The trade is up a very modest $44 on $968 of risk but if GS can just hang around here for 30 days then I can make a bit more according to my risk graph which is in day step mode (each day represents 8 days of time passing). I will just hold for now but a lot will depend on the overall market. Technically GS is right near resistance at 150. Remember this GS trade is using August options and not weeklies.
Just before I went to bed last night I decided to put on a speculative earnings trade on AAPL. I was slightly bearish on the stock so I decided to go for a 1/3/2 unbalanced call butterfly using 250/260/270 strikes (knowing that it would give me short deltas and short vega heading into earnings) using the weekly options. As it was, I felt that I didn't have much of a chance getting filled as AAPL was at 246 and the trade was fluctuating around $0.08 - $0.20 debit. Anyway I decided to put in a couple of orders anyway. One was for 2 contracts at even and another was for 1 contract for $0.06 debit (I know this is breaking my rule on this type of play but I was kinda hoping to get one trade on last night - I really need to practice a bit more patience and discipline). Well upon waking up this morning I found that I got filled on both trades. Here is how it looks.
AAPL reported stellar earnings last night after the close and the stock is now up 9 bucks to finish at $259 which is right at my short strike. From the risk graph it would appear that my trade is now doing quite well - extremely well in fact but we'll have to see what happens on the open. My plan at this stage is probably to take most of the trade off even though these options expire on Friday meaning I get some big decay over the next 2 sessions. My intuition tells me that institutions will be all over AAPL when the normal session get's under way tomorrow and I expect some follow through but possibly not before a bit of profit taking on the open (gap will be faded slightly). I note that there is some resistance at the 262 area so perhaps I might take a wait and see approach to this one.
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ReplyDeleteHi David,
ReplyDeleteWell weekly options will have more theta just by virtue of the fact that they have such a short shelf life and expire in a short amount of time. Your question made me think about weekly options more and I guess the secret to trading weekly options lies in how you trade them. BWB’s and 1/3/2’s or any strategy where you can buy the closer to the money and then finance it by selling a further out of the money option will work very well when you get a situation where get some kind of movement. Remember weeklies will have more theta but they will also have more gamma too as expiration approaches. Thus we want to own gamma but without paying for it in case we are dead wrong with our directional prognosis. This is the real advantage of the BWB and 1/3/2 unbalanced butterfly as you can get them done for a credit thus you are not constantly paying out if you are wrong.
... I was just editing my post as you replied...
ReplyDeleteWeekly options - theta must be rather a major factor with them?
And does Jul4 mean the 4th weekly option for July