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Let's Trade Options

  • #11,161
  • Edited 11:38pm Nov 9, 2015 8:36pm | Edited 11:38pm
comparatively, the SPY DD below, w/ $1 spreads, eliminates the losing gap in the P/L curve, and will lose only a few bucks for SPY between $195 and $216 at expiry.....best result, as usual, would be a price drop and rising iv into the expiry date.
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"If The Fool persists in his Folly he will become wise." - William Blake
  • #11,162
  • Nov 9, 2015 9:49pm Nov 9, 2015 9:49pm
Quoting The Fool
..... I filled several $32 & $33 Dec/Jan VXX call calendars today, all for around 20c, counting on JY to crack that whip....
like this one....pretty much a license to print money
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"If The Fool persists in his Folly he will become wise." - William Blake
  • #11,163
  • Nov 10, 2015 5:25pm Nov 10, 2015 5:25pm
Had some modest hopes for continuation of Monday ... . Nuh-unh.

Ended on having to settle on a whopping .91 on the M strangle for tomorrow's earnings and, of all things, a short strangle in AET for 1.98. Not hugely liking the rest of the dwindling earnings calendar for toys to play with, since a lot of it is big retail names -- HD, WMT, LOW, TGT, and they aren't exactly known for their volatility.

GMCR (Keurig Green Mountain) (current IVR/IV 100/97) could be worthwhile (the Nov 20 1 SD short strangle goes for 1.75/contract at the mid) if the volatility holds up until earnings ... . Any others, just gonna have to see when we get there, but most of them will probably be picking up pennies on the sidewalk.

Watched an interesting market measures segment today about extending duration in low IV. https://www.tastytrade.com/tt/shows/...5?locale=en-US The takeaways: in sub-15 VIX, go out to 100 days; above-15 VIX, stick with 45 DTE with index short strangle plays (I assume the same would apply to iron condors). As Tom pointed out, you're not going to want to do this very often, but if you're desperate to slap some theta on, it beats forcing a shorter duration setup ... . The obvious downside for smaller players is that a 1 SD short strangle is going to tie up buying power for two options cycles if you go 100 days out, although I could see putting one of these on as earnings peter out to bridge the gap until the next round in something smaller BP-wise, like IWM ... .
Fireworks are fun ... as long as you don't blow your fingers off.
  • #11,164
  • Nov 10, 2015 5:32pm Nov 10, 2015 5:32pm
if you are willing to hang in trades for 100 days, m/l, look at getting into time spreads right after the iv crush on earnings, and then be set up for the expiry either just before or just after the next ER round. Good way to do calendars, just something to add to the mix....
"If The Fool persists in his Folly he will become wise." - William Blake
  • #11,165
  • Nov 10, 2015 5:39pm Nov 10, 2015 5:39pm
Quoting The Fool
if you are willing to hang in trades for 100 days, m/l, look at getting into time spreads right after the iv crush on earnings, and then be set up for the expiry either just before or just after the next ER round. Good way to do calendars, just something to add to the mix....
Excellent idea. I've worked a couple of underlyings in post-earnings afterglow, but it's usually because IV remains high ... .

100 DTE, though ... . That's a long time to wait in line at the candy store. I'd have to absolutely nothing on. Naturally, you can always take the darn thing off and redeploy ... .
Fireworks are fun ... as long as you don't blow your fingers off.
  • #11,166
  • Nov 10, 2015 5:42pm Nov 10, 2015 5:42pm
Quoting The Fool
{quote} like this one....pretty much a license to print money {image}
I may do this one or something similar ... . My timing, though, is pretty much consistently off with VIX products. I check VIX and VXX daily just to see where the broader market is at, but am not always looking at whether there's a trade there ... .
Fireworks are fun ... as long as you don't blow your fingers off.
  • #11,167
  • Nov 10, 2015 5:48pm Nov 10, 2015 5:48pm
Quoting ZebraSquirl
{quote} I may do this one or something similar ... . My timing, though, is pretty much consistently off with VIX products. I check VIX and VXX daily just to see where the broader market is at, but am not always looking at whether there's a trade there ... .
the premise there is to catch a post Dec FOMC vix spike. I made them wide to give the trade a chance to catch a large protracted move into January. If it doesn't pan out, I'm likely out a g, because I have 50 of those @ around 20c debit.
"If The Fool persists in his Folly he will become wise." - William Blake
  • #11,168
  • Nov 10, 2015 5:53pm Nov 10, 2015 5:53pm
Quoting ZebraSquirl
... . 100 DTE, though ... . That's a long time to wait in line at the candy store. I'd have to absolutely nothing on. Naturally, you can always take the darn thing off and redeploy ... .
If you do calendars, you don't have to tie up any margin. But - you do have to be a real good shot to hit your calendar window 3 months out, so best to get in cheap. Just remember, you get what you pay for with time spreads. If you make the spread wide (wide in strikes & wide in time, $1 or more and a month or more....) you pay more, but you give yourself better odds of being itm when they come due....
"If The Fool persists in his Folly he will become wise." - William Blake
  • #11,169
  • Edited 6:11pm Nov 10, 2015 5:55pm | Edited 6:11pm
Quoting ZebraSquirl
{quote} I may do this one or something similar ... . My timing, though, is pretty much consistently off with VIX products. I check VIX and VXX daily just to see where the broader market is at, but am not always looking at whether there's a trade there ... .
Were I to have any common sense, I would probably just set up a GTC order of some kind or another for a given expiration in VIX, like an 11/13 debit spread. 2/3rd's of the time the darn thing is under 15 ... :

