Taking advantage after the drop.
STO the /CL next week 45.5/55 strangle for 0.23. Plan to close or roll by Monday or Tuesday. The theta decays is huge 285 a day on 5 contracts.
Have not had time to post but this is good news, too good not to share.
Working on dispersion trading. Income trading plus directional kicks when opportunity is there.
Will update after the live trading session at the end of the month.
Hope everyone is doing/trading well.
The low volume march to infinity has triggered my adjustment level so I closed the CCS side of the 12/13 318/322 for a 0.83 loss. I am hoping for a pull back on Monday when people return but hoping has never made me any money.
Left the put side open, will close when it is down to 0.05 then loss will only be 0.20.
Following the new rules I opened the PCS side for 12/20 at the 304/301 strikes for 0.24 credit. Will stay one sided until there is a definitive change/reversal.
A rapid flush down I would back ratio.
Happy Thanksgiving Bistro’ers!
#spycraft v 6.1 12/13 291/295 and 318/322 IC
Have not added any the last 2 weeks. I am trying a full cycle before adding additional spreads. But what I have so far has proven what almost always happens with these. They are challenged in 1 direction only, in this case the upside. I have a profit but negligible ($49 on a 5 lot vs. 315 at expiration). The short strike is 318 for the 12/13 expiration.
So this is the decision point. Do I close the short calls and leave the puts open? Do I back ratio? Do I butterfly and cap losses to the upside? Or do I just sit on my hands and see if we eventually stay in the range and close for near full profit.
Here is my thought process. We can certainly keep grinding higher but if I back ratio and it stalls or reverses I basically lock in a loss at that point. If I close I lose on the calls but still have the puts making a few extra $. If I butterfly same as the back ratio, basically lock in a loss to one side.
So since I have not breached the short strike I will let it sit and decay and hope for flat or a little pull back. Then might be able to close early for a small profit.
But additional rules to putting these on, I will start them only one sided, then add the other side only at a definitive reversal. In the indexes the credit is generally higher on the put side and father OTM as well. That is something that has been persistent since 1987 black Monday (or was it Friday?). So there is more room and time to adjust to the put side anyway. Plus the market goes down faster than up so at that point a back ratio would make sense and likely give you a nice directional pop to the account.
Also will probably be going shorter time frame, looks like 10-21 DTE may be ideal as opposed to 28-45 DTE. I know the TT research shows 45 DTE ideal and it seems to be for naked options. But with spreads the decay is soooooooo slow it gives the market too much time to move.
Will update if I do anything or if it expires. Then will try the ladder one sided and will post as I open/close.
Anyone else has any ideas feel free to share? I know these can work, the math and probabilities are there, just need to avoid the big losses or convert losing trades to winners or flat.
FOMO, irrational exuberance, when are people going to learn buy low sell high or short high and buy low. Everyone piling in when the market is more expensive than it has ever been………
Bloomberg had something on the other day that said the smart money is already positioning for a pull back for what it is worth. But I am not going short until it is established.
Whats the famous quote, the market can be irrational longer than I can be solvent 🙂
Closed out the /ES 2690/2700 back ratio for 300 or a $3025 loss. Just means the market did not crash.
So I have been trying to figure out a cheaper way to do these but still get the 10% coverage for a 10% down move. I came up with a modified risk twist/unbalanced butterfly. Cost about half as much as the back ratio.
BTO the Mar 2020 /ES 2790/2780/2770 butterfly. Ratio is one 2790 sold, bought three 2780 and sold one 2770 for $1690. About half the cost of the back ratio. Still good coverage and could always tweak the ratio if the market really starts to move. So this will only cost about $6800 per year instead of 12k but the deductible stays about the same.
Here is the graph and just put his on 10 minutes ago so can probably do the same. For every 100k in the account I would do 1.
Rolled the 125 #jadelizard converted to a #fuzzy down to 95/95 strikes. Short option 15 DTE. When all cleared my cost basis is now 37.33. Need about 0.33 per week to break even and have until Jan 2022 to do it.
I am done with earnings. Too random and binary. 6 out of 9 of my earnings trades this year imploded even with some limited risk positions.
This one trade reduced my yearly profits by about 20% for the year even being only a 7% position in my portfolio.
Black swans are more common than the options price for.
Added the Dec 13 put side since we are just chopping for now. Now that I put the trade on watch the market move.
STO 296/292 CCS for 0.29. 5 contracts completing the IC with the calls at 318/322. 0.63 credit total.
Starter position this morning.
STO the Dec 13 318/322 CCS for 0.34 when the market opened lower.
You could do better now or move up a strike. At the time the short was at delta 15-16.
5 contracts so max risk around $1700 with commissions.
Will wait on adding put spread until a bigger pull back.
Plan is to add new positions each week and manage at 21 DTE or 50% profits, or big movement to the short strike whichever occurs first. If the short delta hits 30-32 would modify.
Version 6.1 or so.
Trying these again with a small account. Starting value around 6k. They work, the issue is controlling the 1 or 2 out of 10 that go against you and wipe out the gains on the other 8-9.
Here are the mechanics.
Start 28-45 DTE. Sell the 16 delta puts or calls then buy options 3-5 strikes outside that. Manage at 21 DTE or 50% profit, whichever is first.
Set up as ladder so add new positions each Thursday or Friday. As they are managed, roll or close.
Adjustments: back ratio works if you catch it early. The problem is it usually reverses then you lose some on the spread and the back ratio. But if you are going to back ratio I would do it when the delta of the short option doubled to 32.
Other options are convert to butterfly when it hits the short strike. You will still lose but will be much less and if you happen to get a pin then could make some money.
Final option is convert it to a diagonal or calendar. This depends on your outlook for the time the short option is in play.
Will also leg into iron condors depending on overall direction.
Nothing more complex than that.
Plan to start in 2 weeks when my current XBI puts expire in this account. Will post results monthly or so but will post the weekly trades as I open them.
Did not take my own advice, tried another earnings trade and now losing 6 out of 9. EXPE missed earnings by 0.60 and down over night by 17. Opened this morning down 31 or 22%. Had a #jadelizard at 125/144/145. Obviously the 125 are now way ITM.
Converted to a #fuzzy but will take a long time to make the loss back. Bought the 2022 125 put for 27.92 plus will use some more cash to roll my short put down and out.
Will let the call side expire worthless just to now spend any more money on the trade. This had been my biggest winner for the year. 1 night wiped out 11 months of gains on EXPE.