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Let's Trade Options

  • #13,081
  • May 24, 2016 12:02am May 24, 2016 12:02am
"remain" camp of old men looking strong....June swoon of a Brexit win may never materialize, and I am just trying to cover my ass on long vol trades now. OPEC meeting in a couple weeks may move the markets?......this week US GDP and Yellen on tap for Friday....perhaps JY will make a little hawk noise? I doubts it.....

http://www.reuters.com/article/us-br...-idUSKCN0YE2MD
"If The Fool persists in his Folly he will become wise." - William Blake
  • #13,082
  • May 24, 2016 12:11am May 24, 2016 12:11am
Quoting NorthTrader
Anyway, selling strangles sounds good but
selling naked options is a game for the well-heeled.....it helps to have portfolio margin and to be able to push way out on the curves....you need to be able to put on good size to compensate for relatively low returns per contract, and you can't have fat comms getting in the way.

Even selling defined risk credit spreads, the worst damage I have ever done to my accounts has been on those naked legs....
"If The Fool persists in his Folly he will become wise." - William Blake
  • #13,083
  • May 24, 2016 9:37am May 24, 2016 9:37am
Quoting ZebraSquirl
{quote} 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 Nio 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 ... .
I actually caught a little break here in my UNG position so that I can undo a little bit of stupidity (that rolling out of the short call to October). The Oct short call dipped enough in value for me to exit it at break even, so that I can see something far closer in time -- a July ... .
Fireworks are fun ... as long as you don't blow your fingers off.
  • #13,084
  • May 24, 2016 9:59am May 24, 2016 9:59am
Quoting The Fool
{quote}selling naked options is a game for the well-heeled.....it helps to have portfolio margin and to be able to push way out on the curves....you need to be able to put on good size to compensate for relatively low returns per contract, and you can't have fat comms getting in the way. Even selling defined risk credit spreads, the worst damage I have ever done to my accounts has been on those naked legs....
The pluses of the short strangles is their nimbleness with adjustments, rolling, etc. The minus is that they are far bigger buying power hogs than a defined risk setup, so you can't have as many on at a time as you can have, for example, comparable iron condors, so you just can't get the number of occurrences with all short strangles as you can with all iron condors (so you can't disperse risk as effectively if your account is too small to accommodate the buying power requirements of a short strangle).

That being said, they do have a place in my trading, and that is in underlyings that defined risk setups suck all the premium out of due to the underlying's price. It's really tough to get jack diddly out of a sub-$30 underlying with an iron condor because the long options suck profit potential out of the setup ... . That's when I use short strangles (e.g., the GDX short strangles shown above) or short straddles (e.g., the GPS short straddle). Managing those suckers is like anything else; you have to be mechanical and stay mechanical, know your "scratch" or breakeven point, and bail out of broken setups as quickly as possible at scratch and move on ... .

Karen the Super Trader is no lightweight; she has a multi-million dollar fund she manages, and she primarily trades SPX and RUT short strangles, which is more than manageable for an account of that size, particularly because her ROC goals are really quite conservative (1-3% per month). Even putting on relatively tame short strangles in SPY or IWM (1/10th the size of SPX and RUT, respectively) can be unmanageable for the small account trader ... .
Fireworks are fun ... as long as you don't blow your fingers off.
  • #13,085
  • May 24, 2016 10:43am May 24, 2016 10:43am
This up move has me dancing a little bit ... .

I had a SPY 208/212 short call vertical expiring Friday that was looking "honkey dorey" to exit at or near max profit ... . With this upmove, eh, not so much ... .

Because Tuesday's my housecleaning day on anything that's expiring this Friday (4 DTE), I rolled the spread up and out to the Jun 10th expiry, the 209/213, for an additional $40 credit while I could ... .

On the flip side of the coin, gold is finally moving "my way." I'm not big on trading gold, but got sucked into a GLD iron condor, the top side of which broke on the monstrous upmove we experienced. I was able to move the short call side out a couple of weeks for "fairly cheap" (as compared to when GLD was at the top of its arc) and improve the spread by a strike, rolling the June 17th 117/120 to the July 1st 118/121 for a $28 debit, which I then financed with a short put vertical in the same expiration (111/114) for a $51 credit, leaving me "net credit" on the deal. The "vacant" short call vert spot left by the roll (leaving an unmatched short put vert) was filled in with June 17th 121/124 for a $45/contract credit. I'll now look to close the June 17th iron condor at 50% max profit, and play the July 1st one "by ear."

I call this "leap frogging"; you roll out the broken spread of an iron condor for duration and strike improvement, leaving the oppositional wing in place, after which you sell a side in the spot vacated by the rolled spread. You simultaneously sell an oppositional side to match up with the side you've rolled, creating two iron condors. Naturally, this increases exposure to the underlying, but it's one way to work off a broken side, particularly in those instruments where you've got a core position on anyways (multiple expiries/multiple spreads).

