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Epsilon Options Trade Alert: 22 May 2013

22nd May 2013
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We will adjust our SPY calendar as SPY has exceeded its upper break even point. Hence, as per our trade rules, we will adjust. Trade Buy 10 SPY 170 Jul Calls Sell 10 SPY 170 Jun Calls Debit: $0.81 Total Cost (inc original trade): $1560 SPY is 167.17 now New Break even points: 161 and 171 Trade Management - Exit…

22nd May 2013
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Welcome once again to the Epsilon Options newsletter. A good week for our trades... The market is powering ahead, assisting our two covered calls on IBM and Microsoft. I expect the Microsoft covered call to expire well in the money at the end of this week, delivering us our planned 3-4%, including the dividend, over less than a month (not…

19th May 2013
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Option Greeks Part 2: Gamma What is Gamma? We saw in Part 1 that the Greeks are an important measure of risk to used by options traders to assess the impact in changes of certain variables on the price of an option. In particular we looked at one of these, delta: the sensitivity of option prices to changes in the…

17th May 2013
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You may have noticed that most posts and pages on the site have social media icons (Facebook, Twitter and Google+). So if you like something, an article perhaps or a trade alert, please do share with others in your network. At the very least I'd really appreciate it if you could like/+1 anything you, well, like. What's more you can…

15th May 2013
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Welcome everyone once again to the Epsilon Options newsletter. A few things to go through this week. We have a new trade: another SPY calendar trade and I’ve started a series on the Greeks. Details of both are below. The previous set of lessons on the Calendar Spread have been turned into an ebook for download. Get your copy from…

15th May 2013
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Option Greeks Part 1: Introduction & Delta Introduction In the world of finance, Greek letters are used to represent how sensitive a financial derivative’s prices are to changes in parameters. Financial derivatives can be volatile and sensitive to factors such as changes in the pricing of the underlying asset. Each character denotes the of sensitivity of an option's price to the…

14th May 2013
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As you know Calendar Spreads are a favourite strategy of ours in the sort of low volatility market we're in now. Think Money magazine's Spring 2013 has an excellent article on the Calendar Spread. Here's the link. Have you been reading Think Money? It's the quarterly magazine of thinkorswim, the options specialist broker now owned by TDAmeritrade. It's always full…

10th May 2013
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I've been itching to put on an at the money SPY calendar spread, like the one we put on a couple of months ago. I was waiting for volatility to fall a little more, but have decided not to be too greedy: the opportunity with the VIX at around 13 is too good. Here's the official trade alert for members…

10th May 2013
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We will put on another calendar spread on SPY, the ETF which tracks the S&P 500 index, as we did successfully in February. The market is quiet, with low volatility, and hence conditions are great for this type of trade. Should there be a fall in SPY, rising volatility should compensate for some/all of stock movement. As before our approach…

8th May 2013
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Calendar Spread EBook I've started turning the courses online into ebooks. The first one to be complete is our recent set of courses on the Calendar Spread. I've combined all 3 lessons into one 6 page ebook which you can download by clicking on this image. Chris [symple_box color="gray" text_align="left" width="100%" float="none"] Open Positions MSFT Covered Call Original Price: $28.71…

7th May 2013
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Welcome, again, to the Epsilon Options newsletter. A particular welcome to those of you who've joined recently (an Epsilon Options record: 31 since the last newsletter). This newsletter is mainly a round top of everything that's been going on on the site: trade alerts, new features, new course material etc The main news this week is that I've started a…

7th May 2013
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Open Positions MSFT Covered Call Original Price: $28.71 Price now: $29.00 (-$0.02 today) Unrealised Profit: $0.29 IBM Covered Call Original Price: $198.11 Price now: $197.45 (-$0.66 today) Unrealised loss: $0.66 Commentary A quiet day yesterday on Wall Street. The SPX meandered between 1614 to 1620 during the day, ending just 3 points higher at 1618. The VIX is continuing its…

5th May 2013
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Welcome to this, the first of my daily (or nearly daily) blogs. I decided that I wouldn't restrict myself just to the normal newsletters, articles and trade alerts and give you a more unvarnished view of what I think's going on. I'll keep you updated on the progress of trades, what I'm thinking of the market, including my thinking on…

5th May 2013
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IBM Covered Call Following our success with the MSFT trade we will put on an IBM covered call, hoping to capture their dividend too. The trade is low risk and should provide a 3% return over 46 days (24% annualised). Trade Buy 100 IBM Stock @$204.51 Sell 1 IBM June 200 Call @$6.40 Debit: $198.11 Total Cost: $19,811 Total Capital:…

