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Let's Trade Options

  • #12,341
  • Mar 11, 2016 11:15am Mar 11, 2016 11:15am
Quoting StrayDog
{quote} Retreated just a few points from there (managed to short for a "massive" 2 points) ... I am thinking what will happen today in final hour of trading. After that colossal bear trap yesterday... that many people are short, me included (I covered mine and took a loss). They will close positions, majority of them will... volume was pretty high yesterday. Market is stalling now, and it will probably run higher because of forcing to cover before weekend. Some pullback maybe on Monday and then sideways until FOMC. Idk. I had some /ES put spreads...
yeah not shorting at the moment on equities until I see that VIX coming from lower levels 10 or 11 as previously posted many times, should see Apple around 107 S/P 2050/75 also posted about a month ago
  • #12,342
  • Mar 11, 2016 5:37pm Mar 11, 2016 5:37pm
Quoting ZebraSquirl
Sold SCTY April 15th 13/16 short put vertical for a .75 credit. On the notion that we don't see $16 by expiration ... .
Out at 50% max today ... .
Fireworks are fun ... as long as you don't blow your fingers off.
  • #12,343
  • Mar 11, 2016 5:43pm Mar 11, 2016 5:43pm
Continued vol in gold, oil, so filled this one today:

GDXJ April 15th 23/31 short strangle for a $98 credit.
Fireworks are fun ... as long as you don't blow your fingers off.
  • #12,344
  • Edited 6:54pm Mar 11, 2016 5:55pm | Edited 6:54pm
Will probably hand sit through the majority of next week unless something pops out at me big time.

VIX finished the week at 16.50. May have a gander at VIX/VIX product setups early next week depending how the "horse does at the gate" (Monday). If we see a tight range in /ES like we did pre-Draghi in prep for FOMC, this could go a little lower Monday through Wednesday.

Index ETF's: No sense in selling premium here in broader index instruments with VIX the way it is. Brazil, oil/gas, and gold space continue to have the vol, but I'm already in all of the underlyings that have any juice in their options that are at 70+ IVR (EWZ, GDXJ, RIG, and XOP) in those sectors.

Oil: The 2016 high was set on 1/4 at 35.36 (I'm looking at the USOIL chart in TradingView); it tested the underside of that level Tuesday, Wednesday, and Thursday. Today it broke through it by a whopping .20 cents, so who knows whether that'll hold. In my opinion, this rally from the 2/11 bottom to this level is fundamentally unsound and is probably in large part speculative "smoke and mirrors." If oil caves, the S&P will follow hard (the S&P currently has a .93 correlation with USOIL). (As a side note, an "oil cave" plus a Fed rate hike could deliver a double whammy to the loonie -- a petro currency, sending it skyrocketing back to the level it saw before this oil run up ... ).

EURUSD: I'm not set up to trade spot, won't be trading FXE (the Euro proxy), and don't feel like dabbling in /6E, but I think that this is the strong/weak pair to watch if you're doing any of those things. For me, this is not a pair I would dick around with "playing in the middle" between 1.08 and 1.10. As I did last year, I would wait for it to hit 1.14 and then go short if it's inclined to react to the upside on whatever FOMC says; otherwise, stay out. The fundamentals on this pair should be telling everyone to only short on strength (ECB easing; Fed tightening).
Fireworks are fun ... as long as you don't blow your fingers off.
  • #12,345
  • Mar 11, 2016 9:49pm Mar 11, 2016 9:49pm
Quoting ZebraSquirl
Oil: The 2016 high was set on 1/4 at 35.36 (I'm looking at the USOIL chart in TradingView); it tested the underside of that level Tuesday, Wednesday, and Thursday. Today it broke through it by a whopping .20 cents, so who knows whether that'll hold. In my opinion, this rally from the 2/11 bottom to this level is fundamentally unsound and is probably in large part speculative "smoke and mirrors." If oil caves, the S&P will follow hard (the S&P currently has a .93 correlation with USOIL). (As a side note, an "oil cave" plus a Fed rate hike could deliver...
GOOD chance oil rally will collapse but I will wait to see what the Fed will do. Oil fundies are dicey for a rally extension but weak usd will help that. Fed hiking next week likely a long long shot but anything's possible.
"If The Fool persists in his Folly he will become wise." - William Blake
  • #12,346
  • Mar 11, 2016 10:00pm Mar 11, 2016 10:00pm
Quoting ZebraSquirl
VIX finished the week at 16.50. May have a gander at VIX/VIX product setups early next week depending how the "horse does at the gate" (Monday).
BOJ & FOMC both dovish will open the door for total vix collapse, equity rallies to last Summer highs or above - last chance for this to go b4 the Jun FOMC/Brexit combo, bastards Know & will make it happen
"If The Fool persists in his Folly he will become wise." - William Blake
  • #12,347
  • Mar 11, 2016 10:05pm Mar 11, 2016 10:05pm
Quoting Cecil Gee
yeah not shorting at the moment on equities until I see that VIX coming from lower levels 10 or 11 as previously posted many times, should see Apple around 107 S/P 2050/75 also posted about a month ago
^vix back down there by April if the Fed plays nice......
"If The Fool persists in his Folly he will become wise." - William Blake
  • #12,348
  • Mar 13, 2016 4:02pm Mar 13, 2016 4:02pm
I've been looking at various long vol plays and just can't get the level of satisfaction out of them I'd like. The TastyTrade way to go is general some kind of vertical/debit spread, but your timing with those has to be somewhat spot on both with entry and exit to have them work out profitably ... . I've been fairly successful doing credit spreads at the low end of things, but that's another thing where you have to watch the underlying, get in at the bottom (again timing).

