My Ratio Calendar Combination on CLF

Discussion in 'Options' started by JJacksET4, Feb 26, 2010.

  1. Closed this morning as CLF was up around 3 points to 66 range.

    Long (2) Jul 60 Call - Closed at 1091
    Long (2) Jul 50 Put - Closed at 195

    Short (1) Apr 60 Call -Closed at 795
    Short (1) Apr 50 Put -Closed at 30

    Closed Longs = $2572
    Closed Shorts = $825

    Credit for close = $1747

    Now, to find the next one :)

    JJacksET4
     
    #11     Mar 16, 2010
  2. drcha

    drcha

    Nice work!

    Stocks scare me--I think I might want to use ETFs. I am remaining on paper for now but am interested to see your trades unfold.
     
    #12     Mar 16, 2010
  3. drcha,

    Thanks. I have looked into using ETFs with this kind of strategy, both "normal"ones and leveraged ones, but the numbers never seem to work out good for me with them. Also, I just don't feel ETFs usually have the potential for big gains (or maybe even more so losses) to make a trade like this a big winner every once in a while.

    I feel like stocks scare me sometimes as well, but not too much with this kind of position - you don't have to worry about a stock collapse because you have puts (especially if you buy extra puts), and you can get nice gains on a solid up move. The only real bad thing is a real quiet period and the IV just drains out of the long options, but even then you usually would only lose so much per day and can close out when you feel you hit a limit, and/or just close at the front expiration month.

    The only other real bad thing that could happen would be if the company got bought out right in the range they were at, but that is usually quite rare (i.e. buyouts are usually for higher prices), and that risk on each trade is minimal if you only hold for a few weeks or a month or 2 and there isn't any buyout chatter at least when you buy in (i.e. you wouldn't want to do this with a company like PSYS now where it's near 30 on talk of a buyout in the 30 range).

    I think one of the real keys is to try find stocks where the current IV is simply too low and not likely to stay down there for long. In the case of CLF, the IV hasn't really risen yet, but it didn't fall more either and the stock price went up enough to make the trade a profit. So, what I am looking for now are stocks that are near 52 week low IVs and had earnings maybe 1 or 2 months ago and the IV could pick up again as their next earnings approach. I haven't picked another play yet - I was looking at RIG last night, not quite sure the numbers are good enough.

    Thanks,

    JJacksET4
     
    #13     Mar 16, 2010