With "one off" broken trades that I'm working off (trades in which I only have a single position for whatever reason (e.g., an earnings play)), I just generally look at the setup as it approaches expiration, close out the side approaching worthless, roll out the "broken" side, and then sell an oppositional side against for at least a credit that exceeds the cost of the roll ... . If I can do strike improvement in a "one off," I generally do that, too ... .
Fireworks are fun ... as long as you don't blow your fingers off.
  • #13,086
  • May 24, 2016 10:50am May 24, 2016 10:50am
Quoting The Fool
"remain" camp of old men looking strong....June swoon of a Brexit win may never materialize, and I am just trying to cover my ass on long vol trades now. OPEC meeting in a couple weeks may move the markets?......this week US GDP and Yellen on tap for Friday....perhaps JY will make a little hawk noise? I doubts it..... http://www.reuters.com/article/us-br...-idUSKCN0YE2MD
Aw, fuck ... . Was hoping it would remain closer for longer ... . Looks like "remain" is pulling away with less than 30 to go:

Attached Image (click to enlarge)
Click to Enlarge Name: Brexit Poll.jpg Size: 49 KB
Fireworks are fun ... as long as you don't blow your fingers off.
  • #13,087
  • May 24, 2016 11:46am May 24, 2016 11:46am
Quoting ZebraSquirl
Aw, fuck ... . Was hoping it would remain closer for longer ... . Looks like "remain" is pulling away with less than 30 to go:
The "remain" camp just put on a big fear media blitz, now I think I heard there has to be "radio silence" after this week up until the vote (?) .... anyway, anything can happen in 4 weeks.....
"If The Fool persists in his Folly he will become wise." - William Blake
  • #13,088
  • May 24, 2016 3:24pm May 24, 2016 3:24pm
man, what a mess....I am gonna have to hustle to figure my way outta this one....market in full breakout mode.....I heard Bill Gunderson on the raddio this morning, he said the SnP is going to 2,300 in the next 6 months. No Brexit, no Grexit, no Zika epidemic, .....rate hikes? rate hikes? the market loves rate hikes....no contested convention in Cleveland (Mitt Romney has much better hair than the Donald, tsk, tsk)......no heinous acts of terrorism, no bad news anywhere, nothing but blue sky, that's all I see.....
"If The Fool persists in his Folly he will become wise." - William Blake
  • #13,089
  • May 24, 2016 3:51pm May 24, 2016 3:51pm
Quoting The Fool
....market in full breakout mode...
the show must go on......with breakout mode here for a day or here to stay, I will shop DC's and similar trades for names with ER's in the 1-2 weeks following July opex - preferred meat there will be the Jul/Aug, 1-month kitties. I filled AAPL Jul/Aug DC today but I hadda push the calls to $110, and the DC cost me about $1.10.....(ended up with $80/$110 - something for everybody, just don't squat in the middle come July, cuz it's a tad too wide....)
"If The Fool persists in his Folly he will become wise." - William Blake
  • #13,090
  • May 24, 2016 4:06pm May 24, 2016 4:06pm
I've dried quite a bit of powder out in premium selling setups over the past few days, so I'm in fairly good shape to weather this up move ... . There isn't shit out there premium selling wise anyhow, especially if you're a picky ass mofo like me. I took a few hits in the proverbial oysters on that Valentine's Day Rally (still working some short call side off from that), so this bullshit ain't nothing new, but the last thing I want to do is spend all of my time working turd piles (the fun in that is "limited," to say the least).

It looks like that's just how it's going to be in the short term, and it's best to keep plenty of powder dry for doing that, since I know I'm going to be paying for some of these rolls ... . Ugh. (I can't say it enough). Ugh.
Fireworks are fun ... as long as you don't blow your fingers off.
  • #13,091
  • May 24, 2016 4:08pm May 24, 2016 4:08pm
Quoting The Fool
{quote} The "remain" camp just put on a big fear media blitz, now I think I heard there has to be "radio silence" after this week up until the vote (?) .... anyway, anything can happen in 4 weeks.....
Similar "blackout" pre-Scottish indie vote. The benefit of this is that it may add a touch of uncertainty, even though "remain" is ahead at this point.
Fireworks are fun ... as long as you don't blow your fingers off.
  • #13,092
  • May 24, 2016 5:17pm May 24, 2016 5:17pm
Quoting ZebraSquirl
"remain" is ahead at this point.
.."REMAIN" may well prevail, but it ain't looking too good in euro land..
"If The Fool persists in his Folly he will become wise." - William Blake
  • #13,093
  • May 24, 2016 6:36pm May 24, 2016 6:36pm
A short-term engagement trade while I work on "crap heaps":

SPX June 15th 2000/2010/2120/2130 iron condor

Metrics:

Probability of Profit: 63%
P50: 68%
Max Profit: $310/contract
Max Loss/Buying Power Effect: $690/contract
Theta: 10.61/contract
Delta: -2.98/contract

