Yes, that is what the others on ET were referring to.
I should keep my mouth shut and you should be advising me instead of the other way around.
Regards,
Surviving super low implied volatility markets (ES/FTSE)
- Thread starter hardtofin
- Start date
I should keep my mouth shut and you should be advising me instead of the other way around.
Regards,
"S.O.H." -- Sitting On Hands -- is tough when you feel like you're not *working* unless you're *working*......
FWIW, when you can write right after a move, do so.
When you write, keep the duration short (1-2 weeks).
When you feel like you see sufficient premium to write further, try to take less, and write a BWB (+1/-2/skip/+1) where you own the strike closest to the market. Writing a BWB will put you closer to the market, true, but it also gives you a "free" 2-3 strike roll on the same expiry, while giving you *many* different choices on how to handle market moves, including splitting the BWB to go closer to the market, farther from the market, or "selling" to exit.
I target BWBs between |.20| and |.24| delta, looking to secure a purchase price of at least -40¢. You can usually work them in 3-5 weeks out.
So --
1) S.O.H.
2) Verticals 1-2 weeks out, during/after a move.
3) BWBs 3-5 weeks out.
FWIW, when you can write right after a move, do so.
When you write, keep the duration short (1-2 weeks).
When you feel like you see sufficient premium to write further, try to take less, and write a BWB (+1/-2/skip/+1) where you own the strike closest to the market. Writing a BWB will put you closer to the market, true, but it also gives you a "free" 2-3 strike roll on the same expiry, while giving you *many* different choices on how to handle market moves, including splitting the BWB to go closer to the market, farther from the market, or "selling" to exit.
I target BWBs between |.20| and |.24| delta, looking to secure a purchase price of at least -40¢. You can usually work them in 3-5 weeks out.
So --
1) S.O.H.
2) Verticals 1-2 weeks out, during/after a move.
3) BWBs 3-5 weeks out.
markets are efficient if premiums are low they're low for a reason
Just to clarify, are you putting on the BWB's all at once (and targeting a max debit of .40 cents)? I can understand that with the shorter duration, you are paying up for the closer to-the-money strike while your short strike won't bring in as much (or perhaps you are playing these a bit wider), hence still paying up even with the skipped strike to anchor it.
Robert Morse
Sponsor
Yes and no. Look how many times the ATM SPX/ES options when from sub 10 to over 15 in the last few years for short periods of time. Market participants get complacent, then panic. Also, the broad market lack of volatility affects the prices of the individual symbols that can have sector or company specific events.
I have clients that only sell index options. I have a clients that only buys what he feels are mis-priced options on stocks that he feels have a catalyst to move in the short term and activity trades stock around it. They have both been making money. You just can't do these things randomly. Experience helps.
Specifically, I lean on "Buy-to-open" price of -40¢ each on average. You have to remember that you're looking at 4 options, so at 1.3¢/option, you have +5¢ as an exit cost -- that impacts your choice to hold-to-expiration, roll up or roll out, etc. (One simple little trick, as things get close to expiration, is to roll the tail insurance strike closer-to-market (thus, onto the skipped strike) as that will create a butterfly, for maybe a nickel+commissions, and you end up with no margin impact from the remaining strikes -- a lottery ticket should the market run into your position. Yeah! Doesn't happen often, but hey......
At any rate, taking a BWB for less than 30¢ can easily involve a loss, if you end up having to fiddle with commissions, so I target ~50¢, *generally* ranging from 40¢ to 70¢.