The Official Trading Thread

I closed my Tesla position about 5 minutes back when it dropped to $115.50. Which is quite unfortunate because in the next three minutes it ended up popping another 1.5% and setting a new high...haha. But I would rather not be glued to my screen and test my nerves since with Ben speaking right now, things can easily flip.

For those interested in the actual numbers. Yesterday I purchased the Tesla puts for $2.74 each, and the Tesla calls for $2.36 each. Today I sold the puts at $1.39 and the calls at $5.70. I had the same amount of contracts on both sides.

Earlier I said a 30% loss on the puts, I stand corrected. It was actually a 42% loss. On the bright side a 100% on my calls. So all is gravy.

There is a serious resistance level for Tesla at $118 and finally $120. From this point, I too much of a limited upside intraday and didn't want to be greedy, so I felt that locking in the gains was the best route.

In terms of Apple..one of the weaker performing stocks on my watchlist. It continues to battle the 50 & 100 dma at the same level..would love to see it finally pop.
 


MGrunin it seems the media is saying lots of google earnings are in direct correlation of their mobile revenue particularly mobile search and cpc advertising.

Would it be smart to examine our mobile properties and perhaps partners that have huge mobile properties and make a option play depending on their results like cpc/revenue etc. since it would be indicative of a main overall goog earnings factor?

Just on the forum members alone, it seem we have all alot of google properties that we could figure out from a profit standpoint if earnings are increasing or not (cpc, rpm, etc.)
 
surfer808 said:
MGrunin it seems the media is saying lots of google earnings are in direct correlation of their mobile revenue particularly mobile search and cpc advertising.

Would it be smart to examine our mobile properties and perhaps partners that have huge mobile properties and make a option play depending on their results like cpc/revenue etc. since it would be indicative of a main overall goog earnings factor?

Just on the forum members alone, it seem we have all alot of google properties that we could figure out from a profit standpoint if earnings are increasing or not (cpc, rpm, etc.)
Click to expand...

Google Mobile Revenue is going to skyrocket after the forced flip to Enhanced Campaigns on July 22nd/23rd, but i'm sure that's already baked into the market.
 
Did you guys see the Paulson interview on CNBC? That guy is a genius omg, I want to rewatch it.
 
surfer808 said:
MGrunin it seems the media is saying lots of google earnings are in direct correlation of their mobile revenue particularly mobile search and cpc advertising.

Would it be smart to examine our mobile properties and perhaps partners that have huge mobile properties and make a option play depending on their results like cpc/revenue etc. since it would be indicative of a main overall goog earnings factor?

Just on the forum members alone, it seem we have all alot of google properties that we could figure out from a profit standpoint if earnings are increasing or not (cpc, rpm, etc.)
Click to expand...

Investors and wallstreet have been following mobile earnings on Google and Facebook very closely. It is no secret that both companies have been hurt by the increased usage of mobile versus desktop. Hell..half of Facebook's pageviews if not more is done on mobile. For the last couple quarters, both companies have been beating street estimates in terms of mobile revenue.

Sorry, but trying to compare cpc rates between your friends and large mobile properties will not give you reliable data for Google as a whole.
 
I want to spend some time covering the Google calender spread I mentioned yesterday. This position was opened to hold through earnings. This spread is a very tricky position because it is difficult to figure out your possible gains or breakeven levels after earnings. This spread is a play on volatility - the Vega greek comes in play here.

Let me show the position:



 Notice how we purchased calls/puts in August, and sold calls/puts for this week. The implied volatility for this week's option is high because of an upcoming catalyst - earnings (tomorrow). The issue that is presented is that current market tools do not have us a weighted vega for the position. These are two separate expiration levels, and we do not know how much of a drop or rise the short options will have, neither do the long options. They do not follow each other 1:1 in terms of implied volatility. We cannot simply look at the vega between the two positions, subtract the difference, and carry that as our weighted vega...because that is incorrect. The IV on the august option has a different value compared to the IV of this week's IV. This is what creates the uncertainty for a volatility play. I cannot draw out a P/L graph simply.

Lets stick with what we can calculate for now. We sold a $955 call for this Friday, and $890 put for this Friday. At the moment, the options are priced $6.10 and $8.70 respectively. Simple math, for the buyer of the calls, Google needs to be at $896.10 come expiration time. Buyer of puts, Google needs to be at $882.30 come expiration time. If Google has bad earnings, and the stock pulls down to $885, what happens? Well..the calls we sold expire worthless. So +$6.10 x 100 x 3.
The puts we sold, their value will be $5. So $8.70 - $5 = $3.70 x 100 x 3.

