Gotta love it when the market hands us a little two-way action to remind everyone that stocks go both up and down. And more importantly, I get real excited when I start to see options premiums rise thanks to irrationally freaking out market participants. Is the top in? I don’t know and neither do you (my gut says no), but there are plenty of people starting to buy protection in the options market to protect their positions. We’ll happily take the other side of those insurance bets. [Read more…]
Managing Options Positions Near Expiration
From time to time I like to review some of my Best Practices for my own benefit, but also for the benefit of readers of this blog, and for subscribers to All Star Options. So let’s get right to it…
This past Friday marked an important monthly date in the regular cycle of options expirations. Friday marked the line in the sand where we crossed under 21 days until October expiration.
Why is 21 days until expiration important?
In short: because of theta and gamma.
For long premium positions, theta decay starts to become a major drag, and increasingly so with each passing day. For short premium positions, gamma has the potential to produce wild swings in your position equity. Neither of these scenarios are very appealing for obvious reasons.
Lets breakdown the risks and actions to take for a variety of common strategies. [Read more…]
[Options Premium] October 2018 Conference Call Video Recording
This is the video recording of the October 2018 Conference Call for Members of All Star Options [Read more…]
[Options Premium] An Old School Leader
We were bullish on Microsoft all summer, and with $MSFT printing another new all-time high this week, our stance hasn’t diminished in the least. The only thing that’s changed is we’ve raised our price target. That tends to happen in bull markets.
In our October conference call for subscribers, we teased a bullish trade idea in $MSFT. And upon further reflection, I think I’ve come up with an even better probability play with an opportunity for better risk adjusted returns. [Read more…]
[Options Premium] November Income Trade
We’ve got 46 days until November expiration and it’s always good to have some income trades on for every monthly expiration. It just makes good sense for somewhat diversifying our portfolio. We don’t want to have only directional and/or long premium plays on. If the market goes sideways or falls somewhat from here, we need to have some cushion built in somewhere.
After reviewing all the most liquid ETFs we track, I’ve identified our best candidate based on relatively high implied volatility and range-bound trading action. [Read more…]
[Options Premium] Which Way XLK?
As the Technology sector goes, so often goes the market. And the Tech Select Sector ETF $XLK has been going nowhere — increasingly so — over the past several weeks.
Does anybody here think broader market indices go sideways from now until the end of the year?
Yeah, I didn’t think so.
If, or rather when, indices start busting a move, we’re pretty confident that the technology sector will have a major say in the direction and pace. And we’ve got a plan to participate, whichever way it goes. [Read more…]
Calendar Spreads Offer Three Ways to Win in this Current Environment
Sticking with a theme we’ve been discussing with All Star Options subscribers for the past month or so, we expect to continue keeping things simple around here until the market tells us it’s time to change.
One way we’ve been keeping things simple is to be buyers of straight long call options. It’s still a bull market in spite of what gets shouted to you on TV, and volatilities continue to be low — pricing options relatively cheaply. So as long as the volatility in any individual name is still cheap, we’re always going to be looking at long slightly out-of-the-money call options to participate in bullish plays while affordably limiting our risk.
One variant of this play that also holds a lot of interest for me — especially in higher priced names where I might wish to limit my risk a little bit more — is the long call calendar spread which consists of a short call in a near month combined with a long call at the same strike in a further out month for a net debit. It gives us three ways to win! [Read more…]
[Options Premium] Details For October 2018 Conference Call
This is the monthly conference call for Members of All Star Options. In this call we will discuss the current market environment and focus on price and volatility behavior. Throughout the session, J.C. Parets will add commentary on the technical outlook moving forward, and Sean McLaughlin will discuss the options strategies available to profit from the market activity.
This month’s Conference Call will be held on Tuesday October 2nd at 7PM ET. Here are the details for the call:
[Read more…]
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