HUH's crash and burn trading thread

Boy I'm pretty freaking irritated here. I want to start opening up april positions but the iwm april options have not opened yet.....I can't do May because the damn May RUT options aren't available.....so I had to look to June and the only IWM options available for June are quarterlys....argh. Well I decided to open a couple of June call positions until april or may show up. I think it should be fine to go out so far but ya never know, we'll see!

Closed positions
mar 480/490 call/short marQ 49 iwm call @ profit of $44.60
mar 460/470 call/short marQ 47 iwm call @ profit of $51.28
short feb 46 iwm call@ profit of $148.88
bot feb 450/460 call/short feb 46 iwm call@ profit of $182.51
bot feb 500/490 put/short feb 49 iwm put@ profit of $224.6
bot feb 510/500 put/short feb 50 iwm put@ profit of $178.88
bot feb 520/510 put/short feb 51 iwm put@ profit of $314.88
bot feb 520/510 put/short feb 51 iwm put@ profit of $200.88
bot feb 530/520 put/short feb 52 iwm put@ profit of $157.28

Open positions
bot feb 440/450 call/short feb 45 iwm call@ cost of $137.06
bot feb 440/450 call/short feb 45 iwm call@ cost of $163.54
bot feb 450/440 put/short feb 53 iwm put@ credit of $297.82
bot feb 450/440 put/short feb 53 iwm put@ credit of $278.82
bot mar 420/430 call/short mar 43 iwm call@ cost of $153.06
bot mar 410/420 call/short mar 42 iwm call@ cost of $128.54
bot mar 480/470 put/short mar 47 iwm put@ cost of $133.06
bot mar 490/480 put/short mar 48 iwm put@ cost of $172.06
bot mar 490/480 put/short mar 48 iwm put@ cost of $183.06
bot jun 420/430 call/short junQ 43 iwm call@ cost of $2.21
bot jun 420/430 call/short junQ 43 iwm call@ cost of $2.21
 
I added another jun call position. Nothing exciting happening at the moment as the market seems to be in a holding pattern waiting for stimulus details. Jobs report is coming on friday as well so we should get a resolution to this 440-465 range we've been stuck in for a few days.

Closed positions
mar 480/490 call/short marQ 49 iwm call @ profit of $44.60
mar 460/470 call/short marQ 47 iwm call @ profit of $51.28
short feb 46 iwm call@ profit of $148.88
bot feb 450/460 call/short feb 46 iwm call@ profit of $182.51
bot feb 500/490 put/short feb 49 iwm put@ profit of $224.6
bot feb 510/500 put/short feb 50 iwm put@ profit of $178.88
bot feb 520/510 put/short feb 51 iwm put@ profit of $314.88
bot feb 520/510 put/short feb 51 iwm put@ profit of $200.88
bot feb 530/520 put/short feb 52 iwm put@ profit of $157.28

Open positions
bot feb 440/450 call/short feb 45 iwm call@ cost of $137.06
bot feb 440/450 call/short feb 45 iwm call@ cost of $163.54
bot feb 450/440 put/short feb 53 iwm put@ credit of $297.82
bot feb 450/440 put/short feb 53 iwm put@ credit of $278.82
bot mar 420/430 call/short mar 43 iwm call@ cost of $153.06
bot mar 410/420 call/short mar 42 iwm call@ cost of $128.54
bot mar 480/470 put/short mar 47 iwm put@ cost of $133.06
bot mar 490/480 put/short mar 48 iwm put@ cost of $172.06
bot mar 490/480 put/short mar 48 iwm put@ cost of $183.06
bot jun 420/430 call/short junQ 43 iwm call@ cost of $2.21
bot jun 420/430 call/short junQ 43 iwm call@ cost of $2.21
bot jun 420/430 call/short junQ 43 iwm call@ credit of $1.89
 
I added the following june put position to the above open positions:

bot jun 480/470 put/short junQ 47 iwm put@ credit of $66.49
 
Okay, guys, I have been following this thread since it began, and I have to say that this is one of the most worthwhile journals that have appeared on ET in a long time! But I have a simple question, huh, one that has been eating me alive since your very first post: I understand perfectly the reason for the offsetting, naked hedge, being short the IWM, but what would be the difference in just going short two RUT options instead of only the one? Please take it easy on me, I'm still a newb to options, so if this is a stupid question, I apologize. But is there any real-world reason for crossing over into the different underlying?
 
