Let's Trade Options

TSLA - interesting spot



thinking of selling call spreads, where that rectangle is... like 205/215

at this point I am working heavy dayjobs overload and have just a little time to think about trading. I have multiple SPY IC's put on a month ago, net credits ranging from 65c to 85c, and I am watching those & taking them off when they dip below 20c - looking for 70% maxP net out. Most worrisome among them is Mar $198/201 calls and Mar $185/182 puts - looking for good chances to bring those off.....the $198/201 sitting at b/e rat now....

Tried to fill a UVXY Mar4 call fly - $45/50/55 - the premise there a big vix pop post a Mar FOMC surprise .... I think that's a long shot but worth a cheap gamble if I can find one .... went out 25c on the fly & no fillzees......

I think risk is to the upside in Q2 and so I am keen to get on these little vol pops and sell some Apr SPY put spreads.......since I am usually always in some kind of long vol setup, I am somewhat hedged for moves against those, if that happens....

equities down, USD up, oil up, FOMC looming - I won't be surprised to see this chop persist into the FOMC week & Mar opex, then if (when) they kick the can .... face ripper rally time....

...if Trump sweeps (or cleans up) Super Tuesday, the 2016 pres election will be set for Trump vs Mrs. Clinton, and I could see markets settling into that - with a m/l clear outcome a Clinton win....

may open the VIX trade this week but as a strangle 6 months out, the options are on sale either way

With 5 DTE: A "too close for comfort" roll of the CRM naked short 70 to the March 18th 71 for a .55 credit; paired it up with a 62 short put for a .53 credit, so it's a March 18th 62/71 short strangle now. Not sure 71's enough room ... .

Another "too close for comfort" roll of the BIDU 177.5/182.5 short call spread to the March 18th 180/185 for an additional .17; paired it up with a March 18th short put 152.5/157.5 spread for .48.

Peeled off the short put side for a .10 debit and rolled 1045/1050 short call side out another week to the March 11th 1060/1070 for an additional .45 (never did like that 5 wide anyhoo). Matched it up with a March 11th 985/995 short put vert for 1.20 ... .

Naturally, it's possible that 1045/1050 would've worked out with the dip here, but I unfortunately don't get a lot of time to pay attention to these rolling into expiration. If it's not near worthless on the Monday, Tuesday before expiry and it looks "too close" (totally subjective), it gets the roll/sell oppositional side against treatment, and I leave it to grind some more, hopefully in my fave ... .

Here are my (kinda, sorta) basic rules:

1. Intratrade Rolling. I roll a wing as a unit toward current price if there are 25 or more days DTE and it's profitable to do so. A general rule of thumb for me is that if I can't get at least an additional .25 credit for the roll, I should just leave it alone. Additionally, I set up most of these index ETF's in a skewed fashion, with the short call at about the 75% prob OTM strike and the short put at the 85% prob OTM strike. I don't roll past those levels intratrade.

For non-skewed instruments like individual underlyings, both sides are generally set up at the 85% prob OTM strike for nondirectional plays.

2. Toward Expiry. Most IC's I have GTC orders to cover at 50% max profit. Naturally, sometimes that just plain doesn't happen. Price has broken a side or is too close to it for that to occur.

The TastyTrade (really, the Soz) way is to just plain ass walk away from these. I personally find absolutely no reason to do that, and a few of the Dough traders like Robyn and such don't really do that either without at least making some attempt at getting them to scratch or, at the very least, mitigating max loss. (The darn Robyn will work any broken setup to profit, I swear, but I think that she has the patience that the Soz does not).

At any rate, the first thing I do is close the "winning" side for near worthless (for a naked, .05; for a spread, .10 or less). I generally do this on Tuesdays before the Fridays of expiration. Naturally, you can wait until "0" day, but I personally don't like being on pins and needles up until the last moment; I do this "housekeeping" the same day every week for setups that are going to expire that week. Moreover, for some things, it's just patently obvious that "you're not going to get there" with 2, 3, or 4 DTE, so you might as well just go ahead and roll it with a couple of days to go.

I then, for lack of a better word, "putz" with setups, first checking to see whether I can get a credit for rolling the loser "as is," at improved strikes, etc.; I will check this for various expiries -- a week out, two weeks out, etc. If I can get a credit (even if it's like .05), everything is honky dory. I roll it out for a credit and proceed to sell an oppositional side against. Naturally, if you can both improve your strikes and get a credit for the roll, that's ideal.

If there is absolutely no way I can get a credit for the roll of the "loser side" under any circumstances, I then look at what I can get in credit for the selling of the oppositional side set up in "my standard place." Once I have that number in hand, I attempt to roll the "loser side" to strikes for which I have to pay a debit that does not exceed the credit I will receive for the sale of the oppositional side. Even when you can't get a credit for the roll of the "loser side," I still look at whether I can improve strikes, so long as that improvement doesn't require me to pay more of a debit that I will receive for the sale of the oppositional side.

Those are the "ideal" situations.

