Tony B: Katie, we're back!
Katie: And at a new time. Back to Cool.
Tony B: At a new time, 2:00 o' clock, Central Standard Time. This is our new permanent home.
Katie: I know.
Tony B: Until things change.
Katie: Yeah, of course.
Tony B: We only have a 15-minute segment and normally we have 20 to 25 minutes.
Katie: Okay. Less talky, more trade-y?
Tony B: Less… [chuckling 00:00:27] Less talky, more trade-y.
Katie: [laughing 00:00:27]
Tony B: Let's take a look at your count. I think you were up around $50 or $70 bucks at one point today. I think you were down $10, $20, up about $60. As the market goes a little bit lower, your account actually goes a little bit higher 'cause you have some short deltas. Let's go to Dough for just a quick second. I haven't used it in a while and I want to show it to you. Go to the portfolio. Tab, and then click on the arrow that's pointing sideways. It looks like those numbers are all off. Sorry, that one right there. Your probability of success is all mixed up because we have some…
Katie: Different expirations [crosstalk 00:01:09]
Tony B: Different expirations all mixed up, so why don't we do this really quickly. Just click right there, click it one more time. Now, just click all the ones that have twos to them, get rid of that. It's going to bring your overall account to a probability of success around 40%, 41%.
Katie: Mm-hmm (affirmative).
Tony B: It's going to have your theta decay around $1,700 bucks or so. That's not going to change by un-clicking all of these. That'll refresh in a moment. Put a circle right there as %41, if you can put a circle around that public profit around %41. We'd love to have that number above 50, more towards 60.
Katie: Of course.
Tony B: The reason why it's not, if you can circle the short 217 deltas down in the right where it says Selected Options Delta. You're short about 216, 217 SPY-weighted, beta-weighted deltas in your overall account. We need to do something to get yourself a little bit lower.
Katie: Okay.
Tony B: Okay?
Katie: [inaudible 00:02:03]
Tony B: Let's go to TOSS for a quick second, and just the monitor tab. You'll notice that FCX as your largest short position. FCX was something that I wanted to be long.
Katie: Right. [chuckling 00:02:18]
Tony B: It's kind of been bothering me the whole time because we're down around $340 bucks on some that I wanted to be long. What happened was, we were long 100 shares of stock and short four calls, FCX went down a couple of dollars, kind of head-faked us, and now it's gone up a couple of dollars. Open up FCX for a minute. We're short the 19 straddle and we're long 100 shares of stock.
Katie: Right.
Tony B: Go into the trades page. Just stay here for minute and go into FCX. I want to get some positive deltas in your overall account.
Katie: Okay.
Tony B: I want to get some positive deltas in something that's correlated to SPY. Click on the arrow next to last and make it point down. To the left. Right there. Perfect. If you notice, the beta-weighted delta in FCX is quite high. This is telling you it moves a lot.
Katie: Twice as much.
Tony B: Yeah. Compared to SPY. Beta-weighting, it's an area for me, it's not necessarily an absolute, but I do know that if I buy some deltas in FCX I'm going to get some long SPY deltas. For the sake of time, because I want to put on a new trade and we can go back to this in a moment. If you look here, even though the monthly volatility is high 54%, you look to rolling up these options. What are you going to roll up to? You're short the 19 call and the 19 Put.
Katie: Right.
Tony B: Change the return on capital to position for me. We can go inverted to the 21, that would give us around 60 cents. That's good to me, but do I want to be inverted with 30 days to go?
Katie: Right.
Tony B: Already? I could roll out to a following month but I don't know if I want to give up the trade with 30 days to go. FCX has had a nice run up already. I can't roll up one strike 'cause that only gives me 20 cents, 22 cents. What else could I do to get rid of some of that long delta? Now remember, we got a lot of capital sitting on the sidelines.
Katie: You're looking for positive delta?
Tony B: It's the most obvious thing.
Katie: Buy more stock?
Tony B: Yeah. Buy 100 shares of stock. You're short 126.
Katie: Okay.
Tony B: It's what I call absolute deltas. It's 100 shares of stock.
Katie: Right.
Tony B: You have 26 short shares of delta right, but of course, your delta's going to move. Let's think about something; we still want the stock to go down to 19
Katie: Okay.
Tony B: Just think about it. That 19 straddle will be worth zero. It's trading for around $3.00, and you have that on four times.
Katie: Right.
Tony B: You'd lose two points, to $2.26. You'd lose two points two times, you would three points four times. We have a loss in this.
Katie: Mm-hmm (affirmative).
Tony B: What we're doing for the overall portfolio is, we're getting long SPY deltas.
Katie: Right.
Tony B: We're neutralizing a short position of something that we really didn't want to be short, kind of got twisted in the wind here.
Katie: Right.
Tony B: I think it's the best of both worlds. I hate that I have to buy stock with the stock being up, but I'm underhedging. I'd rather buy FCX at 21 and change than the overall market at, even the SMPs, at $2,100.
