Any option writers out there?

[Grinder]

nice discussion starter

Breads & Cereals: Traditional style IC on the XJO, approx 2-4mths out legging in via credit spreads, closing out before gamma takes effect. Never holding anywhere near expiry

Veggies & Fruit (The occational bias): As above but with ratioed wings either bullish/bearish skewed to one side, might even morph into a DD or calander if feeling overly healthy

Meat & Milk (Running scared): heavier wings on IC, pre-dominantly put side or an ATM put/call as a catastrophe stopper

Fats & sweets (Feely naughty): Load up on WTFOTM puts (lottery tics)

 

[cutz]

Hi Gary,

In a nutshell I mainly put on XJO credit spreads/iron condors, no more than 4 to 6 weeks out, sometimes trading in and out of the short positions. I’ve had a crack at the US market with SPY options but ironically I’m finding the ultra high liquidity/fast movements and 100 lot contracts hard to get used to, also being up late is a bit of a drag.

My other scheme is writing calls against my long term stock holdings doing whatever it takes to keep assignment at bay.

Forgot to mention, I removed some profits off the table with CSL stock last year so since then I’ve been writing naked puts on that underlying when the timing/stock price is appropriate. I’m also comfortable with ANZ bank naked puts ATM. I tend to use simple TA to determine my strikes i.e.(MACD/support&resistance) along with simple probability calculations.

 

[mazzatelli1000]

nice discussion starter

Breads & Cereals: Traditional style IC on the XJO, approx 2-4mths out legging in via credit spreads, closing out before gamma takes effect. Never holding anywhere near expiry

Agree
Like to diversify delta - and have bearish, bullish and sideways stuff on
Especially since late last year, the sideways stuff was difficult to manage

Sometimes have put on 1-2 week straddles on stocks that frequently exhibit fat tails, but IV has been too high for the liking of late.

Veggies & Fruit (The occational bias): As above but with ratioed wings either bullish/bearish skewed to one side, might even morph into a DD or calander if feeling overly healthy

ooooo....
risk taker --- "big swingin dick"

Will add skip-strike flies to this - sometimes initiated as a skip strike fly or adjusted into this position

Meat & Milk (Running scared): heavier wings on IC, pre-dominantly put side or an ATM put/call as a catastrophe stopper

Slingshots!!
Batman Spreads!!

I might regard this as bread and cereal in way, as tend to add extra long strikes in for added insurance

Will depend on technical and statistical analysis

BTW I thought Dairy products were a separate food group

Fats & sweets (Feely naughty): Load up on WTFOTM puts (lottery tics)

Prefer cheap straddles or left over long hedges from wingspreads or Diagonals after components to take money off the table

 

[mazzatelli1000]

Forgot to mention, I removed some profits off the table with CSL stock last year so since then I’ve been writing naked puts on that underlying when the timing/stock price is appropriate. I’m also comfortable with ANZ bank naked puts ATM. I tend to use simple TA to determine my strikes i.e.(MACD/support&resistance) along with simple probability calculations.

Question/Clarification

What does previous profits have to do with writing naked puts now?

Back for my cousins wedding so gonna raise hell on option threads for the weekend

 

[cutz]

Question/Clarification

What does previous profits have to do with writing naked puts now?

Back for my cousins wedding so gonna raise hell on option threads for the weekend

Hi Mazza,

Last year I needed to get my level of gearing down to sleeping level, CSL at the time looked like it was topping out at around the $40 level, so I sold a portion of my holding freeing up cash, as I was selling calls against CSL , cashing in and selling puts and calls seemed the obvious choice.

I pretty much still wanted to stay fully married to the stock whilst freeing up cash, 30/32 seems to be a reasonable strike for puts obviously higher for calls.

