Who's an Optionetics Grad?

Thanks Volga.

Quote from volga:

ok now I get the picture much better..

Still depends on whether you want to trade it as a breakeven (in which case always do nothing!) or manage it delta/gamma/vega/theta

If you want to manage it:
Depends if you want to take real delta risk.. do u think the market is going to dump? If so, you can do one of two things:

buy more 1065 puts or even 1060 or 1050 puts as protection. This is a soft delta, meaning that your max loss is the premium.. ie: you pay out say 1 tick net net for more downside options.. if the market rallies, u lose your tick and your return from the trade is lower.

sell the underlying. this is a hard delta though.. meaning, if you get it wrong u are going to lose more money quicker (get the picture!) so, if the market rallies another 5 points, bam, u get shafted on your trade....

I hope this helps you out..
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Quote from volga:

taigong:
ahh zee iron condor..

this is very subjective... There are two ways of looking at such a trade:

1. Breakeven. You collect 5 for something maximum worth 7 or something.. In which case, leave it alone.. you know u will only lose 2 or make 5.

2. Trade in and out of it. at which time u are trading direction and vol... take a view.. place your bets! I would look for what might be well offered on a vol basis and pick that up.. maybe some teenie puts in a 2-4X ratio against your short strike is always a good idea.. you might give up profits, but u are going to win big if the market really moves either way..
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Hi volga,

Thanks first of all for answering my question.

1, Breakeven--I think your examples are those IC's that have short strikes wrapped around the current price of the underlying. I do mostly IC's on indices and I go way OTM, so r/r typically is not pretty--let's say, $.60-$.70 per side (I usu leg in) of a 5 point spread on XEO. Most often they expire worthless and 10-15% return on margin per cycle is not bad.

2, Trade in and out of it. It is taking directional bets, as you said, when you do it. Sometimes I trade SPY against threatened short strike intraday or otherwise to make up some "loss", so it is not exactly hedge, just directional bets, and of course they are often wrong. You suggest adding some teenie puts, which is something I will keep in mind when doing IC on stocks. On indices, my concern is whether it is throwing good money after bad, with vol spiking and indices rarely plunge as a stock would.

Again, thanks for your reply.

tc
 
Volga,

I have a couple of more questions.
1) I can only trade the first a couple of hours. Will this work?
2) What scanning/analyzing software package(s) you think are adequate or sufficient? (I don't have choice on execution software).
Again, thanks.
 
Quote from taigong:

Hi volga,

Thanks first of all for answering my question.

1, Breakeven--I think your examples are those IC's that have short strikes wrapped around the current price of the underlying. I do mostly IC's on indices and I go way OTM, so r/r typically is not pretty--let's say, $.60-$.70 per side (I usu leg in) of a 5 point spread on XEO. Most often they expire worthless and 10-15% return on margin per cycle is not bad.

2, Trade in and out of it. It is taking directional bets, as you said, when you do it. Sometimes I trade SPY against threatened short strike intraday or otherwise to make up some "loss", so it is not exactly hedge, just directional bets, and of course they are often wrong. You suggest adding some teenie puts, which is something I will keep in mind when doing IC on stocks. On indices, my concern is whether it is throwing good money after bad, with vol spiking and indices rarely plunge as a stock would.

Again, thanks for your reply.

tc
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I would be wary of indicies.. they can dump.. it does happen..
and in fact, with the vix as low as it is.. i would bet on it happening quite soon!
 
Quote from wan2BTrader:

Volga,

I have a couple of more questions.
1) I can only trade the first a couple of hours. Will this work?
2) What scanning/analyzing software package(s) you think are adequate or sufficient? (I don't have choice on execution software).
Again, thanks.
More...


1) In my experience discipline, determination and solid plans of action work. Just tailor it to your schedule.

2) I trade futures and some stocks. I go for single stocks if I think something good could happen in them for the time being. I think best to focus on a couple of markets and learn them inside out.. its an "edge" over the other guys.


--volga
 
Quote from volga:

I would be wary of indicies.. they can dump.. it does happen..
and in fact, with the vix as low as it is.. i would bet on it happening quite soon!
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Hi Volga,

Point taken--I was referring to huge gaps the stocks are more prone to. It just hurt to see that one has to close a bad leg just when vol is spiking for some decent premium selling.

Thanks again for your suggestions--much appreciated.

tc
 
A word from the wise:

Selling options is a long term loser.... it feels great, but when she comes to get you.. its like a withdrawl u never imagined!!!!!!!
 
Quote from volga:

A word from the wise:

Selling options is a long term loser.... it feels great, but when she comes to get you.. its like a withdrawl u never imagined!!!!!!!
More...

Volga thats hilarious :D

I have consistently made over 15% per year for 15 years with simple writing strategies.

I never knew I was a junkie..... lol.
 
Quote from volga:

A word from the wise:

Selling options is a long term loser.... it feels great, but when she comes to get you.. its like a withdrawl u never imagined!!!!!!!
More...

Oh no, Volga, I was not talking about naked short premium, rather the "lose 2 or make 5" kind of "odds" play that you mentioned in your earlier post.
 
Quote from taigong:

Oh no, Volga, I was not talking about naked short premium, rather the "lose 2 or make 5" kind of "odds" play that you mentioned in your earlier post.
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The Price of the fly is lower with higher volatility. Do you understand that?
 
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