Riskarb's combo to fly conversion journal

[El OchoCinco]

Well basically if I assigned on the short $400, the long $390 backs it up so early assignment allows me to get the max value early instead of waiting for expiration so I take it as a good thing.

I could also roll the $390/$400 bull call spread into a $390/$400/$410 long butterfly and bring in $3,350 in credit to reduce the max loss from $9,100 to $5,750 locked in and have much lower risk. But since I now feel GOOG will stay above $400 I will shoot for the $4,100. I can pursue that later when theta squeezes out some of the premium and that spread gets wider if I change my mind.

The point is that if choose to pursue more small positions in these I should have a few at a time as Risk does to spread out the diversification. This way I can chop off the losses on positions like GOOG fairly easy at a predetermined point and milk the winners to come out net ahead.

Worthwhile tuition which I am going to make back on OIH

Quote from ssternlight:

Hm... I am showing $11.50 excess value right now -- it's clearly bouncing around. $52ish call vs $40.50 ITM. And I agree right now that's a lot of excess value to give away today.

But what I was thinking was people might decide to take profits next week on the strong pre-earnings run-up rather than hold.

I guess the question would be in that situation would I want to be long a 390 call on the earnings risk or exit...just thinking out loud.

 

[riskarb]

Quote from optioncoach:

Cmon... do a Prego Fly, everyone is doing it.....don't be such a square....

Well as for OIH it is at 153 so I may wait another day to see if it slides a little more, pushing vols up.

Hahaha. You sound a bit like Tony Soprano with that one. Yeah, you're not the first on this forum to push the prego. You should talk to GATrader; none of this fancy, little Lord Fauntleroy, prissy prego stuff. No estrogen! [Accept my apologies DonnaV].

What's next? The low carb combo?

 

[riskarb]

Quote from optioncoach:

Cmon... do a Prego Fly, everyone is doing it.....don't be such a square....

Well as for OIH it is at 153 so I may wait another day to see if it slides a little more, pushing vols up.

Vols in share-options tend to drop into a tighter distro, and otm calls dominate the smile, depressing vols on declines within 1 sigma; like Kobe/Raptors!

 

[riskarb]

GOOG covered at $70.00 -- $1500 loss -- will update PnL today and to contrast fly debits, converted vs. mark to market.

 

[El OchoCinco]

$1,500? I guess you only did 1... lol

I am looking at ACL @ $128.85

FEB $130 Straddle at $10.60 at 41% vol at an extreme high with HV at around 26%. Earnings coming out 2/8.

I might do this and OIH today...

Quote from riskarb:

GOOG covered at $70.00 -- $1500 loss -- will update PnL today and to contrast fly debits, converted vs. mark to market.

 

[riskarb]

Quote from optioncoach:

$1,500? I guess you only did 1... lol

I am looking at ACL @ $128.85

FEB $130 Straddle at $10.60 at 41% vol at an extreme high with HV at around 26%. Earnings coming out 2/8.

I might do this and OIH today...

Actually, I did. For the journal all trades are single contract basis. I am short xxx of 530 and 600 calls/long shares.

I won't run the scan until tomorrow afternoon for the weekend combos, but I'll watch ACL and see if it comes up on bbg OSCN.

 

[El OchoCinco]

I am gonna try and get in today to front-run you . Actually I might be out most of the day tomorrow so I may put the orders for OIH and ACL near the end of the day.

Quote from riskarb:

Actually, I did. For the journal all trades are single contract basis. I am short xxx of 530 and 600 calls/long shares.

I won't run the scan until tomorrow afternoon for the weekend combos, but I'll watch ACL and see if it comes up on bbg OSCN.

 

[riskarb]

Journal took a hit with GOOG, was flat PnL before that debacle. I blame Coach for strike selection.

I will trade one of the following, when/if hedging is performed:


1) Index futures hedge into book-delta, VaR. This would be traded <7d to expiration

2) Index wing strike purchase concurrent with the purchase of ticker wings. Sum of marked debit risk on ticker flies = debit outlay on index wings.

3) Index straddles in cheap-gamma such as Dow, DIA, YM. Sum of marked debit risk on ticker flies = debit outlay on index body.

Both two and three would involve discrete hedge adds due to a daily mark to market on the fly risk-debits. There would certainly be days in which no hedge would be traded unless a material increase was seen in mark to market PnL on the flies.

The index replication under two and three is long the vol box; in effect, a short dispersion strategy. I don't want to complicate things, just to define.

On many occasions the fly debits may allow us to offset significant gains w/o the need for an intermarket hedge.

 

[El OchoCinco]

I blame Cramer-ites and brokerages who jump on chair and scream GOOG is going to $600. $1,500 is not even an anthill for you to surmount.

As for the other parts of your post, I ain't even gonna try and translate that...

Quote from riskarb:

Journal took a hit with GOOG, was flat PnL before that debacle. I blame Coach for strike selection.

I will trade one of the following, when/if hedging is performed:


1) Index futures hedge into book-delta, VaR. This would be traded <7d to expiration

2) Index wing strike purchase concurrent with the purchase of ticker wings. Sum of marked debit risk on ticker flies = debit outlay on index wings.

3) Index straddles in cheap-gamma such as Dow, DIA, YM. Sum of marked debit risk on ticker flies = debit outlay on index body.

Both two and three would involve discrete hedge adds due to a daily mark to market on the fly risk-debits. There would certainly be days in which no hedge would be traded unless a material increase was seen in mark to market PnL on the flies.

The index replication under two and three is long the vol box; in effect, a short dispersion strategy. I don't want to complicate things, just to define.

On many occasions the fly debits may allow us to offset significant gains w/o the need for an intermarket hedge.

 

[riskarb]

#1 would involve trading futures against the fly debit risks.

#2 and #3 are simply index wing or body longs in which the premium outlay would be = the running sum of the debit risks on the completed flies. I'd buy $1,000 in index strangles, or preferably straddles, into the market debit risk on our flies.

Jeez, talk about bad timing in GOOG. :eek: