"Fixing" Options Trades

[newwurldmn]

Quote from IVtrader:

There can be a fairly big difference between what you call "semantics" and a material change in the option greeks. all "views" aside

I don't understand what a material change in the greeks have to do with anything?

Either your view changes or it doesn't. Your view can be expressed in greeks, stock distribution, relative value or something else.

If you are losing money you have two choices: do something or not. If you do something, you are changing your view. If you don't then you aren't. It's okay to change your view. It's also okay to not change your view. But saying, "I'm going to adjust my position" is being intellectually dishonest to yourself.

 

[IVtrader]

Quote from newwurldmn:

I don't understand what a material change in the greeks have to do with anything?

Either your view changes or it doesn't. Your view can be expressed in greeks, stock distribution, relative value or something else.

If you are losing money you have two choices: do something or not. If you do something, you are changing your view. If you don't then you aren't. It's okay to change your view. It's also okay to not change your view. But saying, "I'm going to adjust my position" is being intellectually dishonest to yourself.

you said:"It's semantics as to what is a NEW position vs an OLD one."

then you say:"I don't understand what a material change in the greeks have to do with anything"

you evidently don't make the kinds of distinctions that advanced option traders make in analyzing an option spread position. if you did, you wouldn't just simply describe it as either "your view has changed or it hasn't"
the distinctions matter because, using the greeks will tell you when an adjustment has turned a trade from nondirectional to directional or vice versa. and that's NOT just "semantics".

 

[newwurldmn]

Quote from IVtrader:

you said:"It's semantics as to what is a NEW position vs an OLD one."

then you say:"I don't understand what a material change in the greeks have to do with anything"

you evidently don't make the kinds of distinctions that advanced option traders make in analyzing an option spread position. if you did, you wouldn't just simply describe it as either "your view has changed or it hasn't"
the distinctions matter because, using the greeks will tell you when an adjustment has turned a trade from nondirectional to directional or vice versa. and that's NOT just "semantics".

You aren't giving me enough credit on my options knowledge.
Greeks are just risk parameters to help you express your view.

You can have a non directional view (on gamma or vega) or you can have a directional view (on delta). If your trade is losing money, it's losing money. There's no such thing as adjustment.

If you are long gamma and bleeding in theta, you are losing money. Maybe you are wrong on your vol view. But to say I can sell some skew to offset the theta is expressing a different view. To say I can cut my risk is expressing a view that I was wrong. To say, I am going to add because the vol will pick up is reinforcing my view. But normally adjustments change the risk profile and thus change the trade.

In your original example of the iron condor, the moment you delta hedge it, it becomes a different trade. I'm sure you would understand why. It's not an adjustment, you are expressing a different view, which might be right conditioned on the new information.

It's fine to roll strikes around, start to hedge, and change your position. This isn't about being consistent, but it is VERY important to be intellectually honest about what you are doing. Otherwise you will find yourself in some kind of quagmire you don't want to be in.

EDIT: I could think of one "adjustment" which doesn't change the view. If you have ATM gamma and find yourself with either downside or upside gamma after a stock move.

 

[taowave]

well said....

greeks are simply a quantification of your view

Quote from newwurldmn:

You aren't giving me enough credit on my options knowledge.
Greeks are just risk parameters to help you express your view.

You can have a non directional view (on gamma or vega) or you can have a directional view (on delta). If your trade is losing money, it's losing money. There's no such thing as adjustment.

If you are long gamma and bleeding in theta, you are losing money. Maybe you are wrong on your vol view. But to say I can sell some skew to offset the theta is expressing a different view. To say I can cut my risk is expressing a view that I was wrong. To say, I am going to add because the vol will pick up is reinforcing my view. But normally adjustments change the risk profile and thus change the trade.

In your original example of the iron condor, the moment you delta hedge it, it becomes a different trade. I'm sure you would understand why. It's not an adjustment, you are expressing a different view, which might be right conditioned on the new information.

It's fine to roll strikes around, start to hedge, and change your position. This isn't about being consistent, but it is VERY important to be intellectually honest about what you are doing. Otherwise you will find yourself in some kind of quagmire you don't want to be in.

 

[IVtrader]

Quote from newwurldmn:

You aren't giving me enough credit on my options knowledge.
Greeks are just risk parameters to help you express your view.

You can have a non directional view (on gamma or vega) or you can have a directional view (on delta). If your trade is losing money, it's losing money. There's no such thing as adjustment.

If you are long gamma and bleeding in theta, you are losing money. Maybe you are wrong on your vol view. But to say I can sell some skew to offset the theta is expressing a different view. To say I can cut my risk is expressing a view that I was wrong. To say, I am going to add because the vol will pick up is reinforcing my view. But normally adjustments change the risk profile and thus change the trade.

