I'm thinking about a naked put on RIMM. Looking at Deccember 55, .79 credit with delta of .12. The naked puts just seem to be working for me, any thoughts.
65 seems to be a good area of support so 55 is a logical "safe" strike, and the delta confirms that. On the weekly you've got several more areas of support at 60 and 65, increasing the likelihood of the stock staying above those points. The only thing that concerns me is that IV has fallen off a cliff since September earnings, which is really taking the juice out of the option price. At this point I may be more inclined to go long volatility with the understanding that IV is now pretty low but will start to build as the next earnings date approaches. I would use a long calendar here. Hopefully Shawnta can show us her favorite strategies for this scenario.
Mike, to clarify, I'm definitely not trying to talk you out of doing a naked put here, just giving you my take on it. 79 cents is a decent credit, and volatility still seems to be dropping so that should help. What are you looking to squeeze out of this trade?
I haven't checked it out yet but Tyler Craig over at http://tylerstrading.blogspot.com/ recommended Livevol for IV readings. I usually just look at Ivolatility.com, as you mentioned.
mike, your selling puts has been a good succesful strategy in this up trending market these last few months, something I did not participate enough in myself. but now the market is really ripe for some kind of correction. So my concern is what will RIMM do if the market has a couple bearish weeks, which is very possible. RIMM has had the biggest drop after earnings of the tech big names so far. For one month since its earnings it has also under preformed the market. Its IV is the lowest in a year. If RIMM breaks 64 I can see it going to 58-60 with a higher IV in a few weeks. Your theta decay on the OTM put will help you more in another 2-3 weeks. So If the market has some weakness and RIMM is at 60 in a couple of weeks with higher IV, I bet your 50 DEC put will get you about the same credit you are looking for now with the 55. That possible scenario would be a much safer play because of time frame, price movement and IV
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65 seems to be a good area of support so 55 is a logical "safe" strike, and the delta confirms that. On the weekly you've got several more areas of support at 60 and 65, increasing the likelihood of the stock staying above those points. The only thing that concerns me is that IV has fallen off a cliff since September earnings, which is really taking the juice out of the option price. At this point I may be more inclined to go long volatility with the understanding that IV is now pretty low but will start to build as the next earnings date approaches. I would use a long calendar here. Hopefully Shawnta can show us her favorite strategies for this scenario.
ReplyDeleteMike,
ReplyDeleteto clarify, I'm definitely not trying to talk you out of doing a naked put here, just giving you my take on it. 79 cents is a decent credit, and volatility still seems to be dropping so that should help. What are you looking to squeeze out of this trade?
If I can get 50 cents out of it I fiqure it's not bad. Where do you go to see how much the volitatily has moved? Ivolatility.com?
ReplyDeleteI haven't checked it out yet but Tyler Craig over at http://tylerstrading.blogspot.com/ recommended Livevol for IV readings. I usually just look at Ivolatility.com, as you mentioned.
ReplyDeletemike, your selling puts has been a good succesful strategy in this up trending market these last few months, something I did not participate enough in myself. but now the market is really ripe for some kind of correction. So my concern is what will RIMM do if the market has a couple bearish weeks, which is very possible. RIMM has had the biggest drop after earnings of the tech big names so far. For one month since its earnings it has also under preformed the market. Its IV is the lowest in a year. If RIMM breaks 64 I can see it going to 58-60 with a higher IV in a few weeks. Your theta decay on the OTM put will help you more in another 2-3 weeks. So If the market has some weakness and RIMM is at 60 in a couple of weeks with higher IV, I bet your 50 DEC put will get you about the same credit you are looking for now with the 55. That possible scenario would be a much safer play because of time frame, price movement and IV
ReplyDelete