Today is expiration. You may want to watch what is known at pinning: price of major indices beginning pushed to round numbers or between two round numbers. The corresponding short straddles and short strangles would then see their premium decrease the whole day.
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SPX Credit Spread Trader
- Thread starter El OchoCinco
- Start date
Short Straddle results are fine this morning. My ISP was off this morning and didn't get into the web until an hour after the market opened. The account two credit verticals I didn't worry about. Good cushion on them. I believe that is money in the bank +$1180 NET profit.
The learning SHORT STRADDLE is doing okay. Making a little over a dollar, or $100 on one option contract. gross. Have to look up the commission on the one option contract? I sold it for $6.70 and will buy it back around noon I suppose? Take the dollar and change? It was done on the WEEKLY so has to be closed today. The straddle ASK premium totals are around $5.50 right now and shrinking as you said.
Not sure if there is anything to gain by letting the SHORT STRADDLE expire? Can you explain that to me? Should I let it expire instead of buying back?
Took a look at the SHORT STRANGLE. Haven't been paying it much attention, but it looks like it is losing money? Far as I know I sold the 485 out the money CALL and Sold the 495 PUT at the bid. I am not at all clear on what is happening here though over several days. Should have paid more attention. It's being done on scratch paper. The STRIKE was at 490 in the OEX.
There is something going on here as the market gyrates up and down. The prices either on the CALLS or the PUTS gyrate quite big.
I didn't do enough study and record keeping to understand what is going on, or how to profit from the SHORT STRANGLE. Will probably have to repeat it again, maybe NEXT WEEK? Don't know where the profit is on this thing?
The learning SHORT STRADDLE is doing okay. Making a little over a dollar, or $100 on one option contract. gross. Have to look up the commission on the one option contract? I sold it for $6.70 and will buy it back around noon I suppose? Take the dollar and change? It was done on the WEEKLY so has to be closed today. The straddle ASK premium totals are around $5.50 right now and shrinking as you said.
Not sure if there is anything to gain by letting the SHORT STRADDLE expire? Can you explain that to me? Should I let it expire instead of buying back?
Took a look at the SHORT STRANGLE. Haven't been paying it much attention, but it looks like it is losing money? Far as I know I sold the 485 out the money CALL and Sold the 495 PUT at the bid. I am not at all clear on what is happening here though over several days. Should have paid more attention. It's being done on scratch paper. The STRIKE was at 490 in the OEX.
There is something going on here as the market gyrates up and down. The prices either on the CALLS or the PUTS gyrate quite big.
I didn't do enough study and record keeping to understand what is going on, or how to profit from the SHORT STRANGLE. Will probably have to repeat it again, maybe NEXT WEEK? Don't know where the profit is on this thing?
CACHE LANDING
If you have the time?
I have got /ES or E Mini, which is options on the E Mini Futures apparently? I'm trying to interpret what I'm seeing on TOS for prices
Looking at September which is ESUO.
Do you recommend trading the straight futures, or the options on futures? I see a dollar spread in there between bid and ask.
I was not able to bring up a chart on Big Charts? So where do I find a chart?
Any information would be welcome!
If you have the time?
I have got /ES or E Mini, which is options on the E Mini Futures apparently? I'm trying to interpret what I'm seeing on TOS for prices
Looking at September which is ESUO.
Do you recommend trading the straight futures, or the options on futures? I see a dollar spread in there between bid and ask.
I was not able to bring up a chart on Big Charts? So where do I find a chart?
Any information would be welcome!
This week is over looks like?
20 mins left, not much going to change.
Made a net of +$1275 this week, if I include the scrap paper trade of a straddle, that earned $95.
Good week! Gained confidence with my Vertical Credit Spread methodology and also know now how to trade the SHORT STRADDLE.
Will move on next week, to something else?????
E Mini futures are giving me trouble. Can't find a chart, or other information on how to trade them?
20 mins left, not much going to change.
Made a net of +$1275 this week, if I include the scrap paper trade of a straddle, that earned $95.
Good week! Gained confidence with my Vertical Credit Spread methodology and also know now how to trade the SHORT STRADDLE.
