I suggest you start a new thread in the options section with questions like that, lest the answers get buried in here.
ES Journal - 2019/2020
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I suggest you start a new thread in the options section with questions like that, lest the answers get buried in here.
Without logging on, how much did the 3000 put sell for, and how much did the 2 2905's bring in?
It'll be easier to explain if I know that.
Maybe it was incomplete information to begin with. Then again I wouldn't know...
This was the full message (put on this morning):
"I’m buying 1 Jul 06 ES 3000 put and selling 2 Jul ES 2905 put, I’m receiving $2 for the spread, the max profit is at ES 2905 which will be $102. I start loosing under ES 2803."
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Do you have ThinkOrSwim installed? If not, open a TDA a/c (you don't have to fund it). Then you can do the analysis yourself, change dates etc. Anyways, this is what your P&L profile would look like. Basically, if you hold till expiry, you will make money as long as ES is between 2813 and 2995. If I am trading it, I may or may not hold it till expiry. Under 2813 you start losing money like being long 1 ES
My numbers are different from whoever posted the original trade as I am putting the trade on NOW as opposed to whenever and ES has moved since then, obviously, vol moved, yada yada
Hey DS thanks for helping me understand.
The "July 06" I'm guessing is the date of expiration?
Ah I need to do some reading to learn the basics. Was just trying to understand this specific position that was put on this morning by someone I recently started following.
Yes, that's the expiry date. Everyone learns differently, and I am no option player by any means. But it is best to experiment & simulate. It will be a huge mistake to just look at P&L at expiry. You need to understand the greeks, and understand the pricing moves from the time you put the trade on and as price, time & vol moves. For example, you will make the most money at say 2902 at expiry, but if we were to drop to that tomorrow, you will have a mark to market loss tomorrow. That is assuming vol remains constant, which it won't and will go up, and that will change P&L. Have fun!
Dart's pretty much answered your question. Anyways, this is clearly a bearish bet, but one where the trader sees limited downside. It almost looks like a trade off the Goldman call that we'll be range bound between 3200 - 2850. Without being in the trader's head, I'll guess selling two of the 2905 is to make the trade a net credit trade. I guess it also shows conviction on the range. If i was in this trade, I probably wouldn't hold it to expiry given the economic backdrop. Or I can cut bait on the short 2905s if I saw further downside.
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