CLOSE OUT THE AUG18 HEDGE SIDE FOR 4.80 CREDIT

LEAVE OPEN THE JUL27 625/620 BEAR CALL SPREAD

NOW THAT OUR ORDER TO CLOSE THE HEDGE SIDE FOR 4.80 CREDIT HAS EXECUTED, THE MAX LOSS ON THIS EARNINGS PLAY THAT WENT WRONG IS .75 X 8 CONTRACTS. .55 INITIAL DEBIT AND 5-4.80=.20 CREDIT LEFT ON TABLE TO EXIT THE AAPL HEDGE SIDE.

AS OF NOW THIS EARNS PLAY COST US .75X8 OR 600$

NOT BAD FOR A HUGE AAPL BET IN OUR PORTFOLIO, THAT WAS PROPERLY HEDGED.

THE HEDGE EFFECTIVELY REPLACED ALMOST ALL OUR POSSIBLE LOSSES ON THIS EARNINGS PLAY WHERE INITIALLY $4440 WAS STATED AT RISK, AND THEREFORE GOT $3840 RETURNED BACK TO US FROM OUR INSURANCE HEDGE.

Your Order Has Been Submitted
Order Details
You have entered a spread.
Leg Action Contracts Option Description Price Duration
Leg 1 Buy to Close 8 AAPL Put AAPL Aug 18 2012 635.00 Put Credit 4.80 Day Order
Leg 2 Sell to Close 8 AAPL Put AAPL Aug 18 2012 640.00 Put Credit 4.80 Day Order
Quote AAPL   577.93   -22.99 Bid 577.93 Ask 578.20 Volume 7,273,517
AAPL AUG 18 2012 635.00 PUT
AAPL AUG 18 2012 640.00 PUT
Bid 58.55 63.50
Ask 59.80 64.50
Last 59.35 63.80
Change 16.70 [39.16%] 17.60 [38.10%]
Volume 356 244
Delta -0.89 -0.91
Open Int 1,616 2,927
Desc AAPL Aug 18 2012 635.00 Put AAPL Aug 18 2012 640.00 Put
Net Quote
Bid (natural)
3.70credit
Mid
4.83credit
Ask
5.95credit

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WELL DAM THE LUCK, I HAD A SNEAKY FEELING AAPL WOULD PARDON MY FRENCH, “SCREW THE LONGS THIS TIME”! I STILL WENT LONG AAPL, BUT CAUTIOUSLY WITH THIS PLAY.

THEREFORE, THATS WHY I DEPLOYED THE PLAY I DEVELOPED, AND AFFECTIONATELY CALL THE CRAZY IVAN.

Crazy Ivan is a U.S. Navy term for a Soviet submarine maneuver, characterized by any number of sudden and sharp turns, used by submarine crews to “look behind” them. Due to the acoustic distortions and noise caused by propeller blades, it is near-impossible to use conventional sonar behind a submarine. With the sudden turns, the area where the sonar is not effective shifts relative to the current heading of the submarine, causing previous gaps in sonar coverage to be revealed while masking known areas. This gap in sonar coverage because of the submarines own propeller is commonly known amongst submariners as ‘the baffles’.

THE REASON, I CALLED THIS PLAY A CRAZY IVAN, IS BECAUSE, EVERYONE FIGURED THEY KNEW HOW AAPL WOULD REACT TO EARNINGS. UP UP AWAY LIKE USUAL! WELL BEFORE I FOLLOWED THE CROWD, I HAD A TACTIC CALLED THE CRAZY IVAN. I SET UP A TURNAROUND HEDGE IN CASE AAPL SHOWED UP WITH BAD EARNINGS TAILING OUR ASS AND NOW CRAZY IVAN’D IT!

I LOOKED UP THE SAME SITUATION IN GOOG JUST NOW ON AN EXIT TRADE TOMORROW FROM THIS PLAY. IT HAD THE SAME PUT DIFFERENCE IN PRICES AND MIMICKED OUR SETUP, WHERE AAPL IS AFTER HOURS.

THE EXIT OF THIS TRADE FOR TOMORROW RANGED FROM .70 DEBIT ALL THE WAY TO .55 CREDIT (REMEMBER WE PAID .55 DEBIT TO ENTER THE TRADE) GIVE OR TAKE A STRIKE OR TWO AWAY.