 

[jackson8]

I like your approach, with regards to profit taking

RE: holding til expiration
Try this - ask yourself "Would I sell this put/call/spread at today's prices?"
If the answer is no, maybe it is time to close out and look to short something else for beefier premium

'''''''looking back over my trades have closed out 90% before exp . then sit back and wait for another opportunity elsewhere'''''''''''''

If I remember right, you're with Commsec and the commissions hurt
I hope that doesn't deter you from closing out positions and taking profits/minimizing losses

''''''''''''commissions are high especially when i am only dealing in 2-3 contracts at a time'''''''''''


Personally I like to sleep at night, Ill take the insurance
IMO Like any other business, there can be unforeseen circumstances that occur despite all the precautions you take

''''''' better to be safe than sorry i suppose''''''''''''

Why not put on a larger size of credit spreads?

Is it because you are worried about the short strike getting ITM & being assigned?
I ask because when I was newish (not implying you don't know anything) I used to do the calcs
E.g. CBA = $30, 10 contracts would mean 10,000 shares - so total to cover is $300,000 ---- F**K ME!!!

That shouldn't be a worry, if you understand about early exercise and adjusting

'''''''''''ahha the adjusting.......thats what i am trying to learn about now have been waiting on some of Wayne's posts but they have not been forthcoming'''''''''''''

May I ask the reasoning behind selling further out?
Is it just to obtain more premium?

'''''''''''thats right but i have now changed my plan of attack and only sell month out or less''''''''''''

There was a thread started by WayneL about how he would analyze an index write.

''''''''''again have been studying index writes and occasionally dip my toes in ''''''''''


it is good to hear back from you all on this thread , have only been trading options for a few months now, basically self taught which i believe is the best way to go and i try to read up as much as i can.

regards Gary

 

[Grinder]

Agree
Like to diversify delta - and have bearish, bullish and sideways stuff on
Especially since late last year, the sideways stuff was difficult to manage

tell me about it!

Sometimes have put on 1-2 week straddles on stocks that frequently exhibit fat tails, but IV has been too high for the liking of late

much better now for that play.

ooooo....
risk taker --- "big swingin dick"

Will add skip-strike flies to this - sometimes initiated as a skip strike fly or adjusted into this position

haven't liked the DD of late, the ratio puts served me well to reduce risk instead.

Slingshots!!
Batman Spreads!!

Finding the slingys alittle costly, tried setting one up as a reverse sling to the downside but the numbers did'nt add up.

I might regard this as bread and cereal in way, as tend to add extra long strikes in for added insurance

Yep, it's been a B&B over last the few months

Will depend on technical and statistical analysis

BTW I thought Dairy products were a separate food group

yeah, but their positioning is the same.

Prefer cheap straddles or left over long hedges from wingspreads or Diagonals after components to take money off the table

Like your thinking.

 

[Grinder]

Jackson,

Self taught also, the adjustment stuff will come over time the more you play around with modeling tools, excell, payoffs.. whatever you use. The more you play with different scenarios the better you'll get at managing the adjustments.

 

[mazzatelli1000]

Hi Mazza,

Last year I needed to get my level of gearing down to sleeping level, CSL at the time looked like it was topping out at around the $40 level, so I sold a portion of my holding freeing up cash, as I was selling calls against CSL , cashing in and selling puts and calls seemed the obvious choice.

I pretty much still wanted to stay fully married to the stock whilst freeing up cash, 30/32 seems to be a reasonable strike for puts obviously higher for calls.

Good work!!!
I was just going to point out that past profits shouldn't allow you to get reckless with current trades
But you have your stuff in control

Looking good!!

 

[sails]

Wow, ASF has had some cool discussions --- I like the clash of the titans on the SPI trading thread.

BTW haven't seen any WayneL activity ..... sleeping in his coffin?? :batman:
Im not up to speed on this forum!!...

Good to see you back, Mazza! Are you back from o/seas yet?
EDIT: just saw your earlier post that you're back for a wedding ...

Yes, Wayne seems to have disappeared again. Think I remember reading a post about him moving - could explain the current silence. Hopefully he will be back...

