[quote=TexasRep][quote=NASD Newbie]

I generally favor doing nothing if the stock is above the call strike and below the put strike--by doing nothing you're assured that you will be assigned exercise notices on both sides of the trade but the commissions will be only $8 on buy and $8 plus a few cents for taxes on the sell.

Then sometime Monday or Tuesday you can put the legs down again.

Right now the August contracts seem to have about 76 to 77 points available for a sixty point combo--370/430 or 380/440

Not as good as last month, but perhaps by Monday things will have changed.

I think I will be less aggressive with the August contracts, at least initially because the one thing you know is going to happen is it will run one way or the other after earnings.  Prudent man stuff would say to have very wide combos--instead of sixty points maybe 80 or even 100.

Then wait for the move--cover the losing option which will be expensive but will have gone much deeper in the money which squeezes out the time value.  Pay for most of it by writing one that narrows the strike price differentials.

[/quote]

lets say you're wrong (wait, can that happen?) about GOOG and earnings come out big after you've written 10 and 10 on the 370/430-- GOOG zooms towards 450-ish:

explain your reaction:
....cover the losing option which will be expensive but will have gone much deeper in the money which squeezes out the time value. 


then:

Pay for most of it by writing one that narrows the strike price differentials.

[/quote]

If the stock is in the 450 range the option that will be "killing me" is the 370 call.  It will be worth about 85--80 points intrinsic value, 5 points time value.

The 380 will be worth about 8 points less--so it could be sold and you would have spent 800 to save 1000, a 25% return on the 800.  The 390 would probably be worth about 15 less--so you spend 1500 to save 2000 which is a 33% return on the 1500.

I am not wild about doing that because of the whipsaw that seems to occur in these volatile issues--next thing you know the stock is back below 390 and you didn't save at least 2000 with the 1500 you threw at it.

Remember I'm talking about a single option here--if you do two of them everything doubles and so forth.

For my money a better strategy is to simply pull the entire position up.  Let's assume the stock is at 450 as you suggested.

Buy back the deep in the money call for a huge loss, but buy back the now out of the money put for a huge gain--then assume essentially the same risks as you had before but at different points by selling a 400 call and a 460 put.  Those two sells will not bring in as much as you had to pay to get out of the earlier two positions--but it's not working out so you're going to take a loss in that you won't be able to make as much as you figured you would initially but you're still making money.

In other words if you sell a 60 point combination for 77 and have to roll it up for, say, 5 you're still selling a 60 point combination for 72 and that's not all bad.  Especially since the first one didn't work.

If you were willing to roll the position out as well as up you should be able to bring in even more money--but you take on the exposure for more time as well.

are you going to wait until after YAHOO announces?

Spent the day day-trading--lots of volatility.  At the end of the day I am short ten July 380 calls and short six July 440 puts--net short 400 shares with fingers crossed that it pulls down tomorrow and I'll cover some of the calls.

It gets fun in the last week--earning due Thursday after the close--they do that on purpose.  It killed me in October of last year--huge gap in after hours--can't recall, maybe 40 points in the after hours session.  I was on a plane.  Screwed but not in the mile high club.

[quote=NASD Newbie]

Spent the day day-trading--lots of volatility.  At the end of the day I am short ten July 380 calls and short six July 440 puts--net short 400 shares with fingers crossed that it pulls down tomorrow and I'll cover some of the calls.

It gets fun in the last week--earning due Thursday after the close--they do that on purpose.  It killed me in October of last year--huge gap in after hours--can't recall, maybe 40 points in the after hours session.  I was on a plane.  Screwed but not in the mile high club.

[/quote]

GOOG treading water before earnings- ?

what are you doing today?

I'm out--with more than the 18 points that I anticipated because I covered some of the puts before it came down.

I covered the calls this morning, and then started to short the stock at various levels to cover the naked puts that are still out there.

It will be put to me this evening at 450--but I ended up with a bit more than $20,000--but that's a short term gain.

So I'm flat right now--will wait till Monday or Tuesday to put some August legs down.

It's Monday and for those who are following along.

Legged into seven August 380c and 450p for a total credit of 84.60.  Plan to do a total of twelve

It was scary because the stock was steady to up in the premarket, got weak before 10 AM, tried to rally but failed, got even weaker around 2:30 and than finally got in line with the soaring Dow after 3:30.

I was lucky today, but as they say "I'd rather be lucky than good anytime."  I must have entered and cancelled at least 40 orders.

Legging into these thiings is always challenging.

Just an update for those who are following along--covered the short combination today at an average of $74.20--not as good a month as July, netted a bit less than ten grand--but a few days ago it looked like netting nothing when the stock was in the high 360s.

The stock is settling down a bit, and the premiums are coming out of the options.  It looks like I'll be lucky to get $80 for a 70 point combo for September--still bearish in spite of what happened today.

Been through too many bull traps.

Here we are a month later and it's getting to be time to move the September combos.

October will be earnings season so the Oct contracts have some pretty good water in them.

Here's a good idea--called a strap.  Write 20 Oct 350 calls for a total of $70,000 and also write 10 Oct 400 puts for a total of $27,000.

You'll have $97,000 in your account.

If the stock plunges on earnings you'll have to buy 1,000 for $400,000 but you keep the $97,000 so your cost will only be $303,000 or $303 per share--it's at 378 right now.  It hasn't been as low as 303 this year.

On the other hand if the earnings come in strong and the stock soars you'll have to sell 2,000 for $700,000.  You keep the $97,000 so you'll  have $797,000 to buy the shares, or $398.50 per share.

Now clearly that is a risk--so place a stop order at $400, but hope you don't get whipsawed.

Finally what's the maximum gain?  Well if the stock is at $350 on the third Friday of October you will have to buy 1,000 for $400 which you can sell for $350--that will cost you $50,000, but you get to keep the $97,000 so you're going to be ahead of the game by $47,000 or a bit more than $10,000 per week while you wait.

What you can do while you wait is play around with the message boards--just have your Fidelity Pro Trader alerts turned on and spend the day posting on this forum.

Newbie did you realize that you could actually be a valued and productive contributor to this forum if you managed to limit your posts to topics about which you had some knowledge?  Some useful contributions?  Instead of editorializing on use of emoticons and people’s spelling, and trying to be a lawyer?  ::rolls eyes::

And you talk all the time about how (you think) people paint a picture of my from my postings…