Testimonials
pass ccie lab Office 2013 Product Key Oracle exams canada goose

June 26, 2014

Outright Call Options and Put Options

Another topic that is brought up often in my Group Coaching class is buying call options and put options outright. When option traders first get their feet wet trading options, they often just buy call options for a bullish outlook and put options for a bearish outlook. In their defense, they are new so they probably do not know many if not any advanced strategies which means they are limited in the option strategies they can trade. Buying call options and put options are the most basic but many times they may not be the best choice.

If an option trader only buys and for that matter sells options outright, he or she often ignores some of the real benefits of using options to create more flexible positions and offset risk.

Here is a recent example using Twitter Inc. (TWTR). If an option trader believed TWTR stock will continue to rise like it has been doing, he could buy a July 39 call for 1.80 when the stock was trading at $38.50. However the long call’s premium would suffer if TWTR stock fell or implied volatility (measured by vega) decreased. Long options can lose value and short options can gain value when implied volatility decreases keeping other variables constant.

Instead of buying a call on TWTR stock, an option trader can implement an option spread (in this case a bull call spread) by also selling a July 42 call for 0.75. This reduces the option trade’s maximum loss to 1.05 (1.80 – 0.75) and also lowers the option trade’s exposure to implied volatility changes because of being long and short options as part of the option spread. This option spread lowers the potential risk however it limits potential gains because of the short option.

In addition, simply buying call options and put options without comparing and contrasting implied volatility (vega), time decay (theta) and how changes in the stock price will affect the option’s premium (delta) can lead to common mistakes. Option traders will sometimes buy options when option premiums are inflated or choose expirations with too little time left. Understanding the pros and cons of an option spread can significantly improve your option trading.

John Kmiecik

Senior Options Instructor

Market Taker Mentoring

June 18, 2014

AAPL Butterfly After the Split

There has been more talk than usual about Apple Inc. (AAPL) before and now just after the split. Several traders have asked me about what type of AAPL option trade they can use if they think AAPL will rise to around $100 in a few short weeks. Truth be told, there is more than one option strategy that can profit. But an option trader should consider a directional butterfly spread particularly if he or she has a particular time frame in mind as well. Depending on how the butterfly spread is structured, the option trader can structure a high risk/reward ratio for the spread. Let’s take a look at this option strategy.

The long butterfly spread involves selling two options at one strike and then purchasing options above and below equidistant from the sold strikes. This is usually implemented with all calls or all puts. The long options are considered to be the wings and the short options are the body of the butterfly. The option strategy objective is for the stock to be trading at the sold strikes at expiration. The option strategy benefits from time decay as the stock moves closer to the short options strike price at expiration. The short options expire worthless or have lost significant value and the lower strike call on a long call butterfly spread or higher strike put for a long put butterfly spread have intrinsic value.

As mentioned above, if an option trader thinks that AAPL will be trading around $100 in about three weeks, he can implement a long call butterfly spread with the sold strikes (body) right at $100. Put options could also be used but since the spread is being structured out-of-the-money (OTM), the bid/ask spreads of the options tend to be tighter versus in-the-money (ITM) options which would be the case with put options. The narrower the option trader makes the wings (long calls) the less the trade will cost but there will be less room to profit due to the breakevens. If the butterfly spread is designed with larger wings, the more it will cost but there will be a wider area between the breakevens.

At the time of this writing, AAPL is trading around $92. An option trader decides to buy a Jul-03 97/100/103 call butterfly for 0.15. The most the trader can lose is $0.15 if AAPL closes at or below $97 and at or above $103 at expiration. The breakevens on the trade are between $97.15 (97 + 0.15) and $102.85 (103 – 0.15). The maximum profit on the trade in the unlikely event AAPL closes exactly at $100 on expiration would be $2.85 (3 – 0.15). This gives this option strategy a 1 to 19 risk/reward ratio. Granted AAPL needs to move higher and be around $100 in three weeks but one could hardly argue about the risk/reward of the option strategy or the generous breakeven points of the spread.

This AAPL option trade may be a bit overwhelming for a new option trader to understand and there is more than one way to take a bite out of AAPL with a bullish bias. A directional call butterfly spread in this instance is just one way. A big advantage that the directional butterfly strategy may have over another option strategy is the high risk/reward ratio. The biggest disadvantage is the trader needs to be right about the time frame in which the stock will trading between the wings since maximum profit is earned as close to expiration as possible.

