Comments on: Delta And The Moneyness of Options https://www.thebluecollarinvestor.com/delta-and-the-moneyness-of-options/ Learn how to invest by selling stock options. Fri, 08 May 2015 11:13:52 +0000 hourly 1 By: Alan Ellman https://www.thebluecollarinvestor.com/delta-and-the-moneyness-of-options/#comment-22922 Fri, 08 May 2015 11:13:52 +0000 http://www.thebluecollarinvestor.com/?p=10277#comment-22922 Running list stocks in the news: CRUS:

Cirrus Logic reported a stellar 4th quarter earnings report on April 28th, beating market consensus by 40% ($0.66 EPS compared to expectations of $0.47). As a result guidance was also elevated through the 1st quarter, 2016. CRUS is a key supplier of sound technology for Apple Computer and 78% of the 4th quarter revenues came from its relationship with Apple. This may be a concern to some and a bonus to others.

Our premium running list shows that CRUS is in the “Chips” industry currently ranked “A”, has a Scouter Rating of “7”, a beta of 0.79, weekly options available, adequate open interest for near-the-money strikes and a projected earnings report date of 7-23-15.

Have a look at the beautiful technical chart since December, 2014 when the 20-d ema crossed the 100-d ema (green arrow). CLICK ON IMAGE TO ENLARGE & USE THE BACK ARROW TO RETURN TO BLOG.

Alan

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By: Alan Ellman https://www.thebluecollarinvestor.com/delta-and-the-moneyness-of-options/#comment-22901 Wed, 06 May 2015 21:59:00 +0000 http://www.thebluecollarinvestor.com/?p=10277#comment-22901 ETF Report & the 10% guideline:

This week’s 6-page report of top-performing ETFs and analysis of ALL Select Sector Components has been uploaded to your premium site. The report also lists Top-performing ETFs with Weekly options.

NOT A PREMIUM MEMBER? Check out this link:
http://www.thebluecollarinvestor.com/membership.shtml

***With the markets declining the past 2 days many of us closed our short option positions using the 10% guideline since we are in the 3rd week of a 4-week contract. Nice work. Since most positions were impacted by overall market sentiment rather than specific stock news, rolling down to a lower strike seemed to have been the follow-up strategy of choice based on emails I have received. To those who closed the short positions but did not roll down or sell the stock, waiting to see how the market opens tomorrow before deciding on a definite plan is not unreasonable. If there is a strong rebound, hitting a double is unlikely but possible.

Alan and the BCI team

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By: Alan Ellman https://www.thebluecollarinvestor.com/delta-and-the-moneyness-of-options/#comment-22898 Wed, 06 May 2015 19:32:04 +0000 http://www.thebluecollarinvestor.com/?p=10277#comment-22898 In reply to Pos.

Pos,

The percentage of ITM strikes I use is based on 3 factors:

1- Overall market assessment
2- Chart technicals
3- Personal risk tolerance

The more bearish or volatile the market conditions are, the higher the percentage of ITM strikes and vice-versa. I am currently at 50% ITM but that may increase or decrease depending on market action Thursday and Friday. This percentage will be archived at the end of our weekend blog article and in our Premium Member Stock Report.

Using all ATM strikes is not appropriate in my view.

Alan

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By: Pos https://www.thebluecollarinvestor.com/delta-and-the-moneyness-of-options/#comment-22897 Wed, 06 May 2015 19:25:34 +0000 http://www.thebluecollarinvestor.com/?p=10277#comment-22897 In your newsletter you regularly mention the trend followed by the selection of covered call strike, whether ITM, or OTM.
When selecting the ITM strike, during the period when the trend is bearish, how many strikes ITM do you select as a general rule?
Could one be content with just doing the ATM covered call, irrespective of the trend?

Many thanks
Pos

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By: Alan Ellman https://www.thebluecollarinvestor.com/delta-and-the-moneyness-of-options/#comment-22886 Tue, 05 May 2015 21:43:41 +0000 http://www.thebluecollarinvestor.com/?p=10277#comment-22886 In reply to Mike.

Mike,

I rarely turn to inverse ETFs although it would have been a good idea in 2008. Even on down days like today the market usually recovers quickly. My main go-to strategy in short-term bear or volatile market conditions is to use in-the-money strikes that give additional downside protection. I am currently using 50% in-the-money strikes as I have been stating for the past few weeks. The Complete Encyclopedia…has over 50 pages of exit strategy material which I expanded on from my first book. You can also use the google search tool at the top of our web pages for free articles on a myriad of topics.

Alan

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By: Mike https://www.thebluecollarinvestor.com/delta-and-the-moneyness-of-options/#comment-22885 Tue, 05 May 2015 21:40:51 +0000 http://www.thebluecollarinvestor.com/?p=10277#comment-22885 Alan,

How do you use covered calls in a bear market? Inverse ETF’s? With IV as low as it is, it’s difficult to sell options for any adequate premium. If you have addressed such questions, just direct me to the video.

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By: Alan Ellman https://www.thebluecollarinvestor.com/delta-and-the-moneyness-of-options/#comment-22866 Mon, 04 May 2015 16:04:48 +0000 http://www.thebluecollarinvestor.com/?p=10277#comment-22866 In reply to Hai.

Hi Hai,

As you can see in our latest stock report, we are on the same page with the 5-20 projected earnings report date. In these reports, we break down eligibility by CONTRACT MONTH not calendar month. The May contracts expire on 5-15 so CRM is eligible for the May contracts but will not be eligible for June contracts until the report passes. Please also note the black line in the “running list” between RAX and CRM delineating eligible stocks between the May and June contracts.

Alan

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