Newbie's XEO trading journal

[momoneythansens]

Nick,

Just wanted to clarify a few things:

1) You've chosen to practice a long vega position: the caledar. Is this because you think that volatility will rise over the next few weeks?

2) Will you be continuing with the iron butterfly/iron condor strategies?

3) How do you propose to turn your calendar into positive expectancy positions?

4) You appear to have chosen ITM options for your calendar, are you aware of what impact it will have on your position and P/L due to early exercise of your short option? What was your train of thought for choosing the 565 strike?

5) What is your lower break even point?

6) Did you take into account the loss of time value of your long option in your P/L estimate for this friday?

7) Will you be rolling your short options before expiration?

8) What adjustment strategies have you got on your horizon to lock in profits and/or reduce loss or are you planning to play it as "fire and forget" expiration by expiration?

Keep it up.

Momoney.

Quote from skanan:

11/04/05

I decide to practice +vega, +theta this Dec expiration month so here is the calendar spread.

Open December position with calendar spread. I started with Nov/Dec 565 put spread.
I started with OEX because it has weekly.

BTO Dec 565 $5.2
STO Nov 565 $1.30

Total debit $3.90

If the index stay around 565 this Friday, my profit for DEC would be around $1.30 - slippage on 565 DEC b/a spread.

For Nov expiration month, I'll loose money if the index move beyond 570.5.

 

[RichardRimes]

hey...my itchy trigger finger was NOT meant to be funny

Quote from momoneythansens:

I aim to please Tales of your itchy trigger finger likewise brings much welcome relief and levity to an otherwise staid environment.

 

[skanan]

Mo,

First, thanks for those questions. I could use help.

I forgot to mention that I opened this position when the index was about 568.

Quote from momoneythansens:


1) You've chosen to practice a long vega position: the caledar. Is this because you think that volatility will rise over the next few weeks?

I was thinking that the index might move down near 565. I can profit from both time decay or the move down in price.

2) Will you be continuing with the iron butterfly/iron condor strategies?

Actually, I don't have my heart set on those but they are something I'm most comfortable with. I might not do it this Dec exp month because of the market train.

3) How do you propose to turn your calendar into positive expectancy positions?

If I can capture time decay of this week and my long Dec 565 put does not loose the value too much, that would be my positive expectancy.

4) You appear to have chosen ITM options for your calendar, are you aware of what impact it will have on your position and P/L due to early exercise of your short option? What was your train of thought for choosing the 565 strike?

I don't mind the 565 if it goes into the money. I'll settle with cash or Sell my 565 long put.

5) What is your lower break even point?

For this month, according to my calculation, if the index moves way below 565, I should not loose money because my long 565 would offset with my short 565. Please correct me if I'm wrong on this.

I won't get time decay premium if index goes below 565 - premium of short 565

6) Did you take into account the loss of time value of your long option in your P/L estimate for this friday?

Yes. The decay on short 565 is more than the decay on long 565.

7) Will you be rolling your short options before expiration?

If it is cheap, I might roll it.

8) What adjustment strategies have you got on your horizon to lock in profits and/or reduce loss or are you planning to play it as "fire and forget" expiration by expiration?

I plan to do some adjustment.

For this position, I plan to sell DEC 570 put expect index to move up. However, if it stays very near 565, I might sell weekly OEX 565 again.

Mo, I appreciate your feedback.

 

[skanan]

11/18/05

Wow! I woke up and saw the OEX around 574. I bought back Nov 565 put for 5 cent and did not know quite what to do next. If I sell put at 570 when index was around 574, it was too risky. I decide to wait out.
Now, it is around 571.

Let's see if it drops more.

 

[skanan]

OEX does not drop more and I have no patient to hold my long put over the weekend. I sold Dec 565 put for $3.1

So for this calendar, I made $1.25 from Short Nov 565 put and loss $2.1 from long DEC 565 put.

The loss on this is $2.1-$1.25 = $0.85 + commissions.

 

[skanan]

At the end I had one 550 put left. I paid $2.70 so it was total lost. The profit from the call side was $0.90. The profitt I got earlier from long put spread was pretty much even out with the lost on the short call spread.

So this Nov exp month, my lost is $2.70 - $0.90 on one contract which means $160 on real money.

 

[skanan]

After 3 months, I felt that due to my capital size limitation which dictacte my position sizing, I can take on only 1 or 2 contracts maximum on OEX. I also limitted my total loss for $3000 before getting out of option trading. So far, I losted less than $500 on this OEX but make some money on other stuff.

I'm not comfortable with 1-2 contracts. I can't spread my position over time or strikes with that. So, I'll focus mainly on spys, xsp, mnx, and other stuff instead.

So, I'm closing this one and will start a new journal instead. I'll call it
"How long my $3000 last".

-Nick


[EDIT BY MAGNA:] Here's a link to the new journal --

http://www.elitetrader.com/vb/showthread.php?s=&threadid=59095