Options Mentoring

[mazzatelli1000]

PS - Nice to see you pop in too, Mazza! Hope all is going well...

Thanks M
The cranium has been expanding...

I hope your "sailing" along well too (I know poor joke

 

[mazzatelli1000]

Hi gary,

It was the 14 of Apr, and I was feeling particularly bearish, (it shows because XJO was trading just above 3700), it started as a 5 to 8, then a 6 to 8 and finally a 6 to 12 as the days/weeks progressed, in hindsight I could have purchased some STW to flatten out the position at around 3800 but the push through 3900 took me by surprise.

3850 will get me back in the green and so would 4550 so I’ll guess I’ll suck it and see, it least the put leg turned out OK, I traded in and out of that short leg twice moving the strikes up.

Unfortunately STW doesn’t seem to follow XJO precisely and i can’t short it to defend a pear shaped put spread.


BTW the long calls where quite cheap when i did the final adjustment, only $40 each, also thanks for the link.

I would prefer to have backspreads in the back months to account for -/+ 2 sigma moves (depend on vols)

Then play any short gamma stuff in front months
But this is very fee intensive, and in Oz that would be pretty terrible

Have you modelled how quickly theta will go against you in the next 2 weeks assuming vols/delta is constant?

 

[Grinder]

Hi Guys,

I’ll put up one of my positions for comment, it’s one that’s going a tad pear shaped. What was originally an XJO iron condor has turned into a call back spread due to the fact that I closed out the put short side and added long calls as defence, the strikes are as follows, 3700/4200 ratio of 1 to 2. (6 short 12 long may ex).

Due to the market pushing upwards I am now approaching the valley of death as mazza nicely put it, no convenient instruments exist for gamma scalping, with 2 weeks to go I need a solid push up or down on the XJO.

Any tips anyone ?, I’m inclined to sit it out for 2 weeks and maybe add some more longs because anything is possible (up or down) but I’m wondering if I should roll out Monday into June in case we get bogged down around the 4250 zone.

Thanks

Cutz.

G'day Mark,

Glad to see ya pop into the ASF, you'll be greatly welcomed. Have enjoyed reading your blog & sifting through your many posts on ET. Keep up the good work

For the all the reasons Sails & others have mentioned, will now be soley trading the US options market. So might trouble you for a few hints from time to time.

Cutz, Being so close to May expiry probs would'nt add to the existing position, like this set up if you had more time on your hands.

 

[mazzatelli1000]

For the all the reasons Sails & others have mentioned, will now be soley trading the US options market. So might trouble you for a few hints from time to time.

So... you have finally come to the dark side :vader:
Welcome.....Feel the power
See Mark is on our side too
LOL

 

[Grinder]

It's been a long time coming, tried to resist for so long, but have finally succumb to the powers of the dark side.

 

[cutz]

Thanks for your comments everyone, i think i'm set for another action packed week.

BTW mazza yep I have checked out theta and it’s just popped below 0, dropping to -350 as we head towards 4200, by then gamma will kick in and launch me into hyperspace , (I wish, seriously though a correction back to 3700 isn’t out of the question in the next two weeks, touch and go maybe ?)

 

[jackson8]

Thanks for your comments everyone, i think i'm set for another action packed week.

BTW mazza yep I have checked out theta and it’s just popped below 0, dropping to -350 as we head towards 4200, by then gamma will kick in and launch me into hyperspace , (I wish, seriously though a correction back to 3700 isn’t out of the question in the next two weeks, touch and go maybe ?)

hi cutz

have spent much of the weekend looking into ways of adjusting trades especially those that turn ugly

having thought about your situation a bit more, would it be prudent to take some defensive action now by purchasing back a quantity of the shorts whether it be 1 or 2 of them .

this would reduce your overall loss should the market keep rising which is good but at the same time possibly locking in a loss now depending on how much premium was received from the initial sale of the put spreads and the call spread

it must be hard to make that call as no-one likes the idea of loseing money but it may reduce your loss over the longer term should the market keep rising.

of the top of my head i think mark may have mentioned something of this in one of his blogs

gary

 

[Mark Wolfinger]

It's a shame as I have put an enormous effort into learning options only to find it's pretty difficult to overcome the fee issues here.

Wow. I had no idea that trading options was so costly where you live.

Are there government regulations, is the cost so high because there is no incentive for anyone to lower them? And add slippage to that! It's a wonder anyone trades options.

I remember when it was important to find trades that I could hold without adjustment - that was many years ago when commissions were much higher here. That's not good. Adjustments are part of the game, but very costly for you. I agree that it's a shame. Can you negotiate fees with a broker?

Mark

 

[mazzatelli1000]

Thanks for your comments everyone, i think i'm set for another action packed week.

BTW mazza yep I have checked out theta and it’s just popped below 0, dropping to -350 as we head towards 4200, by then gamma will kick in and launch me into hyperspace , (I wish, seriously though a correction back to 3700 isn’t out of the question in the next two weeks, touch and go maybe ?)

Grinder was more direct in that theta is a bit heavy coming the next few weeks and since your not able to scalp to offset some of that theta bleeding adding more longs might not be too good.

You should model that the vol line will drop as well with a rally to 4200
Will delta/gamma profits beat that and theta as well?

Wasn't your upper breakeven 4550?

