I want to try a weekly to weekly spread here and sell the elevated one day vol. The Options Tab (click to enlarge) is included.
I want to see how an Aug 6 weekly 110 straddle purchase for $1.42 + $1.46 = $2.88 does while selling the Jul 30 weekly 109/11 strangle @ $0.20 + $0.12 = $0.32. This gives a total debit of $2.88 - $0.32 = $2.56.
If the strangle expires worthless, on Monday I would sell the straddle or at the very least the strangle. I'm essentially looking for a quick turn on this trade and if I have to hold it, to sell multiple options per each long option.
I did something similar last week on my posts at thestreet.com and it worked out nicely. Let's see if this type of trade works again this week.
This is trade analysis, not a recommendation.
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Looks like you get more bang for your buck by selling the 110/111 JUL(5)'s. A tad tighter on the breakeven's, but quite a bit more money to be made off the initial sale?
ReplyDeleteDefinitely another way to play it. Could also go naked sales in this week. I actually like selling 2 of the strangles to one straddle purchase too.
ReplyDeleteIf you really want to sell the weeklies, another way to go might be the 109/110/111 1/3/2 fly. It's getting a .18 credit right now, and those 110's have.30 of IV and time value which is going to get sucked out in a hurry.
ReplyDeleteI thin kit's possible the SPY closes greater than 0.30 away from 110 though; too tight for me, but I'm just one opinion. It's very creative approach.
ReplyDeleteQuestion: why not get out of whole thing right at open? Aren't we taking theta risk holding straddle over weekend?
ReplyDeleteyes, we are. A close on 12:58 might be ideal! I am going to post the close if I like it at 12:40 ish so ppl have a chance to react. (PST times).
ReplyDeletei'm sure it will work--- this market going to sleep. The last couple of earnings plays worked out nicely as well. Thanks for all you do.
ReplyDeleteI did actually a similar trade yesterday: bought 111 call calendar (aug1/jul5) and 109 put calendar (aug1/jul5). The total cost was 1.50, currently worth around 1.75. 17% in few hours of holding, and if SPY stays in 109-111 range, it will be probably more.
ReplyDeletenice Kim...
ReplyDelete