Alice in Optionsland

[qlai]

You aren’t holding the 990 put at zero cost. You are holding it at the current market value. If you close it, you bank that much pnl. It’s not a free put.

But it’s just how you want to look at it, no? At the origination, the max loss on the trade was about 4k. At this point, max loss is zero and max gain is 990 (theoretically speaking). Why do I have to look at this leg as a stand alone trade now?

Do you have the view tsla will fall?

I have no idea. Can TSLA go back to 900 and then back to 1500 and then back to 950 within a month? Having a “paid for” put gives me options (pun intended).

Keep in mind that this trade was not thought out, but was a result of a fat finger. This was an still is an experiment. Fortunately (or unfortunately) I got lucky and thus somewhat invalidates it.

personally don’t and I cut most of my position (which was synthetically short)

What structure did you use to be synthetically short?

 

[newwurldmn]

But it’s just how you want to look at it, no? At the origination, the max loss on the trade was about 4k. At this point, max loss is zero and max gain is 990 (theoretically speaking). Why do I have to look at this leg as a stand alone trade now?



I have no idea. Can TSLA go back to 900 and then back to 1500 and then back to 950 within a month? Having a “paid for” put gives me options (pun intended).

Keep in mind that this trade was not thought out, but was a result of a fat finger. This was an still is an experiment. Fortunately (or unfortunately) I got lucky and thus somewhat invalidates it.



What structure did you use to be synthetically short?

oh. I remember this chat now.

I think it’s poor risk management to think of a trade as “house’s” money unless your performance is auto-correlated. How would a robot think of it?

you should always have a view otherwise what rational (again, like a robot) reason would you have a position?

I went short March Vega when vol was close to 70. The vol is correlated to the stock so that was how I got short but I had the added kicker that I don’t think the recent realized vol will persist and that will provide tailwinds to the position. I made about 10 vols on the position in about 3 weeks.

 

[qlai]

you should always have a view otherwise what rational (again, like a robot) reason would you have a position?

What if my view is : sideways with a dash of volatility?

I am treating this trade like a game of poker - let’s see what card will be revealed next and act based on that. I got lucky initially (never expected such a big drop) so might as well press this to the end.

 

[qlai]

This was an still is an experiment. Fortunately (or unfortunately) I got lucky and thus somewhat invalidates it.

I was not sure where to take this journal now. The only reason I have a journal is because it forces me to think things through more deeply (because millions of people are reading, lol).
So I had an idea of how to try and salvage this journal.
I have been trying to get a “cheap lottery ticket” out of this, but there’s no lottery being held!

What if I do a similar trade but the long leg overlaps with earnings? I will have to do this as a long strangle which would double the cost. I would need to find a stock which is volatile enough but would still stay within the strangle at expiration(range bound).

 

[taowave]

Q,I think you traded it in the style you did as it was a one lot,and to your credit you pressed your bet...If you had a "meaningful" position on,how would you have traded it??

My best guess is you will be selling your long option or some other to lock in a profit should TSLA continue to rally,most likely at a price which is close to where the spread went out on your intitial short leg expiry/cover...

Trading earnings is a whole different ballgame...Having an earnings report with pre/ post moves (ORATS) helps,but you can also trade it strictly on Vol differentials..

 

[taowave]

Q,I think you traded it in the style you did as it was a one lot,and to your credit you pressed your bet...If you had a "meaningful" position on,how would you have traded it??

My best guess is you will be selling your long option or some other to lock in a profit should TSLA continue to rally,most likely at a price which is close to where the spread went out on your intitial short leg expiry/cover...

Trading earnings is a whole different ballgame...Having an earnings report with pre/ post moves (ORATS) helps,but you can also trade it strictly on Vol differentials..Regardless,you followed your game plan and hit a double...so far

 

[qlai]

Q,I think you traded it in the style you did as it was a one lot,and to your credit you pressed your bet...If you had a "meaningful" position on,how would you have traded it??

Yeah one lot trading is always tough - all or nothing kind of.

I would follow my general trading guideline: get to break even asap, take some profits when opportunity presents itself, leave a runner for a home run trade. But I don’t know if options are suitable to this kind of trade management. Monetizing options, especially with size, is not as easy as with underlying.

Regardless,you followed your game plan and hit a double...so far

What I am really trying to do is to find a way to have home run trades. Don’t get me wrong, if this trade had a repeatable edge, I would be ecstatic to get singles and doubles.
But it doesn’t, so I need a few outsized gains to make it worthwhile. No edge also means I will be one lot trader for awhile

 

[Overnight]

...

What I am really trying to do is to find a way to have home run trades...

Go long Pfizer right now. BOOM! Done.

 

[qlai]

What if I do a similar trade but the long leg overlaps with earnings? I will have to do this as a long strangle which would double the cost. I would need to find a stock which is volatile enough but would still stay within the strangle at expiration(range bound).

OK, so let's try this ...
Legging into long strangle on CRM with 81 DTE

 

[qlai]