 

[mazzatelli1000]

''''''' better to be safe than sorry i suppose''''''''''''

I guess you won't be scared sh!tless, until the black swan hits you
I've seen plenty of new option traders cop the hit on naked puts (after learning about it from wealth gurus)
It is not a pretty sight

And they all quoted that buying insurance costs too much
Trader's choice

'''''''''''ahha the adjusting.......thats what i am trying to learn about now have been waiting on some of Wayne's posts but they have not been forthcoming'''''''''''''

I think Wayne and Magaret have posted plenty on this!!!
If i recall Wayne detailed transforming the naked option to a ratio spread as one of the possible adjustments

Like Grinder says, there is no specific magic bullet adjustment
The adjustment is so that the new position matches your outlook

There are some spruikers who advocate rolling away the strikes as the magic defense

Sometimes adjustments aren't favourable due to the pricing in the market --- e.g. Grinders experience with the reverse slingshot

Maybe throw up a scenario real time and I am sure there will be suggestions

 

[mazzatelli1000]

Good to see you back, Mazza! Are you back from o/seas yet?
EDIT: just saw your earlier post that you're back for a wedding ...

Yes, Wayne seems to have disappeared again. Think I remember reading a post about him moving - could explain the current silence. Hopefully he will be back...

Thanks M

Truth is I missed you guys too much
hehe

 

[cutz]

'''''''''''ahha the adjusting.......thats what i am trying to learn about now have been waiting on some of Wayne's posts but they have not been forthcoming'''''''''''''
regards Gary

Hi Gary,

Have a play with Hoadleys, and have a look how position delta and payoff changes as you buy/sell units in the underlying, may be a bit of an eye opener.

Edit>> Sorry Mazza, i meant to quote Gary.

 

[cutz]

Hi guys I’ve been following this conversation but I need help with the lingo,

risk taker --- "big swingin dick"

Will add skip-strike flies to this - sometimes initiated as a skip strike fly or adjusted into this position

Slingshots!!
Batman Spreads!!

Skip flies, batman spread, slingshots. Sounds interesting but what type of spreads are we talking about here, i couldn't find them in my Bible of Option Strategies. .

 

[sails]

Hi guys I’ve been following this conversation but I need help with the lingo,

Skip flies, batman spread, slingshots. Sounds interesting but what type of spreads are we talking about here, i couldn't find them in my Bible of Option Strategies. .

Cutz, have you read Cottles book yet? I don't think it is beginners or bedtime reading, but you would probably find it very helpful at this stage and give better understanding to the strategies you mention. Here is a link to his site: http://www.riskdoctor.com/books.htm. I believe it can only be ordered from his site and a downloadable PDF is available making it quicker and cheaper with the AUDUSD so low at present. He makes chapter one available free if you scroll down to the bottom of the page so check it out to see if you think it is for you.

Have put my understanding of these strategies quickly below:

Skipflies: I'm guessing this is aka BWBs (broken wing butterflies). If so, it is a normal butterfly, but with one of the wings moved further OTM.
eg call bwb
+1 @ $11
-2 @ $9
+1 @ $8

Batman spread: Combination of a Call BWB and Put BWB giving a wider profitable area similar to a condor.

Slingshot: butterfly with extra wings. eg
+2 @ $10 strike
-2 @ $9
+1 @ $8

Biggest downside is fees with so many contracts to one position!

Hope this helps!

 

[jackson8]

Why not put on a larger size of credit spreads?

Is it because you are worried about the short strike getting ITM & being assigned?
I ask because when I was newish (not implying you don't know anything) I used to do the calcs
E.g. CBA = $30, 10 contracts would mean 10,000 shares - so total to cover is $300,000 ---- F**K ME!!!

