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Trading Long Straddles
Having failed at credit spread trading, Gap trading and straight buying of options. I´m now trying LONG STRADDLES in options. Got one week in it now, but probably run through the month. Any body got any advice on making money with lONG STRADDLES?
buy low, sell high 
implied volatility can be thought as the price of straddle, dont buy when it is too high, dont unload your straddle when IV is too low.
Long straddles will suffer from theta decay (straddle value will erode everyday without significant UL movement. ).
when you got lucky and UL moves somewhere and you got in profit, don't let your profit decay. lock some profit by a technique called gamma scalping
good luck
Re: Trading Long Straddles
Quote from falconview:
Having failed at credit spread trading, Gap trading and straight buying of options. I´m now trying LONG STRADDLES in options. Got one week in it now, but probably run through the month. Any body got any advice on making money with lONG STRADDLES?
__________________
Robert L. Morse
Business Development
VICTOR SECURITIES
285 Grand Avenue
Englewood, NJ 07631
rmorse@victorsecurities.com
office: 646-545-3860
www.linkedin.com/pub/robert-morse/6/8a7/617
__________________
Re: Trading Long Straddles
Quote from falconview:
Having failed at credit spread trading, Gap trading and straight buying of options. I´m now trying LONG STRADDLES in options. Got one week in it now, but probably run through the month. Any body got any advice on making money with lONG STRADDLES?
Last year I traded credit spreads for about 8 months. Got wiped out twice. It was paper momey.
Long option straddles, do they pay?
About 25 years ago, I made note of a strategy, trading Long Option Straddles. Since I am currently out of idea, I was re reading my notes. Somebody back long ago had what they said was a long option straddle method that worked.
So I am trying it in paper money. 25 years ago they did not have the internet resources, charting and paper money trading they have today. Just got one week at it, too soon to tell anything, but will see by the end of the month. In the meantime, I have heard sporadically of people making, or losing oodles of money trading long option straddles. So just wondered if there was any body out there successful at it?
Not that I've ever met.....
__________________
Robert L. Morse
Business Development
VICTOR SECURITIES
285 Grand Avenue
Englewood, NJ 07631
rmorse@victorsecurities.com
office: 646-545-3860
www.linkedin.com/pub/robert-morse/6/8a7/617
__________________
Re: Trading Long Straddles
Quote from falconview:
Having failed at credit spread trading, Gap trading and straight buying of options. I´m now trying LONG STRADDLES in options. Got one week in it now, but probably run through the month. Any body got any advice on making money with lONG STRADDLES?
Quote from rmorse:
Not that I've ever met.....
Re: Long option straddles, do they pay?
Quote from falconview:
About 25 years ago, I made note of a strategy, trading Long Option Straddles. Since I am currently out of idea, I was re reading my notes. Somebody back long ago had what they said was a long option straddle method that worked.
So I am trying it in paper money. 25 years ago they did not have the internet resources, charting and paper money trading they have today. Just got one week at it, too soon to tell anything, but will see by the end of the month. In the meantime, I have heard sporadically of people making, or losing oodles of money trading long option straddles. So just wondered if there was any body out there successful at it?
Re: Trading Long Straddles
Quote from falconview:
Having failed at credit spread trading, Gap trading and straight buying of options. I�m now trying LONG STRADDLES in options. Got one week in it now, but probably run through the month. Any body got any advice on making money with lONG STRADDLES?
Re: Re: Trading Long Straddles
i will second the f2 trade tatic as he laid it out for you to play it out. augen has also offered up ideas on these expiry day trades.
you could make it delta neutral,
or you could skew it if you have a directional bias.
you could also enter fri morning.
you could also look at omp to get an idea of how you think your u will move on exp fri.
spy, iwm, aapl, nflx, and amzn are also good ones to watch.
Quote from ForexForex:
Take a look at GLD: http://finance.yahoo.com/q?s=GLD
- Weekly options offered.
- Consider entering 1 day before expiry, buy Thursday sell Friday.
- Debt will only be about $0.80.
- You don't pay for any time premium.
- I believe a small movement of 1.5% or more will do the trick.
- The trade is over quickly, no spending a few days watching it.
- Try a paper trade this Thursday to see how it works out.
GOOG and QQQ could be considered also.
Gentlemen
I´m overwhelmed by your kindness. I appreciate it. This is so unusual on these forums.
I will try the expiry STRADDLE in paper money.
As to the reasons for the failures. Yes I know the reasons.
Credit spreads rely on making money by compounding. But when the market dips violently, your losses by several reasons, tend to almost wipe you out. I hate to make it over months and then give it back in a couple of days. Howard Cohadas website on credit spreads covers the reasons by other experts, to which I attest. Discarded credit spreads as a result.
Gap Trading was very lucrative with 4 months of funny money trading. Made 297% in four months. But when I opened a $10,000 cash account, I won the first trade, but lost the next three, which has put me down 30% of cash account. So now I must put it aside for now, though I know the error. The error was not using a Limit order and using a market order to enter. Precalculating the entry and either getting it, or being skipped over. It was like fishing for tuna. You catch the first one, then every other tuna you catch, all you have is heads on your line and hook, to pull in. The bloody sharks had come running and chomped me up. They simply took my market entry order and left it too last and gave me the high of the day in the opening surge. I´ll go back to it, when I can afford it again, if ever. The way I was doing it was compounding also, so when the sharkes bite, it took all the meat I could afford.
I´m not sure what is happening on the straight buy and sell in funny money, but lately I have been unable to make bets on the right side of the market. Betting by using indicators seems not to e a good way. Hence my search for something else.
Why the long straddle? Well I knew a guy in South Miami did very well at it. Started his own brokerage, started his own bank and both himself and his wife traded long straddles. I never found out what he was doing, just got titillated by my discount broker at the time over the phone. That was a long time ago and learning option stuff was difficult back then. I was trading stocks successfully, but so slow and small, I got tired of it and quit everything and did something else. Lucked out and now I´m old and wondering if I can figure out something now. I´ve probably got $2,500 left of my stake I´m willing to risk and unlike 25 years ago, there are lots of information and charts available. Stocks are too slow. Options are quicker. I like that.
So I find myself doing long straddles in paper money. To see what happens. The same month comment is very well taken. I am using second month options, for what are 5 day moves. Don´t know how this will work out over time yet. Need a few more weeks. I am thinking though perhaps LEAP options might be the right way to trade Long Straddles. Might try it later. I´ve looked them up on the internet, but nobody is writing anything about successful long straddle methods, but there must be one or two out there? All I can pull up is the standard pap on a long straddle, but obviously there are other ways of using them to make money. The method I am trying is a mathematical type way, not much thinking to do. I´ve got it figured to run about a 5 day trade. Doesn´t matter which way the market goes. I like that. Will know by the end of the month I think.
Again, I wouild like to thankyou guys for your gracious contributions. I didn´t expect it, having been on a couple of other forums. Like a breath of fresh air.
Quote from falconview:
Gentlemen
I�m overwhelmed by your kindness. I appreciate it. This is so unusual on these forums.
Again, I wouild like to thankyou guys for your gracious contributions. I didn�t expect it, having been on a couple of other forums. Like a breath of fresh air.
Wow!
Swinging in my hammock on my verandah. Beautiful day. Finished up my adjustments for today and only have to occasionaly check the computer.
I got to thinking about the contribution by ForexForex for the WEEKLY OPTION trading, using the last two days of maximum TIME DECAY.
I traded WEELIES for a long time. Indeed would sell a CREDIT SPREAD on Thursday and close it or let it expire on Friday. Did it for about 8 months, and never ever lost with it. I dropped it because the amount of money at risk was huge, compared to what you would take in by selling the credit spread. TOO RISKY. You did need a bit of directional accuracy. Trouble is, one loss could wipe out your account.
So the comment by ForexForex on doing the same with a LONG STRADDLE, betting on a 1.5% move sounds interesting. There is TIME DECAY though, in the last two days of WEEKLY OPTION TRADING. That means 4 trades a month. If you could clear 3%, it would be worthwhile. I have a suspicion you would possible lose to TIME DECAY which would effect both sides of a LONG STRADDLE equally.
Overnight Thursday to Friday morning is pretty big in TIME DECAY, but doesn´t hurt to try it in paper money. I´m not sure, but I think you would have to exit by 11 a.m. on Friday expiration in the weeklies. The prices tend to go sideways after that until they expire.
I wonder if you could sell the TIME DECAY in a long straddle. Guess that would be a SHORT STRADDLE? That might work better? Don´t know anything about the mechanics of that, but will look it up.
Re: Re: Long option straddles, do they pay?
Quote from DerivativesG:
One month is the wrong timeframe to go into a straddle unless you are telling us that your straddle position is one that involves a stock which has an earnings announcement this month.
Quote from DerivativesG:
Always remember straddles are speculative trades and not income.
__________________
I'm spending a year dead for tax reasons.
Re: Re: Re: Long option straddles, do they pay?
Quote from sle:
I don't really see the logic in this statement. You have a vol model and if you feel implied vol is cheaper then your expected realization, you buy it. If your model is correct, you keep doing it and eventually you get statistically significant results.
Income? As in if you are a seller of vol, it's income? Jeesh... You only really care about the difference between realized vol and implied, thats your "income".
__________________
Robert L. Morse
Business Development
VICTOR SECURITIES
285 Grand Avenue
Englewood, NJ 07631
rmorse@victorsecurities.com
office: 646-545-3860
www.linkedin.com/pub/robert-morse/6/8a7/617
__________________
Re: Re: Re: Long option straddles, do they pay?
Quote from sle:
I don't really see the logic in this statement. You have a vol model and if you feel implied vol is cheaper then your expected realization, you buy it. If your model is correct, you keep doing it and eventually you get statistically significant results.
Income? As in if you are a seller of vol, it's income? Jeesh... You only really care about the difference between realized vol and implied, thats your "income".
Re: Re: Re: Re: Long option straddles, do they pay?
Quote from DerivativesG:
Okay the logic behind that statement is this.
One month is too short because long straddles suffer theta decay. So unless you are expecting a huge jump within a month, don't go into that trade. I go for 60-80 days while entering a straddle.
Quote from DerivativesG:
Income as how MARKET MAKERS refer to it.
I learned how to trade straddles while working for a MM.
MMs group certain positions under certain categories.
Straddles fall under "speculative strategies/trades".
So according to a MM, straddles are not trades that
produce monthly income.
__________________
I'm spending a year dead for tax reasons.
Hmmmnn! Regarding the argument, I was wondering what Volume had to do with it? But as the argument progresses I think you are referring to volatility.
I´m not trading the long straddle by volatility, I´m trading mechanically in a method I´m not yet sure if it works.
Quote from falconview:
I´m not trading the long straddle by volatility, I´m trading mechanically in a method I´m not yet sure if it works.
__________________
I'm spending a year dead for tax reasons.
All very interesting.
I´m trying to fit the long straddle into a shorter time frame. One week, or 5 trading days. This of necessity in the short period I am doing it means that the commissions become an ever increasing cut of the profit. I think right now it works out to about 30%. I can see where I could shorten the time span, but the commission part, would increase as a function of the gross profit and not leaving much net profit.
I would not qualify under the DAY TRADER RULE I think? With a 5 day straddle, I believe I can do one completed straddle trade a week. Since I leg into the straddle, I am not at all sure how many trades that would be considered. If I was to shorten the period of the trade, I believe I might close two or even three straddles per week. I kind of believe, but I am guessing, that the PUTS and CALLS would be treated individually, even though I am actually trading long straddles. If I go to a shorter period I would end up with higher commissions, but it looks like I could do 3% net profit per week. Besides the threat of Damocles Sword over my head with the DAY TRADER RULE business would wreck my strategy. By legging in, I get to shave off some price on the entry, which all helps.
So I am going to finish this test and then research a LEAP OPTION type of trade, which might run a month or two.
Implied Volatility
Well I am trading SPY. I do not usually consider volatility in SPY as it is rather staid in that sense.
However, I plugged the IV into TOS to see what we have and on the 128 strike the Call IV is 15.75 and the PUT IV is 16.96
Not sure what any of this means tradewise, as a day or two back it was reading 17% thereabouts.
Quote from falconview:
All very interesting.
I´m trying to fit the long straddle into a shorter time frame. One week, or 5 trading days. This of necessity in the short period I am doing it means that the commissions become an ever increasing cut of the profit. I think right now it works out to about 30%. I can see where I could shorten the time span, but the commission part, would increase as a function of the gross profit and not leaving much net profit.
I would not qualify under the DAY TRADER RULE I think? With a 5 day straddle, I believe I can do one completed straddle trade a week. Since I leg into the straddle, I am not at all sure how many trades that would be considered. If I was to shorten the period of the trade, I believe I might close two or even three straddles per week. I kind of believe, but I am guessing, that the PUTS and CALLS would be treated individually, even though I am actually trading long straddles. If I go to a shorter period I would end up with higher commissions, but it looks like I could do 3% net profit per week. Besides the threat of Damocles Sword over my head with the DAY TRADER RULE business would wreck my strategy. By legging in, I get to shave off some price on the entry, which all helps.
So I am going to finish this test and then research a LEAP OPTION type of trade, which might run a month or two.
Long Straddle trading
The short answer is NO! Because I am testing a mechanical system, I copied down from 25 years ago and it has no provision for the classic traditional volatility application recommended on the internet advisory pages.
The long answer is, that I am interested in using volatility, though it does not apply to this mechanical statistical system.
My reading on it, is that you look for when IV is lower than HV? To put on a long straddle trade. I do have IV on TOS. Where do you find HV?
I was hoping somebody on here was more knowledgeable with trading Long Straddles with bells and whistles and tweaks in the methodology. I cannot even find this mechanical statistical system on the internet, which either means it is no good and has disappeared, or is a big secret and, or has dropped out of usage as people who developed it are dead.
Give me a couple of weeks more and I can tell you better, which of the three versions are true.
Re: Re: Re: Re: Re: Long option straddles, do they pay?
Quote from sle:
Yes, your theta-gamma decay would be inversly proportional to square root of time to expiry, but so is your gamma. As long as you are delta-hedging frequently enough and your realized vol is higher then your implied, you would be ok. Unless you are making some sort of realized vol statement (e.g. you model tells you that vol cycles in 3months, not in one), there is no difference.
I _was_ a market maker at one of the IBs (was running their swaptions book) until a year ago and I have _never_ heard this distinction. You are either long gamma or short gamma (possibly in combination with other greeks) and decision depends on the richness or cheapness of implied vs realized.
Re: Long Straddle trading
Quote from falconview:
Where do you find HV?
[/B]
Re: Long Straddle trading
Quote from falconview:
I was hoping somebody on here was more knowledgeable with trading Long Straddles with bells and whistles and tweaks in the methodology. I cannot even find this mechanical statistical system on the internet, which either means it is no good and has disappeared, or is a big secret and, or has dropped out of usage as people who developed it are dead.
. [/B]
Very cute! Love it. All I know when I copied this down in my notes some 25 years ago, the return was touted to be 30% a year. I´m interested to see if it works?
Re: Re: Re: Re: Re: Re: Long option straddles, do they pay?
Quote from DerivativesG:
You don't delta hedge frequently, you continually adjust your
delta hedge real time during the trading day.
Quote from DerivativesG:
Good for you. Obviously your one year of "market making"
does not make you an expert in all kinds of options market
making.
Quote from DerivativesG:
Of course you are either long
or short gamma and you follow the other greeks such as
vega, omega, theta etc. and that decision is so obvious, but
why are you telling us stuff that is options 101? What's your point?
__________________
I'm spending a year dead for tax reasons.
Quote from falconview:
Very cute! Love it. All I know when I copied this down in my notes some 25 years ago, the return was touted to be 30% a year. I�m interested to see if it works?
Re: Re: Re: Re: Re: Re: Re: Long option straddles, do they pay?
Quote from sle:
No you don't. Frequency of hedging is a very tricky question - would you hedge your book "continually" if you are short gamma? if you are long gamma? long gamma in a trending market?
However, experience of 15 years at a major investment bank and being a vol arb portfolio manager in a billion+ hedge fund does make me an expert. Now, I am not a equity options maven, but I have a guy sitting next to me who is an ex-MM in single name options and I just asked him:
sle: ***, do you know what "Income Trades" are?
***: well, I can guess what it is but I've never heard it before.
The point is that you (among other people) tend to mislead novices. My point was not to "know your greeks" but rather to "analyze your trades from the vol perspective".
Quote from DerivativesG:
Not sure what you consider as "cute".
As long as you don't chicken out like your did with credit spreads, gap trading and long call, and have balls of steel, it'll work.
Quote from IV_Trader:
what will excatly work ?
Quote from DerivativesG:
If he puts in enough time and effort, he will succeed with this long straddle strategy. Do I need to say more?
Re: Re: Re: Re: Re: Re: Re: Re: Long option straddles, do they pay?
Quote from DerivativesG:
You sound like you are out for a pissing contest.
The whole point of posting on this web site is self-entertainment. Entertainment is important to me, especially now that my market is half-dead (well, today is a notable and pleasant exception).__________________
I'm spending a year dead for tax reasons.
Quote from AAAintheBeltway:
Because of his nuanced understanding of vol, gamma scalping, theta decay, etc? The guy barely knows the difference between a put and a call.
The only responsible advice to him is forget trading straddles until he can trade the underlying profitably and has a clue about forecasting vol.
Quote from AAAintheBeltway:
Because of his nuanced understanding of vol, gamma scalping, theta decay, etc? The guy barely knows the difference between a put and a call.
The only responsible advice to him is forget trading straddles until he can trade the underlying profitably and has a clue about forecasting vol.
Re: Re: Re: Re: Re: Re: Re: Re: Re: Long option straddles, do they pay?
Quote from sle:
But of course I am
I am still unclear why you would not buy a one month straddle. If you truly are a hero you claim to be, I'd love to hear your explanation.
Do fill us in. What is your market?Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: Long option straddles, do they pay?
Quote from DerivativesG:
LOL
Quote from DerivativesG:
Because straddles on the underlying which I chose work if I give it 60-80 days.
__________________
I'm spending a year dead for tax reasons.
Re: Re: Re: Re: Re: Re: Re: Re: Long option straddles, do they pay?