Then come our long legs. We would obviously take a hit on our own call legs. Since they are expiring in august..we wouldn't lose all their value, but safe to say we would lose the majority of the value. For the puts we bought, their value will be much higher. Hopefully enough to cover the loss we took on our calls. In doing so, we can then count our gains as everything that came from the options we did sell.

The only variable we cannot account for is by how much will IV drop on our long legs. Since any position we purchase is long vega..drop in IV will such away $$$.

Optimally, it is best if Google is able to stay within the $890 to $955 range on Friday expiration. That way we can at least pocket all the premium from the short legs. If Google does not move at all though..then our only concern with our long positions is the vega hit.

When I opened this position on Monday, Google was trading right at the current level it closed at today ~ $920. The overall theta for the spreads was nearly $1,000 for 24 hours. So you would think I would be doing quite well, especially when the stock hasn't moved. But as you can see in the positions, I am still negative simply because IV is popping on the short legs, and if we sell positions, we are short vega. During the day tomorrow IV will reach its highest level, and we will probably see the position at a bigger loss.

An advantage to opening the position a few days before the earnings drop is that I was able to open the long legs at a lower IV level. So IV will not be dropping that much further after earnings.

Anyhow, I'll keep you guys in the loop as to what happens Friday morning with the position. It is a small play, and a learning experience for me.
 
In regards to the Apple position, it is likely that I will be closing the position off early tomorrow. Apple is simply not moving at all and we are still 1-2% away from where I need to be. Position is currently at 20% loss. Remember..this is a huge reward versus small risk position, so a 20% loss on such a position is very minor. Much different than a 20% loss on a naked call or put.

I also opened a naked call position on one of the accounts for Tesla. Loved the 10% rebound today, and the close above $120. A push to $125 is definitely possible. Currently Tesla is up 1.5% in the premarket.
 
Opened a put position on AMZN today. RSI, MACD, ForceIndex, ElderRay all bearish after the high of 309 a few days ago, going to make a short play before earning get involved on the 25th.

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Also looking at GRPN for a long entry point, missed the boat a couple days ago but going to let it consolidate a bit more at current levels before picking it up. RSI shows underbought on the daily, MACD is still showing sell however...considering opening a position monday if it falls/stagnates a bit more.

Opened a YHOO put just before close yesterday, closed it this morning for a decent gain. This was a fairly dangerous position to be in, and typically it's not my style to play off of earnings, but YHOO was very overvalued at the EOD yesterday. IMO it's still overvalued @ 29.8, and it's already finding some resistance around the $30 mark. Personally gonna wait until crosses 30 to open a long position.

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Probably gonna start posting in this thread more, I like the accountability :cool:.
 
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Google ended up trading about $10 lower than the entry level on the calender spread. Looks like even with the rise in IV for the short legs, burning of theta was enough to post a minor gain heading into tomorrow.

Google reported earnings today and ended up missing. Aftermarket price was $873. Looking at my positions, the short puts are ITM and with Google at $873. That would come to $17 premium on that leg if Google does expire right at that level. Considering the current premium is $9.40 on the leg..that would be nearly $2,820 loss. The short calls..there is $1,000 premium that I will end up capturing. Only question remains is how much I will make on my long puts and lose on my long calls. Since there is still plenty of theta value in those options..those are more difficult for me to calculate. Optimally..it is clear the closer I can have Google trade to $890 the better..or at least to $880.

For an added test, on another account I decided to open another calender trade on Google..and this one was opened minutes before the close. So when IV on the short options were at their very highest.

Here is the actual position:

gLQh6W8.png


It will be interesting for me to see the differences in both spreads. In contrast to my earlier calender spread, the puts are much further out. As long as Google trades above $860 tomorrow, then for the short positions I will take in the $2.65 and a juicy $6.75. So..$265 and $675. Then once again..it is a matter of how my long options end up looking. My long puts will obviously grow in value, but the long calls will lose value. In this spread..it seems that I should have 3 winning legs..so coming out in a gain will not seem like an issue.

I will update this thread tomorrow on both positions. Should be a good for learning. The new spread is very small because it is strictly there for education.
 
I just went back to ThinkBack to see what the IV was on the long legs and this caught my eye. So the longs were opened when the IV was at 26.42%. The day the IV on the shorts was 54.82%.

Next day on Tuesday: Longs - 25.81% ||| Shorts - 59.57%
Next day on Wednesday: Longs - 25.56% ||| Shorts - 67.48%
Next day on Thursday: Longs - 24.86% ||| Shorts - 80.34%

So..after the position was open, every day after that, the IV on the short legs would rise, but the IV on the long legs would drop. Considering a short position is short vega..the increase in IV on the shorts was filling in more premium against me. Since my long position is long vega, the decrease in IV on the longs should have been taking away value from my options.

