The Ni's Trading Journal

The_Ni · December 19, 2022, 10:03pm

Vega play around FOMC/CPI

Played around with a calendar spread last week to take advantage of IV shenanigans around CPI+FOMC+opex, journaling that here.

Setup

The IV for options expiring last week were extremely high (below), where calls and puts expiring on Friday were very close in value to those expiring on Monday.

IV had jacked up the premium to account for a wide range of movement from CPI+FOMC. This set up a nice vega play.

My bet was that on Friday, there would be sufficient IV crush that the extrinsic value would decline to result in a nice spread between the Fri (12/16) and Mon (12/19) options. Theta would also hopefully contribute, as at that point it was 0DTE vs 3DTE.

Dec 12, 10.05am

I got 395C calendar spreads for 0.08 and a 393P calendar spreads for 0.19. They were both 5DTE/8DTE spreads.

As we can see below, the potential returns were astronomical if the market ended up in the goldilocks zone. I didn’t really expect it to be dead center in that zone, but as long as SPY ended up over 375, I was going to be ok. SPY was at ~394.50 when I took these trades, so it seemed like a very safe bet.

Dec 14

Closed half the spreads right after FOMC. Calendar put spreads closed at 2.42pm for 0.40 (buy price 0.19), and calendar call spreads closed at 3.39pm for 0.25 (buy price 0.08). IV had done down some, but not too much. Still, was able to recover initial capital and then some. Plan was to hold the other halves into EoD Thu or maybe even Fri to see how much I could milk out of this.

Dec 15, 3.03pm:

Closed out the other half of the 0.19 put calendar spreads for 0.50. SPY was at the 389 handle, so the 393P was ITM, and didn’t want to deal with assignment overnight.

Dec 16, 9.41am:

Closed out the last of the 0.08 call calendar spreads for 0.24. 395C were deep ITM as SPY opened at the 385 handle. Deep ITM calls don’t do the extrinsic decay thing that well, so returns were much less than it could have been as a result of SPY crapping 4% in 2 days…

Reflections:

Can’t complain about the results, though they could have been so much better had SPY not moved so much - 200% return on the calls, and 136% return on the puts.

I wasn’t sure how this would work out and how much I’d have to actively manage it. Seemed to work reasonably well and management was low effort, so will share the setup as I enter it, next time.

The_Ni · December 19, 2022, 10:12pm

Picked up a pair of broken wing butterflies today, one on the call side and one on the put side. Bet is that SPY will move up to 1% in one direction or the other tomorrow, at some point during the day.

Thing will work out as long as SPY stays between 374 and 384 tomorrow. We closed right at 380. I don’t plan on holding this 1DTE setup till end of day.

The_Ni · December 20, 2022, 8:12pm

Closed out the 0.10 call leg for 0.57.

The 0.12 put leg is worthless for now, so net return is 159% at this point.

The_Ni · December 20, 2022, 8:56pm

CCL Calendar Spreads

Following @TheHouse’s lead, taking positions into CCL earnings tomorrow.

IV is jacked, so calendar spreads make sense.

Got 12/23 - 12/30 6.5P spreads for $0.02 and 9C spreads for $0.06. (The commissions were annoying on these penny buys =P)

The_Ni · December 20, 2022, 9:13pm

SPY Broken Wing Call Butterfly

Took another call butterfly for tomorrow. No puts this time. Market seems to like this floor we have going.

The_Ni · December 21, 2022, 9:52pm

I messed up this broken wing call butterfly play bad. The morning started great. Got distracted with work, but I figured market was moving slowly enough that I could check back in in an hour. When I did check back, SPY was up sharply, and I was deep in the red. Limit sell order didn’t hit along the way as there’s a theta component to the broken wing butterfly - the values I was targeting were afternoon values. Was counting on a retracement but that never quite came either.

All in, I lost about 1000% of the initial trade value. Did buy back on one of the local dips at 0.90. Initial cost was 0.11. This represents about 3% of my play portfolio =/

I did manage to win back about 30% of the loss with futures, playing /MES, and that took chunks of time out of the post-lunch session.

Lesson? Shouldn’t be playing these fast moving setups when I can’t keep an eye on things pretty regularly =P

The_Ni · December 22, 2022, 4:13pm

KMX Put Calendar Spread

Carmax had pretty bad earnings, yet prices are up 10% after falling 15%.

12/23 Dec IV still jacked compared to 12/30:

Took this calendar put spread for 0.20:

Best case scenario is we close above $50 this week, and then drift lower next week.

Edit 1/9: This expired worthless. KMX continues to show incredible strength, in the face of mediocre earnings.

The_Ni · December 29, 2022, 8:48pm

Took a looooong 8/16/23 (230DTE) VIX 23C/29C call spread:

Something should go bump in the next 8 months, right?

This is sort of like a base position so that I capture any increase in volatility in general.

The main downside of this long DTE is the returns; oddly enough, anything beyond April seemed to have the same cost basis of around 2 per contract.

Will play vol more closely with shorter DTE when it actually happens. Setting limit sell at 3.00.

The_Ni · January 9, 2023, 8:51pm

SPY 400C Calendar Spread

1/13 IV is 27% and 1/17 IV is 22% because of CPI on 1/12, so got a 400C calendar spread. Bet is to benefit from both market going up, and/or IV crush. Will shoot for similar put spread tomorrow if market is green again. Small position.

