fuzzballl 7:15 am on Monday, August 8, 2016

NUGT…back on track

Sold NUGT AUG 12 2016 170.0 Call @ 3.00

Paired with this week’s 155 put. Back in the routine now…selling a fairly aggressive strangle in this week and next week. That allows a 2 week rollout of the current week if needed and still collecting big theta while only requiring small margin.

fuzzballl 7:41 am on Monday, August 8, 2016

This is my strateegery. Seems to be working especially during a big move. Much less stressful vs having more contracts. If buying power isn’t a factor then more contracts seems like the way to go. If buying power is a concern (mine is during a huge move) then selling closer to the money seems like the way to go.

Meat of the segment starts at 7:00…

https://www.tastytrade.com/tt/shows/market-measures/episodes/scaling-increase-contracts-or-delta-08-03-2016

Sometimes I’ll use a hybrid of both strateegeries…initially sell delta 16 strangles and then eventually roll the unthreatened side to delta 30 for additional premium.
- vxxkelly 8:07 am on Monday, August 8, 2016
  
  I’ve seen you mention the 30 delta before and I often look at $NUGT to see where the 30 delta strike is at. It always seems waaay to close to the money for me given how far this thing is capable of moving. If it works, keep doing it. My strategy has been to stay far from the money, sell a few more contracts total, balance the puts and calls so that Delta is fairly neutralized but keep the time frame very short. My current Delta is only 6 and my closest position is still more than $40 OOTM (this weeks $120 put). Have no open positions past Aug 26. Looking for an opportunity soon to do something Sept 2, likely a $90 to $100 put for a start then add a “free” call if $NUGT gets back near $170/$175 area.
  - fuzzballl 8:59 am on Monday, August 8, 2016
    
    Absolutely a great way to do it…love it! (I do it all the time too). In fact, the TT research showed that selling wider gives a greater probability of profit and usually a higher actual dollar return…while giving up some return on capital. Having plenty of cushion in the account allows you to ride out the big moves of course. That’s why they say if buying power isn’t a problem then that’s the way to go.
    
    I got a little uncomfortable with the big swings in my account, so as an experiment started selling slightly closer and much smaller. The goal is to add 500-750 cash to my account each week while never having more than 4 contracts outstanding at any time. 1 strangle this week and 1 strangle next week. If it’s a fresh position I’ll start out with delta 16’s…(one standard deviation). Then, adjust accordingly as the trade progresses.
    
    Been meeting my goal for cash flow so far. What I really like is the margin required is only about 9 to 10 thousand for the 4 contracts…(TDA portfolio margin).
    
    Thanks for the post. I love these types of conversations. Gets me thinking. In fact, I’ll dig into the TOS analyze tab and check some stuff. Mainly, is selling too closely a bigger risk to margin than I think it is if we get a 70 or 80 point 3 day move? Or, am I overestimating my margin hit if I go wider and bigger size?
    - fuzzballl 10:14 am on Monday, August 8, 2016
      
      From the TOS analyze tab…basically backs up the TT data. If account is big enough to withstand margin and P&L swings then wider and more contracts the way to go. Selling just slightly tighter for similar premium and one third the size really reduces account swings but not quite as high of probability of expiring. Didn’t run the numbers for anything more than a 25 percent move but as we all know, anything is possible with this beast!
      
      ————————-
      Based on TDA portfolio margin
      ————————-
      
      3 Aug 19 120/220 strangles
      Premium received 630
      Margin Required 9800
      
      Margin required on 25 percent move:
      19300 up move
      13100 down move
      
      P&L on 25 percent move:
      -2100 up move
      -2300 down move
      
      ——————————————-
      
      1 Aug 19 135/195 strangle
      Premium received 620
      Margin required 4200
      
      Margin required on 25 percent move:
      7900 up move
      4900 down move
      
      P&L on 25 percent move:
      -1300 up move
      -1280 down move
      - Ramie 10:21 am on Monday, August 8, 2016
        
        Great info Fuzzy, thanks for posting!
      - vxxkelly 11:58 am on Monday, August 8, 2016
        
        Nice, that is very good info.

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