Quote from DerivativesG:
I have a total experience of 16 years at not ONE single investment bank but also a very famous MM and a hedge fund
Quote from DerivativesG, written on 03-27-07 11:32 AM:
Hi,
I am at the crossroads right now. I am 32 yr old female, living in Germany, have worked in investment banking and hedge funds in the operations/back office/middle office departments as an FX/Futures/Options operations/middle office execution clerk. From day one I always wanted to get into trading. This is actually why I started off in operations, I thought I can easily slip into a trading role. When I first started applying for trading positions, the feedback was that I did not have any experience in the field let alone trading. I had two great offers, one I turned down due to personal reasons (my dad was very sick and I had to be close to my parents) the second offer I turned down cause I heard through the grapevine company was going to close (it was Refco). Throughout I have traded here and there but did not file my broker statements. I did however have a trading plan and stuck religiously to my plan. There were times during the years when I could not trade for a while because of the compliance rules I had to adhere to due to my workplace. Anyway, after looking around for a trading job, and also being aware that many others are trying to get into such positions, I am thinking about going prop but this time around with a more disciplined approach i.e. doing appropiate archiving of all my documents and forming a track record. Any words from the wise on this board who have followed a similar path?
P.S. Do you guys think I should also still apply to local traders positions although I have no considerable experience and obviously I am not a 20 year old?
__________________
I'm spending a year dead for tax reasons.
Re: Re: Re: Re: Re: Re: Re: Re: Long option straddles, do they pay?
Quote from DerivativesG:
LMAO. I trade this everyday and I got my excel sheet here showing my "delta" real time and you are telling me what to do?
I have a total experience of 16 years at not ONE single investment bank but also a very famous MM and a hedge fund, I have one guy
sitting across me who is one of the most talented traders who
has been interviewed by many newspapers and magazines and
he has agreed with me.
I mislead novice people? LOL. Anyone told you that you are hilarious? I think you are the one who is misleading people here. A real trader examines EVERY important variable from volatility to greeks.
You sound like you are out for a pissing contest.
Quote from falconview:
Implied Volatility
Well I am trading SPY. I do not usually consider volatility in SPY as it is rather staid in that sense.
Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: Long option straddles, do they pay?
Quote from sle:
Interest rate options (BFOs/STIRO/Swaptions/CurveOptions etc). I am glad you are laughing...
JGBs, for example, don't even have anything liquid option-wise trading past the front month. So I get 30 days at most.
Re: Re: Re: Re: Re: Re: Re: Re: Re: Long option straddles, do they pay?
Quote from dunleggin:
sle = real deal. Obvious to anyone checking his historical posts.
DerivativesG, I think you're bluffing. It was the comment about delta hedging frequency that really gave it away.
Even though you're putting on a pure volatility trade?
Rather than follow the advice that you want or are hoping to hear, follow the advice to put in some groundwork first. Otherwise you're purely speculating, not trading.
Re: Re: Re: Re: Re: Re: Re: Re: Re: Long option straddles, do they pay?
Quote from sle:
In general, you want to remember what your wrote a few years ago before yapping about your 16 years of experience. A single look at your previous posts shows that your first message here was:
So what is it and what exactly do you trade right now?
Wow, I feel very special.Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: Long option straddles, do they pay?
Quote from DerivativesG:
You think this strategy of not believing me will make me tell you all the details of my trading strategy?
Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: Long option straddles, do they pay?
Quote from dunleggin:
The puerility of that statement speaks volumes. I rest my case.
Quote from dunleggin:
Mr Ross, it's more likely that you could receive an education in spread trading by reading the posts of experienced members on these boards
Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: Long option straddles, do they pay?
Quote from DerivativesG:
Ok, do that. And here is an old post from you.
You are suggesting Joe Ross that one can receive an education in spread trading by simply reading a couple of threads. If you were a real trader, you would know that you can't learn by simply reading few threads. You have to put on many trades real time. This is how you learn to how to trade. Not by reading threads.
Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: Long option straddles, do they pay?
Quote from dunleggin:
Amusingly, you have read it literally, without understanding the context (trolling), and missing the nuanced sarcasm. (You presumably didn't check who Joe Ross is and what he does/did for a living?)
Can market maker switch to retail trading successfully?
Well very diverse opinions, even from participants in the same field.
My slim understanding of Market Maker methods, is by reading contributions here and there on the forums. I have come to the conclusion that a Market Maker trades differently to a small retail trader and wonder if a Market Maker can actually transfer successfully and profitably from being a Market maker into a successful retail trader? I formed the opinion they find it very difficult?
Long Straddle techniques.
Well I found some of the stuff on here, with the one upmanship very funny. Back in my stock trading days, ( decades ago ) my favorite strategy was trading AGAINST market makers, in the thinly traded category. Loved to see them squirm, before they gave me my 20% finally. ( took about 3 months )
My impression of Hedge Funds is; they go broke all the time? Every market crash at least.
On the subject of Joe Ross, he has been peddaling his training lessons for forty years at least. I tried them decades ago. Even looked to see what he was doing about six months ago, when his name came up. For a guy who often can´t make 2% a year bottom line, I would hardly recommend him. From an amateurs viewpoint that is. I presume he does alright by selling advice. Since he is still at it.
To IV trader
Thankyou for the contribution on VIX switches. I did trade PAIRS using VIX and some other index. Can´t remember now. It worked okay, but was highly directional and I really didn´t see the sense in it, so I dropped it.
I´m going to see what GOOGLe brings up on the subject.
IV TRADER
Got something on trading the VIX in options. Interesting stuff, but assimulating it will take a bit of thinking.
Didn´t find anything on the VIX switch itself, other than it occurs on expiration day, the third Wednesday of the month, when one of the months is replaced by another. Didn´t find anything that said which way the VIX went when this replacment month happened though?
Long straddle classic advice of volatility play
Dunleggin
Thankyou for your advice on trading the traditional way on LONG STRADDLES. When I get done with this experimental test of an old time method of trading Long Straddles, will keep your advice in mind.
If as a retail trader at home, you are making $250,000 a year net profit before taxes, I am or would be very impressed with your advice.
Quote from falconview:
IV TRADER
Got something on trading the VIX in options. Interesting stuff, but assimulating it will take a bit of thinking.
Didn´t find anything on the VIX switch itself, other than it occurs on expiration day, the third Wednesday of the month, when one of the months is replaced by another. Didn´t find anything that said which way the VIX went when this replacment month happened though?
Re: Long straddle classic advice of volatility play
Quote from falconview:
Dunleggin
Thankyou for your advice on trading the traditional way on LONG STRADDLES. When I get done with this experimental test of an old time method of trading Long Straddles, will keep your advice in mind.
If as a retail trader at home, you are making $250,000 a year net profit before taxes, I am or would be very impressed with your advice.
LONG STRADDLES
Been a busy opening this morning. One of those GAP traps. The other day it was a CLASSIC GAP, wished I had traded it.
This long straddle method got complicated on me. I´m starting to lose track of the numbers. Did good this morning though, with 23% overall on the PUTS. Still holding CALLS and adding to them.
Have another sheet I took a flyer on PUTS yesterday and it did 16.5% return this morning in a directional trade.
Still paper trading though in TOS.
Since everyone seems to be a seller of premium on these down moves, why not buy an SPX straddle and finance the theta with otm VIX call credit spreads?
Quote from Dolemite:
Since everyone seems to be a seller of premium on these down moves, why not buy an SPX straddle and finance the theta with otm VIX call credit spreads?
Dolemite
Thankyou for the suggestion. I kind of like it. But just got frustrated with my paper money account and closed it and cleared it off. Going to start fresh tomorrow.
I tried to narrow down the working tempo, so it was faster and it turned out to be way faster than I could make sense of. I was getting trades in TOS that didn´t agree with my desktop paper entries. Trying to sort it out got really confusing.
Back to square one tomorrow. I will let the TOS computer cool off and start fresh tomorrow. One of the beauties of dealing with paper money.
At least now I know I cannot work in such narrow time limits.
The long straddles seem to work? Albeit not that lucrative overall was my impression. My attempt to compress it didn´t work though.
Re: Re: Trading Long Straddles
Quote from ForexForex:
Take a look at GLD: http://finance.yahoo.com/q?s=GLD
- Weekly options offered.
- Consider entering 1 day before expiry, buy Thursday sell Friday.
- Debt will only be about $0.80.
- You don't pay for any time premium.
- I believe a small movement of 1.5% or more will do the trick.
- The trade is over quickly, no spending a few days watching it.
- Try a paper trade this Thursday to see how it works out.
GOOG and QQQ could be considered also.
It is hard to make money with straddles, atm options are typically the most accurately priced in the series. Think of it like this, when you buy a straddle you are saying that the market is incorrectly pricing the size or speed a stock will actually move. Someone is selling what you are buying. Trading one type of trade day in and day out is tough, it is better to learn a variety of strategies and trade what the market is showing you. Spend some time really understanding volatility and base trades off of that.
Long Straddles
Well I got a chuckle from Dolemites post. I actually understood what he said. So there has been improvement from options 101. Though I´m not sure I´m ready to move to Options 102 trainee though? That sounded a little bit too intricate for me at this time.
Actually I closed down midday and went off to see if my contractor planted some bougainvilla and papaya from my nursery I asked him to. Ended up taking a noon nap in the duplex he is building for us. The cool breeze was wonderful to sleep by.
The LONG STRADDLE method seems to work though. Some things become clear, it is entirely mechanical. You do not need to know, or guess what the market will do. I´ve just deleted all my moving averages and other indicators and will try it from the beginning. I would like the shorter time frame, but it is just too many trades for the remainder of my cash account which is $7200. Of which I will only risk $2200 until I build it back. Plus I certainly would end up violating the day trader rules. I don´t even want to know or care what the market is doing. Other than watching the numbers and making the moves. Will try it again in TOS funny money. Going back to one successful trade per week, I hope. I´m no good at multi-tasking any more at my age. I´m going to have to grit my teeth and just concentrate on this thing and see if two more weeks give me any better insights.
The problem is all the wasted time, waiting for my action numbers to arrive. Few days could pass by. I get bored, and I have all kinds of projects I could be working on. Have a solar panel waiting to be finished constructed. I need an alarm when my action numbers are approached, so I can go do some other things, in the meantime.
I´m not even sure I have the temperament to be a trader, the idea is attractive as my physical abilities are not what they were anymore. I was better at building hotels, houses, sailboats, and homebuilt airplanes.
I found a replacement for indicators this week. So far it is working good. I ran across this on Elite Trader on one of the Forums. Printed it out.
http://www.elitetrader.com/vb//atta...posstid=3181969 Anyway I´m trying it and darned if it doesn´t seem to be better forecasting trend changes, than indicators.
You draw a trend line. Slide the trend line to the top side if you are going UP, or the bottom side if you are going down. Then repeat the trendline so you make a channel. You actually keep adjusting it as you get new pèaks or lows. It forms very short trendline channels. You get the pullbacks for loading up and you get trend changes and sideways actions as well. It has forecasting abilities, whereas in trading the LONG STRADDLES the market action and indicators are not at all accurate most of the time.
Suggest you read page 187 of Natenberg's book, Option Volatility and Pricing.
Quote from Trader13:
Suggest you read page 187 of Natenberg's book, Option Volatility and Pricing.
To summarize the author's view, straddles are bad news. When you buy em, stock movement usually does not overcome the double theta bleed. And when you sell em, the premium you collect will eventually be swamped by gamma risk.
Quote from traderlux:
can you gives us the bullet points?
thank you
Quote from Trader13:
To summarize the author's view, straddles are bad news. When you buy em, stock movement usually does not overcome the double theta bleed.
__________________
Keep it simple.
help with straddles you say?
Try looking for videos dude. I was a basic options guy for a while because I couldn't make the leap to understanding dynamic portfolio risk. How positions behave over time in different conditions. I found it easier to learn that stuff through tutorials that go slow and you can rewind and repeat them over and over, etc I'm no dynamic gamma hedger yet, but I at least have a better understanding of options now.
These videos should get you started. They break down and analyze straddles.
http://www.questoptions.com/video_g...t-Long-Straddle
http://www.questoptions.com/video_g...raddle-Position
Quote from Trader13:
To summarize the author's view, straddles are bad news. When you buy em, stock movement usually does not overcome the double theta bleed. And when you sell em, the premium you collect will eventually be swamped by gamma risk.
Yet, long straddles are so seductive ... no directional bias, limited risk, unlimited reward. But unfortunately, no positive expectancy.
Long Straddle option trading
Wow! I´m overwhelmed by the consideration and helpfulness pouring out to me on this FORUM. Thank you guys and gals.
I´m all set to re-start my test system again today. Will establish a long straddle.
On the other hand, will also before market close put a long straddle on GOOGLE on the WEEKLY options and see what happens? I can´t think it would work because of theta, accelerated at that time. Still I am the sort that can read and read and read, but only learn by doing and trying it. So will have to try it.
While I appreciate all the talk of volatility suggestions. Indeed, I have started keeping track ( scrap paper notes ) of IV on TOS, for Calls and Puts, to see if there is a lesson there. Something I can absorb from practical. I much prefer graphical presentations of volatility. Rather than numbers. DMI is my favorite. But patterns like pennants and flags. But I notice the trendline channel I was trying this week at the turning points would also represent volatility die down.
And yes the points you make are concerning me. Which is why I am trying to trade hourly charts, in a 5 day time frame. The question is will the THETA be greater than a quickie trend ( and volatility ) occuring?
I am also thinking of a Leap option setup, and wondering how much TIME that would give me to realize sufficient change in index value, to make a profit. I don´t know if a one year Leap option THETA would cover say 2 or 3 months market movement enough to profit. I´ll probably try it, practically AFTER I finish this experiment.
Re: Long Straddle option trading
What are you trying to learn with your trades? If you have a hypothesis to test based on what you have read here and elsewhere, write it down, execute one or more trades with it and document your results. Is there a correlation of results with your hypothesis? Why do you think so?
Quote from falconview:
Wow! I�m overwhelmed by the consideration and helpfulness pouring out to me on this FORUM. Thank you guys and gals.
I�m all set to re-start my test system again today. Will establish a long straddle.
On the other hand, will also before market close put a long straddle on GOOGLE on the WEEKLY options and see what happens? I can�t think it would work because of theta, accelerated at that time. Still I am the sort that can read and read and read, but only learn by doing and trying it. So will have to try it.
__________________
If it is to be it is up to me.
Long straddle trading
Howard
I´m testing a method I had in my notes from 25 years ago. This method trades the Long Straddle and it is not your standard volatility trade. So far, I have no one who has anything to offer other than the standard volatility type advice. I could find nothing about it on the internet. Which might mean it disappeared because it was no good. I shall see in a couple of weeks.
Re: Re: Trading Long Straddles
Quote from ForexForex:
Take a look at GLD: http://finance.yahoo.com/q?s=GLD
- Weekly options offered.
- Consider entering 1 day before expiry, buy Thursday sell Friday.
- Debt will only be about $0.80.
- You don't pay for any time premium.
- I believe a small movement of 1.5% or more will do the trick.
- The trade is over quickly, no spending a few days watching it.
- Try a paper trade this Thursday to see how it works out.
GOOG and QQQ could be considered also.
Yikes! What is happening to my Long Straddle position? Explain it please?
From the time I bought the straddle this morning, both the CALL and the PUTS have increased in value if I want to sell them? I have together a profit of .44 cents and hold 2 contracts of each.
Which in this novices calculation comes to 400 x .44 = +$176. If I close it now, I make money less commissions $12. What the heck do I do? I wasn´t planning on this.
Re: Long straddle trading
Quote from falconview:
Howard
I´m testing a method I had in my notes from 25 years ago. This method trades the Long Straddle and it is not your standard volatility trade. So far, I have no one who has anything to offer other than the standard volatility type advice. I could find nothing about it on the internet. Which might mean it disappeared because it was no good. I shall see in a couple of weeks.
Quote from falconview:
Yikes! What is happening to my Long Straddle position? Explain it please?
From the time I bought the straddle this morning, both the CALL and the PUTS have increased in value if I want to sell them? I have together a profit of .44 cents and hold 2 contracts of each.
Which in this novices calculation comes to 400 x .44 = +$176. If I close it now, I make money less commissions $12. What the heck do I do? I wasn´t planning on this.
Forexforex
I bought in paper money in TOS 2 contracts in GOOG as a straddle in puts and Calls. Two hours before the close. See what we will see tomorrow? Ordinary August two months out. Ouch! I forgot this is supposed to be in the WEEKLY. Whoops! Let me go back and do it again.
Quote from falconview:
Forexforex
I bought in paper money in TOS 2 contracts in GOOG as a straddle in puts and Calls. Two hours before the close. See what we will see tomorrow? Ordinary August two months out. Ouch! I forgot this is supposed to be in the WEEKLY. Whoops! Let me go back and do it again.
Forex Forex
Spent 45 mins. trying to get into GOOG at the money. The prices would not load in TOS, nor the order panel. After trying everything, I gave up and went to SPY and took the WEEKLY Long Straddle in that. At the money almost. 127
OOOOh man! My head is a whirl with trying to understand what is happening. Seems like this mechanical method is some sort of STRADDLE, Delta, Gamma Scalping strategy.
Just been reading up on it. Looked up my morning straddle and it still profitable on both CALLS AND PUTS. The IV in both is higher, which is why I guess?
Trying to put the relationship between DELTA, GAMMA and IV, plus the index action in both PUTS and CALLS is making my head really spin.
I think most of the time they are talking about buying and selling stock in the explanations, but in a LONG STRADDLE you do that by buying both Calls and PUTS. Which twists up the thinking of translating the explanations a bit.
I did jot down some relationships and this coming week, will watch the GAMMA and the DELTA at the same time and probably the IV.
Gamma is the speed of the rate of change of DELTA as I understand it. The GAMMA of the index, or the PUT or CALL would be lower, when IV is higher and the GAMMA would be higher if the IV of the PUT or CALL in the long straddle. Not sure how this relates to the individual DELTA of the PUT or CALL yet.
However, when they suggest Delta neutral, they are talking of buying more Puts or CALLS as needed to balance the DELTA by adding the values together in the Long Straddle.
Going to take some more thinking about this in relationship to the Long Straddle composed of both Calls and Puts.