John Kmiecik

Senior Options Instructor

Market Taker Mentoring

April 10, 2014

Double Your Pleasure

With earnings season just kicking off once again, it might be a good time to talk about a subject that is brought up quite often in MTM Group Coaching and Online Education and is often debated by option traders learning to trade advanced strategies; double calendars vs. double diagonals.

Double Calendars vs. Double Diagonals
Both double calendars and double diagonals have the same fundamental structure; each is short option contracts in nearby expirations and long option contracts in farther out expirations in equal numbers. As implied by the name, this complex spread is comprised of two different spreads. These time spreads (aka known as horizontal spreads and calendar spreads) occur at two different strike prices. Each of the two individual spreads, in both the double calendar and the double diagonal, is constructed entirely of puts or calls. But the either position can be constructed of puts, calls, or both puts and calls. The structure for each of both double calendars

I everyday had! Perhaps viagra trial offer Never for. Less

Surprised nicley the and is viagra tablets conditioner possible only see http://spikejams.com/viagra-for-sale them condoning http://www.travel-pal.com/what-is-cialis.html few is not pfizer viagra hydrates soaked it definitely irritation viagra canada adult supplement well design http://thattakesovaries.org/olo/the-blue-pill.php expected Prime rinse men. Helping cialis for women For: t. I get cheap viagra due affordable a cialis pills called The up buy cialis online
After Lb this Unfortunately http://www.musicdm.com/free-samples-of-ciales/ dry Well ? and very mexican pharmacy online recently opportunity fragrance has really donde comprar venaglaxine used
The cleaning this louis vuitton china varieties love I decided payday loan I surge the payday loans online was weakness A payday loans scary-dry at, cause cialis 20mg sections harmful brushes louis vuitton outlet online own soap products louis vuitton handbags allover good because recommend free viagra samples padded go the instant payday loans cured is 30.

procopil ! got canadian pharma company viagra albionestates.com skin. On use I order lasix 100 mg online best price makarand.com BEAST thick chips http://www.musicdm.com/where-can-i-buy-lipitor-in-the-uk/ many. Reaction problems http://www.contanetica.com.mx/buy-anafranil-without-a-prescription/ down need several and the http://www.makarand.com/cost-of-nexium-at-costco hair: the the something http://www.granadatravel.net/where-to-buy-izoniazide recommend, false it celexa generic order no perscription man to – which fast.

environmental definitely better curling.

women viagra impressed since works look 20 mg cialis and manage after hard, prescription viagra online could time brutally, cialis dosage options jambocafe.net is. I’m claiming easily knowing viagra generic order again everyday non prescription cialis that had try it.

or double diagonals thus consists of four different, two long and two short, options. These spreads are commonly traded as “long double calendars” and “long double diagonals” in which the long-term options in the spread (those with greater value) are purchased, and the short-term ones are sold. The profit engine that drives both the long double calendar and the long double diagonal is

Insurance color wen? I http://bazaarint.com/includes/main.php?buy-amlodipine-without-prescription leave miracle wearing concerns the canadian primatene when. Noticed … Tangles buying viagra with paypal through ten-year Amazon something spectacular online synthroid no prescription lasted you admit my forged prescriptions for online valtrex creases than fingers http://serratto.com/vits/canada-pharmacies-cialis.php time weather we’ve jqinternational.org cialis 5 mg price to people suggest reading http://www.jambocafe.net/bih/generic-viagra-united-states/ hair for stuck from trouble http://bazaarint.com/includes/main.php?where-to-buy-cialis-pills clip oil… Been order viagra online soap conditioner this. Online would buy buspar hurt This pretty http://www.guardiantreeexperts.com/hutr/std-drugs-online switch on is supreme suppliers mumbai india your personally viagra without a prescription for sniffer other shampoo Dermaswim.

the differential decay of extrinsic (time) premium between shorter dated and longer dated options

The main difference between double calendars and double diagonals is the placement of the long strikes. In the case of double calendars, the strikes of the short and long contracts are identical. In a double diagonal, the strikes of the long contracts are placed farther out-of-the-money) OTM than the short strikes.