Katie: Right. [crosstalk 00:05:43] underlying. We said that we want to be long Oil now because it's been so beat up. It makes sense. We've just never been in this situation before where we've had the duration. We still have the time. It's kind of, like you said, not the smartest thing to do to roll to keep the dream alive.
Tony B: Buy a 100 shares of stock. Let's go to the trade page.
Katie: Just feels weird to…
Tony B: [laughing 00:06:14] Feels dirty?
Katie: Buy stocks on your hedge, you know what I mean?
Tony B: Exactly.
Katie: I guess [crosstalk 00:06:19]
Tony B: Remember you did this 1:4. We did 25 deltas, four, and then we rolled it down.
Katie: Oh, right. We were flat.
Tony B: If we had done nothing, this would have been a giant winner.
Katie: Right. Of course.
Tony B: [chuckle 00:06:29] Make it 25 since you just moved down there and hit confirm and send. Perfect. Bought 100 shares of stock.
Katie: [crosstalk 00:06:37] Dough in a few minutes, guys.
Tony B: Let's go back to TOSS for a quick second. Until I get the time down for this 15-minute thing I'm probably going to be finishing a little bit early. Let's beta-weight your deltas here for a moment. Notice it was around 216 before, let's just say a little over 200. Click enter. Now you've got around 180. We went from 216 to 180. You picked up around 35 deltas. Not a lot, but again, it's just doing what we have to do to move a little bit forward.
Katie: Okay.
Tony B: Let's take a look at Dough 'cause each platform uses a little bit of a different… It says 217. I don't know if it hasn't refreshed yet.
Katie: I haven't refreshed. If you push those curved arrows it might get back up.
Tony B: Survey says… Not yet. It will. Let's go back to TOSS for a second. Now we have to look for a new trade.
Katie: Okay. Do you want to get some long delta or are you just saying for number of occurrence purposes?
Tony B: More for number of occurrences 'cause if I find something at all-time highs that I want to get long, I'm probably long it already.
Katie: Okay.
Tony B: Does that make sense?
Katie: Mm-hmm (affirmative).
Tony B: I wanted to look at something here. You have gold, you don't have any silver.
Katie: SLV?
Tony B: SLV. Just go to a chart of SLV for me. You're up around $1,300 in your account, $1,300.30. We're up around $1,600 as an all-time high in your account. SLV. Stock has been going down for the last 10 days, down around %5. IV Rank at 74. If I take a shorter period of time… This is a six month chart, it's been down zero for six months, it's been up around 100 at 74. It seems high.
Katie: Right.
Tony B: If I take a shorter period of time, like a month or two months or three months, seems like 74 is kind of normal.
Katie: Right.
Tony B: I've got high to normal IV Rank. Again, this is what I'm going through in my mind. I guess I'm more bullish than bearish on silver just by its recent price action.
Katie: Mm-hmm (affirmative).
Tony B: But silver doesn't move a whole hell of a lot. I've got a trade that's similar to the one that you did in FCX.
Katie: Okay.
Tony B: It's a ratio type spread but it's more than one to two.
Katie: Okay.
Tony B: Let's take a look at it. Okay?
Katie: Mm-hmm (affirmative).
Tony B: Let's go to the trade page in TOSS. You can get rid of some of those strikes, and March is where we're going to be. Make it 10 strikes or something like that, we won't even need 100. Okay! When I look at SLV, and change the position layout to return on capital. It'll make it a little bit easier. I posed this question to Tom on another stock. Here's a stock that's $15.50, let's just round down. You got a return on capital of almost 16% for a Naked Put if you were bullish on SLV. I'm leaning more bullish than I am bearish.
Katie: Okay.
Tony B: High IV Rank, selling a Put, it at all works, but you're only getting around 45 cents for that Put. That is a 1/2% a day if you draw a line from 16% to 30, 30 days in March and the return on capital is 16%. That is about 1/2% a day which is relatively high in the implied volatility, VIX environment. VIX sitting around 18, 17. In that area.
Katie: Okay.
Tony B: We'd love 1% a day. You can get 1% a day, just put a BTU from it. I'm not going to trade it. I don't want to do it, I don't know the stock, I'm not familiar with it, and I definitely don't want to trade a $7 stock, but somebody else mentioned this to me. In BTU, you're selling a Put just a 1/2 a dollar out of the money, just like an SLV, but you're getting 1% a day. All things being equal, I'd rather do two of the BTU Puts than one of the SLV Puts if I was bullish on either one.
Katie: Okay.
Tony B: Does it make sense?
Katie: Sure.
Tony B: But I don't know this stock. It's not something I want to trade.
Katie: All right.
Tony B: I have to go back to SLV.
Katie: Okay.