THE REASON WE MAY HAVE VERY LITTLE LOSSES, OR BREAKEVEN, IS BECAUSE THE CRAZY IVAN HEDGE DEPLOYS A HIGHER ITM FURTHER OUT DELTA HEDGE. WHEN A STOCK MOVES BIG AGAINST OUR INTENDED DIRECTION, IT KICKS IN TO PROTECT US AS MUCH POSSIBLE AND ALMOST NEARLY MATCHES THE CLOSER EXPIRY SPREAD DELTA WISE.

THEREFORE, THIS HEDGE (CRAZY IVAN) IS THE ULTIMATE HEDGE I CAME UP WITH FOR EARNINGS PLAYS.

WE WILL PROBABLY BE HURT SOMEWHAT TOMORROW, BUT BY GOD, WE TOOK AAPL DOWN IN THE OCEAN DEEPS WITH US!

WE WILL BE EXITING THIS TRADE TOMORROW NO MATTER WHAT.

______________________________________________________________________________________________________________________________________________________________________

SO EARLIER WHEN I WROTE THE POST, MY LAPTOP BATTERY WAS DYING, I HAD LIMITED TIME TO WRITE UP THE TRADE, AND COULDN’T EXPLAIN THE HEDGE PART OF THE TRADE AS WELL AS I WANTED.

HAD THIS TRADE GONE AS INTENDED, WE WANTED AAPL TO BE ABOVE 625 AT JULY 27 EXPIRY, OR MAYBE HAD CLOSED THE JUL27 625-620 BULL PUT CREDIT SPREAD AT .10 OR LESS BEFORE EXPIRY.

HAD THAT HAPPENED, WE WOULD HAVE INHERITED 8 AUG18 640-635 AAPL DEBIT PUT SPREADS FOR ANYWHERE BETWEEN .55 TO .65 TOTAL  DEBIT COST.

ANOTHER SITUATION WOULD HAVE BEEN TO JUST CLOSE THE WHOLE SPREAD TOMORROW AT MAYBE 1.00 TO 3.00 CREDIT ALTOGETHER, AS THE JUL27 SPREAD WOULD BE ALMOST WORTHLESS, BUT THE AUG SPREAD WOULD STILL HAVE VALUE.

COMMENTS OR QUESTIONS WELCOMED

IF YOU WERE LONG AAPL, AND UN-HEDGED I APOLOGIZE FOR YOUR TOUGH NIGHT AND FEEL FOR YOU.

CREDITSPREAD23

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CRAZY IVAN PLAY , DONT HAVE MUCH TIME HERE, BUT THIS PLAY IS SELF HEDGING. i HAD TO UP TO .55 TO EXECUTE HERE. ON THE SURFACE IT LOOKS LIKE ALOT AT RISK BUT ISNT.

THIS IS A LONG AAPL PLAY, WHERE WE GET NEAR FREE AUG PUT SPREAD AFTER JULY EXPIRY WKLY

Order Details

You have entered a free form.
Leg Action Contracts Option Description Price Duration
Leg 1 Sell to Open 8 AAPL Put AAPL Jul 27 2012 625.00 Put Debit 0.55 Day Order
Leg 2 Buy to Open 8 AAPL Put AAPL Jul 27 2012 620.00 Put
Leg 3 Buy to Open 8 AAPL Put AAPL Aug 18 2012 640.00 Put
Leg 4 Sell to Open 8 AAPL Put AAPL Aug 18 2012 635.00 Put
Quote AAPL   600.88   -2.95 Bid 600.76 Ask 600.89 Volume 13,723,831
AAPL JUL 27 2012 625.00 PUT
AAPL JUL 27 2012 620.00 PUT
AAPL AUG 18 2012 640.00 PUT
AAPL AUG 18 2012 635.00 PUT
Bid 30.10 26.65 45.40 41.70
Ask 30.15 26.80 45.75 42.00
Last 30.05 26.90 45.60 42.50
Change 1.75[6.18%] 1.80[7.17%] 2.40[5.56%] 2.70[6.78%]
Volume 1,871 1,972 480 322
Delta -0.90 -0.84 -0.78 -0.75
Open Int 624 938 2,641 1,624
Desc AAPL Jul 27 2012 625.00 Put AAPL Jul 27 2012 620.00 Put AAPL Aug 18 2012 640.00 Put AAPL Aug 18 2012 635.00 Put
Net Quote
Bid
0.10credit
Mid
0.33debit
Ask (natural)
0.75debit
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