Will move on next week, to something else?????
E Mini futures are giving me trouble. Can't find a chart, or other information on how to trade them?
Falconview:
An example that may help in understanding straddle better. Yesterday, I thought Friday would be horizontal action, and that QQQQs might be pinned at 45. At the time, QQQQs were at 44.80 area. The 45 straddle on Thursday afternoon was: 0.20 for calls, and 0.40 for puts. Total was 0.60.
Today QQQQs at the close are: 44.92. The calls are worthless, and the puts are worth 0.08. So the straddle at end of day is worth 0.08 total.
What to do to close it, you could buy back the puts, and the calls. It would cost around 0.09. So we collect 0.60, and pay back 0.09, plus commission.
The other way to flatten the short straddle is to short the QQQQs because the puts would be assigned. (Assignment of puts is someone asking me to buy the QQQQ, so the next effect will be zero.). However this assumes that the calls will not be assigned, which should be the case because QQQQ is out the money. But should it rise for whatever reason before the deadline to submit assignment notices, the calls might be assigned.
I check the QQQQ now (in after hours), they are trading at $45. It leaves the holders of call and puts perplexed on the assignment question. Automatic assignment is however done using the close price, which would lead to assignment of puts and calls being worthless.
An example that may help in understanding straddle better. Yesterday, I thought Friday would be horizontal action, and that QQQQs might be pinned at 45. At the time, QQQQs were at 44.80 area. The 45 straddle on Thursday afternoon was: 0.20 for calls, and 0.40 for puts. Total was 0.60.
Today QQQQs at the close are: 44.92. The calls are worthless, and the puts are worth 0.08. So the straddle at end of day is worth 0.08 total.
What to do to close it, you could buy back the puts, and the calls. It would cost around 0.09. So we collect 0.60, and pay back 0.09, plus commission.
The other way to flatten the short straddle is to short the QQQQs because the puts would be assigned. (Assignment of puts is someone asking me to buy the QQQQ, so the next effect will be zero.). However this assumes that the calls will not be assigned, which should be the case because QQQQ is out the money. But should it rise for whatever reason before the deadline to submit assignment notices, the calls might be assigned.
I check the QQQQ now (in after hours), they are trading at $45. It leaves the holders of call and puts perplexed on the assignment question. Automatic assignment is however done using the close price, which would lead to assignment of puts and calls being worthless.
Quote from falconview:
Took a look at the SHORT STRANGLE. Haven't been paying it much attention, but it looks like it is losing money? Far as I know I sold the 485 out the money CALL and Sold the 495 PUT at the bid. I am not at all clear on what is happening here though over several days. Should have paid more attention. It's being done on scratch paper. The STRIKE was at 490 in the OEX.
There is something going on here as the market gyrates up and down. The prices either on the CALLS or the PUTS gyrate quite big.
The last paragraph is the most important observation you may have made in more than a week. OEX was between the two strikes. It means the puts and the calls both have only time value left in time, and the clock is getting close to stop. When OEX heads towards the put, it gives life to the put, and kill the call. When it goes towards the call, it gives life to the call, and kills the put.
You have seen gamma in action! Gamma is violent and is big, close to expiry when the stock is around the strike.
At expiry time minus second/small time, the gamma will fall from the skies to zero! At that moment, the time values in both the call and put will disappear, and the strangle becomes worthless, since both puts and calls expire if OEX ends between the two strikes. You have seen what happens to them as they expire. It is a unique show to watch.
Trading Journal
"At expiry time minus second/small time, the gamma will fall from the skies to zero! At that moment, the time values in both the call and put will disappear, and the strangle becomes worthless, since both puts and calls expire if OEX ends between the two strikes. You have seen what happens to them as they expire. It is a unique show to watch."
Bit confusing there, don't understand it. Does expiring worthless mean you get to keep your credit received? If the OEX is between the two strikes at expiration. Saving commissions thusly?
**************************
I don't think I'm trading the SHORT STRADDLE like anything you describe? Your way is too dangerous.
