Whoa... it's supposed to be a bear market and we have just witnessed another decent upwards move. Option traders have to be very careful at this point by making sure that they don't get caught off guard with a rapid volatility expansion. The VIX has displayed a somewhat predictable trend over the past couple of years when we look at the weekly chart. About every 6 weeks or so we had a volatility expansion so after 5 weeks of contraction it's time to take profits and stay small.
Reminder: it's best to sell options when the volatility is high.
So what's my trade for today?
#AAL (#AmericanAirlines) again. I keep getting back to this stock nowadays as the potential ROI is massive. This time I went for the $15 / 20 July strangle. My feeling is that we have greater upside risk as I don't see the value of tangible assets fall much lower.
Trade Type: Short Strangle
Strike: $15 / 20
Expiry: 15 Jul
IV Rank: 34
Cap Req: $199
Annualised Prof at Expiry: 392%
IMPORTANT: we can all learn a great deal by studying previous trades. Take a look at my other trades from today.
I nice winner!
Closed at $1.32 for an annualised profit of 174%.
Probably could have held it for a bit longer and potentially roll it to Sep but I wanted to move the capital elsewhere.
Rolled to Aug $15/16 for $0.62 credit.
Total credit: $2.06
Rolled down the call side to $14.5 for $0.24 credit.
Total credit: $1.44
Rolled down the call side to $16 for $0.28 credit.
Total credit: $1.20