Need Expert Opinion...

M

MBfromLA

I've been trading e mini futures,, daytrading,, but now getting into options.
Used to trade options before for many years, getting back on the board, need an expert opinion or advice please..


1. I want to put this type of combination trades but can't find a name or definition of it, not sure why it's not discussed anywhere, maybe I'm missing something.

2. Trade example:
Symbol NFLX : Price 109.00 March 9th

Buy NFLX July 120 CALL 9.80
Sell NFLX July 130 CALL 6.75
Debit $-3.05
--------
Buy NFLX July 97.5 PUT 9.30
Sell NFLX July 87.5 PUT 5.80
Debit $-3.50
----------------------------------------------------
Total Debit -6.55 Maximum Loss
3.45 Maximum Profit..


This is just an example, there are many trades where your risk reward is
alot higher.
According to the volatility of the stocks, for the price to hit
the lower or the higher strike prices are as high as 90-95%.
Also, I could go farther in to place a trade in the month of Sept, therefore buying more time, with very little or no extra cost.

There can also be included risk management situations, for example not letting the time value influence the trade, perhaps placing condors for the shorter term explorations on the same symbol etc......

Please tell me if I'm missing anything here, it sounds like a very solid strategy for someone who is willing to wait 4 months or so,
At the same time you can be invested 100% in many different options as well.
Will be suitable putting these positions on prior to earnings season.

Look at the previous volatility, if a stock is moving for example 8 points in average in 3 months period, and the trade is placed for example in 6 point spreads on each side, plus implementing risk management techniques, in my calculations this can earn100-120% a year without loosing sleep and much stress.
Please tell me if I'm missing something here..thanks a lot.....
 
Iron Condor is done for a credit and is usually put on 30 days before expiration,,,this one is a debit trade and is put on 4 or more months before expiration.

Iron Condor is profitable on a low volatility stocks ,,,this one is profitable on volatility stocks.....


Again, it's possible that i'm missing a point here, or miscalculated something, there is not much I don't know about the options, just need an input from someone who is a pro in options...
 
Quote from MBfromLA:

Iron Condor is done for a credit and is usually put on 30 days before expiration,,,this one is a debit trade and is put on 4 or more months before expiration.

Iron Condor is profitable on a low volatility stocks ,,,this one is profitable on volatility stocks.....


Again, it's possible that i'm missing a point here, or miscalculated something, there is not much I don't know about the options, just need an input from someone who is a pro in options...
More...

lol
 
I'm looking into this as well(but I was looking at it as an earnings play). I'm going to do more back trades but right now I have found that stangels do better, much better, at least as an earnings play.(I see though that you're looked to do this as a long term trade not as a quick earnings play). I think the more popular trades are more popular because they're more profitable more often. Each time I think I found a strategy that's being overlooked I eventually find out why. I do agree with your analysis though, just can't see why it's not popular.
 
Quote from MBfromLA:

Iron Condor is done for a credit and is usually put on 30 days before expiration,,,this one is a debit trade and is put on 4 or more months before expiration.

Iron Condor is profitable on a low volatility stocks ,,,this one is profitable on volatility stocks.....


Again, it's possible that i'm missing a point here, or miscalculated something, there is not much I don't know about the options, just need an input from someone who is a pro in options...
More...
I guess I wasn't specific enough. It's actually just a short iron condor with a 4 month time frame. If you go on TOS analyzer and throw in the strikes you've mentioned with an Iron Condor selected, you'll get the risk/reward numbers you mentioned (or pretty close). Depending on whether you select bid or ask, you'll get a long/short iron condor.
I don't think the time frame of the trade matters as far as the overall structure, other than the loose rule of thumb that if you short an option you want as little a time as possible for the other guy to be correct and vice versa for a long position.

http://en.wikipedia.org/wiki/Iron_condor
 
Quote from MBfromLA:

I could go farther in to place a trade in the month of Sept, therefore buying more time, with very little or no extra cost.

Please tell me if I'm missing anything here, it sounds like a very solid strategy for someone who is willing to wait 4 months or so,
More...
If the UL moves up/down soon, the trade wins right away.

Since you long, time is your enemy (decay) and the longer it takes for that move to occur, the wider your BE points become because each side's spread has only about +10 delta. They may be wider than you think. If you can model the position over time, this will become apparent.

Another reason for the wide BE's (later in tme) is that one side's vertical is losing while the other side's gain is slowed by the increasing drag from the short leg.
 
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