Saturday, March 11, 2017 7:44:03 PM
Well,
The spread is wide on a percentage basis (a little over 25%), and the amount received for selling those things (mainly the Puts) is also high (especially considering the Puts I picked are so far away), but I guess that's what one should expect when both the UV and IV are high and the strike price spacing is wide and awkward and somewhat unavailable from a common sense point of view (multiples of $2.50 and separated by 3-months after April).
Since the far-away Puts were so expensive relative to the nearby Calls, I thought I should assume most of the trading pressure was tied to the current purchase of nearby Puts, so I obliged by selling them because I don't think price gets down that low again very soon, and when/if it does I think it will stay above the lower trend line which would be higher than $7 by that time. And that's when I would jump in and buy more shares and sell nearby Puts and not sell any Calls.
Looking at its trading pattern, it could break out the top or go back down to 7-ish, so that low number is why I decided to sell the Puts at $7.50 because I wouldn't mind being put more shares there.
What I actually expect is that it continues to trade as it has and stays within the triangle and mostly close to the top as there is good lower support. There's a small chance it's ready to break out the top and make $9.50 support.
My sale of $10 Calls expires next Friday, and the way it's currently trading I doubt my shares get assigned, in which case I'll sell more Calls but I'll wait to determine the strike because the pressure looks like it wants to break higher, out the top of the triangle; so if it does that and I sell Calls again then they would have to be the next strike higher, $12.50.
The spread is wide on a percentage basis (a little over 25%), and the amount received for selling those things (mainly the Puts) is also high (especially considering the Puts I picked are so far away), but I guess that's what one should expect when both the UV and IV are high and the strike price spacing is wide and awkward and somewhat unavailable from a common sense point of view (multiples of $2.50 and separated by 3-months after April).
Since the far-away Puts were so expensive relative to the nearby Calls, I thought I should assume most of the trading pressure was tied to the current purchase of nearby Puts, so I obliged by selling them because I don't think price gets down that low again very soon, and when/if it does I think it will stay above the lower trend line which would be higher than $7 by that time. And that's when I would jump in and buy more shares and sell nearby Puts and not sell any Calls.
Looking at its trading pattern, it could break out the top or go back down to 7-ish, so that low number is why I decided to sell the Puts at $7.50 because I wouldn't mind being put more shares there.
What I actually expect is that it continues to trade as it has and stays within the triangle and mostly close to the top as there is good lower support. There's a small chance it's ready to break out the top and make $9.50 support.
My sale of $10 Calls expires next Friday, and the way it's currently trading I doubt my shares get assigned, in which case I'll sell more Calls but I'll wait to determine the strike because the pressure looks like it wants to break higher, out the top of the triangle; so if it does that and I sell Calls again then they would have to be the next strike higher, $12.50.
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