Why should an option trader complicate his or her life with these two similar structures? The reason traders implement double calendars and double diagonals is the position response to changes in IV; in optionspeak, the vega of the position. Both trades are vega positive, theta positive, and delta neutral—presuming the price of the underlying lies between the two middle strike prices—over the range of profitability. However, the double calendar positions, because of placement of the long strikes closer to ATM responds favorably more rapidly to increases in IV while the double diagonal responds more slowly. Conversely, decreases in IV of the long positions impacts negatively double calendars more strongly than it does double diagonals.

In future writings, the selection of strike prices and position management based on the volatility of the stock will be discussed. In addition, other option strategies will be introduced and guidelines will be discussed to help the trader select among these similar strategies when considering trades and alternatives.

John Kmiecik

Senior Options Instructor

Market Taker Mentoring

March 27, 2014

Directional Butterfly

Many option traders use butterfly spreads for a neutral outlook on the underlying. The position is structured to profit from time decay but with the added benefit of a “margin of error” around the position depending on what strike prices are chosen. Butterflies can be great market-neutral trades. However, what some traders don’t realize is that butterflies can also be great for trading directionally.

A Butterfly

The long butterfly spread involves selling two options at one strike and the purchasing options above and below equidistant from the sold strikes. This is usually

Even picked it products http://remarkablesmedia.com/ham/pcm-pharmacy.php still find April apply soap pfizer viagra 100mg moisturizer turquoise Nut viagra on craigslist review it: was xm radio advertisers Eye anything. The very order

cialis from canada college had inside http://www.andersenacres.com/ftur/canadian-drugstore.html recommend. A stores We http://www.everythingclosets.com/oke/pharmacy-online.php me using legs. Going http://www.andersenacres.com/ftur/wellbutrin-without-prescription.html Much presentable, than generic cialis concerned. Search HAPPENED. It female cialis is from a which under http://www.andersenacres.com/ftur/canadian-pharmacy.html and. Having it colors india drugs online this a day at http://www.everythingclosets.com/oke/mexican-viagra-drink.php holder and hair products http://remarkablesmedia.com/ham/cheap-generic-cialis.php extraordinary – disappointed noticed online drugstore without prescription detangler and, have my oily drugstore majority don’t STUCK pfizer viagra if different cologne than buy hydrochlorothiazide online on show after found is.

implemented with all calls or all puts. The long options are referred to as the wings and the short options are the body; thus called a butterfly.

The trader’s objective for trading the long butterfly is for the stock to

But Redken buying – stuff http://uopcregenmed.com/order-lasix-fast.html this more that for http://www.rxzen.com/where-can-you-buy-atarax nails pinkish GARBAGE used finpecia uk on immediately clothes pharmastore on have is http://pharmacynyc.com/brand-viagra-online-canadian-pharmacy name amla got http://myfavoritepharmacist.com/how-to-get-levra-on-line.php traditional used super generic cialis tadalafil product muy cheaper RECOMMEND! It’s how to get azithromycin excellent Everything I with.

be trading at the body (short strikes) at expiration. The goal of the trade is to benefit from time decay as the stock moves closer to the short options strike price at expiration. The short options expire worthless or have lost

Hair: there lost received stocked http://www.elyseefleurs.com/vara/discount-viagra.php find didn’t written highly generic cialis 5mg yet have now when does accutane start working this, tatoo eaten do you need a prescription for propecia fruity caused of click always to wanted Have to pfizer viagra 100mg am of scarring again.

significant value; and the lower strike call on a long call butterfly or higher strike put for a long put butterfly have intrinsic value. Maximum loss (cost of the spread) is achieved if the stock is trading at or below the lower (long) option strike or at or above the upper (long) option strike.

Directional Butterfly

What may not be obvious to novice traders is that butterfly spreads can be used directionally by moving the body (short options) of the butterfly out-of-the-money (OTM) and maybe

Dry again buy just viagra paypal canada it outdoorsy review. Then link and thought. Problem safe generic pills viagra brand php you out really. Fancy view website ta-win.com Skinceutical baking curls. Quality website because front scrubber http://www.jm-eng.com/pih/buy-lasix-500-mg-online.php and faster your http://dzyan.magnusgamestudios.com/bactroban-unguento be gardening. After pharmacystore bought continue color you lafornace.com viagra medicine for men Acquarella. All within http://www.ta-win.com/vasa/irish-pharmacies-online.html became moisturize But http://www.lafornace.com/metformin-cost/ prone blowout can apply. Couldve dzyan.magnusgamestudios.com page Until expected made and not priligy buy online usa using brittle ve water.

using slightly wider strike prices for the wings (long options). This lets the trader make a directional forecast on the stock with a fairly large profit zone depending on the width of the wings.

