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Journal of Poor Recent College Grad
- Thread starter knocks420
- Start date
I was digging through the Mcmillan book, reviewing the part on the greeks and had a theoretical scenario to throw out there:
Lets take a stock like GOOG. There's a discrepency between implied and historical vol. most likely due to the upcoming earnings announcement. I want to capatilze on this when the implied comes back to the historical (assuming it does). But I also know the GOOG is gonna swing wildly up to and after this point. I still think implied's coming down after the announcement. So what would I do?
I would need to create first a gamma neutral position, then delta neutral by buying/shorting the stock.
1) How do I decide which strikes to choose, is it completely up to me?
2) How about expiry, is FEB allright or should I look further out or again is that completely up to me?
3) If the stock is expected to move $30 bucks or more, would you need to make huge adjustments and therefore make this entire pos a huge mess?
Thanks for any advice!
Lets take a stock like GOOG. There's a discrepency between implied and historical vol. most likely due to the upcoming earnings announcement. I want to capatilze on this when the implied comes back to the historical (assuming it does). But I also know the GOOG is gonna swing wildly up to and after this point. I still think implied's coming down after the announcement. So what would I do?
I would need to create first a gamma neutral position, then delta neutral by buying/shorting the stock.
1) How do I decide which strikes to choose, is it completely up to me?
2) How about expiry, is FEB allright or should I look further out or again is that completely up to me?
3) If the stock is expected to move $30 bucks or more, would you need to make huge adjustments and therefore make this entire pos a huge mess?
Thanks for any advice!
Been awhile, been studying hard for those GMATS! Taking them in two weeks.
Here's what I've been up to:
1) Took some profits in ELN
2) MO looking tiresome, may close the '07 leaps and establish a bull spread so I don't miss any litigation movement. Have to think about the best way to do this. Maybe just sell some aggressive puts longer term?
3) Made some quick bucks on BA earnings. Noticed HUGE call option volume, bought a measley 2 calls for .95, sold for 2.
4)GOOG, got hit on expiry friday for a big loss. I had a 420/430 bull put. Could've bought back at .05 in the morning. Didn't want to believe what I saw, had to buy them back for 6.5. Learning experience and a half!!
5) That same friday. Bought 2 420/430 Goog bull spreads for 3.30 each. On Monday, bought back 1 of the 430's, let the call run for a gain of 2 points (5.3-3.3) Had I held longer would've been nicer. Held on to one spread for the earnings play.
6) After earnings, GOOG was massacred. I was able to buy back the 430 at 4. Now I own a 420 Call for 7. At BE with the 420 now, hopefully google rises more and can get some profit out of this one. I'll be watching close. It's a big gap to fill.
7) ELN took profits but opened 5 15/17.5 APR bull call spread. Meeting in March will be positive for ELN, just hope it has time to get to 17.5
8) Dove headfirst into Index credit spreads. Wanted to open an Iron Condor 1250/1300 SPX credit. Did not get proper fill on the put side. Had to rethink the situation. Ended up just doing one leg. The 1305/1310 bear call spread for 1.00. This is based on resistance areas.
Thats where I stand, I think. Opened an IB account, love the commissions.
Here's what I've been up to:
1) Took some profits in ELN
2) MO looking tiresome, may close the '07 leaps and establish a bull spread so I don't miss any litigation movement. Have to think about the best way to do this. Maybe just sell some aggressive puts longer term?
3) Made some quick bucks on BA earnings. Noticed HUGE call option volume, bought a measley 2 calls for .95, sold for 2.
4)GOOG, got hit on expiry friday for a big loss. I had a 420/430 bull put. Could've bought back at .05 in the morning. Didn't want to believe what I saw, had to buy them back for 6.5. Learning experience and a half!!
5) That same friday. Bought 2 420/430 Goog bull spreads for 3.30 each. On Monday, bought back 1 of the 430's, let the call run for a gain of 2 points (5.3-3.3) Had I held longer would've been nicer. Held on to one spread for the earnings play.
6) After earnings, GOOG was massacred. I was able to buy back the 430 at 4. Now I own a 420 Call for 7. At BE with the 420 now, hopefully google rises more and can get some profit out of this one. I'll be watching close. It's a big gap to fill.
7) ELN took profits but opened 5 15/17.5 APR bull call spread. Meeting in March will be positive for ELN, just hope it has time to get to 17.5
8) Dove headfirst into Index credit spreads. Wanted to open an Iron Condor 1250/1300 SPX credit. Did not get proper fill on the put side. Had to rethink the situation. Ended up just doing one leg. The 1305/1310 bear call spread for 1.00. This is based on resistance areas.
Thats where I stand, I think. Opened an IB account, love the commissions.
Question to the spread traders out there regarding adjustments, as this seems the critical portion of spread trades. What are your opinions on the following strategies:
As the underlying moves towards your short strike, do you,
1) Purchase a call/put as a hedge. Don't alter the original spread?
2) Close a portion of the initial spread?
3) Buy back the short option, leave the long one for profit?
4) Close a portion of the spread, open another one higher or create a condor?
Hopefully these adjustments make sense, its late at night and I'm trying to type fast so If you have questions I can elaborate on them further. Look forward to your thoughts.
As the underlying moves towards your short strike, do you,
1) Purchase a call/put as a hedge. Don't alter the original spread?
2) Close a portion of the initial spread?
3) Buy back the short option, leave the long one for profit?
4) Close a portion of the spread, open another one higher or create a condor?
Hopefully these adjustments make sense, its late at night and I'm trying to type fast so If you have questions I can elaborate on them further. Look forward to your thoughts.
Quote from knocks420:
Question:
It seems aparent that in trading, and in most things in life, a mentor can be invaluable in learning the game. How does one go about finding a mentor?
Anybody have any novel ideas to find a mentor? I tried posting on Craigslist but no luck.
I've outlined a price based strategy in the thread "NEW Anyone Counting Price?" It's a far cry from trading on news, but it might interest you.
Go in for a bundle of those near the money PUTS on DJX, QQQQ, and SPY. In 3-6 months you'll be sittin' pretty.