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Let's Trade Options

  • #12,801
  • May 3, 2016 10:14am May 3, 2016 10:14am
looking for SPY to break Fridays low of $205.0x, latter week maybe we gum up pre-NFP. Perhaps we get a dose of the good news/bad news meme on Friday and a strong NFP gets a fear the Fed bear run rolling?
"If The Fool persists in his Folly he will become wise." - William Blake
  • #12,802
  • May 3, 2016 12:36pm May 3, 2016 12:36pm
Quoting The Fool
all I have to do in the coming week is watch AAPL bounce back a bit and settle on $95 by Friday........otherwise, I might start looking at ivr on some of the done APR ER names, maybe look out to Jun/July calendars for the next ER round....
AAPL bounce despite the market red day, I am trying to close with net $0.40 out on the 21c DC, should get it by the close if AAPL will pull back towards $95 even
"If The Fool persists in his Folly he will become wise." - William Blake
  • #12,803
  • May 3, 2016 4:16pm May 3, 2016 4:16pm
Quoting The Fool
{quote}AAPL bounce despite the market red day, I am trying to close with net $0.40 out on the 21c DC, should get it by the close if AAPL will pull back towards $95 even
done...AAPL DC entered for 21c & out @ 61c.....I fully expect the put spread (May1/May2 $95 puts - in for 12c out @ 61c) - fully expect now AAPL will dither around $95 and pin right on it on expiry day Friday and I will have left 50c or more on the table.....but Say la V....it takes stones to ride these time spreads down to the wire and I will have no regrets about taking the money & running
"If The Fool persists in his Folly he will become wise." - William Blake
  • #12,804
  • May 3, 2016 4:37pm May 3, 2016 4:37pm
Quoting The Fool
let's see....Monday, market up 0.75%, Tuesday, market down 0.75%....so these prolly won't fill at 15c....but great r:r and chance for a quick 2x or 3x on any modest vol spike
tough to make a Big Call, but if Friday NFP is a blow-out it could be enough to spook the market into sell-in-May mode ---- I am scrambling to find more equity to lay on crazyass long vol trades, might be close to my limit....
"If The Fool persists in his Folly he will become wise." - William Blake
  • #12,805
  • May 3, 2016 9:43pm May 3, 2016 9:43pm
my SPY May $212/215 bear calls vert about to come off for about 75% maxP.....I will prolly do Jun $211/$214 for $0.85 or maybe $210/213 for around $1.00 credit.....just need some red candle action tomorrow....
"If The Fool persists in his Folly he will become wise." - William Blake
  • #12,806
  • May 3, 2016 10:22pm May 3, 2016 10:22pm
super bear for a June swoon? maybe try the Jun/qtrly $185 calendar.....@38c offers a little better than 5:1 maxP.....b/e pretty good at around $198
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"If The Fool persists in his Folly he will become wise." - William Blake
  • #12,807
  • May 3, 2016 11:40pm May 3, 2016 11:40pm
Quoting The Fool
....@38c offers a little better than 5:1 maxP.....b/e pretty good at around $198
can you beat that with a straight put vert?....maxP 5:1 means you need to pay less than 20c for a $1 spread....the Jun $198/197 does the trick and has a b/e a little higher than the calendar, but, more better, has a maxP point at a much higher level, at about $193

...the moral: verts are better than time spreads, although time spreads have their uses....
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"If The Fool persists in his Folly he will become wise." - William Blake
  • #12,808
  • May 4, 2016 6:36pm May 4, 2016 6:36pm
Quoting The Fool
{quote}if UVXY keeps dropping, you might not do better on spreads, as the iv will drop, too.
Thought better of those of UVXY put spreads, in the end. Peeled them off today for scratch. Better to use the contango, in part, to your advantage by sticking to the call side for setups in VXX/UVXY. No sense in rowing against the tide down here ... .

* * *

Boredom's not a good reason to put on a trade, but it can be okay to throw an engagement trade on now and again while you're waiting for stuff to play out, as long as you go small:

Sold WFM May 13th 25.5/31 short strangle for $85/contract. I'll look to take it off at 50% max. (It moved a whopping .06 AH post announcement).
Fireworks are fun ... as long as you don't blow your fingers off.
  • #12,809
  • May 4, 2016 7:20pm May 4, 2016 7:20pm
Quoting ZebraSquirl
Thought better of those of UVXY put spreads, in the end. Peeled them off today for scratch. Better to use the contango, in part, to your advantage by sticking to the call side for setups in VXX/UVXY.
BETTER scratch than learning a hard lesson...tastytrade had a vid on it a day or so ago - why selling vix options doesn't work. There is a way to make your chances somewhat better on UVXY, I will show if I get something on that way.

