http://www.marketwatch.com/story/in...ont-use-this-easy-options-strategy-2016-02-26 Nice list but I'll do my own trades on it: Trade SPY: http://finance.yahoo.com/echarts?s=SPY+Interactive#{"range":"5y","allowChartStacking":true} Jan '17 130/125 bull put spread for a net credit of $28 Yield = 28/472 = 5.9% in 328 days or 6.6% annualized Prob = 99% Expectation = .99(28) - .01(472) = 27.7 - 4.7 = 23 Trade TLT: http://finance.yahoo.com/echarts?s=TLT#{"range":"2y","allowChartStacking":true} Jan '17 105/100 bull put spread for a net credit of $25 Yield = 25/475 = 5.3% in 328 days or 5.8% annualized Prob = 94% Expectation = .94(25) - .06(475) = 23.5 - 28.5 = -5 Trade T: http://finance.yahoo.com/echarts?s=T#{"range":"5y","allowChartStacking":true} Jan '17 30/25 bull put spread for a net credit of $44 Yield = 44/456 = 9.6% in 328 days or 10.7% annualized Prob = 93% Expectation = .93(44) - .07(456) = 40.9 - 31.9 = 9 Trade VZ: http://finance.yahoo.com/echarts?s=VZ#{"range":"5y","allowChartStacking":true} Jan '17 38/33 bull put spread for a net credit of $29 Yield = 29/471 = 6.2% in 328 days or 6.8% annualized Prob = 97% Expectation = .97(29) - .03(471) = 38.2 - 14.2 = 24 The other symbols in the list have options problems (e.g. negative bids on the spread) so I'll bypass those. Best trade?
The bid on the spread was $44 when I read it (Options Xpress). It's entirely feasible that a higher fill could be obtained.
Since you gave a link to yahoo I assumed you would have used the options data there. They have: Code: AT&T, Inc. (T) 37.13 -0.24(0.64%) NYSE - As of 4:00PM EST After Hours: 37.12 -0.01 (0.03%) 7:41PM EST Puts Jan 20, 2017 : Strike Contract Name Last Bid Ask Change %Change Volume OI IV ... 25.00 T170120P00025000 0.39 0.35 0.38 0.00 0.00% 604 57352 31.25% 28.00 T170120P00028000 0.61 0.59 0.61 0.00 0.00% 2 24213 27.71% 30.00 T170120P00030000 0.85 0.82 0.87 0.01 1.19% 9 25441 25.90% ... Yes, correct: 0.82 - 0.38 ==> $44. I just wonder how you calculated the probability of 93% for the above case? Update: I think I've found the formula here: http://investexcel.net/probability-of-a-successful-option-trade/ I'm going to try it out...
Here's a probability calculator that produces numbers that are not significantly different from the data used by OptionsXpress in getting the probabilities I show above. (the data the calculator is using is a little stale for non-subscribers, but since price behavior is not really log normal anyway, AND we're looking far into the future and ignoring the probability of significant events changing the distribution, it's as good as anything else) It's a neat little product and gives some good big picture information if you trade spreads: http://www.optionistics.com/calculators/probability-calculator/SPY
I'm trying to learn and understand these figures by calculating them myself. But I'm getting some significantly different results, so I would like to ask if the above calculations were done by yourself and their accuracy verified by you, or do these calculation results come from a 3rd party? Where I got struck is the calculation of the dividend: are you really sure about the 9.6% dividend above? Isn't that nearly like a "free lunch" then? ;-) And: how was the number "456" computed? Is it maybe $440 + $16 commission? I only get an implied dividend of IDIV=2.35% for the K=30 leg, and IDIV=1.04% for the K=25 leg, if that makes any sense. (I admit I only just recently started learning about IDIV) This is the data I used for the above case (from yahoo site): Code: AT&T, Inc. (T) 37.13 -0.24(0.64%) NYSE - As of 4:00PM EST on 2016-02-26-Fr After Hours: 37.12 -0.01 (0.03%) 7:41PM EST Calls Jan 20, 2017: Strike ContractName Last Bid Ask Change %Change Volume OI IV ... 25.00 T170120C00025000 12.10 10.75 13.55 0.15 1.26% 10 477 47.51% 28.00 T170120C00028000 9.15 8.90 9.35 0.45 5.17% 1 6134 20.80% 30.00 T170120C00030000 7.17 7.10 7.30 -0.27 -3.63% 10 9298 15.63% ... Puts Jan 20, 2017: Strike ContractName Last Bid Ask Change %Change Volume OI IV ... 25.00 T170120P00025000 0.39 0.35 0.38 0.00 0.00% 604 57352 31.25% 28.00 T170120P00028000 0.61 0.59 0.61 0.00 0.00% 2 24213 27.71% 30.00 T170120P00030000 0.85 0.82 0.87 0.01 1.19% 9 25441 25.90% ... Thx.
I really can't provide private tutoring. Sorry To answer my own question above the best trade is VZ: Prob = 97% Expectation = 24