My option trades

Quote from scottandmo:

Didn't know what a backspread was, but I was trying to say that the "short backspread" could be suicide. In other words, why do a "short backspread" when you can just do the same thing as a fly with one more call on the top end.
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Being backspread is simply the overall position adding deltas as the stock price moves in either direction, but generally used in one directional trading. You're looking for time decay, as always. Front spread you have deltas moving against you as the stock moves.

You really should take a weekend to read up on all these basics before getting too involved with real money.

Again, for review: Delta's (net value vs. 100 shares of stock. i.e. if stock is $50, the near term $55 calls may have a 25 delta, meaning it takes 4 of them to offset 100 shares of stock). Now, look up gamma, betas, and thetas. Then, understand conversions (long stock, short call, long put = price of stock as adjusted to fair value, meaning days until expiry and current interest rate assumptions, no volatility involved, straight math).

Have fun,

Don
 
Calendar Spread Don

Found a good site on that, read about three though.

Your mention of delta adjusting is a bit puzzling.

Are you meaning you buy more, or sell more to keep the numbers of contracts each side the same delta? Didn´t see that mentioned in the articles I just read.
 
Quote from falconview:

Very good opinions by trader 198 and Don Bright.

I am trying to work within a 5 trading day trade frame.
My reasoning being, equity buildup depends on both the number of trades you can make in a year and size of the bet.

I´m trying to trade the weekly bar. Using hourly charts. I don´t make enough to cover commissions as a small retail trader in smaller time frames, such as 15 minutes, or less. It´s the experimenting that creates losses for me. We obviously are never satisfied with what we have and tend to try something new?

If there is some small advantage to using OTM options, I would like to know what it is.? My testing says you tend to throw money away with them.
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"5 trading days" = 5 days of money out the window if long, that's the problem with buying. Say the stock is $39, you buy $40 calls for 25 cents, 5 days from expiration. Stock goes up a full $dollar in 5 days, the $40 calls are still worthless. Lost 20% per day. Now, if you sold the calls, and we're afraid when the stock got up to say $39.80, 4 days later, you could buy back for 25 cents or less, and endured an 80 cent rise, pretty good, right? And if the stock went down, you make all the money, and you would lose all the money no matter which way the stock moved when buying.

Research the percentage of call options expire worthless, might help with my posts.

FWIW,

Don
 
Quote from falconview:

Calendar Spread Don

Found a good site on that, read about three though.

Your mention of delta adjusting is a bit puzzling.

Are you meaning you buy more, or sell more to keep the numbers of contracts each side the same delta? Didn´t see that mentioned in the articles I just read.
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As traders, especially on the trading floors, we would have thousands of options, long and short. Puts and calls. Each one has a certain delta assigned to it daily, hourly, to the minute actually. We run "sheets" of all the stock we are long or short, all the calls and puts, everything. My buddy, Blair Hull ran "Options Research" in S.F., we would log into his mainframe for this.

We see that we are net short 2,000 deltas (the equivalent of 2,000 shares). We sell enough otm or atm puts to adjust that to near neutral. Go home happy and safe.

An example of this, although buying this time, true story.

Short story on delta adjustment (kinda goes against my "sell everything" slant however). Back in 1987, the Friday before the infamous "Black Monday" I was just leaving the options floor, heading off to play blackjack in Lake Tahoe. I thought I better run my CPQ report to see if I was neutral. I wasn't, I was delta long.

Upon leaving the pit, I noticed a few hundred otm puts in the "book" for about 25 cents. Stock was about 31 I think, puts were 30 strike (don't hold me to exact on this, long time ago). I went to buy 200 or so, then the crowd wanted to "share" - so I said, "buy the book" meaning I wanted all of them. So I bought several hundred of these stupid "worthless" puts. Well, on Monday, I started to sell them off at around $3.00 or so as the price of CPQ went crashing down. NOT SMART, JUST CAUTIOUS AND LUCKY, AND A BIT OF A JERK AT THE TIME, LOL.

OK, Yin and Yang. I get interviewed by the S.F. Chronicle after the "Black Monday" that everyone got murdered on. I said, "I had my best day ever, well over $6figures." STUPID,STUPID, STUPID. I was in the middle of a divorce settlement, my wife's lawyer read the paper, cost me, well, let's say a Hell of a lot of money for opening my stupid mouth, LOL. (Eventually I just hired my wifes lawyer away from her, and settled for fair child support...but she still got the chunk of money from my "best day ever."