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Edit: The flip side -- GTC order to get a high VXX/VIX cheap calendar on one of these sub-15 dips. Can't tell you how many hours I waste doing "price discovery" and trying to get fills ... .
Fireworks are fun ... as long as you don't blow your fingers off.
  • #11,170
  • Nov 10, 2015 5:59pm Nov 10, 2015 5:59pm
Quoting The Fool
{quote} If you do calendars, you don't have to tie up any margin. But - you do have to be a real good shot to hit your calendar window 3 months out, so best to get in cheap. Just remember, you get what you pay for with time spreads. If you make the spread wide (wide in strikes & wide in time, $1 or more and a month or more....) you pay more, but you give yourself better odds of being itm when they come due....
The only thing I have trouble wrapping my head around with these is managing them intratrade ... . I assume the front month short strike can be peeled off, leaving you with the back month long to deal with ... .
Fireworks are fun ... as long as you don't blow your fingers off.
  • #11,171
  • Edited 6:16pm Nov 10, 2015 6:04pm | Edited 6:16pm
But I am liking the margin aspect ... . I'm unsure of why I didn't realize that earlier (sometimes the light bulb is awfully slow to go on).

Edit: Just need to quit being a wuss and put one on. I'm sure the management aspects will come to me; it ain't rocket science, after all, really.
Fireworks are fun ... as long as you don't blow your fingers off.
  • #11,172
  • Edited 9:40pm Nov 10, 2015 6:18pm | Edited 9:40pm
Quoting ZebraSquirl
The only thing I have trouble wrapping my head around with these is managing them intratrade ... . I assume the front month short strike can be peeled off, leaving you with the back month long to deal with ... .
big light bulb right there - if you are timing trades around scheduled events, and you give yourself plenty o time before the event, you can set the front short leg of the time spread to expire the week before or week of the event.....so, the big event draws nigh, the front option expires worthless, and the back longs are set up to go deep itm.

That is exactly what I have done with the VXX calendars above: Dec FOMC is 12/16 & Dec opex is 12/18. There are 2 scenarios I am fishing for:

1) The vix catches fire in the run-up to the Dec FOMC and VXX price comes well up into my fat P/L, or
2) VXX is coming up, the Fed hikes, VIX keeps coming, but not quite to my calendar strikes, so I can let the front options expire & then ride the back calls up into deep itm.

VXX could spike and range into the upper $30's and my 50 calls could be worth $25k-$40k......well, a nice dream anyway, perfectly plausible. The results for a similar trade with UVXY could be even juicier. I know an options trader who netted >$20 on the last UVXY spike to $90, ......
"If The Fool persists in his Folly he will become wise." - William Blake
  • #11,173
  • Nov 10, 2015 6:34pm Nov 10, 2015 6:34pm
Quoting The Fool
VXX could spike and range into the upper $30's and my 50 calls could be worth $25k-$40k......well, a nice dream anyway, perfectly plausible.
If it comes to pass I would turn right around and do the same thing with puts for the mean reversion play.

The Dec/Jan VXX calls calendar in the low $30's/upper $20's will likely be around as the SnP turns up in the Santa rally, we'll see, ....if we get VXX down to $17.xx or lower then you can get in the 1-month calendars even cheaper, but probably not below 15c.....
"If The Fool persists in his Folly he will become wise." - William Blake
  • #11,174
  • Edited Nov 11, 2015 9:44am Nov 10, 2015 9:19pm | Edited Nov 11, 2015 9:44am
Quoting The Fool
a similar trade with UVXY could be even juicier.
the trick is to get in low enough, so that the initial move does not overshoot your short leg....then the other trick is getting filled on the calendar for the mid or near.....then the last trick is filling your sell order when the long options go to $5000/contract.....
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"If The Fool persists in his Folly he will become wise." - William Blake
  • #11,175
  • Nov 10, 2015 9:52pm Nov 10, 2015 9:52pm
check the Time & Sales to see crazy shit.......somebody bought 20 UVXY Dec $80 puts @ $52.90 and 40 Dec $62 puts @ $35.95....a huge bet that the vix will fall into Dec......
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"If The Fool persists in his Folly he will become wise." - William Blake
  • #11,176
  • Nov 10, 2015 10:10pm Nov 10, 2015 10:10pm
fund your UVXY boondoggles with a short Dec puts vert, $21/$19, for 78c
"If The Fool persists in his Folly he will become wise." - William Blake
  • #11,177
  • Nov 10, 2015 11:31pm Nov 10, 2015 11:31pm
another peculiarity of UVXY is the fat prices of the options way out in the chain - so you can put on very wide bflys - another trade to put on that doesn't tie up margin.......if you catch a vix spike you don't have to hold the fly to expiry, it will pay almost anywhere...not cheap and you will lose the debit if the event spike does not come, but great if it does...
Attached Image(s) (click to enlarge)
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"If The Fool persists in his Folly he will become wise." - William Blake
  • #11,178
  • Nov 11, 2015 9:00am Nov 11, 2015 9:00am
filled the UVXY bfly just above for 30c
"If The Fool persists in his Folly he will become wise." - William Blake
  • #11,179
  • Nov 11, 2015 11:20am Nov 11, 2015 11:20am
What up, SDog - how you doin'? Do you believe The Fool could turn a $800 debit UVXY options trade into a $250,000+ winner? (see above)
"If The Fool persists in his Folly he will become wise." - William Blake
  • #11,180
  • Nov 11, 2015 11:26am Nov 11, 2015 11:26am
Hi TF... UVXY... idk, man.... Used to trow change at that shit, but no success so far.

Jus look at famous "V" reversal on /NQ... I took something today on the way down, but nothing on the way up -> need to solve that problem in my head...
Hope is dangerous in this game.
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