The Beauty of Options - Portfolio Insurance at a Discount

Sweet Bobby said:
Hello Sigma,

You've been following my strategy for some time. How many times have the options ”gurus” predepicted the demise of Sweet Bobby? Yet, Sweet Bobby continues to bank the bucks! They lack the guts to trade like I do. I set my risks and go on about life. You know how this story ends.

SB
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A slow market decline that does not wake up the IV, is a serious concern for your strategy. Whether it will ever happen or not is another story.
 
The guy shows one legit run with a $4K net liq. He’s starting a hedge fund. Perhaps he could start with passbook savings. Baby steps..
 
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shh said:
A slow market decline that does not wake up the IV, is a serious concern for your strategy. Whether it will ever happen or not is another story.
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You are incorrect. I have more arrows in the quiver, including futures and other options trades that I initiate during such conditions.
 
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Sweet Bobby said:
Hello ffs,

Anyway, I hope I answered some of your questions. If you need any more specifics, just let me know.

Sweet Bobby
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Thank you for giving more details. I haven't really been posting here, but been following you for a while as I've been playing around with similar types of strategies myself.

I was left with a couple of questions:
- You have the shorts somewhere in the 90-150 DTE range. Say, the shorts were at 120 DTE, how much earlier would the longs be? Around 90 ? (And how much does it matter?)
- How do you select the strike of the shorts? Is it a specific delta that you are looking for?
- You said you put on a GTC order for buying puts on the same DTE as the shorts for much lower price. It was unclear to me what the strike for this order would be? Is is 50 points below the shorts of the same strike as the shorts (essentially buying them back at a lower price)?
- How much lower price are you looking for in the GTC order?
 
xasmx said:
Thank you for giving more details. I haven't really been posting here, but been following you for a while as I've been playing around with similar types of strategies myself.

I was left with a couple of questions:
- You have the shorts somewhere in the 90-150 DTE range. Say, the shorts were at 120 DTE, how much earlier would the longs be? Around 90 ? (And how much does it matter?)
- How do you select the strike of the shorts? Is it a specific delta that you are looking for?
- You said you put on a GTC order for buying puts on the same DTE as the shorts for much lower price. It was unclear to me what the strike for this order would be? Is is 50 points below the shorts of the same strike as the shorts (essentially buying them back at a lower price)?
- How much lower price are you looking for in the GTC order?
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The initial long puts are 30 days closer in time than the shorts, and are 50 points lower. I sell the shorts for a credit near $3.00. I then put in a GTC order to buy puts in the same expiration as the shorts 50 points lower at a price of around $1.35.
 
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Sweet Bobby said:
The initial long puts are 30 days closer in time than the shorts, and are 50 points lower. I sell the shorts for a credit near $3.00. I then put in a GTC order to buy puts in the same expiration as the shorts 50 points lower at a price of around $1.35.
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SweetBobby,
I have a question. So, then per every 0.6 shorted, there will be an immediate 1 longed? Or the ratio is achieved over time?

If hypothetically market goes up and there is an opportunity to buy back in the shorted month for $1.35, then the short to long ratio changes (we have more longs than we want); what is the next step then? To add 1 new short for example in Sep strike 1900 and 1 long Aug strike 1850, to rebalance the ratio?
 
Sweet Bobby said:
Once the longs are filled at $1.35, I immediately go out further in time and sell additional shorts. Rinse and repeat.
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So you'd spend 5*$1.35 for the longs for a total of $6.75. And then you'd try to sell 3 puts 50 strikes above 30 dte further out and try to get $2.25 each or better for a total of $6.75?

What do you do if the price moves against you since you bought the longs? (E.g. the GTC order triggered overnight and you had a big move during the rest of the night and were not able to get anywhere near 2.25 in the morning?)

Lets say you get the $2.25 each for those new short puts. What price will you use for the new GTC buy order? Still $1.35 or use the same ratio (2.22) and have the gtc order for $1.00 ?
 
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Sweet Bobby said:
The initial long puts are 30 days closer in time than the shorts, and are 50 points lower. I sell the shorts for a credit near $3.00. I then put in a GTC order to buy puts in the same expiration as the shorts 50 points lower at a price of around $1.35.
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Thanks, a few more questions :)

So, at one hand, you have this structure on as a big lottery ticket in case of a crash. On the other, you do some income trades on top of the structure, which would decay the power of that lottery ticket. How do you decide how much income trades to have on, so to still have the hedge work and have the lottery ticket power in case of a crash?

Lets say a market crashes. When would you take the structure off for a profit instead of waiting for an even bigger crash (or losing the paper profit due to a bounce) ?
 
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