help? for people researching options training
- Thread starter IVtrader
- Start date
+100 to Maverick's advise.
There is a ton of free stuff online; and actually its much better than any paid content you will find anywhere.
I have pointed to this material before also; but here it goes again. Go to tos archives and scroll down all the way down 4-5years back; and listen to Tom Prestons seminars. There are maybe 5-7 of them; and thats all there is to options. Then you go play on a backtesting engine and put some hours. No education can replace what you learn there or top that.
And as for the Sheridan method of adjusting; lets just say it wont work. If you need proof take any of his methods (from the videos posted on cboe page) and try to put them on paper and backtest for more time than he shows in his free lectures.
Ah.. by the way if you really want to spend some change; register for tastytrade.com. TomSos is talking live 5hours a day for 45bucks an year (actually; you make money - cause if you have tos account you can have your commisions cut in half; worth about $400). Thats definitely a deal you cant beat.
Best of luck!
-gariki
I think you could have gotten out of the August mini-crash alive with an IC. I was in cash at the time (thankfully), so the following is hypothetical.
I think in order to have survived (and I say "survived," not "profited") you had to have paid attention to implied volatility leading up to the cliff. I'm certainly not an expert in options, but it seems to me that very few IC traders talk about IV considerations prior to establishing a position. ICs are not just theta trades; they're vega trades. Because ICs are short vega, a large spike in implied volatility after establishing the trade is going to be very detrimental to your position. Combined with a large downward underlying move causing you to suddenly be long many deltas, an IC in the "sweet spot" can cost you your shirt in a hurry.
That said, looking at SPX options data leading up to the early August mini-crash, there was a significant rise in implied volatility as the days ticked down toward the drop. While I doubt very many people thought that the S&P would lose almost 200 points in 5 trading sessions, the timing of your IC opening may have provided you some breathing room in the days to come. If you're one who simply must be in a position 365 days out of the year, you may have ignored the dropping IV during the week of 7/22, and established your position then. Not only would you have established your condor at a lower IV than the days that preceded it, you would have established your put spread 40-50 points higher than if you'd have done it 4 days earlier. With the lingering systemic problems with both the Euro and US sovereign debt*, it strikes me as a poor idea to not give yourself as much berth as possible on the downside (while still receiving acceptable credit for your trade). In my opinion, this means:
1) Establishing your trade on a spike in implied volatility. Important: Not only is a spike in IV important, you must have good reason to believe the IV will revert downward to the mean. If your volatility forecast is incorrect, and volatility of the underlying rises swiftly as well, your theoretical edge is gone. Establishing an IC on an IV spike prior to the August mini-crash would have perhaps provided some cushion, but the subsequent rise in statistical volatility of the S&P negated any theoretical edge. Underlying volatility doesn't always spike with IV, but it's up to the trader to accurately forecast volatility during the life of the trade. Easier said than done.
2) Establishing the position based on what the market is pricing the options at, i.e. using delta instead of a fixed number of points.
3) Ensuring that your short strikes (at your desired delta) still give you at least 100 points (I personally shoot for 150+ on SPX) on either side, particularly the down side.
Personally, if I can't do those things above, I will not establish a position. In my own case, the last SPX IC I closed was on 11/30, and I haven't established one since. A look at the VIX may tell you why.
* The above is moot if the Eurozone collapses tomorrow; all of the above may be thrown out the window at any time when systemic problems exist. I'm a bit of a hypocrite with this (I have traded ICs in the months following the US credit downgrade and during the Eurozone crisis), but perhaps the best way to play defensively when trading ICs is to stay in cash until the global economy stabilizes.
I'm open to any thoughts or criticisms about the above.
I think in order to have survived (and I say "survived," not "profited") you had to have paid attention to implied volatility leading up to the cliff. I'm certainly not an expert in options, but it seems to me that very few IC traders talk about IV considerations prior to establishing a position. ICs are not just theta trades; they're vega trades. Because ICs are short vega, a large spike in implied volatility after establishing the trade is going to be very detrimental to your position. Combined with a large downward underlying move causing you to suddenly be long many deltas, an IC in the "sweet spot" can cost you your shirt in a hurry.
