We’re initiating our September Supplemental Trades* portfolio this afternoon with the following order: Day limit order Buy to open 2 KO Oct 57.5 calls Sell to open 2 KO Sep 57.5 calls Buy to open 2 KO Oct 55 puts Sell to open 2 KO Sep 55 puts for a net debit of $0.87 or better. Note that 2 contracts is our base position for double-calendars. Trading whole-number multiples of the base size ensures that…
Tuesday, April 13, 2010
With only three days to expiration and KO trading above support at our current risk-management threshold of $54.90, it looks like the only way to avoid riding the expiration-week gamma bull is to unwind this position. That’s going to take two steps. First, we’re selling the put vertical we bought Thursday: Day limit order Buy to close 1 KO Apr 52.5 put Sell to close 1 KO Apr 55 put for a net…
Thursday, April 8, 2010
After rallying to $53.78, KO has pulled back some, and a close above $54 looks all but impossible…however, indicators on the 30- and 60-minute charts are flashing buy signals. Risk-management and disciplined application of trading rules always trump technical analysis, so we’re going ahead with an adjustment to cut our delta exposure–but instead of rolling down to a more bearish calendar position, we’re going to hedge with a put vertical, as follows: Day limit order Buy to open 1…
Thursday, April 8, 2010
As of 11:20am, traders are battling it out around KO $53.50, with the stock oversold on the 15-minute to 60-minute charts. This test of support “feels” like another whipsaw, and it looks like buyers are starting to gain some traction. A turn-around could easily bring the price back up to our risk-management threshold—nevertheless, we will follow our strategy rules and make an adjustment trade the minute it looks like the bears are back in control.
Wednesday, April 7, 2010
KO closed at $53.82 today, below its 50-day moving average and our $54 risk-management threshold. If the stock continues to fall tomorrow morning, or fails to mount a convincing rally in the first hour or so of the session, we’ll be making an adjustment to our April/May 55 call calendar; otherwise, look for an update around 11:00am. Note that because this is a Supplemental Trade position, we might try something a little different than our standard Calendar Options adjustment technique,…
Thursday, April 1, 2010
With KO rallying off support around $55.20, we’re paring back our upside risk by closing the position at the 52.5 strike: Day limit order Buy to close 4 KO Apr 52.5 puts Sell to close 4 KO May 52.5 puts for a net credit of $0.37 or better. NOTE: Supplemental Trades are optional and primarily intended for more experienced/risk-tolerant subscribers. They are not autotraded, and have no bearing on our core newsletter portfolio. Four contracts per leg…
Wednesday, March 24, 2010
As of 11:13am (Eastern), KO is trading under $55, failing to confirm yesterday’s close above our $55.20 adjustment threshold. Nevertheless, as some of you no doubt have noticed, our long May options have decayed to about half their original value, reducing the current dollar allocation of both April/May Supplemental Trade positions to about what we originally allocated to a single position. This leaves us enough cash for as many as two more entry trades for the April cycle. As long…
Tuesday, March 23, 2010
After closing our March trades last week for another net loss (–3.47% Model Portfolio return), I had planned to begin this week’s Update by reminding members, once again, why it’s important to apply any proven strategy consistently, trade after trade and month after month. But rather than bore you all by repeating myself at length, I’ll pass along some comments from two other savvy traders. Calendar Options member Bryan D. wrote the following in an e-mail last week, and I…
Wednesday, March 17, 2010
There’s just a few pennies of premium left in our short March KO puts, so we’re rolling out to April. Note that we’re swapping the 55 put spread for an April/May 55 call spread to get a better risk profile. This means we need to make two trades: Order #1 Day limit order Sell to close 4 KO May 55 puts Buy to close 4 KO Mar 55 puts Buy to open 4 KO May 55…
Thursday, February 25, 2010
Coke’s announcement of plans to buy back bottler Coca-Cola Enterprises is driving the stock down more than $2 today. Implied volatility for the Mar 55 puts has jumped to more than 24%, putting us at a paper loss exceeding our 25% loss-level risk-management threshold. Nonetheless, May IV for KO puts is up less than one point from our initial entry, so adding a position to offset delta looks like a reasonable move here. We’re taking advantage of the forward volatility…
Jared Woodard is a registered commodity trading advisor who specializes in trading volatility as an asset class. With over a decade of experience trading options, futures ... Read More
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Tuesday, August 24, 2010
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