Okay so I’ve been playing with Doc’s tool from optionsprofitcalculator.com. I entered one strangle trade that I was considering on SPY:
Not too bad. For a pretty modest move of under 2% either way I can get a decent profit roughly 20X that 2%. So I’m thinking to myself, I wonder how other ETFs and tickers look. So I pull them up one by one. QQQ, IWM, and several large and popular tickers that have plenty of volume. Nothing even comes close to SPY.
Just start punching in examples. I kept it at Sept 1 and priced them around $1.00, give or take a quarter. It doesn’t really matter what you do. Look to the right of the results graph which shows you the percentage changes, pick a % just under 2% (like 1.9 or 1.8) and run to the left to see the price and profit %. I have not found one that even comes close to SPY’s performance.
Now, I can see trading tickers other than SPY if there is a specific reason why it would have more volatility then the general market. But even then, I’m going to look at calculator tool to see specifically what kind of profit I’m looking at so I can decide if it’s really worth it.
I have been struggling to figure out what the numbers mean when you hover over a cell on that calculator. That being said, I’m guessing that all that green is a good thing. On the TECS option that I did, it did not have a lot of green, just a lot of red…doc
When you hover over the cell, it tells you the percentage profit you would get if you immediately sold to close all of your calls and puts at that price on that date. It also tells you in parentheses how much money you would gain in profit (not total proceeds which would be larger).
In my SPY example, it shows that with a stock move of less than 2% you could get a 40% profit. As I said, your TECS straddle looked scary to me. You needed a lot more movement a lot quicker to get similar 40% profit.
Okay, I got in again. September 1, Call 465, Put 420, Total price 1.21.
SPY gapped down this morning then traded back up to around unchanged which is where I entered. Everything (SPY, QQQ, SMH, IWM) looks like they want to go down to me so that’s what I’m looking for, but this trade is pretty balanced profiting pretty equally up or down.
Hopefully this goes better than my last SPY strangle that was like a 75% loss.
In your opinion is it a better risk to trade the S&P (actually any option) when it is closer to a dip or peak than when it is in the middle of a range? Looking at the SP chart right now it looks closer to the middle of a price range vs at a peak or low…doc
If you pull your chart out to a month or so, S&P was looking pretty bad to me over the weekend. Like it was consolidating for a break downward. But NVDA today had a big surge taking SPY with it. So yes, S&P does look to be sorta in the middle of it’s August range. Generally speaking I think that a stock or index has a better chance of making a big move it it breaks up or down out of a range. That being the case, right now doesn’t feel too great in terms of the volatility that we want.
Now, I’ve said before in multiple threads that I feel pretty bearish on the S&P and many tech stocks that comprise some of the largest market cap players. I was bearish on semiconductors largely because I was bearish on NVDA which has looked terrible to me, but then they go and launch positive today on bullish analyst comments from Morgan Stanley. The thing is analysts have no impact on my feelings and if anything the strong positive move today on NVDA makes me even more bearish because I think that volatility (even up) is a bad sign. I generally base everything on price action and give little to no value to fundamentals. NVDA has an earnings release 8/23 and that might be something worth playing. Either directly on NVDA or on an index like SMH or even SPY where NVDA holds a high weighting.
Yeah, everything looked weak this morning, except for NVDA, but that one has settle down. Everything looks like they want to go down to LOD and beyond, but we shall see…
Yes, nearly everything went down to finish at or near the low of the day, and I still think everything looks bearish, but I also recognize that things can look different depending on your perspective. To me looking at the last month everything is super volatile and mostly negative which is a bearish sign in my book. Then again, when I look at a whole year, it sure looks like we are simply in a pause on a largely bullish trend.
LTBH investors are largely okay, but short term traders still need to be able to switch directions.
Okay, so I entered a strangle on SPY yesterday. Just after 2pm, SPY was consolidating after a slight intraday decline where I might normally look for a further decline, but they gave a slight RSI divergence on the 5 minute chart indicating a possible reversal to the positive. I thought about trying a call, but I chickened out because the divergence was really slight and it might just break downward too. So I entered a strangle. As I’ve said before, the profit potential on SPY is generally better than any other ticker. Sure, maybe you can get lucky and hit a bigger move on an individual stock, but overall I feel like you are more likely to profit with SPY given the relative discount on the option premiums compared to individual stocks.
My Straddle was 9/5/23, call 450 and put 430 when the SPY price was around 441.00. Total cost 0.88. According to my calculations, I only needed a move of 1% in either direction in order to book a decent profit. I exited when SPY was at about 445.50 for 1.10 which is about a 1% move on the ticker, and this gave me a guaranteed profit of 25%. If I get anything at all for the puts (even if I lose money on them) then this adds to my profit and I will get significantly more than 25%.
This illustrates two important points for me, given how and what I trade. 1) Trading options gives you much higher leverage than trading stocks (I got 25X the profit), and 2) SPY is one of the best tickers to use for options trades because it allows you to profit very well on relatively small moves.
Well, I guess if I would have held longer, then I would have made more profit. But then when you’ve accomplished your plan and can get out with a nice profit, then being greedy can often reduce your profits. SPY turned around and lost more than a whole point before going back up, so I’ll just be satisfied. I may think about doubling down my puts at a steep discount if I get a good setup.
Okay, so I doubled up my puts near the end of the day but only paid 0.15 so my total cost is now 1.03 rather than 0.88 and my profits in the book right now is 6.8% (again, on the previous 1% move). My actual profits is actually a lot higher. If I had closed all of my puts at the end of the day (high of the day) I would have captured an additional 0.26 and my profit would be 0.33 on 1.03 basis = 32.0%. Now, if SPY pulls back at all, no matter how small, my profit goes up because I am trading on the house right now (potential profits on zero risk). If SPY gives back all of today’s gains and I hold all the way down, then my profit will be over 100%. I seriously doubt that happens.
I always prefer to be in a position like this where I have a small guaranteed profit that could grow larger. That is the main reason why I closed my calls when I did. Because it reached the point where I could book a guaranteed profit then trade for free to make more money. That was the lower risk path. Had I held onto my calls, I would have made a lot more money, but I didn’t know it at the time. There was always the risk that it might have just gone down and never came back up and I might have lost out on being in my current situation. Safer money is usually better than going for more money.
As it stands, I don’t need for my puts be be profitable. If I even get a dime in a big loss this can still double my profits because I consider my basis to be zero on this strangle.
