HowardCohodas Index Options Credit Spread Trading Journal

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Quote from falconview:

Howard
( repeat question )

Let me see, the margin on one side in an Iron Condor has me confused. The question is, if I have one side winning, about 5 cents right now and that side would be margin free. At what point would it be worth my while to cash it in? You have said at 85% in the past.
Maybe I can figure this out myself and you confirm? If I have .60 cents credit, then when the spread reaches +.55 cents thereabouts, I can close it. And just forget the part about it being margin free? Thats a plus just in using money, or not using money for the trade and simply raises the 3% normal return to 6% or something?
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The margin required to put on a credit spread is the difference in strike prices less the credit received. The companion spread that would make it an Iron Condor does not require any additional margin because there is no additional risk to the broker. The underlying instrument price can only put one spread into jeopardy at any given time.

Recall that my trading unit is the credit spread. If I received $1.00 in credit then I would begin looking for roll opportunities when its value was less than $.20. Should I close the spread there is no change in margin requirements because the companion spread is still active. I am right back to the position of having only one spread of the IC open so I seek to open the other side. Another credit and no change in margin. That's a fun time.
 
2011-02-14_a_Journal.png


This gives a view of my dashboard is its minimalist form. The opportunities and jeopardies are clear to see from the yellow highlighted cells. The details are available a few posts earlier in this thread.

Quick summary:

No incomplete Iron Condors

Five opportunities to roll.

One spread is in caution territory as a consequence of Probability of Touching.

Eighteen spreads expire this week.

No spreads (in spite of the one spread in caution) is in caution because of loss on capital at risk.
 
Hey Howard,

I am somewhat familiar with some IC schemes where they use delta for the probability metric. For instance, choosing the short strikes with a delta of 0.10 or less theoretically gives a 90% chance of expiring worthless.

Why did you choose PoT instead of delta? If you look up and down the option chains with both values, you can see they're usually in the ballpark of each other. For instance a delta of 0.10 is usually around a 20% PoT.
 
Quote from stevegee58:

Hey Howard,

I am somewhat familiar with some IC schemes where they use delta for the probability metric. For instance, choosing the short strikes with a delta of 0.10 or less theoretically gives a 90% chance of expiring worthless.

Why did you choose PoT instead of delta? If you look up and down the option chains with both values, you can see they're usually in the ballpark of each other. For instance a delta of 0.10 is usually around a 20% PoT.
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Tradition and laziness. I came to the idea from some of my own research before I had a good understanding of delta. In fact I suggest that those who do not want to use ToS use delta as an effective proxy. However, I do like having a number right in front of me that is a good proxy for the chances I will have to close a spread rather than letting it expire without having to look at a conversion chart.
 
Okay gotcha on that. 80% of credit and the free margin plays no part in closing it, or rolling it. Thanks for that comeback. Somedays I am not at all too bright.

Right now diddling with the Options Xpress platform trying to learn it. Plus testing some 15 minute chart strategies in SPY.
 
Quote from HowardCohodas:

Tradition and laziness. I came to the idea from some of my own research before I had a good understanding of delta. In fact I suggest that those who do not want to use ToS use delta as an effective proxy. However, I do like having a number right in front of me that is a good proxy for the chances I will have to close a spread rather than letting it expire without having to look at a conversion chart.
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I understand what you're doing with the PoT since it's more or less a direct reading of the probability that you'll have to act some time during the trade.

Delta can be used, but it's not the same direct reading. You'd just have to have rules set up where "if delta <= 0.10, look to enter" and "if delta is > 0.20 during expiration week, look to exit"
 
2011-02-14_p_Journal.png


Surprisingly, three roll opportunities were available with good places to land. I did not expect to collect so much credit in the last week before expiration.

If I don't mess up, this will be an outstanding month.
 
Quote from stevegee58:

I understand what you're doing with the PoT since it's more or less a direct reading of the probability that you'll have to act some time during the trade.

Delta can be used, but it's not the same direct reading. You'd just have to have rules set up where "if delta <= 0.10, look to enter" and "if delta is > 0.20 during expiration week, look to exit"
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Precisely.
 
Quote from HowardCohodas:


Surprisingly, three roll opportunities were available with good places to land. I did not expect to collect so much credit in the last week before expiration.

If I don't mess up, this will be an outstanding month.
More...

When you refer to landing, do you mean the location of the short leg of the new credit spread when you roll?

Rolling is generally considered one operation where you close one position and open another in one order. If you close a credit spread that hits the 80% profit target but there is no new rolled up (or down) position available how do you count it? Or do you count it as a "roll" when you actually open the new credit spread?
 
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