Looking at data from about one month ago, the IV on the current expiration date of my longs is sitting at 24.05%. Currently my longs are back at this same IV..so I do not see how I can have too much value sucked out of my longs come tomorrow morning.

Have some more data to work with here. April 18th, the last day before Google reports.

Short leg IV - 94.52%
Long leg IV - 27.43%

The very next day:

Short leg IV - Cannot get a value for this. But the very next week options, IV there dropped from 40% to 23%.
Long leg IV - 21.70%

Here is the other variable coming in, Google went up that day. IV drops when a stock moves higher. Today Google missed earnings, so if anything, that should keep some decent IV in the longs; or at least not take a crazy bit out. Considering those longs went to 21.70% on a +4% day..had it been -4% day..we could probably be looking at a 23% IV or so. Which fits the calculations I made in my prior post. Big difference is that instead of the longs dropping from 27.43% to 21.70% like it did in this example..instead I should be looking at 25% drop to 22%.

By the way..I set up this ThinkBack example with similar strike levels compared to my actual positions right now (% wise), and this spread in April was in the green. On $11,100 risk; it came out at $3,500 gain. This is with the short call legs going ITM by $15. Which is practically where Google finished trading today in the aftermarket against my short put. ($875)
 
Regarding the other positions. Tesla opened higher today..I had a 40% gain sitting, but I missed the chance to sell and closed the position right at breakeven once it started to fall.

Apple was quite irritating today. It ran up for the first hour, and I was up 100% on the position. I didn't sell, simply because I am waiting for the bigger payout - 400%/900%. Well..it ended up closing a few dollars lower, so with that plus theta burn, the position is back to sitting at a 5% loss.

Since Google missed their earnings in the aftermarket report, it should be a tough day for tech tomorrow. Typically Apple and all tech will follow the same flow that Google will set tomorrow. So I do not see Apple being able to gain 2% tomorrow to make this position quite profitable. It is very likely that I will cut this position off near the open, while there is still some value in the legs because of theta. Remember, the spread is an OTM play..so it is worthless unless Apple gets its ass over $435 by 4 PM tomorrow. Apple right now is at $431.78.

Most likely..if Apple opens down a buck or two tomorrow, the position will be closed at around 20-25% loss. For those interested in that dollar amount..it is $1,030. Had Apple hit $440 this week, the reward would have been $4,300. Had Apple hit $445 this week, the reward would have been at $9,000.

The high of the week for Apple was at $434.87 so far. On Monday, when Apple ran higher, there was an opportunity to lock in a $1,000 gain. Today, when Apple spiked up again, there was another opportunity to lock in a $1,000 gain. Right now instead the P/L is sitting at $50 in the red.

Like I said earlier, it is likely that I will be closing it tomorrow at a $200-$250 loss. Which is really quite miniscule compared to the amount of money I have made successfully in the last month with these exact OTM spreads. So taking an opportunity to make $4k-$9k on a several hundred dollar risk is quite good. Usually by Tuesday you can tell whether or not your spread will ever go ITM, and you can cut it there for a 30-40% loss. Sometimes you'll see that crazy 4% move for the next three days, but more times than not, it won't happen. These are good probability trades.
 
David, I like both of those trades. Puts on any large tech right now should be a winner since this earning season has been quite awful so far. Buyers will definitely locking in profits and not risking. On top of that, if you do buy puts right now and hold right before ER, if you have losses/theta burn, it will be generous, since the continuous pop in IV will flow in value. That is if you purchase next week's options.

Regarding Yahoo, they just reported, IV is on the low end, so being an option buyer here is favorable. I'm looking at a $30.50C/$31C for next Friday. For every $90 risk, $410 reward if it hits $31. If you are even more bullish than that, then $31C/$31.50C, every $50 risk, has a $450 reward. Level to hit here is $31.50.
 
r3p1v said:
Did you guys see the Paulson interview on CNBC? That guy is a genius omg, I want to rewatch it.
Click to expand...
Did not catch it. Enjoyed Mario Gabelli on it last week though - the old timer is so sharp I almost felt embarrassed for the commentators interviewing him.
 
