What do I do next week with $AAPL $VXX $UVXY $IBB $GOOGL and $SPY?

This week on Options Action, the traders and the ChartMaster talked about a few new names and then reviewed a few old trades. 

AAPL – Dan Nathan is short term bearish on AAPL but really is bullish in the longer term recommending a selling a naked put, specifically the March 16 150 put for about $2 or $200 per contract. 

I like this, but I can’t trade naked short puts in my retirement account with limited margin so I’ll have to do it as a spread. I could sell the 150 put with the Mar 16 expiration date and buy the March 23 140 put option for $70 to create a credit spread of $130.  

I know this is being a bit cute but buying the 140 put that expires one week later gives me a bit more flexibility in managing the trade. No matter if I was to buy the !40 put expiring on Mar 16 or the next week I will be required to put up $1000 in margin requirements for each contract spread.  (the difference between 150 and 140). 

$USO – these guys are bearish and bullish on the dollar. I agree, but I had sold my USO position last year as Fidelity informed me they were going to charge $300 per year to generate K1’s on MLPs starting in 2018 and USO was the only thing that I had that qualified as an MLP. 

However, I do own SCO (short crude oil) which comprises a whopping 0.3% of my speculative portfolio and is down about 37% from purchase. I had bought it as a hedge and will sell it if there is a big drop in the USO. 

$SPY – Mike Khouw recommended a trade in the SPY buying a March 16 275/265 put spread for $265 per contract spread.  

Again, I like this but I think I would use a calendar put spread buying the March 16 275 put for $511 and selling the Feb 16 175 put for about $300. This will cost you about $211. With my trade if on Feb 16 the SPY is above 272 you can roll the short call a total 6 times between then and Mar16. Great trade providing this downturn is short. 

$GOOGL – Mike had a GOOGL call spread he put on last week buying the Feb16 1185/1270 call spread for $2650. 

I put on something different, and I’m glad I did. I bought a butterfly that expires in March, a month later. I bought the 1210/1270/1300 call butterfly for $1,428. Mine will break even at 1225 on March 16. Mike’s will break even at 1211 on Feb 16. I’m glad to have that extra month. I could sell mine now for about $400 but will probably give it some time and maybe sell a credit spread before that date. 

$IBB– Dan had bought a March 120-135 call spread last week for about $225. I am already long quite a few calendar call spreads and a fewer number of calendar puts, so I didn’t add anything. I may add an iron condor tomorrow to extract some extra value from the calendar spreads I have. 

Tomorrow should be interesting! 

Do you have any questions about options or specific names? Send me an email or leave a comment. 

WTF? I thought this market was supposed to only go up? $VXX $UVXY $SPY $AMZN $AAPL $GOOGL

The Selloff

Today it happened, the market sold off. Particularly the $SPY and $QQQ and $DIA took it on the chinny, chin, chin. 

What didn’t go down? $AMZN for one thing, and $NFLX  and $FB only fell about 1.5% when the QQQ was down 2%.  

OSTK, on the other hand, was down almost 16% closing at 56. 

But in my speculative portfolio my holdings in VXX and UVXY were up 13.5% and 27% respectively. 

I hold this stuff in my portfolio just for days like this. I never know when they are coming, but that’s why I hold it. 

Volatility is here to stay, deal with it! 

Turns out the CNBC chyron from a few days ago was correct. At least through today. 

I’m gonna try to detail what I did with my volatiltiy options since three days ago but if this sounds like nails on a chalkboard, please skip down to my SPY section below. 

You’ve been warned! 

Three short days ago I sold covered calls in my holdings of both UVXY (at 15) and VXX (at 30). These were scattered over the Feb 2 (today’s) expiration, Feb 9 and Feb 16. 

The next day volatility retreated and I and I put on one calendar put spread for each 100 shares of each of the two names buying the Mar 16 puts and selling the Feb 16 puts at the 27 level in the VXX and 12 in the UVXY. 

Yesterday as volatility retreated even more I rolled the covered calls up and out, to 31.5 for the VXX and 20 for the UVXY. I also put on some matching call calendars at the 30 level for VXX and 12 for the UVXY.  

Good thing, since these two names closed up on the day VXX closed at 13.76 and UVXY closed at 32.92. 

I’m happy where this ended out. Now on Feb 16 I have both some (virtual) strangles (in the VXX) and straddles (in the UVXY). 

Buying the SPY

Is this the start of the big decline, or just a minor pullback? I don’t know, it might be but my feeling is that this is temporary. When earnings keep coming in hot, and projections are for increasing revenues, it is hard to imagine this will be a prolonged pullback. Could it go down another 3%, 5% or 7% or more? No problem. 

But besides squaring up all my expiring trades today, I also bought small amounts of SPY and a micro amount of TLT.  

I may add to my XIV if it has another day like today and I’m looking to sell some put credit spreads in the SPY and close out some of my long put spreads in the same (which is really the same thing – selling a higher price put option and buying a lower price put option, its just with the debit spreads I already own the spread) 


Good luck next week ! Check back this weekend for some updates.