That shouldn't be a worry, if you understand about early exercise and adjusting

hi mazzatelli
yes that is a concern with a higher no. of contracts

lets just say i take out a call credit spread sell otm buy fotm even no. on a stock such as bhp . its trading at $30 say 10 contracts , my total risk between $1 strikes is $1000 less premium received put me at defined loss of around $7000 overall. so i can accept that

but if am excercised i will be up for $310000 + purchase now thats going to cost me another $1000 in fees and if i need to excercise my bought calls there is another $1000 based on comsec .35 % excercise fee (rough calculations here just for example purposes only)

would this be correct ? as i have been lucky enough not to have been assigned nor excercised on any of my past positions i have yet to experience this fate.

i realise that if i am still in the game in another 6 months these questions will appear quite stupid as i look back on my early posts when i first started out i think well what a dumb a.....s i was back then.

gary

 

[mazzatelli1000]

Skipflies: I'm guessing this is aka BWBs (broken wing butterflies). If so, it is a normal butterfly, but with one of the wings moved further OTM.
eg call bwb
+1 @ $11
-2 @ $9
+1 @ $8

Just a point of clarification
Yeah these Americans keep interchanging these terms - getting people confused
The BWB is aka Ratioed verticals and Unbalanced Butterflies

The skip strike fly is different in that the amount of risk is the same on both sides despite one side being wider than the other
More like this:
+1 @ $11
-3 @ $9
+2 @ $8

 

[mazzatelli1000]

hi mazzatelli
yes that is a concern with a higher no. of contracts

lets just say i take out a call credit spread sell otm buy fotm even no. on a stock such as bhp . its trading at $30 say 10 contracts , my total risk between $1 strikes is $1000 less premium received put me at defined loss of around $7000 overall. so i can accept that

but if am excercised i will be up for $310000 + purchase now thats going to cost me another $1000 in fees and if i need to excercise my bought calls there is another $1000 based on comsec .35 % excercise fee (rough calculations here just for example purposes only)

would this be correct ? as i have been lucky enough not to have been assigned nor excercised on any of my past positions i have yet to experience this fate.

i realise that if i am still in the game in another 6 months these questions will appear quite stupid as i look back on my early posts when i first started out i think well what a dumb a.....s i was back then.

gary

Hey Gary, you're not dumb at all!!!
LOL - but if you insist

I raised that question coz when I was fairly new I used to think that too.
These days I sometimes put on plays on GOOG - which is a $300 + stock. But if you understand early exercise and time value nuances you wont get assigned.

sails has gone through dealing with spreads on expiration in this thread so have a read:
https://www.aussiestockforums.com/forums/showthread.php?t=11825&highlight=assignment

I recommend you understand about why early exercise would happen and read up on that- to avoid those situations - its in the above link.

I know with IB the exercise fees are nil so there are options to box off ITM spreads etc - but I dunno how well that would work with Oz options

 

[cutz]

Cutz, have you read Cottles book yet?

Have put my understanding of these strategies quickly below:

Skipflies: I'm guessing this is aka BWBs (broken wing butterflies). If so, it is a normal butterfly, but with one of the wings moved further OTM.
eg call bwb
+1 @ $11
-2 @ $9
+1 @ $8

Batman spread: Combination of a Call BWB and Put BWB giving a wider profitable area similar to a condor.

Slingshot: butterfly with extra wings. eg
+2 @ $10 strike
-2 @ $9
+1 @ $8

Biggest downside is fees with so many contracts to one position!

Hope this helps!

Thanks for the info Sails,

Yep I did download and read the condensed sampler some time ago, (pretty heavy going even in its reduced form) and although i may never put on many of the strategies described I may have to bite the bullet and get hold of the hardcopy.

 

[Grinder]

Yep. the fees are'nt great, especially when your making adjustments for a few cons here & there, but you can make it work. If your putting on say 20cons or more per leg & your using a flat fee per leg you can redue the commish a fair bit (all depends on your broker)

Jackson,

You might like the XJO (Euro style-cash settled) & ACH 39c pc... makes a difference.