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jeffalvinson
Registered: Nov 2006
Posts: 453 |
02-16-12 02:49 PM
Ryan,
Good job on ACOM, the call/put debit is almost at a double!
Jeff
Very cheap options are really the key to these things and a catalyst to propel the stock in either direction. That means smaller movements give a profit easier on the total debit.
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ryanpatrick
Registered: Nov 2011
Posts: 360 |
02-16-12 03:04 PM
Quote from jeffalvinson:
Ryan,
Good job on ACOM, the call/put debit is almost at a double!
Jeff
Very cheap options are really the key to these things and a catalyst to propel the stock in either direction. That means smaller movements give a profit easier on the total debit.
The strangle does seem to work although its too soon to call it out. Here's some numbers to think about when doing these trades too. I got a 19% average swing for ACOM's last 4 quarterly reports and I'm only talking about intraday highs the day following earning reports. Taking the +42% pop outlier, then we have 10, 13, and 14, which comes to 12.3% avg swing.
With the ACOM strangle I played yesterday costing me $1.77 or about 10% of ACOM's swing (calculated that by (1.77 + 1.00) (from the fact that ACOM shares closed at $28.5 compared to my 27.5 puts)/27.5 put strike. If ACOM had just hit the avg swing, then from 28.5, we'd see 25.1 and I should at least get 2.4 - 1.77 = 0.63, As I initially increased my odds to 2/3rds by taking both direction and only losing if something like WTW pans out. My odds also greatly increase knowing that ACOM has on avg swung 12% from its previous day close price. I'm not one with some math formula, but after these simple calculations, I'd say I like my odds. I'd say the odds of me closing the trade with a net profit is at least around 75-85% of the time. Of all the components, the only unknown is what can management pull (especially when they know the stock will take a hit) to keep the stock leveled.
I did close out at avg 4.00 on the puts....once ACOM fell below my high expectations of $24, that was it for me.
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ryanpatrick
Registered: Nov 2011
Posts: 360 |
02-16-12 03:08 PM
I am all cash now at a little above 9400. Net gain on wtw was about 394.
Now I'll go see if NTAP has legs, and whether there's profit in an AAPL 20 point move over the next 5 trading days as Monday's an off day.
Also like ROVI puts as well as ARUN, JWN, and ESRX calls...just initial research and have dug deeper just yet.
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jeffalvinson
Registered: Nov 2006
Posts: 453 |
02-16-12 03:13 PM
Quote from ryanpatrick:
The strangle does seem to work although its too soon to call it out. Here's some numbers to think about when doing these trades too. I got a 19% average swing for ACOM's last 4 quarterly reports and I'm only talking about intraday highs the day following earning reports. Taking the +42% pop outlier, then we have 10, 13, and 14, which comes to 12.3% avg swing.
With the ACOM strangle I played yesterday costing me $1.77 or about 10% of ACOM's swing (calculated that by (1.77 + 1.00) (from the fact that ACOM shares closed at $28.5 compared to my 27.5 puts)/27.5 put strike. If ACOM had just hit the avg swing, then from 28.5, we'd see 25.1 and I should at least get 2.4 - 1.77 = 0.63, As I initially increased my odds to 2/3rds by taking both direction and only losing if something like WTW pans out. My odds also greatly increase knowing that ACOM has on avg swung 12% from its previous day close price. I'm not one with some math formula, but after these simple calculations, I'd say I like my odds. I'd say the odds of me closing the trade with a net profit is at least around 75-85% of the time. Of all the components, the only unknown is what can management pull (especially when they know the stock will take a hit) to keep the stock leveled.
I did close out at avg 4.00 on the puts....once ACOM fell below my high expectations of $24, that was it for me.
Ryan,
Your math and overall thinking on this trade was perfect for these kinds of trades. Do you remember a few days ago I mentioned
that the call/put debit should be under 2.50 and that under 2.00 is best? Then all you need is the prior stock price range history
(like you mentioned in this post) to support the profit potential and a catalyst to trigger that range movement (an earnings catalyst is good).
Every element of a perfect trade was there. Great job!
Jeff
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atticus
Registered: Mar 2007
Posts: 12603 |
02-16-12 03:28 PM
Quote from jeffalvinson:
Ryan,
Your math and overall thinking on this trade was perfect for these kinds of trades. Do you remember a few days ago I mentioned
that the call/put debit should be under 2.50 and that under 2.00 is best? Then all you need is the prior stock price range history
(like you mentioned in this post) to support the profit potential and a catalyst to trigger that range movement (an earnings catalyst is good).
Every element of a perfect trade was there. Great job!
Jeff
How about 1.99? 1.50? The point is the vol is priced into the debit. Bigger vol = bigger debit. You should not be arbitrary in pricing spreads.
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