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Let's Trade Options

  • #8,801
  • May 24, 2015 3:45pm May 24, 2015 3:45pm
so, if you are short 10 calls for Jun2, you might as well go short 10 puts for Jun2 also, because you get that margin for free - but the puts are not as rich. So, for instance, if I go short calls $216/$218 for Jun2 I may look at short puts $206/$204 for $0.17....

..the above is part of the program that I have been remiss in getting on, but that can change....partly because I have been going "super bear" and going long put plays on the puts - that has not been working and I would be much richer if I had been also shorting puts spreads for the last few eons (months) of SPY consolidation.

I can see cutting back on any long options plays unless there just be overwhelming indications of good movement on tap.
"If The Fool persists in his Folly he will become wise." - William Blake
  • #8,802
  • May 24, 2015 3:47pm May 24, 2015 3:47pm
Quoting The Fool
{quote} I showed above SPY call spreads I am in, looking for more always as usual, I am looking these days no less than 20 dte, but I will check Tues on the Jun2 calls, so by then that would be 17 dte. Also, I am usually looking around 20-25 deltas for the short leg. So, as of now, I would try Jun2 short $216/$218 for $0.35. I don't usually go wider than $2 and I don't like going less than $0.30 credit.
Thanks ... . Good guidelines ... . Trying to figure out a way to do SPY somewhat mechanically ... . Looking for the sweet spot in terms of strike price width, pop %-age, DTE, credit, etc. The software helps tons, but I've got to play around quite a bit ... .
Fireworks are fun ... as long as you don't blow your fingers off.
  • #8,803
  • May 24, 2015 3:55pm May 24, 2015 3:55pm
Quoting ZebraSquirl
{quote} Thanks ... . Good guidelines ... . Trying to figure out a way to do SPY somewhat mechanically ... . Looking for the sweet spot in terms of strike price width, pop %-age, DTE, credit, etc. The software helps tons, but I've got to play around quite a bit ... .
yes, by all means share what you are learning thru practice. Regarding trade management - that's the key, something I obviously suck at - I need to go back over all the tastytrade vids regarding management - when to close winners, when to roll or close losers, etc. That is where the art of trading options really lies. Some of it is counter intuitive. Like, I hate paying to close a winning spread - trading spreads is expensive, if you are trading in small numbers, lots of your profit is eaten up by comms on the front and back ends, so I often will let winners expire and save some $ that way - but the gurus are always pushing the notion of closing out early, the premise being that if you are 50%, 75% up or whatever, hanging on an extra week or 2 for that additional remainder is an inefficient use of margin. And I get that....but, the gurus are a mouthpiece for the brokers, also, and brokers love comms.....
"If The Fool persists in his Folly he will become wise." - William Blake
  • #8,804
  • May 24, 2015 4:01pm May 24, 2015 4:01pm
Quoting The Fool
so, if you are short 10 calls for Jun2, you might as well go short 10 puts for Jun2 also, because you get that margin for free - but the puts are not as rich. So, for instance, if I go short calls $216/$218 for Jun2 I may look at short puts $206/$204 for $0.17.... ..the above is part of the program that I have been remiss in getting on, but that can change....partly because I have been going "super bear" and going long put plays on the puts - that has not been working and I would be much richer if I had been also shorting puts spreads for the last...
I've also overlooked that somewhat ... . It seems a bit counterintuitive where the underlying assumption goes the other way; I just need to put the assumption that would be applicable to trading the underlying aside and belly up to the fact that options decay as expiration approaches and that money can be made even if the assumption of the options trade is contrary to the assumption for the movement of the underlying ... . This is where my previous experience in day trading UL's gets in the way of my thought process ... . Need to chuck a lot of that crap out the window ... .
Fireworks are fun ... as long as you don't blow your fingers off.
  • #8,805
  • May 24, 2015 4:12pm May 24, 2015 4:12pm
Quoting ZebraSquirl
Need to chuck a lot of that crap out the window ... .
well, I wouldn't go that far - it is still important to be watching how the u/l moves, imho - you can put it all together and up your edge, I think. You often see options traders not even looking at charts of the u/l, though. But why not? Why not put as much in your favor as possible?

Idk, I could be wrong. When you are trading a big book of SPY or SPX options, it gets to be a different game, you are always just managing margin, managing put side against the calls, it's more of a math balancing act than a directional game. And I know there are traders who do it with ease with 100's of positions on at a time, so it makes me feel pretty dim when I start getting antsy because I have maybe 10....
"If The Fool persists in his Folly he will become wise." - William Blake
  • #8,806
  • May 24, 2015 4:13pm May 24, 2015 4:13pm
Quoting The Fool
{quote} yes, by all means share what you are learning thru practice. Regarding trade management - that's the key, something I obviously suck at - I need to go back over all the tastytrade vids regarding management - when to close winners, when to roll or close losers, etc. That is where the art of trading options really lies. Some of it is counter intuitive. Like, I hate paying to close a winning spread - trading spreads is expensive, if you are trading in small numbers, lots of your profit is eaten up by comms on the front and back ends, so I often...
They are big on that 50% close-out rule ... . I don't have a total grasp on rolling myself although I've watched a ton of videos ... . They seem to invariably roll for credit for the entire set-up where possible, and that's the best I can make of it ... .

