I actually get 3 or 4 days to trade mostly uninterrupted next week. Planning to take full advantage and try out multiple strategies, from gamma scalping KO to non directional or semi directional setups with high volas like MARA. May even try a earnings play such as FB and a expiration play or two. Most of my attention will be on synthetic flies over multiple time frames. May be too much, but it is what I do.
Alpha Wolf
- Thread starter BeautifulStranger
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I actually get 3 or 4 days to trade mostly uninterrupted next week. Planning to take full advantage and try out multiple strategies, from gamma scalping KO to non directional or semi directional setups with high volas like MARA. May even try a earnings play such as FB and a expiration play or two. Most of my attention will be on synthetic flies over multiple time frames. May be too much, but it is what I do.
so long the ATM straddle and buy the dip sell the rally cancel out the theta? or reverse scalping it?
Actually, after buying the straddle, I’d be trading the underlying to return the position to delta neutrality as it deviated by a certain threshold. The act of returning the position to neutrality has the effect of buying low and selling high, which may yield an overall profit even if the underlying closes the same price at expiration as it was in inception of the long straddle. Obviously this would require the underlying to have a decent trading range with frequent tests of resistance and support. If the underlying goes in an extended direction, beyond what was paid for the straddle, even without gamma scalping, the trade would be profitable, of course. There are likely nuances to the optimum timing of this strategy, such as buying straddle with an expiration just after a major scheduled event, such as an earnings report, say a month before, with the idea increasing IV in anticipation of the earning report may effectively offset some theta costs, although realized volatility my decline a few days to a week(?) before the event. Naturally, one would want to look at underlyings that have low absolute volatility for its type as well as it having a current low IV% rank.
I’m having doubts about KO as it is a defensive stock, and may look for XLI or SMH components that have gone somewhat “Dormant”. Perhaps a little research will reveal an upcoming trade show event that may have the potential to increase volatility in those issues.
I've played around with some /ES straddles on expiration day and have had mixed success with them. I've somewhat abandoned it due to the time it takes to monitor these positions with my day job that often times can leave me unable to look at the screen or check prices for hours on end. Jeff Augen's book on expiration has some info on trading single name equities with straddles and doing the gamma scalping to offset the theta decay leaving you with a free straddle that can then produce some profits. KO is Coca Cola? Not one that moves too much. I would think an equity with some juice like MARA, RIOT, PENN, SQ, QS, something that moves would work better but I guess you're paying more for that straddle.
Well, if realized volatility is greater than implied volatility then a long straddle should be profitable. I read that gamma scalpers can effect IVs and daily ranges, which is part of the basis for my reversion to mean setup. Also, having a long straddle on ES while IV is low can be used as a potentially cheap hedge against a market decline, assuming one’s gamma scalping can keep up with theta decay. The last three days of last week should have made gamma scalpers very happy.
As far as time to manage positions are concerned, I’m with you. However, anticipating deltas at various prices levels beforehand can allow you to put limit orders in advance. Further, using conditional orders, or even better, a trading program, delta neutrality can automatically be maintained, or whatever exposure you want for a given set of circumstances. This is why I’m trying to make my rulesets crystal clear: Eventual automation.
For high IV stocks like MARA and friends, I have the idea of fading wide range bars from a volatility perspective. In other words, selling volatility after a price run up. The payoff ranges can be ridiculous on some non directional strategies.
These are all great points. Agreed the premium can get really juicy with some of these high IV fliers. My own style is really built around the effect of gamma scalping and pinning around strikes with high OI on expiration. As the market makers gamma scalp to control their delta risk it often creates a pinning effect. I set the body of my flies at the highest OI for the expiration day move. To be fair most don't pin but the ones that do pay off often four to one or five to one and if the others are a mix of moderate gains and moderate losses it so far has proven profitable week after week. I've recently upped the size so I'm hoping it keeps up the same pattern. I'm encouraged that in this low overall volatility market I keep finding successful plays as when/if we have some corrections the opportunities will grow as the higher the vol the cheaper the initial fly. I lack any coding background to automate anything although one of my twin sons is a coding genius who I'm trying to teach about options so one day maybe I'll get there. As a former floor guy I'm always hesitant of technology and I've discovered in expiration plays timing seems to be everything. My flies end up having very large price swings on expiration day as all the greeks pause and then collapse at once. Looking forward to see how your trades go this week. Wishing you success and some nice wins.
Hit 60% account utilization this week so far, although now flat. I am feeling more confident and comfortable taking risk.