23rd April 2013
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Welcome, again, to the Epsilon Options newsletter. A particular welcome to those of you who've joined recently. A short newsletter this week. We put on a new trade - a Microsoft Covered Call - timed with the completion of our series on Covered Calls (the final lesson, part 3, is available today). New Trades Microsoft Covered call We added a…

23rd April 2013
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Covered Calls: Part 3 In our previous lessons, we've learnt what a covered call is, how it can be used and how it is, unmanaged, riskier than many people think. Let's complete our covered call course, therefore, by looking at some risk management techniques: Risk Management Here are the key ways risk can be managed. Stop loss The first thing…

20th April 2013
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MSFT Covered Call We will put on a Covered call, following the outline in our Covered Call course. Microsoft has just reported earnings, which had a reasonable reaction, and hence should be low risk. As per our method, we will buy the stock and then sell an in the money May option, thus reducing risk. We have chosen Microsoft especially…

16th April 2013
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Welcome, again, to the Epsilon Options newsletter. A particular welcome to those of you who've joined recently. There’s been quite a bit of activity since our last newsletter. We managed to take our EBAY backspread off for $665 profit. We also put on an unusually short term trade (we prefer trades lasting several days/weeks) on the continued collapse in the…

15th April 2013
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Covered Calls Risk And so what’s the catch? Are covered calls really low risk? Let’s look at a the Profit & Loss diagram for this trade: Do you recognize the shape? It is exactly the same as a sold $450 put option. And because the P&L graphs are the same, it is exactly the same trade. This is a good…

15th April 2013
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Our bet on Gold's collapse continuing - see here - worked well. Almost too well. We bought 10 out of the money 138 Apr/May calendar spreads with GLD (i.e. gold) at 144.0 for $940. Well, overnight the price fell by 13.2 points to 130.8 (an equivalent to $132 off the gold price - the largest one day fall since 1980).…

15th April 2013
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We will buy an out of the money directional calendar as per our article. Buy 10 GLD May 138 Puts @ 1.49 Sell 10 GLD Apr 138 Puts @ 0.55 Total cost: $940 GLD: $143.95 We’ll remove the trade should the trade fall to $750 (20% loss) or rise to $1,200 (27% gain). Here’s the P&L graph.

Exploit Gold Collapse Using a Directional Calendar Spread

15th April 2013
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Gold Directional Calendar We have used the relative calmness of the gold price in the last 18 months to successful sell LEAP 'covered calls' This has been a good strategy for us, but we need to rethink in the short term: Gold (GLD) has been falling dramatically over the past few days. Let’s see if we can exploit any further…

11th April 2013
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EBAY Backspread - Sell Ebay has exceeded its profit target of $500. Trade Buy 5 EBAY 50 Jul Calls Sell 10 EBAY 55 Jul Calls Credit: $1.10 Proceeds: $550 Original net credit received: $115 Total profit: $665 A nice approx 27% profit on the $2385 capital on the deal.

4th April 2013
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Welcome to this week's Epsilon Options Newsletter. I hope you those of you celebrating Easter (or Passover) had a good break. Let's get back to the trading. As ever there's quite a bit to get through - updates on trades, new courses etc. Trades Review EBAY Backspread This trade is going well and is showing a $385 profit. Click…

4th April 2013
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Original Trade: 4 February 2013(click here to review): Adjustment: 14 March 2013 (click here to review): Position Now 10 EBAY 55 Jul Calls -5 EBAY 50 Jul Calls EBAY is $55.79 Original adjusted price: $0.22 credit Price now: $0.55 debit Unrealised profit: $385 Net capital required (incl margin): $2,405 Profit percentage: 16% Trade Management - Adjustments Remove trade if it…

4th April 2013
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WMT Calendar Spread - Sell WMT has hit its breakeven point of 75.6 and so we will take the trade off as planned for a $200 loss (20%, the usual setting for our breakeven points). Trade Buy 10 WMT 72.5 April Calls Sell 10 WMT 72.5 May Calls Buy 10 WMT 75 April Calls Sell 10 WMT 75 May Calls…

4th April 2013
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Covered calls Covered calls have always been a popular options strategy. Indeed for many traders, their introduction to options trading is a covered call used to augment income on an existing stock portfolio. But this strategy is more complicated, and riskier, than it looks. We’ll go through exactly what a covered call is, how it can be used, the risks…

