trade?
– DM 9:55 AM CST
New IPO $FIT had a great debut but has found some very stiff resistance at the $40 level:
– DM 9:00 AM CST
During stock research this morning I noticed this well-defined Down Channel that has formed in $ITW:
Now that price has begun to arm wrestle the 200 SMA I will be watching for a move down to the $90.50 level. An ideal trade here would be a Put Ratio in my opinion.
– DM 10:05 AM CST
I like the June 80/82.5/85/75 Risk Reversal Call Fly for an ADBE earnings trade (long the 80/82.5/85 Call Fly and short the $75 puts).
I have an existing position in FDX but for an earnings trade consider this:
Long the June 182.5/185 Call Spread
Short the June 177.5 Puts
Cost: $.20 credit
– DM 10:40 AM CST