Speculative play based on dividend

[NilesMike]

I'm interested to see if anyone else trades this setup.

Liquid dividend stock. Stock prices usually dip after ex dividend date. Note weekly high of week containing ex dividend date, wait for a weekly close higher than that high. Buy a 3 month, 80+ Delta call.

Exit: 20-25% return


I've been doing it for a while and was seeking others' input and refinement.

Good luck to all.

[Dividend Watcher]

No clue, Mike. I'm only familiar with selling logic and even that is pretty limited. What's a Delta call?

If you've done it for a while, I'm sure your thoughts on it are 1000% better than mine.

[NilesMike]

(04-06-2014, 10:12 AM)Dividend Watcher Wrote: No clue, Mike. I'm only familiar with selling logic and even that is pretty limited. What's a Delta call?

If you've done it for a while, I'm sure your thoughts on it are 1000% better than mine.

80 Delta is referring to the Delta of a particular option. The higher the Delta, the more it mimics stock ownership. Stock moves 1.00 your way, an 80 Delta option moves .80. It also has little time premium priced in, so your decay is minimal. Time doesn't kill you as badly as a typical option purchase does.

Hope others have some feedback and exchange of ideas.

[ChadR]

Looks like a very interesting strategy. My option trading is pretty much limited to selling puts for stocks that I want to buy. What stock(s) are you using this strategy?

[NilesMike]

(04-06-2014, 10:45 AM)ChadR Wrote: Looks like a very interesting strategy. My option trading is pretty much limited to selling puts for stocks that I want to buy. What stock(s) are you using this strategy?

The last was JNJ but it's really not important as to what equity. The important part is the strategy and that the equity is liquid so you can get out easily.

If no one else is trading like this maybe I need to go into the seminar biz

[Kerim]

(04-06-2014, 06:48 PM)NilesMike Wrote: If no one else is trading like this maybe I need to go into the seminar biz

It seems likely that lots of people trade like that, just not us boring DG folks here. I'd love to learn more about it. My options universe is limited to straight call and puts when I have a hunch about direction. And then only with tiny bits of money to scratch my trading itch when there is nothing to do with my DG portfolio -- which is often the case!

Tell us more!

[NilesMike]

(04-06-2014, 08:14 PM)Kerim Wrote:

(04-06-2014, 06:48 PM)NilesMike Wrote: If no one else is trading like this maybe I need to go into the seminar biz

It seems likely that lots of people trade like that, just not us boring DG folks here. I'd love to learn more about it. My options universe is limited to straight call and puts when I have a hunch about direction. And then only with tiny bits of money to scratch my trading itch when there is nothing to do with my DG portfolio -- which is often the case!

Tell us more!

I don't know what more there is to tell.

Entry signal is given-weekly close higher than high of ex dividend weekly close. Position is given- I use an 80 +/- delta call with about 90-100 days to expiration. Exit target is given- 20-25% gain on the call.

If you have some specific questions, I'd be glad to try and help.