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Let's Trade Options

  • #11,881
  • Jan 22, 2016 12:10am Jan 22, 2016 12:10am
Quoting ChinaTraderz
Hi Fool, I see you trade quite lots of instruments, equities, etc. Do you attached ETF in your portfolio? You use vertical more often?
I am pretty much trading options just as you see in this thread. I am trading mostly in IRA accounts where I can not trade futures options, per US law. I wish I had large accounts so that I could trade shares and options on the underlying shares, but my accounts are small, so I am trading equity options almost entirely. Now and then I will buy cheap stocks, but that's pretty rare.

I will trade verticals when I find good opps in those. I would rather sell than buy them. I trade time spreads - diagonals and calendars - quite a lot. Frequently I am trading those spreads with pretty wide time (1 month or more) as a way to get into the back long options more cheaply. Lately I have been trading butterflies and broken-wing bflys more.....
"If The Fool persists in his Folly he will become wise." - William Blake
  • #11,882
  • Jan 22, 2016 12:16am Jan 22, 2016 12:16am
Quoting The Fool
{quote} I am pretty much trading options just as you see in this thread. I am trading mostly in IRA accounts where I can not trade futures options, per US law. I wish I had large accounts so that I could trade shares and options on the underlying shares, but my accounts are small, so I am trading equity options almost entirely. Now and then I will buy cheap stocks, but that's pretty rare. I will trade verticals when I find good opps in those. I would rather sell than buy them. I trade time spreads - diagonals and calendars - quite a lot. Frequently...
Actually by vertical, probably iron condor could be consider as you prefer to sell rather than buy, right? I am considering to going on to US equities market, but not now, maybe few months later as I am still researching on it now. That's why I follow your post on this thread a lot to gain more experience on equities. I have seen quite a lot of people sharing about ETFs and I found it is pretty suitable for running long term iron condor.
  • #11,883
  • Jan 22, 2016 12:32am Jan 22, 2016 12:32am
I do IC's sometimes but usually leg into them, today was looking at SPY put condor as shown.....
Attached Image (click to enlarge)
Click to Enlarge Name: 2016-01-21_2229spy.png Size: 108 KB
"If The Fool persists in his Folly he will become wise." - William Blake
  • #11,884
  • Jan 22, 2016 12:41am Jan 22, 2016 12:41am
Quoting The Fool
I do IC's sometimes but usually leg into them, today was looking at SPY put condor as shown..... {image}
That's pretty nice. I usually will take only 2 gaps and usually I will use Delta as guidelines. I can share my trade, but it is all in Chinese, that's China. LoL. I am putting my strategy now on Dax actually but it is not like those well know strategies such as Iron Condor, Vertical etc. I build the strategy base on Standard Deviations. Still waiting EUREX to open.
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  • #11,885
  • Jan 22, 2016 12:55am Jan 22, 2016 12:55am
with a big blizzard bearing down on the US eastern seaboard this weekend, I might buy cheap UNG calls 7-14 dte
"If The Fool persists in his Folly he will become wise." - William Blake
  • #11,886
  • Jan 22, 2016 3:06pm Jan 22, 2016 3:06pm
my short vol trades (UVXY and SVXY) looking much better today, especially UVXY put flys with UVXY down a ton. Just need the Fed to follow thru next week and say the rate rise program will be slow as Juneau molasses, and oil maybe work on that floor, and we could see a nice equity rally and vol collapse, which is what I need for February. For next week, AAPL is looking good and giving me what I need, a steady rise into ER day will make me smile. NFLX screwed me but I didn't lose any money on the NFLX kitty.