25th March 2013
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WMT Calendar Spread - Adjustment WMT has hit its breakeven point of 73.9 and so we will adjust to form a double calendar as planned. Trade Buy 10 WMT 75 May Calls Sell 10 WMT 75 April Calls Debit: $0.50 Total capital employed in this and original trade: $980 WMT is $74.28 now New Break even points: $71.7 and $75.6…

21st March 2013
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Profit and Loss Diagrams Introduction One of the ways options traders analyse the profitability or otherwise of an options trade is via a Profit and Loss Diagram. We’ll use them throughout this course to show how certain trade set up make or lose money. These diagrams are simply graphs plotting the net profit/loss of an options position (on the y…

18th March 2013
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WMT Calendar Spread We will put on another Calendar Spread, this time using a specific stock: Walmart (WMT). WMT's options, like much of the market, have low implied volatility and should benefit from any increase in IV. This will follow our Calendar Spread approach outlined here. We will put half the trade on at the money now and then, should…

18th March 2013
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Welcome, again, to the Epsilon Options newsletter. A particular welcome to those of you who've joined recently. There’s been a longer than usual gap between this newsletter and the last one – newsletters will usually be weekly – and so there’s quite a bit to go through. Trades Review SPY Calendar We closed our SPY Calendar for a 15%…

13th March 2013
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EBAY has fallen to just below $50.98 and so we will move our backspread down: Original Trade Here was our original trade on 14 February. Buy 10 EBAY 62.5 Jul Calls Sell 5 EBAY 57.5 Jul Calls EBAY is $57.05 now (14 Feb 13) Credit: $0.19 Total Credit: $95 Margin: $2,500 Net capital required: $2,405 Adjustment EBAY is now $50.98.…

12th March 2013
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Calendar Spreads This is the third in a series of lessons on the calendar spread, an intermediate level options spread we introduced in Part 1 and Part 2. Recap of Part 1 and 2 A calendar spread involves selling a near term option and buying as longer dated one of the same type (call/put) and strike price (usually at the…

3rd March 2013
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As per our trading plan, we will remove our SPY Calendar for a nice 15% profit. Original Trade Here was our original trade I'm 4 February. Buy 5 SPY 150 April Calls Sell 5 SPY 150 March Calls Debit: $0.83 Total Cost: $415 SPY was $149.54 at trade entry Adjustment And then we adjusted on 20 February. Buy 5 SPY…

26th February 2013
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Welcome, again, to the Epsilon Options newsletter. A particular welcome to those of you who've joined recently. This week we will again review the performance of our active trades ( SPY Calendar Spread and EBAY Backspread). There was an adjustment trade alert for our SPY Calendar sent out in the week. Plus, just as I was about to send out a trade alert,…

26th February 2013
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Original Trade (click here to review): Trade Buy 10 EBAY 62.5 Jul Calls Sell 5 EBAY 57.5 Jul Calls EBAY was $57.05 (14 Feb 13) Credit: $0.19 Total Credit: $95 Margin: $2,500 Net capital required: $2,405 Trade Management - Adjustments Remove trade if it ever loses approx 20% (i.e. $500) Trade Management - Exit Exit if $500 profit is made.…

26th February 2013
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Original Trade: 4 Feb 2013(click here to review): Buy 5 SPY 150 April Calls Sell 5 SPY 150 March Calls Debit: $0.83 Total Cost: $415 SPY is $149.54 at trade entry Break even points: $146.0 and $153.8 Adjustment: 20 Feb 2013 (click here to review): Buy 5 SPY 155 Apr Calls Sell 5 SPY 155 Mar Calls SPY is $153.19…

19th February 2013
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SPY is near its breakeven point of approx 153.2 and so we will adjust to form a double calendar as planned. Our original plan was to put a new calendar on at $158 if required. However, due to falling volatility, we will have to put one on at $155 (otherwise the middle of our double calendar would 'sag' too much).…

18th February 2013
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Welcome, again, to the Epsilon Options newsletter. A particular welcome to those of you who've joined recently. This week we will review the performance of our active trades ( SPY Calendar Spread and EBAY Backspread). In addition look forward to receiving another trade alert over the next couple of days. My plan is to provide a new trade every week; but then we…

