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Let's Trade Options

  • #8,901
  • Jun 2, 2015 10:48am Jun 2, 2015 10:48am
Quoting Vermeer
Hi Guys, Anyone familiar with Brian Johnson's books? I've just read "Option Strategy Risk / Return Ratios" with the concepts of Delta/theta riskratio and Vega/theta risk ratio. The book offers some nice reflections on the greeks & risks in option income strategies. However, I'm no option-wizard so I'm curious what you guys think of Johnson's approach....
Hi, Vermeer.
Nope, I didn't read that. Do you find it useful? I did read some books about options trading, but most of the good stuff I found on-line.
Hope is dangerous in this game.
  • #8,902
  • Jun 2, 2015 11:03am Jun 2, 2015 11:03am
A friend sent me this pic, interesting stuff.

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Click to Enlarge Name: spx jun.PNG Size: 144 KB
Hope is dangerous in this game.
  • #8,903
  • Jun 2, 2015 11:21am Jun 2, 2015 11:21am
Quoting StrayDog
Entered another bear call spread on mighty SnP.... /ES July 2155/2165 for $2.75 credit... entered with ES @ 2107
Adding to position, with /ES rip to 2112... another spread sold for $3.05... averaging to $2.90 credit.
Hope is dangerous in this game.
  • #8,904
  • Jun 2, 2015 11:23am Jun 2, 2015 11:23am
Quoting StrayDog
How about selling a /CL August 45 put for $0.20 ($200)? With 98% POP? It expires on July 16th... Margin req about $1,200... /CL Aug contract trades for $58 now.
That was last Wednesday... today that put is just $0.08... or $80.
Hope is dangerous in this game.
  • #8,905
  • Jun 2, 2015 2:56pm Jun 2, 2015 2:56pm
Quoting Vermeer
Hi Guys, Anyone familiar with Brian Johnson's books? I've just read "Option Strategy Risk / Return Ratios" with the concepts of Delta/theta riskratio and Vega/theta risk ratio. The book offers some nice reflections on the greeks & risks in option income strategies. However, I'm no option-wizard so I'm curious what you guys think of Johnson's approach.
Hi, Vermeer. Good to see a new face here & hope you will stop by more to talk options trading. I did look at that book several months back and remember at the time thinking it might be over my head. I am slightly more knowledgeable about the Greeks, now, so maybe I will check it out.
"If The Fool persists in his Folly he will become wise." - William Blake
  • #8,906
  • Jun 2, 2015 3:11pm Jun 2, 2015 3:11pm
Hey, Cecil - do you think we could get a weekly jump for US indices when Greece is saved again?
"If The Fool persists in his Folly he will become wise." - William Blake
  • #8,907
  • Jun 2, 2015 3:35pm Jun 2, 2015 3:35pm
Quoting The Fool
Hey, Cecil - do you think we could get a weekly jump for US indices when Greece is saved again?
I'm monitoring the USD cash index for clues and we're right on edge here at 95.99, a break and close beneath tomorrow will not look good for the indices going forward if Greece gets saved we may get a reprieve but I'm looking ahead to next ER and a strong dollar has to have some effect to results, technically big cap stocks like APPLE already had a key reversal bear candle 2 weeks ago and looking for that stock to fall to around 115 area and the DOW has been looking weak for the last month in my opinion
  • #8,908
  • Jun 2, 2015 7:13pm Jun 2, 2015 7:13pm
Quoting The Fool
m/l what I have been doing is looking at SPY (sometimes IWM, too) out anywhere from 21 to 42 dte (3-6 weeks) and selling credit spreads @ 20 perhaps max 25 deltas on the short leg, trying to get a minimum of 20% the width of the strikes (that's $0.40 on a $2 spread) but ......

Looking to put on 20% of margin on each spread, running 3-4 spreads at any given time, with always at least 20% in reserve. So, in a $10k account, that's $2k margin hit for a 10-lot $2 spread that might bring in $0.25-$0.35 net, every week - so, if I never lose that would be 10%-14% return on equity per month. Best case ...
Any thoughts on this? 10%-14% per month, are you serious? Any constructive criticism or reality check feedback is welcome.

Many an options guru peddling their "sell options spreads (or IC's) for weekly income" e-books online - and I have not read any of them. But I would not be surprised if the premise stated above is a synopsis of their works.

Of course, everything is great until you let a loser get past you and wipe out 2-3 month's worth of winners. Especially true now, with vol so low, and you are tempted to risk $2 to make 50c....
"If The Fool persists in his Folly he will become wise." - William Blake
  • #8,909
  • Jun 3, 2015 4:35am Jun 3, 2015 4:35am
Quoting The Fool
.... Of course, everything is great until you let a loser get past you and wipe out 2-3 month's worth of winners. Especially true now, with vol so low, and you are tempted to risk $2 to make 50c....
Exactly. In order to get VIX above $15 and for it to STAY there, we need 3 nice red days in a row... since this PA is buy the dip at open, sell the rip at close, and do that all over again. Nothing wrong with that, if you make some $ on it. There is no fear whatsoever...

