EOW 3 NLV (AH): $2293.89 (-206.11/-8.2%)
In a previous post I talked about buying more vol in AAPL and bought a put backratio spread in the hopes that IV would start to tick up. Since then, the stock has gone up almost 5% and IV is only a point or two higher. The vega of the long legs dropped as they moved farther OTM and as a result our position vega got cut nearly in half. I’m still of the opinion that IV in AAPL is significantly underpriced, and decided to roll the spread up and out to the 109/113 13Jan put backratio (+2/-1) to the 115/120 20Jan for $0.69 credit. This had the dual benefit of moving our breakeven prices up several dollars and get long more vega (~18 vs 9 before adjustment). I don’t normally like to take on more risk with a roll ($3 wide rolled to $4 wide) but I felt the credit taken in combined with extra duration and more favorable vega exposure made it worth it.
Later in the day I finally put a position on in BAC, selling 2 of the 20/21/25/26 27Jan17 iron condors for $0.25 a piece. For such a low credit — even less after commissions — it was a tough trade to construct, but the risk:reward of 3:1 is in line with what I shoot for and BAC IV has been floating just above its 50th percentile for a few weeks now.
Finally, I sold another IC in GLD to take advantage of the still-inflated IV, picking the 102/105/111.5/114.5 27Jan17 for $1.11. On entry the spread was almost delta neutral, short ~3.75 gamma and ~7.3 vega, and long 1.2 theta.
In other news, I’ve become very comfortable with our top 10 underlyings and decided to add two more to give us more opportunities. I stayed within CBOE’s top 20 stocks by option volume for November and settled on XOM (Exxon Mobil) and GILD (Gilead Sciences). These two stocks have very liquid option markets and give us exposure to two new sectors. Both are also decently priced stocks which is helpful.
- Roll 1 AAPL 109/113 13Jan17 –> 115/120 13Jan17 +2/-1 put backspread @ $0.69
- STO 2 BAC 20/21/25/26 IC @ $0.25 per
- STO 1 GLD 102/105/111.5/114.5 IC @ $1.11
Portfolio Greeks: -16.34Δ, -26.24γ, -10.87ν, 5.79θ
Vega Medic 