Zero Cost Collar

"A collar is an option strategy that limits the range of possible positive or negative returns on an underlying to a specific range." In other words, a collar will protect an investment against drastic downside movement by sacrificing some gains from a drastic upside movement.

A collar consists of 3 positions:

• A long underlying
• A long OTM Put (called the "floor")
• A short OTM Call (called the "cap")

By collecting more for the short call than it costs for the long put, the collar costs you nothing, and can even bring in a credit.

Suppose you owned 100 shares of TSLA, with a cost basis of $120. You believe in TSLA and are very bullish long-term. Now, suppose that TSLA is trading over $140 and you'd like to protect yourself in case the price drops.

JCP Leap

9/30/13 -Open

With JCP down -35% in the past 2 weeks, and dipping below $9 for the first time in 13 years it's time to buy into weakness.

The IV is 101% with a recent range of 48-116%. That places the current IV in the 78%-tile (101-48)/(116-48). So we'll collect some of the inflated premiums in the puts and use the credit to help finance a LEAP.

• JCP @8.81
• BTO +10 Jan 11 C
• STO -10 Nov 8 P
• Debit = 0.16 * 10 = $160

NFLX High IV Rank

10/10/13

This is a purely high IV play. With the 2-month IV Rank at 98%, the inflated premiums offer up a nice Iron Condor. Normally this type of trade is opened around the 1st of the month so there are 45 DTE (days to expiration), but at that time the IV was 15 points lower.

• Iron Condor, NFLX @ 305.80
• STO -1 Nov 390 Call
• BTO +1 Nov 400 Call
• STO -1 Nov 215 Put
• BTO +1 Nov 205 Put
• Credit = 1.47
• Risk = 853
• ROR = 147 / 853 = 17% in 36 days

PCLN Iron Condor

10/2/13

Today was our first meeting of the Humpday Traders.

This first trade started with a recommendation from Dinger.

PCLN @ 1067.00
STO NOV 1205 CALLS for a nice credit.
If you can't go naked or don't want to....you could consider:
STO NOV 1205 C and BTO NOV 1220 C for a solid credit.

After looking at the chart, we see that the current IV percentile is 50% compared to the past year, 77% for the past 4 months, and 100% for the past month. As a side note, TastyTrade is now referring to 'current IV percentile' as 'IV rank' in order to avoid the confusion with current IV. With the monthly IV rank at 100% we can cash in on the high premiums by add a credit Put spread to Dinger's Call spread to create an Iron Condor. The high IV rank also allows us to move farther OTM to the 90% strikes. This morning with PCLN @ 1056 I placed an order to sell an IC for $1.70.

• Iron Condor, PCLN @ 1056
• STO -1 Nov 1210 C
• BTO +1 Nov 1220 C
• STO -1 Nov 895 P
• BTO +1 Nov 885 P
• Credit = 1.70
• Risk = 830
• ROR = 170 / 830 = 20%