Expiration Friday trading

Very close now - big question is do we bust up or retreat - you know what I am betting on, but if I am wrong I will lose, obviously:rolleyes:

J_S

Screenshot_2016-07-08-19-28-03_1.jpg
 
Tempted to short another NQ, but will hold off and buy some more VXX shares if we go up a bit more.

Feck this trading larky anyway - why can't every trade I do be a winner:rolleyes:

Oh well, time for a bit of Indian - not too hot I hope, as bit of heat already today:D

J_S
 
OptionGuru said:
Forget OI and focus on the premium for the ATM straddle. The market doesn't reward dumb money and will make sellers and buyers earn their money.


Example:
  • SPY at 209.99.
  • SPY July 08, 2016 210.00 Call (bid $0.71 ask $0.76).
  • SPY July 08, 2016 210.00 Put (bid $0.90 ask $0.91).
  • A strangle buyer will pay $1.67 and needs the SPY to finish above $211.67 or below $208.33 to make a profit.
  • A strangle seller will collect $1.61 and needs the SPY to finish in between $211.61 and $208.39 to make a profit.
The above quotes show that the SPY will trade in a price range of about $211.61 to $208.39 until expiration, and on expiration finish at about $211.61 OR $208.39. Both traders will break even unless the market moves beyond what the option premiums indicate - in that case one of the traders will profit.


Long story short - This Friday the SPY will close at $211.61 OR $208.39, give or take a dime.
More...



EXPIRY UPDATE


  • SPY closed at $212.65.
  • The 210.00 ATM straddle was mispriced on Wednesday.
  • Advantage went to the 210.00 ATM straddle buyer.
  • 210.00 ATM straddle bought for $1.67 - sold for $2.50. P/L $83.00
  • The 210.00 ATM straddle seller would have lost about $89.00.

Overall there is no advantage of being a seller or buyer since the ATM straddle (long or short) is priced to break even at expiry.

If the trader feels the ATM straddle is mispriced then they can enter a trade that will profit from the mispriced options. They might be right, they might be wrong.

IMO ..... The price of the ATM straddle is a much better indication of were the underlying will trade at than the volume or open interest of the options.




:)
 
IMO ..... The price of the ATM straddle is a much better indication of were the underlying will trade at than the volume or open interest of the options.

Do you have any idea how that would have worked on AAPL this week?
 
OptionGuru said:
EXPIRY UPDATE


  • SPY closed at $212.65.
  • The 210.00 ATM straddle was mispriced on Wednesday.
  • Advantage went to the 210.00 ATM straddle buyer.
  • 210.00 ATM straddle bought for $1.67 - sold for $2.50. P/L $83.00
  • The 210.00 ATM straddle seller would have lost about $89.00.

Overall there is no advantage of being a seller or buyer since the ATM straddle (long or short) is priced to break even at expiry.

If the trader feels the ATM straddle is mispriced then they can enter a trade that will profit from the mispriced options. They might be right, they might be wrong.

IMO ..... The price of the ATM straddle is a much better indication of were the underlying will trade at than the volume or open interest of the options.




:)
More...

We forgot to check the economic calendar for Friday - well, I did anyway:mad:

News moves the markets - market makers only have so much money, and when pension funds decide to buy, they buy!

Anyway, not to worry, good bit from max drawdown so not really worried - let's see what next week brings, and have another go at it:banghead::D

J_S
 
The big question now, is, what have we learned from the outcome, as, if we learned nothing then it was just a waste of time!

I have learned one important thing from OG's words, but, as most sit back and look, and do not partake, I am not going to say what it is - gone long past the point of saying "hey, look what I know":rolleyes:

Next week is a new week, and anything can happen in the markets - if you do not take on some risk, be it for 30 sec, or a few weeks, you will never make any money - that is one sure thing!

Market drops I make some money, goes up and my drawdown increases - I have a good bit of leeway yet, so I am not really worried, but will follow closely in case I need to take some action to limit losses if need be, which is my own personal decision.

Taking profits is the easy bit.

That's trading for ya!

J_S
 
Worst part of Expiration Friday trading is that if you're right, you make good money. If you're wrong, you lose a good deal. Too much risk for me!
 
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