The Collar Put Ratio starring Facebook

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:

FB_G

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

The rhyming market

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:

$NYHL_B

Weekly chart

If you believe that history repeats – more accurately rhymes – then now is the time to create a Buy list.

 

– DM 9:40 AM CST

Bottom Fishing

Now that we are into the heart of Earnings season, my list of stocks that are getting beat up post-Earnings is growing. Although I have a full Submarine Basket at the moment – primarily where I would add new positions for these – I am considering creating a 2nd basket.

Here are just some tickers from the growing list of candidates:

$UTX
$LXK
$PII
$CAB
$COL
$TEN
$BIIB (I added to the Submarine Basket on 7/24)

There are also numerous pull-back candidates that are at interesting Buy points. Here are 2 well-known brands:

$FDX
$UPS

 

– DM 9:30 AM CST

 

July 24 weekly Options expiration

I have 6 positions that include Options for the July 24 weekly expiration:

$AXP  I own the 78/79.5/81 Call Fly (which looks to go poof). Options Net: $1.63 and booked stock gain of $.29

$MU  I am long at $18.75 with a 19/17.5 Put Spread. I will likely adjust this PS to a future expiry. Options Net: $1.95

$MA  I am long at $92 with short $94 Calls (covered calls). Fab 5. I will adjust the short Calls to a future expiry. Options Net: $3.52

Earnings:

$IBM  I own the 175/177.5/167.5 RRCS. I am short stock at $170.44 as a hedge. Options Net: $.25 This trade should auto-unwind for +$3.19

$CMG  I own the 675/695/620 RRCS.  I am considering adjusting the short $695 Calls to a future expiry & taking stock at $675. The short $620 Puts will go poof. Options Net is currently: -$.46

$GPRO  I am short the 65/55 Strangle and long stock at $63 (hedge). If this does not get called away then:

The short Strangle goes poof
I will consider keeping the stock & sell premium against it for next week
Options Net is currently: $.41

 

– DM 10:25 AM CST

 

Monthly Options expiration for July

Seems like I do this every 4 days lol

Here is what I have in existing positions that include July monthly Options as part of the trade:

$CRM  I own a 75/82.5/67.5 RRCS. Options Net: -$1.50 and booked stock gain of $9.45. Should go poof

$FLTX  I own a 45/50/55 Call Fly. Options Net: $1.32 and booked stock gain of $.50. Want to get some value from the long $45 Calls

$IACI  I own a 75/80/85/70 Risk Reversal Call Fly (L 75/80/85 CF, S $70 Puts). Options Net: $.53 and booked stock gain of $.45. Sweet spot here with price near $80

$RENT  I am long stock at $57.82 with a 70/65 Collar. Options Net: $1.18. Will likely adjust to an August Collar

$PCP  I am short stock at $207 with a Sep/July 250/200 Risk Reversal (the Puts are the short July $200). Options Net: $.25. The short Puts will assign, short stock get called +$7

$QRVO  I am long stock at $76 with a 85/85/75 Collar Put Ratio. Options Net: $2.03. The long $85 Puts are well ITM so I am not sure if I will adjust or let the position unwind

$XLF  I am long the $25 Calls. Options Net: $.12. Likely goes poof

$CYBR  I am long stock at $40 with $75 Puts. I will let this position unwind for +$33.20

$ESPR  I am long at $76.44 with a 85/75 Put Spread. I will adjust this to August (have short $90 Calls there as other part of the Collar Put Spread)

$JCI  I am long the $50 Calls. Likely goes poof

$MAR  I am long at $59.50 and long a 80/70 Put Spread. I will adjust the PS to a future expiry

$BWA  I am long a 57.5/60 Call Spread. Options Net: $1.74. This CS should go poof.

