er2 naked future option journal

[domestic]

thank-you sith.

i knew when i listed my positions that it may be confusing. i will improve.
the "1.8" refers to what interactive brokers says the contract is currently worth. so if i sold at 3.1 and it is now worth 1.8 my net at that particular moment is 1.3 in unrealized gain. thanks again for following the thread and any inputs are welcome.

 

[domestic]

update er2 future options

-10 puts october 610 sold @ 2.00 /current value 1.19

-10 calls october 795 sold @ .95 /current value 1.27

-10 calls october 800 sold @ 1.05 /current value 1.08



open sept positions

-10 puts 610 @ 293.35 value .13

 

[boze_man]

Hey Risk...

Quote from riskarb:
It is far more sound to simply sell ER2 puts and get flat deltas in ER2 futures. Even hedged weakly is preferable to your current course of action.

why synthetic straddle over a natural staddle?

Quote from riskarb:
At least with a weak synthetic straddle you may walk away without injury. Traded strong [1x2] and you'll earn.

also what do you mean by "traded strong (1x2)"...

Thanks again for all your insight...
Bill

 

[riskarb]

Quote from boze_man:

Hey Risk...


why synthetic straddle over a natural staddle?


also what do you mean by "traded strong (1x2)"...

Thanks again for all your insight...
Bill

The synthetic is only a straddle if traded 1:2. I was referring to trading ratios 1:3, 1:4, and so on. Anything weaker than 1:2 is actually an overwrite.

Traded strong refers to a position in which neutrality = strike price.

 

[LeonPhelps]

dom,

Do you have any other defences besides roll up and out? When do you take a loss?

Thxs

 

[domestic]

Quote from riskarb:
It is far more sound to simply sell ER2 puts and get flat deltas in ER2 futures. Even hedged weakly is preferable to your current course of action.

i do understand the concepts that you have put forth. i just do not think i may have the ability to effectively implement that strategy. i am working on it though.
the main reason i started this journal is to showcase my theory in way otm option writing is safer,more manageable and more rewarding than spreads. i know that i am in the minority big time; but really the when the position goes against me and i clearly can show what i am doing to manage it; that will be when it all becomes far more interesting.

 

[jeffm]

Hi domestic,

You are a brave man to discuss unhedged option shorts. Its only a matter of time before somebody summons He Who Must Not Be Named, the Dread Lord VN! Mwahahahahaaaa!

Seriosuly though...
What do you use to time your entries?

One of the advantages of naked vs spread is that if the market moves your way, the naked will drop in value much faster than the spread. This allows you to close the trade earlier and sit in cash waiting for the next entry. Obviously it helps to get a good entry, hence my question above.

The big knock on naked or credit spreads is the 2+ sigma event that wipes out everything. If you can increase the % of time you are in cash, you are also increasing the likelyhood of missing the wipeout event.

Not that a 3 sigma move has to be career ending. Ansbacher and a few others demonstrate that. But it does become an exercise in very strict discipline.

 

[domestic]

Quote from jeffm:

Hi domestic,

You are a brave man to discuss unhedged option shorts. Its only a matter of time before somebody summons He Who Must Not Be Named, the Dread Lord VN! Mwahahahahaaaa!

seriously though...
What do you use to time your entries?

no complex stuff here, just some overbought/sold indicators and to me just as important real world events taken as a whole.

as you noted, i do buy back most of my positions when i feel a certain profit is reached. my feeling is, those that spread must go closer to the money and will be turning .5 gains into 5pt loses before i am adjusting because i tend to go even further out.

Quote from jeffm:



One of the advantages of naked vs spread is that if the market moves your way, the naked will drop in value much faster than the spread. This allows you to close the trade earlier and sit in cash waiting for the next entry. Obviously it helps to get a good entry, hence my question above.

The big knock on naked or credit spreads is the 2+ sigma event that wipes out everything. If you can increase the % of time you are in cash, you are also increasing the likelihood of missing the wipeout event.

Not that a 3 sigma move has to be career ending. Ansbacher and a few others demonstrate that. But it does become an exercise in very strict discipline.

the key is good entry, failure to do so will lead to problems later. the basis in my future success is the drop in value of the contract when things go "my way".when the sigma damning event occurs, can i adjust quickly and successfully? we will see, if i do it may be luck also. i do want to illustrate it as long as there is interest. you essentially articulated what i may have failed to do.
thanks

 

[greeks]

I started seeing this Sigma thing but have not idea what it's. Would someone please explain it?

Thnaks,
Tom

Quote from jeffm:

Hi domestic,

You are a brave man to discuss unhedged option shorts. Its only a matter of time before somebody summons He Who Must Not Be Named, the Dread Lord VN! Mwahahahahaaaa!

Seriosuly though...
What do you use to time your entries?

One of the advantages of naked vs spread is that if the market moves your way, the naked will drop in value much faster than the spread. This allows you to close the trade earlier and sit in cash waiting for the next entry. Obviously it helps to get a good entry, hence my question above.

The big knock on naked or credit spreads is the 2+ sigma event that wipes out everything. If you can increase the % of time you are in cash, you are also increasing the likelyhood of missing the wipeout event.

Not that a 3 sigma move has to be career ending. Ansbacher and a few others demonstrate that. But it does become an exercise in very strict discipline.

 

[jeffm]

I'm curious then about your Oct 610 put entry. You first mentioned it on Aug 31 (unless I missed it earlier.) The past few days would seem to be a good entry for short calls, but not necessarily for puts.

OTOH, you sold them for 2ish and they are now down to 1ish, which would indicate that you sold them earlier and at a more favorable location. Does that mean you added the oct puts while the earlier Sep puts were still open?

Quote from domestic:

no complex stuff here, just some overbought/sold indicators