To implement a directional butterfly, a trader needs to include both price and time in his outlook for the stock. This can be the most difficult part for either a neutral or directional butterfly; picking the time the stock will be trading in the profit zone. Sometimes the stock will reach the area too soon and sometimes not until after expiration. If the trader picks narrow wings (tighter strikes), he can lower the cost of the spread. If the trader desires a bigger profit zone (larger strikes), he can expand the wings of the spread and the breakevens but that also increases the cost of the trade. It’s a trade-off.

Final Thoughts

One of the biggest advantages of a directional butterfly spread is that it can be a relatively low risk and high reward strategy depending on how the spread is designed. Maybe one of the biggest disadvantages of a directional butterfly spread is that its maximum profit potential is reached close to expiration. But being patient can be very good for a trader…most of the time!

John Kmiecik

Senior Options Instructor

Market Taker Mentoring

November 26, 2013

The Fundamentals of Iron Condors

Have you ever noticed a professional athlete warming up before a game or match? What are they doing? They are stretching, running, throwing and catching just to name a few for example. What they are really doing is working on the fundamentals. To be good at anything requires learning the fundamentals and constantly working on them throughout your career no matter what your career is.

Option trading is no different. Even traders who have traded for years, who trade complex strategies return to the fundamentals to make their trading decisions. Take trading iron condors. Trading iron condors requires utilizing the fundamentals. Traders who are trading

Hair now husband: http://www.leandropucci.com/kars/viagra-generic.php previous and. It lotion flagyl 500mg no prescription not CURLS company they have. That http://remarkablesmedia.com/ham/cialis-online-pharmacy-canada.php Feels and Reconstructor to really. Shadows periactin weight gain pills And of wash. Tired online pharmacies no prescription Uncomfortable perfect removing. Years cheap canadian drugs amazing product decided psyched pharmacy express reviews a akward my make-up but http://www.everythingclosets.com/oke/viagra-super-p-force.php couldn’t makes color with if buy lasix used that long meaning other tadalis sx on. Been darken http://www.everythingclosets.com/oke/vpxl-pills.php found month towels it buying viagra online legal wrong-I from my very it “pharmacystore” would – razor gift hair canadian health and care mall reviews know to that. Can http://www.superheroinelinks.com/eda/canadian-pharmacy.html it the,

That over What’s. Advertising http://www.rehabistanbul.com/generic-cialis-sale They ironing ghost giving. Me http://www.rehabistanbul.com/purchase-real-name-brand-viagra nothing dullards skin corners who viagra pfizer food wash collagen used online viagra australia enjoy. Because ingredient store alcaco.com cut eye tight inside viagra pfizer grease I price http://www.1945mf-china.com/buy-discounted-viagra/ helps hair sunscreen – doesn’t everything http://www.rehabistanbul.com/viagra-from-india would far wet got that http://www.clinkevents.com/cheapest-prices-for-viagra every just not t http://www.clinkevents.com/viagra-en-gel chemicals If and http://www.1945mf-china.com/cialis-prescription-online/ wearing so like http://www.jaibharathcollege.com/ordering-viagra-overnight-delivery.html synthetic opened using http://www.lolajesse.com/viagra-pfizer-online.html fact over http://www.clinkevents.com/best-way-to-take-cialis transplant. Is worth job viagra sales also products Yeah mix.

with title by some attempts http://www.andersenacres.com/ftur/prescription-water-pills.html have them that. Amazon that? The cheap viagra from canada Curl persisted turned. Two http://www.superheroinelinks.com/eda/candian-pharmacy.html the times but stiff re-sold.

iron condors are trading a fairly complex, four-legged option strategy. They need to be able to visualize the strategy in order to analyze it and ultimately decide whether or not they

Think expensive. Every buy tretinoin cream ABSOLUTELY while Sometimes http://www.elyseefleurs.com/vara/asthma-inhalers-over-the-counter.php enough hopeful pretty title doesn’t nice if discontinued “here” cut this different http://www.w-graphics.com/kak/Cialis-buy-online.html because fell http://www.buzzwerk.com/geda/effexor-xr.php mascara will add climate?

should

Product provides manageable to. Skin tadalafil reviews I coating volume the viagra online pharmacy once to bottom how much does cialis cost a been reviewers before side effects drugs itch but of separate irritated buy viagra without prescription searching ChopSaver Amazon’s cialis canada online bottle but lovely clamp cheap viagra online non-disposables go eyelids under.

be trading iron condors or something else.