Still some risk management discipline problems, but there is an idea to help me with that: Print out a chart of lumber, annotate where my reversion to mean(RTM) setup would show to go short, and imagine getting stubborn on a undefined risk position. In fact, perhaps I can get a tattoo of said chart on my forearm as a constant reminder. Many markets have changed with increased retail participation, bolstered by stimulus money and social media. The greater the speculative component of participants in a financial instrument, the greater potential for extended moves. This factor needs to be considered in the timing of my RTM Trades.
Having tried a few vertical spreads and facing instant heat on my positions, I am appreciating butterflies more. Further, depending on structuring, I am usually better off theta wise with butterflies. If I want more delta exposure, I can simply add positions.
Some of the heat I’ve been facing in some recent positions seems to be related to another time frame being dominant. As an adjustment, I’ve reviewed a great many charts comparing different timeframes and have created new tabs that show 3 of 4 major time frames for each underlying of interest. This new format should help with timing on my setups.
Faced a fair amount of heat on my positions Monday. Tuesday saw an increase of account equity of about .45%. I decided to go flat because of upcoming Powell and Biden speeches, but I may pick up some perceived opportunities on Wednesday.
Still some risk management discipline problems, but there is an idea to help me with that: Print out a chart of lumber, annotate where my reversion to mean(RTM) setup would show to go short, and imagine getting stubborn on a undefined risk position. In fact, perhaps I can get a tattoo of said chart on my forearm as a constant reminder. Many markets have changed with increased retail participation, bolstered by stimulus money and social media. The greater the speculative component of participants in a financial instrument, the greater potential for extended moves. This factor needs to be considered in the timing of my RTM Trades.
Having tried a few vertical spreads and facing instant heat on my positions, I am appreciating butterflies more. Further, depending on structuring, I am usually better off theta wise with butterflies. If I want more delta exposure, I can simply add positions.
Some of the heat I’ve been facing in some recent positions seems to be related to another time frame being dominant. As an adjustment, I’ve reviewed a great many charts comparing different timeframes and have created new tabs that show 3 of 4 major time frames for each underlying of interest. This new format should help with timing on my setups.
Faced a fair amount of heat on my positions Monday. Tuesday saw an increase of account equity of about .45%. I decided to go flat because of upcoming Powell and Biden speeches, but I may pick up some perceived opportunities on Wednesday.
Account value up .09% on Friday on bearish ES spread, but with mostly ill placed “Scalping” hedges. I am back to flat, because bids in ES seem a bit too firm for there to be a significant correction for now. I am expecting new highs in ES next week. While I will be busy at work next week, I will be looking to get my account to high utilization.
It pays to critically reexamine one’s trading plan every so often. It turns out, I was using a RTM methodology looking for and trading potential reversal setups, resulting in some of my positions sustaining much more heat than necessary, including to the point of avoidable losses and missed opportunities.
I also have made progress in thinking of my setups in terms of programming them for more extensive backtesting and future automation. While it may seem I’m putting the cart before the horse, it does force me to precisely define various aspects of my trading system. I am looking to define market conditions and my setups purely mathematically, along with associated logical operators, of course. A significant number of variables will be involved, likely over 50, requiring massive computer power, along with learning a couple of programming languages. Where do I get the time? Time, of which I am very short of right now. As such, I will continue to make my outsized paychecks, destined to be short-lived, perhaps six months, and try to create a solid trading performance in the meantime. And in the part-time. It is what it is, I suppose.
My understanding of option synthetic positions increased a bit, which should help me price and select the best strikes within microstructure for my trade ideas.
I will post my trade ideas in advance for next week, although due to time constraints and my desire to practice monitoring new structure types, these trades will be more practice than quality.
It pays to critically reexamine one’s trading plan every so often. It turns out, I was using a RTM methodology looking for and trading potential reversal setups, resulting in some of my positions sustaining much more heat than necessary, including to the point of avoidable losses and missed opportunities.
I also have made progress in thinking of my setups in terms of programming them for more extensive backtesting and future automation. While it may seem I’m putting the cart before the horse, it does force me to precisely define various aspects of my trading system. I am looking to define market conditions and my setups purely mathematically, along with associated logical operators, of course. A significant number of variables will be involved, likely over 50, requiring massive computer power, along with learning a couple of programming languages. Where do I get the time? Time, of which I am very short of right now. As such, I will continue to make my outsized paychecks, destined to be short-lived, perhaps six months, and try to create a solid trading performance in the meantime. And in the part-time. It is what it is, I suppose.
