Obviously no risk on the upside,I'll make the credit plus any residual value...Max risk is 82 cents on the downside...My thought are if they crush the stock,I'll be in the 2 week synthetic 20 call for .82 with vol hopefully still high..Have to believe the apes will bid the calls up
Hi taowave, wouldn't your risk be less then .82? If AMC would crush and the puts go itm before 2/7, you could always sell another put 19/7 on 2/7 with strike 19 and collect some extra premium.
Yes,I could always roll or hedge and hopefully reduce my max loss..Vol is coming in,so I am slowly rolling my options to be long calendars as opposed to diagnols.. If the stock craters but vol stays high,I don't see much risk.obviously ,20 is my sweet spot. My guess is I am only risking .30 with a very low probability of making 1-2 dollars, buy most likely .50
Asked the same question in a facebook group (Options A to Z) i joined because i really liked some of his youtube content...anyway this was his reply I thought i would share with the group. Hi Zack! Thank you for the kind words, and I'm glad you're finding the site helpful. Calendar spreads are primarily used for pricing discrepancies. For CLOV, the trade would be to buy December at 150% and sell June at 385%. However, that will make money assuming the stock stays fairly neutral--a big assumption with those stocks. So, you're right that it's statistically a good trade, but it's not a bullish outlook. Instead, there's a huge risk premium being offered by buyers of the June calls. They must bid up the price to entice sellers to take the other side of the trade. The big question is whether it's bid up too high, too low, or just right. I would take the trade, but keep deltas on the wings, For instance, you could sell the straddle but buy the wider-strike strangle with an added option on each wing. That way, you'll participate if the stock makes a big move--up or down--but also capitalize on the large pricing discrepancy.
Which calendar/diag did you ask about or was it a general question?? The question. Is does spot/ 1 month vol stay super jacked.. Yes,flys can be bought cheaply (Short straddle,long wings)
I looked at these yesterdays. IMO, the diags work pretty well by buying 2 week and selling the one week, with enough strike difference to pay out on a significant upward movement. You can set it up to pay around 50% more on an up move than you would lose on a down move. Risky, but running the trade week after week would likely yield very high profits. May try this next week. I did try to get filled at extremely favorable prices (just a bit above the bid, and let it sit for a few hours) but it didn't happen. Will likely try harder next week.
Vol was indeed hit hard, good thinking. I’m experimenting with a variation of my normal ‘bread and butter’. For CLOV I bought the 17/12 C 20, sold the 18/6 C 22 for a debit of 3.25 ( 7.80 – 4.55). The plan is to sell short dated C around strike 20-22 till the debit is reduced to near zero. At that point I can 1) choose to sell weekly/monthly calls at the same strikes or 2) let the 17/12 ride for upside potential. Would CLOV rise substantially the 17/12 will probably rise more then the 18/6, since vega is higher for far-dated options. If CLOV stays at the current levels IV would decline, but since price remains relatively close to the strikes premium will not decrease very much. The biggest risk is -slow- crush in price, premium on relatively far otm calls (which I sell) will decrease.