Have a good weekend, ya'll.
"If The Fool persists in his Folly he will become wise." - William Blake
  • #11,887
  • Edited Jan 23, 2016 2:33am Jan 22, 2016 11:14pm | Edited Jan 23, 2016 2:33am
UVXY ranged down $17.25 on the week. Vol collapse cratering UVXY is about as dependable as the sunrise. Not a question of if, ever, but of course when? is still the essence. Anyway, I anticipated this late Jan vol collapse and most of my better trades are in that vein. In this little account I doubled down with two put flys - a $31/27/22 first, and then, as UVXY kept rising, a $36/32/26... the first a 25c debit and the latter 11c. In the P/L model below I show expiry with a 60% iv reduction. Who knows where iv will actually be on the crazy mofo but it will certainly be less if it gets on down there. I need UVXY to keep sliding and grind out between $26 and $32 by Feb expiry, looking for a $1.50+ net out....
Attached Image (click to enlarge)
Click to Enlarge Name: 2016-01-22_2100UVXY.png Size: 95 KB
"If The Fool persists in his Folly he will become wise." - William Blake
  • #11,888
  • Jan 24, 2016 6:22pm Jan 24, 2016 6:22pm
I should change the name of this thread to "Let's Trade Butterflies".....I have the stranded USO Apr $20 calls, left over from a Jan/Apr spread that lost small money......I can use it to make a $12/16/20 bfly with a decent chance for profit....first I will buy 6x the Apr USO $12 calls, then wait (how long?) for USO to rally some and I will sell 12x Apr $16 calls...with luck I can do it for small additional debit (<$100) and end up with a fly that could make >$1,200
Attached Image (click to enlarge)
Click to Enlarge Name: 2016-01-24_1620uso1.png Size: 96 KB
"If The Fool persists in his Folly he will become wise." - William Blake
  • #11,889
  • Jan 24, 2016 11:22pm Jan 24, 2016 11:22pm
Quoting The Fool
I should change the name of this thread to "Let's Trade Butterflies".....I have the stranded USO Apr $20 calls, left over from a Jan/Apr spread that lost small money......I can use it to make a $12/16/20 bfly with a decent chance for profit....first I will buy 6x the Apr USO $12 calls, then wait (how long?) for USO to rally some and I will sell 12x Apr $16 calls...with luck I can do it for small additional debit (<$100) and end up with a fly that could make >$1,200 {image}
Looks good I still have a $10 covered call running in USO with BE at 9.22 thats few dollars in profit. Oil is above $32 bottom might have been set who knows. This last rally was really good to me got everything back in profit after being down a bit after the huge sell off. Was able to get my portfolio back delta neutral and will be looking to add some more short delta on any rally into the 1950 range.
  • #11,890
  • Jan 24, 2016 11:27pm Jan 24, 2016 11:27pm
Quoting ChinaTraderz
{quote} That's pretty nice. I usually will take only 2 gaps and usually I will use Delta as guidelines. I can share my trade, but it is all in Chinese, that's China. LoL. I am putting my strategy now on Dax actually but it is not like those well know strategies such as Iron Condor, Vertical etc. I build the strategy base on Standard Deviations. Still waiting EUREX to open. {image}
Actually, I think we can actually figure that setup out just by looking at the strikes and the "P" or "C" next to them ... .
Fireworks are fun ... as long as you don't blow your fingers off.
  • #11,891
  • Jan 24, 2016 11:39pm Jan 24, 2016 11:39pm
I'm digging the VIX product trades ... . I went a little crazy with them myself last week, primarily in a couple of SVXY short put credit spreads and then, on the flip side, some VXX short call credit spreads.

You're right, TF, about the "trickiness" in fading vol. Price has moved, I dunno, like a buck in VXX to the downside, but the credit hasn't budged much while SVXY has moved up and those setups are 20% plus in profit ... . There's volatility in them there volatility instruments ... .
Fireworks are fun ... as long as you don't blow your fingers off.
  • #11,892
  • Jan 24, 2016 11:42pm Jan 24, 2016 11:42pm
Quoting The Fool
I do IC's sometimes but usually leg into them, today was looking at SPY put condor as shown..... {image}

Legging in to the put side on weakness on the call side on strength is the way to go on these. Naturally, if you never get the strength to leg into the call side (or vice versa), you just deal with the thing as a credit spread going into expiration ... .
Fireworks are fun ... as long as you don't blow your fingers off.
  • #11,893
  • Jan 24, 2016 11:57pm Jan 24, 2016 11:57pm
Quoting ZebraSquirl
{quote} Legging in to the put side on weakness on the call side on strength is the way to go on these. Naturally, if you never get the strength to leg into the call side (or vice versa), you just deal with the thing as a credit spread going into expiration ... .
The alternative (if you're an enormously impatient guy like myself) is to go "iron chicken" -- uber wide with the spread between your wings and roll the wings in toward current price within the same expiry when it becomes profitable to do so (i.e., when the short option on that side approaches worthless):

