Post by Admin on Jan 9, 2015 0:18:36 GMT
This is a strategy developed and will require constant tweaking. This is less based on IV and more on reducing cost overage of purchasing stock. Considering having same principles apply using IV to establish set ranges.
First experiment was with TD 45/42.50 spread posted early Jan 1, 2015. Credit was $0.026. TD was not at a predetermined level of support using IV when this trade was put on. I'd suggest running two samples. 1) Use IV ranges and only sell spreads when a drop has occurred or sharp rise (when IV is high). 2) Do not use IV ranges, look only to establish spread positions where net dividend is greater than 4%.
Example
1) Strategy 1: Use 30 day chart Wait till price moves 1 std IV levels on Daily chart. Initiate trade closer 1 or 2 weeks to Expiration of bull put spread.
Current stats:
TCK: TD:NYSE
current price: 44.99
IV: 21.30 - add approx 10% for buffer. 23.50
IV ranges:
1STD: 68% chance of being within range
1.5STD: 86%
1.75:90%
2STD: 95%
2.5STD: 99%
52W
1STD: 10.55
Low:34.35
High: 55.45 make 55.50
30D (Use average of 365 and 255)
1STD: 3.65
Low: 41.25
High:48.55
15D (Jan 22)
1STD: 2.65
1.75STD: 4.6
Low: 44.25
High:47.55
This is after after a 3 standard deviation move (premium is much richer and this is a <1% chance of happening. )
Do this after one STD move on 30 day chart and see what happens.
Current stock price: 44.99
9 days to expiration:
ATM Bull put ATM Bear Call following month:
Sell Jan 16 2015 ATM Bull Put spread.
Put -45/+42.50
net credit $0.35 (0.50 to 0.70) - (0 to 0.15)
Sell Feb 16 2015 ATM Bear call spread
Call -45/+47.50
Net credit $0.75 (1.10 to 1.40 ) - (0.25 to 0.40)
total credit: 1.00
ATM Bull Put OTM Bear Call following month:
Sell Jan 16 2014 Put
Put 45/42.50
net credit: 0.35
Sell Feb 16 2015 OTM Bear call pread
call 47.50 /50
net credit 0.30
Total Credit: 0.65
Nearest OTM Bull Put
Sell Jan 16 2015 Nearest OTM Bull Put Spread.
Put 42.50/40.0
Net credit $0.1
Next examine at start of 15 days without pull back. expiration cycle nor more than two weeks.
Should we initiate exactly 15 days to expiration, without any pull back? Or start watching the stock 15 days to expiration and wait for size able pull back?
First experiment was with TD 45/42.50 spread posted early Jan 1, 2015. Credit was $0.026. TD was not at a predetermined level of support using IV when this trade was put on. I'd suggest running two samples. 1) Use IV ranges and only sell spreads when a drop has occurred or sharp rise (when IV is high). 2) Do not use IV ranges, look only to establish spread positions where net dividend is greater than 4%.
Example
1) Strategy 1: Use 30 day chart Wait till price moves 1 std IV levels on Daily chart. Initiate trade closer 1 or 2 weeks to Expiration of bull put spread.
Current stats:
TCK: TD:NYSE
current price: 44.99
IV: 21.30 - add approx 10% for buffer. 23.50
IV ranges:
1STD: 68% chance of being within range
1.5STD: 86%
1.75:90%
2STD: 95%
2.5STD: 99%
52W
1STD: 10.55
Low:34.35
High: 55.45 make 55.50
30D (Use average of 365 and 255)
1STD: 3.65
Low: 41.25
High:48.55
15D (Jan 22)
1STD: 2.65
1.75STD: 4.6
Low: 44.25
High:47.55
This is after after a 3 standard deviation move (premium is much richer and this is a <1% chance of happening. )
Do this after one STD move on 30 day chart and see what happens.
Current stock price: 44.99
9 days to expiration:
ATM Bull put ATM Bear Call following month:
Sell Jan 16 2015 ATM Bull Put spread.
Put -45/+42.50
net credit $0.35 (0.50 to 0.70) - (0 to 0.15)
Sell Feb 16 2015 ATM Bear call spread
Call -45/+47.50
Net credit $0.75 (1.10 to 1.40 ) - (0.25 to 0.40)
total credit: 1.00
ATM Bull Put OTM Bear Call following month:
Sell Jan 16 2014 Put
Put 45/42.50
net credit: 0.35
Sell Feb 16 2015 OTM Bear call pread
call 47.50 /50
net credit 0.30
Total Credit: 0.65
Nearest OTM Bull Put
Sell Jan 16 2015 Nearest OTM Bull Put Spread.
Put 42.50/40.0
Net credit $0.1
Next examine at start of 15 days without pull back. expiration cycle nor more than two weeks.
Should we initiate exactly 15 days to expiration, without any pull back? Or start watching the stock 15 days to expiration and wait for size able pull back?