18th February 2013
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18th February 2013
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Original Trade (click here to review): Buy 5 SPY 150 April Calls Sell 5 SPY 150 March Calls Debit: $0.83 Total Cost: $415 SPY is $149.54 at trade entry Break even points: $146.0 and $153.8 Update: SPY price: $152.17 Price: $0.82 Total value: $410 Unrealised Profit/Loss: $5 Loss New Profit & Loss Graph: Commentary Despite a significant (over 2 points)…

14th February 2013
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Our second trade is an EBAY backspread to take advantage of any uplift in the economy over the next 3-6 months. There's a more detailed explanation of the rationale on the site here. Trade Buy 10 EBAY 62.5 Jul Calls Sell 5 EBAY 57.5 Jul Calls EBAY is $57.05 now (14 Feb 13) Credit: $0.19 Total Credit: $95 Margin: $2,500…

Using an EBAY Backspread To Bet On Economic Strength

13th February 2013
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The New Year has seen stock markets around the world rise on the back of encouraging signs for the US economy and a resultant switch from cash into equities by the large market players. Although we are mainly non-directional traders - we like to trade on non movement of stocks and/or volatility - we don't want to be too left…

12th February 2013
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Welcome, again, to the Epsilon Options newsletter. A particular welcome to those of you who've joined recently; we're fast heading towards 200 members which is fantastic. This week we will: - review the performance of our active trades (just a SPY Calendar Spread at present); - present the new courses available on the site In addition look forward to receiving another…

11th February 2013
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The following trades are active: SPY Calendar Original Trade (click here to review): Buy 5 SPY 150 April Calls Sell 5 SPY 150 March Calls Debit: $0.83 Total Cost: $415 SPY is $149.54 at trade entry Break even points: $146.0 and $153.8 Update: SPY price: $151.77 Price: $0.83 Total value: $415 Unrealised Profit/Loss: $0 New Profit & Loss Graph: Commentary…

11th February 2013
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This is the second in a series of lessons on the calendar spread, an intermediate level options spread we introduced in Part 1. Recap of Part 1 A calendar spread involves selling a near term option and buying as longer dated one of the same type (call/put) and strike price (usually at the money). We’d consider putting one on when:…

5th February 2013
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1.2 Uses of an Option Intro So now that we know what an option is, what are its uses? Why would we want to buy and sell these things? Here are the main ones: Insurance The main use for options, originally, was as insurance. If you are exposed in some way to price of a stock or (more likely in…

5th February 2013
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Welcome, again, to the Epsilon Options newsletter for all members of the service. Many thanks for those of you who've given feedback on the new site. The consensus seems to be you all like its look and feel, like the courses that have been put up there so far but want to know more about how the new trade alerts…

4th February 2013
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We will start our new Non-Directional portfolio with a calendar spread on SPY, the ETF which tracks the S&P 500 index. Our approach will be to put half the trade on at the money now and then, should SPY move, adjust into a double calendar (see below). Trade Buy 5 SPY 150 April Calls Sell 5 SPY 150 March Calls…

4th February 2013
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Intro Calendar Spreads are on of the key non-directional strategies used by options traders to make money in any market. They are used in low volatility environments when a stock is not expected to move much in the next month or so (depending on the length of the trade) and/or when its options’ implied volatility is expected to rise. What…

28th January 2013
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A quick update to yesterday's newsletter. A couple of you have contacted me to say that you were disappointed by the rather abrupt ceasing of trade alerts over the New Year. This was particularly an issue for those of you following the hedged put / LEAP call trades - which were still going. My plan had always been to start…

22nd January 2013
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Update The access detailed below has been changed: All Bronze members will now have access to the Trade Alerts and Courses until 1 July 2013. The paid Silver and Gold services will commence from this date. Chris Welcome to this special edition of the Epsilon Options newsletter. Today's the day when our pre-launch officially comes to an end and…

15th January 2013
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Iron Condor What is the iron condor? The iron condor is a strategy for options trading. It works by taking a total of four positions in the same underlying security (such as a stock) with all four coming due on the same day. Two of these are calls, meaning you have the right to buy the security at a set…

15th January 2013
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In this course we will be going through the basics you’ll need before you can start trading basic options strategies. There’ll be the following lessons: 1.1 What is an Option? 1.2 Uses of an option 1.3 Profit and Loss diagrams 1.4 Using an options broker 1.5 What is an option worth? How do you price it? 1.6 Introduction to some…

14th January 2013
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Welcome to this week's Epsilon Options newsletter. The last one before our full launch on 21 January. Next week's note will include full details of the new site, plus a great offer for you, the pre-launch members. I mentioned last week that courses will be a key part of the new service, and that I'd give a sneak preview of one…

