Managing/Adjusting Positions

[dreamliner]

Quote from spindr0:

I think that the bigger problem with rolling is the B/A slippage.
I'm not worried about donating 70 cts to my broker

What is "b/a slippage" and what broker gives you .70 cents? Mine is $1.25. I guess you probably trade more than I do .

 

[Premium]

Quote from dreamliner:

Thank you. Very helpful. Yes, I just today noticed that I'm selling the options cheap as I sell puts when market goes up and calls when it goes down. What would be some other ways to increase/decrease delta, by selling premium, that does the same thing?

Being delta neutral tells nothing about the risk in your position. Gamma (especially for credit spreads) and Vega are important, too. You seem to want to "sell premium" your way out of trouble, but it would simply add more risk despite flattening out the delta. When your credit spreads are being threatened, you need to manage the position at hand, and various ways have already been mentioned.

A simple way to eyeball risk is by looking at a P/L or risk graph incorporating your current position. It sounds like you have a ThinkorSwim account, and they have very good analytics to show you what happens if the underlying moves against your position. You can also add simulated positions (adjustments) and see what kind of effect it would have on the graph. This gives you a much better representation of risk than simply being delta neutral.

 

[RichardRimes]

Quote from spindr0:

I think that the bigger problem with rolling is the B/A slippage.
I'm not worried about donating 70 cts to my broker

no question...I call it Bad Ass slippage...learning to leg into trades helps....unless it hurts!!

 

[daniel5198]

Quote from dreamliner:

What is "b/a slippage" and what broker gives you .70 cents? Mine is $1.25. I guess you probably trade more than I do .

b/a is bid/ask, and IB give (take, actually) 70 cents if you trade more than 1 contract at a time.

 

[spindr0]

Quote from dreamliner:

What is "b/a slippage" and what broker gives you .70 cents? Mine is $1.25. I guess you probably trade more than I do .

B/A slippage is difference b/t bid and ask. IB is 70 cts per contract (25-50 cts if option less than 10 cts) with free assignment and exercise.

 

[adamchubb]

Quote from dreamliner:

This makes sense, but I watched a webinar with Don Kauffman (search for him at Think or Swim webinars) and he showed how by merely adjusting "portfolio delta" (adding Vertical calls when needing negative delta, adding Vertical puts when needing positive delta) you can keep all positions on until expiration and come out quite a bit ahead.

For example, I put on about 6 Iron Condors and Calendars, but as you know the market has plummeted recently (about 6% drop so far), which has put me in large positive delta for my overall portfolio. All my positions would have been a loss had I closed them early. But instead I've just put on some Vertical calls, which have reduced my portfolio delta down a long ways, and it appears that I will now be able to wait until February expiration and close out at a profit.

Maybe if you watched Don's video presentation on "Adjustments" (search for his name at Think or Swim) it might help to clarify what he suggests. I'm not saying this is right, just explaining what he taught, and how it is doing so far.

dreamliner, thanks for letting us know about the webinar. That was very informative. Have you seen the webinar on CBOE by Dan Sheridan??? That was about "Managing by the greeks". Perhaps that'll give you more insight on this topic.

 

[NHS]

Quote from adamchubb:

dreamliner, thanks for letting us know about the webinar. That was very informative. Have you seen the webinar on CBOE by Dan Sheridan??? That was about "Managing by the greeks". Perhaps that'll give you more insight on this topic.

Any links for the two seminars? - I can not seem to locate any of the two

 

[dreamliner]

Quote from adamchubb:

dreamliner, thanks for letting us know about the webinar. That was very informative. Have you seen the webinar on CBOE by Dan Sheridan??? That was about "Managing by the greeks". Perhaps that'll give you more insight on this topic.

You're welcome. No I've not seen the one by Dan Sheridan. I'll look it up. Thanks again.

 

[sonoma]

Quote from Premium:

Being delta neutral tells nothing about the risk in your position. Gamma (especially for credit spreads) and Vega are important, too. You seem to want to "sell premium" your way out of trouble, but it would simply add more risk despite flattening out the delta. When your credit spreads are being threatened, you need to manage the position at hand, and various ways have already been mentioned.

A simple way to eyeball risk is by looking at a P/L or risk graph incorporating your current position. It sounds like you have a ThinkorSwim account, and they have very good analytics to show you what happens if the underlying moves against your position. You can also add simulated positions (adjustments) and see what kind of effect it would have on the graph. This gives you a much better representation of risk than simply being delta neutral.

I would add that flattening deltas by selling premium obligates you to own cheap wingstrikes before the underlying moves too far in one direction. If you've got those additional wingstrikes to the point of net long contracts, then when you add your short gamma to flatten, you don't find yourself adding risk to the point of potential ruin.

 

[dreamliner]

Quote from sonoma:

I would add that flattening deltas by selling premium obligates you to own cheap wingstrikes before the underlying moves too far in one direction. If you've got those additional wingstrikes to the point of net long contracts, then when you add your short gamma to flatten, you don't find yourself adding risk to the point of potential ruin.

You guys have been doing this way longer than I have, and know what you are talking about. I'm just starting and don't understand a lot, but am learning quickly.

I'm posting my positions (about 12 of them) in case you can offer any help. After today's market increase it has come back toward the center, but is still long delta of about 60.

If I add any more negative delta by selling premium all I'm doing is reducing profit, without really adding much protection. I think I will just exit all trades if they reach my lower break even.

Thank you for any and all suggestions, I'm learning a lot from you guys.