What was the price for vanilla 460 OCT/NOV long CALL calendar?
Being an OTM calendar with massive tenor skew, it would have been relatively cheap to buy. It is now trading at about $13
SPX Credit Spread Trader
- Thread starter El OchoCinco
- Start date
What was the price for vanilla 460 OCT/NOV long CALL calendar?
Being an OTM calendar with massive tenor skew, it would have been relatively cheap to buy. It is now trading at about $13
They were in the sense that the OCTs I sold were very inflated helping to reduce the cost a bit. But you are right I was not playing this as a vol play.
But the NOV/DEC vega was $141.00 in dollar terms- pretty flat considering. The back months were trading at around 38 vols when the position was opened and I expected both to move in line with each other since all the juice was in OCT leading up to the report. In this case, why would NOV crash and DEC stay high? They both fell together the same magnitude thus making the IV changes a non-issue.
MO: The $470 OTM Call calendar I believe was priced at $3.00 or so when I checked but I do not remember exactly. I wanted to test the FLYs as an OTM combo and it was cheaper to do both at $1.55 then the two OTM FLYs. I also wanted to see a haircut on the stock ($600.00)
But the NOV/DEC vega was $141.00 in dollar terms- pretty flat considering. The back months were trading at around 38 vols when the position was opened and I expected both to move in line with each other since all the juice was in OCT leading up to the report. In this case, why would NOV crash and DEC stay high? They both fell together the same magnitude thus making the IV changes a non-issue.
MO: The $470 OTM Call calendar I believe was priced at $3.00 or so when I checked but I do not remember exactly. I wanted to test the FLYs as an OTM combo and it was cheaper to do both at $1.55 then the two OTM FLYs. I also wanted to see a haircut on the stock ($600.00)
Coach:
I'm not clear on what your trigger levels will be for adjusting diagonals. With verticals you consider adjusting the position when the index is about 15 points from the short strike.
Are you planning to use the same trigger for diagonals? If so, since most here are placing there diagonal short strikes closer, wouldn't this typically increase the number of adjustments made relative to verticals. On the call side since volatility typically decreases, there doesn't seem to be much advantage over verticals. Sure you can roll to November, but isn't there a school of thought that says if you wouldn't put on the rolled position by itself independent of your adjustment then you should just offset.
So on the call side I'm not sure I see much advantage to diagonals over verticals. On the put side, I think there are.
I'm not clear on what your trigger levels will be for adjusting diagonals. With verticals you consider adjusting the position when the index is about 15 points from the short strike.
Are you planning to use the same trigger for diagonals? If so, since most here are placing there diagonal short strikes closer, wouldn't this typically increase the number of adjustments made relative to verticals. On the call side since volatility typically decreases, there doesn't seem to be much advantage over verticals. Sure you can roll to November, but isn't there a school of thought that says if you wouldn't put on the rolled position by itself independent of your adjustment then you should just offset.
So on the call side I'm not sure I see much advantage to diagonals over verticals. On the put side, I think there are.
I am still newer to diagonals as comapred to Murray but the adjustment would not occur at the same water mark as with verticals. Depending on how wide your short strikes are, whether they are in a ratio or not, and how much time to expiration is left would dicatate when an adjustment is made but I would not make adjustments if the market was 15 points away from the short strike. With diagonals, you do get a little more leeway from what Murray has shown and if expiration is close I would want the market to move to the short strike.
I think I will place the positions on a risk graph and pick a max loss point before I adjusted or closed it out. This would depend on time left and IV changes of course. i think these require more finesse in timing adjustments or closing than verticals where I try and make it more black and white as to when to close or adjust.
I definitely, in both cases, would not be comfortable letting the market run past the short strike without doing anything unless we were right at expiration and my market sentiment was that it would not end up being painfuly past my short strike.
I think I will place the positions on a risk graph and pick a max loss point before I adjusted or closed it out. This would depend on time left and IV changes of course. i think these require more finesse in timing adjustments or closing than verticals where I try and make it more black and white as to when to close or adjust.
I definitely, in both cases, would not be comfortable letting the market run past the short strike without doing anything unless we were right at expiration and my market sentiment was that it would not end up being painfuly past my short strike.
I think there is potential for these kind of FLYs if used correclty and in the right situations. Once the SPX OCT options expire, I will test it out on NOV/DEC/JAN SPX strikes and see how it reacts since huge skews are less likely than in the stocks.
At the opening, the position is very flat the Greeks with slight biases. Only wild card is vols which if I can stress test I can get a god idea of how it will react and how to adjust accordingly. What I like about it is that if I choose the strikes correctly, it will not cost me anything and the haircut is very small as opposed to credit spreads. So I can do a few of these FLYs and still have margin available for diagonals or credit spreads.
At the opening, the position is very flat the Greeks with slight biases. Only wild card is vols which if I can stress test I can get a god idea of how it will react and how to adjust accordingly. What I like about it is that if I choose the strikes correctly, it will not cost me anything and the haircut is very small as opposed to credit spreads. So I can do a few of these FLYs and still have margin available for diagonals or credit spreads.
Quote from IV_Trader:
welcome to my world , OC
Your $141 $vegas contradict the above. You're were 3:2 on Nov/Dec vegas. Of course they would move in tandem. The trade was a delta bet. You bought cheap Nov deltas through fat Oct gammas. I am glad it worked, but to think this thing is somehow magically flat vega is silly. The vol switch [1:1 vol line] has very little impact.
A point on your October premium was worth > 20 on the vol line. I'd say that's lacking some resolution.
I am in agreement that it was a bet on movement. It sure was.
coach
i sent you a pm.did u get a chance to look at it.
thanks
i sent you a pm.did u get a chance to look at it.
thanks
The point was that the delta bet made the slight +vega a non issue. There was no skew between the NOV and DEC months to hurt the position. OCT's vol today are irrelevant as well.
This GOOG play was not a typical cross FLY I am detailing here. it was a way to play the OTM strikes at a lower cost.
Usually I am selling cheap deltas with fat potential gammas so this is a nice switch no..
Of course I only understood 5% of your post
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EDIT: Moreover, my first post said the point was to profit from a large move in either direction which was the delta bet I was making. The profit on the IV collapse in OCT just meant that even though the market surges towards on of the strikes, the option would still lose money for a profit. The bet would not have worked if the market stayed flat although the loss would have been very small.
This GOOG play was not a typical cross FLY I am detailing here. it was a way to play the OTM strikes at a lower cost.
Usually I am selling cheap deltas with fat potential gammas so this is a nice switch no..
Of course I only understood 5% of your post
.EDIT: Moreover, my first post said the point was to profit from a large move in either direction which was the delta bet I was making. The profit on the IV collapse in OCT just meant that even though the market surges towards on of the strikes, the option would still lose money for a profit. The bet would not have worked if the market stayed flat although the loss would have been very small.
Yes I am gonna answer you today. I just have an article to finish this morning and some trades to resolve today so will be there shortly..