buy and hold!
Gotta love ZERO RISK in the SP500 = $$$
- Thread starter makloda
- Start date
I've been long an ES butterfly for the 18th for about 3 months at 2040/2050/2060...paid a whopping $25 for it after commission, so have just been holding it with every intention of making it through expiration. Been pretty excited this week at the remote possibility of it actually hitting after 3 months lol, not looking so great anymore. Oh well!
Seems too narrow...I think the best way is to leg a vertical spread into a butterfly and it can still come pretty close to being done for a small debit...
Yeah, late one night I thought I found some pricing anomoly when I entered the fly, then about 10 seconds later I realized I was wrong lol. But since I only put $25 into it, I figured what the heck, I'll just let it ride.
I followed your advice (somewhat) and held for longer, thanks for the good tip! I'm about to go into a meeting and be away from the computer for several hours, so just locked in the gains!
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I think you misunderstood what Visaria meant by "Buy and Hold", but happy it worked out for you. BTW trading ITM options with holding period in hours seems not too common
Yeah, just edited my post lol. It was an improvement on my typical hold time at least is what I meant, but far from a longer hold you are definitely right.
Working with a smaller account, so felt more comfortable holding options long while not constantly watching vs the outright. Not that I expect some massive move down, but it allows me to focus on my job a bit better until I look back at the computer.
FCX, assuming the expiry is at least a few days away, you might want to choose strikes based on where you think you will be making an exit (as a rule of thumb). That is, if you are looking for 20 point increase in ES, choose strike closest to current price + 20 points. You will get a better % return. Which of course means being long OTM options. There is no "security" in buying ITM options, because if you are badly wrong, the ITM can go to OTM in a hurry and would hurt you more. Plus, if your trade is going right, your delta & gamma would increase rapidly as you approach ATM. ITM options has gamma dropping off as you get deeper in the money. Just something to think about. Last but not the least, spreads are considerably tighter for OTM than ITM, which would be a huge consideration for smaller holding periods.
Thanks for the good advice, after your prior post mentioning the ITM options, I checked to see how they performed compared to the OTM and realized there wouldn't have been much of a difference in the return $ by moving to a higher strike that was around a third of the cost..SO with that being said, thank you for the solid tip. I will look into doing that next time as I think that will be a much better decision.
In the past I have basically just taken the current price and in ES for example used a strike 10pts or so higher. But I will definitely look into doing it more like how you mentioned. That would be the better risk adjusted return.