$HSY  I am short the $90 Puts. Options Net: $.57 and stock gain: $.17. Looking for these short Puts to go poof

$RH  I am long at $90.04 with a 100/100/95 Collar Put Spread. I will adjust to a future expiry

$TSCO  I own a 95/90 Risk Reversal. I am short stock at $90 (hedge). I will exit this Fab 5 position. Options Net: $.22

$DATA  I am long at $97 with a July 120/110 Put Ratio. I will adjust the PR to August

$ROST  I own a 50/52.5/48.75 RRCS. I will exit this Earnings trade

$SONC  I am short the 35/30 Strangle. I am short stock at $29 (hedge). Options Net: $1.04 and booked stock gain: $1.63. I will exit this Earnings trade

$LEN  I am long the 50/52.5/55 Call Fly and short the $47 Puts.  I will exit this Earnings trade

$STZ  I am short the $120 Calls (2x), long the $125 Calls, and short the $115 Puts. Options Net: $2.18 and booked stock gain: $2.20.  I will exit this Earnings trade, remaining Options should go poof

$PAYX  I am long at $44.66 with a 48/47/45 CPS.  I will exit this Earnings trade

$PEP  I am short the $97.5 Calls (2x), long the $100 Calls, and short the $94 Puts. Options Net: $1.88  I will exit this Earnings trade, remaining Options should go poof

$PSMT  I am short the 95/90 Strangle and long stock at $95 (hedge). I want this to go poof. Options Net: $3.22

 

 

– DM 11:00 AM CST

 

Options Expiration – July 10 weekly

 

$DTV  I own the 90/94/88 RRCS. I will StC the $90 Calls before eod. Fab 5. The other 2 option pieces will go poof

$YUM  I am short the $92.5 Calls. Fab 5. Should go poof

$XLF  I am short the $25 Calls (part of a Call Calendar with next week $25 Calls). Long-term account. Should go poof

$PCLN  I am short the 1150/1090 Strangle. Submarine Basket. Should go poof


 

For clients:  $AAPL $COST $DECK $PG $XLF

 

 

– DM 9:30 AM CSt

 

A sketchy chart

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.

Be prudent.

At least buy Puts if long.

SKX_B

– DM 11:40 AM CST

 

Options Expiration for July 02 weekly

$AMBA  I am short stock at $108.44 from 6/22. I have a 98/115/96 Bear Collar Call Spread (long 98/115 CS, short 96 Puts). I will let the long $98 Calls auto-exercise and cover the short stock for +$10.44. The rest of the options go poof

$LNKD  The short $215 Calls will go poof

I have already adjusted the following from July 02w to a future expiration or exited:

  • $MA (Fab 5, $100 Roll)
  • $SBUX (wife’s account)
  • $ORCL (trade exited)

– DM 10:20 AM CST

 

RSI as a trigger

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:

PCLN_RSI

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

Looting a Call Fly

For those that are not familiar with a Call Fly, here is how it is structured:

  • Long a Call. This is the bottom of the Call Fly
  • Short 2 Calls at a strike (or more above). This is middle of the Call Fly
  • Long a Call above the short Calls. This is the top of the Call Fly

This trade structure will be for a debit (I often sell Puts below to pay for it).

So what does it mean to loot a Call Fly? This is really a made-up term from me but this is what I am referring to:

You have a Call Fly and the stock moves up enough to where the bottom of Call Fly is ITM (in the money). However, it doesn’t have enough momentum to get near the middle of the Call Fly. What I often do now is StC (Sell to Close) the long Calls (bottom of the Call Fly) thus leaving the rest of the Call Fly (middle, top). You want the remaining pieces to all expire worthless. By doing this though I increase the Risk (I would be short 2x Calls in this situation) so I always set a Buy Stop near the middle Call(s) strike (would act as a hedge).

Here is a recent trade where I did just that:

Lennar $LEN

I initially opened a long July 50/52.5/55 Call Fly with short $47 Puts on 6/23 for Earnings. The stock did move up near the $52 level but stalled and pulled back. I StC the $50 Calls thus leaving the rest of the trade. I then set a Buy Stop at $51.25 on 6/25 (which has triggered).

 

– DM 9:40 AM CST