The only good thing about earnings plays is that you virtually know as expiration approaches that one end or the other of the stick is going to expire worthless, which can be nice ... . That being said, not a fan of the being on pins and needles as expiration approaches for plays that are going down to the wire ... .
Fireworks are fun ... as long as you don't blow your fingers off.
  • #8,807
  • May 24, 2015 4:24pm May 24, 2015 4:24pm
Quoting The Fool
{quote} well, I wouldn't go that far - it is still important to be watching how the u/l moves, imho - you can put it all together and up your edge, I think. You often see options traders not even looking at charts of the u/l, though. But why not? Why not put as much in your favor as possible? Idk, I could be wrong. When you are trading a big book of SPY or SPX options, it gets to be a different game, you are always just managing margin, managing put side against the calls, it's more of a math balancing act than a directional game. And I know there...
The YOKU and VOD plays still have a good deal of time until expiration, so I'm not going to jump the gun and monkey with them just yet unless the put side of those is just not providing any further pro to the call side (another thing the TastyTrade guys recommend is closing the untested side or rolling it up toward the tested side, resulting in, you guessed, more commissions ... ).

100's of trades just boggles my mind ... . They must be looking to take advantage of small fluctuations throughout the market day or week to maximize profit or keep their delta neutral ... .

Unfortunately, I've got a ways to go until I can avoid the PDT rules ... .
Fireworks are fun ... as long as you don't blow your fingers off.
  • #8,808
  • May 24, 2015 4:26pm May 24, 2015 4:26pm
Quoting ZebraSquirl
... . That being said, not a fan of the being on pins and needles as expiration approaches for plays that are going down to the wire ... .
It's good experience to go through that, though - because once you do it a few times, you will have a better understanding of theta & gamma and how they impact the endgame of your options trades.

I showed some examples above where I played the short leg down to the wire because the u/l was pinning right around that short strike at expiry. I prolly shoulda played those differently, but if I had, I would have lost a lot of money & in the end I made a little. Eventually, though, the u/l is going to move against you in a decisive way and you're going to have to roll or close and that is where I know I suck. Trading forces you to know where you suck and to answer the questions why do I suck? and what am I gonna do about it? I am still working on those answers....
"If The Fool persists in his Folly he will become wise." - William Blake
  • #8,809
  • May 24, 2015 4:26pm May 24, 2015 4:26pm
Which reminds me of another thing about Karen the Super Trader ... . How does that bitch go flat every month? Seems to me she's going to have to cut short trades, but I guess that's the way she rolls ... .
Fireworks are fun ... as long as you don't blow your fingers off.
  • #8,810
  • May 24, 2015 4:32pm May 24, 2015 4:32pm
Quoting The Fool
{quote} It's good experience to go through that, though - because once you do it a few times, you will have a better understanding of theta & gamma and how they impact the endgame of your options trades. I showed some examples above where I played the short leg down to the wire because the u/l was pinning right around that short strike at expiry. I prolly shoulda played those differently, but if I had, I would have lost a lot of money & in the end I made a little. Eventually, though, the u/l is going to move against you in a decisive way and you're...
As a practical matter, I generally can't wait until the last day to make a roll decision ... . Always concerned that I'll be at work and totally space the thing out ... . Naturally, if I didn't have the day job, I'd probably sit there until the last possible minute before rolling, hoping that price would implode in my favor at market close ... .
Fireworks are fun ... as long as you don't blow your fingers off.
  • #8,811
  • May 24, 2015 4:35pm May 24, 2015 4:35pm
Quoting ZebraSquirl
Which reminds me of another thing about Karen the Super Trader ... . How does that bitch go flat every month? Seems to me she's going to have to cut short trades, but I guess that's the way she rolls ... .
I don't know how she does it, I gotta believe it's more complicated than they make it sound, though
"If The Fool persists in his Folly he will become wise." - William Blake
  • #8,812
  • Edited 1:27am May 25, 2015 12:43am | Edited 1:27am
XLE should rise on good demand this summer, so long as the usd does not crash up - XLE one of the names with quarterly expiries

----also look at XLE Jun5/Jul1 calendars, with only 2 dte difference between expiries, the calendars are very cheap - you can string calendars together for high prob trades...
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"If The Fool persists in his Folly he will become wise." - William Blake
  • #8,813
  • Edited 8:05am May 25, 2015 7:49am | Edited 8:05am
Quoting ZebraSquirl
{quote} ... 100's of trades just boggles my mind ... . They must be looking to take advantage of small fluctuations throughout the market day or week to maximize profit or keep their delta neutral ...
Hi ZS. The thing is that most of that huge number of weekly trades are futures scalping, not options trading.

Also, about Karen and tt crew in general... there are a "cheat sheet" for credit plays with 45 DTE:

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It is from this video >> Optimizing Redeployment << I recommend it.

