TSLA earnings Wednesday August 03, after the bell. PCLN August 04.

Discussion in 'Options' started by OptionGuru, Aug 1, 2016.

  1. vanzandt

    vanzandt

    I don't come close to using up all of my margin

    Don't worry, the market will do that for ya.
     
    #21     Aug 3, 2016
  2. Calendar b/e is about the price of the straddle which is around $14. So with TSLA at 227, it is around 213-242. So about the same, but you have limited loss and much less capital used.
     
    #22     Aug 3, 2016
  3. atrp2biz

    atrp2biz

    What expiry are you using for the long side? The Aug5/Aug 19 225 call calendar closed at ~$1.30. The Aug19 240 call mid-price closed at $3.20. I guess we'll see what the crush looks like in the morning.
     
    #23     Aug 3, 2016
  4. atrp2biz

    atrp2biz

    I'm waiting with bated breath.
     
    #24     Aug 3, 2016
  5. atrp2biz

    atrp2biz

    Another thing to note about the strangle is that the unlimited risk is not uncompensated. There is a significant difference in gamma which has the following effect. If one considers the plot of P/L vs. the underlying:

    integral of short straddle between b/e points >> integral of calendar between b/e points
     
    #25     Aug 3, 2016
  6. atrp2biz

    atrp2biz

    Edit:

    integral of short STRANGLE between b/e points >> integral of calendar between b/e points
     
    #26     Aug 3, 2016
  7. The Aug5/Aug 19 calendar is trading at 2.90, over 100% gain. Your straddle has around 15% return on margin currently and had maximum return on margin of ~20%.
     
    #27     Aug 4, 2016
  8. atrp2biz

    atrp2biz

    Of course it is--it's pinning the strike @$224. Yes, in this instance a calendar would have been better than a strangle. But I won't be shedding any tears taking this profit.

    Again, I don't care about margin.
     
    #28     Aug 4, 2016
  9. I used 227.5 calendar to be consistent with your strangle.

    Return on margin is the ONLY correct way to calculate gains. If you don't care about margin, how do you calculate your position sizing?

    Lets assume for the sake of the argument that you have 100k account and are willing to risk 2% of the account. How many strangles would you trade?
     
    #29     Aug 4, 2016
  10. atrp2biz

    atrp2biz

    It is not. Undefined risk trades would therefore by definition never have potential for a 100% ROM as compared to debit spreads. Does this mean they don't have their place in trading?
     
    #30     Aug 4, 2016