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Let's Trade Options

  • #11,961
  • Jan 29, 2016 9:43pm Jan 29, 2016 9:43pm
Quoting The Fool
I am in this SVXY combo, which will make me $5k richer if it can rally to $60 by Mar expiry....P/L modeled w/ additional 20% iv reduction, which doesn't hurt the fly.... {image}
Yeeesh, that would be pretty awesome. I seem to get distracted on these VIX products at the worst possible times. But if you catch the bottoms/tops, just trading these can be quite productive, assuming you get good pops in volatility (unlike most of last year).

My thinking going forward is to wait for the extreme and then ladder credit spreads 30, 60, 90 days out (although later out in time doesn't work with some of the products very well; UVXY gets really squirrelly out there).
Fireworks are fun ... as long as you don't blow your fingers off.
  • #11,962
  • Jan 29, 2016 9:45pm Jan 29, 2016 9:45pm
Quoting The Fool
{quote} the bid/ask on relatively illiquid SVXY & UVXY really messes with the verticals - you have to scan the chains for mispricing, but those show up with regularity. I think flys and brokewing flys are the way to go with these guys.......the UVXY puts fly combo I am in for Feb expiry has 10-bagger potential, I just have to watch out for the downside bust {image}
As usual, I need to do some work on modelling these mothers on my day off or over the weekend ... . I like to keep things simple, but sometimes "simple" is not all that profitable ... .
Fireworks are fun ... as long as you don't blow your fingers off.
  • #11,963
  • Jan 29, 2016 9:57pm Jan 29, 2016 9:57pm
Quoting ZebraSquirl
But if you catch the bottoms/tops, just trading these can be quite productive, assuming you get good pops in volatility (unlike most of last year).
as I noted somewhere above, if you are in any kind of wide UVXY calls calendar or fly that you got in cheap, with lotsa time, it does not matter too much where your strikes are, it will make money when the iv pops.....
"If The Fool persists in his Folly he will become wise." - William Blake
  • #11,964
  • Jan 29, 2016 10:00pm Jan 29, 2016 10:00pm
I guess the next target for a vol spike might be the Mar FOMC.......but I am watching for a strong vol collapse now (we will see the S&P back above 2,000 pdq) and then I will be shopping for long vol spreads out April or beyond....
"If The Fool persists in his Folly he will become wise." - William Blake
  • #11,965
  • Jan 29, 2016 10:07pm Jan 29, 2016 10:07pm
Quoting The Fool
However, nothing pays better than a long option in a directional trade when you catch a trending move and the long option goes deep in the money....
I'm down: I'd love to find a runner. I have been thinking NFLX.....AAPL, too has potential.....any other candidates?
"If The Fool persists in his Folly he will become wise." - William Blake
  • #11,966
  • Edited Jan 30, 2016 12:10am Jan 29, 2016 11:56pm | Edited Jan 30, 2016 12:10am
looking for NFLX to bottom n bounce, looking at wide June calls, bw fly.....to take off before the next ER
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"If The Fool persists in his Folly he will become wise." - William Blake
  • #11,967
  • Jan 30, 2016 12:07am Jan 30, 2016 12:07am
if you don't want to spend big bucks on the wide fly (who would?), you can double- or triple-up on narrow flys and also get off the broke wing and save the margin hit (good idea!)....wow, look at all those comms, your borker will luv you....
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"If The Fool persists in his Folly he will become wise." - William Blake
  • #11,968
  • Jan 30, 2016 12:42am Jan 30, 2016 12:42am
Apr AAPL fly, get out before the iv ramps up into the late Apr ER....you could buy a cheap (<10c) $5 call vert out there past the $120 to protect and gain profit in case AAPL makes big moves up
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"If The Fool persists in his Folly he will become wise." - William Blake
  • #11,969
  • Jan 30, 2016 9:19am Jan 30, 2016 9:19am
Quoting The Fool
strangles are too expensive, ChinaT.....I can do better with spreads. However, nothing pays better than a long option in a directional trade when you catch a trending move and the long option goes deep in the money....
Indeed it is quite expensive and I don't like directional trade anyway. I prefer a hedge or people call it (vol arb). The example I have given earlier about 61 cents cost is a trade that I have done when OIL price relatively at 31. I have bought Out Of Money PUT at 25 and Out Of Money Call at 37 for March Contract. Hence, my total cost is 61 cents for about 42 days. OIL rose to 33.50 after I put on that trade and I closed my CALL at 1.27 profit actually and my PUT by that time is no more value. If we put it on total derivatives value, we just need about 7% one sided volatility to close my profit and about 3.3% move for breakeven. Of course, no matter where it moves as long as single sided and I believe a 5% move of single sided volatility is not that difficult for any instruments within 42 days.