What I am looking for is $2 profit ( before commissions) an option contract, at trend turning points on the weekly bar chart.
Sell for around $7.75 total and buy back around $5.50 as the premium ballooning deflates at the turn of the trend.
I quite like it as a trade and fine tuning it now that I am understanding it better. Once I get comfortable with it and can routinely perform the trade, will up the ante in contracts.
"At expiry time minus second/small time, the gamma will fall from the skies to zero! At that moment, the time values in both the call and put will disappear, and the strangle becomes worthless, since both puts and calls expire if OEX ends between the two strikes. You have seen what happens to them as they expire. It is a unique show to watch."
Bit confusing there, don't understand it. Does expiring worthless mean you get to keep your credit received? If the OEX is between the two strikes at expiration. Saving commissions thusly?
**************************
I don't think I'm trading the SHORT STRADDLE like anything you describe? Your way is too dangerous.
What I am looking for is $2 profit ( before commissions) an option contract, at trend turning points on the weekly bar chart.
Sell for around $7.75 total and buy back around $5.50 as the premium ballooning deflates at the turn of the trend.
I quite like it as a trade and fine tuning it now that I am understanding it better. Once I get comfortable with it and can routinely perform the trade, will up the ante in contracts.
Trading Journal
Thinking over the SHORT STRANGLE a bit. I like the idea of a Thursday trade. Had been thinking along the same lines. The only thing frightening would be a Friday morning big move.
Which then raises the question, instead of having the SHORT STRANGLE out one strike each side of the price action How about going out two strikes of the price action, or even three strikes?
Then the OEX would settle and close between the strikes. Not sure what this would give you in premiums? Will have to check out that next Thursday and Friday.
Still if the SHORT STRANGLE closes at expiration and settles, it should let me keep the credit, if it is between the outer whatever?
Not sure how you could get into this? Legging in? Or if at a STRADDLE, would probably have to be done before Thursday noon. At three strikes out it would work. At two STRIKES out it is a bit touchy for the close of the OEX between them.
I notice the IRON CONDOR is still working at 2 strikes out on the upper side and 3 strikes down on the lower side for PEAK INVESTING GUY. I presume one could do something similar in a SHORT STRANGLE? Wonder if it would be cheaper in margin requirements than the IRON CONDOR?
Thinking over the SHORT STRANGLE a bit. I like the idea of a Thursday trade. Had been thinking along the same lines. The only thing frightening would be a Friday morning big move.
Which then raises the question, instead of having the SHORT STRANGLE out one strike each side of the price action How about going out two strikes of the price action, or even three strikes?
Then the OEX would settle and close between the strikes. Not sure what this would give you in premiums? Will have to check out that next Thursday and Friday.
Still if the SHORT STRANGLE closes at expiration and settles, it should let me keep the credit, if it is between the outer whatever?
Not sure how you could get into this? Legging in? Or if at a STRADDLE, would probably have to be done before Thursday noon. At three strikes out it would work. At two STRIKES out it is a bit touchy for the close of the OEX between them.
I notice the IRON CONDOR is still working at 2 strikes out on the upper side and 3 strikes down on the lower side for PEAK INVESTING GUY. I presume one could do something similar in a SHORT STRANGLE? Wonder if it would be cheaper in margin requirements than the IRON CONDOR?
Falconview:
1. "Bit confusing there, don't understand it. Does expiring worthless mean you get to keep your credit received? If the OEX is between the two strikes at expiration. Saving commissions thusly?"
If price finishes between strikes, the straddle is worthless, and there is nothing to pay back.
2. What you trade, and how you trade them depend on your overall strategy, edge, skills, needs, etc.
From what I read so far, I have the impression that you seem to understand the credit spread, and seem to be good at direction forecasting.
I am however not sure that you fully understand options at fundamental level. For instance your question about the strangle suggests to me that you may not fully understand the basic block which is the put and the call. My reasoning is that if you understood it fully, then you would have understood that the call would be worthless (because the price is below its strike), and the put would be worthless (because the price is above its strike).
I wish you success in your learning experience!
