Options Mentoring

[wayneL]

Hi guys,

I was after an opinion on managing an iron fly.

Is there anything fundamentally wrong with rolling up/down one side (generating credit) and pulling short positions off the other side to keep delta in check, what you end up with is crossed short strikes and a messy looking position.

Does anyone consider this to be an acceptable practice as an alternative to using spot.

Example?

 

[cutz]

Hi WayneL.

For simplicity index level is at 4600 after moving up from 4500.

A 4000/4500/4500/5000 iron fly ten times is turned into a 4100/4600 by 10 on the put side and a 4500/5000 by 7/10 on the call side to bring up delta.

Rough hypothetical only but something like that.

 

[mazzatelli]

Silence, sinner!!!:evilburn: Don't you read the options bible?

There shouldn't be a problem, you're readjusting the goal posts knowing your +theta style. Personally would KISS, because of the extra slippage + commissions.

Risk shifts to the downside due to the 10:7 ratio - you comfortable with that after a +100 point move?

 

[cutz]

Thanks mazza,

Just wanted to make sure I'm not doing anything silly but I see your point, perhaps closing a couple of short puts and buying a SPI contract can achieve a better outcome.

Anyway my favorite market is closed and its time for beer.

Merry Christmas all you crazy option fanatics.

 

[mazzatelli]

Yes Merry Xmas and Happy NY to fellow ops traders!!!

cutz, maybe get rid of MQG as an adj? lol just joking

 

[wayneL]

Καλά Χριστούγεννα! Ευτυχισμένο το Νέο Έτος!

May the Greeks be kind to you in 2010.

 

[Fox]

2009 has been a fruitful and eventful year. Fruitful because, with the tremendous help from forum members, I have got to a point which I could not have possibly arrived without ASF. Eventful because the learning journey has been exhilarating, yet difficult and financially painful. Thanks, guys (and gal) for a fabulous 2009.

I look forward to a consistently profitable 2010 and wish success for all forum members. I also look forward to interesting, educational and entertaining posts for 2010. Happy New Year everyone!

 

[Grinder]

ASF option traders,

All the best for a successful 2010, both finacially and in life.

Im now the proud father of a beutiful baby boy So may the new year bring calm non trending markets so I can continue to grind out theta, allowing me to adjust less and profit more and hopefully get some sleep.

 

[Fox]

Option gurus,

In your experience, is reviewing and adjusting your income trades only once a day sufficient? If not, is continuous monitoring and adjusting the best way to go?

I personally like the idea of adjusting at the close of day for these reasons:
1. Keep my deltas under control and ready to withstand a gap during the opening of the next trading day. I'm focused on XJO at the moment and XJO options typically open with a gap from the previous night's SPI futures price movements.
2. Avoid frequent adjusting due to daily highs and lows, when my delta limits are temporarily breached.

I'm sure there are advantages to continuous monitoring and adjustments. I'm more interested in finding out if any of you can trade profitably by monitoring/adjusting just once a day when dealing with income trades over index options. Any thoughts or comments on this topic will find an appreciative ear.

Thanking you.

 

[Grinder]

Fox,

Replied on the other thread but will continue here.

I hear what your saying about end of day with your deltas and price gaps but for me it's kinda like chess not checkers. In a week I might only trade two or three times, it all depends on what I have on. If my positions are behaving they way i want them to then no adjustment is required and if it's time to open some trades I will. Patience and discipline play a big part in how I trade.

Most of my planning is done outside of market hours so I know what i want to do whatever happens during market hours, the only time when the last 2 hours is'nt sufficent is when adjustments are required all at once on seperate indexes. This is when I'll find myself pushed for time trying to adjust multiple positions before the market closes. For this reason i have found that extra protection handy when pressesd for time.

 

[Fox]

...for me it's kinda like chess not checkers.

Most of my planning is done outside of market hours so I know what i want to do whatever happens during market hours, the only time when the last 2 hours is'nt sufficent is when adjustments are required all at once on seperate indexes.

Thanks Grinder for your thoughts. As you know, I'm still trying to find my way with income trades. I've been guilty of both over over and under adjusting in my trades so far. I'm trying to find a good balance between the two and your ideas have helped. Thanks.