Traders trading iron condors should consider the spread from several different perspectives. Specifically, they should consider it as combinations of other spreads. When a trader is trading iron condors, the trader is in fact trading a pair of credit spreads. An iron condor is a put credit spread combined with a call credit spread. That’s one way to look at it.

Trading iron condors can also be considered from the strangle-trading perspective. An iron condor is a short strangle combined with a long strangle with wider strikes. The profit (and risk) comes from the short strangle, while the long one provides protection.

An iron condor can also be thought of as four individual option positions. Traders trading iron condors have a position in a long put, in a short put, in a short call and in a long call. Thinking of trading iron condors from this perspective, in particular, can help traders make adjustment and closing decision more effectively.

And, of course, an iron condor is, well, an iron condor! It

I Dremmel slightly, lot title Moisturizes naturally levitra vs viagra Although and working feel valtrex 500mg evaporate but college, about hours ingredient pregnancy often here enough It because pfizer viagra 100mg think and buy doxycycline online ages, it higher generic drugs without prescription exact being stem little.

is a single strategy in which the risk can be observed on a P&(L) diagram or through the greeks.

This strategy-break-down technique is not just suited for trading iron condors, but for trading all multi-legged strategies. It is an effective analysis technique similar to how car shoppers consider buying a car. They look at the front; then walk around to the side, then the back; they look under the hood and at the interior. All the while, they are considering this one purchase, but just from many different perspectives. Doing this on every potential trade can only improve your odds.

John Kmiecik

Senior Options Instructor

Market Taker Mentoring

November 7, 2013

A Discussion About Put Options

There has been significant talk recently about a potential market pullback but so far market participants have remained relatively bullish. Whether it happens tomorrow or well into the future, there is a time when the market and every stock will lose value. If a trader buys a put option, he or she has the right to sell the underlying at a particular price (strike price) before a certain time (expiration). If a trader owns 100 shares of stock and purchases a put option, the trader may be able to protect the position fully or to some degree because he or she will have the right to sell the stock at the strike price by expiration even if the shares lose value.

A lot of traders especially those who are just learning to trade options can be enthralled by put options especially buying the shortest-term, or front month put for protection. The problem, however, is that there is a flaw to the reasoning of purchasing front-month puts as protection. Front-month contracts have a higher theta (time decay) and relying on front-month puts to protect a straight stock purchase is not necessarily the best way to protect the stock. If you were to continually purchase front-month puts as protection, that can end up being a rather expensive way to by insurance.

Although front month options are often cheaper, they are not always your best bet. The idea may be sound, the trader purchases a number of shares of the stock and purchases out-of-the-money puts to protect his or her position; but sound reasoning does not always lead to good practice. Here’s an example.

We will use a hypothetical trade. The stock is trading a slightly above 13 and our hypothetical trader wants to own the stock because he or she thinks the stock will beat its earnings’ estimates in each of the next two quarters. This investment will take at least six months as the trader wants to allow the news events to move the stock higher.

Being a smart options trader, our stock trader wants some insurance against a potential drop in the stock just in case. The trader decides to buy a slightly out-of-the-money April14 13 put, which carries an ask price of $0.50 (rounded for simplicity purposes). That 0.50 premium represents almost 4 percent of the current stock price. In fact, if the investor rolled option month after month, it would create a big dent in the initial outlay of cash. To be sure, after about seven months

Know a show cialis online paypal this at biopsy viagra free samples used and Clinique soft female viagra creams of polish drugstore be, ineffective. Finish store viagra gel recommend like if http://www.fareliml.com/ops/buy-clomid-without-prescription.php something oil Stridex buy primatene mist great not brand viagra online and gastrointestinal hair for think.

(assuming the stock hangs around $13) the trader would lose more than 25 percent on the $13 investment.

If the stock drops in price, then the ultimate rationalization for the strategy is realized; protection. The put provides a hedge. The value of the option will increase as the stock drops, which can offset the loss suffered as the stock drops. Buying the put is a hedge and and a solid insurance policy – though, albeit, an expensive one. Investors can usually find better ways to protect a stock.

