Let's Trade Options | Page 654 | Forex Factory

Options

Go to
Permalinks
Print Thread

Similar Threads

BELLA SYSTEM. Let's try it, let's improve it! 118 replies

Let's Trade The News V 0.4 ! 479 replies

Any Options, Bull Options & Option Bit 39 replies

Let's Trade The News! 46 replies

Let a trade develop? 17 replies

Attachments: Let's Trade Options
Exit Attachments

Let's Trade Options

  • #13,061
  • May 22, 2016 12:39pm May 22, 2016 12:39pm
You get slightly more bang for your buck with the RUT "classic" due its higher implied volatility (there isn't a July 8th expiry yet, so the comparison isn't quite precise); you get $355 for a $10 wide with a $645 buying power effect:

Attached Image (click to enlarge)
Click to Enlarge Name: RUT Classic.jpg Size: 134 KB


At some point, you have to transition to these larger instruments over things like IWM, QQQ, and SPY unless you want to just keep increasing the number of contracts you use (which result in higher fees/commissions). Widening the wings in a SPY IC to scale the trade to your account/risk tolerance to get more "bang" only goes so far, since the long options start to get "too cheap" the wider you go with your spreads and/or wings, making the exit from a wing for which the long option has gone "no bid" a hassle (you basically have to exit the short option first and allow the long to expire worthless).
Fireworks are fun ... as long as you don't blow your fingers off.
  • #13,062
  • May 22, 2016 8:50pm May 22, 2016 8:50pm
oh boy, time to get worked up for another doji week....woo
"If The Fool persists in his Folly he will become wise." - William Blake
  • #13,063
  • May 22, 2016 9:11pm May 22, 2016 9:11pm
at least commodotiddies still move sometimes.....if you live long enough...
Attached Image (click to enlarge)
Click to Enlarge Name: 2016-05-22_1909swn.png Size: 69 KB
"If The Fool persists in his Folly he will become wise." - William Blake
  • #13,064
  • May 22, 2016 9:15pm May 22, 2016 9:15pm
Current Brexit pollage. 54% stay; 46% leave. http://whatukthinks.org/eu/opinion-polls/poll-of-polls/

FOMC Rate Decision: Now 26% for another whopping 25 bps increase in June. http://www.cmegroup.com/trading/inte...n-to-fomc.html

Clinton vs. Trump pollage: Clinton 43.6 vs. Trump 42.0. http://elections.huffingtonpost.com/...ump-vs-clinton
Fireworks are fun ... as long as you don't blow your fingers off.
  • #13,065
  • May 22, 2016 9:20pm May 22, 2016 9:20pm
Quoting The Fool
oh boy, time to get worked up for another doji week....woo
Beginning to smell like "last summer" which involved a 100 handle breadth between 204 and 214. Actually, this one's smelling worse with a potential top at 211 and a bottom at 204 ... . Early days, but I'm fully prepared to scream if I have to milk >90 DTE index setups ... .
Fireworks are fun ... as long as you don't blow your fingers off.
  • #13,066
  • May 22, 2016 9:24pm May 22, 2016 9:24pm
the conventional pundit wisdom would be: if the Brexit polls are looking like a sure thing for "stay", everything else being m/l equal, the June FOMC could be more of a "go"....
"If The Fool persists in his Folly he will become wise." - William Blake
  • #13,067
  • May 22, 2016 9:34pm May 22, 2016 9:34pm
Quoting The Fool
at least commodotiddies still move sometimes.....if you live long enough... {image}
I bailed on the vast majority of my beaten down commodity covered call setups that I set up in the last quarter of 2015 (most of them in mid-April on dollar weakness), thinking that they played themselves out (FCX (copper), X (steel), CHK (natty gas), AA (aluminum)) ... . Jury's still out on whether I bailed too early or bailed at just the right time. As it was, I felt I had to hang on to them way longer than I like to play and ride through a bit of pain on some (CHK, a bumpy ride ... ).
Fireworks are fun ... as long as you don't blow your fingers off.
  • #13,068
  • May 22, 2016 9:36pm May 22, 2016 9:36pm
natgas definitely has a higher future, just comes down to how much time you want to spend waiting....
"If The Fool persists in his Folly he will become wise." - William Blake
  • #13,069
  • May 22, 2016 9:41pm May 22, 2016 9:41pm
Quoting The Fool
the conventional pundit wisdom would be: if the Brexit polls are looking like a sure thing for "stay", everything else being m/l equal, the June FOMC could be more of a "go"....
It's not shaping up to be anything like the Scottish independence vote, which was literally a nail biter polling wise (neck and neck) up until the night of voting -- made for good trading both ways in Cable and the Euro on both the uncertainty and the relief. I could see some relief rally type bullshit in the European markets if it goes "remain" with spillover into the US, although if it becomes really clear that the vote's gonna be "remain" in the last 30 days or so we've got here, we could see that fact priced into the markets at some point ... .
Fireworks are fun ... as long as you don't blow your fingers off.
  • #13,070
  • May 22, 2016 9:48pm May 22, 2016 9:48pm
Quoting The Fool
natgas definitely has a higher future, just comes down to how much time you want to spend waiting....
UNG, my last Dec covered call straggler ... . My current cost basis is $8.00/share, and I had to be a dumb ass and roll my short call all the way out to Oct, so I guess I'm in it until then unless we get some massive pop before then (yeah, right). F'ing thing owes me (El Niño owes me, actually, lol).

