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Matthew Whiz Buckley
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Matthew Buckley is the founder and CEO of Top Gun Options LLC and a Managing Partner at Wealth Creation Investing LLC. Matt was formerly the Managing Director of Strategy for PEAK6 Investments, L.P., one of the largest volatility arbitrage options trading firms in the country. He was the founder... More
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  • AAPL March Iron Condor

    Strategic Mindset - The market will continue to see risk on/risk off days as we've seen for the past 2 days. Now that Q4 earnings are almost behind us and the market survived somewhat intact, traders are looking for the next catalyst that will drive this market higher or lower. As we saw Monday, basically non-news out of Europe caused a risk off day Monday followed by a relief rally yesterday. We will continue to see the market move sideways into March where we will see volatility increase and the market pullback on sequestration and the battle of the budget/continuing resolution.

    Target - AAPL (456.30)

    We believe AAPL will move sideways and remain range bound as traders decide if 400-500 is the "new" 500-600. AAPL and its products have become commoditized and margins will continue to come under increasing pressure as the tech giants battle it out on pricing, similar to the implosion of the airline industry.

    Tactic - March Iron Condor

    This neutral tactic consists of selling 2 spreads, a bull put spread (credit spread) believing AAPL will not go below a certain price and a bear call spread (credit spread) believing that AAPL will not go above a certain price.

    The trade and price (credit of 1.26) is listed below, along with the probabilities of max profit, max loss, and breakeven.

    The probabilities of max loss/gain/breakeven are listed below using at the money volatility.

    Adjustment/Exit Tactic - Since we are a net seller of this iron condor we will look for this trade to expire worthless and for us to collect a max gain of $1,890 as AAPL remains between our 2 short strikes - below the 490 call and above the 410 put.

    If the trade rises in value to 2.52 (double the credit received) we will look to eject or adjust the trade, based on the velocity of the movement. We will break the iron condor up into individual spreads and if the stock is seeing significant velocity, eject from the trade.

    If the stock velocity is not that high we will consider rolling a losing bull put spread down and out to April, or a losing bear call spread up and out to April, with the strike prices to be determined by the velocity.

    This trade will be added to the Wealth Creation with Options model portfolio and managed in our weekly live trading session for maximum profit or exited for minimum loss. To see our portfolio manager trade live each week and see all the trades in the model portfolio, follow this link.

    Tags: AAPL
    Feb 06 10:07 AM | Link | Comment!
  • Goldman Sachs Powers Forward, Leading The New Normal

    Strategic Mindset - At Top Gun Options our strategic mindset is short term neutral based on debt ceiling and sequestration issues, however we are long term bullish.

    Target - Goldman Sachs (NYSE:GS), 141.01

    Commit Criteria - This week Wall Street's flagship reported strong earnings, seeing Q4 net income nearly triple to $2.83B over $1.01B for the same period last year. GS seems to be returning to its pre-financial crisis role as the Street's ATM. Fixed income trading, once a powerhouse for the former investment bank, has returned in full force, along with their traditional investment banking business. The financial crisis also forced GS to tighten its belt; headcount has been reduced and costs slashed while its infamous compensation structure was updated to strike a balance between paying their top talent and returning equity to shareholders.

    While still very far south of the mid-200's the stock visited in the past, I believe that GS has cracked the code on the "new normal" and once again will print money ahead of its peers. I am long term bullish on Goldman, however I still believe that GS, along with the rest of the financial sector, will see short term headwinds as we face a faltering economy, out of control deficits, and increased financial regulations, in addition to an unsolved European fiscal and economic crisis.

    Tactic - Long Call Diagonal

    Buy 1 Jan15 105 call
    Sell 1 Feb13 145 call
    Net debit of 40.43, or $4,043

    Tactical Employment - A Long Call Diagonal is the perfect tactic to employ when we hold a short and long term strategic mindset that differs. This bullish tactic involves going out as far in time as possible and purchasing deep-in-the-money calls. When buying calls at Top Gun Options we select a strike that has a delta of at least .80. Delta is a measure of the rate of change in the price of an options relative to a change in price of the underlying stock. The higher the delta the higher the rate of change in the option price, and vice versa.

    Since these .80 delta calls are expensive (loaded with time and intrinsic value), we look to sell front month, in this case, February upside calls to help 'finance' the .8 delta call purchase. After Wednesday's 4.1% pop and the stock hovering at 52 week highs, we believe the stock will stabilize as the Street battens down the hatches in preparation for the debt ceiling dogfight.

    Therefore we have selected the February13 145 calls. By selling these calls we take in a credit of $1.65, reducing the cost of the deep-in-the-money Jan15 105 calls from $42.08 to $40.43.

    Mid-Course Guidance - If by February expiry GS is trading below 145 we will collect the full credit of the short calls and will look to roll the short call position out to March. By continuing to sell front month upside calls we can potentially pay off the deep-in-the-money calls, own them outright, and continue selling calls to potentially further profit.

    If GS is trading above 145 we will simply buy back the calls and roll them up and out to a higher strike in March, and that strike will depend upon our short term strategic mindset and current economic conditions.

