DE, RIG & RUT Entries

[Administrator]

Hello guys,

After a week of recovering from getting 3 wisdom teeth removed (OUCH) I am back on the saddle and ready to trade again. Luckily, I went to all cash before my surgery because I knew I'd be out of it for several days and not quite mentally present enough to manage any trades. This is always a good rule of thumb if you have an upcoming event, vacation, trial hearing for your prison sentence, or whatever you're dealing with! It's always better to be in all cash during those times then to sit in the hospital bed wondering if you've hit your loss mark on your trades!

Here's what I will be trying to get filled on this morning. I will keep you posted as I get filled on them...

DE- John Deere has been on my watchlist for a few years and I had successfully done calendars on it back in the day, so as I was perusing my list, I saw another entry point. It's been channeling for quite a while with recent low but rising volatility. We have until 11/25/09 earnings to get in and out. I will most likely ride this up to a few days before earnings to capture as much volatility increase as possible.
I will enter the Nov/Dec 43 call calendar and go full size upon entry, then scale out half of the contracts to adjust to a double calendar if needed. I am going full-in in case this stock doesn't move much in price but increases in volatility.

RIG- Our trade team member, Marlin72, brought up his vertical trade on RIG, so I will look at doing a Nov/Jan 85 put & 90 call double calendar. I am choosing Jan to see if we can practice rolling this calendar for 2 months (Nov & Dec). As you can see from the chart, it's been channeling since June with low to rising volatility. Earnings is on 11/4/09 but that still gives me 4 weeks of potential volatility increase.

RUT- Typically I do RUT iron condors every month for monthly cash-flow but the last few months I stepped out and switched to large calendars on NDX to be on the right side of the volatility move (iron condors= high to dropping volatility where calendars are the opposite). We are seeing a potential opportunity now with RUT as it recently shot up in volatility and is starting to turn back down. Also, chartwise, it is right in the middle zone of the Fibonacci retracement lines drawn (on 2 year chart) from 9/22/08 when the market crashed to 3/9/09 when it reached it's most recent bottom. In futures trading, this middle region of Fibonaccis (between 50% and 61.8% lines) is called the "ambush" zone. This typically signifies a reversal, however sometimes there will be channeling in this region until the bulls and bears duke it out. It is more bullish to neutral but there is still uncertainty.
http://imgsrc alt="RUT IC- Open 10-7-09" title="RUT IC- Open 10-7-09" width="300" height="170" class="aligncenter size-medium wp-image-857" />
I will be legging into my Nov 670/680 (bear call spread side) and 510/500 (bull put spread side) to make the iron condor. If you're a beginner we recommend you enter the whole I.C. as 1 order for at least $1.61 so you remain delta neutral from the beginning. Per my rules, I shoot for $1.60+ on my total credit on this $10 wide spread iron condor. If you're more advanced, I will be probably legging in to the bear call spread side first since the pre-market activity is pretty bullish, then legging into the bull put side once it's bottomed and starting to turn upward. I will post my IC trading rules in the Model Portfolio forum for you.

As with any trade, expect to adjust, don't place and forget the trade. So I will post the adjustments as we move along.
Good luck and Happy Trading!

[ANCOLL]

thanks admin for the insight..

keep it update..
I will try to follow with my model portfolio..

[Paulsei]

Where have you posted your trading rules for the RUT Iron Condor? thanks Pablo

[MatthewHaley]

Good advice on the trading with upcoming events. I am recovering from a severe asthma attack, and the drug combination is not conducive to a huge number of new trades. You get breathing treatments which are primarily synthetic adreneline. You get a lot of steroids which for me increase emotions, especially volatile emotions like paranoia and anger . And to still the cough and pain they give you narcotics.

So, you have a lot of energy, your mind is thinking happy thoughts and not focused and you are emotionally trying to see how the world (or market) is screwing you and getting mad and every turn.

So, I have been only doing trades that are obvious, and only trades that are completely analytically clear.

I have also cut down on commenting here in case I write something about the black helicopters trying to get you to trade against your will, or write about how the pretty flowers are blowing in the winds...

Matt

[Mojo]

Dude... don't knock the black helicopters. They are real....

[ANCOLL]

Originally Posted by MatthewHaley

Good advice on the trading with upcoming events. I am recovering from a severe asthma attack, and the drug combination is not conducive to a huge number of new trades. You get breathing treatments which are primarily synthetic adreneline. You get a lot of steroids which for me increase emotions, especially volatile emotions like paranoia and anger . And to still the cough and pain they give you narcotics.
................................
Matt

May God bless you , Matt
stay well and be with us.

[bytor]

Greetings Admin (and others)

I'm so glad I found this forum. There are so many great ideas posted that I am following and learning from.

Regarding rolling your RIG calendar for 2 months - Nov and Dec: I'm assuming by rolling you mean selling the Nov against the Jan then closing that or letting that expire and then selling the Dec against the Jan. If so, I'm not seeing any Dec options, unless they don't exist yet ....just trying to follow and learn so apologies in advance if I am overlooking something.