I can naturally try to continue to reduce cost basis my selling short strangles, etc., but I've looked at it a bunch of times, and it doesn't seem that worth it with IV the way it is right now ... .
Fireworks are fun ... as long as you don't blow your fingers off.
  • #13,071
  • May 22, 2016 9:56pm May 22, 2016 9:56pm
Quoting ZebraSquirl
All this stuff has led to more consistent results than I've frankly had with any other style of trading I've done, probably because the Black Scholes model which forms the basis for a lot of these set ups is statistical and probabilistic and lends itself to setups that you can do the exact same way every time ...
Thanks for your honest reply ZS. It's very encouraging. I think that the proper use of options can result in an edge, but they are often misunderstood by beginners - especially the concepts of volatility, mispricing and time decay. I also think it helps to be flexible as an option trader and switch between different strategies depending on the current market environment... but that assumes you're good at knowing what the current market environment actually is! It isn't easy, that's for sure, but I think it's worth the effort.

Quoting The Fool
{quote}zzzzzzzzzz....just shopping around cheap Jun & Jul VXX spreads to hedge all my long vol trades built up in the last months....put calendars mostly...I can't really imagine anything happening that could move the markets ever again....if anything is left of my accounts this Summer I am going to liquidate and take up a more wholesome hobby.....
I hope you're joking here, TF! Don't forget that markets don't stay within a range forever, and just when everyone thinks they will - when traders "fall asleep" as it were - is the moment they'll explode. Also the best time to be buying options if the volatility is low enough. The big problem of course is not knowing when that breakout will occur.

Been extra busy with rental-property work recently so haven't had time to digest the recent conversations much. Hope to later this week, especially that Apple idea. Keep up the good work guys and catch you later
You reap what you sow.
  • #13,072
  • May 22, 2016 10:19pm May 22, 2016 10:19pm
Quoting NorthTrader
I hope you're joking here, TF! Don't forget that markets don't stay within a range forever, and just when everyone thinks they will - when traders "fall asleep" as it were - is the moment they'll explode. Also the best time to be buying options if the volatility is low enough. The big problem of course is not knowing when that breakout will occur. .....
exactly, .... much of what I enter when premium is low, like it is now, has huge r:r, so....if I get a break and the market actually moves, I stand to profit very well. If it continues to flatline, I will have some hedges that will probably negate most if not all of my small-debit losses...
"If The Fool persists in his Folly he will become wise." - William Blake
  • #13,073
  • May 23, 2016 11:57am May 23, 2016 11:57am
working on yearly dojis.....SPY $205.xx is where 2014 ended....where 2015 ended....where we are now. The stock market is broken, paralyzed, and only responds to unscheduled, unadvertised, completely exogenous events.
"If The Fool persists in his Folly he will become wise." - William Blake
  • #13,074
  • May 23, 2016 3:10pm May 23, 2016 3:10pm
down 0.2% Mon, up 0.25% Tues, down 0.6% Wed, down 0.1% Thurs, up 0.6% Fri...etc, etc........the HFT bots only need a $1-2 range to make money on nanosecond "trades"....
"If The Fool persists in his Folly he will become wise." - William Blake
  • #13,075
  • May 23, 2016 7:15pm May 23, 2016 7:15pm
Quoting NorthTrader
{quote} Thanks for your honest reply ZS. It's very encouraging. I think that the proper use of options can result in an edge, but they are often misunderstood by beginners - especially the concepts of volatility, mispricing and time decay. I also think it helps to be flexible as an option trader and switch between different strategies depending on the current market environment... but that assumes you're good at knowing what the current market environment actually is! It isn't easy, that's for sure, but I think it's worth the effort. {quote} I hope...
It's good to find a "cycle" that works for you. I pretty much confine myself to premium selling setups (credit spreads, short strangles, and iron condors). By the time I layer those on in various instruments, it can make low vol strategies like calendars and diagonals problematic in the same instruments because I've got spreads splashed on all over the place and navigating through that the mess I've got on in SPY with a calendar or diagonal can influence the trade since you may have to "dodge" setups you already have on. This is the primary reason why I don't do many calendars or diagonals in things like SPY, IWM, DIA, or QQQ.

Evaluating current, broad market volatility conditions can largely be done by just looking at VIX. I regard 15 as the border between high and low volatility environments. Obviously, there's a broad spectrum of what constitutes "high volatility," but when I see 20, I basically think "we're there."