Instead of watching price in either VIX or VXX to bottom out, I'm going to go with something more flexible here that has plenty of time to work out and doesn't require a "perfect finish" intratrade or at expiration -- a synthetic/poor man's covered call.

Here's the setup:

VXX Sept 16th 14 long call/April 15th 21 short call
Whole Package: $585/contract

Truth be told, this is more buying power than I generally like to tie up on a per contract basis for a given trade. But with vol at these levels, I don't have a ton of stuff that I've got on from a premium selling standpoint, and I need to be setup for something that bides me time in the event we have a repeat of last year's mid-March to August volatility lull ... .
Fireworks are fun ... as long as you don't blow your fingers off.
  • #12,349
  • Mar 13, 2016 4:10pm Mar 13, 2016 4:10pm
Quoting ZebraSquirl
I've been looking at various long vol plays and just can't get the level of satisfaction out of them I'd like. The TastyTrade way to go is general some kind of vertical/debit spread, but your timing with those has to be somewhat spot on both with entry and exit to have them work out profitably ... . I've been fairly successful doing credit spreads at the low end of things, but that's another thing where you have to watch the underlying, get in at the bottom (again timing). Instead of watching price in either VIX or VXX...
thats the key when longing VIX, it will depend so much on how long it will take for the VIX to get near 10, it could be the movers will wait to see if TRUMP truly has a real chance in getting to the white house
  • #12,350
  • Mar 13, 2016 8:09pm Mar 13, 2016 8:09pm
Quoting Cecil Gee
{quote} thats the key when longing VIX, it will depend so much on how long it will take for the VIX to get near 10, it could be the movers will wait to see if TRUMP truly has a real chance in getting to the white house
That's kind of an interesting point. Traditionally, there has been some cyclical movement in the markets around elections, generally centered on uncertainty surrounding the outcome. Last mid-terms, we didn't get much movement, but this year may be entirely different from the perspective of the market, particularly since there's a lot of jawboning over the possibility of a brokered Republican convention, a circumstance that just hasn't come up in recent history (and something that -- the way Trump is trundling along -- is probably just wishful thinking on the Republican National Committee's part; frankly, I don't know why their wishful thinking would encompass, basically, "chaos" surrounding the selection of their nominee).

Hillary's already been able to motivate some movement in the biotech sector merely by talking about what she wants to do with prescription drug costs ... .

Right now, though, polls are showing Hillary over (fill in the blank) Republican candidate (most likely Trump), so I could understand some possible market weakness post-general election if she does win the general (even though, according to Bernie, she's "in Wall Street's pocket"). The reality is, though, that if she does win the general, status quo conditions are largely likely to remain intact given the current mix in the House and Senate, since Congress will block virtually every one of her progressive proposals, from free/cheaper higher education costs to modifications of the Affordable Care Act to expand low/no cost health insurance to "you basically name it" ... .

As usual, though, what "makes sense" and what the market does are two entirely different things ... . And unfortunately, we've got a long way to go until November.
Fireworks are fun ... as long as you don't blow your fingers off.
  • #12,351
  • Mar 13, 2016 8:19pm Mar 13, 2016 8:19pm
When volatility is low such as it is now in shorter term expiries, you have a couple of different choices when selling premium in broad-based market instruments like SPY, IWM, QQQ, and DIA : (a) sit on your hands, waiting for volatility to pop to a level such that less-than 45 DTE setups are more profitable; or (b) look farther out in time for volatility to "regularize" in more time-distant expiries. (Naturally, there is nothing to prevent you from continuing to put on premium selling setups in this environment, but they're subject to the vagaries of volatility expansion, which is the opposite of what you generally want when selling premium).

In this particular case, I'm looking to keep setups in queue in the event that this lower volatility hangs about for several weeks and, after looking at the implied volatility for April, May, and June, have concluded that implied volatility in SPY options doesn't begin to "regularize" until the June expiry: April's IV is 17.2%; May's, 18.7%; and June's, 19.9%, after which the IV%-age pretty much hangs around the 20% area for the remainder of the year. So, a June setup it is.

