Live: Tuesday, March 14, 2017

3/14 – 2:45 p.m. New York time

I entered two positions, on SNAP and IEF. I exited two positions, MYL and SGMS, each for a profit.

I have placed an exit order  on IONS, but it has yet to be filled and appears unlikely to be. Nonetheless, I shall leave it active and shall update the live feed after the closing bell if it should indeed be executed.

3/14 – 12:28 p.m. New York time

I managed two positions, exiting them below my usual target of 25% of maximum profit in order to free up space in my account for other trades. Also, given the undeniable reality that time itself is risk, getting out early preserves my profits from events in an unknowable future.

The two exits were from options positions on MYL and SGMS; I shall update their analyses with results prior to the closing bell. I am attempting an early exit from IONS, so far without success.

3/14 – 10:35 .a.m. New York time

I have no earnings plays on my desk this morning, which gives me a chance to experiment.

Last night I mentioned that I would take a look at a diagonal on IEF as a companion, and perhaps alternative, to my shares position. I shall also take a look at a new issue, SNAP, as a potential play. SNAP is now in its ninth trading day since going public.

I placed an order in to exit SGMS at my target price — 25% of maximum potential profit — but it has not yet been filled.

3/13 – 8:15 p.m. New York time

I have no prospective new positions on my desk for action on Tuesday.

I shall explore setting up a long diagonal play, composed of calls, on the share position on IEF, the 7- and 10-year bond exchange-traded fund, in order to give it some extra kick.

A calls diagonal is the close equivalent of a covered call constructed entirely of options. It is composed of a long in-the-money call option and a short out-of-the-money call option with a nearer expiration.

I shall use the rules outlined by the team at Tastry Trade, whose trading strategies are very similar to my own. The Tasty Trade description of diagonals can be found here, but briefly, here’s what I shall be looking at:

  1. Approximately a 10% spread either side of the at-the-money point, adjustable to meet the third and fourth requirements, which are firm rules.
  2. Long option 50 to 70 days to expiration, and short option, 20 to 40 days to expiration, adjustable to meet circumstances of the available options.
  3. A net debit of no more than 75% of the interval between the two strikes.
  4. Extrinsic value of the long calls that is less than the extrinsic value of the short calls.

For example, one IEF diagonal structure that meets these requires is:

  • At the money point at $103.
  • Long the SEP series $92 strike calls (extrinsic value 0.03)
  • Short the JUN series $108 strike calls (extrinsic value 0.20)
  • Net Debit: $11.55 (72.2% of 18-point strikes spread)

That’s not necessarily what I’ll attempt to trade, but it is an example.

By Tim Bovee, Portland, Oregon, March 13-14, 2017