- Implied volatility as a percentile of the most recent range, which must be at 60% or higher,
- a bid/ask spread as a percentage for front-month at the money calls in the single digits,
- and triple-digit open interest on the strike prices for the range I might use to trade, generally out to odds of closing out-of-the-money up to 85%.
My one prospect for today, an earnings play on ROST, meets the implied volatility criteria, although barely, with IV in the 60th percentile
However, the bid/ask spread is too high, at 12%, and triple-digit open interest on puts stretches only to the strike having a 77% chance of being out of the money at expiration.
One failure alone disallows a trade, and ROST has failed on two points.
I shall do no further analysis of the symbol and have no plans to pursue new positions today. I shall be looking for opportunities to exit current holdings, and if any occur, I'll report them in an Outcomes post near the close.
-- Tim Bovee, Portland, Oregon, March 1, 2016
Tradecraft: Playing the odds to build winning stock market trades from options, a description of how I trade, can be read here.
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Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.
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