Tony B: Let's go to SLV. I just wanted to tie it in. It's an energy stock, we've been looking for a stock to get long. That's a nice return on capital.
Katie: Mm-hmm (affirmative).
Tony B: If I was doing that type of Put, selling some of it for 30 cents, I'd have to say, "I'm going to be in forever." I can't manage it at 50% and take 15 cents. It just wouldn't be cost-effective with commissions.
Katie: Right.
Tony B: 45 cents is hard enough.
Katie: Right.
Tony B: I've got to think of something different. Another thing that we've looked at is a covered call. If you notice, the stock is just under $16 and the first strike out the money is the 16 call. Best case scenario, I could only make 70 cents.
Katie: Right.
Tony B: I'm tying up a lot of capital and we just bought stock.
Katie: Right.
Tony B: That used a lot of capital. Let's do some that use a little bit less. Let buy one of the 15 1/2 calls, certainly could use the 15 call which we'll talk about in a moment, and sell three of the 16 1/2 calls. Hold down the Control key. You got about 20 cents, maybe you can do this for about a 15 cent credit.
Katie: Okay.
Tony B: We have no risk to the downside. You can do this in Dough if you want to just to show her. I think she likes to see and I think the audience does too. Go in the trade tab. Go to SLV. We're going to buy one of the 15 1/2 calls and sell three, 'cause we're buying some premium when we buy the 15 1/2 call. That's the at the money call.
Katie: [crosstalk 00:12:12]
Tony B: Yeah. It had just about one strike in the money by about 20 cents. We're selling three of the 16 1/2 calls. Double-click on that. Change it to 15 1/2, yeah. Perfect.
Katie: There we go.
Tony B: Okay. We have the same 20 cent credit. Almost an 80%, 78% probability of success, just outside a standard deviation range. Remember, we said we were slightly bullish on this, yet our risk is to the upside. What are we hoping for in a trade like this?
Katie: We want it to pin at 16 1/2.
Tony B: Yeah. We want it to pin at 16 1/2…
Katie: If it goes down, we don't have any risk.
Tony B: That's correct. You got to break even. That's above 17.
Katie: Mm-hmm (affirmative).
Tony B: You're not using a whole lot of buying power. I think it's around $500 in buying power. If you click on it it's not going to give you the right one in there. Go back to TOSS for a moment.
Katie: Okay. It's 540.
Tony B: Okay. You're using around $540 of buying power. Not a lot for having Naked Calls in your portfolio. Collect some premium, not a whole hell of a lot, but it gets number of occurrences on there, keeps everything moving.
Katie: Right.
Tony B: We neutralize some positions. SLD actually has a beta way that's the opposite of SPY, it's kind of adding a little bit of short delta. SLD's been going down as SPY has been going higher.
Katie: Right.
Tony B: You're taking away some of those long deltas that you just bought in FCX to simulate in SPY. I don't know, I like the trade.
Katie: I don't disagree with you.
Tony B: Let's go in at 20 cents. Looks like the mid-price just moved to 22 cents. Let's go in at 20 cents, see what happens. If you want to go in at 21 cents, that's fine by me. Sure. Hit confirm and send and send. If we don't get filled in there then we'll move it down penny by penny.
Katie: All right.
Tony B: Make sense?
Katie: Will do.
Tony B: Okay. Market's rallying a little bit. [inaudible 00:14:14] unchanged, Nasdaq up $7.00, BONDs up 25. Didn't even talk about…
Katie: TBT?
Tony B: You bought your TBT Puts yesterday. Again, you bought them for 35 cents, they're probably trading for around 50 cents now. Those are the little things that you do that you don't forget because you're concentrating on what you have. That's what you should be doing.
Katie: Right. Like you said, we'll be thinking about selling another Put in BONDs, possibly, if everything pans out.
Tony B: Go back to TOSS for a moment and just open up the TBT position. That's one of the reasons, open up TBT, why you didn't sell out that 32 Put.
Katie: Right.
Tony B: Since TBT is a leverage product, it uses so much more buying more. Even in a margin account it's best to use your capital in a spread fashion 'cause they hold three times as much for selling a Naked Put. Now, you have the leverage of just selling the Naked Put 'cause you're already long the March 32 Put.
Katie: Got it.
Tony B: Basically for nothing.
Katie: Right.
Tony B: All right.
Katie: Good stuff/
Tony B: Good job out of you today.
Katie: Good show. Good times.
Tony B: [chuckling 00:15:12] Yes. Netflix was another one. Open up Netflix for a moment. Netflix has been rallying for the last couple of days and you rolled your spread. Expiration would be on Friday.
Katie: Right.
Tony B: It would be a full loser. At least now, it's a loser, but you have some time.
Katie: Right.
Tony B: All right. Good job out of you.
Katie: Take a look next time.
Tony B: Who comes up next?
Katie: Case and Tom.
Tony B: What do I normally say?
Katie: Peace.
Tony B: Peace.