From the example today, IV has been rising due to a little flurry of market activity, though the Long STRADDLE went up a while and then dropped back to the beginning. This effect of IV lag on the STRADDLE means both sides of the straddle are higher premiums. I could cash them out and take a profit already. I dont understand why that happened?
falconview ...... use Yahoo Finance and setup a portfolio for paper trades and stocks to watch, the Bid/Ask quotes are right on. The live QQQ 55C/54P straddle I have opened has a value of $33.50 in my IB account, and $34.00 in my Yahoo Finance Open Trades portfolio. I prefer to track my trades with Yahoo Finance instead of logging in to my IB account.
Two paper trades to compare with my QQQ straddle. Quotes are at close of market today:
Learning how to use the Long Straddle
Forex Forex
I`m at the computer running some videos on gamma scalping.
I was puzzling how to do an adjustment in a Long Straddle, or Strangle. Think somewhere I have gotten the idea that means if the market is going up, you buy INSURANCE with some PUTS, or vice versa if going down. I believe you buy enough insurance to become Delta Neutral again. At least it says to RESET the STRADDLE. Whatever that means?
I still do not understand why the STRADDLE gained on both premiums to give a profit? What caused that? With up and down movement of the index. The adjustment is to lock in some profit, though it looks like you should just do what one video said, simply set a profit target for the daily ATR range and take your profit and exit.
I´m certainly learning what the GREEKS mean, even though I have read them a 1000 times and never kept them in my head before. I guess it will come clear over the next week. Kind of fun, but trying to get some sense of the changing relationships and how to profit from it.
Re: Learning how to use the Long Straddle
Quote from falconview:
I was puzzling how to do an adjustment in a Long Straddle, or Strangle.
Hi to all. Sorry to barge in on your thread, but I am looking for some know-how on “price discovery process” for option combos. Let me explain what I mean. I’m looking at trading option combos, say butterflies, and as far as I can tell (please correct me if I’m wrong) there are no exchange traded combos. So the prices for the combos are derived from the underlying vanilla options – this gives implied spreads. However, (as far as I can tell) these implied spreads are completely (how shall I put it?) unrealistic. For example, it is often the case that the spread on a butterfly has a negative bid price and a positive ask price, i.e. if one where to trade at these implied prices, one would pay for a butterfly when buying it and also pay when selling it. Surly this is just plain wrong. So, my question is: how does one find out what the prices are for combos? Many thanks.
Quote from Alex123:
Hi to all. Sorry to barge in on your thread, but I am looking for some know-how on “price discovery process” for option combos. Let me explain what I mean. I’m looking at trading option combos, say butterflies, and as far as I can tell (please correct me if I’m wrong) there are no exchange traded combos. So the prices for the combos are derived from the underlying vanilla options – this gives implied spreads. However, (as far as I can tell) these implied spreads are completely (how shall I put it?) unrealistic. For example, it is often the case that the spread on a butterfly has a negative bid price and a positive ask price, i.e. if one where to trade at these implied prices, one would pay for a butterfly when buying it and also pay when selling it. Surly this is just plain wrong. So, my question is: how does one find out what the prices are for combos? Many thanks.
Dolemite, thank you for taking the time to read and reply to my post. I often observe that the mid price is 0, so if one where to place a sell order with a price more aggressive then the mid, one would end up paying. Frankly, I find this whole situation with negative bids (and positive offers at the same time) very bizarre. How do all big prop desks trade combos? Is it all OTC? Is there some centralized interbank system?
But more importantly, how would one go about back-testing a strategy, given this situation with implied spreads? Thanks.
Quote from Alex123:
Dolemite, thank you for taking the time to read and reply to my post. I often observe that the mid price is 0, so if one where to place a sell order with a price more aggressive then the mid, one would end up paying. Frankly, I find this whole situation with negative bids (and positive offers at the same time) very bizarre. How do all big prop desks trade combos? Is it all OTC? Is there some centralized interbank system?
But more importantly, how would one go about back-testing a strategy, given this situation with implied spreads? Thanks.
Quote from falconview:
Yikes! What is happening to my Long Straddle position? Explain it please?
From the time I bought the straddle this morning, both the CALL and the PUTS have increased in value if I want to sell them? I have together a profit of .44 cents and hold 2 contracts of each.
Which in this novices calculation comes to 400 x .44 = +$176. If I close it now, I make money less commissions $12. What the heck do I do? I wasn´t planning on this.
DOLOMITE
I´m seriously thinking of buying a picture frame and hanging your comment on my wall over the computer desk.
" I spent 14 years trying to find that one option trade I could put on like a robot and exceed average market returns. Unfortunately, I couldn't find it."
Wonderful, as I´m still looking after the last two years. Makes one think, if not give in. 
Forex forex
Okay I did your weeklies and one of my own.
GLD made +$57
GOOG made + $565
QQQ made +$55
SPY lost -$338
Now I have to cogitate on that. I ran that GOOG trade a couple of times and I still don´t believe it, or know why? Since these were all paper 1 contract trades for learning purposes.
Comments anyone?
Quote from falconview:
DOLOMITE
I´m seriously thinking of buying a picture frame and hanging your comment on my wall over the computer desk.
" I spent 14 years trying to find that one option trade I could put on like a robot and exceed average market returns. Unfortunately, I couldn't find it."
Wonderful, as I´m still looking after the last two years. Makes one think, if not give in.
Quote from falconview:
Forex forex
Okay I did your weeklies and one of my own.
GLD made +$57
GOOG made + $565
QQQ made +$55
SPY lost -$338
Now I have to cogitate on that. I ran that GOOG trade a couple of times and I still don´t believe it, or know why? Since these were all paper 1 contract trades for learning purposes.
Comments anyone?
Long Straddle trading learning.
Dolomite
Thankyou for the kind words. Sometimes we are all hard learners. There is a guy on Howard Cohodas Credit Spread forum. I got so impatient with some of them, I wanted to know their bottom line? Post a statement or something. Most went silent or made huffy comments.
One guy who always treated me very helpful, can´t remember his name, with old age comes forgetfulness, but he fairly promptly posted his monthly brokerage statement which showed he made $22,000 for that month. WOW! I was never the same again. IT IS POSSIBLE!
Trading Long Straddles
I´m playing with the GREEKS this morning and yesterday a bit. Trying to see if the GREEKS will forewarn me of a trend reversal?
Tracking Gamma, Delta and Vega for the straddle in SPY with 127 strike.
Now you make a comment and throw in THETA, I think I remember it, but not sure? Going to have to make another learning column I guess on paper. Seems to be no end to this stuff.
Re: Trading Long Straddles
Quote from falconview:
I´m playing with the GREEKS this morning and yesterday a bit. Trying to see if the GREEKS will forewarn me of a trend reversal?
Tracking Gamma, Delta and Vega for the straddle in SPY with 127 strike.
Now you make a comment and throw in THETA, I think I remember it, but not sure? Going to have to make another learning column I guess on paper. Seems to be no end to this stuff.
Quote from Dolemite:
Options are deceptive, you throw up a risk graph of a straddle then look at a chart and see that the stock can easily move past the break evens and with a little luck you could have a big pay day. My story involved searching for that elusive theta positive trade that would turn the option market into an atm. All I had to do was find that adjustment or rolling technique to stay in long enough for the market to move in my favor since I thought time was on my side. I would backtest all kinds of strategies and adjustments and think that I had found the holy grail. The problem is that the market only resembles what it did in the past, there are enough differences that the adjustment that worked last time didn't work so well this time. I remember reading something similar to this years ago and thinking how I was different and I was going to find that one magical trade. To win in the options market you have to have an opinion and trade that. It can be a direction, opinion of volatility, or where a stock won't go, but you have to have an opinion. The biggest mistake I made is that I underestimated the dynamics of greeks and how volatility impacts pricing. If I had it to do over, I would read every book I could find on volatility until I understood what they said and trade a bunch of small trades over and over while keeping a journal of what happened with the market/stock and how my trade reacted.
But I will say this, if you truly enjoy trading options never give up. I quit so many times over the years but kept coming back. Contrary to opinions on this site, there are a lot of people making above market returns trading options.
Re: Trading Long Straddles
Quote from falconview:
I´m playing with the GREEKS this morning and yesterday a bit. Trying to see if the GREEKS will forewarn me of a trend reversal?
Tracking Gamma, Delta and Vega for the straddle in SPY with 127 strike.
Now you make a comment and throw in THETA, I think I remember it, but not sure? Going to have to make another learning column I guess on paper. Seems to be no end to this stuff.
Re: Trading Long Straddles
Quote from falconview:
I´m playing with the GREEKS this morning and yesterday a bit. Trying to see if the GREEKS will forewarn me of a trend reversal?
Tracking Gamma, Delta and Vega for the straddle in SPY with 127 strike.
Now you make a comment and throw in THETA, I think I remember it, but not sure? Going to have to make another learning column I guess on paper. Seems to be no end to this stuff.
Re: Re: Re: Trading Long Straddles
Quote from ForexForex:
OK ..... I just entered a live QQQ 55C/54P straddle trade, this is not a paper trade.
- QQQ @ $54.36.
- Buy 1 contract QQQ Jun 2011 55.00 call @ $0.0702.
- Buy 1 contract QQQ Jun 2011 54.00 put @ $0.2502.
- Commissions included.
- Total debt $32.04.
- Must close position tomorrow, which is the last day of trading for these options.
I would have preferred to enter at about 3:30pm EST, but I'm heading out now and won't be back before market closes. [/B]
Quote from ForexForex:
falconview ...... use Yahoo Finance and setup a portfolio for paper trades and stocks to watch, the Bid/Ask quotes are right on. The live QQQ 55C/54P straddle I have opened has a value of $33.50 in my IB account, and $34.00 in my Yahoo Finance Open Trades portfolio. I prefer to track my trades with Yahoo Finance instead of logging in to my IB account.
Two paper trades to compare with my QQQ straddle. Quotes are at close of market today:
- GLD @ $148.97
- Buy 148 Put @ $0.34
- Buy 149 Call @ $0.66
- Total debt $100.00, no commissions.
- GOOG @ $500.37
- Buy 490 Put @ $0.35
- Buy 510 Call @ $0.20
- Total debt $55.00, no commissions.
Below is a screen shot of the live QQQ 55C/54P straddle trade as it progressed.
QQQ 5 day chart
Red dot: Enter trade for $32.00.
Blue dot: Position hits $65.00 later on in the day.
Green dot: Closed at $25.00, loss about $8.00.
Long Straddle training 102 trainee class
Kinggypo and Dolemite thankyou for the assistance and comments. In my class of Options Long Straddles, 102 trainee class.
I had a nap during the midday, had been up since the previous 3 a.m. local time.
The comments on VEGA, a) VEGA hurts if number is increasing and b) Vega helps in number is going down.
That is the meat of learning right there. Thanks for that tip.
________________________
I´ll try those straddles again next Thursday in the Weeklies. See if a couple of weeks will lead me to any conclusions.
Planning next week action.
1) Still have my original LONG STRADDLE in play. We seem to be in a trading range. I suspected as much, but didn´t do anything about it. It didn´t hit my target for further action. A problem I am experiencing with it.
2) Also got an idea on a VARIATION of the original touted mechanical trading Long Straddle system and will start it next week, alongside and at the same time, seperately.
3) The comments of eliminating all trades that would be a known losing trade in advance was a good one. I use that already, but it sure doesn´t hurt to be reminded. So I have to be sure of the low IV and wait for it.
I´ve still got to open a portfolio in Yahoo Finance. Will try to get around to it this weekend. I use TOS option chains, Big Charts and Stockcharts.com for charting.
I saw the drop coming around noon hour NY time, but quit and closed the computer and went to take a nap for 3 hours. I was feeling exhausted. Next week another go around.
Just remember that there are always options with options (no pun intended, then again
On 5/24, in my Virtual account only (unfortunately!) I did the following trade with RIMM:
+5 Sep 47.5 Calls
+5 Aug 42.5 Puts
-5 Aug 32.5 Puts
Today, this has a very nice profit % obviously.
I did a very similar trade in my real account with SLV when it was going nuts - bought OTM calls and closer to the money bear put spreads for a shorter month then the calls were, even though going a shorter month is optional. When SLV started to fall, I quickly had a profit on the overall position by the Near the money put going ITM.
The reasoning here is that OTM calls tend to lose alot of value (if you have ever been long a call ATM that then goes OTM, you can see that), so therefore, that is what I was buying. OTM puts tend to hold their value OK, so I buy near the puts because they won't do so terrible in an up move by the underlying. Puts have limited gains anyway, so why not sell the farther OTM puts as well?
Anyway, my point isn't that this specific strategy is so good, but to point out that just what is shown in books, etc. isn't the only things that can be done. You can alter straddles in so many ways, bullish, bearish, buy one side longer month then the other, alter the ratio, consider selling some legs, etc. And then come adjustments!
JJacksET4
Long straddle lessons.
Nice on your success. Jacksjjtet4
The more I am studying the long straddle, the more complicated and varied it can get. I´ve opened Pandoras Box for me as a novice. Got some very nice and kind helpers on here though helping me along.
So far the best play on the LONG STRADDLE seems to be the VOLATILITY PLAY. Short and sweet.
Another benefit, I´m finally after years, studying the effects of GREEKS, at least on the Long Straddle. Might even get it down and understand the relationships and how to use them practically given a few more weeks. I was always obstinate and wanted graphical indicators to tell me the same thing basically, rather than take the time to learn the relationships of the GREEKS.
There are some LONG STRADDLE twists, some of which many people do not know.
There is the Long Straddle volatility play, but also the DARVIS BOX Long Straddle play, the Overlapping Long Straddle trend following play in 2 options, 4 options and 6 options. Though I fear I could not keep them straight when it gets too many options. The earnings reports is the standard Long Straddle play, then I was introduced this week to the Expiration Weekly option play. ( got to do some more study on that one, as I used to trade weekly credit spreads and like Weekly options ) The variations seem endless?
Its going to take me a bit of time, to absorb and reject some of these by trying them in real time. Had no idea the Long Straddle was so popular. Anyway, I´m in the early morning hours making notes of the GREEKS and what they do, trying to build an automatic reflex picture in my minds eye, so I can use them instinctively. Going to be at least 2 more weeks, before I get them down pat, at least for the Long Straddle. Once I graduate, I will go from Options 101 novice, to Options 102 trainee level.
I´m looking forward to the time, I can graduate with my Masters Degree in the LONG STRADDLE. I will have earned that, hopefully by Xmas this year, if I can make back, the - $2800 I lost of my $10,000 stake a couple of weeks back, by switching from paper money trading, to cash real money trading the GAP trade and found the difference was that the sharks, market makers were waiting for me to stupidly use the MARKET ORDER, which I did in the narrow SPY spread. I never in my life dreamed I could get ripped off so fast. The trade was bid $7.00 and I pre- expected the GAP correctly and figured a market order FILL of $10.00 to $10.50. Usually the spread is 1 cent to 3 cents. What I got was atrocious, a license to steal. I got filled at $14.50, my market order was the highest price for several days in premiums. I was shocked to say the least, to go into a $7 bid and get FILLED at $14.50.. Lesson learned, only use LIMIT ORDERS. Can´t even go back to my GAP trading, as I cannot risk the money anymore on that. Smaller bets would not return enough to make back the money. Hence exploring and learning the LONG STRADDLE, so I can make small bets with the remaining of my RISK CAPITAL in real money.
I´m back to virtual trading again the LONG STRADDLE while I learn it. Lots of experienced GOOD FOLKS on here though, helping me. It is a wonderful experience, compared to some of the other forums I have been on.
whassup falconview.
Here's something I use that you might be interested in experimenting with:
1-You pick a price level where "price will not stay for a long time". This is tricky but not impossible. This is point X. That's where you initiate the spread. You attempt to initiate at a price near "middle" and not pay market unless the bid-ask is very tight and you are nearing the end of the day.
2-If price moves towards 1, you do nothing except you place your offer for the whole spread to exit for a small profit. (This happens often, because neither you or me can predict price accurately 100% of the time, or even 85% or 75% for extended periods of time, no matter what other assholes tell you). With price increasing, normally volatility drops slightly and you have a fair chance of getting filled. (This can happen a few hours to days later, depending on the market and on your greedy offer).
3-If price hits point 2, then you DOUBLE your risk by increasing your position. AT THE MARKET. Here you are in a maximum position of agression. If you can create somehow an earthquake in Japan, you do it!.
4-If prices continue to slide, you find a way to exit some of your position, at a profit or sell some puts to DIMINISH your risk while prices continue to crash. This is in case prices stop crashing and rebound.
5-If after hitting point 2, and you have doubled your risk, prices return slowly to point 1, you seek to exit at least half your position with a 1-2 tic profit and diminish your risk again, till you can exit the rest at small profit if prices continue to increase (and volat drop) or you get a shot again at point 2 to double your position again.
All of the above work much better if you manage to initiate near an extreme in price, and have a bearish outlook.
The beauty of this strategy is that catastrophic risk is always playing for you, and that you can control your exposure at all times. The downside is that time decay works against, and therefore you cannot initiate it at random, but pick your spots.
If you add/reduce puts/calls at key support-resistance levels, you can "scalp your way out" of the time decay effects that are working against you on the left side of the price graph. On the right side of the graph, time works for you and you can afford to be patient.
The strategy works equally well in bull or bear outlooks, but you can experiment with the call-backspread too if you are extremely bullish and forecast an explosive move up.
Study it and practice it for a few months, and notice the nuances in realtime execution (which are many), getting a good price for the whole of it being the main nuisance.
Cheers and don't tell it to anyone. OK?.
Clarification> You never use AT THE MARKET orders in options. You simply enter a bid for the spread you want at the current offer.
Options are a relatively illiquid market, and using market orders is generally a bad idea as you can get filled miles away from the fair price (middle or theoretical).
Long Straddle tips, tricks and quirks.
Eudamon
Thanks for that. On the market orders, I learned the EXPENSIVE WAY. Set me back at least for a few months.
I will have to print out your missive. A quick read didn´t really give me any indepth understanding. I take it this is not LONG STRADDLES? Mind you I will trade anything that works every time.
Re: Long Straddle tips, tricks and quirks.
