Iron Condor When/how to adjust ?
- Thread starter grainmerchant
- Start date
Dear Prevail,
I really don't know what a a sigma is (sorry) but the important part of optiontrading (imho) is how you adjust/change your position. When selling strangles you don't want the underlying comes near the strikes because that will kill you. Everyday is a new day and if needed you should adjust your position. For me (option)trading is like chess, if they board changes I will check if I have to change my position.
PS. I don't play chess because there's no money involved
Whenever we trade we have to pay a spread / commission / clearing fees. Whenever we trade we lose edge, so my philosophy is to adjust (trade) only when the risk is absolutely no longer acceptable. I measure risk in terms of position delta and typically Iâll tolerate fairly large deltaâs for the reasons given above.
However, when trading a limited risk/reward strategy (such as an IC) I would look at the position only from an expiry point of view and not adjust at all.
Also, if youâre running a combination of bullish AND bearish positions in different equity and index options then a VaR assessment is the way to go. Personally I risk 10% of my trading capital each day with 95% confidence. In other words, I expect to be down 10% of my trading capital once every 20 days. I also expect to be up 10% once every 20 days.
As with most aspects of option trading, the above is not necessarily right or wrong, just my way of operating.
However, when trading a limited risk/reward strategy (such as an IC) I would look at the position only from an expiry point of view and not adjust at all.
Also, if youâre running a combination of bullish AND bearish positions in different equity and index options then a VaR assessment is the way to go. Personally I risk 10% of my trading capital each day with 95% confidence. In other words, I expect to be down 10% of my trading capital once every 20 days. I also expect to be up 10% once every 20 days.
As with most aspects of option trading, the above is not necessarily right or wrong, just my way of operating.
that's fine if costs are not prohibitive and mean reversion does not take you out back.
Quote from FT79:
Dear Prevail,
I really don't know what a a sigma is (sorry) but the important part of optiontrading (imho) is how you adjust/change your position. When selling strangles you don't want the underlying comes near the strikes because that will kill you. Everyday is a new day and if needed you should adjust your position. For me (option)trading is like chess, if they board changes I will check if I have to change my position.
PS. I don't play chess because there's no money involved
sigma is another term for standard deviation. 1 sigma is thus 1 sd (68% probability), 2 sigma is 2 sd's (95% probability). It is one of the inputs option pricing models use to arrive at their outputs.Quote from FT79:
Dear Prevail,
I really don't know what a a sigma is (sorry) but the important part of optiontrading (imho) is how you adjust/change your position. When selling strangles you don't want the underlying comes near the strikes because that will kill you. Everyday is a new day and if needed you should adjust your position. For me (option)trading is like chess, if they board changes I will check if I have to change my position.
PS. I don't play chess because there's no money involved
db
Unfortunately they only support a closed proprietary format.
68% is the probability of the market being within 1 standard deviation by a defined time period.
The standard deviation is a statisitical calculation. Implied volatility is one standard deviation implied through the option prices expressed as a percentage of the price (volatility.).
The standard deviation is a statisitical calculation. Implied volatility is one standard deviation implied through the option prices expressed as a percentage of the price (volatility.).