May 9 - For the love of calendars

It was the summer of 1998--the summer before my first year of university.  I entered into my first options position.  It was a calendar spread on Dell Computers.  I think DELL was trading at around $116.  Earnings were scheduled to be announced after-the-bell on the Thursday of the week of the expiry of the short leg.  I remember the September 120 call was $7 and change and the August 120 call was $4.30.  I opened the spread with 16 DTE on the August contract.

DELL headed straight downhill.  I was bleeding money despite the volatility spike (I paid little attention to IV anyways at the time).  I think DELL flirted with $100.  My position was way out-of-the-money.  I remember watching the Nightly Business Report on PBS and the blowout earnings report.  The next day, DELL spiked to $119 or so.  Perfect--I could close out my spread for a nice gain.  But I didn't.  I held on to the following week.  The next Monday, DELL opened at around $123.  The short August contract expired and I sold the long September contract for $7 and a bit.  With four contracts, I ended up making $1600 on the trade.  As an options-virgin no more, I was on cloud nine.  I had no idea what I was doing.  Reminds me of other things that year...

Low IV environment

Maybe it's that first experience, but I've always had an affinity for calendar spreads.  With the low IVs we're seeing these days, there's no better opportunity to open a position in one of my favorite strategies.

GOOGL

Last Thursday, I legged into a GOOGL calendar (May/June 715 call) for a net debit of $7.10 x 4 contracts.

• Bought June 715 calls @ $19.40 x 4
• Sold May 715 calls @ $12.30 x 4

IV is 20% with a six-month range of 17-40%.  I chose calls simply due to improved liquidity versus puts.  However, if volumes are equal, I prefer the put side to avoid any headaches with early assignment.

GOOGL closed today at $729.  I'll get out if it goes much higher, otherwise I'll hold on until early-mid next week when the May contracts expire.

AAPL

In a similar vein, today I legged into an AAPL calendar/diagonal.

• Bought June 95 calls @ $2.07 x 20
• Sold May 95 calls @ $0.88 x 5
• Sold May 94 calls @ $1.30 x 15

Low IVs are the theme.   AAPL closed today just under $93.

MCD

• Bought July 130 puts @ $3.30 x 25
• Sold May 131 puts @ $1.29 x 10
• Sold June 130 puts @ $2.42 x 15

MCD closed today at $130.80.

Strangles for fun

I shorted a couple of short-term strangles to get my feet accustomed to undefined risks.

• POT: Sold May 15/16 strangle for $0.43 x 3
• SLW: Sold May 18/19 strangle for $0.95 x 3

IVs for both in around the middle of their six-month range.