Thanks in advance! - Bytor

[tincup]

Hello Admin

Thanks for posting your trades and I hope you are recovering from your wisdom teeth extraction.

Can you please tell me why you selected a double calendar instead of a single calendar on RIG? My impression is that many traders begin with a single calendar structure initially, then adjust to a double when the market dictates. I'm trying to learn...

Thanks
tincup

Originally Posted by Administrator

Hello guys,

After a week of recovering from getting 3 wisdom teeth removed (OUCH) I am back on the saddle and ready to trade again. Luckily, I went to all cash before my surgery because I knew I'd be out of it for several days and not quite mentally present enough to manage any trades. This is always a good rule of thumb if you have an upcoming event, vacation, trial hearing for your prison sentence, or whatever you're dealing with! It's always better to be in all cash during those times then to sit in the hospital bed wondering if you've hit your loss mark on your trades!

Here's what I will be trying to get filled on this morning. I will keep you posted as I get filled on them...

DE- John Deere has been on my watchlist for a few years and I had successfully done calendars on it back in the day, so as I was perusing my list, I saw another entry point. It's been channeling for quite a while with recent low but rising volatility. We have until 11/25/09 earnings to get in and out. I will most likely ride this up to a few days before earnings to capture as much volatility increase as possible.
I will enter the Nov/Dec 43 call calendar and go full size upon entry, then scale out half of the contracts to adjust to a double calendar if needed. I am going full-in in case this stock doesn't move much in price but increases in volatility.

RIG- Our trade team member, Marlin72, brought up his vertical trade on RIG, so I will look at doing a Nov/Jan 85 put & 90 call double calendar. I am choosing Jan to see if we can practice rolling this calendar for 2 months (Nov & Dec). As you can see from the chart, it's been channeling since June with low to rising volatility. Earnings is on 11/4/09 but that still gives me 4 weeks of potential volatility increase.

RUT- Typically I do RUT iron condors every month for monthly cash-flow but the last few months I stepped out and switched to large calendars on NDX to be on the right side of the volatility move (iron condors= high to dropping volatility where calendars are the opposite). We are seeing a potential opportunity now with RUT as it recently shot up in volatility and is starting to turn back down. Also, chartwise, it is right in the middle zone of the Fibonacci retracement lines drawn (on 2 year chart) from 9/22/08 when the market crashed to 3/9/09 when it reached it's most recent bottom. In futures trading, this middle region of Fibonaccis (between 50% and 61.8% lines) is called the "ambush" zone. This typically signifies a reversal, however sometimes there will be channeling in this region until the bulls and bears duke it out. It is more bullish to neutral but there is still uncertainty.
http://imgsrc alt="RUT IC- Open 10-7-09" title="RUT IC- Open 10-7-09" width="300" height="170" class="aligncenter size-medium wp-image-857" />
I will be legging into my Nov 670/680 (bear call spread side) and 510/500 (bull put spread side) to make the iron condor. If you're a beginner we recommend you enter the whole I.C. as 1 order for at least $1.61 so you remain delta neutral from the beginning. Per my rules, I shoot for $1.60+ on my total credit on this $10 wide spread iron condor. If you're more advanced, I will be probably legging in to the bear call spread side first since the pre-market activity is pretty bullish, then legging into the bull put side once it's bottomed and starting to turn upward. I will post my IC trading rules in the Model Portfolio forum for you.

As with any trade, expect to adjust, don't place and forget the trade. So I will post the adjustments as we move along.
Good luck and Happy Trading!

[msmenacker]

Bytor - the December options will be made available the Monday after October expiration. My understanding is that if there is not enough open interest for the market makers to open up the next month's options then they wait until the current (front) month is closed. HTH.

[Gekkotrader]

Hi Matt,

This was one of the weirdest posts I've seen yet. You must be taking a crazy drug cocktail like me right now. I'm on Percoset for my teeth, and I tried to ween off of it so I could go back to work. Yeah well, then I got some crazy nausea and dizzy spells because I went off it, so the surgeon put me back on. Let me tell you how much ginger is my friend right now. I lost my lunch twice today...YUCK!

Ok, so that's my silly post for the day. Thanks for participating Matt even though you don't feel well. GET BETTER CHIEF- we need you to pilot the black helicopter! :P

Originally Posted by MatthewHaley

Good advice on the trading with upcoming events. I am recovering from a severe asthma attack, and the drug combination is not conducive to a huge number of new trades. You get breathing treatments which are primarily synthetic adreneline. You get a lot of steroids which for me increase emotions, especially volatile emotions like paranoia and anger . And to still the cough and pain they give you narcotics.

So, you have a lot of energy, your mind is thinking happy thoughts and not focused and you are emotionally trying to see how the world (or market) is screwing you and getting mad and every turn.

So, I have been only doing trades that are obvious, and only trades that are completely analytically clear.

I have also cut down on commenting here in case I write something about the black helicopters trying to get you to trade against your will, or write about how the pretty flowers are blowing in the winds...

Matt