The_Ni · January 11, 2023, 8:40pm

SPY Diagonal Calendar Spreads

Got two diagonal calendar spreads to take advantage of the IV spike associated with the CPI print coming out tomorrow.

The put spread for $0.01:

The call spread for $0.02:

The simulator is not that great at handling differential IV crush on different legs, so the returns are not as glamorous as it makes it out to be, but manual checks suggest this should come out positive.

The central argument for this working is that the change in delta (both around 0.3x), if there is a major move, will still be more than offset by the massively high theta of the 1/12 short leg (-3.x) vs the sane theta on the long leg (-0.4x):

This is mostly for science at the moment; let’s see how it goes.

The_Ni · January 12, 2023, 9:10pm

1/12 vs 1/17 put spread closed out for 0.40 and call spread closed out for 0.71.

IV crush is a wonderful thing:

vs

The_Ni · January 13, 2023, 7:58pm

Took this double calendar spread to play NFLX earnings on 1/19 for $3.52:

1/20 (93% IV) vs 1/27 (75% IV)
320P put legs
355C call legs

The max profit and range over which this trade shows green is way off in the simulator - manual adjustments suggest a 50-100% return is possible, unless NFLX knifes more than 5-7% in either direction. Best outcome is for it to end somewhere in the middle of $320 and $355 post earnings, so that the short legs expire worthless next Friday.

I’ve left a bit more room on the calls side (22 points) vs put side (13 points) as NFLX has been on the move up recently. And it’s the responses to the previous two earnings were also positive.

The_Ni · January 13, 2023, 8:44pm

Closed the 0.25 calendar spread for 1.0 (300% return). This was the last of the CPI plays, and was put on on Monday.

Since this was a 400C/400C spread, best returns would occur when we close very close to but just below 400. Which we seem to be doing.

Timing worked out well. Could have squeezed a few more cents out maybe, but let limit sell do it’s thing, with 17 mins to spare.

The_Ni · January 13, 2023, 9:14pm

Shorts on 3 shitcos

Took the following near the end of the day:

MULN 1/20 0.5P for 0.16
BBBY 1/20 3.5P/2.5P debit put spread for 0.53
CVNA 1/20 6.5P/5P debit put spread for 0.50 (overpaid for this…)

Relatively small positions, betting lunacy stops next week. Especially if one of these goes bankrupt over the long weekend

Edit 1/20 - noting exits:

MULN for 0.23
BBBY for 0.10
CVNA for 0.21

Gah.

The_Ni · January 20, 2023, 11:18pm

Took the following, to keep experimenting on calendar spreads. Expecting them to benefit from IV changes around earnings.

Double calendar spread for $LMT Tue, Jan 24 earnings for $2.85
Double calendar spread for $GE Tue, Jan 24 earnings for $0.69
Double calendar spread for $MSFT Tue, Jan 24 earnings for $2.30
Double calendar spread for $TSLA Wed, Jan 25 earnings for $3.03
Double calendar spread for $LUV Thu, Jan 26 earnings for $0.43

The_Ni · January 20, 2023, 11:28pm

The setup for this was almost perfect, yet a series of events botched things. Sold around noon for $3.85 (+9%) instead of almost 100% yesterday =/

This spread was at ~$7 at close yesterday. NFLX moved right into the middle of the range I’d chosen, almost perfectly splitting the strike of the wings of $320 and $355. For these, we want the price to be closer to one of the strikes.

The spread opened today around $5.50 but the shorter legs still had ~$1 in them total, and wanted to see if I could squeeze at least that $100 more out per contract as they expire worthless at the end of the day.

Yes, that $1 evaporated, but so did the IV on the long leg. End result was ending up almost where I started.

Kinda annoyed, but this still proves that calendar spreads can work and are relatively low risk. Need to get much better at the strikes of the wings, and when to get out.

The_Ni · January 23, 2023, 7:13pm

Liquidated this for 9% loss as TSLA moved too much today, blasting through the 125/140 range. Extrinsic evaporating as 125P goes far OTM, and 140C goes increasingly ITM. Earnings are Wed AH, so will reposition tommorrow morning, if possible.

The_Ni · January 23, 2023, 9:45pm

Got this bearish put spread for April '23 for $2.50. Counting on SPY revisiting the 380-level lows sometime in the next 3 months. Since we touched SPX 4000 again and VIX is quite low, seemed like a good day to get this.

The_Ni · January 24, 2023, 8:04pm

Closed this out for 0.70, now that earnings are behind us. For a scratch.

Key to these calendar spreads is the price is somewhere between the call and put legs, to take max advantage of IV crush. Strike is at $80 already vs call leg of $79, so the extrinsic that gives these calendar plays the juice is much reduced. GE also low IV, which doesn’t help. So closing out instead of waiting.

LMT earnings are done too, but waiting on those as strike is between legs, and IV is still ok.

The_Ni · January 25, 2023, 6:00pm

Closed MSFT earnings calendar spread for $3.00 (+30%).

Closed LMT earnings calendar spread for $3.75 (+32%).

Just a regular SPY vertical put spread, but closed for $3.00 (+20%) as it feels like there’s still some gas left and I can get back in again later for this April expiry.

The calendars are working out well so far. Confirms that I’m almost certain to get all of initial capital back, though for both MSFT and LMT moved too close to one of the legs or even passed through it, so the extrinsic “fat” is less than it could be.