4th January 2013
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Just 2 rolls today: GLD roll 4-Jan-2013 Buy to close GLD 4 Call 04Jan13 163 $0.01 Sell to open GLD -4 Call 11Jan13 161 $0.63 Total premium received: $248 MA roll 4-Jan-2013 Buy to close MA 4 Put 04Jan13 495 $0.05 Sell to open MA -4 Put 11Jan13 505 $3.06 Total premium received: $1,204 For those that are new here…

31st December 2012
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Welcome to this the last Epsilon Options newsletter for 2012. There are quite a few new members and so I thought this would be a good time to take stock on how we've gone in the last 6 months - since our July 'pre-launch' - and give a sneak peak on plans for 2013. Where are we now? We are…

22nd December 2012
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There are 2 rolls today: Buy to close 4 GLD 14Dec12 166 Calls @ $0.02 Sell to open 4 GLD 22Dec12 166 Calls @ $0.52 Total credit: $200 Buy to close 4 MA 14Dec12 485 Puts @ $0.60 Sell to open 4 MA 22Dec12 485 Puts @ $5.90 Total credit: $2,120 Chris

17th December 2012
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Welcome once again to the Epsilon Options newsletter. Things are going well as we head off into the New Year. The first thing to report is that the portfolio is now in profit (just) at $102,044. 2% profit after 6 months is not exactly stellar I realise but, given the poor performance of our IBM trade, this is pretty good.…

10th December 2012
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Welcome once again to the Epsilon Options newsletter. Firstly, a quick apology. We had a few technical problems and so the market alert didn't go out as planned on Friday. Hopefully those following the trades either worked out their own rolls; if not I'll go through what to do below. Secondly, as promised, all the past newsletters and trade alerts…

2nd December 2012
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Welcome once again to the Epsilon Options newsletter. We have quite a few members and rather than me go through from the beginning exactly what we are doing I thought I'd post many of the key newsletters on the website. Please do review the 'Newsletter Archive' section of the site when it goes up in the next couple of days.…

30th November 2012
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There are 2 rolls and an adjustment today. First, the weekly rolls: Buy to close 4 GLD 30Nov12 168 Calls @ $0.19 Sell to open 4 GLD 07Dec12 168 Calls @ $0.79 Total credit: $240 Buy to close 4 MA 30Nov12 480 Puts @ $0.40 Sell to open 4 MA 07Dec12 485 Puts @ $4.95 Total credit: $1,820 We're also going to extend, again, the downward breakeven on our…

26th November 2012
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Welcome once again to the Epsilon Options newsletter. Firstly Happy Thanksgiving to those of you in the US. As a Brit I'm not 100% sure of the background to the holiday (I have in my mind pardoned turkeys, pilgrims and the biggest shopping day before Christmas, but I'm sure there is more to it than that) but it seems a…

23rd November 2012
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Epsilon Options Trade Alert 23 November 2012 There are 2 rolls and an adjustment today. First, the weekly rolls: Buy to close 4 GLD 167 Calls @ $0.85 Sell to open 4 GLD 168 Calls @ $0.99 Total credit: $56Buy to close 4 MA 465 Puts @ $0.02Sell to open 4 MA 480 Puts @ $6.13Total credit: $2,444 We're also…

A new Gold LEAP call

21st November 2012
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As discussed in this week's newsletter, we plan to complete our 'Apprentice' portfolio. For those new to the site we are building a portfolio of four LEAP call and hedged put trades. We have two on at present on UNP and IBM; detail and rational below: IBM UNP Anyway, we want to add a third: a LEAP call on GOLD via…

19th November 2012
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Welcome, once again, to the Epsilon Options newsletter. A busy trading week to go through with both the monthly and weekly options being rolled. Plus I decided to bite the bullet on IBM and reset this trade. But first, a quick update on the site and the progress to the full subscription service. I'm spending a lot of my time with developers putting together what…

16th November 2012
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As it's the last day in the options month, there are 4 rolls today. Below are the trades. In addition I have decided to adjust the IBM position down to nearer at the money. Again see below for the hedge adjustment to make this happen. I'll have more on the reasoning for this in newsletter... Chris

12th November 2012
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Welcome, once again, to the Epsilon Options newsletter. Quite a bit to go through today: the Apprentice portfolio performance plus the much awaited return to the more complex 'Master' trades. I've included a detailed article on the first in a series of complex trades: a VXX broken wing butterfly. This will probably be going onto Seeking Alpha this week, but…