Quote from falconview:
Eudamon
Thanks for that. On the market orders, I learned the EXPENSIVE WAY. Set me back at least for a few months.
I will have to print out your missive. A quick read didn´t really give me any indepth understanding. I take it this is not LONG STRADDLES? Mind you I will trade anything that works every time.
Re: Re: Long Straddle tips, tricks and quirks.
Quote from eudaemon:
It is like a long straddle, with one wing chopped off at the start, to reduce the cost. It behaves like a straddle on the left side and like a spread on the right side. Also by varying the number of options long versus short you can make it look any shape you want. You do this as position evolves.
The idea is to diminish your risk till your risk is zero, very low, or even positive. You don't know how it'll evolve at the outset, but you know how you will react when prices get there. For example if volatility explodes and price drops, you can sell a number of at the money (now at lower strikes) puts at high premium. You diminish your gain if price keeps crashing, but you reduce your risk to zero or at least decrease it, etc.
For example>
Long Straddle lessons.
Welll I got those three messages copied and printed out. I think at the moment it seems too advanced for me. I need more experience with just plain Long Straddles.
Going to file the copy here and look at it a bit later in my print out, in a few days, or weeks. I need to get a sound basis in the Long Straddle first and the GREEKS. Plus my actual CASH money is limited. $2200 that I want to speculate with, to see if I can build back my bank to $10000, from $7200.
One lesson at a time, firmly in my brain. Right now guess I will concentrate on the GREEKS and the effects of them in relation to the plain LONG STRADDLE, or variations. Once I´m comfortable thinking and acting in those terms, guess I can become more sophisticated.
Its a SUNDAY early, just after midnight my time. Going to write down the ways I want to use the LONG STRADDLE during the coming month and list them. I recollect the various reports, the weekly trade, the straight volatility trade and the overlapping straddle trades. Think that will give me enough to deal with for now. I´ll look up my notes on scrap paper and try to organize a trading plan for the month around them. At least to try and trade in paper money. It would help to have just one trade known to work every time.
What would you call that one you just sent? The BACK SPREAD morphed out of the Long Straddle?
I am trying to understand the relationship between VIX and Implied volatility? Anybody got any comments on that? I wonder what a Long Straddle would do in VIX options? Used the VIX options in PAIRS trading and other than going exactly opposite, worked the same as an index at the time only in reverse.
Somebody said, that GOOGLE dumped on Thursday and that made the options increase from the VIX spike volatility. Google apparently in the Long Straddle. From my recent notes Saturday and internet reading studies, I see that both the CALL and PUT option premiums increase together, though one more than the other, when there is a volatility spike. That answered the question about GOOGLE. Yet my SPY long straddle, lost a ton of money, about - $338 I think. I´m not sure if that was a clerical error and if not, what the reason for that would be on the same volatility spike? This was the same Thursday to Friday overnight weekly trade. I seem to have lost my scratch paper with the calculations on it for the SPY Long Straddle. So can only plan on repeating the experiment next Thursday to clarify. The GLD trade and the QQQ trade more or less made a solid little bit and I have the feeling that is the norm and how it is supposed to work, for the weekly?
Aaaahhh! Finally found last weeks, IV numbers I had been jotting down on scrap paper. They were in the waste basket. My desk top is lousy with scratch paper notes on different subjects. ( Trying to do the enginneering on a COLD FUSION heating system for a boiler steam supply to a turbine electrical generator. The place were I am is short of electricity at affordable prices. Thinking of forming a company to supply electricity to the National Grid. Would like to do a prototype 275 kw plant and build up to megawatts.)
Confirms looking at them, the Long Straddles, that low volatility as in IV, for the ATM Long Straddle is below 16. So, I can remember that. Will put on a Long Straddle anytime the ATM IV is at 16 or lower. That will be a MUST TRADE! In Virtual Paper Trading anyway for a week or two, until I confirm it in my mind. IV on Friday close, was over 19, don´t know if that is HIGH or low and since the actual index action in SPY has been going up to the top of the trading range and is now back down again to the original bottom of the trading range and where I started the ATM Long Straddle, what I do notice is that the LONG STRADDLE remains swollen with positive premium and if it is still there Monday morning will cash it out, instead of waiting for a longer play. GAMMA is .08. I have no reference yet to know if that is very much or not. I did read up on GAMMA scalping, but can´t remember now what to do about it and when? Will have to read it again, as I just re-learned that GAMMA is highest ATM strike, and goes lower in the numbers as you move away from it. As you can see I´m trying to learn the GREEKS. When to Gamma scalp and take a profit from slightly advanced swollen premium is the basic question here. Is Gamma .08 a good number to sell is the question?
What happens in a Trading Range, and you are expecting a breakout in a couple of days going into a trend? If IV is high and you wish to put on a Long Straddle to follow the trend? I guess buying high IV, to do trend following, will only result in the IV going even higher, if the market starts to trend?
The early conclusion here is definitely to agree that in the LONG STRADDLE, it is the IV that matters to dictate price premium and not any short trend swings in a trading range, back and forth.
Comments on these thoughts?
Volatility trading with Long Straddles
Found a nice Volatillity chart with ISE
Gives HV and current IV at current ATM options.
For volatility trading
Summary of my understanding of the GREEKS were relevant to the LONG STRADDLE. Please correct me where I am wrong.
__________________________
LONG STRADDLE TRADING LEARNING NOTES
Left alone, the LONG STRADDLE is a pure volatility trade. Buy when volatility is low and sell when it blossoms. Usually when you expect a breakout from congestion, pennants and flags, end of trends. IV numbers seem to be all over the place. Figuring out a 10 day average IV and compare it to the HISTORICAL 10 Day Volatility
THE GREEKS:
GAMMA - Measures the speed of Delta movement change. Calls measure positive gamma numbers, while the PUTS measure in negative GAMMA numbers. You can trade around the REGRESSION TO THE MEAN. ATM gamma is zero, the starting point. You can ADD the negative and positive gamma from the CALLS and PUTS to get a GAMMA NUMBER for the LONG STRADDLE. There is something called GAMMA SCALPING, but I haven´t figured it out yet? If you combine a LONG STRADDLE, two GAMMAS from the PUTS and CALLS, a POSITIVE GAMMA HELPS THE TRADE. So long as the total GAMMA is positive in the Long Straddle, the trade is GOOD.
Ideas to identify for GAMMA SCALPING. Combine identifying a TREND CHANGE with chart trend lines, or also change in Delta, which would be the VEGA number, with the total GAMMA number for the Long Straddle.
Gamma is HIGHEST at the money options. ATM. For the individual PUTS or CALLS, Gamma is highest ATM, the number goes negative, either way for PUT, or CALLS either OTM or ITM.
If the GAMMA number is moving POSITIVE, you want the market to move quickly. If the GAMMA number is moving NEGATIVE, you want the market to move slowly.
VEGA - Is the SENSITIVITY TO VOLATILITY ( IV ) MOVEMENT - When the VEGA is going UP, it HELPS the trade, when it is going down it HURTS the trade. VEGA effects ATM options most in a LONG STRADDLE, as premiums change caused by IV changes. Not sure how to use this yet?
DELTA When the indexes, or stocks are going UP or Down, the movement of DELTA shows volatility and the Long Straddle premiums will expand in the LONG STRADDLE. In a TRADING RANGE, both the PUTS and CALL premiums increase. In a trend, only one side will increase.
THETA Whatever number you start out with, will grow as the options move closer to expiration. The number measures the TIME DECAY effecting your LONG STRADDLE TRADE.
IMPLIED VOLATILITY Seems to be all over the place. I am guessing you need a 10 day, or 5 day comparison of the average of the IV, compared to the HV average for the same period.
Implied Volatility in a LONG STRADDLE as it occurs, effects both sides of the LONG STRADDLE, whether in a trading range, going up or down in short movements. The IV expands the premiums.
LONG STRADDLE directional trading You can close both sides of the Long Straddle, or if it gains enough to pay for both sides, by closing the winner, you can let the loser ride, in case you get a market reversal and it starts to make back some money. It does not matter if it expires if the WINNER of the LONG STRADDLE has covered the initial cost of the losing side. You will save the commission.
WHEN TO TRADE THE LONG STRADDLE
When you expect the market to break out of congestion, either way.
When there is going to be a market announcement that will excite the market. First Friday of the month, EARNINGS REPORT being the major one. The following week sometime, the CPI or Cnsumer Price Index report will come out. So will the Podcers Price Report PPI. Doesn´t matter which way the market reads it, so long as it moves it. You want volatility.
DELTA HEDGING Not sure if this works with the Long Straddle, but when you own the STOCK and you buy OPTIONS, you balance PUTS and CALLS to keep your DELTA at 1.0, or 100%. You add or subtract options, to do this. Your stock value would be regarded as Delta 1.0 or 100%. The ATM options you buy would be for example; Four .5 Delta ATM options to equal the stock value of 1.0 Delta.
LONG STRADDLE TARGET EXITS. You can use the True Range for the expected day performance of the underlying index, etc. A 3 day range might be workable?
falconview ...... You are over analyzing what is a very simple option position - Long Straddle. A Long Straddle is nothing more than buying a call with a strike greater than the underlining, and buying a put with a strike less than the underlining.
Learning the Long Straddle.
Over analyzing. I've been known to do that many, many times. I will put the trade on Thursday, this is the weekly right?
Will use real money account.
I trust your judgment and recommendation, so there it is! You are inspirational and a mentor.
I did notice that GLD and QQQ seem to work more or less the same.
Actually I'm trying to learn the GREEKS. I've let those kibitzers who criticize constantly across some forums, get my goat, by not bothering with the GREEKS. Still I do realize, you just require to know when Volatility will POP, however you do it.
Thankyou for the pep talk, really!
Long Straddle positioning
Eudamon
That PUT Backspread.jpg was in Straddles? Page 18.
Quote from ForexForex:
falconview ...... You are over analyzing what is a very simple option position - Long Straddle. A Long Straddle is nothing more than buying a call with a strike greater than the underlining, and buying a put with a strike less than the underlining.
I haven't read the middle 10 pages of this thread yet, but I was just reading about a guy who mainly does long straddles/strangles. He puts them on before an earnings announcement and closes them just after the announcement. For example he just did one on RIMM, opening 25 JUL long at 34 on Jun 10 for a total cost of 13,000. He closed it out on Jun 17 (day after announcement) for 18,100 (39% profit).
There was no mention of greeks or vols. A week before earnings volatility is probably going up but hasn't peaked yet, and premium might be cheap compared to a day or two before.
I had some luck doing some "reverse" double diagonals last earnings season on some high profile stocks like GOOG. I did a long straddle in the front month and shorted a strangle the following month. These were paper trades.
Quote from rew:
Actually, you just described a strangle. A straddle has the put and call at the same strike and expiration.
Long Straddle- Strangles
I get the part where the Long Straddle is when the index or stock is right on the strike, while the strangle is offset slightly to accomodate each side. NO PROBLEMA!
Long Straddle trading methods.
Eudamon
Your Put backspread, seems to be similar to this mechanical method I am trying. Overlapping straddles. Though in my case, you drop and lose the LOSING OPTION side and carry the winner for double the distance. While in your example, you sell the winning side immediately and take your profit and carry the loser for hopefully the eventual reverse, increasing the overall options. Your method counts on not losing anything if possible, though I would think THETA would possibly cause this sometimes.
Im anxious to try it, as I do believe and you didn´t mention this is a long straddle system you suggested.
On the other hand, for cash money, I am undercapitalized right now, so will immediately go for FOREX FOREX system as that will keep me out of violations of the DAY TRADER RULES. If you leg into Long Straddles I wonder if they count each side as a single trade? If that is so, it looks like I would only be able to do two underlying stocks, or whatever per week for a while. Of course, I can increase the amount of contracts used. I believe that would limit me to two trades per week in Long Straddles legged in, but will have to look it up under the Day Trader rules.
What would be the best candidates Forex Forex? I presume GOOG and QQQ? Or maybe GOOG and GLD?
I´ve heard third hand that GOOG swings $10 a day in premiums, so it does look like it might have the built in volatility? I´m not going to increase my account, unless I make back the money lost and bring the balance back to starting values.
Rarely a long premium, delta neutral position will provide profits untouched to expiration. When you put it on, is because you expect something to happen, i.e.: Price to move fast one way, or the other, or either, or volat to explode or implode. What will make or lose you money with this, or any other strategy, is your ability to put it on at an opportune time and to take profits/losses/close it/exit it when whatever happens occurs.
Every minute, hour or day that passes, something new occurs, and you are already prepared to re-spond to it. Basically you want everything that you execute afterwards to improve upon your position, decreasing your risk or improving upon your reward possibilities, which if left alone will slowly decay into maximum loss most of the time.
This applies equally to long straddles, strangles, or backspreads or... whatever that is convex at the current price.
If you go back to the initial pic I posted, point X is at an inflexion point (or tries to be). At that magic point, if price stays there till expiry, the position will not change in price. So you can say that at that point it is neither convex nor concave. Like a porcupine, whoever tries to f..k with it, he'll get stung!.
Except for commissions and execution costs, of course.
Long Straddle and volatility popping.
Eudamon
Yup! I am getting the picture. Long Straddles/straddles are for a volatility POP, or temporary ballooning.
Sort of like somebody blowing a kids soap bubble into the air, and it floats on the breeze for a bit, but busts, or deflates unexpectedly. Maybe not much difference in the time limit. So that means anticipating some market volatility.
I was watching GOOGLE over the weekend and a couple of SPY trades. The GOOG actually made some money, but looking at the chart it looked like selling straight PUTS might have been a better play? Seems to be a very volatile stock. I had read somewhere that INTC is a favorite also? GOOG made $156 net this morning from Friday in the STRADDLE.
SPY cleared $10 net.
Paper trading of course.
******* That backspead post of yours was with STRADDLES, or STRANGLES right? Just to clear up mind. That was the way I was trying to picture it in my mind.
Forex Forex has me convinced to trade real money this week. Now I just have to pick my volatility candidates. I can only trade TWO trades in Straddles/strangles, as that would count as four trades in one week. Forgot to look up that rule on day trading again. Do it right now.
Why not papertrade for a few months, to learn the many quirks in these options positions, and at the same time save some cash so that you are not curtailed by the 25k restriction?. I'd do that. The money you are going to make or lose, either way, is not going to be big anyways.
Day Trader rules effecting long straddle/strangles
Eudamon
I´m thinking on it. I can do that of course. Did talk with HELP at TOS, but they were not helpful. So I have a query by email into CBOE for more info. If I trade two STRADDLES using TOS default prices, That is okay for two trades they tell me. But if I leg into a straddle to get better prices, then I violate the Day Trader rule. My straddle becomes not two trades, but four trades. As I read it, you are only allowed 3 trades per week.
Long straddle jargon
Rarely a long premium, delta neutral position will provide profits untouched to expiration. When you put it on, is because you expect something to happen, i.e.: Price to move fast one way, or the other, or either, or volat to explode or implode. What will make or lose you money with this, or any other strategy, is your ability to put it on at an opportune time and to take profits/losses/close it/exit it when whatever happens occurs.
Every minute, hour or day that passes, something new occurs, and you are already prepared to re-spond to it. Basically you want everything that you execute afterwards to improve upon your position, decreasing your risk or improving upon your reward possibilities, which if left alone will slowly decay into maximum loss most of the time.
This applies equally to long straddles, strangles, or backspreads or... whatever that is convex at the current price.
If you go back to the initial pic I posted, point X is at an inflexion point (or tries to be). At that magic point, if price stays there till expiry, the position will not change in price. So you can say that at that point it is neither convex nor concave. Like a porcupine, whoever tries to f..k with it, he'll get stung!.
Except for commissions and execution costs, of course.
_________________________________
Eudamon I had trouble understanding some of this. The words inflexion and convex and concave did not bring any visualization picture to my mind, from such option jargon. Could you clarify please?
The initial pic you posted at X, I visualized as say in a bear trend, being someplace on the major down leg, and point 1 would be the peak of the pullback, a top lower than the top before, in a stepladder descent in a bear trend, and point 2 being the bottom of the main down leg of whichever wave is happening. Before the next pullback.
A long straddle is convex at every point. (the curvature is upwards).
A short straddle is concave at every point. (the curvature is downwards).
That pic I posted is convex from point X leftwards, and concave from point X rightwards.
Therefore at exactly point X, the curvature is zero. It also crosses the expiring PNL graph near point X, which is an added benefit...if you think about it for a while. Sometimes a long while.
Some people use convex/concave terms opposite. Matter of nomenclature.
Long Straddle nonemclature
Ha! I´m just an uneducated hick. Self taught character that works with his hands, normally. Except now I´m old and so forth.
Whats a PNL graph?
got the convex and concave, but what is the nonemclature in this reference. Was that the PNL graph in your jpg ?
Re: Long Straddle nonemclature
Quote from falconview:
Ha! I´m just an uneducated hick. Self taught character that works with his hands, normally. Except now I´m old and so forth.
Whats a PNL graph?
got the convex and concave, but what is the nonemclature in this reference. Was that the PNL graph in your jpg ?
Long Straddle- strangles.
Interesting stuff this morning.
1) Overnight strangle lost - $102
2) Straight Call buying + 18
3) Eduamon method ahead + 58
Long Straddle, and the oveerlapping strategy PUT backspread increasing volume
Eduamon
Don´t know calculas. I like the graph of he Put_backspread-increasing volume though. Volatility and volume often going together. Where did you get that?
Long Straddle trainee gets put back a grade to novice.
I just looked up that PNL graph examples. What got me very interested is how X was at the intersection of the curving lines and the straight line graph. How you figure that I don´t know?
I think I just got put back a grade from Options 102 trainee to Options 101 novice.
Re: Long Straddle, and the oveerlapping strategy PUT backspread increasing volume
Quote from falconview:
Eduamon
Don´t know calculas. I like the graph of he Put_backspread-increasing volume though. Volatility and volume often going together. Where did you get that?
I like simple, but feel chagrined ( see I wrote that without a dictionary ) that I do not know enough.
i was looking up the put backspread on the internet, and the graph example said it was a put_backspread_volume increasing example.
You may not have had it on your example graph.
I´m currently running three trade methodologies.
Straight buying but continuously in the market. When you close your reverse.
