I think atty may be referring to OTM put FLY and OTM calendar set up to be delta neutral at the opening. Assuming his first paragraph of "and" meant both at the same time. You can use ToS analyzer to play around with strikes until you get a neutral range set up around atm spot price.
HowardCohodas Index Options Credit Spread Trading Journal
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I think atty may be referring to OTM put FLY and OTM calendar set up to be delta neutral at the opening. Assuming his first paragraph of "and" meant both at the same time. You can use ToS analyzer to play around with strikes until you get a neutral range set up around atm spot price.
First, please forgive my unconscionable rude behavior toward you.
Second, don't sell yourself short with respect to understanding these strategies. The greeks are a useful shorthand for understanding the risk you choose to take on. More than that, they inform you of what modifications to your position will change them to your desired risk profile. The only problem you have is not having lived with them long enough to understand instinctively that "when you this, it does that."
So there first thing you want to understand is the result you want in terms of the greeks. The second is what position modifications will make the changes to get you there.
Permit me another flying analogy. The newbe pilot thinks that the throttle is the primary speed control of the airplane. It take a lot of flying hours before he will put the nose down to go faster and pull the nose up to go slower without first pausing to think it through.
Why does that matter? During final approach the pilot determines that without action he will land short of the runway. The newbe will pull up the nose thinking it will then point to the end of the runway rather than land short. But that actually slows him down and worsens the situation. The pilot with more experience may add throttle to add speed. This may work but time is short and the engine may not respond fast enough. The experienced pilot doesn't even think about it. He points his nose down, gets a quick burst of speed and easily makes his intending landing spot.
It's not thinking many moves ahead as in chess, it's developing the instinct so that you don't have to reason it out each time you need to make an adjustment. You will just know that "if you want it to this, you must do that?
How do you get from here to there? Lots of flying hours.
Howard
That was an excellent analogy and well said and explained. I´m with you in concept, just not with you I think in practice.
ATTICUS and OPTION COACH are symphony class orchestra option players. I´m just a humble one KEY , three chord, ukulele player.
I doubt I have the interest to become an orchestra competent option player. I more lean toward ROI, or return on investment, the most simple brutal way it can be done, in the shortest amount of time.
I think for the time being I will continue playing my option ukulele, one key, three chord instrument, and see how we do with ROI figures. If I can work it up to $200,000 a year and clean the deck monthly, that would be the height of my ambition.
But you obviously have it right!
That was an excellent analogy and well said and explained. I´m with you in concept, just not with you I think in practice.
ATTICUS and OPTION COACH are symphony class orchestra option players. I´m just a humble one KEY , three chord, ukulele player.
I doubt I have the interest to become an orchestra competent option player. I more lean toward ROI, or return on investment, the most simple brutal way it can be done, in the shortest amount of time.
I think for the time being I will continue playing my option ukulele, one key, three chord instrument, and see how we do with ROI figures. If I can work it up to $200,000 a year and clean the deck monthly, that would be the height of my ambition.
But you obviously have it right!
Short delta on both to the 160 strike. It was meant to be a delta-position in which you trade neutral vega at inception. Adding the calendar won't help your gamma position, so -> dispersion -> equity switch. The goal in the example was to contain the gamma with the index trade.
XYZ at 163
150/60/70 short gamma fly (short vega)
160 short gamma calendar (long vega)
Neutral delta long gamma fly on index (small long vega)
Long XYZ/index pairs trade to hedge corr. (partial delta hedge)
The alpha lies in the assumption that XYZ will underperform index. Of course you could simply avoid convexity and place the pairs-trade outright.
Well, in fairness to HoCo, if you assume you can predict "XYZ" directionally, of course you'll make money -- as would he, given that ability.
anyone who tells you they do not trade direction and makes money is a moron, and is most definitely lying to you.
I gotta agree with Atty. Iron condors are sold to people as a way for them to never have to actually make a trading decision. If you don't want to trade, then go plant a garden. It's analogous to people who go to fancy gyms to simply sit on nice equipment. You go to a gym to lift, not read a newspaper. If you want to trade, pick a direction. Enough of this I trade iron condors because I don't want to make any decisions approach.
Unusually pithy.
Managing credit spreads whether in Iron Condor formation or not does require decision making at entry, along the way and at exit. Trading the way you describe is a foreign concept to me.
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