A deeper look at the Diagonal Collar starring Altisource Portfolio Solutions

I have a position in the Submarine Basket for $ASPS that includes the use of Options. Here are the specifics:

  • I am long stock at $84
  • I am short the January 100 Calls (so Covered Calls)
  • I am long the September 90 Puts (currently ITM)
  • The Option pieces were done for a $1.20 debit on 08/08
  • This is a Diagonal Collar given the 2 Options pieces are of different expiration 

So let’s look at a Daily chart to see how things have played out since entering:

ASPS_C

The Green line represents where I am short the Calls and the Blue line is the where I am long Puts.

 

Is your trade “capped” ?

For those that use Options as part of their trading process the situation of having an initial trade capped elicits a lot of different view points. I interact frequently with Option traders that focus a lot on avoiding this situation – but do they do the analysis to determine how often a price move actually warranted avoiding this in their trades?

Another element to capping that is often incorrectly stated – when a trade is actually capped. To illustrate what I mean let’s take a look at a Daily chart of $IBN:

IBN_B

I am long the stock at $43 since 05/05/2014 with short September $49 Calls (so these are Covered Calls). Is the trade “capped”? Let’s look at the crucial piece of data that will actually determine this: Options Net

For my trade, I have an Options Net of $4.27. So in order to determine the true capped price level of the trade you do the following:

  • Take the strike of the short Call: ($49)
  • Add the Options Net: ($4.27)
  • The resulting price is the true capped price level for the trade: $53.27
  • Price closed Friday at $51.97 so this trade is not actually capped

 

A healthy setup in Cardinal

If you like to improve the probability of success in a trade it is important to have a solid disciplined approach for trading. Follow a routine. Keep doing what works. Stop doing what doesn’t work. This approach needs to include the review of relevant data to help support your thesis – whether Bullish or Bearish – and should include Option chain data.

Whether you actually trades Options or not.

I have been doing some normal chart & scan review this morning and noticed the Daily chart of $CAH:

CAH_B

What lead me to look at the chart in the first place was the following additional data:

1) It hit my Large Cap scan this morning. Week Up, Friday Up

2) Look at the August Option chain information:

CAH_Aug_Options

Well hello Option Volume at the $75 Call strike. And at the Ask.

An Earnings trade idea in ManpowerGroup

I posted a trade idea on @Stocktwits earlier this week but wanted to follow up with a few data points. First, a look at the idea again:

  • Long the August 85/90 1×2 Call Ratio
  • Short the August 75 Puts
  • This trade closed at a $.20 debit Friday
  • This trade would take margin until the short Puts and one set of Calls are closed

Here is the Option chain info:

MAN_Aug_Options

As you can see above, the August $90 Calls have the largest Open Interest by far.

Here is the Daily chart:

MAN_b

A few scenarios to consider:

1) price moves above the $85 level but avoids $90. StC the August $85 Calls when you see price stall for your time-frame. This would leave the short 90 Calls (2x) and the 75 Puts (a Short Strangle) until closed

2) price goes nowhere. No harm, no foul. The small debit for this trade is your cost to participate

3) price goes down to the $75 level (near the April lows). If you are comfortable owning there (you did sell the Puts at that strike) then let the stock get put to you

 

 

The Volume Bar buy signal

part of the Simple Approach series of blog posts

For traders that like to trade with simple triggers you may find this of interest. I use RSI and Volume Bars as Buy/Sell triggers and so I like to offer examples to show what I mean.

For an example using Volume Bars as a Buy signal I bring you $CAB:

CAB_volume_bars

As you can see above, I highlight several Buy points (blue vertical line). Here are the details:

1) Buy the next green Volume Bar – after at least 3 Red bars in a row

2) There have been 6 triggers so far with #7 in the works now

3) Use your own Stop and/or Risk parameters for exiting each trade that you would take

4) Trigger #4 is likely a loser

 

A trade idea in Acuity Brands

Acuity Brands reported Earnings on 07/01 and missed estimates:

Estimize Earnings page for $AYI

The reaction was negative as traders took profits or shorted the report. Here are a few looks at the Daily:

AYI AYI_B

As you can see above, price is hanging on to the 200 SMA right now (one Support level).

So what now? If you don’t currently have a trade, here is one idea to consider (if you think it will start a steady rebound into August):

  • Short the July 120/115 Strangle (takes margin)
  • Long the August 120/125 Call Spread
  • This trade can be done for a small credit
  • The margin use will go poof if price is in between the 2 July strikes at expiration

If the $120 level is too close for you then consider this:

  • Short the July 125/115 Strangle (takes margin but will be less than idea #1)
  • Long the August 125 Calls
  • This trade can be done for a small credit
  • The margin use will go poof if price is in between the 2 July strikes at expiration

Position Updates

Noted activity in the my personal accounts

Although this was a holiday shortened week, I was fairly active in the Swing account. Here are the newly added positions this week that survived to the weekend:

  • $ILMN   L July 175/185/170 Risk Reversal Call Spread
  • $VIPS   L August 200/220 Call Spread (LT account)

Exits:

Submarine Basket:

Earnings:

Here is the Summary:

Positions_07042014

 

Position Updates

a look at my Trading activity for my personal accounts

Here are the newly added positions this week that survived to the weekend:

  • $CTRP I am long stock at $56 with short July 60 Calls
  • $BWLD I own a July 160/165/155 Risk Reversal Call Spread
  • $SLB I own a July 03 weekly 110/116/110 Risk Reversal Call Spread
  • $ULTA I own a July 90/87.5 1×2 Put Ratio
  • $VRTX I am short at $102 with a July 90/90/100 Bear Collar Call Spread
  • $BBBY I own a July 03 weekly 56/57 Call Spread
  • $MPC I am long stock at $78.90 and short the July 03 weekly 80 Calls
  • $BKS I am short the July $23 Calls (2x) with a long stock hedge at $22 (and a Stop at 22.50)

Exits this week:

Earnings:

Submarine Basket:

Here is the Summary:

Positions_06272014