Imagine that your credit spread, iron condor, short single option or whatever you got for credit "suppose" to lose 50% of value in 20 days. This is if u/l sits still and IV doesn't change. Now, imagine you have 50% in just 5 days (u/l moved in "your" direction, or there were some vol crush). Well, close that! Why risk, you need to hold that trade for 40 days for another 50%. You can take your profit and put your money elsewhere. Or, you sold some spread for $0.50 credit... last week is approaching and the spread is now $0.10... Do you really want that last week expiry gamma risk?

Generally, for good success we NEED higher VIX than now, we need higher level of IVR to be able to sell distant options or spreads for good credit. After all -> this is a negative risk/reward game, so I wanna be paid for that, but in the same time increase my POP, looking for high IVR (m/l sell expensive far OTM shit). But, no mistake is to sell far OTM junk always, just in low IV environment like now, you will get smaller credit.
Hope is dangerous in this game.
  • #8,814
  • May 25, 2015 10:36am May 25, 2015 10:36am
/ES volume so far about 30.5k ...

Thinking of selling this low volume rip

Interested in selling the /ES futures call options spreads, like June 2155/2165 for like $3.30 or $3.25...($165 / $162.50, since multiplier is 50) I think this is equivalent of SPY call 215/216...
SPY options are more liquid, and have tight bid/ask spread, but with one futures options spread I can get the same amount of credit like with 5 SPY spreads, and pay only 1 commission.

While /ES is on 2125, I am trying to fill the June 2155/2165 call spread for $3.25 -> @ midpoint, but nothing so far. Also, these options have price increments at every 0.05... like VIX options.
Hope is dangerous in this game.
  • #8,815
  • May 25, 2015 2:19pm May 25, 2015 2:19pm
Quoting StrayDog
.. Do you really want that last week expiry gamma risk? Generally, for good success we NEED higher VIX than now, we need higher level of IVR to be able to sell distant options or spreads for good credit. After all -> this is a negative risk/reward game, so I wanna be paid for that, but in the same time increase my POP, looking for high IVR (m/l sell expensive far OTM shit). But, no mistake is to sell far OTM junk always, just in low IV environment like now, you will get smaller credit.
I bet we can see some vol return in June. Anyway, I think it's generally a good idea to be ready to take profit early on the credit spreads, but of course it's easier to make that call when the market is moving in favor of your trade. If you get to 50%+ profit in the first 5 days of a 3-4 week duration trade, sure, go for it. Dicier is when the market moves against you, and the trade is never in profit, you're lucky to be even near b/e, but you know if you can hang in for the theta dump, you can have a chance....

Also, paying comms to close a trade is not insignificant for those of us trading out of cash accounts. A 10-lot spread trade costs me $25 each side, so if I have only got $0.25 credit for the spread, comms eat 10% each side - sometimes I don't mind hanging in til expiry if I have other margin available to do the trades that I want to do and it's not too long of a wait.

I know the above is wrong, though, and I am moving away from that bias. If I close out with most of the trade's profit in hand and immediately go into another profitable trade, that's most likely a more efficient use of margin....
"If The Fool persists in his Folly he will become wise." - William Blake
  • #8,816
  • May 26, 2015 1:44am May 26, 2015 1:44am
I am still long oil for this Summer, USO Jul/Aug $24 calls calendar needs wti about $65 to be in profit at expiry, MaxP about 4x --- if oil slides more I will shop $23
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"If The Fool persists in his Folly he will become wise." - William Blake
  • #8,817
  • May 26, 2015 2:13am May 26, 2015 2:13am
Quoting The Fool
I am still long oil for this Summer, USO Jul/Aug $24 calls calendar needs
July call fly another way to go, cheaper but
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"If The Fool persists in his Folly he will become wise." - William Blake
  • #8,818
  • May 26, 2015 2:34am May 26, 2015 2:34am
SPY & IWM verticals (closing orders) in one IRA acct below. I am looking for a red weekly candle, a SPY finish below $210, possibly to $208. Will buy out of May5 SPY $215/$217 and look to short more SPY call spreads out to Jun2. May super bear fund weekly put debit verts, we'll see. /ES nice and red so maybe we can start the week with a nice gap down.
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"If The Fool persists in his Folly he will become wise." - William Blake
  • #8,819
  • May 26, 2015 6:37am May 26, 2015 6:37am
Watching TLT today, if I can free up some margin I may sell a Jun put spread @ $117 short, looks like TLT will try to base around $120
"If The Fool persists in his Folly he will become wise." - William Blake
  • #8,820
  • May 26, 2015 9:31am May 26, 2015 9:31am
Quoting The Fool
Watching TLT today, if I can free up some margin I may sell a Jun put spread @ $117 short, looks like TLT will try to base around $120
Jun $117 puts @ 22 deltas, $117/$115 gets $0.31, looking for some pullback action & maybe get $0.35 or better....
"If The Fool persists in his Folly he will become wise." - William Blake
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