smasty 12:53 pm on Wednesday, June 27, 2018
Tags: Fundie ( 7 ), IRA ( 431 ), Undies ( 2 )

June 27 Sue Trades

I’ve got about 50 filled orders today on hedge rolls. If anyone is tracking details on a particular position, let me know.
My go-to strategy on these #Undies is to roll hedges to ATM for significant premium collection BUT reduce contracts sold. On BA I started with a 7×5 and rolled it to a 7×3 now. I realized I can collect a lot of premium doing that, but still have a risk graph that is friendly to an upside reversal.
That’s all I’m going to post due to vast quantity of orders today.

Sue

#fundie, #ira

fuzzballl 1:14 pm on Wednesday, June 27, 2018

Thanks Sue. I’ve been looking at that too as far as number of contracts to sell and what strike for the hedges. Was wondering how you were doing yours now. I’ll be selling quite a bit for next week tomorrow. All the roll downs yesterday have really helped as well.

Good luck!
fuzzballl 1:22 pm on Wednesday, June 27, 2018

BTW….looks like something as little as a 2 x 1 has a nice graph on a reversal. Thanks!
Jeff 1:37 pm on Wednesday, June 27, 2018

So you’re rolling to ATM short calls on the way down? How do you handle a face-melting reversal to the upside if that were to happen tomorrow and Friday?
- fuzzballl 1:55 pm on Wednesday, June 27, 2018
  
  From what I can tell so far, if you limit the number you sell to just a small percentage of the longs there’s no upside that can hurt you. By selling fewer but closer to the money you can actually get great weekly premium with little or no whipsaw risk (assuming there is still some value in the longs to help).
  - smasty 2:27 pm on Wednesday, June 27, 2018
    
    Hey guys. Fuzz—you nailed it. So prior to today, the way I was handling down moves on the time-ratio
    spreads (7×5 for example) was to roll the hedge down to around 25 delta, and add the 2 remaining contracts so it would be a 7×7 diagonal. What I found today though, is there is just not enough premium collection to really compensate for the drop. I immersed my brain in this yesterday, and found that if I roll to at-the-money I can pick up huge premium, but I will cut the number of contracts. I can get as much or more premium doing fewer contracts at the money, than more contracts out of the money. By doing a wider ratio spread (7×3 vs 7×5) I have a lot of uncovered long dated calls that play nice on an upside reversal. I use the risk graph to design how many I can sell and still have a generally upward risk graph to the upside. I’m sorry I didn’t take graph pics…
    Take a look at the pic. This is my real BABA position after the roll today. So you can see I’m at max loss after this roll, which is better than before. The blue line I drew in is just hand drawn, but gives you an idea of how to compare to a diagonal. Don’t know if that helps. BABA was a 3×2 that I rolled down 3 times this week. On the last roll I went to ATM with just 1 contract for next week. I still have two more rolls in it before the long expires. I’ve collected $1040 on BABA against the loss showing in the pic.
    - smasty 2:33 pm on Wednesday, June 27, 2018
      
      This isn’t a very good pic for showing the advantage, I’ll try to get some better pics next time. I did feel like this strategy was good for capping any further loss and providing an upside path on the violent reversal that’s coming 🙂 , where a diagonal might get blown out. This was one of the #Fundie test trades, which will be promptly trashed due to the tight timeframes they have. I really doubt this trade can be fully recovered, but I can maybe get a 75% recovery.
      - hcgdavis 4:22 pm on Wednesday, June 27, 2018
        
        75% recovery is much better than a 50-100% loss 🙂
fuzzballl 9:35 pm on Wednesday, June 27, 2018

Just came up with another reason to sell a smaller number more aggressively.

In an #IRA you’ll be able to double sell. If you’ve got some that are really safe for expiration just let ’em go and sell the next batch. You can’t do that when selling a full position each time. Save yourself 75-100 bucks every week for 80 weeks you start getting into some decent cash…LOL
- smasty 5:58 am on Thursday, June 28, 2018
  
  Oh yes, excellent!