XLF Play into Expiration. Best Option Strat?

Discussion in 'Options' started by shortie, Mar 7, 2009.

XLF by March Expiration

  1. +30%

    1 vote(s)
  2. +20%

    2 vote(s)
  3. +10%

    5 vote(s)
  4. Flat

    1 vote(s)
  5. -10%

    1 vote(s)
  6. -20%

    2 vote(s)
  7. -30%

    1 vote(s)
  1. As shown on the chart, there were 4 times in since Sep when buying oversold XLF (using RSI(14) below 30 in this example) would allow one to capture 10-30% EACH time using simple %profit exit strategies.

    Right now we may be at point #5 that might lead to a similar outcome.

    I would like to note that the bounces were quick, so playing XLF options into expiration in 2 weeks has added rewards (and risks).

    One strategy is to sell March puts on XLF and wait if they expire worthless. But if XLF drops more one may get stuck with XLF longs after assignment.

    Buying calls is another alternative or just buy the underlying?

    I want to be bullish but I am afraid to be too early. I did not think financials could get as low as they did, so they COULD go even lower without consulting with me first :)

    Please chime in with your ideas.
  2. [​IMG]

  3. "Eric Daniels, Lloyds chief executive, said he would discuss the deal with shareholders on Monday, and that there had so far been no sign they would object to the plan. "I've received no indication that there is general unhappiness," he told Reuters."

    if the shareholders are happy, it is actually a good news, right?
  4. Don't you think the XLF could do a little revisiting of the oversold conditions of Oct thru Dec 08 on the MACD? Obviously those dips weren't the bottom...

    If we're going to give credit to RSI, why not look at the MACD too?

    Would the shareholders rather LYG to eventually get a bank run, or get nationalized? Regardless, the common shares will be pretty pitiful for at least a while.

    By the sound of your name Shortie, your bullishness is very ironic. :D
  5. rosy2


    upside butterfly gives good odds. maybe the 7-9-11
  6. it is the predictions like the one below that make me NOT want to be LONG financials.

    "“if the government relaxes mark-to-market for 12 to 18 months you could see financials move 100% in a matter of hours.”"

  7. Shortie,

    Here is a question for you--

    Would you pay for the XLF 2011 ATM call $6.18 if XLF were to be NOW priced at $25 with IV 53.0%? Essentially, the current price of XLF is almost as that of a (long-term) call. SO on a reg-T account the actual underlying will 'cost' you $3.09 (with no expiration horizen), whereas the 2011, 6 call, will cost you $2.15. You will need to figure what the $0.94 difference is worth for YOU.
  8. Instead of wagering money on a guess on direction, trade the XLF or other financial favorite and ride the momentum.... but always remember to dance near the door.
  9. next to the dancing floor is usually hot, which makes a man's ice melt faster. if the dancer shakes less, even an old man owning ice may start crying at the sight of his melting ice. But taking a piece of the dancer wherever you can is a good idea, assuming you own melting ice.
    #10     Mar 7, 2009