NAL (New Alliance Bancshares Inc.) was up more than 3.72% on Friday, on no news I could find. The front month option IV went up to the 60’s. and we have a pretty skewed volatility.

I cannot find any information on why the move. Nada. Whatever it is, someone expects it to happen soon, expiration is 14 days away. Looking at the spread, it seems the demand is opening the spread. The only thing I can think of is that institutional investors are showing considerable interest and “staking out positions in a thin stock. Even a small hedge fund buying a couple hundred contracts would have pushed up the IV. But even then, wouldn’t you try to load up on the JUL calls? ( Except even less volume in the July’s )

What ever the reason, the weekend is here and theta will take some value out of the front month, which is good for me. I don’t think there is much I can do, NAL options are thin and I do not think I can unwind my position, I am just going to let them expire.

Blah

~squid

Ok, I got out of the PALM trades. I like the trades, just not the prices I paid. Next time, I will have to follow my own rules.

I had spread limit orders, which I think you should always do. Execution, execution, execution. I lost 0.03 on half PUT calendars, and I made 0.9 on the other half, for a net of +0.06. So I got out of that, and I learned a lesson.

For once, I made money when I had to learn a lesson. What I learned was, don’t over pay, you need to preserve capital.

I think I paid to much for the bottom half of my double calendar on PALM. The net was 0.40, but I paid 1.64 for the short option. This is a killer. I ran it thru my spreadsheet ( that I made after I traded ) and I see where the risk is. It is actually a directional trade. Historical volatility is 30.48 %, implied volatility is 50.77 right now. I see support at 16, resistance at 17.5 for the next three weeks.If the IV drops, I am screwed. But if there is more speculation or an actual buyout offer, I am golden.

Last Tuesday the stock moved up on speculation that there was going to be a buyoutin part because Chief Financial Officer Andrew Brown cancelled a planned presentation at the J.P. Morgan Chase technology , later that day, Palm issued a statement about the change of plans, that Brown, who has back problems, yada, yada, yada.

I am underwater right now and theta over a long weekend won’t save me. The volume was zero in the 15 puts, so I didn’t want to get into a thinly traded option, knowing how hard it is to get out. I didn’t follow my own rules ….. Double calendars work best in a low-volatility environment and Double diagonals work in both low- and high-volatility environments. I think I might roll it into a double diagonal if I can.

They reported Q3 FY07 results last Tuesday, so I do not expect any surprises. This is a long weekend , so everything is closed so I think it is all good.

I put on four calendar spreads today. A double calendar on PALM, single calendar on NAL, and a single calendar spread on INTC.

So in to PALM, I put on a double calendar. The stock has mainly stayed in a range of 16 to 17.5 for the last 6 weeks or so. Got a 6 point IV advantage, and they cost me about 0.40. The bid ask spread was 0.20 – 0.50, I put in an order at 0.40 and was filled almost immediatly. I need to be a little more stingy on my spreads. My target it 0.55 per spread to sell.

Also an INTC call calendar. the puts did not have an IV advantage. INTC was at 23, but it has fallen. And that is what has boosted the IV a little. As when ever trading INTC, it never really moves. It is a big friggin boat. the spread was 0.42 ~ 0.47, I got in at 0.45, right in the middle. My profit target is 0.63.

As for risk, I am positive Theta of course. Delta is positive on both stocks, more than I would like, but still good. I do have negative position Gamma, but I do not expect these stocks to move very much.

I did manage to put on a small position in NAL. I got in at 0.40. Once again a profit target of 0.55. I waited on that trade about 1 1/2 hours. I think someone was trying to get out of a position in a thinly traded option. The bid went from 0.15 to 0.35 in a couple of minutes, and the ask went back to 0.50. I was stingy on that one, and left the day order in for the price I wanted. NAL had a good earning report that pushed it up. I do not see more upside.

I do admit, sometimes when I decide to pull the trigger, I don’t like to wait. But I am getting better at it, putting in a day order and waiting for the market to come to me. If it doesn’t come, there are always other trades.

PALM UPYRW + UPYSW Limit 0.50
PALM UPYFW + UPYGW Limit 0.60
INTC NQGX – NQFX Limit 0.64

Now that the little one has arrived, it is time to start to try to get back to normal. I put off taking the 65 until the kid arrived. I am starting study for my Series 65.  From May 1, 1 hour a day, then take the eam at the end of May. I don’t think it will be hard, except for the insurance part.

So here are some stats on the series 65

Time : 3 hours.
Fee : $120.
Sponsorship needed : No.
Pass rate needed : 68.5%.
Calculator / Scratch Paper : No, may be provided.
Where : Prometric Test Centers

And the study notes are here Series 65 Exam