I am still doing research on this actually and although it is expensive, it might be doing better than spreads sometime.
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  • #11,970
  • Jan 30, 2016 9:30am Jan 30, 2016 9:30am
By the way, by running long strangle, we have to forget about exercising the options because you might see a lot if we exercise it. If the situations does not have any volatility after we put on that trade, we can just close 1 week before expired and probably we might only loss less than 40% of total cost.
  • #11,971
  • Jan 30, 2016 9:26pm Jan 30, 2016 9:26pm
Quoting The Fool
{quote} as I noted somewhere above, if you are in any kind of wide UVXY calls calendar or fly that you got in cheap, with lotsa time, it does not matter too much where your strikes are, it will make money when the iv pops.....
Fireworks are fun ... as long as you don't blow your fingers off.
  • #11,972
  • Jan 31, 2016 1:22am Jan 31, 2016 1:22am
AAPL Apr/May calls $120 calendar. Apr/May brackets the Q1 ER, which will be in the Apr5 week, most likely. iv may fall a bit more for the options in this trade and I may get in it for 25c maybe. iv will rise as the ER date draws nigh. If AAPL moves on $120 of course I will hold on til expiry and try to get the endgame profit explosion. If AAPL does not cooperate I will maybe let the front options go and try to spread, sell some calls as the iv ramps up around the ER, ....good plan in general to try to bracket the late April earnings names with calendars like this.....you could double up & try to get in cheap puts calendars also....
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"If The Fool persists in his Folly he will become wise." - William Blake
  • #11,973
  • Jan 31, 2016 1:48am Jan 31, 2016 1:48am
PCLN ER is 2/17.....looks due for another >$100 pop
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"If The Fool persists in his Folly he will become wise." - William Blake
  • #11,974
  • Jan 31, 2016 2:01am Jan 31, 2016 2:01am
Quoting The Fool
, ....good plan in general to try to bracket the late April earnings names with calendars like this.....you could double up & try to get in cheap puts calendars also....
ok
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"If The Fool persists in his Folly he will become wise." - William Blake
  • #11,975
  • Jan 31, 2016 12:59pm Jan 31, 2016 12:59pm
Layering on a bit more SPY Iron Condor with a particular profit area in mind (between the .236 and .764 Fibs):

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March 4th SPY 180/184/203/207
Probability of Profit %: 62%
Max Profit: 1.04/$104/contract
Buying Power Effect: 2.96/$296/contract
Break Evens: 182.96/204.04

It's skewed a little bit to the down side, but I can always delta balance by rolling up the short side a touch ... .
Fireworks are fun ... as long as you don't blow your fingers off.
  • #11,976
  • Jan 31, 2016 1:05pm Jan 31, 2016 1:05pm
Quoting ZebraSquirl
skewed a little bit to the down side, but I can always delta balance by rolling up the short side a touch ... .
idk but I suspects we are in for a rip in February, 100 pts for the S&P min til the end of the month
"If The Fool persists in his Folly he will become wise." - William Blake
  • #11,977
  • Jan 31, 2016 1:20pm Jan 31, 2016 1:20pm
Quoting The Fool
I guess the next target for a vol spike might be the Mar FOMC.......but I am watching for a strong vol collapse now (we will see the S&P back above 2,000 pdq) and then I will be shopping for long vol spreads out April or beyond....
bullish overload will need to be balanced by some long vol spreads but I am waiting to see the vol collapse play out.....not too fast, I have Feb spreads....looking for UVXY <$30 by Feb opex...
"If The Fool persists in his Folly he will become wise." - William Blake
  • #11,978
  • Jan 31, 2016 9:16pm Jan 31, 2016 9:16pm
Quoting The Fool
{quote} idk but I suspects we are in for a rip in February, 100 pts for the S&P min til the end of the month
Looking that way, at least if this last trading day of Jan is any indication ... .
Fireworks are fun ... as long as you don't blow your fingers off.
  • #11,979
  • Jan 31, 2016 9:22pm Jan 31, 2016 9:22pm
Was going to wait to sell call spreads on strength/put spreads on weakness, but XAUUSD/GLD is kind of in the middle of things:

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GLD March 18th 100/103/111/114 Iron Condor
Probability of Profit %: 56%
Max Profit: .98/$98/contract (although you can play with the width of the wings to wring a bit more out of the trade)
Buying Power Effect: $202/contract
Break Evens: 102.02/111.98
Fireworks are fun ... as long as you don't blow your fingers off.
  • #11,980
  • Jan 31, 2016 9:39pm Jan 31, 2016 9:39pm
Quoting The Fool
{quote} bullish overload will need to be balanced by some long vol spreads but I am waiting to see the vol collapse play out.....not too fast, I have Feb spreads....looking for UVXY <$30 by Feb opex...
Fingers crossed on that; I have a couple of VXX long put verticals on that I put on that aren't looking so hot right now, but I went small and cheap, so no biggie if they don't work out ... . One's a Feb 19th 18/17 long put vert put on for .13/contract; the other, Feb 26th 16/17 put on for .08. Ain't gonna get "Full Monte" on them, I'm pretty sure ... .
Fireworks are fun ... as long as you don't blow your fingers off.
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