Use A Broken Wing Butterfly To Capture VXX’s Down Drift

12th November 2012
2 Comments

In September I outlined a strategy for hedging against market volatility for little cost; even being paid to do so. This involved buying a longish term VXX call backspread and taking off if VXX hadn’t spiked within 3-4 weeks of expiration. (NB the VXX underwent a 1:4 split in October and so the prices quoted in the article should be multiplied by…

9th November 2012
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Two weekly roll trades today: Buy to close 4 GLD 09Nov12 167 calls @ $0.80 Sell to open 4 GLD 17Nov12 167 calls @ $1.76 Total premium : $384 Buy to close 4 MA 09Nov12 465 puts @ $1.60 Sell to open 4 MA 17Nov12 465 puts @ $6.20 Total premium : $1,840 Chris

5th November 2012
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Welcome, once again, to the Epsilon Options newsletter. As you know there was no note last week as was having a very pleasant but hectic break in the South Pacific, attending a good friend's wedding. Much refreshed I'm enjoying getting back into battle... The break came at a good time for us review where we are too. We have recently…

2nd November 2012
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Two weekly roll trades today: Buy to close 4 GLD 02Nov12 166 calls @ $0.63 Sell to open 4 GLD 09Nov12 167 calls @ $0.97 Total premium : $136 Buy to close 4 MA 02Nov12 445 puts @ $0.10 Sell to open 4 MA 09Nov12 465 puts @ $5.25 Total premium : $2040 Chris

26th October 2012
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Two trades today: Buy to close 4 26Oct12 170 call $0.02 Sell to open 4 02Nov12 166 call $0. Total premium And now the MA trade. As with our current IBM position, we plan to sell at the money puts. The only difference is we will sell weekly puts. As a hedge we will buy a long term out…

24th October 2012
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As I flagged briefly in last week's newsletter I have decided to roll the IBM hedge we have to January 2014. If you remember we are selling ATM monthly puts against IBM to capture time premium. We currently have an out of the money hedge: a April 2013 180 put. I would like to roll this forward to January 2014…

22nd October 2012
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Welcome once again to the Epsilon Options newsletter, a weekly round up of everything that's been going on the site. Welcome too to those who've just joined. Please do drop me an email (addresses below) to introduce yourself. I plan to complete the Apprentice portfolio today by putting on our forth and final position on, but before doing that let's review…

19th October 2012
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Today's a busy day for us: a monthly expiry date where we have to roll all three of our current 'Apprentice' positions. The market has kindly given us a couple of tough decisions to make and so let's get on with it: GLD The simplest one first: roll the weekly GLD ($168.77) to just out of the money. Buy…

15th October 2012
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Welcome once again to the Epsilon Options newsletter, a weekly round up of everything that's been going on the site. Welcome too to those who've just joined. Please do drop me an email (addresses below) to introduce yourself. A reasonably quiet week this week. We rolled our GLD LEAP call trade for another $300. And I took on board your feedback (keep it…

11th October 2012
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A quick trade alert to roll our weekly GLD call. Buy 4 GLD 12Oct 175 calls @ o.04 Sell 4 GLD 19Oct 173 calls @ .0.79 Total credit $300 The underlying may move and if the total credit falls below $220 sell at a lower strike price. Chris

8th October 2012
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Welcome once again to the Epsilon Options newsletter, a weekly round up of everything that's been going on the site. Welcome too to those who've just joined. Please do drop me an email (addresses below) to introduce yourself. A couple of updates this week. First we added a third trade to our 'Apprentice' portfolio: a LEAP call trade in GLD. I…

5th October 2012
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5th October 2012
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As discussed in this week's newsletter, we plan to complete our 'Apprentice' portfolio. For those new to the site we are building a portfolio of four LEAP call and hedged put trades. We have two on at present on UNP and IBM; detail and rationale here: IBM UNP Anyway, we want to add a third: a LEAP call on GOLD via…

1st October 2012
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Welcome once again to the Epsilon Options newsletter, a weekly round up of everything that's been going on the site. Welcome too to those who've just joined. Please do drop me an email (addresses below) to introduce yourself. As discussed last week I've split our notional $100k into two lots of $50k: Apprentice and Master portfolios. The Apprentice $50k will…

Completing the ‘Apprentice’ portfolio

1st October 2012
7 Comments

Time to complete our Apprentice portfolio for those of you just starting out in your options education. We currently have a monthly hedged put trade (IBM) and a monthly LEAP ‘covered call’ (UNP); I’d like to put two more trades on over the next 10 days: a weekly hedged put trade and a weekly LEAP ‘covered call’. Then we will…

Auto trading?