Every so often, you have a situation where price blows so far past your setup that you cannot sell an oppositional side for a credit that exceeds the debit you will pay for a roll without "inverting" your iron condor (if you don't want this to happen, avoid earnings; that's generally when such things, a la LNKD, occur). Generally speaking, having an inverted iron condor on is not a good thing.

In this particular case, I again resort to "putzing" with setups.

The first thing I consider is whether merely widening the width of the spread will do the trick. Naturally, this approach is not endorsed by TastyTrade, since it requires the assumption of additional risk and therefore more buying power to do this. However, widening also has the advantage of improving your break even for that spread and when I am generally starting out with extremely modest spread widths (3-4 strikes for most of the index ETF's), I have no qualms widening my spreads by a strike or two if it gives me a shot at profit or mitigation of taking a max loss (I have seen TastyTrade original setups that have ridiculously wide spreads that they're going to have major problems with if they want to do any "repair").

If merely widening won't do the trick, I look at whether I can roll the setup to an iron fly, the goal again being to sell an oppositional side against my rolled "loser" for at least a credit that exceeds the cost of the roll. However, rolling to an iron fly can be less than ideal, depending on the cost of the underlying and how much you are widening the spread as compared to the original setup (sometimes you won't need to widen it; sometimes you'll have to in order to receive a credit for the sale of the oppositional side that exceeds the debit paid for the roll of the loser side).

The last thing I consider is whether I should just strip the spread "naked," particularly if it's been totally breached and the long option has appreciated substantially in value. In that case, I sell the long option (locking in profit there), and then sell an oppositional naked against the now naked short option to set up a short strangle/straddle. Naturally, not everyone can do this, depending on the vehicle they're trading in (you can't do it in an IRA).

On subsequent expiries, lather, rinse, repeat ... .

Of course, all this seems to be like an enormous amount of work to get a broken setup back to scratch or into profit. However, given the risk reward on these setups, this is the only way I can see to keep a few or a string of max losers from ruining your whole month or quarter or whatever. Moreover, some of these rolled out setups work themselves out immediately, some in a 45 DTE cycle or two ... . Naturally, a few "run a bit long in the tooth," you make a decision that your loss mitigation attempts are "good enough," and you walk away from a $45 loser instead of a $250 one.

3. Earnings Plays. Earnings plays I kind of treat differently from my standard 45 DTE setups, most of which are in index ETF's, SPDR's, or things like SPX, RUT, and NDX. Earnings plays are intended to be extremely short-term, massive volatility contraction plays. I don't want to be in them for 45 DTE. I want to be in ... and out ... as soon as possible.

With these, I keep an extremely short leash on rolls if at all possible. If rolling out a week accomplishes the task of allowing price to settle, then that's all the farther I want to roll out. Naturally, on a roll out I still want to be able to get a credit for the selling of an oppositional side that exceeds the cost of the roll-out of the "tested" or "too close for comfort" side, but I'm more generous in terms of assuming additional risk with spread widening and things of that nature because I want the play to work out as soon as possible and then to get out of it as soon as possible and move on to higher probability trades ... .

One of the last "qualifying" (IVR @70+/IV @ 50+) earnings plays I will do this season:

ANF March 11th 24.5/33.5 short strangle for a .98 credit.

Announces earnings tomorrow before market open; glad this season's basically over. Need a little break ... .

Thanks for all that, ZS, I will be thinking it over....

You're right there ... . I'm in some poorly placed GLD short call credit spreads (who woulda thunk up this far this fast?). I've stripped off the put side (which ended up near worthless), so a calendar down below might be the ticket ... . They're good vega risk mitigators, too, and I probably could use a mild dose of that ... .

As Curly used to say, "Soitenly."

high yield, canary in a coal mine for risk assets, I am betting on a Spring rally in US equities and a corresponding vol collapse....

with HYG at $80 now, the Apr $83 calls are $0.05/$0.14.....with zero OI.....

will try to fill a HYG Apr/Jun $84 call calendar - will be hard to fill with thin oi in that strike, but we'll see

might be right as I saw VIX 15$ puts large order yesterday think it was Junes exp

these Q1-Q2 months are historically good for US equities......I'm too lazy to post a monthly chart but we are closing out 3 red candles in a row for the SnP, I believe.....much of that has been oil cratering and dragging equities down.....now we will see the oil reversal continue to grind up towards I would bet >$50 by late Summer...if the Fed plays along with the bulls (their favorite game!) then the March FOMC will be dovish and cite multiple global econ & market concerns....voila the old bad news is good news can kick and markets rally, at least for a good 6-8 weeks or so, until we get to sell in May and go away and watch the Brexit & US elections dramas play out (perhaps the shadow of the June FOMC also)......if you're looking for a bottom range for VIX I'd say wait for May

if DJT implodes the GOP and a Hillary presidency becomes a foregone conclusion, the markets could rally thru the Summer and we could see new ath's across the indices in Q3...

Added a SPY April 15th 205/209 short call spread for .61 on this BS upmove ... .

Mmm. That's interesting. There's always a seasonal volatility lull, so that makes sense, but I'll wait for a bottom and then sell short put credit spreads. Been burned a couple of times on stuff I have to pay for (debit spreads); my timing always seems to be off ... .