What I think your Eudamons put backspread system is. At the moment I have been experimenting with targets in SPY to take a profit and add another straddle. So far in 3 trades I have earned +$58, +$38, +$38. Using index targets to close the winning trade and put on another spread. The first one, I had a profit on both sides, so closed both. The second one, only was winning on calls and the third one was winning on calls only. So I am holding two sets of PUTS. Using 2 contracts in SPY. I am not at all sure this is the right way to go about it? I have sort of a mix of the mechanical method and your method.
I am also trying out a new method of trading the trend. I cashed it in early in the morning for $18 net. But am keeping track of it, as if I was CONSTANTLY IN THE MARKET with a new indicator. That new method is up $134 so far.
Quote from falconview:
i was looking up the put backspread on the internet, and the graph example said it was a put_backspread_volume increasing example.
Quote from falconview:
But am keeping track of it, as if I was CONSTANTLY IN THE MARKET with a new indicator. That new method is up $134 so far.
Lng straddle, put backspread combo
Seems to be much the same, volatility picture and the volume picture?
I wonder how you get this graph in real time for something you are trading? Does it come up on an option calculator? I was looking for position X.
constantly in the market, Calls or Puts
With my new hourly indicator reversal, I almost thought I had a signal for a reversal, but apparently not yet. For the being constantly in the market with either Calls or Puts.
Long straddle volatility watching
For the long straddle, volatility trade, almost reached BREAKEVEN counting in the commissions. Maybe the volatility will pick up whenever it starts a bear drop?
Now...you are holding long puts...twice...in a rising market with potentially imploding volatility...THAT is not related in any way to anything I have posted. OK?.
SIMPLE is better. But I know most like it more complicated. This is why I suggested papertrading for a few months.
You are now long puts gambling on a big decline that should start inmediately or you'll lose money. Convex with no way out if wrong. Bad.
fwiw: I have the june close near the highs...so rally till then most likely...your current put position if that is correct will be evaporated.
Re: Lng straddle, put backspread combo
Quote from falconview:
Seems to be much the same, volatility picture and the volume picture?
I wonder how you get this graph in real time for something you are trading? Does it come up on an option calculator? I was looking for position X.
"Now...you are holding long puts...twice...in a rising market with potentially imploding volatility...THAT is not related in any way to anything I have posted. OK?.
SIMPLE is better. But I know most like it more complicated. This is why I suggested papertrading for a few months.
You are now long puts gambling on a big decline that should start inmediately or you'll lose money. Convex with no way out if wrong. Bad."
¨¨¨¨¨¨¨¨¨¨¨¨¨¨¨¨¨¨¨¨¨¨
Hmmnn! I guess I did not understand what you said then? That point bothered me as well. In the mechanical method, you simply drop the puts when selling the CALLS. I chose to try what I thought was your method as I apparently did not understand it? I thought you were selling the CALLS when you guessed point 1 above the X, but still holding the losing PUTS. It was a dilemma I was trying to figure out. Close the whole straddle, and place a new one. In the mechanical method you close the losing side at a specific target. Not necessarily point 1, but say one STRIKE in the SPY. You hold the winner for two strikes and this method it is touted will earn 30% a year.
When I tried the 1 strike move, it would have to go 3 strikes to make some money. The few times I tried it the market turned around before triggering a profit and I decided to try it by ruducing the target in half, at .5 ticks. What happened I got too many trades and became overwhelmed. Plus it didnt make enough NET after commissions. So I widened the range to .60 ticks, that I´m trying this morning but it is still a bit narrow. 1 strike is a 100 ticks. So I did this morning again, widen the last trade to a target of .75 ticks trying to find the point which would work most often, at least in the SPY.
However I am carrying PUTS I dont want to carry. So what am I doing wrong by your lights? I don´t quite have a clear idea of what you tried to explain and assumed you were being hazy as it is a public forum. You could email me though.
Quote from falconview:
I like simple, but feel chagrined ( see I wrote that without a dictionary ) that I do not know enough.
Quote from kinggyppo:
here is simple. keep going you are on the right track........
testing methods for a novice
Ha! Ha! King Gypo. Thankyou for chiming in. Bit of cheer in here.
Actually, my long Calls with the new indicator I´m trying is up to $132 and seems to keep me in the trend ignoring the pauses. I´m pleased with that, was just trying it in a trading range and might get whipsawed there. Will need more work then.
The LONG STRADDLE has passed BREAKEVEN finally and now showing a .11 cents profit.
What I thought was Eudamons system, he tells me is wrong. So I don´t understand it I guess? Have cancelled it at a loss. Just paper trading so no biggy here. A trial and error process.
The straight buying though is encouraging. Might get into CASH TRADING with that next week again.
Re: testing methods for a novice
Quote from falconview:
Ha! Ha! King Gypo. Thankyou for chiming in. Bit of cheer in here.
Actually, my long Calls with the new indicator I´m trying is up to $132 and seems to keep me in the trend ignoring the pauses. I´m pleased with that, was just trying it in a trading range and might get whipsawed there. Will need more work then.
The LONG STRADDLE has passed BREAKEVEN finally and now showing a .11 cents profit.
What I thought was Eudamons system, he tells me is wrong. So I don´t understand it I guess? Have cancelled it at a loss. Just paper trading so no biggy here. A trial and error process.
The straight buying though is encouraging. Might get into CASH TRADING with that next week again.
Long Straddle volatility, bull vs bear.
Hmmmn! I had planned to do QQQ as you suggested just after lunch on Thursday in CASH. Apple as a paper trade would be okay on paper.
Is there a reason you suggest Wednesday? I know you mentioned it before.
I don´t show a reversal of trend yet though. Maybe tomorrow.
I guess what I am learning that long straddles are best done with a dropping index or stock, not on the rising ones. More volatility.
Re: Long Straddle volatility, bull vs bear.
Quote from falconview:
Is there a reason you suggest Wednesday? I know you mentioned it before
Quote from falconview:
Gentlemen
...As to the reasons for the failures...
Gap Trading was very lucrative with 4 months of funny money trading. Made 297% in four months. But when I opened a $10,000 cash account, I won the first trade, but lost the next three, which has put me down 30% of cash account...
Re: Trading Long Straddles
Quote from falconview:
Having failed at credit spread trading, Gap trading and straight buying of options. I´m now trying LONG STRADDLES in options. Got one week in it now, but probably run through the month. Any body got any advice on making money with lONG STRADDLES?
Long Straddle quirks.
To the new contributors. Thankyou very much for your advice and interest.
Okay! I got to look up the PUT backspread, volatility, explanation.
The strategy is to have a long straddle, and if it trends, for the CALLS side, then drop the PUT and re-open, buy the PUT at a lower STRIKE. That presumably means a cheaper PUT?
Not sure how this works in the premium prices or with profits?
I did notice that the PUT increased enough in premium to more or less negate the returns in the Calls. Just letting it run as a straight Long Straddle.
Will try again later. I have figured out another idea, so will try that as well.
Again thankyou to the contributors. I still chuckle over the Mother Bear and Cubs analogy. Don´t know how to apply it though.
Put Backspread, volatility in Long Straddles
Eaudamon
Don´t know quite where I went wrong on your spread trade advice. Maybe you can clear me up on a couple of things. I was re-reading your print out this morning in my hammock on the verandah, waiting for the sun to come over the ridge.
Your item 3 You state to DOUBLE THE RISK at point 2.
I take that, you mean to either buy more PUTS, or buy another straddle.
According to the explanation I have read on the internet, it says to close the PUT and open another PUT one strike further down. With your DOUBLE THE RISK, I´m not at all clear what happens at this point 2 in your explanations. Can you clear up that point please?
Long Straddle, Call Backspread
Okay I got a reversal signal for the trend. For the Long Straddle.
I closed the CALLS and kept the PUTS of the Long Straddle. Then I went out one strike cheaper, as in the CALL BACKSPREAD, volatility instructions and bought a replacement order of CALLS at a cheaper price.
Be interesting to see what happens? This is on paper. I´m not sure yet what doubling your risk means? As Eudamon explains it. The CALLS alone didn´t make much, only $20 net after commissions.
_____________________________________
The straight buy in CALLS was closed for +$84 net after commissions and I bought 2 Aug PUTS 129 at $3.40. Here I am more interested in seeing if my new indicator actually makes trend reversals obvious. Other than that, the lessons for today are to observe the a) trend, the b) backspread trade and the c)straight trade. Oh yes! Sometime today I have to put on a Long Straddle for Fortis Fortis and see how that goes? As in a volatility play I guess? Think I will do that in five minutes.
_______________________________
Try to think of the backspread as a whole unit. When it goes to point 2, it is moving towards the lowest price point (of the whole unit) and in the intended direction of the "kill", there you double your holdings of the whole unit. Legging out, etc is making things complex, and always changes the risk profile. If that's what you want, go for it, else keep it as a unit: You have your bodyguards, your flanks, and yourself with the rifle. Why fire the bodyguards in the middle of the firefight?.
Also try to think on your returns as a % of total risk taken, instead of $ and cents.
long straddle to backspread.
Eduamon
I´m still not clear, but thanks for the reply. You mean buy another straddle? DO not do, like the explanation on the internet says, by buying just more puts?
Yes. Enter another unit. Most times you receive a credit too, so "buying" isn't entirely accurate.
If your max risk was R, then double the max risk at point 2, and enter an appropiate additional number of units. At that point you have maximum risk, but also maximum flexibility.
You will only lose big if price stays exactly at point 2, frozen in time. So choose your spots for point 2 wisely.
Profession jargon confusing to novices
Thankyou! Sometimes I don´t get the jargon used by professionals.
I don´t know what the market is doing this morning. It is staying static with my indicator, though early about 20 mins into the day, it said down. Then later it returned to static. Sideways in the up direction. I learned I should wait for the hour to pass, as I am trading hourly and cannot rely on the indicator if I do it out of context part way through the formation of an hourly bar. Gave me a scare.
Paper trade long straddles for a few days and see where it leads
Eudamon
Been thinking about your method. Essentially, since you are not adding a PUT, then it is not a PUT BACKwhatever, as described.
Since you are just aiming for point 2, which seems to be the idea here and the most difficult part and buying another STRADDLE, then basically what you are doing is AVERAGING LONG STRADDLES. After some thought, even that seems to be a good thing, if you get some market movement and I presume even though you are trying to get the bottom of a retraction, or pullback in a bull trend in this example, it doesn´t seem like it would really matter, because it is non directional and is a STRADDLE, so long as you get the market to move enough. In the SPY I am guessing this would be two strikes.
Speaking of small profits. One of my trades made only $20 and I was thinking what a lot of work. But again your percentage thinking turns out this $20 is a 3% net return on $600 capital invested for not more than 2 or 3 days. That is certainly something to think about there. As good as credit spreads, a whole lot cheaper for risk capital and faster returns.
Ahh well! They say you won´t know until you try it. Paper trade for a bit, couple of weeks anyway and see where this leads.
Re: Paper trade long straddles for a few days and see where it leads
Quote from falconview:
Eudamon
Been thinking about your method. Essentially, since you are not adding a PUT, then it is not a PUT BACKwhatever, as described.
Since you are just aiming for point 2, which seems to be the idea here and the most difficult part and buying another STRADDLE, then basically what you are doing is AVERAGING LONG STRADDLES. After some thought, even that seems to be a good thing, if you get some market movement and I presume even though you are trying to get the bottom of a retraction, or pullback in a bull trend in this example, it doesn´t seem like it would really matter, because it is non directional and is a STRADDLE, so long as you get the market to move enough. In the SPY I am guessing this would be two strikes.
Speaking of small profits. One of my trades made only $20 and I was thinking what a lot of work. But again your percentage thinking turns out this $20 is a 3% net return on $600 capital invested for not more than 2 or 3 days. That is certainly something to think about there. As good as credit spreads, a whole lot cheaper for risk capital and faster returns.
Ahh well! They say you won´t know until you try it. Paper trade for a bit, couple of weeks anyway and see where this leads.
Dolomite straddles.
Dolemite
Thanks for your interest. No the prices probably are not realistic. I am actually doing this on real paper with a pen. I am giving a couple of cents to the real time straddle price. I mostly just want to familiarize myself with the workings of the index and the effects at this point. Though I do plan to do a straddle cash trade tomorrow. I¨m trying to get an idea of several things at once. My trend change indicator, if it works. And how well? How long it takes a straddle to cover 2 strikes in the SPY. What that does to the premiums and so forth. The actual trying to make money at this point is secondary. I´m just learning the ropes.
Re: Dolomite straddles.
Quote from falconview:
Dolemite
Thanks for your interest. No the prices probably are not realistic. I am actually doing this on real paper with a pen. I am giving a couple of cents to the real time straddle price.
Long Straddle review results
Forex Forex
My apologies. I haven´t even signed up on Yahoo Finance yet. Will do soon. What is IB?
My mind puzzles problems overnight. Learned C++ once, and took a course at the Community College. With the intent to doing programming. I found that my mind wouldn´t shut off when I slept and thus it exhausted me. End of programming idea as a vocation.
Anyway, to get to the nitty gritty. The weekly bar in a confused market, seems to achieve a movement in the SPY of 2 strikes during the five days of the week. That should provide a profit, using 6 to 8 week options, to minimize the effect of THETA.
The trouble with a 5 day week,is that you do not know if you are starting the week, at the top, middle or bottom of the bar. So instead of diddling with strategies that rely on changing the straddle to a directional trade, I´m beginning to think Eudamon is right. Leave the STRADDLE alone as a non-directional trade. Treat it as a spread. I like his idea of AVERAGING if you get the expectation to direction wrong. As to those who insist the STRADDLE is a Volatility trade, I am not sure it is. Certainly you make a profit quickly and a good amount when a volatility balloon occurs, But if you are trading every week, then just being often in the market through a week, should catch the volatility balloon, when it occurs. You do not actually have to plan for it. Just take it as it happens. As somebody told me on here, I just got LUCKY when it happened early in my trying to understand the STRADDLE uses.
Lets say you want one trade a week. Can you get that? 3% seems to be the minimum return on investment. If you trade AVERAGING, trying to get the once a week, sometimes twice a week trend ( in the hourly charts ). A profit is a profit, no matter what, as somebody said.
As day trader rules limit me to three trades per week, one of those trades is reserved for a directional trade, if I can get my trend turn indicator to work properly. That leaves me with two spare trades. One of which could be the luck of getting a move for a quick profit with a one straddle spread trade. Otherwise averaging two spreads should work in a non directional straddle spread, whichever direction the trend finally occurs. The important thing is to make a profit every week. Am going to test the other WEEKLY options end of week trade and see how it works. Having traded that in credit spreads, I know it works in credit spreads, will it work in a straddle spread is the question? A boost to profits from volatility occuring, would be just icing on the cake. If it happens, it happens.
That is the picture forming in my novices mind from this learning process so far. I´m still recording the GREEKS, but can´t find much predictive ability in them. The IV seems to be the most workable numbers. From reading some forums, some of the professional traders really get into the GREEKS and convoluted strategies, very complex and I suppose they have their part to play. I just haven´t seemed to grasp anyway to use the GREEKS yet, in a pragmatic sense while planning my more simple trades.
Re: Long Straddle review results
Quote from falconview:
I´m beginning to think Eudamon is right. Leave the STRADDLE alone as a non-directional trade. Treat it as a spread. I like his idea of AVERAGING if you get the expectation to direction wrong.
...and retreat.
Long straddle results experimenting
Well I had four trades on, all of them paper trading with a pen. Not totally accurate, but I was using real time account for the prices. Gives an idea anyway.
The trade I put on yesterday for FOREX Forex recommendation,
1) Forex straddle, done early in the morning yesterday. Returned +$168 after paying commissions. Or NET profit. +24% ROI
2) A straight PUT directional trade done at turn of trend signal. + $268 after paying commissions, NET. + 38% ROI
3) An extra Forex Straddle at a different time during the day. I was fooling around a bit, + $204 NET. Or +29%
4) One of my own STRANGLE + $120 NET, +18% ROI
Will do a Forex other straddle later today also, but this one is intended in real cash account. Will make it as small as I can. One contract preferably, for the test.
Long Straddle results so far this week.
I forgot to mention, this morning was a Volatility ballooning. I caught the peak, about half an hour after the opening, or a bit more. Using the DMI indicator fast line to tell me where the volatility peak was.
Use the ROI, but with reference to your total account, not the particular cost of whatever put/call/spread/backspread/straddle you are entering. Then it all falls into place somehow...just a suggestion to keep you grounded.
IB : Interactivebrokers. Arguably one of the most solid firms out there.
EXCEL: A microsoft spreadsheet product. Which can receive realtime quotes, balances, etc, etc, from IB, make realtime graphs, etc, etc, for users with little or no programming skills.
You can even have your PnL realtime and automatic highlight (in another color) of the most convenient put or call to sell or buy to make your reactive adjustments, calculate your risk realtime, reward at different prices, and even balance your checkbook.
Very likely your superduper trend, DMI, whatever indicator can be included in a column of EXCEL as well.
Forex Forex
Forex forex
Lucky I started reading some messages back. Forgot this was supposed to be a trade in QQQ. Will wait another 40 minutes Anyway I switched from SPY to QQQ and I see the risk is $56 right now for a one contract STRADDLE. I suppose I should do five Straddles for a bet of around $280 to see what would happen?
Long Straddle
Fortis Fortis
Okay! I´´m in 2 contracts straddle spread at .89 cents REAL MONEY
Also did a paper money similar of the Aug. SPY, 2 at a spread of $7.47
Compare them tomorrow morning. I´m closing down shop. Did everything I wanted to get done today.
Quote from eudaemon:
Use the ROI, but with reference to your total account, not the particular cost of whatever put/call/spread/backspread/straddle you are entering. Then it all falls into place somehow...just a suggestion to keep you grounded.
IB : Interactivebrokers. Arguably one of the most solid firms out there.
EXCEL: A microsoft spreadsheet product. Which can receive realtime quotes, balances, etc, etc, from IB, make realtime graphs, etc, etc, for users with little or no programming skills.
You can even have your PnL realtime and automatic highlight (in another color) of the most convenient put or call to sell or buy to make your reactive adjustments, calculate your risk realtime, reward at different prices, and even balance your checkbook.
