Vertical Spreads for Aggressive Growth

Quote from momoneythansens:

Cache,

Wonder if you're following Tom Preston@thinkorswim's MonkeyBrains blog

His experiment to pit long SPY vs. SPX Iron Condors is potentially about to go horribly wrong!

Food for thought.
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Wow, you're not kidding. I hadn't been following but it is interesting. Not sure I really like the position though. Way too vulnerable on the downside. Of course he is at least getting some help on the positive print.
 
Well, although it seems it might not be worth much after the last couple weeks, I thought I'd share my opinion for tomorrow as I will probably not be around.

I think the GE ER will come in as expected and that tomorrow will pretty much be a non-event day. A little dip in the morning is expected, but the losses will likely be erased fairly quickly and I'm expecting a positive print, maybe something around 3-4 points on the SPX.

Next week things will really start to heat up, but not until tuesday. I think that next week (and likely the following week) will actually be the wildest week we will see for the rest of the year.
 
Quote from momoneythansens:

Wonder if you caught that dip? :)
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If you mean the plane crash dip, no, my reflexes arent that quick :D It seems 1% is considered a dip nowadays though.

I did put on a long gamma position on the DOW a few days ago. Bad month for counter trend short gamma trades. :mad:
 
Quote from Cache Landing:

Unlike Rally, I might still roll as it is getting pretty close to my roll point after today,
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I may do a 1400 vertical on increased size but i need some confirmation that this trend isnt going to keep going forever. It is quite possible we got the oct low in july this time around and we can rally well into jan. I dont intend to get caught shorting this rally martingale style. We shall see what next week brings.
 
Quote from rallymode:

I may do a 1400 vertical on increased size but i need some confirmation that this trend isnt going to keep going forever. It is quite possible we got the oct low in july this time around and we can rally well into jan. I dont intend to get caught shorting this rally martingale style. We shall see what next week brings.
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Yeah. I'm not going to martingale it either. If a drop doesn't come during the next couple weeks then I don't expect it till next year really. That's why I'm not willing to increase my risk on this. I'm willing to "buy" a bit more time to see if my forecast will play out.

I should emphasize that this move is why I went closer to ATM with this SPX vertical. This brings me back to my theory on selling closer to the money if I am less convinced of my forecast. I'f i'd gone out to 1365 I'd still be in trouble but sitting on a much larger loss right now.
 
Posted this over at oc's house, but guess I should have asked it here. How would you adjust an atm credit spread or naked straddle as the market hits your b.e. pt to the upside? I know the positions are different but they share that they were written atm.

If you don't martingale, do you roll up and out? Flip to a put credit spread, thus moving with the trend, or some other jujitsu?
 
On a separate note, anyone following this journal (I don't know if there are many though) might notice the sporadic nature of my posts recently. I had much more time available when opening the journal, but that spare time has almost completely disappeared.

When I started the journal I was able to post trades real-time. Now it is becoming fairly difficult to do so. I don't believe in posting trades after the close, because it is too easy to deceive. I also don't feel like posting screenshots of my account for every trade either.

It seems that given the situation, this will eventually result in a poor quality thread. I will finish out the current positions (record the losses :) ) but I don't know that I'll be able to continue with the blotter upkeep after that. I'll still be around for questions if anyone has any though.

P.S. To the poster who requested a breakdown of business cycle and sector correlation. I will still try to get to that in the near future.:p
 
I don't care if you post after the fact. I don't see any auditors around here. Can still get the same level of lively and educational banter.:p

Wonder how the premium funds are doing today (ljm, zenith, ansbacher, etc). Maybe they just set puts ala VN.
 
Quote from LeonPhelps:

Posted this over at oc's house, but guess I should have asked it here. How would you adjust an atm credit spread or naked straddle as the market hits your b.e. pt to the upside? I know the positions are different but they share that they were written atm.

If you don't martingale, do you roll up and out? Flip to a put credit spread, thus moving with the trend, or some other jujitsu?
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Quick suggestions.

Forget about the current position and formulate a forecast as if it weren't there. You can't do anything until you know what you're predicting. If you were to tell us what you think will happen then we could indicate some adjustments. For example;

If (like me) you think we still have a higher prob of a drop than a rise (or simply stagnancy), you might consider rolling the spread out but not up. This way you don't increase the risk parameters of your initial position. You've "bought" more time with a currency called "decreased p.o.p."

If you think the rally will continue, roll into a call debit spread and ride the wave. Or if you don't mind the risk, buy the shorts back and look for a better exit on the longs later.

You're naked straddle was a theta/vega play. You can stop the bleeding (eg. buying the OTM strangle) but other than that you have no choice but to ride it out or cut losses. Again it will depend on your forecast.

BTW, when analyzing your naked straddle, consider the idea that what we are in right now are the PERFECT conditions for taking profits on a naked straddle, ie. extremely low vols and very little time till expiry. IOW, what was originally a theta/vega play has now become a directional play. Theta won't help you any more, and vega is much more likely to work against you than for you at this point. Do you want to be in a directional play right now? Just a thought.
 
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