Here's the metrics:

June 17th 177/181/215/219 Iron Condor
Probability of Profit: 61%
Max Profit: $104/contract
Buying Power Effect: $296/contract

Unfortunately, this is quite a bit longer out in time than I generally like (45 DTE's the sweet spot), but I don't want a repeat of last year's mid-March to August low vol to slog through with index ETF positions, which largely forced me into earnings plays for my bread and butter ... .
Fireworks are fun ... as long as you don't blow your fingers off.
  • #12,352
  • Mar 13, 2016 8:22pm Mar 13, 2016 8:22pm
Quoting The Fool
{quote} BOJ & FOMC both dovish will open the door for total vix collapse, equity rallies to last Summer highs or above - last chance for this to go b4 the Jun FOMC/Brexit combo, bastards Know & will make it happen
Totally spaced on BOJ. Used to review the Econ calendar on Sundays to see what was up ... . Kind of got out of the habit.
Fireworks are fun ... as long as you don't blow your fingers off.
  • #12,353
  • Mar 13, 2016 9:38pm Mar 13, 2016 9:38pm
Jun FOMC is 6/15, Brexit referendum 6/23, RNC convention 7/18-21...............these, especially Brexit, all have big volatility inducing potential. We could see equities rally thru to May if the Mar FOMC is dovish....but then a big sell in May go away .... watching for entries on UVXY VXX maybe VIX....call flys and verts

....re: the RNC, could be very interesting....good possibility of Chicago '68 deja vu, or worse....
"If The Fool persists in his Folly he will become wise." - William Blake
  • #12,354
  • Mar 13, 2016 11:41pm Mar 13, 2016 11:41pm
Quoting The Fool
Hints from Heloise for buying butterflys: you want to buy cheap wings and sell the middle strike dear. The strikes at the x0's and x5's will have better volume and will therefore have better bid/ask spreads - you should always sell on a x0 or x5 strike. Conversely, you should buy the wings at strikes off the x0 and x5 strikes. The Jun $36/45/54 UVXY call fly below has a 58c mid. The $35/45/55 has a 90c mid. The downside is it will be harder to fill a fly with wings on the odd strikes....
...same Jun UVXY fly I am loading for 20c now.....
"If The Fool persists in his Folly he will become wise." - William Blake
  • #12,355
  • Mar 14, 2016 11:52am Mar 14, 2016 11:52am
I am just hanging on for the FOMC this week, may put something on early Wednesday for weekly gamble, won't have too much to say until after....seems like a long shot the Fed would hike now, but I suspect there is more of a chance than most of the fin press may surmise. We'll see......
"If The Fool persists in his Folly he will become wise." - William Blake
  • #12,356
  • Mar 14, 2016 11:54am Mar 14, 2016 11:54am
Holy Cow lookit GWPH, I might have to buy a put....
"If The Fool persists in his Folly he will become wise." - William Blake
  • #12,357
  • Mar 14, 2016 12:18pm Mar 14, 2016 12:18pm
Quoting The Fool
Holy Cow lookit GWPH, I might have to buy a put....
an Apr $70/$55 bear put spread for $2.00.....?
"If The Fool persists in his Folly he will become wise." - William Blake
  • #12,358
  • Mar 14, 2016 12:43pm Mar 14, 2016 12:43pm
Quoting The Fool
an Apr $70/$55 bear put spread for $2.00.....?
...filled a 1-lot, couldn't resist....
"If The Fool persists in his Folly he will become wise." - William Blake
  • #12,359
  • Mar 14, 2016 4:01pm Mar 14, 2016 4:01pm
Quoting ZebraSquirl
When volatility is low such as it is now in shorter term expiries, you have a couple of different choices when selling premium in broad-based market instruments like SPY, IWM, QQQ, and DIA : (a) sit on your hands, waiting for volatility to pop to a level such that less-than 45 DTE setups are more profitable; or (b) look farther out in time for volatility to "regularize" in more time-distant expiries. (Naturally, there is nothing to prevent you from continuing to put on premium selling setups in this environment, but they're subject to the vagaries...
No fill on the June SPY iron condor ... .
Fireworks are fun ... as long as you don't blow your fingers off.
  • #12,360
  • Edited 5:23pm Mar 14, 2016 4:31pm | Edited 5:23pm
Filled my synthetic VXX covered call (VXX Sept 16th 14 long call/April 15th 21 short call) for a $593 debit ... .

For some reason, I got frisky and rolled out the April 15th 21 to the May 20th 21 for an additional .77 ($77 credit) ... .
Fireworks are fun ... as long as you don't blow your fingers off.
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