I always find it fascinating how and why the market sets certain values as critical breaking points.
In the last two weeks the $390 level on SPY was tested 6 times and was tested again today.
Many traders would be looking at the tape tomorrow to see if the $390 level breaks as the theory is that if the price goes below a fairly solid support line than we can expect the price to go a fair bit lower.
As an options trader my trades are often non-directional so if the price falls below $390 then my call side will benefit and my put side will suffer. However, as long as the price remains between my put and call strikes I am fine.
Today I had to adjust some of my call strikes down to collect additional premium.
So what's my trade for today?
#ROKU. It's been moving sideways for a few weeks without major swings so I thought I take a shot at it with a wide strangle slightly on the bearish side. Both legs are around 14 delta, which provides a fairly good risk/reward ratio. My ROKU trade from July was a nice winner so hopefully this one will work out too.
Trade Type: Short Strangle
Strike: $55 / 95
Expiry: 21 Oct
IV Rank: 30.5
Cap Req: $1477
Annualised Prof at Expiry: 164%
IMPORTANT: Studying previous trades provide the opportunity to everyone to learn a great deal so I encourage you to click on the links below and digest the info.
Let me know what you think.
Closed at $3.70 for an annualised profit of 34%.
Letting the call option expire worthless but had to roll my put to Nov $50 for $0.83 credit.
Total credit: $4.99.
Rolled down the call side to $55 for $0.32 credit.
Total credit: $4.16.
I was very hesitant to roll down the call side for a couple of weeks but I finally made the move.
Rolled down the call side to $60 for $0.60 credit.
Total credit: $3.84.
Rolled down the call side to $75 for $0.39 credit.
Total credit: $3.24.
Rolled down the call side to $80 for $0.46 credit.
Total credit: $2.85.