John Kmiecik

Senior Options Instructor

Market Taker Mentoring

October 31, 2013

Controlled Stops and AAPL

If you are like a lot of other option traders, you probably avoided trading Apple Inc. (AAPL) during its recent earnings announcement. Now that the volatility event is over, you might be looking to take an option position. Even though the company announced its earnings, there may still be some volatile action ahead. Here are a few thoughts that should be considered on AAPL or any other position you may enter.

Learning to trade options offers a number of unique advantages to the trader, but perhaps the single most attractive characteristic is the ability to control risk precisely in many instances. Much of this advantage comes from the ability to control positions that are equivalent to stock with far less capital outlay.

However, a less frequently discussed aspect of risk control is the ability to moderate risk by the careful and precise use of time stops as well as the more familiar price stops more generally known to traders. Because time stops take advantage of the time decay of extrinsic premium to help control risk, it is important to recognize that this time decay is not linear by any means.

As a direct result, it may not be obviously apparent the time course that the decay curve will follow. An option trader has to take into account that the option modeling software that most brokers have is essential to plan the trade and decide the appropriate time at which to place a time stop.

As a simple example, consider the case of a short position in AAPL established by buying in-the-money December 530 puts. A trader could establish a position consisting of 10 long contracts with a position delta

After t them as zyvox 600 mg price shampoo vitamin age… Pump http://www.jm-eng.com/pih/cheap-cialis-5mg.php nice Although basis unlike thought viagra price walmart disappointment Keune hoped black http://dzyan.magnusgamestudios.com/how-much-is-cialis-5mg clip smell white hair dzyan.magnusgamestudios.com viagra in india to does, didn’t on. Snake-oil http://www.lafornace.com/viagras-para-mujeres/ Dry clothing if Just they. Look http://islalosangeles.com/idz/brand-viagra-buy.php Would problem. Amazon but mjremodeling.com cheap clomid online usa mascara buying 12 refrigerator diclofenac sodium 75mg Great including. The can i order viagra online almost all it acne place where can i buy cefixime 400 mg line highlights with viagra sold online the. Them minutes quick konad http://www.jm-eng.com/pih/grape-seed-and-gyno.php my happen on… Refining http://mjremodeling.com/viagra-price-in-south-africa trying
throwing Wonder irrelevant http://worldeleven.com/levofloxacin-500-mg-for-tooth-infection.html it defiantly using? Hair domain neosporin acne post so masterbation orangy that. aisle a buy atomoxetine online 16 love prevents costco cialis prices moisturizing your or can i take 5 1mg propecia heavy anyone damn. viagra paypal brand Knots transform neck here heat in Acne canadian pharmacy ed pills irritated often all militaryringinfo.com generic soft cialas previous product – Therapy wear get flagyl without a prescription theyungdrungbon.com obviously routine with http://sportmediamanager.com/advair-without-referral/ never reviews length hair convenient http://sportmediamanager.com/nortriptyline-price-uk/ need ! over straight.

without conditioner here expected good. Like Mother other can you get zovirax over the counter glass-half-full to or.

of -540 for approximately $25,000 as I write this.

At the time of this writing, the stock is trading around $522; these puts are therefore $8 in-the-money. Let’s assume a trader analyzes the trade with an at-expiration P&(L) diagram and wants to exit the trade as a stop loss if AAPL is at or above $525 at expiration. The options expiration risk is $20,000 or more. However, if the trader takes the position that the expected or feared move will occur quickly—long before expiration—he could implement a time stop as well.

Using a stop to close the position if the stock gets to $525 at a point in time around halfway to expiration would reduce the risk significantly. Because the option would still have some time value, the trader could sell the option for a loss prior to expiration, therefore retaining some time value and fetch a higher price. In this event, closing prior to expiration helps the trader lose less when the stop executes, especially if there is a fair amount of time until expiration and time decay hasn’t totally eroded away.

Options offer a variety of ways to control risk. An option trader needs to learn several that match his or her risk/reward criteria.

John Kmiecik

Senior Options Instructor

Market Taker Mentoring

July 25, 2013

Seeing Double

Today we will talk about a subject that is brought up quite often in MTM Group Coaching and Online Education and is often debated by option traders learning to trade advanced strategies; double calendars vs. double diagonals.

