CTXS Bullish Diagonal
CTXS dropped on Monday, then went up each day the rest of the week finishing the week up about 1/2 point. On Thursday I uncovered the diagonal after 2 up days with MACD up.
Currently the CTXS diagonal has a profit of 3%.
CTXS PCCRC
There were no adjustments to the CTXS PCCRC position last week. The PCCRC shows a profit of 7% based on an original debit of $2435.
Posts
2 comments:
I note that the May 85 option closed just about ATM. Why do we buy the May 85 back when we sell the June option (1 week before expiration) as we have 2 Sept back month options to cover?
Can you advise the various option prices for entry exit as I am interested in the PCCRC methodolgy.
Tom
Tom,
If you did not buy back the options expiring in 1 week when selling the next months options you would increase the risk of the trade for that week. Gamma would be 6 times higher on the CTXS trade. You would essentially have a calendar type position that would be very sensitive to price moves. You would also eliminate one of the features of the PCCRC, the huge profit potential if there is a sudden gap up or down, as there is no unlimited profit to the upside or downside in a calendar, only increasing losses.
When I enter a PCCRC it first has to pass the screener I have for PCCRCs. Then I check the news to see if the company has raised guidance or outlook. I also check to make sure IV of the potential long options in the trade is between 25 and 40. I also make sure there is no more than a 2% IV skew between the short and long options. If all those checks pass then I set up the trade at the mid price and adjust higher from there until it fills. On exit I also start at mid and go lower until it fills. If I have trouble getting a fill I sometimes pass on the trade as slippage can eat too much of your profits.
Post a Comment