About % per month... everything above 5% per month is attractive, IF you can make that consistently.... This is a marathon, so I agree with you - trading should be boring, rinse and repeat... You should spent majority of time planing and waiting for opportunities to present themselves, and when that happens, trade that.
Hope is dangerous in this game.
  • #8,910
  • Jun 3, 2015 4:41am Jun 3, 2015 4:41am
Quoting Cecil Gee
{quote} I'm monitoring the USD cash index for clues and we're right on edge here at 95.99, a break and close beneath tomorrow will not look good for the indices going forward if Greece gets saved we may get a reprieve but I'm looking ahead to next ER and a strong dollar has to have some effect to results, technically big cap stocks like APPLE already had a key reversal bear candle 2 weeks ago and looking for that stock to fall to around 115 area and the DOW has been looking weak for the last month in my opinion
Hi CG.
Although I don't use DXY for correlations, I agree with you. AAPL is overbought on monthly chart, exhausted there... Nothing much is expected in following period, so it should have a correction... Many of the Nasdaq 100 stocks looks like that, exhausted on monthly, or weekly / daily charts. On the other hand, this market where, IMO, the ZIRP is the most important factor, tends to get out from overbought conditions going through boring consolidations, instead of correction. It can't go sideways forever I hope.
Hope is dangerous in this game.
  • #8,911
  • Jun 3, 2015 6:26am Jun 3, 2015 6:26am
Quoting StrayDog
{quote} Hi, Vermeer. Nope, I didn't read that. Do you find it useful? I did read some books about options trading, but most of the good stuff I found on-line.
Yeah, certainly useful. Although most of us know to minimize delta, gamma, vega (and rho, but not sure that one still exists in 2015 ) and to maximize theta, the author gives a couple of nice ratios to monitor the risks. In fact, a couple of strategies mentioned in this topic, like Double Diagonal, calendars etc are compared.

Definitely a good read in this low-volatility era with a lot of guru's advertizing option income without a proper risk approach. Vega is still alive and to be honest I often overlooked the risk of changing values during the time to expiration and didn't know how to make proper adjustments. Well, now I know the fundamentals, hopefully it will be easier...

I think it's not that difficult to read The Fool. At a first glance I was also a bit overwhelmed by its topic (I'm not a star in mathematics & greeks), but I understood most of it after a single read. Even the calculations!
  • #8,912
  • Jun 3, 2015 9:25am Jun 3, 2015 9:25am
Quoting Vermeer
I think it's not that difficult to read The Fool. At a first glance I was also a bit overwhelmed by its topic (I'm not a star in mathematics & greeks), but I understood most of it after a single read. Even the calculations!
cool, I will check it out, thanks....
"If The Fool persists in his Folly he will become wise." - William Blake
  • #8,913
  • Jun 3, 2015 9:37am Jun 3, 2015 9:37am
Quoting StrayDog
{quote} Exactly. In order to get VIX above $15 and for it to STAY there, we need 3 nice red days in a row... since this PA is buy the dip at open, sell the rip at close, and do that all over again. Nothing wrong with that, if you make some $ on it. There is no fear whatsoever... About % per month... everything above 5% per month is attractive, IF you can make that consistently.... This is a marathon, so I agree with you - trading should be boring, rinse and repeat... You should spent majority of time planing and waiting for opportunities to present...
Thanks for the feedback, bro. Selling the rips still looks ok, just thin premium hard to get motivated on sometimes. IV on index options with <25 deltas usually in the 10% vicinity....woohoo ....hard to squeeze any blood outta them turnips
"If The Fool persists in his Folly he will become wise." - William Blake
  • #8,914
  • Jun 3, 2015 9:49am Jun 3, 2015 9:49am
Quoting The Fool
IV on index options with <25 deltas usually in the 10% vicinity....woohoo ....hard to squeeze any blood outta them turnips
Looking out to Jul (44dte) SPY short calls at the 24 deltas strike - a $217/$219 gets $0.50 with luck today, will be better if we push up to $213 or better this week....

iv just shy of 9% on that $217....
"If The Fool persists in his Folly he will become wise." - William Blake
  • #8,915
  • Jun 3, 2015 9:53am Jun 3, 2015 9:53am
Quoting The Fool
iv just shy of 9% on that $217....
oh dear me I have started looking at ER trades for the upcoming cycle...
"If The Fool persists in his Folly he will become wise." - William Blake
  • #8,916
  • Jun 3, 2015 9:55am Jun 3, 2015 9:55am
VXX touched a new 52-wk low today....
"If The Fool persists in his Folly he will become wise." - William Blake
  • #8,917
  • Jun 3, 2015 10:02am Jun 3, 2015 10:02am
Quoting The Fool
.. iv just shy of 9% on that $217....
Dry as firewood...

VIX at $13.55 ... well, IMO -> learn to trade now, when ranges are small and vol is low... Shorted /ES @ 2119 small(ish) position, looking to take a few points... wanna see selling pressure at the end like in the days before. Seems like a bunch of day-traders and algos just moves market in tight range - buying the dip right after the open and then they close positions in final hour, bringing the price down.
Hope is dangerous in this game.
  • #8,918
  • Jun 3, 2015 10:08am Jun 3, 2015 10:08am
yeah the liquid indices volume I'd bet is almost all algos now. Anyway I have been waiting for the Greek tweets, not coming. Friday will be a possible big payoff day if the European day closes and they have not paid that IMF bill. Maybe worth a gamble on some long puts ...?
"If The Fool persists in his Folly he will become wise." - William Blake
  • #8,919
  • Jun 3, 2015 10:20am Jun 3, 2015 10:20am
TLT about to visit lows not seen since last Fall, one place to look for decent IVR, but I have not been trading it.
Attached Image (click to enlarge)
Click to Enlarge Name: 2015-06-03_tlt.png Size: 127 KB
"If The Fool persists in his Folly he will become wise." - William Blake
  • #8,920
  • Edited 10:42am Jun 3, 2015 10:30am | Edited 10:42am
Quoting StrayDog
.. Shorted /ES @ 2119 small(ish) position, looking to take a few points...
Closed the mofo @ 2116.75

Addon
Timing is a biatch.... 2113.75 ten minutes later.
Hope is dangerous in this game.
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