That said, looking at SPX options data leading up to the early August mini-crash, there was a significant rise in implied volatility as the days ticked down toward the drop. While I doubt very many people thought that the S&P would lose almost 200 points in 5 trading sessions, the timing of your IC opening may have provided you some breathing room in the days to come. If you're one who simply must be in a position 365 days out of the year, you may have ignored the dropping IV during the week of 7/22, and established your position then. Not only would you have established your condor at a lower IV than the days that preceded it, you would have established your put spread 40-50 points higher than if you'd have done it 4 days earlier. With the lingering systemic problems with both the Euro and US sovereign debt*, it strikes me as a poor idea to not give yourself as much berth as possible on the downside (while still receiving acceptable credit for your trade). In my opinion, this means:
1) Establishing your trade on a spike in implied volatility. Important: Not only is a spike in IV important, you must have good reason to believe the IV will revert downward to the mean. If your volatility forecast is incorrect, and volatility of the underlying rises swiftly as well, your theoretical edge is gone. Establishing an IC on an IV spike prior to the August mini-crash would have perhaps provided some cushion, but the subsequent rise in statistical volatility of the S&P negated any theoretical edge. Underlying volatility doesn't always spike with IV, but it's up to the trader to accurately forecast volatility during the life of the trade. Easier said than done.
2) Establishing the position based on what the market is pricing the options at, i.e. using delta instead of a fixed number of points.
3) Ensuring that your short strikes (at your desired delta) still give you at least 100 points (I personally shoot for 150+ on SPX) on either side, particularly the down side.
Personally, if I can't do those things above, I will not establish a position. In my own case, the last SPX IC I closed was on 11/30, and I haven't established one since. A look at the VIX may tell you why.
* The above is moot if the Eurozone collapses tomorrow; all of the above may be thrown out the window at any time when systemic problems exist. I'm a bit of a hypocrite with this (I have traded ICs in the months following the US credit downgrade and during the Eurozone crisis), but perhaps the best way to play defensively when trading ICs is to stay in cash until the global economy stabilizes.
I'm open to any thoughts or criticisms about the above.
Another big mistake is that iron condor traders don't pay attention to the IV skew which is pretty important when you are selling OTM especially FOTM options. I trade condors from time to time and 767trader is right, it all boils down to correctly guessing something. Either volatility skew/volatility changing or price staying within a certain range, etc. It would be nice to be able to blindly put on a condor every month and with a few magical adjustments have it performing like an ATM machine. The problem is that they are successful until they aren't and that might mean a string of successes over a year. However, the risk you took will get you one day.
Swag
I already have an edge compared....... to beginners. whether you do or not, I don't know. what I do recognize is that you are a "know it all" who clearly thinks there is only one way to educate. while I don't mentor people, I do advocate it because I had one. if you don't like that, that's just tough.
https://www.google.com/search?q=iro...s=org.mozilla:en-US:official&client=firefox-a
https://www.google.com/search?q=iro....,cf.osb&fp=75c72e6ffd8ae8d7&biw=1104&bih=607
You're pot committed because you've thrown away $6,500. I would probably be defensive as well.
Have you MET any other MMers? They're somehow magical because they were there to make handle-wide markets in options? MMing strategies are anathema to upstairs traders. They bought the bid, you sell it.
Yes, a positive hit-rate. Let's say the condor wins 70% of the time, but you lose 2.5x your average win when you lose. A -expectancy. A hit-rate is meaningless w/o context.
Where is the edge in Sheridan's iron condor? I'll give you the $6,500 if you can post a legitimate edge that Sheridan proposes.
well if you made money with iron condors this year then good for you, but again, i highly doubt the vast majority of traders have done well. the surge in volatility put a lot of traders deep in the hole even after those nice quiet months earlier in the year. i would just say try to backtest, or, if you can, use the 'on demand' feature with tos and test out those iron condors for the whole year and be honest with yourself and see what your results would have been. its the most over-hyped and dangerous strategy and a little back testing should help ground a new trader.
one more little tid bit. although paper trading can be helpful and it really is, understand that your fills do not necessarily reflect a real world trade. that means your fills will not be as fast and your fills will not be as generous to you. good luck.
Atticus
you sure have a "chip on your shoulder" about marketmakers/ex marketmakers and iron Condors, nevermind Sheridan
Obviously you decided you couldn't learn anything from them. others over the years strongly disagree with you. some of those include individuals who have been interviewed in SFO and other magazines
there are times to put on a negative vega trade, whether it be a IC or a butterfly and times not to.
would you be another "know it all" like Swag?