    We recently closed a bullish long call diagonal on RIMM for a nice profit as we anticipated a run up in the stock prior the Blackberry 10 release on January 30th. We initiated the position when RIMM was trading around $7 and closed the trade when it recently hit $14. The trade gained over $8,000 on $4,500 in risk.

    Click here to learn more about our live trading services.

    Exit Plan - The main risk in a diagonal is the underlying position. Stocks can go to 0, however we obviously believe that the probability of this occurring is statistically insignificant and our max loss is limited to the debit (minus the credit) for the trade.

    We will exit this trade before expiry of the Jan15 105 deep-in-the-money calls for maximum profit as GS powers to the head of the financial class and shows the Street that it has the maneuverability to deliver outside returns in the new world.

    Disclosure: I am long GS.

    Tags: BBRY, GS
    Jan 18 2:49 PM | Link | Comment!
  • Market Go Or No Go For Launch

    With conflicting economic data overseas and ashore along with weak Q3 earnings giving investors vertigo of late, this week will most likely provide an answer to the question - Go or No Go?

    Before getting airborne in my F/A-18 Hornet off the flight deck of an aircraft carrier I had to make sure that my systems, weapons, aircraft and I were FMC, or fully mission capable. With a single thumbs up to my plane captain followed by a salute to the catapult officer I signaled my ability to carry out my mission.

    This week we will see if the market is a 'Go' or a 'No Go' for launch. But before we take an operational and then tactical look at the U.S. we must first take a look strategically at the financial battlefield and how this helps shape our neutral with a bearish slant strategic mindset.

    The United State's banker, China, reported GDP 2 weeks ago. Any numbers out of China that involve government hands are of course suspect. China's head of state declared a month ago at the World Economic Forum that they will hit their annual goal of 7.5% GDP for 2013. Period. He can say that. China can say whatever they want and put up whatever numbers they want. Kind of like our government and monthly unemployment claims the month before an election.

    CPI numbers out of Big Red for September were in line with expectations but the Producer Price Index (wholesale) fell, a bigger retreat in fact than August. Add in the once a decade change of command in the leadership next month and China is a significant contact on our radar.

    Europe has done a nice job of taking Greece off the front page, attempting to get the markets to price in the eventual 'Grexit', or the Greece exit from the Euro Zone. Spain's borrowing costs have eased somewhat, but other than that Mrs. Lincoln, how was the play? The country faces systemic pressures from banks, government institutions, and the people. Spain is viewed as too proud to request a bailout as ECB President Dragi acts like Jack Nicholson's character in A Few Good Men when asked for the all important tower logs - His response? "You have to ask me nicely".

    The request might not happen and if it does it may be too late. With borrowing costs on their 10 year bonds hovering over 7% for a couple weeks last month the country only slid further under the waves.

    A front page story in today's Wall Street Journal reports that Catalonia may seek independence from Spain. Why? Known as 'the factory of Spain', the region has tired of powering the nation's economic engine while others sit on their hands and live off the fruits of their northern neighbor. Sound familiar? Any way we can boot Kalifornia and Illinois from the Union? Or maybe Texas and Florida will declare independence… Texas did it once and after living in the Republic for 7 years I can tell you they would have no problem doing it again. For good.

    The Middle East continues to be a bubbling cauldron as the administration plays 'Who's on First' with their not so subtle cover up of the 9/11 attacks that, again, killed Americans. Syria continues to thumb their nose at the international community, with big brothers China and Russia laughing at a weakened United States. And of course Iran continues spinning away, looking forward to the day in the immediate future where they can destroy Israel.

    Operationally here in the U.S. we've seen weak Q3 numbers from a majority of companies. At Top Gun Options we focus on revenue - not earnings. Why? Simple. Earnings can be manipulated and anything that can be manipulated by the street will be. Can you say 'Libor'?

    Even stocks that tend to sandbag, like Apple (NASDAQ:AAPL), are having a hard time hitting the ball over the net…that they had previously lowered.

    This of course is causing us to already start focusing on Q4 earnings, along with the impending fiscal cliff and sequestration. At least the 2008 tsunami was somewhat a surprise (not really). We have known about this fiscal cliff for over a year and no one has done a thing to stop it. Our bearish positions on SPX, along with positions in SH, SDS and VIX have been performing as designed and have been profiting nicely as the sleeping giant wakes up and sees a recession occurring on 2 January. Not our words, but words from the independent Congressional Budget Office (CBO).

    At Top Gun Options we remain market neutral to bearish until after the elections when we will see if anyone in Washington intends on doing the job they're getting paid to do. We will continue to hold our bearish positions while looking at potential bullish trades in Jan/Feb in case the brain trust in Washington kicks the can down the road and the market experiences a relief rally.

    Market Schedule -

    Mon - Commerce reports personal income/spending

    Tues - S&P/Case Shiller 20 market housing index, Conference Board reports consumer confidence

    Wed - Q3 employment cost index

    Thurs - Auto and retail sales numbers, October ISM, ADP private payroll numbers, weekly jobless claims, construction spending and business productivity

    Fri - Commerce releases October jobs numbers, look for an increase to 7.9%, unless of course the administration plays with the numbers again…

    Tags: AAPL, Q3, Q4, China, S P, CBO, VIX, SDS, SH
    Oct 30 9:16 AM | Link | Comment!
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