SPX Credit Spread Trader

Quote from optioncoach:



What you descirbed is not different than a stock at $34 moving to $35 and the $37.50 Calls not budging because the expectation is extremely low that it would move there.
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You are incorrect on that one, usually 2 strikes OTM have a delta of about .33 so each point would move the options .33 cents. But VIX isnt normal in any way, thats the whole point i am trying to get across so comparing it with normal option pricing isnt realistic.

But we already agreed to disagree on this one, didnt we? :D
 
Yes we disagree but your option observations are not entirely accurate. The two strike OTM strike call for VIX has a delta of .18 in MAY.

Delta is a theoretical value and the MM is not bound to move the option by the delta. For example, GOOG was down $0.71 to day to $408.95 and the MAY $410 PUT with a delta of .49 was down $0.20 based on last sale. Time Value premiums take in some of the expected move and therefore the option does not move its exact delta. Also as a theoratical value, it is off based on all the incorrect assumptions of B-S model (constant vols, etc..)

Second the VIX was down .24 today and the MAY 12.50 strike Call was down $0.10 even though it has a delta of .59. You will rarely find an option that moves its exact delta because delta is not constant, even if it were not theoretical. So VIX is not behaving any differently than any other option chain I have seen.

Finally you are comparing the delta of today to the 1.00 move in VIX over a few days. Delta does not work that way really. YOu cannot take delta for a move that occurs over 3 or 4 days since even in theory delta/gamma are constantly changing.

Your observations are normal moves for options and not indicative of anything out of the ordinary. Compare the VIX options to GOOG or IBM and you will see the same movements.

:D I do not think you can prove or disprove this based on small fluctuations in the price of the underlying or VIX. Smae way a GOOG call or put is not going to change significantly from small fluctuations in price like today. Also, MM price options wit time value premium and vols in mind which also affect changes in the options prices. If expectation is low that an option will be ITM than small moves will not budge the option price, even with a delta of .20.

The only true test is a 30 point spike in VIX honestly. For now, I have been speaking with as many traders as I can who seem to think that the options would have to trade close to intrinsic.

Quote from rallymode:

You are incorrect on that one, usually 2 strikes OTM have a delta of about .33 so each point would move the options .33 cents. But VIX isnt normal in any way, thats the whole point i am trying to get across so comparing it with normal option pricing isnt realistic.

But we already agreed to disagree on this one, didnt we? :D
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Jessica says: this is pointlesss. We will never know until it happens.

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EXCUSE ME...... THERE IS NOTHING POINTLESS ABOUT A JA PIC!!!!!!!

This pic was taken out by our pool in the backyard of our home the Valley :D

[waking up]

whoaaa what happened....
 
You guys discussing this reminds me of a conversation I had with a friend a while back regarding religion. :D

This is similar in that we concluded that the answer to the debate (does God exist or not) will be determined when we die. In this case, the answer will be made known during a black swan event.

But the discussion really revolved around which path was the more logical, given that one will only know the truth of a religion after death. I was of the opinion that it costs very little to follow the teachings of religion compared to the possible protection one would have if the religion were true. So if I was right, my eternal future looked better than hers. If she was right, we all ceased to exist after death so everyone loses regardless.

I guess it is really a matter of better safe than sorry.
 
Quote from optioncoach:

As long as we have Jessica, we all win :D
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Something we can all agree on.:D

BTW coach, you ever see the movie "Honey"? One of the cheesiest movies I've ever seen, but man JA can dance.
 
C'mon... the only reason any Man saw Honey was because of her. I saw it twice! Could not tell you anything about the plot, just 90 minutes of JA dancing...

ALERT ALERT ALERT

Oops my dork alert just went off..

Quote from Cache Landing:

Something we can all agree on.:D

BTW coach, you ever see the movie "Honey"? One of the cheesiest movies I've ever seen, but man JA can dance.
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Diagonals and Iron Condors mixed together..... Murray and others might find this interesting. I am going to try and catch it if I can:

Double Diagonals - Throw in Some Iron, End Up with Butter
This Thursday, April 13, at 4:15 PM EST, Craig Faassen, our Chief Option Strategist, will be giving a free webinar on 'Managing Double Diagonals'. In the first of a 2 part series, he will be running through a real life trading example of getting into a double diagonal, then converting the position into an Iron Condor, which is Step 1 in his ultimate transition to butterflies. As usual, he will explain all of his reasoning for each move and show how ChartBender Pro gives him an edge.

It is a hotcomm presentation and a free trial of hotcomm can be downloaded at http://www.hotcomm.com/downloads.asp, if you don't already have it.

In Hotcomm, the Target Site is Woodiescciclub:Stocks-Options.

Look forward to seeing you there.

Brian Sloyer
Managing Director, ChartBender
 
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