AMZN Call Credit Spread, BIDU Iron Condor, SPY & IWM Credit Call Spreads Looking Attractive

Apr. 27, 2011 9:52 PM ETBIDU, AMZN, SPY
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Contributor Since 2009

My name is Trevor Vernon and I created BookingAlpha in response to the events precipitated from the financial collapse of 2007-2008. After years of generating additional wealth for already wealthy individuals through my hedge fund and various other holding companies and financial activities, I had a wake up call. Witnessing family, friends, and complete strangers being adversely affected ,and many totally devastated, by the ripple effects of the collapse affected me in a way I didn't know that it could. The greed, complacency, and morally corrupt financial system that it is Wall Street cause this devastation to occur. What's worse was I realized I was a part of this. I toiled sucessfully for years to perpetuate an industry of thieves, liars and cheats; and it was all coming home to roost. I was mortified and ashamed to be associated with such a farce. I founded BookingAlpha to provide never available before access for REGULAR investors to the world of Hedge Fund investing and its out-sized returns. The strategies I and other hedge fund managers use to generate consistent returns for wealthy clients are very much an art and science reserved for the Fat-Cat Boys Club of Wall Street. Buy and hold is dead for stocks proving long term investing is a joke, and mutual funds are probably the greatest wealth generating industry for everyone EXCEPT the actual investors in the financial universe.
Considering the information and price action hangover from today, here is an update on trading plans and our overall thoughts:
 
BONUS TRADE -  BIDU Iron Condor Trade This Week:
The bonus BIDU credit call spread tweeted on Monday to all BookingAlpha readers was supplemented today by suggesting the addition of puts to create an Iron Condor.  The calls carried a credit of $0.21~ and today's puts carried a credit of $0.22~.  The position carries max profitability of 9.41% if the options expire worthless.  This FREE to all bonus trade is structured using weekly options that expire on Friday.  The position is set up well as Friday expiration approaches.
 
AMZN Call Credit Spread:
WTF happened to AMZN today.  They literally crapped the bed with their earnings and in response the stock takes out the all time high.  Gotta love it. 
 
Anyway, our credit call spreads are still out of the money by a couple of percent.  New weekly options will be available tomorrow (Thursday) and will provide adjustment opportunities if needed.  I do expect $200 resistance to hold but if not, we can always roll out and up with the newly available weekly options. 
 
The ability to roll out and up is key when playing short term option positions like this.  Being short call spreads is much more "comfortable" than being short put spreads.  Credit call spreads offer the ability to exploit overbought situations (like our original thesis to open the AMZN call spread) and if the short strike is threatened, rolls can be undertaken to allow the overbought condition to be worked off via price consolidation or a pullback. 
 
It can be much different with credit put spreads.  It can be much harder for a stock to recover from oversold conditions than it can be to pullback or consolidate overbought circumstances.  Therefore, call spreads offer enhanced safety over put spreads.  Remember, you will never wake up to the market gapping up 10%.  However, you can wake up to limit down conditions.....believe me, been there!
 
SPY & IWM Call Spreads Looking Attractive:
Now that S&P 1350 has been reached, and the Russell has closed at an all-time high, credit call spreads are ripe for selling.  As the week continues, we plan to start deploying spreads to create iron condors on SPY & IWM; especially if the rally continues.  Our existing put spreads using May options were opened a couple weeks ago in anticipation of this rally.  The puts are now more than 10% out of the money and confidence is very high with their probability and profitability.  The call spreads will be placed OTM (Out of The Money) and will provide a nice margin of safety in case the rally performs a blow-off top and shoots higher before digesting these gains. 
 
Stay tuned and happy trading everyone.  Follow us today!
  
 
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