RE: OIH - all theta. Vols are actually up marginally.
Riskarb's combo to fly conversion journal
- Thread starter riskarb
- Start date
Bad luck on GOOG. Hindsight is a killer. Right now your 400 straddle would be looking good.
I'm curious as to why you closed those other straddles. I suppose it depends on your philosophy or belief pertaining to the "negative expectancy" of trading options but some would consider converting to the fly for less than the current fair value a better proposition in the long term rather than taking profits on the straddle. It might seem counter-intuitive. I must add, from a pragmatic point of view, I can understand why you have opted to take profits.
However, doing a rolling combo to fly conversion week to week on various issues, sometimes on the same issue in consecutive weeks allows you to build up an inventory of cheap/free flys with a potentially cumulative wide profit zone. Superlative risk/reward.
This is a distinct objective from offsetting naked straddles for profit.
Whatever makes you money though!
MoMoney.
I'm curious as to why you closed those other straddles. I suppose it depends on your philosophy or belief pertaining to the "negative expectancy" of trading options but some would consider converting to the fly for less than the current fair value a better proposition in the long term rather than taking profits on the straddle. It might seem counter-intuitive. I must add, from a pragmatic point of view, I can understand why you have opted to take profits.
However, doing a rolling combo to fly conversion week to week on various issues, sometimes on the same issue in consecutive weeks allows you to build up an inventory of cheap/free flys with a potentially cumulative wide profit zone. Superlative risk/reward.
This is a distinct objective from offsetting naked straddles for profit.
Whatever makes you money though!
MoMoney.
Mo:
With ACL, I could have rolled into the 125/130/135 FLY for a net credit of $0.60 or a guaranteed minimum profit of $300. The 120/130/140 FLY would have been for a net debit of about $2.00 or $1,000. Knowing the earnings were coming up next week and the stock has moved in the past off of earnings, I decided for myself the best choice was to take the profit now $658 over the guaranteed minimum of $300 and the debit of $,1000 to pocket it and then watch what would have happened around earnings. A nice move would make the position a losing one in both cases so I took money in the hand so to speak in exchange for watching what really happens. Since I am new to this strategy I was being more conservative I guess. Also living so much off the indexes I do not have the same feel on individual stock swings which looks like it might happen with ACL and as I learned with GOOG.
With OIH, honestly I felt that rolling to the FLY for what would have been a net debit of around $1.60 or so was a good idea given the tight range of OIH but again I decided to pocket the $800 in income and then watch what happens going into next week and expiration.
GOOG I legged out on the price swings and that was not planned, I just took advantage of what was there to get out for nothing or a small loss. Of course the straddle lost 50% or so of its value so that would have been nice pocket change but I need to be realistic, I never would have held a naked straddle through GOOG earnings so I cannot even consider that as lost proifits LOL.
As was pointed out, IVs did not contract at all and the profits were pure theta since the underlyings were pretty close to the body strikes. I kind of want to crawl into this slowly so hence I decided to take the profits off and then watch without any stress or bother. I was not intended on simply making a profit of selling straddles, but since it was there, I figured take it and sit back and watch.
I was also reviewing different adjustment strategies and it is much easier to think when the positions are off
.
I got my scan results from chartbender.com this morning so I will be looking to enter another 1 or 2 positions before going into the weekend.
With ACL, I could have rolled into the 125/130/135 FLY for a net credit of $0.60 or a guaranteed minimum profit of $300. The 120/130/140 FLY would have been for a net debit of about $2.00 or $1,000. Knowing the earnings were coming up next week and the stock has moved in the past off of earnings, I decided for myself the best choice was to take the profit now $658 over the guaranteed minimum of $300 and the debit of $,1000 to pocket it and then watch what would have happened around earnings. A nice move would make the position a losing one in both cases so I took money in the hand so to speak in exchange for watching what really happens. Since I am new to this strategy I was being more conservative I guess. Also living so much off the indexes I do not have the same feel on individual stock swings which looks like it might happen with ACL and as I learned with GOOG.
With OIH, honestly I felt that rolling to the FLY for what would have been a net debit of around $1.60 or so was a good idea given the tight range of OIH but again I decided to pocket the $800 in income and then watch what happens going into next week and expiration.
GOOG I legged out on the price swings and that was not planned, I just took advantage of what was there to get out for nothing or a small loss. Of course the straddle lost 50% or so of its value so that would have been nice pocket change but I need to be realistic, I never would have held a naked straddle through GOOG earnings so I cannot even consider that as lost proifits LOL.
As was pointed out, IVs did not contract at all and the profits were pure theta since the underlyings were pretty close to the body strikes. I kind of want to crawl into this slowly so hence I decided to take the profits off and then watch without any stress or bother. I was not intended on simply making a profit of selling straddles, but since it was there, I figured take it and sit back and watch.
I was also reviewing different adjustment strategies and it is much easier to think when the positions are off
.I got my scan results from chartbender.com this morning so I will be looking to enter another 1 or 2 positions before going into the weekend.
Thanks. All sounds quite reasonable 
ISRG popped up on the radar today.
IV is off the charts with earnings coming today (100% ATM vols).
Stock at $127 and the $130 straddle selling for $21 and change.
Was also added to QQQQ as of yesterday so perhaps a Qs hedge could work lol.
I sold 3 FEB $130 Straddles @ $21.70 (vol ~104%)
Only doing 3 due to risk and pricing and desire to keep it small. Alos chose the $130 to have a slight upward bias given the past movement of the stock. Initial maintenance is about $16k so the I like the potential returns to risk as of today.
IV is off the charts with earnings coming today (100% ATM vols).
Stock at $127 and the $130 straddle selling for $21 and change.
Was also added to QQQQ as of yesterday so perhaps a Qs hedge could work lol.
I sold 3 FEB $130 Straddles @ $21.70 (vol ~104%)
Only doing 3 due to risk and pricing and desire to keep it small. Alos chose the $130 to have a slight upward bias given the past movement of the stock. Initial maintenance is about $16k so the I like the potential returns to risk as of today.
Nah because I never bought into that "retail can't win, neg expectancy" mularky lol. If we did, who would trade!?!?!
OIH 148+ Feb 145...12.60...36%
Bought the OIH 35/55 outside strangle at $2.80 with OIH at $147.60. Comms of $.03 per fly.
Own the 135/145/155 fly at $.23 risk debit.
The marked-fly is trading at $3.23 vs. the converted fly at $.23. The 145 straddle is trading $9.40, a potential $3.20 gain had I simply offset.
Marginal gain on offset/conversion, but large static expectancy in the fly.
Bought the OIH 35/55 outside strangle at $2.80 with OIH at $147.60. Comms of $.03 per fly.
Own the 135/145/155 fly at $.23 risk debit.
The marked-fly is trading at $3.23 vs. the converted fly at $.23. The 145 straddle is trading $9.40, a potential $3.20 gain had I simply offset.
Marginal gain on offset/conversion, but large static expectancy in the fly.
I think your last statements are the issue I was facing this week. Wait to roll into the FLY or take a profit if it rears its head in a week... For ACL and OIH I decided to take the profits since I still could not roll into the FLY at no or really cheap cost, as well as to get out and watch.