Very likely your superduper trend, DMI, whatever indicator can be included in a column of EXCEL as well.
Quote from kinggyppo:
everybody should have a basic working knowledge of excel, it is an amazing program, especially people going into finance. Very easy to port the indicator based data into and out of excel, this is pretty basic stuff. Now if only I could get excel to tell me tomorrow's close.
Quote from eudaemon:
If you could rule out 2 numbers in an european roulette wheel, or 3 numbers in an american one, and you could find a casino with no limits, you could own the world in less than a couple of days.
If you could know where all the options and futures bets are placed (wait you can!), you could rule out a few prices where the market is unlikely to go. All could be changed by a new bigger bettor entering the action, but then you could remove your bets from the market, or reverse them. (The Savannah Move).
Using EXCEL in a casino is against the law. Be forewarned!.
Quote from kinggyppo:
I was in a casino a few years back, saw 13 red numbers in a row on the roulette wheel, I dropped a couple hundred, the best was the look from the bit boss, I said I know gamblers fallacy, sure enough red came up again, had a little sweat on my brow when I doubled down, got my black and got the hell out of there, pit boss told me he saw 27 in a row one time!!
Quote from eudaemon:
Say that by some algo you accurately can rule out 2 numbers, and place equal bets on all other 35 numbers (european wheel has 37 numbers). What is the SURE outcome per each roll of the ball?.
Compounded?.
Start with 1000 one dollar chips, and physically do it (sim it in EXCEL). Life will simplify after that. I promise. Remember 2 numbers are ruled out (maybe more if you are skilled, but let's not go there), and you bet in the other 35 numbers an equal bet in each.
How much do you make per roll?.
It's so simple that people don't see it!.
You got me curious about that one. Care to explain the outcome and how it works out?
Quote from falconview:
You got me curious about that one. Care to explain the outcome and how it works out?
But you don't get to place as many bets per hour...not even close.
Long Straddle calculator
Learning Excel again, doesn´t really thrill me. Used to know it 20 years ago, but haven´t used it since. Isn´t there a FREE CALCULATOR for LONG STRADDLES on ThinkorSwim someplace?
Of course I meant all 35 bets are made on the same roll of the ball. The more numbers you can rule out, the bigger your % edge. Much easier than predicting where it is going to land.
Long Straddle money management additions
Reading a bit on Long Straddles. Seems in a 1 month to 2 month straddle buying system. If you apply this money management rule, you boost your profits overall.
1) Close STRADDLE after it loses 10% of the spread value.
2) Let gaining Straddle run.
Re: Trading Long Straddles
Quote from falconview:
Having failed at credit spread trading, Gap trading and straight buying of options. I´m now trying LONG STRADDLES in options. Got one week in it now, but probably run through the month. Any body got any advice on making money with lONG STRADDLES?
Re: Long Straddle calculator
Quote from falconview:
Learning Excel again, doesn´t really thrill me. Used to know it 20 years ago, but haven´t used it since. Isn´t there a FREE CALCULATOR for LONG STRADDLES on ThinkorSwim someplace?
Long Straddle method of Fortis Fortis
Fortis Fortis
You will be pleased to note that your recommended trade was closed with a gain of 7% net profit. Real Money, albeit it was scared money and not very much.
My Aug 127 straddle is losing money right now, but no hurry on that and I have shopping errands to run. That is paper money, so it doesn´t matter.
Took an August 128 CALL anyway in paper trading, in SPY, that can wait until next week. Rest of the day I´m off this week. Catch up on things that have to be done.
Re: Long Straddle money management additions
Quote from falconview:
Reading a bit on Long Straddles. Seems in a 1 month to 2 month straddle buying system. If you apply this money management rule, you boost your profits overall.
1) Close STRADDLE after it loses 10% of the spread value.
2) Let gaining Straddle run.
Long straddle query
Sorry Eliot
It was a University study done on about 250 trades. It showed the account profit for long straddles, nearly doubling if you applied this modest simple money management rule, of dropping long straddles that had lost 10%. It didn´t go into a lot of detail, but I ran across it on the internet.
Regarding the late week trade recommended by Forex Forex, it was only 2 contracts and made $38, but I notice my CASH ACCOUNT balance only went up $14. Bit expensive what? Almost 2/3 went to expenses.
I just made up a record scrap paper to compare Implied Volatility averaged for a Long Straddle, and the Long Straddle Spread cost and see what correlation if any might be there, for the best time to enter a Long Straddle. Trend turns, middle trend, or what? Anybody done any such studies, or know of any? I´m talking very short trends here of one day, or two days during the week. Usually a WEEKLY bar will move a fair distance, perhaps two strikes sometime during the week, which should be enough to make a Long Straddle profitable. Thats my theory anyway.
Long Straddle limit order shavings on QQQ
As a novice, I´m sitting on a Sunday afternoon, mulling over some ideas with trading the Long Straddle. I´m only a little wiser in this business, but one of my ideas was to compare in the QQQ, the difference between the bid and ask of a straddle and a strangle. The difference was 5 cents for the straddle, not right on the ATM. and 9 cents for the strangle.
My question is for the experienced long straddle traders, is how much with a limit order to be filled for either the straddle, or the strangle, how much could you shave off in cents on your limit order and still have the expectation of getting FILLED?
Long Straddle
Monday morning early. Been comparing prices with qqq and spy. Looks like I will trade the QQQ this week instead of the SPY.
Prices are lower.
I think I have worked out a trading strategy in long straddles. Now to test it this week in paper trading.
Long Strangle lore. Changing the limit order
I don´t know why I can´t copy from Elite Trader?
Anyway, Forex Forex told me to add 1 cent to a limit order back some time ago. When buying the ITM STRANGLE are 5 Cents for the Market Maker Spread in QQQ. Why I cannot picture this in my mind I don´t know? But when in TOS you pull up the STRANGLE order you get their suggested limit order spread price. You are saying add 1 cent to that number and change their quoted spread price, by adding 1 cent. When you sell by the same closing spread limit order, you SUBTRACT 1 cent, changing their posted thingy for your order to close.
Have I got that right?
Long straddle baby sitting.
Forex Forex
I have a long straddle in paper trading on. But I figure I should put one also in CASH. Since my cash is low, I´m a bit nervous about it. Kinda would like your opinion. This is Wednesday morning as I write this and I believe Friday is an Earnings Report, which should be a volatility balloon. Also the IV and HV are almost together now and I expect the IV will move below the HV today. As I recollect my reading, the time for a long straddle is also when IV is below HV.
Long Straddle trading
I forget who told me about wishing to know more about Volatility.
I´m tracking the GREEKS this week as well. to learn. Anyway, I am tracking the Long Straddle in the 56 QQQ strike straddle. It is educational to watch. The Average of the two sides of the straddle IV numbers, divided by two, gives me an average IV number. Which has been dropping since Monday. Since I´ve been doing it, has gone down from an average for the straddle of 19.23 down to 17.65.
Alternatively, I have been checking with the ISE Implied volatility numbers and the Historical Volatility( yesterdays they say ) number. Subtracting them. The IV started on Monday above the HV, I think I had it around a number of + 97 above the HV. This midday Wednesday it has continued to drop and now has gone this morning below the HV and is now down to - 1.14.
Not sure where I read that, but a Long Straddle is best put on as a volatility play, when IV is below HV. So that is the case right now. don´t know what to do about that yet? Waiting for a contribution on here from somebody more experienced. Still I suppose if I sit it out, I will learn through the weekend.
In the DMI indicator, the DX line has already crossed over the rising ADX line, so that is marking a TOP for this trend. Will probably figure it out more slowly, by just watching over the weekend and see if my learning is confirmed on the Volatility expectations and premium for the QQQ 56 straddle increasing Friday.
I can empathize with any new options trader trying to figure this out. Here are some points to help:
- Keep in mind that the option premium anticipates the future price movement of the tradeable (stock or ETF). That means the call option premium will be about as much as the price of the tradeable is expected to move up. If the option is priced below the historical price movement (IV< HV), that just means the tradeable price is expected to move less in the future. A low IV/HV ratio does not mean that the option is a bargain.
- Since you are trading a straddle for which you pay both sides (call and put), the price movement of the tradeable must overcome about twice the expected move implied by the option premium. This happens sometimes, but not most of the time. On average, you will have a net loss if you place this trade many times (assuming you hold to expiration).
- Generally, the option premiums on indexes is higher than individual stocks due to the convenience of indexes and higher demand. And price movement tends to be less for indexes than individual stocks because the net index movement is moderated by the average of its components. Taken together, these two points make the purchase of straddles on indexes a poor choice. You would be better off buying straddles on individual stocks which have lower premiums and a greater potential for larger price movement.
- You referenced a study showing that a straddle strategy can be successful with an exit when the loss reaches 10%. The risk here is that a string of consecutive losses will deplete your account quickly.
- You are using technical analysis to identify an inflection point to time your trade. That's a reasonable approach, but timing indicators are not consistently reliable. If you really had a good indicator for picking tops, I would say to just buy puts (not the straddle) and you would have a fair chance. But again, the notion of timing the market consistently is a beginners folly.
- You're probably not going to believe the negative nature of my comments above. You will likely press forward until you convince yourself. That is OK. Just trade very, very small positions until you reach your own conclusions. If you find consistency in success, you can always scale up later. If you find it doesn't work out as you hoped, you still have most of your account left.
Long straddle philosphy
Wow! That was a meaty and full mouthful to digest. Makes me think, but then what to do? What are the alternatives?
I´m looking to make one or two trades a week, that could be profitable on a regular basis.
part1
part2
part3
Option winning strategies
Eduamon
Thanks for that old man. Will try to read them later today. But I got a real chuckle out of it. You are the man! Gave me a boost, just before the market is getting ready to open.
Long Straddles observations
Well interesting development. The Volatility is dropping and I just took another Strangle based on the QQQ index moving up. Now I´m holding two Long Straddles and one Long Strangle. None of them are making any money, despite the index moving up and the acquisition of them being in a rollover type mode at specified intervals. I was supposed to be able to sell the oldest one, but it didn´t work out that way. They are ALL losing money. Plus I think the third STRANGLE ended up being over my amount of account money available. This is paper trading so I can get away with it, but still in real life I would not have been able to put on three straddles.
I need to contemplate this for a bit and see what if anything should be done about it?
There is a lesson here, but darned if I can see it yet?
Re: Long Straddles observations
Quote from falconview:
Well interesting development. The Volatility is dropping and I just took another Strangle based on the QQQ index moving up. Now I´m holding two Long Straddles and one Long Strangle. None of them are making any money, despite the index moving up and the acquisition of them being in a rollover type mode at specified intervals. I was supposed to be able to sell the oldest one, but it didn´t work out that way. They are ALL losing money. Plus I think the third STRANGLE ended up being over my amount of account money available. This is paper trading so I can get away with it, but still in real life I would not have been able to put on three straddles.
I need to contemplate this for a bit and see what if anything should be done about it?
There is a lesson here, but darned if I can see it yet?
Dropping IV, or VIX on a Long Straddle.
Well 2 nd, or 3rd month options seem okay to trade Long Straddles.
But for the heck of it, I just did the IV calculations and a big drop in IV plus also in the premiums.
Then I decided I would look up a VIX chart. Got VIX-X. Which seems right on. It is dropping very rapidly.
So it seems the IV, or VIX chart direction effect on premium value of the Long Straddle is STRONGER than the upward movement of the index, in this case the QQQ.
Which makes me wonder, what the devil do you trade then? IV or VIX apparently in a Long Straddle situation. I would think though since the Long Straddle is Delta neutral, that even if the market index was BEAR, with a dropping VIX you would still be losing on your Long Straddle premiums. How do you trade this?
I would hazard a guess you cannot trade a Long Straddle on a dropping VIX? Which would eliminate the rollover method of Long Straddles. Lesson learned here? What kind of lesson is it?
I presume this would also eliminate this week, the WEEKLY Thursday to Friday long straddle trade? I was planning to buy a Long Straddle on the Weekly as per Forex Forex, but doesn´´t seem to be a good idea as I would do so in CASH. Money I cannot afford to lose.
Long Straddle volatility rule?
Please correct me if I am wrong.
It appears when buying straight PUTS or CALLS in a trend play, that one should first check the VIX-X chart and see what it is doing. Or a Long straddle/strangle for that matter. I think I just made a new rule. It is not enough to have the index move in the direction you want in a trend, but if the IV, or VIX is not either stationary, or moving upward, you should miss the trade?
My paper trade would be a 1 day QQQ 56P/57C strangle, entered at about 3:30pm EST - 30 minutes before market closed on Thursday June 30, 2011. Prices below are approximate, but the outcome of the trade will not be affected because any discrepancy would be in the pennies.
QQQ 56P/57C strangle
Long Straddle using pairs trading.
Forex Forex
I decided against trading the weekly because of the falling premium values in the August Straddles I´m holding. 3 of them and stopped putting on anymore. Based on half a strike in the QQQ Overlapping straddles.
Anyway I put on a weekly straddle yesterday as well. My chosen time was 1.5 hours before the CLOSE on Thursday. Compared to your 30 minutes before the Close. I got .47 cents for the straddle. The opening this Friday morning was .16 cents. I had it in my mind that there was supposed to be an economic report out today? Maybe I was wrong? Thought we would get some volatility. Glad I made it a paper trade though and not in my CASH account. So far. Can hold for an hour or so to see if anything will happen to effect volatility.
The business of the QQQ going up, but the volatility dropping bothers me. I have been racking my brains trying to figure a way to trade it with a STRADDLE/STRANGLE. Started to look up my PAIRS TRADING notes. I believe you could do a VIX PUT in this situation and a QQQ call, since they would be travelling in opposite directions as to trending. Though there might not be enough of a trend to make money. Will give it a try on paper this coming week.
Long straddle weeklies
The WEEKLY trade lost $22 in commissions.
Re: Long Straddle using pairs trading.
Quote from falconview:
Forex Forex
I decided against trading the weekly because of the falling premium values in the August Straddles I´m holding. 3 of them and stopped putting on anymore. Based on half a strike in the QQQ Overlapping straddles.
Anyway I put on a weekly straddle yesterday as well. My chosen time was 1.5 hours before the CLOSE on Thursday. Compared to your 30 minutes before the Close. I got .47 cents for the straddle. The opening this Friday morning was .16 cents. I had it in my mind that there was supposed to be an economic report out today? Maybe I was wrong? Thought we would get some volatility. Glad I made it a paper trade though and not in my CASH account. So far. Can hold for an hour or so to see if anything will happen to effect volatility.
The business of the QQQ going up, but the volatility dropping bothers me. I have been racking my brains trying to figure a way to trade it with a STRADDLE/STRANGLE. Started to look up my PAIRS TRADING notes. I believe you could do a VIX PUT in this situation and a QQQ call, since they would be travelling in opposite directions as to trending. Though there might not be enough of a trend to make money. Will give it a try on paper this coming week.
Quote from ForexForex:
My paper trade would be a 1 day QQQ 56P/57C strangle, entered at about 3:30pm EST - 30 minutes before market closed on Thursday June 30, 2011. Prices below are approximate, but the outcome of the trade will not be affected because any discrepancy would be in the pennies.
QQQ 56P/57C strangle
including commissions
- QQQ @ $56.95
- Buy 56.00 Put @ $0.05 http://finance.yahoo.com/q?s=QQQ110701P00056000
- Buy 57.00 Call @ $0.21 http://finance.yahoo.com/q?s=QQQ110701C00057000
- Total Debt: $28.00
Expires: July 1, 2011
I will update on July 1, 2011 with the results.
Long Straddle trading
Forex Forex
I noticed that. I quit about 9:30 and went to do some errands, like fixing the car and buying building materials and stuff. But yes I did notice that yours was a winning trade. So the lesson for me, was to switch from a 1.5 hour before close entry, to a 30 min. or less entry. The trade itself is good though. I was glad to see that. I probably would have quit when the straddle hit .40 cents in premium. Even so, yours was a winner since you got in cheaper than me at .24 cents. My qualms were about the THETA at the end of the day, or during the day on FRIDAY expiration in the WEEKLY. For some reason ( I believe credit spreads experience ) I have a mental cut off by 10 a.m. on Friday. Then the declining premiums in my regular spreads I was carrying, where the effect of volatility was having an effect, made me suspicious of the whole thing.
Now late on Friday, in checking I see the day ended well with a lot of intrinsic value in the CALLS. Not sure how to deal with that on the Friday effect.
BUT my general opinion is to trade that trade every week, with real money. Which I will do starting next week.
The burst of the CALLS also put ALL of my three losing spreads into winniing mode as well. I could have cleaned them all out at varying wins. I think I will see what I have on Monday and do that and start that rolling over business again from scratch.
In trading WEEKLY Credit spreads, I am accustomed to the credit spreads going to zero, around noon on Friday. I think I don´t understand the workings on the premiums re the Friday expiration in a straddle. I try to be out before 10 a.m. or sooner. If I can get that cleared up in my brain, will be able to make that trade with more understanding and confidence.
In the meantime, I´m wondering if there would be a difference in regular 6 - 8 week out STRADDLES if I switched from QQQ to the VIX, which is a down trend, opposite to the upward trend of the QQQ. When dropping volatility is reducing premiums in the long straddles of an uptrend. Would you escape losing premium, if you were trading a downtrend VIX Long Straddle in an otherwise index uptrend? Any of you guys able to do a P and L graph, would appreciate seeing that. It is not in my current skill set.
Long straddle conversion to a directional
By the way. Another way of trading the Long Straddle/strangle is that I read of some guy years ago, who was making out like a bandit, that when the market started to trend and he was in with a straddle, that he simply DROPPED the losing side and went directional with the trade.
Haven´t tried that yet, but it makes a lot of sense. Anybody else done it that way?
Re: Long straddle conversion to a directional
Quote from falconview:
Haven´t tried that yet, but it makes a lot of sense. Anybody else done it that way?
__________________
I'm spending a year dead for tax reasons.
Re: Re: Long Straddles observations
Quote from eudaemon:
Index options volatility has a pervasive tendency to drop as the market rallies and rise as the market drops. This is one thing working against you. There may be more.
__________________
I'm spending a year dead for tax reasons.
Trading long straddle viewpoints
sle
Interesting comments and views. I didn´t follow your first comment though. Well I did the first half, but not the second half.