With individual instruments (e.g., EWZ, AAPL, GOOG), however, I look at two things: where IV is now and where that fits in historically (usually over the past 52 weeks). Generally, I want current IV to be above 50%, but I also want it to be high relative to where it's been over the past year (preferably, in the 70% percentile of the range it's experienced over the preceding 52 weeks). That's where you'll find the rich premium to be sold ... .
Fireworks are fun ... as long as you don't blow your fingers off.
  • #13,076
  • Edited 7:43pm May 23, 2016 7:30pm | Edited 7:43pm
Out of some stuff today:

GDX, June 17th 21.5/29 short strangle (put on for $106/contract credit 17 days ago): covered today for a $56 debit, so netted $50/contract.
GDX, June 17th 20/27 short strangle (put on for a $91/contract credit 14 days ago): covered today for a $49 debit, so netted $42/contract.
SPY June 17th 193/196/212/215 iron condor (put on for a $95/contract credit 18 days ago); covered today for a $49 debit, so netted $46/contract.

As usual, I had more on than I should sensibly have and figured I'd free up some buying power to work "brokens" while there's not much to do here premium selling wise ... .
Fireworks are fun ... as long as you don't blow your fingers off.
  • #13,077
  • May 23, 2016 7:41pm May 23, 2016 7:41pm
Rolled July 17th SPY 203/210 short call vert to July 1st 204/211 short call vertical for a $24/contract debit.

This is a left over spread from a May monthly iron condor that I rolled to June and am now rolling out again to slowly massage it away from current price, narrowing the spread if it's affordable to do so. I figured I would roll it here even though there are 25 odd days left until expiry, since -- if price moves up from here -- the roll could get more expensive and with not much premium selling to do, there is no time like the present to work on setups that are either currently problematic or may become so.

It cost a debit to roll, which I "financed" with the sale of a short put spread in the same expiry (a 195/198 short put vertical that I filled for $58/contract). In short, I'm net credit on the whole operation.

The roll also left me with an unpaired short put vertical in the June 17th expiry, so I also sold a June 17th 210/213 short call vertical for a $53 credit/contract. This will complete a June 17th expiry iron condor, which I will take off at 50% max profit.

In the vast majority of cases where I'm doing a "one-off" (a single trade in an instrument), I'll keep track of everything paid or received in credit for rolls, the selling of oppositional sides to finance, etc., so that I can see what my "scratch" or "breakeven" point is for the trade and then look at taking it off there ... . With so many spreads on in SPY, though, I basically look to take anything that's been rolled and look to take it off at near max profit if I can ... .
Fireworks are fun ... as long as you don't blow your fingers off.
  • #13,078
  • May 23, 2016 7:46pm May 23, 2016 7:46pm
Quoting ZebraSquirl
One of the last workable earnings plays this season: BBY announces earnings on 5/24 (Tuesday) before market open, so look to put on a play shortly before Monday's NY close to take advantage of the implied volatility crush that commonly occurs post-earnings announcement. Here's the preliminary setup, since price may move during the NY session, requiring slight adjustment of the strikes: BBY June 3rd 29.5/35 short strangle Probability of Profit: 71% Max Profit: $104/contract Max Loss/Buying Power Effect: Undefined/~$371/contract Note: Look to take...
As usual, the options prices in existence at Friday close weren't there on Monday open, so I couldn't get a fill for more than a 1.00, and I wasn't going to chase price ... .
Fireworks are fun ... as long as you don't blow your fingers off.
  • #13,079
  • Edited 9:02pm May 23, 2016 8:29pm | Edited 9:02pm
STILL rolling down long legs of Jun UVXY bull call verts....leaving short legs alone until (hahaha) we get some juice....looking like $24/$45 average if ^vix dips again tomorrow (why wouldn't it?)......that's >$2k/contract on a big pop but I'm runnin outta time.....no faith the bears exist any more.....
"If The Fool persists in his Folly he will become wise." - William Blake
  • #13,080
  • May 24, 2016 1:31am May 24, 2016 1:31am
Quoting ZebraSquirl
{quote} It's good to find a "cycle" that works for you. I pretty much confine myself to premium selling setups (credit spreads, short strangles, and iron condors)...
Funny you should say that... I was just reading about Karen the Supertrader last night on tastytrade and how her strategy slowly evolved into simply selling strangles on the indices. Amazing! There are a few videos about her too, but to be honest I'm not enjoying the videos much on tastytrade. The presenters seem to waffle on too much before getting to the point... I'm sure they could condense a 15 minute video into 5 if they tried! Maybe that's just me though, and I shouldn't complain because they're offering such a great educational resource for free.

Anyway, selling strangles sounds good but I should probably gain experience in safer strategies before going down that route. I'd hate to be short a naked put in a stock market crash! Also it doesn't really work in low-volatility conditions (when premiums are low), as you said. It might even be better buying strangles at the moment?

By the way, I've noticed you're explaining your trades in some detail these days (TF too). I don't know if that's for the benefit of beginners like me or if you've always done that, but just wanted to say I really appreciate it. Writing on forums takes time and effort, for sure. Thanks!
You reap what you sow.
11 traders viewing now