 

[mazzatelli]

In your experience, is reviewing and adjusting your income trades only once a day sufficient? If not, is continuous monitoring and adjusting the best way to go?

Difficult to say, since it depends on the trading style, signals, products traded, asset classes
I manage from a book perspective, so deltas from other tickers will offset for example index deltas

Hedging approach is utility-based, so performed only when required

 

[cutz]

Hi Everyone,

Thought I'll run something by the experts,

I've noticed that quote widths on aussie american style and euro style options to be the same, any traps or quirks if shorting an euro style and going long american style within an equity backspread.

I'm experimenting with this approach in my aussie account.

 

[freebird54]

I have had good years in options [covered calls and selling puts] $20,000 income WDC, WPL, BHP

But this year a disaster - Rolling BHP, STO, expired TAH, TLS premiums so low as volatility less

Anyone like to comment on what they have been doing

 

[mazzatelli]

I've noticed that quote widths on aussie american style and euro style options to be the same, any traps or quirks if shorting an euro style and going long american style within an equity backspread.

I'm experimenting with this approach in my aussie account.

You're paying more for your long hedges, than if you were long European gamma.
The only time their values would = when all extrinsic value has bled from both styles.

 

[cutz]

Gotcha Mazza,

So I take it apart from that it shouldn't be too much of a problem,

It's a strange way of doing it but I'm OK with taking a little less on the short if it means I wont cop an early surprise if the underlying takes a flogging.

The lack of open interest on the euro styles is a little disconcerning thou, some have zero, that's why I stuck with the americans on the longs.

At least this way half the position will have liquidity problems instead of the lot.

 

[cutz]

Anyone like to comment on what they have been doing

Butterflys and backspreads,

Thing I've changed thou is the distance of body to wings, this huge grinding rally has highlighted that my call backspreads initially weren't tight enough, more set up for higher speeds.

Leftover puts from adjusted put sides should serve rather well if the market takes a beating.

 

[Grinder]

Simmilar to Cutz but ICs as per usual with added backspreads and the like to have my P/L graphs point upwards.

 

[freebird54]

I have had good years in options [covered calls and selling puts] $20,000 income WDC, WPL, BHP

But this year a disaster - Rolling BHP, STO, expired TAH, TLS premiums so low as volatility less

Anyone like to comment on what they have been doing

I posted this to a slow thread that I cant edit so..............
I have done some nice trades lately - covered calls and the occasional put on stock I am happy to buy.

But I am trading a lot more frequently on up days sell cov calls and down days sell puts.

More than $1000 profit on BHP calls and STO puts this week

Is there a site that gives % return over the number of weeks to expiry or any % return?


I know the AFR publishes them for % return/annum but too late and not always accurate?

On the enclosed watchlist I need to setup an extra column with a formula that automatically calculates the % return/month on an option

This I have to change many times a day of course

So any excel experts?

Pasting the csv below in to excel

The calculation will be column h2 etc. [Last trade ] divided by strike/exercise price e2 x 100 to give a percentage/annum then divided by 8 or 9 which is weeks to expiry then x 52 to annualise then /12 to give a monthly figure
Weeks to expiry date column d2 from this week so = 8 weeks to 24/6 expiry info below from westpac watchlist today

I bought back BHP June $43 calls I did a few days ago and I look for 2% per month so for BHPGS8 the calculation is [where / = divided by]

when I sold the call I got 1.77 so calculation is

1.77/43 x 100 = 4.11% per annum/9weeks = 0.45 x 52 weeks = 23.74%/12 = 1.97% per month

So the guy who sold them back to me today got...................................................

.95/43 x 100 = 2.2% per annum /8 weeks = 0.275 x 52 weeks =14.3% / 12 = 1.2% per month




Name Code Call/Put Expiry Date Exercise Price Bid Offer Last Change ($) Change (%) Last Trade Time High Low Volume Open Interest Contract Size % return per week
options BHPGS8 Call 24/06/2010 43 0.92 0.98 0.95 -0.42 0 2:10 PM 0.97 0.94 39 1023 1000

 

[wayneL]

...on up days sell puts (synthetically) and down days sell puts.

corrected