To cut a long story short, he came out with a neutral synthetic, one long leg, one short leg, and a pair of black scholes.
Either I'm retarded or this is a pretty solid strategy
- Thread starter badlucktrades
- Start date
To cut a long story short, he came out with a neutral synthetic, one long leg, one short leg, and a pair of black scholes.
Okay, so I know where I screwed my trade. it was the two additional calls and the ignoring of time value.
So revised Position is:
shares - 100 = +19800
Call 200 +1 = -150
put 197.50 - 1 =+470 (470= 50 intrinsic, 420 Time value, so linear decay would be about 0.23 per day)
=20120
If by sept 4, spy is at 193
shares -100 =19300 (+500)
call 200, +1 = -150
put 197.50 = (-450 intrinsic -420 time value) +115 (use 0.23 per day)
= -405
@at this point you can still sell the 197.50 or 197 put for the following week for at least 450 + time value. (thinking it would be enough to offset the loss here and purchase 197-200 call for cheap. )
If by sept 4, spy is at 203
shares -100, 20300 (-500)
call 200 = +150
put 197.50 = (450 intrinsic + 420 time value + 115 time decay)
=+635
Loss area is 192-200.50
Anyway, i think this is right.
dont know why this made me laugh
-100 shares and the long 200C = a synthetic 200-strike long put in Sep4, 2015
-1 197.50P in Sep18, 2015
Value on the synthetic call: $350
Put val: $470
Net credit (absent carry, comms): ($120)
You would be long (1) 197/200 bear vertical if these were the same duration. You are in a diagonal from -1.20.
The issue is that you're short 95-delta with the Sep4, yet long 65-delta with the Sep18. This is not a vola position (not now, anyway), so basically you're short 30-delta out to Sep4. You have no intention of holding this beyond Sep4 last trading day and the thing has a theta of like 5.
Why not simply short 30 shares of SPY? I can't fathom how you think this makes any sense whatsoever. The same-expiry trade would be a short collar = bear vertical. You add in Sep18 expiration, but have no intent of holding past this weekend.
I was going to put up the stress-test, but it's pointless as vola has rallied 500bp and the SPY has dropped $5.
my intent, was to use a short put below my short stock in order to purchase a call to cover the upside risk.
You're looking at all of these pieces as though they don't reduce; they do. Don't involve the shares. An example: long shares, long 90P, short 100C = the 90/100 bull vertical. With shares it's a collar, but it's unnecessary to involve stock that you don't already own or are in possession of a pre-existing short position. The collar reduces to a two-leg vertical spread. Some brokers will reduce your haircut due to the reduction in risk (no haircut on shares), but some will simply apply Reg-T to each individual position.
Long shares + long put = long call
Short shares + long call = long put
Long shares + short call = short put... find out about synthetic relationships; P/C parity.
Puts are calls, calls are puts.
"The difference between a call and a put? Shares"
thanks for all the response.
Anyway, this trade was poorly executed. To recover, this is what I will do.
Current position after commissions
-100 shares @197.85 = +197.85 - daily interest rate % 2, 1.08 + 15% = 1.25 per day
-1 put @197 for credit of 6.67, $667
+1 sept 4 200.5 call (was 3 originally), @$1.50 a piece total =$450
+1 sept 11 198 call (order in today) @$1.30
Remaining credit 0.55
less commissions and interest
=0.24
sept 4
upside loss @200.50 =($450 +215) - put (time decay and delta)
sept 11
upside loss @198 = (450 + 130) - put (Time decay + delta)
Sept 18
going to try to use the remaining credit of 0.24 to subsidize a loss.
Anyone have any suggestions that can make this trade better for a less damaging recovery?
Anyway, this trade was poorly executed. To recover, this is what I will do.
Current position after commissions
-100 shares @197.85 = +197.85 - daily interest rate % 2, 1.08 + 15% = 1.25 per day
-1 put @197 for credit of 6.67, $667
+1 sept 4 200.5 call (was 3 originally), @$1.50 a piece total =$450
+1 sept 11 198 call (order in today) @$1.30
Remaining credit 0.55
less commissions and interest
=0.24
sept 4
upside loss @200.50 =($450 +215) - put (time decay and delta)
sept 11
upside loss @198 = (450 + 130) - put (Time decay + delta)
Sept 18
going to try to use the remaining credit of 0.24 to subsidize a loss.
Anyone have any suggestions that can make this trade better for a less damaging recovery?
Close it out. We rally tomorrow (perhaps another 15-20 ES is possible from here), but not enough to salvage it. Repair strategies are simply loss-avoidance. Don't trade (a repair strat) that you wouldn't consider as a standalone strategy.
So many people write calls on their long-term holdings. They see the shares drop 30% and then get called away when it rebounds. Try to remove shares from the equation; it adds comms and increases your haircut. I've seen pros turn a 20% position loss into 200% using repair strategies that turn in -gamma scalps.
So many people write calls on their long-term holdings. They see the shares drop 30% and then get called away when it rebounds. Try to remove shares from the equation; it adds comms and increases your haircut. I've seen pros turn a 20% position loss into 200% using repair strategies that turn in -gamma scalps.
well if i close it out right now, im at a $70 loss but a possible gain of $24.
Why do you call yourself badlucktrades...that's like wishing death upon yourself...can be a self-fulfilling prophecy. 
In trading, and in life for that matter, you kind of need all the good luck and positive vibes you can get and muster.
In trading, and in life for that matter, you kind of need all the good luck and positive vibes you can get and muster.