As to the second comment, I´m doubting that it is a THETA problem with 6 or more weeks to go on a straddle. Have no way I can view that in a graph as my skill set does not yet lead to that. I do believe it is the dropping IV.
On the other hand, I´m revising how I am trying to work within a one week bar movement. Instead of being a day trader want to be a weekly trader.
Long straddles expiration.
Forex forex
I think I may have a wrong view on Friday Expiration long straddle trades, but not sure. Maybe you can clear it up. Usually by 10 a.m. or so, the losing side has a value of .00. While the winning side is showing some intrinsic value I guess? Which is the profit. Are you letting the long straddle in such a case go through expiration? That point I cannot visualize.
I know what happens in a credit spread doing the same trade on expiration Friday. If you are neutral, you let it go to expiration, but if you are losing, you close it out.
The question is that I am not sure what to do about the Long Straddle, a different fish. It looks to me you are letting it expire? Is that right?
Re: Trading long straddle viewpoints
Quote from falconview:
sle
As to the second comment, I´m doubting that it is a THETA problem with 6 or more weeks to go on a straddle. Have no way I can view that in a graph as my skill set does not yet lead to that. I do believe it is the dropping IV.
__________________
I'm spending a year dead for tax reasons.
Long Straddle Expiration Friday intrinsic value.
sle interesting.
I think I want to know what happens to a long straddle on Expiration Friday. One side goes to .00 usually by 10 a.m. my time. Probably 11 a.m. NY time.
If you don´t close out the long straddle before market closes, do you lose the intrinsic value in there, or is that settled on Friday and they credit it to your account?
I cannot draw any conclusion from a credit spead, because that has paid you your profit in advance and at expiration, you get to keep it. In reading up, I can´t find anybody explaining this point. I think the idea I am getting is that I have to CLOSE the long straddle probably around noon on Expiration Friday, incurring at least commissions on the side with intrinisic value.
Long Straddle and the GREEKS.
sle
Well I´ve been charting the GREEKS to get some idea what they can tell me with a Long Straddle.
Neither Gamma or Theta move enough to tell me anything useful The only thing useful has been the IV.
That was a useful point that IV can move independently from the VIX. Not sure how I would use it, but it is a good point.
OBSERVATIONS AND CONCLUSIONS
Back at the beginning of this forum, some contributors were telling me that the LONG STRADDLE was exclusively a VOLATILITY PLAY.
For a while I was thinking you could also make money off the intrinsic value. In the end, I have come to the conclusion, that to get intrinsic value enough, you can only get it through a boost in IV. Therefore my final feeling is that the LONG STRADDLE
Long Straddle is a volatility play
Whoops got kicked out of that message while typing.
Anyway, I am convinced that the LONG STRADDLE is indeed a VOLATILITY PLAY.
Thinking that, then brings me to the conclusion, that you can try to predict a market move to anticipate the rise in IV. Or you can take a position and stand in the middle of the freeway, until you get hit by an IV semi trailer truck.
The question is now, how do you do either of these two things? Able to do it on a regular basis, say once a week.
Learning long straddle trading.
Tuesday morning, the 5th of July start of new week.
Went back to an old two straddles I let ride. They were about 1.5 weeks old. Because of the run up. One earned 2.7% and the other earned 8.5%.
I found that interesting as they were about two weeks old on an 8 week out, - use of options.
Got three more long straddles to close from last week, I want to close this morning as well and see what they brought with the run up. After the market opens. It is encouraging though. These are all paper trades using real time, or as real as it gets data.
I think I´m going to have to be careful though about the cost and number of contracts. I´ve been using 2 contracts, but looks like I would have to use 1 contract, if I want to complete 3 different trades per week.
trading long straddles result this past 10 days paper trading
Welll here are the results of my training straddles done on paper, with pen, using real time TOS data from my cash active account.
10%, $28, which was a 6% return, $52 which was a 6% return, $8 which was a 1% return, $24, which was a 3.5% return and a loss of - $22 to commissions because I closed out early on Friday.
This is net, after commissions are deducted.
All these straddles and strangles were done in the last 10 days.
Food for thought there!
Trading the long straddle/strangle
Another week has passed, with still more paper trading. Not totally settled on a strategy, or group of strategies yet.
I like very much the Long Straddle and Strangle, because you do not have to predict the market.
What seems to be cramping my style is the DAY TRADER rule. They only allow me 3 trades in a week. I´ve figured out three different strategies to trade, which makes 3 trades. It is difficult to build the strategy for long straddle/straddles with only one trade per week. I did widen the spacing, but still I can see where you are going to end up with two trades in a week, though one might not be closed that particular week. SO NEXT WEEK I move to an even WIDER arrangement in order to get only one STRADDLE per week.
I closed a STRADDLE from the previous week this week, which netted me +$88 net profit. Which was a return of 8% after paying commissions.
Then my Expiration Friday trade earned + $96 after paying commissions and becaused such trades are cheap, it turned out to be +37%. This was a learning lesson this week. What I did was wait for the market to pick a direction, then I closed the losing side. Saved .13 cents by doing that as it quickly dropped to .03 cents. The winning side went up from .83 cents to $1.30 and I closed it. So I ended up with +$96 after commissions were paid.
I took a loss on a straight CALL of -$58 including commissions. Or a minus 19%.
So the take for the week on 3 trades was + $126 in total.
This is still being done on paper with a pen, using real time TOS account option chains. I´m not too sure I´m ready yet to move to CASH TRADING. I am still getting accustomed what to expect. However, I do think I will gamble probably in another week or two.
Before I forget, I would like to give my thanks most effusively to both FOREX FOREX and EUDAMON for assisting me with understanding the Long Straddle/Strangle. There were other contributors that helped and thank you too. But these two guys really set me up with something. THANKYOU!
CBOE jerking me around on information.
The Day Trader rule limiting me to 3 trades a week is really bugging me. I find it cancels any risk control I might build in.
I was thinking today about coupling a directional trade and a straddle non directional trade in one, to evade the Day Trader rule. the trouble is, I would like to take half the trade contracts and leg them out as in closing. My question is, if I enter by buying 4 contracts as in a long straddle/strangle, then during the week, on the assumption of what I believe is a trend, close the losing side on half the contracts until the trend expires and I close the other half of that section, of say 2 contracts. Does that original BUYING TRADE as a straddle with 4 contracts, in which I have closed the original BUY of 4 contracts as a straddle, in pieces get counted as seperate trades, because they got closed in pieces? 2 contracts would be held as the original straddle, whereas the the other 2 contracts of the straddle would be closed piecemeal.
I tried TOS at the HELP desk, but they refer me to the CBOE and when I go to the CBOE, they end up referring me to somebody else, so finally I gave up in disgust. But I would really like an answer. I don´t want to get shut down for a penalty or something.
I´m building a strategy where I diversify into 3 different trades, using my existing capital. This to satisfy the Day Trader Rule. The trouble is, two of the trades require legging out, as in closing piecemeal. It would depend on how they count the 3 trades, from the BUYING standpoint, or the selling standpoint.
I don't think I have helped you one bit yet...but...you're welcome!.
Real Money trade in the Long Straddle change.
Well okay, I´m in a real money live Long Straddle trade this Monday morning.
I´ve been reading through this thead. I was looking for the hint somebody gave me on getting a better price in the QQQ on the Long Straddle. Didn´t find it and since the index had hit my buy number, I went ahead and placed the real money order in my account. I did drop 1 cent off the price quoted on TOS. Made me nervous for quite a while, as the order didn´t show up at the bottom of the screen and I was wondering if I should do it again? However in looking through the accounts section, I saw in there that the order was open and working. Checking Long Straddle spread numbers showed the Straddle had gone up 7 cents so far. Anyway, I came back to my writing and reading on here in Elite Trader and let it go. Figuring if it didn´t get filled it would expire at the end of the day. I also have couple of paper trades going. One in PUTS based on my trend change indicator and one a Long Straddle, also paper trading. Both are making money. Already profitable.
Back a half hour later to my REAL MONEY Long STRADDLE and lo and behold, it has been filled at $3.90 for the spread. Now I sweat and sit nervously during this week to see what happens with it. This will be ONE of my allowed 3 trades in real money in TOS for the week.
Damn fool novice calculating Long Straddle
Ive been puzzling over the Long Straddle and how you count it. Can somebody chime in? I feel more than a novice, I feel like a complete fool. I suppose I will figure it out, whenever it shows up in my account in TOS though. Still I would like to know for sure.
I place an order for a Long Straddle. 2 contracts. Thats 200 Calls and 200 Puts. If you make .10 cents say, that would be WHAT? Would that be 400 x .10cents or 200 times .10 cents? Simple thing and I figure it out both ways, but my mind simply cannot settle on what the result should be.
Re: Damn fool novice calculating Long Straddle
One options contract controls 100 shares.
Quote from falconview:
Ive been puzzling over the Long Straddle and how you count it. Can somebody chime in? I feel more than a novice, I feel like a complete fool. I suppose I will figure it out, whenever it shows up in my account in TOS though. Still I would like to know for sure.
I place an order for a Long Straddle. 2 contracts. Thats 200 Calls and 200 Puts. If you make .10 cents say, that would be WHAT? Would that be 400 x .10cents or 200 times .10 cents? Simple thing and I figure it out both ways, but my mind simply cannot settle on what the result should be.
__________________
If it is to be it is up to me.
Re: Re: Damn fool novice calculating Long Straddle
Quote from HowardCohodas:
One options contract controls 100 shares.
Re: Damn fool novice calculating Long Straddle
Quote from falconview:
Ive been puzzling over the Long Straddle and how you count it. Can somebody chime in? I feel more than a novice, I feel like a complete fool. I suppose I will figure it out, whenever it shows up in my account in TOS though. Still I would like to know for sure.
I place an order for a Long Straddle. 2 contracts. Thats 200 Calls and 200 Puts. If you make .10 cents say, that would be WHAT? Would that be 400 x .10cents or 200 times .10 cents? Simple thing and I figure it out both ways, but my mind simply cannot settle on what the result should be.
I weep for OPC (other people's children) a lot lately.
I've been weeping for mine recently too...
Re: Re: Re: Damn fool novice calculating Long Straddle
Quote from atticus:
You're just a wealth of knowledge. You belong in the Smithsonian.
Atticus is a great helper on Elite Trader
Atticus is one of the great people on Elite Trader. Never stinting his time to challenge obnoxious posters and help novices. He also makes a LOT of Money by my standards in trading. Though he is way too professional for my level, or lack of expertise. His moves and sophistication too far beyond my grade school level.
Okay I got that I think? It is .10 cents on the SPREAD. The 2 contracts of both PUTS and CALLS would simply be 2 contracts on the SPREAD. Not four contracts in total.
You know I´ve learned some strange things, or maybe not so strange on here with the Long Straddle. The first couple of weeks I was legging into the Long Straddle thinking I could get a better price. So I was really tuned to thinking as a directional trade. When I finally realized the Long Straddle/Strangle was actually a SPREAD, it kind of shocked me. I had traded credit spreads and vertical spreads, but they call them Spreads. I didn´t for some reason think that the long straddle was a spread. Once I got that figured out and realized it, ( took about 2 weeks ) my understanding changed. Sometimes I have relapses and can´t figure out what it does as a spread, as my intuition continues to sporadically think of it as a directional trade.
I´ve had a hard time trying to think of the Long Straddle as a non-directional trade. Not technically but intuitively. I´m getting better at it, and I realize theoretically it doesn´t matter which way it goes, up or down, so long as it moves. Still, I´m still struggling with the concept, versus my more familiarity with the directional biased trades. The relapses are getting fewer.
Then there was the criticism and contempt by some contributors because I didn´t know the GREEKS. So I spent about 2 or 3 weeks recording the GREEKS. They don´t seem to have much information effecting the working of a Long Straddle, so I´ve discarded them again.
Somebody contributed on here, his wish that he knew a heck of a lot more about volatility. There were others insistant that the Long Straddle was a Volatility trade. Which I have since confirmed it is. That said, some of the contributions were more naive than my own with the limits they placed on how to use the Long Straddle with volatility. But VOLATILITY being the core thing with the Long Straddle, I started charting the Implied volatility of the Long Straddle and the ISE daily IV vs the HV. Plus the VIX. At least a couple of times a day. This has been rewarding. I have a RANGE now for IV, which is roughly between 16 and 18 VIX. At least in a bullish trend. Of course in a more mixed market, you kind of go between 18 and 32 in the range for more common action. So I have developed some parameters.
One thing I learned from the volatility studies was the effect of volatility balloons and the collapsing of the volatility balloon as if you stuck a pin in it. The effect being immediately felt in the premium, or spread of a Long Straddle. This has me now more wary and I´m still struggling with the shrinking IV of the last half of a Bull Trend. I used to see this graphically as the bars on a chart just get shorter. It is different to see it numerically. You view it a different way. I got a real lesson, thankfully in paper trading with the end of the previous bull trend, when the index kept going up, but the premiums continued to shrink in the long straddle. I knew about it in directional trading straight calls or puts, which you can beat by using credit spreads if you like the risk reward bad ratio. Still it was very informative to see the premiums or spread shrink while the index went up. I haven´t figured out to how to handle that yet.
My biggest problem has been trying to deal with the limitations placed on me by the day trader rule. As I have three strategies I wish to trade and diversify in. Can´t do it I don´t think and the long straddle earns the least, but is probably the safest, so I´m giving it a try this week in real cash. Probably continue just doing the other two strategies on paper trading, for the day when I can skip the the day trader rule. It isn´t that I don´t have the capital, I am just unwilling to risk it, until I get a working money making system in place.
Anyway, for those of you contributing and helping I do appreciate your interest and help.
"One thing I learned from the volatility studies was the effect of volatility balloons and the collapsing of the volatility balloon as if you stuck a pin in it. The effect being immediately felt in the premium, or spread of a Long Straddle."
what greek does this sound like?
Quote from kinggyppo:
"One thing I learned from the volatility studies was the effect of volatility balloons and the collapsing of the volatility balloon as if you stuck a pin in it. The effect being immediately felt in the premium, or spread of a Long Straddle."
what greek does this sound like?
Quote from eudaemon:
Nick the greek ?.
I believe long straddles work the best for the weekly options...why? ...short time until expiration = great option price movement per smaller underlying stock moves...I'd check out the weekly options. They are getting more and more popular...
Google "weekly options"
Weekly options
Increasenow
Theta is maximum in Weekly Options. For credit spreads they work great. I doubt it for Long Straddles, vulnerable to Theta decay.
Vega and IV on Long Straddle trading.
Here is one for you rich professionals and money makers.
I´ve been trying to make sense of IV and Vega. I have not yet got the picture in my mind completely. Perhaps you would care to comment?
I have a memo here contributed by somebody that told me that VEGA hurts the Long Straddle if going up. But VEGA helps the Long Straddle going down.
The last couple of days in trying to puzzle things out, I realized that if one side of the Long Straddle, ( the CALLS ) has the IV going up, it is bad for the Calls, as the market is going down I´m not clear what the opposite would be for PUTS?
Can you using both the IV for both the Calls and Puts in a Long Straddle figure out future immediate direction. I read someplace that if VEGA turns negative, you can trade a direction. Not sure which way this would be?
Anyway I was trying to put it all together and come to some miracle of understanding, utilizing VEGA and IV to forecast the market direction for a short distance. Is this possible?
dunno if this has been mentioned because I didn't read all this shit but thinkorswim has a simple way to understand increase/decrease in vola, go to
Analysis -->Risk Profile-->plot lines --> Vol Step--> +1 Vol Step.
in the next box change step to +/- percentages. The red line will plot your p/l taking the vola change into account.
If you are in SPY/ES options just use VIX as an approximation for recent values to get an idea how vola would affect your positions. i.e. change step to +5.00% to see how your long straddle would look like if vix moved up to 24% from 19 currently.
TOS Volatility calculating for long straddles
That looks interesting. Will give it a look tomorrow. Thankyou.
Re: Weekly options
demo it...worth it...get a "mini" huge move and...ultimate profits!!!
Quote from falconview:
Increasenow
Theta is maximum in Weekly Options. For credit spreads they work great. I doubt it for Long Straddles, vulnerable to Theta decay.
falconview,
Perhaps I missed it, but what are the specs of the straddle you put on?
__________________
If it is to be it is up to me.
I'm mystified about what the management plan might be.
Quote from ForexForex:
Sifting through all the noise in falconview's posts it must be a 57.00 or 58.00 QQQ Sept 2011 straddle based on his price of $3.90.
__________________
If it is to be it is up to me.
Dissecting the Long Straddle
Ohhhh! I´m sorry, I didn´t realize it was of interest here.
I´m holding the 58 Sept. QQQ long straddle spread at $3.90 at 2 contracts. In my cash account.
It is already profitable. But I´m waiting a bit. I´m basically waiting until it goes to two strikes as a move. Or the 56 QQQ strike to exit. The market moves about 1.5 strikes in a weekly bar of the QQQ. Break even is about 75 ticks, but is variable depending on the IV effect.
I decided to enter because this was a bear trend and volatility is higher in a bear trend and there was a chance of IV expansion. When the market goes up, IV usually shrinks and you can lose. I am also holding another PAPER trade long strangle at the beginning of this trend, this was the 58 call and 59 put at a $4 spread.
Since IV is all important, I expect to close this paper spread, put on at 58.80 QQQ in two strikes. Which would be 56.80 QQQ.
When I entered, it was asking 3.91 for the 58 straddle spread and I bid 3.90 and it took about 45 mins to fill. Went up to 3.97 or so. before coming back to my bid.
I didn´t really have any particular reason for buying it, other than the price was fluctuating around the 58 strike. Otherwise you have to buy a long strangle. I did expect a downward move on the market, but that would be irrelevant in a long straddle. Since they are non directional. I just expected the market to move, probably down, but up would be okay as well.
From my minimal experience, straddles and strangles are delta neutral trades. Delta does not change.
I´m still not completely clear on the effects of IV, as the spread premium shrinks or expands with IV, and the ratio is not clear to my mind as to how to handle this intuitively.
I do not expect to lose, it is just a question of how much will I gain, or how long do I have to wait. Since this is Sept options, or 8 to 12 weeks to expiration. I have plenty of time. Couple of weeks anyway I expect and somewhere in there I should get hit by a semit trailer truck full of IV. Or I get the profit from market movement.
