It's "moot," not "mute," OG.
Call Out Your Potential Option Trade and Let's Discuss it
- Thread starter jeffalvinson
- Start date
Maverick74, Interesting thought on the synthetic puts, I wouldn't have thought of that. Do people still trade them often? I always thought they were kinda a plan b to buying puts/put spreads.
Have a trading idea. Along the lines of collecting premium in the 1 week WTI options.
Basically sell the ATM put or as of yesterday, the Aug 05 40.50 put for .710 credit while simultaneously selling equal amounts of Sept WTI (Underlying). The market is in a downtrend (strong). I have never performed a trade as this so I just did it yesterday in my IB paper account to see how the position behaves.
Thus,
SLD 2 AUG 06 40.50 PUT @ .71 credit or $1420
SLD 2 CLU6 @ 40.67
The idea being to collect the weekly premium/get exercised and the position gets unwinded on the exercise obligation of getting long at 40.50. The position is not delta neutral...not intended to be.
At expiration this week the trade should look like this...We'll see
Credit of .71 x 2 or $1410
Covered CLU6 from 40.67 x 2 or $340
$1750 less commissions
On the risk side any thing above $41.38 and looking to cover as short futures leg would be
in the red exceeding premium taken in.
Thoughts, ideas, holes etc....Lets hear it.
Basically sell the ATM put or as of yesterday, the Aug 05 40.50 put for .710 credit while simultaneously selling equal amounts of Sept WTI (Underlying). The market is in a downtrend (strong). I have never performed a trade as this so I just did it yesterday in my IB paper account to see how the position behaves.
Thus,
SLD 2 AUG 06 40.50 PUT @ .71 credit or $1420
SLD 2 CLU6 @ 40.67
The idea being to collect the weekly premium/get exercised and the position gets unwinded on the exercise obligation of getting long at 40.50. The position is not delta neutral...not intended to be.
At expiration this week the trade should look like this...We'll see
Credit of .71 x 2 or $1410
Covered CLU6 from 40.67 x 2 or $340
$1750 less commissions
On the risk side any thing above $41.38 and looking to cover as short futures leg would be
in the red exceeding premium taken in.
Thoughts, ideas, holes etc....Lets hear it.
You just wanna sell the calls, yes? Because the mkt is trending and you expect this to continue?
I guess so. Theoretically its the same thing. See any short comings on the position? Idea was first presented to me as a trade in the ES as it rolls over. Trader suggesting it is a serial put seller of put VRP. I just like trading WTI better myself. Formatted it to that contract.
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I like that trade (not my mandate/AC, obviously). I'd sell a bit further out, like next month. Roll-down along the curve is in it's favor big time and it takes advantage of the bear trend.
The reason I'm selling near dated is there is another series available next week in which to reinitiate. My thinking is why have the exposure from event risk especially if there is premium in the shorter dated stuff.
Obvious none of this takes into acct vol's and alike. Any other issues anyone sees?
I haven't looked properly... I imagine the outright vol isn't at a super sexy level to sell. On the other hand, I can see some redeeming features, such as what sle pointed out. The way I see it, the main risk here, which could violently disrupt your trend, is a sharp USD selloff.
....Or a inventory discrepancy between crude & RBOB (drawndown) causeing a short covering spike.
Yeah, today was weird...