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I knew. I just get used to collect premium. :D I like this trade b/c it will me a good balance of my overall portfolio. Now My RUT position has a small delta, a bigger theta and a bigger vega. If the volatility increases next week, I can profit from vega. If not, just collect the theta...

I think there is a closed-form solution. I used to have one and programmed it. It is pretty close to my monte carlo simulation. After some changes in my software, it sometimes gives me a value bigger than 1. I am curious if I got the correct formula. You cannot start from the brownian...

Add a RUT Aug 650/Sep 630 P Diagonal for a debit of 2.75. Really don't like to see a big debit to my account. Lets see how it evolves.

I read an article saying a lot of touch probability is not correct, and they are way off. I lost the article. The touch probability is very useful if you trade exotic like barrier options. Thats why traders like Riskarb has an edge when trading exotic if he has a better model. I think 2 x...

TOS doesn't use lognormal dist. for the probability calculation? I thought all the calculation should be based on lognormal dist.

Jeff, Do you have the formula for POT?

Thanks, Mo. Can anyone share how they use POT? Cache? Anyone knows how they calculate it? Using formula or Monte Carlo?

Just searched and couldn't find it.

You can use your target adjustment point ( Coach's idea is 10 to 20 points from your short) in your touch probability. So you have an idea of how often you need to adjust your position. Do you have the formula for touch probability? My rough estimate is 2 x delta. I used it a lot for...

Anyone uses ever-touch probability in credit spread strategy? If we can estimate the probability that the index moves to our adjustment point, we can estimate how often we adjust our position. Want to get some insight here on the use of ever-touch probability. McMillan thinks it is very...

Mark, I thought market makers write a lot of naked options. Why don't you continue with your market making strategies? Percy

You cannot look at theta and deta. These parameters change with price and time. You need to have an option pricing software. You can go to www.888options.com to price your diagonal. You can also use the position calculator to find out how your total positions change. It is cool stuff b/c...

The initial debit is large. You have to do the math and see how much credit you will get when you sell sept OTM. The credit you will get depends on the price and the volatility. If the volatility drops when Aug expires, you probably won't get much credit by selling sep OTM. I think this...

Thank you for your insight. I like the idea of balancing your naked calls with naked puts. Sometimes when the market keeps going up, I keep selling more puts to get a better balance to protect myself from a sustainable rally. It is my way of hedging against a threat to shorts. In a neural...

Just can't resist not trading when you want to keep compounding. open rut aug 650/640 put for a credit of 0.5 risk = 9.5 ROR = 5.26% Wish Coach can get me a better ROR again? :D

Mark, Just saw your response here. When you see a better credit with the same strikes, it means you have a losing position already. How do you hedge against your losing position? I always wonder if it is better not to hedge? I believe statistically hedging is a losing game, but not...

Mark, I appreciate your insights in the market behavior. In fact, I usually sell naked calls after a huge rally, and sell puts after sell-off. So you scale in your position? Do you add to the same position (i.e. using the same strikes), even though your position is losing on paper...

Mark, You do have an opinion. After a huge rally, you think the rally is not sustainable (at least not as fast as before). After a sell-off, you think the sell-off will at least slow down. You might not have a precise prediction, but you do have an opinion on the market behavior.

I am very sorry to hear that. 50% seems a lot, but how much do you normally make? If you normally earn over 25% in a month, 50% loss in a month should be ok. For positions with high probability winning such as verticals, an loss of 2 month profit is acceptable. I had a huge loss in June...

Great post, MoMoney. A diagonal is a combination of vertical spread and calendar. One can see the behavior of a diagonal by adding these two. It has been posted that a diagonal gives you a better reward for some price range ( close to short strke). However a diagonal has a higher risk...