JNJ & NDX Calendar Entries
JNJ- Johnson & Johnson has been channeling for a few months. Earnings just happened on 10/13/09 so now we are in the aftermath of earnings with low but rising volatility. The 30, 50, and 200 day moving averages are nice, flat, and parallel. I put on the single Nov/Jan 60 call calendar for $0.75 debit to begin with and will look to adjust when I either hit my 7% loss mark or when the risk graph is close to one of my break-even points. I am in half-size at 33 contracts so I could have enough buying power to put on my next trade below for NDX.
NDX- I put on a double calendar Nov/Dec 1700 and 1800. It’s currently centered on my graph and I will again look to adjust if NDX slides toward one of my breakeven points or if I hit my 7% loss mark.
I’ll keep you posted. Good luck and have a GREAT weekend!
-Gekko
Popularity: 15% [?]
If you enjoyed this post, make sure you Subscribe to Insane Money by Email
Allow me to ask something,
1. I saw JNJ Nov/Dec 09 is better with only 0.38 debit and potential of 0.50 profit then JNJ Nov / Jan 09 with the same potential but 0.78 debit. How about it?
2. I am not quite understand about 7% loss, with this example, does it mean when your trade reach 0.78 debit x 7% = 0.054 loss , or 0.72 debit you will make adjustment? please clarify..
For NDX
I am not sure, but in my opinion, I saw the potential of getting profit compared to our risk is 1:4 and the potential profit area is too narrow, and yet if the implied volatility gets lower surely this will shrink our potential profit
here is the picture
is it a good trade? please correct me if I am wrong..
and still this is my opinion, need feed back
Please see my notes in red. Sorry for the delay in responding (work has been busy the last 2 days).
Allow me to ask something,
1. I saw JNJ Nov/Dec 09 is better with only 0.38 debit and potential of 0.50 profit then JNJ Nov / Jan 09 with the same potential but 0.78 debit. How about it?
I do not like going that low in the total debit because of commissions. Remember that even though you can do more contracts with a lower debit/risk, you are spending more in commissions. It all depends on what you're willing to risk/lose.
2. I am not quite understand about 7% loss, with this example, does it mean when your trade reach 0.78 debit x 7% = 0.054 loss , or 0.72 debit you will make adjustment? please clarify..
Yes it would be the 0.72 debit to make the adjustment (0.78 * 93%)
For NDX
I am not sure, but in my opinion, I saw the potential of getting profit compared to our risk is 1:4 and the potential profit area is too narrow, and yet if the implied volatility gets lower surely this will shrink our potential profit
For calendars, we typically look for a probability of at least 50% or higher (on TOS Analyzer is best place to see that). So upon entry, I saw that I had the potential to make $3800 over a risk of $7500 total on the trade. It's true that if volatility collapses or crushes, then so will our profit since calendars are vega positive. However, when I got in, I saw it at resistance near 1750, I figured we'd see some downward movement to counter that. Typically volatility increases on downward movements at major resistance lines because of fear in the market, so I wanted to take advantage of that.
here is the picture
is it a good trade? please correct me if I am wrong..
and still this is my opinion, need feed back
Sounds like a great plan. Let me know how yours goes and we'll compare notes in the end. It's always great to have options on trading options! (No pun intended) :P
I closed JNJ at market open with the volatility jump in the market from yesterday. Although I had time with this calendar, I felt it was a great time to exit and capture profit. I closed it for +20%.
I closed off my Nov/Dec 1800 calendar and left only my 1700 on for now until I see which way the market swings. If it continues downward today, I will add my second calendar again on the bottom side, perhaps around 1600 but we'll see. If it continues back up, then I will revaluate where NDX is at once I reach the top of my profit curve (white line on TOS Analyzer). Now that I made 1 adjustment I only have 1 more to go before I have to exit if I hit my 15% loss mark.
Also what a great return in a week on the JNJ trade!
Marjorie
Go to the Monitor->Activity and Positions page and look in the Position Statement area.
Click on one of your calendars, then hold down the Ctrl key and click on your other calendar. Now both should be highlighted.
Right click on either of these highlighted calendars and you will be offered a choice to Create Closing Order for this combination of both calendars.
(Note that this can be done for any combination you choose, but only up to 4 different legs.)
hth,
Mark
After my second adjustment today by putting back on the Nov/Dec 1800 upon bullish movement this morning, I am now looking to exit the trade and leg out by buying back my short Nov 1700 calls and leaving the long Dec 1700 call on just for a little while until before the market closes or when this bounce off support stops and turns down. I will close this trade and move on.