 

[mazzatelli1000]

Can you negotiate fees with a broker?

Mark

There aren't many brokers to choose from so making negotiations could be difficult and I think sails has alluded to the fact that spread orders aren't available so this will require legging in - even more commissions. Many here have had to turn to US markets.

I do not think that any government re

The market makers here are also a very dodgy bunch, leaving pretty wide spreads. Nothing like their American counterparts.

 

[cutz]

Grinder was more direct in that theta is a bit heavy coming the next few weeks and since your not able to scalp to offset some of that theta bleeding adding more longs might not be too good.

You should model that the vol line will drop as well with a rally to 4200
Will delta/gamma profits beat that and theta as well?

Wasn't your upper breakeven 4550?

Hi mazza, yeah i've come to the realization that this position is ugly as the rally isn't going to continue, and it's to late to defend, all I’m relying on now is a correction, if it doesn’t happen that’s OK, I’ll take a loss on this one and set I’ll up for June better prepared.

Mark I’ve only been trading options for a bit less than 2 years but IB setting up on the ASX has been in my mind fantastic, they are miles ahead of what I was used to in terms of competiveness and technology. The spreads here are wider and sometimes non existent but I stick to the most liquid of options most of the time. ( i just can't resist the allure of MQG )

 

[sails]

... Can you negotiate fees with a broker?

Thanks Mark, I have tried. It is possible to get brokerage down with large size, but that doesn't help with per contract exchange fees or the slippage issues. Also, most brokers here are fairly vicious with stock fees on exercise / assignment.

Trading large size here with options is a worry as it would be too obvious - one feels like a small fish sharing a small pond with some large sharks.

It's no wonder so many Oz option traders prefer to trade the US if they can handle the night shift - and I don't think our exchange cares about it. I have emailed them on occasions too, but they prefer to stick to their policies.

Which reminds me, we have seen one little change - there used to be a one and a half hour lunch break in the Oz options market every day... Thankfully the ASX finally saw the light on that one...

 

[sails]

...The market makers here are also a very dodgy bunch, leaving pretty wide spreads. Nothing like their American counterparts.

Well said, Mazza

Yeah, sailing along quite well - thanks! The avatar shows our view which inspired the nick.

Are you back in Oz?

 

[cooper1308]

Cutz,

In regards to broker negotiation what sort of volume are you trading per month? May be able to sort something out.

Sails you'll probably know this, but from what I can see commissions through IB can be more costly in Aus (not taking into account wider spreads) than US. They charge US.70c for option contract that cover lots of 100 shares, whereas Aussie options are AUD$3 for for exposure to 1000 shares.

So for traders looking for exposure to 1000 shares fees would be US$7 on the US markets as opposed to AUD$3 on the ASX. Or does the liquidity issue more than cover this?

 

[cutz]

Cutz,

In regards to broker negotiation what sort of volume are you trading per month? May be able to sort something out.

Hi cooper1308, i'm sorry but i'm happy with my current broker i think it was someone else that was asking about negotiation.

 

[sails]

...Sails you'll probably know this, but from what I can see commissions through IB can be more costly in Aus (not taking into account wider spreads) than US. They charge US.70c for option contract that cover lots of 100 shares, whereas Aussie options are AUD$3 for for exposure to 1000 shares....

I agree - only IF you compare apples with apples. eg. If trading a $30 stock here vs. a $30 stock there. But that's only on brokerage - doesn't address all the extra fees we get here.

The difference comes where you can trade options on stocks like GOOG trading around $400 being many times higher in price than our humble Oz stocks. I also traded NDX over there and only needed one contract to do the job of about 5-10 BHP contracts out here (can't remember the exact comparison.. Cost was a tiny $1.50 for each trade with no data fees and no further exchange fees. TOS charges on assignment were $15 flat. Absolutely no comparison to the rip offs going on out here.

Not only do you get free data in the US, brokers such as TOS also supply magical option software for absolutely not cost as well.

And slippage (a cost often overlooked) can be a shocker here in Oz.

 

[jackson8]

hi cutz

looks like the gods may be smiling upon you today

lets hope the xjo follows the downer that the dow. had overnight

gary

 

[cutz]

Hi Gary,

Yeah it looks like I may get out of this one unscathed ; we’ll see how things pan out over the next few days.

I may even have a play and see if I can turn it into something else before expiry, maybe a short fly or a 3700/3900 backspread or perhaps close the position entirely and start afresh for June.

I tell you what, I learnt some good lessons over the past couple of weeks, I actually thought I had ICs stitched up.

 

[mazzatelli1000]

Well said, Mazza

Yeah, sailing along quite well - thanks! The avatar shows our view which inspired the nick.

Are you back in Oz?

Where is that view btw?

I am back temporarily for assessment
Ugh!!!

 

[mazzatelli1000]

Hi Gary,

Yeah it looks like I may get out of this one unscathed ; we’ll see how things pan out over the next few days.

I may even have a play and see if I can turn it into something else before expiry, maybe a short fly or a 3700/3900 backspread or perhaps close the position entirely and start afresh for June.

I tell you what, I learnt some good lessons over the past couple of weeks, I actually thought I had ICs stitched up.

LOL congrats
Since when was short gamma this nice
Which God did you send sacrifices to ?

More often than not i've seen the spot move to where I would like it AFTER expiration
HAHAHA