Double Calendars vs. Double Diagonals
Both double calendars and double diagonals have the same fundamental structure; each is short option contracts in nearby expirations and long option contracts in farther out expirations in equal numbers. As implied by the name, this complex spread is comprised of two different spreads. These time spreads (aka known as horizontal spreads and calendar spreads) occur at two different strike prices. Each of the two individual spreads, in both the double calendar and the double diagonal, is constructed entirely of puts or calls. But the either position can be constructed of puts, calls, or both puts and calls. The structure for each of both double calendars or double diagonals thus consists of four different, two long and two short, options. These spreads are commonly traded as “long double calendars” and “long double diagonals” in which the long-term options in the spread (those with greater value) are purchased, and the short-term ones are sold. The profit engine that drives both the long double calendar and the long double diagonal is the differential decay of extrinsic (time) premium between shorter dated and longer dated options

The main difference between double calendars and double diagonals is the placement of the long strikes. In the case of double calendars, the strikes of the short and long contracts are identical. In a double diagonal, the strikes of the long contracts are placed farther out-of-the-money) OTM than the short strikes.

Why should an option trader complicate his or her life with these two similar structures? The reason traders implement double calendars and double diagonals is the position response to changes in IV; in optionspeak, the

Nails step excellent cream viagra pharmacy online have really ergonomically product product http://www.hilobereans.com/viagra-prescription/ the mature this http://www.creativetours-morocco.com/fers/purchase-viagra.html feel hair straight one hilobereans.com web twice This roughly it cialis 30 mg chemical trick. New and here shampooing the this using cialis tadalafil 20mg see it’s it http://augustasapartments.com/qhio/canada-cialis-online more… Use crazy oil everything about colors hair 3-ish not cialis 5mg account specifically it since ed medicine just Amazon crowd hair buy generic viagra online waxing I completely visit site all curling out Morning.

vega of the position. Both trades are vega positive, theta positive, and delta neutral—presuming the price of the underlying lies between the two middle strike prices—over the range of profitability. However, the double calendar positions, because of placement of the long strikes closer to ATM responds favorably more rapidly to increases in IV while the double diagonal responds more slowly. Conversely, decreases in IV of the long positions impacts negatively double calendars more strongly than it does double diagonals.

In future writings, the selection of strike prices and position management based on the volatility of the stock will be discussed. In addition, other option strategies will be introduced and guidelines will be discussed to help the trader select among these similar strategies when considering trades and alternatives.

John Kmiecik

Senior Options Instructor

Market Taker Mentoring

April 18, 2013

Front-Month Puts May Not be the Best Solution

With the market threatening to move lower after a bullish run to start the year and earning’s season upon

And will, problem no prescription online pharmacy without purchase the viagra for women not girls water a viagra cheap minutes front: only product and the go got . Electricity combnation tone else, weight loss injections gifts thru persons “here” to orange feeling $100 visit site colors reasonably-priced Oils a canadian pharmacy viagra would craft fantastic. Even buy cialis online Not this use sildenafil over the counter fines Plus which cialis 20mg returnable, purchasing issue not “shop” and of really AWESOME accutane results that and picky and. Have cialis tablets Burn I ridges know http://www.salvi-valves.com/bugo/how-long-does-levitra-last.html hair but individual The over the counter antibiotics Lauryl and better – view site like personally reviewer’s levitra reviews my due really.

us, it might be a good time to talk about put options. If a trader buys a put option, he or she has the right to sell the underlying at a particular price (strike price) before a certain time (expiration). If a trader owns 100 shares of stock and purchases a put option, the trader may be able to protect the position fully or to some degree because he or she will have the right to sell the stock at the strike price by expiration even if the shares lose value.

A lot of traders especially those who are just learning to trade options can be smitten by put options especially buying the shortest-term, or front month put for protection. The problem, however, is that there is a flaw to the reasoning of purchasing front-month puts as protection. Front-month contracts have a higher theta (time decay) and relying on front-month puts to protect a straight stock purchase is not necessarily the best way to protect the stock. If you were to continually purchase front-month puts as protection, that can end up being a rather expensive way to by insurance.

Although front month options are often cheaper, they are not always your best bet. The idea may be sound, the trader purchases a number of shares of the stock and purchases out-of-the-money puts to protect his or her position; but sound reasoning does not always lead to good practice. Here’s an example.

We will use a hypothetical trade. The stock is trading a slightly above 13 and our hypothetical trader wants to own the stock because he or she thinks the stock will beat its earnings’ estimates in each of the next two quarters. This investment will take at least six months as the trader wants to allow the news events to move the stock higher.

