I am currently having trouble putting together an option/futures position whose P&L outcome matches the desired position traits. I am looking to have an overall position that initially is positive theta, delta negative, with increasing positive vega as price declines and ideally decreasing vega as price increases.
For example. On 7/12/07 the ESU07 at 16:15 was 1555.50. I felt that es would decline or remain at about the same level in the coming days. I wanted to put on a trade that would capture theta if es remained still and overall was net delta short and was either vega positive or had minimal vega exposure if price did decline and IV spiked.
In real life I sold 2 august 1540 puts, sold 1 august 1565 call and shorted 1 es contract (or multiples therof). I was delta negative, theta positive and very negative delta. Price actually did what I wanted, but because of the small spike in IV on 7/18/07 my position didn't capture near the profit I would have liked.
This strategy has worked well in the past when expecting price to rise or remain still as this is usually associated with a drop in IV. I usually hold these trades for a day to a few weeks.
I would appreciate any ideas or constructive criticism on my trade objective and/or the above trade construction.
Thanks, Jeff.
For example. On 7/12/07 the ESU07 at 16:15 was 1555.50. I felt that es would decline or remain at about the same level in the coming days. I wanted to put on a trade that would capture theta if es remained still and overall was net delta short and was either vega positive or had minimal vega exposure if price did decline and IV spiked.
In real life I sold 2 august 1540 puts, sold 1 august 1565 call and shorted 1 es contract (or multiples therof). I was delta negative, theta positive and very negative delta. Price actually did what I wanted, but because of the small spike in IV on 7/18/07 my position didn't capture near the profit I would have liked.
This strategy has worked well in the past when expecting price to rise or remain still as this is usually associated with a drop in IV. I usually hold these trades for a day to a few weeks.
I would appreciate any ideas or constructive criticism on my trade objective and/or the above trade construction.
Thanks, Jeff.