1. "Bit confusing there, don't understand it. Does expiring worthless mean you get to keep your credit received? If the OEX is between the two strikes at expiration. Saving commissions thusly?"
If price finishes between strikes, the straddle is worthless, and there is nothing to pay back.
2. What you trade, and how you trade them depend on your overall strategy, edge, skills, needs, etc.
From what I read so far, I have the impression that you seem to understand the credit spread, and seem to be good at direction forecasting.
I am however not sure that you fully understand options at fundamental level. For instance your question about the strangle suggests to me that you may not fully understand the basic block which is the put and the call. My reasoning is that if you understood it fully, then you would have understood that the call would be worthless (because the price is below its strike), and the put would be worthless (because the price is above its strike).
I wish you success in your learning experience!
Well you have a point there! ( me-dumb country yokel )
"I am however not sure that you fully understand options at fundamental level. For instance your question about the strangle suggests to me that you may not fully understand the basic block which is the put and the call. My reasoning is that if you understood it fully, then you would have understood that the call would be worthless (because the price is below its strike), and the put would be worthless (because the price is above its strike).
I wish you success in your learning experience!"
I guess I was asking do I let it expire, or do I CLOSE it out. But you basically answered that in a round-a-bout way. I get there might be a bit of a cost for one side being in the money, but below the strike?
******************************
Thanks for the suggestion on the idea of putting on a LONG PUT trade! I got to thinking about it. In certain conditions that would or should pay. I believe I have the directional expertise. I think what I want is to clear up a couple of contributory signal indicators by experiments for a couple of weeks and see what I can glean from them to cement my predictions for LENGTH OF TREND guess! The trouble with trends is you cannot know how long they are in advance. At least I don't know yet!
Using my statistical probability earlier study on weekly range for 3 months for the OEX, I think I can improve on that work a bit. Also that study while done for Vertical Credit Spreads is also good in it's conclusions that I should avoid buying LONG CALLS and stick to buying LONG PUT options under optimum conditions. Going to work on identifying those conditions over the next week or two with some new ideas I got from your prompting. Lower cost trades too which is always a good thing.
We just had EARTHQUAKE tremors here. Mild but strong enough to be felt this Saturday afternoon.
*******************************
Option understanding goes with being able to use an option program and input data and see what happens. I no longer have my old option programs to do that, and the ones I find online are not advanced enough. C'est la vie! So I do it by guess and by golly, and trial and error. More time consuming, but it works.
"I am however not sure that you fully understand options at fundamental level. For instance your question about the strangle suggests to me that you may not fully understand the basic block which is the put and the call. My reasoning is that if you understood it fully, then you would have understood that the call would be worthless (because the price is below its strike), and the put would be worthless (because the price is above its strike).
I wish you success in your learning experience!"
I guess I was asking do I let it expire, or do I CLOSE it out. But you basically answered that in a round-a-bout way. I get there might be a bit of a cost for one side being in the money, but below the strike?
******************************
Thanks for the suggestion on the idea of putting on a LONG PUT trade! I got to thinking about it. In certain conditions that would or should pay. I believe I have the directional expertise. I think what I want is to clear up a couple of contributory signal indicators by experiments for a couple of weeks and see what I can glean from them to cement my predictions for LENGTH OF TREND guess! The trouble with trends is you cannot know how long they are in advance. At least I don't know yet!
Using my statistical probability earlier study on weekly range for 3 months for the OEX, I think I can improve on that work a bit. Also that study while done for Vertical Credit Spreads is also good in it's conclusions that I should avoid buying LONG CALLS and stick to buying LONG PUT options under optimum conditions. Going to work on identifying those conditions over the next week or two with some new ideas I got from your prompting. Lower cost trades too which is always a good thing.
We just had EARTHQUAKE tremors here. Mild but strong enough to be felt this Saturday afternoon.
*******************************
Option understanding goes with being able to use an option program and input data and see what happens. I no longer have my old option programs to do that, and the ones I find online are not advanced enough. C'est la vie! So I do it by guess and by golly, and trial and error. More time consuming, but it works.