Mace - 06 February 2012 11:19 AM

v10king - 06 February 2012 10:59 AM

I like spreads but I like naked calls even more for 2 year out options.  I have much more flexibility to sell whenever I want versus a spread where the real money doesn’t start early coming in until close to expiration. Spreads are also not affected by changes in IV, so I wouldn’t want to buy a naked call with Apple at an IV of 52% like it was last October.  But when Apple is at 18% IV, its a no brainer, I want to leverage that low IV and ride the wave up as it increases plus stock price increase + a potential to go up really quick and not lose much theta along the way = way more profit potential than a vertical leap ever could in the mid life of a 2 year LEAP.

I will likely sell thee calls this year when Apple is at 600 in October and IV spikes to 40% going into earnings or some other major product announcement (iTV).  They will be up a lot at that point (600-900%).  If I do hold until expiration and it hits 650+, I may lose some potential profit with a spread but if it hits 700+ like I think it will (but don’t want to risk with a spread), I will make even more money than a spread ever could.  Looking at those two factors, I like naked calls, especially with IV at historic lows (it did go up 1.2% from Friday already, current Vega on the 630 JAN14 is 633.03)

Now spreads for short term plays are the way to go, I love spreads for weeklies and near month expiring options, the only way to go.  Thoughts?

Thank you for sharing.  Like your strategy a lot.  IV play is hard to understand though, delta and theta trade is easier to the gray matter.

IV usually begins to climb up shortly after the post-earning crush.  Why is it still not climbing back up?

It went up 1.2% this week.  IF you look at the way IV works, it typically jumps into the new week and then moves slowly for that particular week.  I estimate a spike up to 24-25% going into shareholder meeting, it will likely fade a little and then spike up into the iPad 3 announcement in March (if we get it) then it will go down and spike again going into earnings.  When iPhone5 comes out (if we know before hand) it will likely spike a ton.  My thoughts.