Quote from mousejockey:

Okay, guys, I have been following this thread since it began, and I have to say that this is one of the most worthwhile journals that have appeared on ET in a long time! But I have a simple question, huh, one that has been eating me alive since your very first post: I understand perfectly the reason for the offsetting, naked hedge, being short the IWM, but what would be the difference in just going short two RUT options instead of only the one? Please take it easy on me, I'm still a newb to options, so if this is a stupid question, I apologize. But is there any real-world reason for crossing over into the different underlying?
More...

MJ, I"m a little confused by your question but I will try to answer what I think you're asking :)

Let me know if this isn't quite what you were thinking:

For instance I open up the 420/430 mar call.
-Currently I hedge by selling a naked 43 IWM call.
-So what you would like to know is why I don't simply sell 2 430 RUT call options.
-Selling 2 RUT call options would result in the following:
-bot 420/430 call vert spread/short 430 RUT naked call for xxxx credit.
-There are several reasons not to do this!
-First one is that being naked call or put on a full size index like spx, rut, etc is waaaaay too dangerous for me. (I'm a small retail trader!). Being short naked 1 430 rut option is like being short naked 10 IWMs! So being long 1 RUT vertical and hedging it with what is equivalent to 10 short iwms can be disasterous.
-Next reason is margin. Right now the margin I pay on the short IWM hedge is in the $1500-$2000 range assuming how much the option is in the money whereas the margin requirement for being short a naked RUT option is in the 8-10K range and it gets much higher as the option continues to be in the money.
- Finally by crossing over the securities I can bend some tax rules to my advantage. The RUT is taxed as 60/40 mark to market and the IWM is treated as a normal stock thus it gets treated as short term gains and losses and is subject to the wash rule unlike RUT, which means I can do some fun things with the IRS via the wash rule.....but we won't get into that
:p

Anyway hope this helps, if I missed the mark then let me know or if anybody else wants to chime in if I made a mistake or if anybody has a better explanation!
 
Like I said, I'm very new to options, especially the indices, and you answered my question perfectly. I had not stopped to consider the margin ramifications, and now that I give it a second thought, I wouldn't want to be naked on an index option, either. Thank you for your time!
 
Few days before you opened this position you were buying call positions. The index hasn't moved since you bought the call position and you opened up a put position. Are you expecting market to rally?

bot jun 480/470 put/short junQ 47 iwm put@ credit of $66.49

Sure you got some credit but this is a long shot you are taking since your break even will be around RUT 370 and market could go that low or lower.
 
Quote from valpak:

Few days before you opened this position you were buying call positions. The index hasn't moved since you bought the call position and you opened up a put position. Are you expecting market to rally?

bot jun 480/470 put/short junQ 47 iwm put@ credit of $66.49

Sure you got some credit but this is a long shot you are taking since your break even will be around RUT 370 and market could go that low or lower.
More...

I am expecting the market to rally over the next month. My gut still says we test 400 one more time but I was expecting that to have happened already. Clearly the following is my opinion as I have no insider knowledge but the market appears to be at a standstill until this stimilus package is passed. I don't think the market cares that much about the specifics of the package as long as there is 800 billion dollars being pumped into the economy waste or not. I think it will rally at the passage of the bill or we will rally when it looks like a done deal. A lot of companies have already reported earnings and the market has pretty much shrugged the earnings off.

The only way that I see (barring the usual black swan type event) of us actually breaking 370 on the RUT is if the stimulus bill fails to pass in the senate in the initial vote that would be a big enough blow to break 370 in which case my puts would be in jeapordy.......HOWEVER, I think a drop like this would be momentary meaning we might drop down to 350 or even 300 over the course of a week but then we will get a STRONG rebound back towards 400 because the stimulus bill will then be passed, so I am not that worried about my june puts being in danger.

So I am basing my bullish assumption on some sort of stimulus bill, all 800 billion+ being passed and inflating prices higher. I HAVE NO DOUBT this bill will pass. The opposition in the senate and house can do all the posturing they want and they may even block it the first time.....but eventually it will pass.

So what I am counting on is that we get a rally off the initial news and before april or may, people will realize things aren't getting that much better and we'll get a pullback under 500 and then I can sell my jun positions for a profit. :)

.....On the otherhand we could just go sideways and I'll just close the jun positions for a small profit in a few weeks :p

Anyway, I opened another jun put position today also!
bot jun 480/470 put/short junQ 47 iwm put@ credit of $56.89
 
I thought so. I have to admit that you have a good way to explain things. You should start your own service. Put it on collective2.com...
 
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