Wow, pretty quiet. Everyone sucking their thumbs or are we trading? I was buying June Puts and Shorting Mar Puts in the ff manner:
Long Jun30Puts, Short Mar 30 and 31 Puts. Continue to roll the near month Puts to April, then May, then June. The 30/31 cost me .12, and the 30/30's cost me .85
Money! It is there staring you in the face. It is like taking candy from Arsh. Hey brother, how are those worthless Puts you purchased way too early doing?
Ben and I shouted at you to wait until today and tomorrow, but you were like the bug to the fire. Oh well, triple down today and tomorrow and make up for it. Those June 30Puts are cheap! Use them as a hedge to short the near months....
BTW, BMY is in its run to EX. Talk about a consistent runner.
I was buying the April 32Calls and Shorting the Apr36Puts today in a 2/1 ratio. Paid for the Calls with a buck and change left over as a credit.
>>last Q- nothing for OTM options then>>
I don't quite know what you are asking but I think you mean that you only roll options that are ITM and/or have time value left, from month to month, or within a month. That is correct. Simply close out the old and go to the new, just as the article describes...
Doc, my head is spinning trying to follow your trades...
A couple of weeks ago you said that, starting March 5th, you would be "Shorting an outer contract Put and purchasing a nearer contract lower strike Put".
But today (March 5th) you are pretty much doing the reverse, buying the outer month puts and shorting the near ones.
Did I get something wrong about this, did you have a change of heart (or mind), or did something else happen?
(Apologies if you have posted about this in the meantime, haven't been keeping up with comments in past week or so).
The short answer..it depends. Money can be made both ways. Here is how I see it. If the outer months including June , but not further are cheap(IV low), then Buy the cheap June Puts at Par or one below the money. Short the near month one above the money or at Par. Roll each month, shorting the next month as the previous OPEX occurs.
If the IV is higher, go to Sept(I talked to you about this) and Short the Puts two below current PPS, using the current month at two strikes below the outer month as your long hedge.
Both work! It depends on where IV is and as you know the way I did it there is less risk if the PPS goes badly against you, because the outer month Long hedge is acting like a catcher's mitt on the way down.
Market was much higher than I expected. Sold 90 contracts of the JUN29puts and bought MAR28 puts for 63cents. Had to stop there because the margin was chewed up.
Got 40 contracts of the bull call spread of JUN28 and JUN29 for 80 cents. That was all I could get. Got 220 contracts of of the bull call spread of JUN29 and JUN 29 for 68 cents.
Now standing back and watching. Have some powder dry, but may sell some of the JUN28/JUN29s to get ready for the SPO.
All the March calls (25 through 30) purchased in Oct did well. It was iffy for awhile, but we can all sleep well at night holding calls and not the stock itself. All except the 25s (90%) returned over 100%. Avg return 125% for the Mar calls bought at 27.33 and cashed Fri.
Good for you James! I like shorter time frames to do the same. I was buying the 13Jan25Calls at that time and did well on the recovery from Oct. Even though I might have made more, I did not want to hold those until Jan of 2013 though...my point.
See my other post on this thread for more...
Aren't you going to get trounced though on shorting the march puts if they do an SPO in the next week or two?
I'm slightly confused about what your trying to do there.
Or are you just banking there will be no SPO here shortly?
I understand the Jun Put, but not so much why your shorting the March Puts.
>>Aren't you going to get trounced though on shorting the march puts if they do an SPO in the next week or two?>>
Opportunity to place more of these Diagonal and Calendar spreads.
Example suppose we end up at 29.00 at Mar OPEX and I shorted the Mar 31(which I did, together with the 30's, but lets use the 31). I got .98 credit for the 31. It is now worth 2.00, so I am down 1.02.
Simply roll it to April 31
>>I understand the Jun Put, but not so much why your shorting the March Puts.>>
The idea is to go Long the outer month that does not contain the dividend month(1.25) for the Long Put purchase @ the current PPS or one strike lower(this is your hedge for the Short Puts). Therefore you can never lose more than the Long Put(Disclaimer, if the Short Put is assigned you need enough cash to purchase the Long shares at many brokerages)
Then short the PPS one strike above the current PPS. You roll the short Puts at each OPEX to the next month. The amount of credit, historically, for AGNC, outweighing the cost of the Long Puts.
So if we have a spo, I will be buying JunPuts at the strike of the spo PPS or one strike below(the hedge) and Shorting one Strike above the spo PPS for the Short end, rolling this short option at each OPEX through June, generating monthly income. This strategy works best, of course, in a bull market.