1st October 2012
1 Comment

I've been asked by a few members about auto trading. For those who haven't come across this before, 'recommended' trades would be executed for real for members by us. In other words, when a trade alert comes out, such as the one the other day rolling the IBM puts, an order is sent automatically to a broker on behalf of clients.…

27th September 2012
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We will roll our Union Pacific (UNP) October calls to collect more premium. For those new to the site we currently own the following spread: 4 UNP Jan14 100 Calls (Current Price: $26.00) -4 UNP Oct12 125 Calls (Current Price: $0.72) The details of the original trade can be found by clicking here: The underlying has fallen to $118.92 and…

24th September 2012
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Welcome once again to the Epsilon Options newsletter, a weekly round up of everything that's been going on the site. Welcome too to those who've just joined. Please do drop me an email (addresses below) to introduce yourself. I suggest you take some time to familarise yourself with the site - and in particular the IBM hedged put and UNP…

How To Capitalize On Apple’s Subscription Model

20th September 2012
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This week Apple (AAPL) smashed through $700 despite what many commentators described as a disappointing iphone 5 launch. Why? And why is the new phone, supposedly only incrementally better than the 4S launched last year, selling so well? The reaction of technorati has been pretty overwhelmingly lukewarm to Apple's new product. There seems to have been a collective 'whatever...' from…

17th September 2012
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Welcome once again to the Epsilon Options newsletter, a weekly round up of everything that's been going on the site. We continue to add to our portfolio. We did a short term AAPL backspread to try to benefit from an AAPL bounce on the iphone5 announcement (which didn't come and we got out for a small $40 loss). We initiated…

17th September 2012
0 Comments

I'd just like to clarify the below trade alert. It is for those of you who are in the IBM hedged put trade: to roll forward your short Sep12 $195 put to the Oct12 $205 put. Here is the original article: http://www.epsilonoptions.com/exploit-boring-ibm-through-monthly-hedged-put-selling/ It should not be put on unless you own the Apr13 $180 put as per this article. Here…

Weeklies vs Monthlies

17th September 2012
0 Comments

I've been asked by a couple of members, by email and through our comments, about whether they should use weekly options rather than monthlies for our hedged put IBM trade. The short answer is that this is a valid strategy but I chose monthly cycles as they are easier to manage and I plan to do several of them (and don't…

Hedged puts vs LEAPs

17th September 2012
2 Comments

I've been asked a couple of times by members why we have used two different methods, hedged puts on our IBM trade but LEAPs on our recent UNP trade. Both rationales seemed the same: exploit a boring but rising stock over the long term. But we used one method from IBM (selling puts against a long term OTM put) and…

Twitter

16th September 2012
0 Comments

Epsilon Options now has a new twitter account: http://www.twitter.com/epsilonoptions. I know a few of you are having trouble noticing emailed trade alerts in time; therefore all trade alerts will also be posted immediately to twitter. Therefore follow our twitter feed and you will receive a tweet for any alert. Hope this will help. Chris

13th September 2012
0 Comments

Firstly, please ensure you have sold out of the AAPL back spread we put on earlier in the week (for around $0.04). It made a v.small loss ($40 on a $10k 'investment') which given the stock's drop is very good. Please find below a new trade alert below on Union Pacific Corp (UNP): Buy 4 UNP 100 Jan14…

Get on track with a Union Pacific LEAP ‘covered call’

13th September 2012
6 Comments

Many people’s first experience of options trading is the covered call. It’s a relatively easy to understand extension to normal stock investing: buy stock and sell out of the money calls to boost ‘income’. There are a few problems with the strategy though. As I’ve noted elsewhere its actually more risky than it seems; it has the same risk profile…

10th September 2012
0 Comments

Welcome once again to the Epsilon Options newsletter, a weekly round up of everything that's been going on the site. We continue to add to our portfolio. Our IBM hedge put selling has started well with the stock bouncing from its $195 low. And we believe we have a good chance to profit from any large AAPL bounce from the…

10th September 2012
0 Comments

Given the expected turbulence in the AAPL stock price (the reason for doing the trade) I thought I'd add a few guidelines if the stock opens significantly changed from our assumed $680. Here's the original alert: Sell 1 AAPL 14Sep12 700 Call Buy 2 AAPL 14Sep12 710 Call Cost: $80 Stock price: $680.44 Margin: $10,000 Should the stock…