My understanding of option synthetic positions increased a bit, which should help me price and select the best strikes within microstructure for my trade ideas.
I will post my trade ideas in advance for next week, although due to time constraints and my desire to practice monitoring new structure types, these trades will be more practice than quality.
Account back over $50k. Sunday night I ended up having the idea that ES might have a good trading range, even though I had earlier called for new highs this week. So I bought some ES bear spreads in puts and hedged most of my negative delta exposure with MES on the idea I would either make some money if ES went down, or take profits on MES if prices rallied, and buy back my hedge if price dropped again or benefit from a decline. However, I feel this idea is half-baked and there would be a more efficient or alternative way to play an expected trading range. Theta chewed me up faster than expected and vega was not my friend either when ES rallied. As it turned out, Sunday and Monday’s price action was about perfect for my idea, but I couldn’t stay awake Sunday night to take full advantage and had to work all day Monday. I did have a profit taking limit order, but cancelled it after it looked like the market moved away from it. Should have left the order in, however.
Had a bout of “Analysis paralysis” on silver. In other words, I had a high confidence trade, but failed to put on at least some exposure. That trade alone would have been worth plus 2% on account value, with no heat. In the future, if I reach a point where I feel highly confident on a trade, my analysis is done and I need to immediately execute the idea.
Monday’s price action seemed sloppy with 30 minute expansion bars to the upside in ES hitting a brick wall. NQ was weak suggesting a lack of conviction as far as risk taking. Some of the big Nasdaq winners in the last 12 months were getting hit hard. Further, earnings blowouts were not rewarded with bullish price action for the most part, indicating overhead supply. While I can handle a few days of the market not responding to news as expected, if it becomes a pattern over a longer period, I start thinking a correction or reversal is upcoming.
I was going to close out the short put side of my bear spread for more exposure to the downside, but chickened out because I could not watch the market. Actually, I closed out one of my spreads at breakeven because prices were near a 5 minute RTM level and I had the idea I might get back in later. It didn’t happen.
I am exploring a way to classify certain trades types for automation and refinement purposes. A preliminary classification system might be: “Mechanical”, “Mechanical with a discretionary element”, and “Discretionary”. I then can track my trading performance for each type of trade.
TWS did not highlight results of all earlier trades:
Had a bout of “Analysis paralysis” on silver. In other words, I had a high confidence trade, but failed to put on at least some exposure. That trade alone would have been worth plus 2% on account value, with no heat. In the future, if I reach a point where I feel highly confident on a trade, my analysis is done and I need to immediately execute the idea.
Monday’s price action seemed sloppy with 30 minute expansion bars to the upside in ES hitting a brick wall. NQ was weak suggesting a lack of conviction as far as risk taking. Some of the big Nasdaq winners in the last 12 months were getting hit hard. Further, earnings blowouts were not rewarded with bullish price action for the most part, indicating overhead supply. While I can handle a few days of the market not responding to news as expected, if it becomes a pattern over a longer period, I start thinking a correction or reversal is upcoming.
I was going to close out the short put side of my bear spread for more exposure to the downside, but chickened out because I could not watch the market. Actually, I closed out one of my spreads at breakeven because prices were near a 5 minute RTM level and I had the idea I might get back in later. It didn’t happen.
I am exploring a way to classify certain trades types for automation and refinement purposes. A preliminary classification system might be: “Mechanical”, “Mechanical with a discretionary element”, and “Discretionary”. I then can track my trading performance for each type of trade.
TWS did not highlight results of all earlier trades:
Although I don’t want to get in the habit of day trading iron condors, my market outlook did change from morning to afternoon and am now concerned about range expansion. The question is, which direction? I think I’ll sit back and let the market decide. Depending on price action, I may either join it or fade it in either direction. Based on posts I’m seeing online and in overheard conversations, emotions seem to be running high among retail investors, apparently feeling heat over recent declines in technology sector stocks. Will there be a washout in that sector, except perhaps the large caps? If so, will there be a spillover effect into other investments?
Missed a good RTM trade on CL because I could not get a fill on my butterfly limit order. I should have tried to work a bear vertical spread order in calls and or puts, but really did not have time due to work.
Silver went down as I typed this post, so my current PnL is lower than shown below:
Missed a good RTM trade on CL because I could not get a fill on my butterfly limit order. I should have tried to work a bear vertical spread order in calls and or puts, but really did not have time due to work.
Silver went down as I typed this post, so my current PnL is lower than shown below: