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Let's Trade Options

  • #13,761
  • Jun 27, 2016 9:47pm Jun 27, 2016 9:47pm
Quoting peterdrill
{quote} I was contemplating shorting TLT and as of now, maybe a wise ass move
Short interest ratio 1.7 days
  • #13,762
  • Jun 27, 2016 10:00pm Jun 27, 2016 10:00pm
Quoting peterdrill
I was contemplating shorting TLT and as of now, maybe a wise ass move
I will be watching what happens overnight & prolly load that trade for a dime.
"If The Fool persists in his Folly he will become wise." - William Blake
  • #13,763
  • Jun 27, 2016 10:03pm Jun 27, 2016 10:03pm
if it doesn't do so well this week, it could become the long $133 put for the following week - a trip to $130 on that would pay ~$3.00, not bad for a 10c fill.....dreaming....
Attached Image (click to enlarge)
Click to Enlarge Name: 2016-06-27_2201tlt3.png Size: 78 KB
"If The Fool persists in his Folly he will become wise." - William Blake
  • #13,764
  • Jun 27, 2016 10:08pm Jun 27, 2016 10:08pm
Quoting The Fool
{quote}...WHAT, so SPX options were not more expensive today, with /ES down >2%, or it just did not matter because the massive load of /VX options bought last week were still selling off today? Or, in other words, the ^VIX is a Fart? And now the inevitable BTFD?https://www.youtube.com/watch?v=xmWeCEIpEVI

There are a few things at play here. First VIX is made up of the 30 day expected volatility. So it depends how many days into the month we are for the % of front month and back month prices that make up the VIX. With 7 days to it flips off that month and goes to the next month.
Actually it doesn't matter about /ES it uses SPX to calculate the options. They are very close but can be differences. So use the % change in SPX for calculations as /ES can swing wildly after hours. But still keep an eye on it as it does get used by other marhets as a hedge
It uses prices from Puts and Calls on over 100 price points so yes VIX can drop when SPX drops. It is only 80% correlated. Options are the same as any stock when it comes to supply and demand. the demand went down today so price went down so the ViX went down. Also VXX can go in the opposite direction of VIX 20% of the time because of the way it is calculated
So why did demand go down? Several possible reasons which I alluded to earlier, I don't know the exact reason, if I did I would be very rich. But I do know what the vix curve looks like, that was the hint I needed to decide on what to do today
By looking at the curve I correctly predicted what would happen (or maybe just lucky because you always have a 50% of predicting direction)
  • #13,765
  • Jun 27, 2016 10:38pm Jun 27, 2016 10:38pm
Quoting The Fool
Sherpa, thank you for dropping knowledge about the ^VIX up in here. I hope you will continue to do so. Maybe post a pic of this mysterious "vix curve" you speak of, and show how you use the ^VIX in your trading?
The VIX curve is not mysterious at all and is quite well known. It is how you tell if we are in Contango or Backwardation and to what degree as well as what the far months 4-7 are doing is important

Just goto http://vixcentral.com he has an awsome free site that shows the VIX curve. Look at how shallow it is compared to other historical days when the market dropped. That is the signal that something different is going on.
  • #13,766
  • Jun 28, 2016 6:57am Jun 28, 2016 6:57am
Quoting peterdrill
{quote} I was contemplating shorting TLT and as of now, maybe a wise ass move
I'm looking at both TLT short and TBT long ... . From a premium selling standpoint, both kinda suck, but it's like a bread and butter trade ... .
Fireworks are fun ... as long as you don't blow your fingers off.
  • #13,767
  • Jun 28, 2016 6:58am Jun 28, 2016 6:58am
Quoting Sherpa
{quote} The VIX curve is not mysterious at all and is quite well known. It is how you tell if we are in Contango or Backwardation and to what degree as well as what the far months 4-7 are doing is important Just goto http://vixcentral.com he has an awsome free site that shows the VIX curve. Look at how shallow it is compared to other historical days when the market dropped. That is the signal that something different is going on.
That web site's a little time saver if you like to look at back month premium, backwardation, and contango ... . Otherwise, you have to toggle through the chains, which is, like, work ... .
Fireworks are fun ... as long as you don't blow your fingers off.
  • #13,768
  • Jun 28, 2016 7:03am Jun 28, 2016 7:03am
Sold NDX Aug 5th 3825/3850/4425/4450 iron condor for $830/contract credit.

Metrics:

POP%: 63%
P50: 74%
Max Profit: $830/contract
Max Loss/Buying Power Effect: $1670/contract
Theta: 16
Delta: -1.69

Notes: At open, the mid was $820, so I set up my order to fill at $830 and was going to do a little "price discovery" on it. Got up for a second to get some coffee, and it filled at $830. Probably could have gotten a little more ... . (Shrugs). Will look to peel it off at 50% max profit. Post-Brexit, moving into "settle to cash," "no assignment" risk instruments ... . Fewer headaches, less anxiety ... .
Fireworks are fun ... as long as you don't blow your fingers off.
  • #13,769
  • Jun 28, 2016 7:08am Jun 28, 2016 7:08am
This is an interesting idea ... . Unfortunately, it involves buying/selling SVXY outright: https://www.tradingview.com/chart/SV...GI-PAYS-AGAIN/
Fireworks are fun ... as long as you don't blow your fingers off.
  • #13,770
  • Jun 28, 2016 7:49am Jun 28, 2016 7:49am
another V-bottom for SPY....how fast can it boogie back to $210+?...end of next week not surprise me....and then, range top....omg I am having deja vu before it happens...precognitive deja vu....diddly du vu viddly de ja I am about to have a Flanders meltdown...no but will the spoos break out in July?
"If The Fool persists in his Folly he will become wise." - William Blake
  • #13,771
  • Jun 28, 2016 7:54am Jun 28, 2016 7:54am
Quoting peterdrill
{quote} Short interest ratio 1.7 days
I meant to add one little critique to the TastyTrade/Dough stuff ... . And that involves POP% and "TROC." Both of these metrics are fine for what they are, but, really, just show me the fucking money in the old-fashioned P&L way that everyone's used to looking at ... . If premium selling is the greatest thing since toast, then I think you could at least show me the actual ROC for these guys ... . "TROC," as it is defined by Dough, https://support.dough.com/hc/en-us/a...-Capital-TROC-, actually says zero, nada, zilch about actual profit; like POP %-age, it represents a "possible outcome" metric ... . I'd like to make money on "possible outcomes," but this is the real world, and money is made on "actual outcomes" ... .

So, when you see a TROC of 20%, that doesn't mean that trader's making 20% over a particular period of time; it means that his or her current setups have the "potential" to return 20% ... . Naturally, this is somewhat useful in examining the profit potential of a particular setup or your entire portfolio, but beyond that, I don't think it gives you a good idea of what returns you should expect over time, and more than a few people think that particular metric -- actual profits -- is, well, at least a little bit important ... .
Fireworks are fun ... as long as you don't blow your fingers off.
  • #13,772
  • Jun 28, 2016 8:02am Jun 28, 2016 8:02am
Quoting ZebraSquirl
-- actual profits -- is, well, at least a little bit important ... .
that's what I like - pwofits....I never look at the POP metric, there seems to just be too many moving variables - time, all the Greeks, the u/l - the POP has to be changing by the hour....
"If The Fool persists in his Folly he will become wise." - William Blake
  • #13,773
  • Jun 28, 2016 8:05am Jun 28, 2016 8:05am
Quoting The Fool
I am about to have a Flanders meltdown...no but will the spoos break out in July?
something tells me. "not this time" - but I am looking at SPY Jul 15 call verts, the $209/$210 is a dime....maybe a diagonal....
"If The Fool persists in his Folly he will become wise." - William Blake
  • #13,774
  • Jun 28, 2016 8:09am Jun 28, 2016 8:09am
Quoting The Fool
{quote}that's what I like - pwofits....I never look at the POP metric, there seems to just be too many moving variables - time, all the Greeks, the u/l - the POP has to be changing by the hour....
POP%, TROC, theta, delta -- all that fun stuff, it's only good at the moment the trade goes on, after which price moves, IV changes, yada yada ... . Used to be somewhat religious about that 70%+ POP%. Now I'm more about 1/3rd the width of wings in credit; the POP may be less than 70%, but anything less than 1/3rd the width of the wings isn't worth it generally ... .
Fireworks are fun ... as long as you don't blow your fingers off.
  • #13,775
  • Jun 28, 2016 8:11am Jun 28, 2016 8:11am
Quoting The Fool
another V-bottom for SPY....how fast can it boogie back to $210+?...end of next week not surprise me....and then, range top....omg I am having deja vu before it happens...precognitive deja vu....diddly du vu viddly de ja I am about to have a Flanders meltdown...no but will the spoos break out in July?
... and then back to the summertime, premium sellin' blues ... .
Fireworks are fun ... as long as you don't blow your fingers off.
  • #13,776
  • Jun 28, 2016 8:19am Jun 28, 2016 8:19am
Pre-Brexit: 20 setups on. Post-Brexit: 5 ... . I don't want to pile back in all at once, but want to disperse risk/setups over time, and that takes time ... . Just hoping the IV sticks around long enough for me to take advantage ... . Will be somewhat crabby if it doesn't ... .
Fireworks are fun ... as long as you don't blow your fingers off.
  • #13,777
  • Jun 28, 2016 8:21am Jun 28, 2016 8:21am
Quoting ZebraSquirl
... and then back to the summertime, premium sellin' blues ... .
....yeah, maybe....there are still some vol wild cards hidden in the deck, though....maybe the RNC Convention will get crazy, maybe crazy Olympics, maybe a Zika outbreak or two, some tweets from the cracking Eurozone, maybe a rough earnings season....or not, ....btfd forever
"If The Fool persists in his Folly he will become wise." - William Blake
  • #13,778
  • Jun 28, 2016 9:50am Jun 28, 2016 9:50am
me in nothing new - no SPY longs, not TLT shorts....still have lots of VXX spreads, quite a bit coming off this Friday. Almost went out on most of them this morning, but maybe there is another vol gasp in store.....prolly I will regret no taking small profits. End month/end quarter, could be some big moves to close the week....
"If The Fool persists in his Folly he will become wise." - William Blake
  • #13,779
  • Jun 28, 2016 10:10am Jun 28, 2016 10:10am
Quoting The Fool
{quote}....yeah, maybe....there are still some vol wild cards hidden in the deck, though....maybe the RNC Convention will get crazy, maybe crazy Olympics, maybe a Zika outbreak or two, some tweets from the cracking Eurozone, maybe a rough earnings season....or not, ....btfd forever
hurricanes, asteroids, heat waves, Bigfoot kidnaps Nick Cage, ....gotta be something out there.....
"If The Fool persists in his Folly he will become wise." - William Blake
  • #13,780
  • Jun 28, 2016 11:11am Jun 28, 2016 11:11am
Quoting Sherpa
.... Also VXX can go in the opposite direction of VIX 20% of the time because of the way it is calculated ...
Absolutely.
C.G. was right yesterday, these divergences often means bounce or drop, when market and VIX do not go as usual. Yesterday - VIX was down, but VXX and UVXY was up, since their calculation comes from VIX futures. Contango imo, is the main reason why they erode over time, and why shorting vol spikes AFTER they happened, is always a better play than chasing it on the long side. VIX futures are in contango most of the time. Not many people have the stomach to short a enourmous UVXY spike, me incuded, but you can always go long XIV, or SVXY instead.
Hope is dangerous in this game.
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