here's the option chain for BOIL, the premiums are very
higher
for example one could buy the stock and sell the 39 call strike
for $4.1 for a covered call.
If you thought that the bottom was in for Natgas and BOIL, one
could sell the 30 puts and still get a buck even though BOIL is
trading for over $38, could be free money. If someone was
willing to buy BOIL at $34 on a pullback, you can sell the 34 puts
for $2.24, anyway some nice premiums, and if it's put to you not
big deal, you were going to buy it anyway.
Posted by falcon5678 on 18th of Jun 2012 at 10:28 am
I'll chime in. The premiums are high (implied
volatility) because the realized volatility is high as well
(meaning the volatility in the actual stock). Having
said that, they do trade a little higher than the realized so
shorting premium is probably not a bad strategy. The
longer term implied levels are in the 70-75 range and you can maybe
sell 100 right now. Good time to write calls against
your stock or indeed write a PUT at a price you'd like to
potentially own the stock (as mentioned in the letter).
If you're bullish a call spread could work as well in a high
implied environment.
Posted by falcon5678 on 18th of Jun 2012 at 10:51 am
For those trading options it is always good to have a chart set
up with realized implied levels (say a 30 or 60 day) overtop
realized levels (30 or 60 day). That way when you're
considering an option trade and you're wondering how the option
prices are trading relative to how volatile the stock has been you
can just plug the symbol in for a quick look. Not sure
how to do that in TradeStation but if someone looks into it
please post it for others. I like to chart 30,60,60
implied vs realized vols. Remember, implied vols are
mean reverting so when option prices get out of whack they will
come back to some sort of 'mean' level at some point.
No guarantee but that is how a lot of option volatility books
trade. Short the overpriced ones and buy the
underpriced ones.
Posted by hawkinslf on 18th of Jun 2012 at 11:39 am
I would love to find a trading platform that would allow me to
chart with realized implied levels overtop realized levels.
For now, I am using Scottrade Elite but looking for the platform
that would offer this information. Help?
If you were willing to go out until September for a covered
call, the $38 strike call options are selling for about $7.5, which
would generate about a 17% return on your money assuming that BOIL
was trading over $38 by Sept OPEX. Your break even price is
lowered to $31.3, price has to fall below that before you even
start to lose money.
The $40 strike options are trading at $6.3 on the bid, so that
would generate about 21% should BOIL be over $40 by Sept and you
are called out. Your break even price is lowered to $32.5,
price has to fall below that before you even lose money.
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BOIL follow up
Posted by matt on 18th of Jun 2012 at 09:53 am
BOIL - Chart Link - up today, volume patterns were bullish on the close of last week after that mega move on Thur
BOIL broke out of it's
Posted by matt on 18th of Jun 2012 at 12:17 pm
BOIL broke out of it's flag pattern
here's the option chain for
Posted by matt on 18th of Jun 2012 at 10:01 am
here's the option chain for BOIL, the premiums are very higher
for example one could buy the stock and sell the 39 call strike for $4.1 for a covered call.
If you thought that the bottom was in for Natgas and BOIL, one could sell the 30 puts and still get a buck even though BOIL is trading for over $38, could be free money. If someone was willing to buy BOIL at $34 on a pullback, you can sell the 34 puts for $2.24, anyway some nice premiums, and if it's put to you not big deal, you were going to buy it anyway.
I'll chime in. The premiums
Posted by falcon5678 on 18th of Jun 2012 at 10:28 am
I'll chime in. The premiums are high (implied volatility) because the realized volatility is high as well (meaning the volatility in the actual stock). Having said that, they do trade a little higher than the realized so shorting premium is probably not a bad strategy. The longer term implied levels are in the 70-75 range and you can maybe sell 100 right now. Good time to write calls against your stock or indeed write a PUT at a price you'd like to potentially own the stock (as mentioned in the letter). If you're bullish a call spread could work as well in a high implied environment.
yep, thanks for chiming in
Posted by matt on 18th of Jun 2012 at 10:31 am
yep, thanks for chiming in and giving your thoughts falcon5678 :)
For those trading options it
Posted by falcon5678 on 18th of Jun 2012 at 10:51 am
For those trading options it is always good to have a chart set up with realized implied levels (say a 30 or 60 day) overtop realized levels (30 or 60 day). That way when you're considering an option trade and you're wondering how the option prices are trading relative to how volatile the stock has been you can just plug the symbol in for a quick look. Not sure how to do that in TradeStation but if someone looks into it please post it for others. I like to chart 30,60,60 implied vs realized vols. Remember, implied vols are mean reverting so when option prices get out of whack they will come back to some sort of 'mean' level at some point. No guarantee but that is how a lot of option volatility books trade. Short the overpriced ones and buy the underpriced ones.
Thanks
Posted by hawkinslf on 18th of Jun 2012 at 11:39 am
I would love to find a trading platform that would allow me to chart with realized implied levels overtop realized levels. For now, I am using Scottrade Elite but looking for the platform that would offer this information. Help?
You can do it on TradeStation; probably on TOS as well
Posted by lessarda on 18th of Jun 2012 at 12:05 pm
have a subgraph of IV, that is.
If you were willing to
Posted by matt on 18th of Jun 2012 at 10:24 am
If you were willing to go out until September for a covered call, the $38 strike call options are selling for about $7.5, which would generate about a 17% return on your money assuming that BOIL was trading over $38 by Sept OPEX. Your break even price is lowered to $31.3, price has to fall below that before you even start to lose money.
The $40 strike options are trading at $6.3 on the bid, so that would generate about 21% should BOIL be over $40 by Sept and you are called out. Your break even price is lowered to $32.5, price has to fall below that before you even lose money.