In your original example of the iron condor, the moment you delta hedge it, it becomes a different trade. I'm sure you would understand why. It's not an adjustment, you are expressing a different view, which might be right conditioned on the new information.

It's fine to roll strikes around, start to hedge, and change your position. This isn't about being consistent, but it is VERY important to be intellectually honest about what you are doing. Otherwise you will find yourself in some kind of quagmire you don't want to be in.

EDIT: I could think of one "adjustment" which doesn't change the view. If you have ATM gamma and find yourself with either downside or upside gamma after a stock move.

I don't think so. you can prioritize being "intellectually honest" all YOU want,yet trading is about one thing: being p-r-o-f-i-t-a-b-l-e.

claiming a iron condor once delta hedged becomes a difference trade is respectfully nonsense. as long as the trade is negative vega, positive theta , its still an iron condor.

in practice exactly how many IC's have you traded? how many calendars have you traded?

 

[taowave]

Its a different trade,I dont see how you could not view it as such..

Take an extreme example..

You are short the 85% spots naked...
Stock trades down 15%,and you decide to delta hedge..

Still negative vega,positive theta...

Same trade,if you hedged out most of the delta,or are you now approximating a synthetic straddle??

Calenders,butterflys and condors are not great examples

Quote from IVtrader:

I don't think so. you can prioritize being "intellectually honest" all YOU want,yet trading is about one thing: being p-r-o-f-i-t-a-b-l-e.

claiming a iron condor once delta hedged becomes a difference trade is respectfully nonsense. as long as the trade is negative vega, positive theta , its still an iron condor.

in practice exactly how many IC's have you traded? how many calendars have you traded?

 

[atticus]

It's obvious and is what defines the novice from the pro. Only a novice would believe that they can "repair" the position. You cannot "fix" the marked-loss unless it reverts. The novice assumes it's within their power to do so.

Consider the flip-side with the long-gamma scalper who is trading opportunistically. The "hedge" is what allows the trader to realize the gains from gamma. It's assumed and mandatory from the inception of the trade. The same cannot be said of the "repair" trade as the only logical action is to avoid taking a trade that you assume will result in a loss.

To state the obvious -- rolling strikes and other attempts to "repair" are simply methods to avoid taking the loss either through adding duration or distribution.

If the trade would not be taken as a opening position (in situ trade + repair) then it should be avoided. The resulting greek position is not opportunistic... you're just BSing yourself to avoid the finality of the loss.

 

[IVtrader]

Quote from atticus:

It's obvious and is what defines the novice from the pro. Only a novice would believe that they can "repair" the position. You cannot "fix" the marked-loss unless it reverts. The novice assumes it's within their power to do so.

Consider the flip-side with the long-gamma scalper who is trading opportunistically. The "hedge" is what allows the trader to realize the gains from gamma. It's assumed and mandatory from the inception of the trade. The same cannot be said of the "repair" trade as the only logical action is to avoid taking a trade that you assume will result in a loss.

To state the obvious -- rolling strikes and other attempts to "repair" are simply methods to avoid taking the loss either through adding duration or distribution.

If the trade would not be taken as a opening position (in situ trade + repair) then it should be avoided. The resulting greek position is not opportunistic... you're just BSing yourself to avoid the finality of the loss.

atticus

when you have been interviewed in SFO and Expiring Monthly magazines,as at least 3 traders in a certain traders community(where repairing trades under certain conditions is done, and where I'm a member in), who have established track records trading IC and calendars, then your opinion will be a lot more credible.

 

[atticus]

Quote from IVtrader:

atticus

when you have been interviewed in SFO and Expiring Monthly magazines,as at least 3 traders in a certain traders community(where repairing trades under certain conditions is done, and where I'm a member in), who have established track records trading IC and calendars, then your opinion will be a lot more credible.

...

 

[atticus]

Quote from IVtrader:

I don't think so. you can prioritize being "intellectually honest" all YOU want,yet trading is about one thing: being p-r-o-f-i-t-a-b-l-e.

claiming a iron condor once delta hedged becomes a difference trade is respectfully nonsense. as long as the trade is negative vega, positive theta , its still an iron condor.

in practice exactly how many IC's have you traded? how many calendars have you traded?

WTF is the difference between an IC and a call condor? I ask because you make a distinction as to an "IC" when there is none. It's a condor.

Here's a simple example of how wrong you are:

Long one ATM call

Short 50 shares

The call position is now a half-lot long straddle. It began as long gamma and vega and remains so.



EDIT: Why was this post deleted?