Investing With Options header image ≡ Menu

Just Released: Get Your FREE Iron Condor Trading Toolkit


Click Here to Download

Take an SMN Vertical for a Hedge

Let's go out there and chuck some ultrashort etf hand grenades. If you need a hedge, you can pick up the Feb 2009 35/40 Call spread for about 1.25. It may be hard to get filled so there's going to be some slippage there. But you're risking 125 to gain 375 with a max gain at 40, which is very feasible if we turn down for an extended period of time. This is a low-probability play.

Not necessarily a good trade by itself, but if the Santa/New Year/Obama rally doesn't last, it would be good as a hedge.

A Bearish RUT Butterfly

This one is a little more high-risk, but the risk is well defined. I moved the strikes out a little further, so the butterfly costs more but it gives you a much more wide profit range. Here's the risk profile:

It's a bearish play but if you've got a long-delta portfolio it's a good hedge. You can also check out this DIA Iron Condor from Andy Swan here.

New AAPL Trade Ideas: Calendar and Straddle Spreads

New AAPL trade idea: AAPL is up on the announcement that Steve Jobs is immortal. This looks like a good sell the news scenario, so here's a couple ideas.

Sell -1 AAPL 95 Straddle 8.05.

That puts your breakeven around 87 and 103 in a couple of weeks. This play is assuming that the stock will chop around and won't have a clear trend for a while. It's not full-on bearish but I like the play. There is unlimited risk here so you might want to be careful and use proper risk management.

Buy 1 AAPL 90 Put Calendar 3.88
This spread is a little more skewed bearish with a max gain at 90. The breakevens are a little tighter than the straddle but there is limited risk since it is a calendar spread.

I think on a technical level that the gap will fill sometime this week and we shouldn't see a whole lot of conviction. This stock can be volatile so know exactly how much you're willing to lose.

Thank You

Content to come soon

More Ultra ETF Voodoo

DXO 3 month

DXO 3 month

I started to slowly build a position in DXO on Friday. It's up and doing well, and I'll add a bit more on a pullback.

But looking at the chart... check out the volume- that's absurd.

And it leads me to my next question: how much are prices of ultra and doubleshort etfs really affected by supply and demand? Technically they're supposed to reflect twice the change in the underlying etf in daily percentage terms. It seems that you could really game the system here by getting bullish exposure (in this case oil) without having an effect on the underlying market. Of course there should be some arb to pick up the slack, but it does seem suspect.

Any thoughts?