Best option strategies to learn ....

[ironchef]

Sometimes, though, I wonder. I'm struggling with stochastic integrals and partial differential equations and see shit like this making it to billion dollar valuation: https://en.wikipedia.org/wiki/Dollar_Shave_Club

It doesn't make any sense.

If this current stint of mine into the fine art of making it rich through speculation doesn't pan out in the near to mid future, I'll take out a little of the ambition while keeping the essential and switch to plan B.

Plan A: Rich = free + powerful.
Plan B: Just free.

Plan B is known in today's world as an universal basic income (UBI) economy. I think of it more as a functioning unified centralized kindness yielding output universally (FUCK YOU) economy.

Plan B by itself is priceless, once you get there you realize you no longer need Plan A.

 

[ironchef]

With that said,there are "seemingly" opportunistic trades that present itself which afford one the luxury of being somewhat clueless as to direction.IMHO,as a former "grinder",when you are right,you need to get richly reawarded. Which is why I am not a terribly big fan of tight verticals as a directional bet.Rather trade them as part of a fly/condor

I can tell, you really know what you are doing. Same reason I moved away from spreads and trade single legs instead.

Question for you sir: If you don't like tight spreads, then why are they OK for fly/condor?

Regards,

 

[taowave]

Hypothetical example...
100 dollar stock.
105-110 call spread trades at 2.25
95-90 put spread trades at 2.00
Sell both spreads for 4.25

Risk .75 to make 4.25
Another way to look at it is 3 five point Butterfly stacked on top of one another for a .75 debit..

That's .25 per fly.Ill take that shot all day long

I can tell, you really know what you are doing. Same reason I moved away from spreads and trade single legs instead.

Question for you sir: If you don't like tight spreads, then why are they OK for fly/condor?

Regards,

 

[qlai]

Risk .75 to make 4.25

What would be acceptable deltas of short strikes in your example? Isn't that a critical piece of info? Thanks.

 

[ironchef]

Hypothetical example...
100 dollar stock.
105-110 call spread trades at 2.25
95-90 put spread trades at 2.00
Sell both spreads for 4.25

Risk .75 to make 4.25
Another way to look at it is 3 five point Butterfly stacked on top of one another for a .75 debit..

That's .25 per fly.Ill take that shot all day long

What would be acceptable deltas of short strikes in your example? Isn't that a critical piece of info? Thanks.

Thank you.

True but isn't it all priced in unless like @qlai said, you have critical information that gives you an edge to come out ahead.

You still need to have the correct opinion in order to eventually come out ahead? In other words, statistically speaking, mechanically buy the above condor regularly will not net me a profit in the long run?

If I have superior opinion isn't it simpler to trade single legs, long call or put with limited downside but unlimited upside?

I am not arguing with you, just want to understand how it is done.

 

[taowave]

In the example I gave you,vol was super jacked, which is why you could collect 4.25...

You would have a very very difficult time losing money on spreads/condors trading at those levels..

For the record,I was talking index options...

 

[ironchef]

True but isn't it all priced in unless like @qlai said, you have critical information that gives you an edge to come out ahead.

You still need to have the correct opinion in order to eventually come out ahead?

In the example I gave you,vol was super jacked, which is why you could collect 4.25...

You would have a very very difficult time losing money on spreads/condors trading at those levels..

For the record,I was talking index options...

I see, so in your example vol is the determining parameter. I think I am beginning to understand.

Thanks.

 

[taowave]

Yes,the high implied vols are the determining factor.If you have an option calculator,you will see that vol would have to be super jacked for the spreads to trade at that level..

The more screen time you have,the easier it will be to pick out spreads and intuitively know how they are priced..

I see, so in your example vol is the determining parameter. I think I am beginning to understand.

Thanks.

 

[anycolour]

What does trading single legs mean? Just trading 1 simple naked put or call?

 

[taowave]

Funny you should ask that as I really dont look at the individual short leg delta's..

I look at percent of spot and the net delta of the spreads.

What would be acceptable deltas of short strikes in your example? Isn't that a critical piece of info? Thanks.