New PCCRC in Hasbro

HAS PCCRC

I opened a new PCCRC trade today in Hasbro. HAS showed up in my screener this morning after posting earnings, raising guidance, and jumping >10%. Below is the screener I have set up in Thinkorswim:

The last criteria above 30 is to weed out low priced stocks. The volume > 1,000,000 is to find options with good liquidity. One caveat is I also check Yahoo finance to verify the average 3 month volume is over 1M as on earnings day the volume is usually higher, so the screener may find something that I will not trade after checking Yahoo finance. The volatility index is between 25 and 50 although IV's over 40 are usually too high, but I leave the screener at 50 (which is for stock IV) and then check the individual options IV. Last the % change is > 10%. This will find stocks that could continue to rise giving the position delta profits and also find stocks whose IV has fallen alot with that price spike, giving the opportunity to buy low IV. Here is a 1 year daily chart with the downward IV spike circled.

Here is the trade I made:

I have a nice positive IV skew between the front and back month options giving me a good 1:1 risk/reward ratio. Most PCCRC's have a r/r of 2:1. I usually buy the strike below ATM as that gives the stock a little room to drop without hurting me (this is a positive delta position). Theta starts out slightly negative, although that will turn positive over the first month. Vega is positive which is why I have been trading some condors to offset the PCCRC's Vega. The front month options need 21 days or more left so I chose March and the back month options need > 90 days left which is why I chose July. I want more than 90 days so the back month expires after the next earnings date giving me the chance to get the full benefit of IV rising into the next earnings if I stay in the trade that long. The plan is to evaluate the trade one week prior to when the short options expire (Mar 12) and rollout the shorts one month if the trade is working. Other adjustments are to lock in profits if the stock rises enough, or if Vega rises, lock in profits by closing the trade.

This trade was down 2 % today.

SPX Monthly IC

The SPX monthly IC was up 6% today despite SPX going the wrong direction (down 9.45 to 1056.64). Theta is really starting to help this one and hopefully I will hit my profit target this week. The goal was to be out in 14 days but with the 2 adjustments it will take longer (this is day 18). The only danger is the downside where I will only look at doing something if SPX breaks 1030, which I don't believe is likely.

FDO PCCRC

FDO was up 0.39 to 31.45, yet the position, which right now is negative delta, was up 3% for a total of a 6% gain. So this one finally is looking better as IV is turning around.

AAPL and CREE PCCRCs

These positions were both up early in the day but fell when the market tanked later in the day. AAPL was down about 1% and is down 2% overall while CREE was down 1 % and is up 6% overall.