Notes: I generally don't like to put on a premium selling setup in a low volatility environment, but I'm collecting nearly 1/3rd the width of the wings here in credit and the theta (10.61) rates as "drop dead gorgeous sexy." Moreover, the "lay" of the strikes here is good from a charting aspect, with the short call slightly above the 2016 high and the short put below that pesky 2040 resistance ... .
Fireworks are fun ... as long as you don't blow your fingers off.
  • #13,094
  • Edited 2:17pm May 25, 2016 1:04pm | Edited 2:17pm
Quoting The Fool
man, what a mess....I am gonna have to hustle to figure my way outta this one....market in full breakout mode..........
my concern has been the large number of UVXY bull call verts that I have....these were all put on pretty cheap, typically around 10c on the $1 spread +/-.....but there are a lot of them and of course, UVXY has dropped to new lows....getting down into R/S territory @ $10....so I have been rolling the nearest long calls (Jun 17) down, down, down....down to $21 now...getting this down for <$0.05 on the $1, often for just 3c....but it's still costing me money.....but rolling down and massaging to get a multiple of 5....so if there is a 5:1 R/S, things might be cleaner and my options numbers will get reduced by 5x also......meanwhile keeping the short legs all out around $45, so if we get any vol in the next 3 weeks, I might still roll those down and cut loss or make a profit.....doing the same with VXX verts also......woe is me, this is what happens when a Fool gets married to a bias ("sell in May, go away")....but there is still some time. Otherwise, I have bullish oil trades and some (not enough) bullish SPY trades making money, so not a catastrophe, yet....
"If The Fool persists in his Folly he will become wise." - William Blake
  • #13,095
  • May 25, 2016 6:37pm May 25, 2016 6:37pm
Quoting ZebraSquirl
A short-term engagement trade while I work on "crap heaps": SPX June 15th 2000/2010/2120/2130 iron condor Metrics: Probability of Profit: 63% P50: 68% Max Profit: $310/contract Max Loss/Buying Power Effect: $690/contract Theta: 10.61/contract Delta: -2.98/contract Notes: I generally don't like to put on a premium selling setup in a low volatility environment, but I'm collecting nearly 1/3rd the width of the wings here in credit and the theta (10.61) rates as "drop dead gorgeous sexy." Moreover, the "lay" of the strikes here is good from a charting...
Filled this for a $305 credit ... .
Fireworks are fun ... as long as you don't blow your fingers off.
  • #13,096
  • May 25, 2016 6:39pm May 25, 2016 6:39pm
Not a single, fairly liquid underlying with IVR >70, IV>50 in the Dough "TastyTrade" grid ... . Might be an awfully long summer ... .
Fireworks are fun ... as long as you don't blow your fingers off.
  • #13,097
  • May 25, 2016 6:42pm May 25, 2016 6:42pm
Quoting The Fool
{quote}my concern has been the large number of UVXY bull call verts that I have....these were all put on pretty cheap, typically around 10c on the $1 spread +/-.....but there are a lot of them and of course, UVXY has dropped to new lows....getting down into R/S territory @ $10....so I have been rolling the nearest long calls (Jun 17) down, down, down....down to $21 now...getting this down for <$0.05 on the $1, often for just 3c....but it's still costing me money.....but rolling down and massaging to get a multiple of 5....so if there is a 5:1 R/S,...
Same boat, but to a lesser degree. One of the Poor Man's Covered Call VXX setup's long option is at 14; we're there ... . The back month for all of these is September, so the answer is to keeping rolling the short calls until there's a pop, but contango's eating away at this thing hard ... .
Fireworks are fun ... as long as you don't blow your fingers off.
  • #13,098
  • May 25, 2016 8:21pm May 25, 2016 8:21pm
Quoting ZebraSquirl
but contango's eating away at this thing hard ... .
..it's been a shit sandwich with all the ^vix derived options....a crowded trade with many traders pushing their luck on very plausible prospects for a June swoon (guilty).....then the Fedheads start singing hawk songs in the last week or so and the markets suck it up and ride the oil rally to a bull breakout? Well, it ain't over til the fat lady sings, June is still looming. All of the dynamite booby traps are still there, waiting......if we get a ^vix pop back towards 20, anytime between now and Jul opex, I am going to score the best set of trades of my career....if not, I'll keep struggling to save my ass...c'est la vie....
"If The Fool persists in his Folly he will become wise." - William Blake
  • #13,099
  • May 25, 2016 10:06pm May 25, 2016 10:06pm
it's a mad world

https://uk.finance.yahoo.com/news/bm...205845486.html
"If The Fool persists in his Folly he will become wise." - William Blake
  • #13,100
  • Edited 12:23am May 26, 2016 12:12am | Edited 12:23am
/cl about to take out $50, I am still holding USO $12 and $14 Jul long calls, leftovers from burned calendars....RIG I have Sept $14 & $15 calls.....PBR $7 and $8 calls for July.....PBR really got dumped over the last couple weeks, has been sliding even with the oil rally...
"If The Fool persists in his Folly he will become wise." - William Blake
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