Attached Image (click to enlarge)
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This example's a bit extreme, but you kind of get the idea ... . I've set a few of these up 100 days out when implied volatility is relatively low, giving me time to work the wings in profitably; with volatility where it's at now, I'd shoot for 45 DTE and less setups, where legging in makes the most sense and where you benefit the most from theta decay closer to expiry ... .
Fireworks are fun ... as long as you don't blow your fingers off.
  • #11,894
  • Jan 25, 2016 12:03am Jan 25, 2016 12:03am
Quoting ZebraSquirl
{quote} The alternative (if you're an enormously impatient guy like myself) is to go "iron chicken" -- uber wide with the spread between your wings and roll the wings in toward current price within the same expiry when it becomes profitable to do so (i.e., when the short option on that side approaches worthless): {image} This example's a bit extreme, but you kind of get the idea ... . I've set a few of these up 100 days out when implied volatility is relatively low, giving me time to work the wings in profitably; with volatility where it's at now,...
In that particular setup, you can also see the obvious "vol skew curse." That thing's basically a delta neutral setup. In order to get that, though, you have to skew the put side way down in comparison to the call side because you can't get squat on the call side. This is why it's best to leg into the put side of these vol skewed instruments (SPY, IWM, DIA, and QQQ) on weakness and into the call side on strength, as it'll help alleviate the vol skew problem that you would have by putting on the whole iron condor at once ... .
Fireworks are fun ... as long as you don't blow your fingers off.
  • #11,895
  • Jan 25, 2016 12:10am Jan 25, 2016 12:10am
Quoting ZebraSquirl
{quote} In that particular setup, you can also see the obvious "vol skew curse." That thing's basically a delta neutral setup. In order to get that, though, you have to skew the put side way down in comparison to the call side because you can't get squat on the call side. This is why it's best to leg into the put side of these vol skewed instruments (SPY, IWM, DIA, and QQQ) on weakness and into the call side on strength, as it'll help alleviate the vol skew problem that you would have by putting on the whole iron condor at once ... .
Not all instruments are created equal when it comes to vol skew. Compare and contrast a fairly delta neutral TLT iron condor with the same expiry to the SPY setup above:

Attached Image (click to enlarge)
Click to Enlarge Name: TLT IC.jpg Size: 145 KB


You'll notice that the short call option at the 1 standard deviation is just about equal in value to the short put option at its respective 1 standard deviation. If anything, the call side's just a touch richer than the put side ... . Given the fact that TLT's virtually devoid of "vol skew," I'm basically free to slap that iron condor on all in one swoop without legging in if I don't want to ... .
Fireworks are fun ... as long as you don't blow your fingers off.
  • #11,896
  • Jan 25, 2016 12:16am Jan 25, 2016 12:16am
Quoting thegmann
{quote} Looks good I still have a $10 covered call running in USO with BE at 9.22 thats few dollars in profit. Oil is above $32 bottom might have been set who knows. This last rally was really good to me got everything back in profit after being down a bit after the huge sell off. Was able to get my portfolio back delta neutral and will be looking to add some more short delta on any rally into the 1950 range.
I could use a bit more short delta somewhere myself ... . But when the broader market tanks, that's a tough thing to find, since everything seems to be tanking simultaneously and you can only adjust what you've got on so much without getting too aggressive and over correcting (done that a few times).
Fireworks are fun ... as long as you don't blow your fingers off.
  • #11,897
  • Jan 25, 2016 1:18am Jan 25, 2016 1:18am
Quoting The Fool
Anyway, I anticipated this late Jan vol collapse and most of my better trades are in that vein. In this little account I doubled down with two put flys - a $31/27/22 first, and then, as UVXY kept rising, a $36/32/26... the first a 25c debit and the latter 11c. In the P/L model below I show expiry with a 60% iv reduction.
forgot to show it above
Attached Image (click to enlarge)
Click to Enlarge Name: 2016-01-24_2316UVXY3.png Size: 85 KB
"If The Fool persists in his Folly he will become wise." - William Blake
  • #11,898
  • Jan 25, 2016 1:23am Jan 25, 2016 1:23am
AAPL kitty just 2 days to go...I'll be happy to net out min 35c
Attached Image (click to enlarge)
Click to Enlarge Name: 2016-01-24_2321aaapl.png Size: 87 KB
"If The Fool persists in his Folly he will become wise." - William Blake
  • #11,899
  • Jan 25, 2016 1:26pm Jan 25, 2016 1:26pm
Quoting The Fool
AAPL kitty just 2 days to go...I'll be happy to net out min 35c
looking like I will have another break-even kitty w/ AAPL, at best. These DC's set up for the ER vol peak are a good idea, but you have to get in them well in advance, and if the market decides to put on a steep sell-off after you are in, even your wide DC may not be wide enough. Say la v.
"If The Fool persists in his Folly he will become wise." - William Blake
  • #11,900
  • Jan 25, 2016 9:09pm Jan 25, 2016 9:09pm
Quoting ZebraSquirl
{quote} Actually, I think we can actually figure that setup out just by looking at the strikes and the "P" or "C" next to them ... .
LoL and that's true. But actually I am a Chinese, not a problem to me to read those so far. I just worried when I share my trades, all buddies here will be crazy. I still can't figure out how to change those language to English, but I believe will be shifting to IB soon as I request my company to do so. This brokers sucks, and that's China market.
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