Hey guys,

On July 22nd, Google automatically forces everyone to start bidding on Mobile. This is going to significantly drive up mobile CPC and mobile revenue. Since Google missed it's earnings, this may be a nice spot to buy if you're willing to wait until the next reporting cycle. Most of you seem to be in and out of stocks quickly, so this may not apply.
 
mGrunin said:
It will be interesting for me to see the differences in both spreads. In contrast to my earlier calender spread, the puts are much further out. As long as Google trades above $860 tomorrow, then for the short positions I will take in the $2.65 and a juicy $6.75. So..$265 and $675. Then once again..it is a matter of how my long options end up looking. My long puts will obviously grow in value, but the long calls will lose value. In this spread..it seems that I should have 3 winning legs..so coming out in a gain will not seem like an issue.

I will update this thread tomorrow on both positions. Should be a good for learning. The new spread is very small because it is strictly there for education.
Click to expand...

Looks like this trade worked out pretty well for you, GOOG @ 896 at close. Did you end up letting these expire or close them out earlier?

Opened a GRPN Aug 13 9 Call @ .69 on Friday, trading was pretty slow during the day as predicted but held onto the price level set two days earlier and hourly chart is showing that it's ready for another move. AMZN trading was also pretty slow, after opening up 3 points down it caught up and ended at 305. Have a mental stop loss at 309.5 (new high) just in case.

Also considering a long IBM calendar spread for this week. Earnings were within estimates and picking up some Oct calls looks pretty good after the volatility drop. Never traded IBM before so I don't know if it will be worth it, will post the details if it happens.

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Gah! Friday was so frustrating because of the missed opportunities on Google. It is safe to say that MM (Market Makers) raped option buyers on Friday. I have seen this happen so many times after earnings that I personally know to never mess with Google with any naked positions. I didn't get burnt on it, but hell...the amount of put buyers that felt they stroke gold on Thursday evening to then later have their put options ripped off all value sucks.

I have yet to discuss this but there is a term referred to as "Max Pain", and this is a specific level, where if the stock ends here for the week, then the most amount of options will expire. Because MM's take the opposite side of an option order (since they are supposed to help make the market), it is typically in their best interest for a stock to finish trading at levels that will cause the most amount of options to expire.

For Google, it was $890 this past week, and for Apple, it was $425. Google missed earnings horribly on Thursday, but rebounded like a hero. Hell...Google was down LESS than fucking Apple was on Friday. Where did Apple finish? $424.95.

Usually the third week of everything month is where you see the strongest pinning of stock, since this is the week where monthly options expire. The OI (open interest) is the greatest during this week.

I know this pinning and such may such like vodoo to many, but coming from someone that has been dealing with weekly options for a straight year, and constantly following where max pain is..I can say that there is definitely something to it.

Now lets move onto the calender spreads like I promised.

David, unfortunately I cut the Google position way too early on Friday. Which really sucks, because like you pointed out, it was right at that gravy level. This is where I closed the position off on the spreads that were opened early in the week:

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A whole $89! gain. Haha. Yep, quite the joke. At that point, my gains were completely dependent on that Jul13 $890 put. When Google opened on Friday it was trading somewhere around $875. The delta on that option was nearly 1...so every dollar that the stock moved up or down, the option would replicate it. I truly felt that Google might end up dipping, so I sold it. Well what do you know, Google rebounds all the way to about $895 at the close. That means..that whole $12.20 premium there would have been ALL MINE. $12.20 x 100 x 3. Yessir..I left about $3,680. That sucks.

What amount the spreads that were opened minutes before the earnings were released?

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Nothing special. When I had a chance to look at the P/L chart at the open..everything in between $880-$920 level was losing territory. $900 level or so being maximum loss. Maximum gain was around the $860 and $940 zones. It was clear to me that if you are buying right before earnings when IV is the highest, then your strikes need to be much more tighter. You lose so much premium on your long legs since so much vega has been priced in, that you lose a crap load along with it. So you want to make sure you have juicy premium on your short legs to make up for it.

Either way..I learned quite a bit from both setups. Hopefully this serves as a learning tool for others out there.
 
Let me cover that Apple position I had open. I closed it several minutes into Friday's open. Apple gaped up to about $434 on the open..and then decides to sell off. This is when I decided it is time to throw the position away and began closing it. Came off at a 20% loss. I'll take it..

This goes against my typical strategy but I opened some Google naked puts to hold over the weekend. Google has ran up over 50% in the last 365 days, and its latest quarter was a horrendous miss! EPS at $9.56 while the expected was $10.80. Revenue at $14.1b while the expected was $14.4b. Very bad EPS miss. I do not see Google being able to challenge its highs with such a quarterly result. I put my money where my mouth is, and opened up Google puts. But listen, I have seen many crazy things on WallStreet, and sometimes a negative ER continues pushing a stock higher. I wouldn't be surprised.
 
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