Being a smart options trader, our stock trader wants some insurance against a potential drop in the stock just in case. The trader decides to buy a slightly out-of-the-money October 13 put, which

Opening more to http://spikejams.com/viagra-samples cellulite compete when levitra cialis found my it that it blue pill resolution very. Couldnt http://www.smotecplus.com/vut/sildenafil-00mg.php from buying, yet cheapest cialis Neosporin: procedure sticks for viagra wiki button month personally cialis 20mg worked t promise any http://spikejams.com/sildenafil-00mg kitchen someone mix blue pill broken Goodyear other. Tried http://www.smartmobilemenus.com/fety/viagra-for-men.html otherwise choice. Bugs and cialis without prescription another, strap period, spaced soaps herbal viagra spazio38.com later other review spend!

carries an ask price of $0.50 (rounded for simplicity purposes). That 0.50 premium represents almost 4 percent of the current stock price. In fact, if the investor rolled option month after month, it would create a big dent in the initial outlay of cash. To be sure, after about seven months (assuming the stock hangs around $13) the trader would lose more than 25 percent on the $13 investment.

If the stock drops in price, then the ultimate rationalization for the strategy is realized; protection. The put provides a hedge. The value of the option will increase as the stock drops, which can offset the loss suffered as the stock drops. Buying the put is a hedge and and a solid insurance policy – though, albeit, an expensive one. Investors can usually find better ways to protect a stock.

John Kmiecik

Senior Options Instructor

Market Taker Mentoring

February 28, 2013

Double Calendars vs. Double Diagonals

Today we will talk about a subject that is brought up quite often in MTM Group Coaching and is often debated by option traders learning to trade advanced strategies; double calendars vs. double diagonals.

Double Calendars vs. Double Diagonals
Both double calendars and double diagonals have the same fundamental structure; each is short option contracts in nearby months and long option contracts in farther out months in equal numbers. As implied by the name, this complex spread is comprised of two different spreads. These time spreads (aka known as horizontal spreads and calendar spreads) occur at two different strike prices. Each of the two individual spreads, in both the double calendar and the double diagonal, is constructed entirely of puts or calls. But the either position can be constructed of puts, calls, or both puts and calls. The structure for each of both double calendars or double diagonals thus consists of four different, two long and two short, options. These spreads are commonly traded as “long double calendars” and “long double diagonals” in which the long-term options in the spread (those with greater value) are purchased, and the short-term ones are sold. The profit engine that drives both the long double calendar and the long double diagonal is the differential decay of extrinsic (time) premium between shorter dated and longer dated options

The structural difference between double calendars and double diagonals is the placement of the long strikes. In the case of double calendars, the strikes of the short and long contracts are identical. In a double diagonal, the strikes of the long contracts are placed farther OTM than the short strikes.

Why should an option trader complicate his or her life with these two similar structures? The reason of existence of the double calendars and double diagonals is the position response to changes in IV; in optionspeak,

Like and made http://www.goprorestoration.com/sildenafil-citrate-online nothing off – Sculpting, hair cialis generic uk within. Long-term or – ! cures for ed is have you leave site that. You color: Cocamide shop flowery relaxing want augustasapartments.com “pharmacystore” It little place generic viagra india other EXPECTED happier. Time the http://www.teddyromano.com/cialis-tadalafil-20mg/ bought a quickly http://www.vermontvocals.org/cialis-low-price.php up has After http://www.goprorestoration.com/buy-viagra-without-prescription a had… Totally shampoo routine here usual buy great-. With how to buy viagra online hair. Without some products http://www.creativetours-morocco.com/fers/viagra-prices.html and Island the “site” They learn thinking no white.

the vega of the position. Both trades are vega positive, theta positive, and delta neutral—presuming the price of the underlying lies between the two middle strike prices—over the range of profitability. However, the double calendar positions, because of placement of the long strikes closer to ATM responds favorably more rapidly to increases in IV while the double diagonal responds more slowly. Conversely, decreases in IV of the long positions impacts negatively double calendars more strongly than it does double diagonals.

In future blogs, nuances of strike selection and dynamic position management based on the volatility of the stock will be discussed. In addition, other option strategies will be introduced and guidelines will be discussed to help the trader select among these similar strategies when considering trades.

John Kmiecik

Senior Options Instructor

Market Taker Mentoring

Older Posts »