OK, back to the real world everyone.....

Don
 
Quote from Don Bright:

Being backspread is simply the overall position adding deltas as the stock price moves in either direction, but generally used in one directional trading. You're looking for time decay, as always. Front spread you have deltas moving against you as the stock moves.

You really should take a weekend to read up on all these basics before getting too involved with real money.

Don
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I've been doing a lot of that lately. I am trying to digest the greeks right now. But I've mostly traded around earnings and low IV stuff (like INTC and ORCL) where I don't really need to know the greeks, I just have my own price expectations and if the options don't fit then I don't make the trade. I don't know all the fancy stuff because until lately I've only been buying calls, but I've always wondered how to get in on stuff like AAPL earnings without paying out the !@# so lately I've been exploring that stuff.

I really like some of the things you can do with them. For example today I bought today's expiration SPY 137/138/139 fly's for $.50 which will be breakeven at 137.50 or 138.50 today and up to 100% gain if it closes right around 138. I can easily stop out at 137.5 and not lose much either, so I like the probabilities.
 
The divorce story was really good for a chuckle. I´m smiling still while typing. Been there done that!

I kind of figured the delta adjustments would be selling shorts. I had a vision in my mind, trying to picture it working as a teeter totter.

I´m not sure how I would work this though on a short time frame. You misunderstand me, I do not normally trade under 90 to 60 days, or three months out, straight buying. Though a short in a calendar would be First month of course.

I was trying to picture the normal weekly bar fluctation and on how you would profit from it in say a 5 day, or one week swing trade.

The short would be the play, as the buy side of the calendar would be third month out and fairly stable. The short side though would be a balance between THETA and and market action. I guess if you caught the down swing on the weekly bar, you could buy back your short sale and then repeat again? On the up swing you would sell the long contracts.

Delta neutral seems to be adjusted from what you said, by selling more contracts as the market fluctuates in the first month.

Thats the way I´m picturing it right now.

You must be in your 70´s Don?

Gonna have my breakfast and a cup of tea, then I´m going to walk down to the beach and take my swim. Priorities, priorities, priorities! Man am I glad to be out of that darned gambling trade. What a relief !
:cool:
 
My programmed mechanical system won't let go of the call direction. It spit out this SPY trade and Buy 1 options are filled:

SPY MAR137 CALLS:
Buy 1=1.60 X 1.3 = 2.10(+30%) if options drop after B1 fills then
Buy 2=1.30 X 1.4 = 1.82(+40%)
Stop= 1.15

Reward to Risk:
Win: .22 + .52 = +.74
Loss: -.45 + -.15 = -.60
R/R: +1.23(W) to 1.00(L)
 
I always do dumb stuff like this, but I covered the 20 138's for $.07, booking $220 profit on that, and am now holding the 10 137's and 139's, with a max loss of $280 if SPY closes below 137. Breakeven is now $137.57 at close if my math is correct.
 
Quote from scottandmo:

I always do dumb stuff like this, but I covered the 20 138's for $.07, booking $220 profit on that, and am now holding the 10 137's and 139's, with a max loss of $280 if SPY closes below 137. Breakeven is now $137.57 at close if my math is correct.
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Never apologize for closing short gamma for nickels. Regardless, it's nearly paid for your longs. Nice job.
 
Quote from scottandmo:

I've been doing a lot of that lately. I am trying to digest the greeks right now. But I've mostly traded around earnings and low IV stuff (like INTC and ORCL) where I don't really need to know the greeks, I just have my own price expectations and if the options don't fit then I don't make the trade. I don't know all the fancy stuff because until lately I've only been buying calls, but I've always wondered how to get in on stuff like AAPL earnings without paying out the !@# so lately I've been exploring that stuff.

I really like some of the things you can do with them. For example today I bought today's expiration SPY 137/138/139 fly's for $.50 which will be breakeven at 137.50 or 138.50 today and up to 100% gain if it closes right around 138. I can easily stop out at 137.5 and not lose much either, so I like the probabilities.
More...

Or just buy the SPY with a stop. 100 delta profit, cheaper costs.

Don
 
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