Meanwhile, today I filled a Jun UVXY $26/$32 bull calls vert for 55c. Getting near my limit on these.....
"If The Fool persists in his Folly he will become wise." - William Blake
  • #12,810
  • May 4, 2016 7:46pm May 4, 2016 7:46pm
I tried to fill a Sep UVXY $18/19 bull call 50-lot for 15c, sat there....
"If The Fool persists in his Folly he will become wise." - William Blake
  • #12,811
  • May 4, 2016 8:10pm May 4, 2016 8:10pm
check the otm options skew on VIX....how do you exploit it?
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"If The Fool persists in his Folly he will become wise." - William Blake
  • #12,812
  • Edited 10:15pm May 4, 2016 9:10pm | Edited 10:15pm
if/when....no, let's be confident: WHEN the vix pops you could buy a cheap put vert to eliminate the tail risk of the original put fly
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"If The Fool persists in his Folly he will become wise." - William Blake
  • #12,813
  • May 4, 2016 10:39pm May 4, 2016 10:39pm
Quoting The Fool
{quote} BETTER scratch than learning a hard lesson...tastytrade had a vid on it a day or so ago - why selling vix options doesn't work. There is a way to make your chances somewhat better on UVXY, I will show if I get something on that way. Meanwhile, today I filled a Jun UVXY $26/$32 bull calls vert for 55c. Getting near my limit on these.....
Lol. Weird that you mention that ... . That WAS the reason I took those off. Lol.
Fireworks are fun ... as long as you don't blow your fingers off.
  • #12,814
  • May 4, 2016 10:49pm May 4, 2016 10:49pm
trading spreads I have found is a lot like playing chess - you need to see the board several moves ahead and anticipate your alternative moves. Every trade is potentially (ideally) correlated to every other trade....the time frame ranges from days to months....

Above I have been buying cheap flys while I know that one outcome is I may be able to break those flys and make verticals out of them, verts that will have very good r:r....if the verts don't look like they will work out, at least they are pretty wide and so I can roll down the short legs to get something back.

I am trying to play both sides of the market so I always have some trades that may get in good (or even stellar) profit. The object of the chess game is to minimize your losses and to win more than you lose. It takes some mental juggling, but the best options traders can run large books of trades while incurring only minimal losses.

If I am trading bw flys or diagonals - which have big tail risk, I am trying to think about where/when I can put on other trades economically to minimize or eliminate that risk...
"If The Fool persists in his Folly he will become wise." - William Blake
  • #12,815
  • May 4, 2016 11:18pm May 4, 2016 11:18pm
Quoting The Fool
I tried to fill a Sep UVXY $18/19 bull call 50-lot for 15c, sat there....
/ES &/CL on the rebound overnight, maybe we see US equities bounce Thursday and ^vix fall back. So I will reload this trade for 12c & cross fingers....while I'm at at, I will try to fill Dec $19/20 calls for 2c.....hey, you never know, sometimes this crazy shit will fill - you won't know unless you put it on.....
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"If The Fool persists in his Folly he will become wise." - William Blake
  • #12,816
  • May 5, 2016 12:33am May 5, 2016 12:33am
building the long vol equity dunghill & praying for a June swoon UVXY pop to $50+
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"If The Fool persists in his Folly he will become wise." - William Blake
  • #12,817
  • May 5, 2016 12:30pm May 5, 2016 12:30pm
Quoting The Fool
{quote}/ES &/CL on the rebound overnight, maybe we see US equities bounce Thursday and ^vix fall back. So I will reload this trade for 12c & cross fingers....while I'm at at, I will try to fill Dec $19/20 calls for 2c.....hey, you never know, sometimes this crazy shit will fill - you won't know unless you put it on.....
no fills on lotto tix.....both of those long-dated UVXY call verts are sitting at about a 20c mid.....15c about as much as I want to commit.....
"If The Fool persists in his Folly he will become wise." - William Blake
  • #12,818
  • May 5, 2016 6:35pm May 5, 2016 6:35pm
Quoting The Fool
trading spreads I have found is a lot like playing chess - you need to see the board several moves ahead and anticipate your alternative moves. Every trade is potentially (ideally) correlated to every other trade....the time frame ranges from days to months.... Above I have been buying cheap flys while I know that one outcome is I may be able to break those flys and make verticals out of them, verts that will have very good r:r....if the verts don't look like they will work out, at least they are pretty wide and so I can roll down the short legs...
It's a whole different game than trading spot, I can tell you that. Not to belittle trading spot or actual underlyings, but now that I look back at it, it's looking like that's checkers and that this is three-dimensional chess ... .
Fireworks are fun ... as long as you don't blow your fingers off.
  • #12,819
  • May 5, 2016 6:35pm May 5, 2016 6:35pm
Quoting ZebraSquirl
{quote} Thought better of those of UVXY put spreads, in the end. Peeled them off today for scratch. Better to use the contango, in part, to your advantage by sticking to the call side for setups in VXX/UVXY. No sense in rowing against the tide down here ... . * * * Boredom's not a good reason to put on a trade, but it can be okay to throw an engagement trade on now and again while you're waiting for stuff to play out, as long as you go small: Sold WFM May 13th 25.5/31 short strangle for $85/contract. I'll look to take it off at 50% max. (It moved...
In for $85 a contract, out this a.m. for $42 ... .
Fireworks are fun ... as long as you don't blow your fingers off.
  • #12,820
  • May 5, 2016 6:39pm May 5, 2016 6:39pm
Not that this is the greatest point at which to sell premium in SPY, but that's where my core positions are at (I think IV in either QQQ or IWM is a bit higher). With VIX at >15, I'm layering an IC on in June:

SPY June 17th 193/196/212/215 IC

Metrics:

Probability of Profit: 54%
P50: 71%
Max Profit: $100/contract
Max Loss/Buying Power Effect: $200/contract
Theta: 1.53/contract
Delta: -3.97

The overall probability of profit for the setup is quite low. However, the P50 -- the probability that the setup will reach 50% max profit sometime prior to expiry-- is 71%, which I'm more than satisfied with since I'm getting one-third the width of the wings for the setup. The other thing is that I already have several iron condors on in that expiry, so I can "mix and match" the short call spreads of one iron condor with the short put spreads of another to peel them off should I want to do that at some point ... .
Fireworks are fun ... as long as you don't blow your fingers off.
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