High risk, high return trade on Apple iphone 5 launch

8th September 2012
6 Comments

Two weeks ago we outlined a strategy to take advantage of the expected increase in Apple (AAPL) implied volatility (IV) and realized volatility – ie large stock moves – before the expected iphone 5 launch, using a medium term at the money (ATM) straddle. This was successful – we made a 14% gain in about a week – but it…

There Are No Strategies For Making Extraordinary Returns With Apple Options

8th September 2012
1 Comment

The following appeared on Seeking Alpha as a response to another article claiming 300%+ consistent returns on trading AAPL. Please note (before you get too disappointed) that I still think large, even extraordinary, profits can be made trading options. I just found the article, especially it not explaining where the edge producing this return was coming from, simplistic. Anyway, here's…

VXX backspread

7th September 2012
6 Comments

It's come to my attention that the VXX backspread entry price from the 'How to Profit from September Volatility Spikes (And Get Paid Waiting For Them)' article last week was incorrect. We recorded this as a $180 credit; which has now turned into a $250 debit (i.e. a fantastic result: we get paid to 'buy' back our credit position). I…

3rd September 2012
0 Comments

Welcome once again to the Epsilon Options newsletter, a weekly round up of everything that's been going on the site. There's been quite a bit of activity and so let's go through what's been going on: Performance tracking: There is now a performance section which gives the (at present) weekly update on how our $100k 'portfolio' is tracking. A summary…

3rd September 2012
0 Comments

Please find below a trade alert below on IBM: Buy IBM 5 Apr13 180 puts @ $8.38 Sell IBM 5 Sep12 195 puts @ $2.94 IBM at $194.85 Cost: $2,720 Margin: $7,500 Total cash outlay: $10,220 Please click link to background article below:

Exploit ‘Boring’ IBM Through Monthly Hedged Put Selling

2nd September 2012
12 Comments

Regular put selling, with a twist, is our favorite strategy for stocks we think are going to do well in the mid to long term; stocks which would also make good covered call trades. International Business Machines (IBM) is one such great covered call candidate; but we are going to use a hedged put sale instead. Why IBM? Before going…

How To Profit From September Volatility Spikes (And Get Paid Waiting For Them)

1st September 2012
0 Comments

With the CBOE measure of market implied volatility (VIX) at all time lows despite so many potential risks (Europe, Presidential Election, QE etc) the "obvious" trade has been long volatility. Unfortunately this has been a losing trade for months as the VIX has gone lower and lower. So why is this? And can we play it differently armed with this…

Should we still own Apple Volatility?

28th August 2012
0 Comments

Last week we suggested that you should buy low Apple volatility. Having proved largely correct we should revisit our rationale. Are the reasons we outlined still valid? Have any of the fundamentals changed after a pretty tumultuous week, even by Apple's standards? For those who didn't read our article we argued that volatility was a buy as: VXAPL, the VIX of…

27th August 2012
0 Comments

Welcome to this, the first Epsilon Options newsletter. We're building up to our official launch later in the year and invite you, our pre-launch subscribers, to use the service in the meantime. The weekly newsletter will summarise what's been going on on the site, include further analysis and articles and, most importantly, review the progress of any trades we have on.…

Buy Apple’s Low Volatility Before iPhone 5 Launch

21st August 2012
4 Comments

The implied volatility of options on everyone's favorite stock, Apple (AAPL), is trading at a near all time low. VXAPL, the so-called VIX of AAPL, is around 22% at the time of writing, the lowest level for 6 months. The last time it was this low, in January 2012, VXAPL didn't stay there for long (see below). Will…

Trading portfolio ground rules

7th August 2012
2 Comments

Let's discuss the options portfolio we are to put together and paper trade over the next few weeks and months. Amount 'traded' We will 'trade' $100,000. Why $100,000? Well this gives us lots of room to do several trades within our portfolio. Higher priced stocks such as AAPL and GOOG have high priced options (some over $10k per contract)…

Options Adjustments: Beware the Song of the Martingale

11th July 2012
0 Comments

The Epsilon Options Approach

10th July 2012
0 Comments

I thought you'd like a bit of a background about our approach, and why I came up with it. Basically I was dissatisfied with the options services available and thought a slightly different approach was needed. Don't get me wrong, there are some great options services out there. I've tried quite a few of them and indeed am a member…