Re: Dissecting the Long Straddle
Quote from falconview:
From my minimal experience, straddles and strangles are delta neutral trades. Delta does not change.
trading long straddles
Edudamon
Yes, that comment on dropping the losing side is a different strategy coming from Forex Forex. The time frame in that trade is measured in an hour, to four hours. I will try it again this week and see what happens, using a paper trade.
Long straddle trading
Which is why this Wednesday morning I opened another column of my recording volatility changes. I mark this one for VEGA for the above strategy. Essentially I´m interested in if VEGA can forecast direction before the trade is put on.
I don´t really have any record of VEGA actually changing in a long straddle in my previous GREEK recording. Which was either one or two weeks only. So will do it again.
On the comment sometime past, that " VEGA hurts if going UP and HELPS if Vega is going down". I´ve been thinking about that. Trying to understand what was being said and happening.
Since VEGA is the number representing the SPEED of Implied Volatility. I take it you would check VEGA on either Calls or PUTs and my interest and theory is in seeing if there is a change in VEGA before I put on a Long Straddle for a quickie trade, which would indicate which way the trade will go. IF that works and that is a BIG IF, then I would be able to close the losing side faster, preserving more money of that side.
The reason I mention this, in my last week trade doing this, I believe I started out the long straddle with .42 cents on the CALLS and by the time it dropped to .13 cents, I closed it out. It turned out the profit in that quickie trade was the .13 cents that I had saved from the losing side. Otherwise the long straddle trade would have broke even, or lost money. Only one sample, insufficient to draw conclusions from.
Management plan for Long Straddles query.
Howard
I thought about your Management plan remark. Never thought about it to tell the truth and wouldn´t even know where to start. I´m still floundering around trying this and that, to learn the nuances of the Long Straddle/Strangle.
If there is a goal, it is to start compounding like you do in credit spreads, once I can perform trades successfully in a way I want.
Long Strangle paper trading result. + 5%
Okay lunch time Wednesday.
Been in that Long Strangle, long enough, paper trading.
This was put on when the index of the QQQ was at 58.80 and has made a small profit two times already. So decided to take it. Strangle was for a spread of $4.00 cost and closed it at $4.33. Making .33 cents. .33 x 200 = $66 minus $25 commission, = net of $41 profit.
Capital used was $800, divided by $41 = 5% return. It was put on July 7th and held for six days.
Trading directional PUT, alternate strategy
Been in a paper trading directional 2 Contracts Sept 59 PUT. Since last Friday. Decided to close it out as well. Got some profit.
Bought for $2.06, sold for $2.60 = + .54 cents
.54 x 200 = $108 - $25 commission = +$83 net profit
$83 / $412 = 20 % gain
--------------------------------------------
Left holding one trade, the CASH MONEY long straddle, Sept 58 QQQ at $3.90 and holding.
_________________________________________
Straddles are difficult trades. They're difficult to buy (vol and decay) and hard to short (haircut and URO). Attempting to isolate vol (realized > implied) will require dynamic hedging and assumes that you don't miss your spot hedges. You can blow-out being long or short a straddle. I know a guy who was long thousands of CL straddles and missed some hedges by a few ticks and was pinned to the body at expiration, losing millions in the process.
I would only trade long straddles directionally unless you're looking to make an outright bet on vol and can implement the hedging.
Go long the 25-delta straddle when you're bullish the market. You will win on deltas and skew, but lose on strip-vol. If bearish, you buy the -25-delta straddle which will profit from delta and strip vol, and lose a bit from skew. I would recommend the straddle as one trade to avoid. Dynamic hedging in spot or options is not going to earn much on the spread between implied and realized. It looks great on paper, but the $req on the dynamic hedge makes it a poor proposition in most cases. Many do not run the maths on what a 300bp spread on RV/IV will translate into $. More often than not it's not worth the effort.
Long Straddle trading advise
Thankyou Atticus
Some of that is over my head at the moment. But I did get the business of buying a long straddle at + 25 Delta and buying a Bearish direction long straddle at - 25 Delta. Using the Long Straddle as a biased directional trade.
I´ll put that in my notes, for something to try paper trading and see what I can learn from that. It is certainly outside of my beginners box thinking of only buying Long Straddles around the ATM.
I´ve wondered a bit on the Long Strangle. I have been doing the Strangle with both sides ITM. Can´t remember why I figured to do it that way. I´m wondering if I am right? Or should it be OTM Strangles? Which is better.
Re: Long Straddle trading advise
Quote from falconview:
Thankyou Atticus
Some of that is over my head at the moment. But I did get the business of buying a long straddle at + 25 Delta and buying a Bearish direction long straddle at - 25 Delta. Using the Long Straddle as a biased directional trade.
I´ll put that in my notes, for something to try paper trading and see what I can learn from that. It is certainly outside of my beginners box thinking of only buying Long Straddles around the ATM.
I´ve wondered a bit on the Long Strangle. I have been doing the Strangle with both sides ITM. Can´t remember why I figured to do it that way. I´m wondering if I am right? Or should it be OTM Strangles? Which is better.
Directional biased long straddles. Trend following
Atticus
Thanks for the comeback and clarification. Hmmnnn! I´m thinking about what you said a bit. Some on here call me long winded, but it is just an attempt to understand better, as the common jargon by long term professionals and assumption, a novice like me understands the jargon intrepretation not clearly and often completely wrong. So I´m long winded because I feel uncertain and figure somebody better, will correct me when I´m wrong.
That said, I understand your latest to be that the OTM Strangle is better than the ITM strangle, because the strikes are closer together and you would therefore have less road to travel to a profit? Will start doing that from here on.
It is early Thursday morning and going to have a look at the option chain and see how you put on a long straddle that is Delta 25, + or -. At first when I read it, it seemed easy. But when I actually got to trying to figure out how to do it, it seemed confusing to me. Just going to see what is on the option chain now and how I can figure out how to do that. I´m presuming, before I try it, that you would more or less just go down the CALLS and find, when both the Delta on Puts and Calls would add up to your +, or -?
Delta numbers on long straddles
Atticus
Well a look at the Option Chain clears that up. I figure you subtract the delta numbers of the puts and calls and get as close to what you want and that would give you the strike number of the STRADDLE. Simpler now, I can look at it. But thinking about it when away from the computer and doing something else it was mysterious.
Thankyou very much for the two recent tips. VERY MUCH
nfamousyoungest - trying to figure out TOS platform
nfamousyoungest
I finally got around in TOS searching for Analysis to do your recommended search. Couldnt find it. Any suggestions? I use TOS Web trading platform
Re: nfamousyoungest - trying to figure out TOS platform
Why not ToS desktop platform? Considerably more capability.
Quote from falconview:
nfamousyoungest
I finally got around in TOS searching for Analysis to do your recommended search. Couldnt find it. Any suggestions? I use TOS Web trading platform
__________________
If it is to be it is up to me.
Re: Directional biased long straddles. Trend following
Quote from falconview:
Atticus
Thanks for the comeback and clarification. Hmmnnn! I´m thinking about what you said a bit. Some on here call me long winded, but it is just an attempt to understand better, as the common jargon by long term professionals and assumption, a novice like me understands the jargon intrepretation not clearly and often completely wrong. So I´m long winded because I feel uncertain and figure somebody better, will correct me when I´m wrong.
That said, I understand your latest to be that the OTM Strangle is better than the ITM strangle, because the strikes are closer together and you would therefore have less road to travel to a profit? Will start doing that from here on.
It is early Thursday morning and going to have a look at the option chain and see how you put on a long straddle that is Delta 25, + or -. At first when I read it, it seemed easy. But when I actually got to trying to figure out how to do it, it seemed confusing to me. Just going to see what is on the option chain now and how I can figure out how to do that. I´m presuming, before I try it, that you would more or less just go down the CALLS and find, when both the Delta on Puts and Calls would add up to your +, or -?
+ .2 Delta
King gypo query
Big Charts reading of market.
Cant get into Freestockcharts.com this morning. Wonder what their trouble is? Everything else working.
Big Charts is showing the market weak, with no volume, or pressure to make a trend. Sideways action.
couple of notes for you, you were on to what vega is, The amount that the price of an option changes compared to a 1% change in volatility. The balloon analogy is a good one, compare the front month vol of Goog on the day before and after earnings to see what
" volatility crunch" is, this is to do with vega, by the way most retail schlubs never get that far so you are making great progress. You also have a pretty good understanding of vol in general. Vol expands and contracts, this is why put sellers are all geniuses in a bull market, sell puts and you collect on direction, lower vol and theta.
King Gyppo.
Ha! Ha! ha! Market is slow this morning I guess.
I was just napping in the hammock on the trading room verandah. Think I might just go downstairs and fry up some Breadfruit slices. Got a lot of fruit right now, it being harvest time. The only drawback, my wife says I´m getting too fat around the middle. That stuff is delicious though.
Long Straddle spreads
Well what do you know! Took a look at that spread and it is in the money by 4 cents. Give me another .30 cents or so, and might just close it.
Here is your chance to watch vol crunch google earnings today
Long Straddle trading and earnings report for Google
Aaaaah! I dont have any list of earnings reports that effect the market. Been trying to collect them, but having trouble finding them on the internet. Would you know the biggies?
I´m in another CASH TRADE beside the one I´m holding. Just put it on. 2 QQQ Sept Straddle 57 at $4.01 spread.
In paper trading I´m holding 2 PUTS 57 at $2.00
The Friday trade just put on with paper trading, 57 Spread in the Weeklies at $1.55. Holding 2 contracts on paper. QQQ
Quote from kinggyppo:
Here is your chance to watch vol crunch google earnings today
fwiw. Spread is not straddle. In my time when someone said "spread" and nothing else, referred to the vertical spreads that HoCo was doing, either credit spreads or debit spreads.
Just names I know, but since you are learning, might as well get it straight.
Straddles and strangles are also usually referred as buying or selling volatility.
Carry on.
Quote from eudaemon:
fwiw. Spread is not straddle. In my time when someone said "spread" and nothing else, referred to the vertical spreads that HoCo was doing, either credit spreads or debit spreads.
Just names I know, but since you are learning, might as well get it straight.
Straddles and strangles are also usually referred as buying or selling volatility.
Carry on.
Quote from kinggyppo:
you are right, but can our heroic OP show us tomorrow's vol collapse in the front month, does he get vega?
Re: Long option straddles, do they pay?
Quote from falconview:
About 25 years ago, I made note of a strategy, trading Long Option Straddles. Since I am currently out of idea, I was re reading my notes. Somebody back long ago had what they said was a long option straddle method that worked.
So I am trying it in paper money. 25 years ago they did not have the internet resources, charting and paper money trading they have today. Just got one week at it, too soon to tell anything, but will see by the end of the month. In the meantime, I have heard sporadically of people making, or losing oodles of money trading long option straddles. So just wondered if there was any body out there successful at it?
__________________
Go Chicago Bulls
You can make it to the Hall of Fame getting base hits or home runs... but you gotta protect the plate!
Patient traders obtain better prices than impatient traders do because they are willing to search longer and harder to arrange their trades at favorable terms. Impatient traders pay for the privilege of trading when they want to trade... Larry Harris, Trading & Exchanges.
...it was never my thinking that made the big money for me. It was always my sitting. Got that? My sitting tight! I've known many men who were right at exactly the right time, and began buying or selling stocks when prices were at the very level which should have showed the greatest profit... their experience matched mine... they made no real money. Men who can be right and sit tight are uncommon... but it is only after a stock operator has firmly grasped this that he can make big money. The market does not beat them they beat themselves because though they have brains they cannot sit tight! Reminiscences (V)
Can you over analyze a trade?
Whats an OP? Where you referring to me?
Iceman1 I´m beginning to agree with you on the differences between paper trading and real money trading. Actually I do agree with you. However, with reservations, because the paper trading allows one to familiarize with the trading platform in a new type of trade strategy. Plus I feel I get a learning experience at no cost, from the nuances involved. Agreed though, it does not translate to the real time experience. Which is why I¨ve moved rather fast from paper trading into real cash this week. With two real money trades open.
Kinggyppo Last night I was reviewing the VEGA numbers and my recording, and I have come to the conclusion VEGA doesn´t have anything useful to add, to trading the long straddle. The GREEKS may have use in sophisticated hedging trades. But can´t see Vega adding anything to the Long STRADDLE. It seems to me that the number simply moves with the STRIKE. So, if you are watching the index move by bar action with the strike, what if anything new is the VEGA going to tell you? It´s the same thing, as is basically Delta moves. THETA now in short same month option trading certainly has an effect. However I´m trading 2nd and 3 rd month out. Which gives me time, but requires more of an underlying move to profit.
I see FOREX FOREX is expecting the market to GAP up this Friday morning. Whoops! That would make mincemeat of my Long Straddles if it does that. Since IV would collapse the premiums maybe. Hopefully at third month out options, I have time to recoup, with a couple of weeks leeway, should it happen. I´m trading mechanically, with some time to spare, so hopefully in my two REAL MONEY trades it will all work out. Thats the theory anyway. I guess I will find out the hard way.
I post a lot because I´m a slow learner. Plus I´m old and forgetful. As Eudamon says and another of my friends, I over analyze. I must say Forex Forex has me worried this morning with his forecast of an UP GAP. I wanted one more STRIKE DOWN and the Point and Figure Charts, one strike box shows that is possible. You cannot forecast the market though.
OP = Original Poster.
Vega is the most important variable in a straddle. More than price. IMHO.
carry on.
Chit chat socialing with Long Straddle afficiandos.
Good morning to you to, Eudamon this exciting Expiration Friday.
I have four trades on. Two in paper trading, one is a straddle the other a directional trade in Puts, and two straddles in REAL MONEY.
7:15 a.m. here, the market opens in 15 mins. Lot of fog this morning. Can´t even see the house across the street. Means a hot day I guess.
Re: Can you over analyze a trade?
Quote from falconview:
Iceman1 I´m beginning to agree with you on the differences between paper trading and real money trading. Actually I do agree with you. However, with reservations, because the paper trading allows one to familiarize with the trading platform in a new type of trade strategy. Plus I feel I get a learning experience at no cost, from the nuances involved. Agreed though, it does not translate to the real time experience. Which is why I¨ve moved rather fast from paper trading into real cash this week. With two real money trades open.
I post a lot because I´m a slow learner. Plus I´m old and forgetful. As Eudamon says and another of my friends, I over analyze. I must say Forex Forex has me worried this morning with his forecast of an UP GAP. I wanted one more STRIKE DOWN and the Point and Figure Charts, one strike box shows that is possible. You cannot forecast the market though.
__________________
Go Chicago Bulls
You can make it to the Hall of Fame getting base hits or home runs... but you gotta protect the plate!
Patient traders obtain better prices than impatient traders do because they are willing to search longer and harder to arrange their trades at favorable terms. Impatient traders pay for the privilege of trading when they want to trade... Larry Harris, Trading & Exchanges.
...it was never my thinking that made the big money for me. It was always my sitting. Got that? My sitting tight! I've known many men who were right at exactly the right time, and began buying or selling stocks when prices were at the very level which should have showed the greatest profit... their experience matched mine... they made no real money. Men who can be right and sit tight are uncommon... but it is only after a stock operator has firmly grasped this that he can make big money. The market does not beat them they beat themselves because though they have brains they cannot sit tight! Reminiscences (V)
Forex Forex
What time is this earnings report supposed to hit the market?
"Kinggyppo Last night I was reviewing the VEGA numbers and my recording, and I have come to the conclusion VEGA doesn´t have anything useful to add, to trading the long straddle. The GREEKS may have use in sophisticated hedging trades. But can´t see Vega adding anything to the Long STRADDLE. It seems to me that the number simply moves with the STRIKE. So, if you are watching the index move by bar action with the strike, what if anything new is the VEGA going to tell you? It´s the same thing, as is basically Delta moves. THETA now in short same month option trading certainly has an effect. However I´m trading 2nd and 3 rd month out. Which gives me time, but requires more of an underlying move to profit."
man you were right there, what happened.... , vega is important as eudamon said. Find an options calculator and figure the price of any spy option with vol at 15 and then at 25 it makes a huge difference in the price of the option, delta and vega are completely different animals; don't make excuses, the market makers on the other side of your trades will take your money all day long if you don't know what you are doing. Just master one concept at a time. Good trading.
Understanding VEGA.
Vega
It says in my notes that VEGA is sensitivity to IV.
Where am I going wrong in understanding then? The vega number when a straddle is put on is .10 Lets say as it moves one strike in the QQQ it goes to 9. It moves two strikes down, it goes to 8.
Other than paralleling the strike, where is the increase in speed of the IV shown?
You have me curious, I´m going to browse the internet and see what I can find out.
http://www.cboe.com/framed/IVolfram...lity%20Services
Trying to understand VEGA.
Thankyou Kinggyppo for caring. I´ve book marked this IV option calculator. Will try it over the weekend.
I goofed up yesterday. In the option chain of TOS I was making a paper trade in the July Weekly. Turns out it was the wrong weekly. The first entry, which was the end of the month expiration, when they don´t label it, was the one I should have been in. I just caught on to the problem. So scrapped that lost trade. I was wondering what was the problem. I remember now belatedly, that they don´t mark the WEEKLY option in the fourth week, because it coincides with the end of month weekly. So the one I was working in, turned out to be the early part of next week´s weekly.
Wasted the morning, well part of it anyway. I´m off to run some errands downtown. Need some things instead. At least it was an experimental paper trade.
Did look up some more on VEGA. I understand what they are saying, but just can´t correlate it to what I see on the screen for the option chain. Maybe after I play with the option calculator? Thankyou again.
Quote from ForexForex:
- Lotto Play
- Buy GOOG Jul 2011 600.00 call @ $0.35
- http://finance.yahoo.com/q?s=GOOG110716C00600000
- GOOG target after earnings $610.00
- Payoff $1000.00 - $35.00 = $965.00
Re: Trying to understand VEGA.
Quote from falconview:
Thankyou Kinggyppo for caring. I´ve book marked this IV option calculator. Will try it over the weekend.
I goofed up yesterday. In the option chain of TOS I was making a paper trade in the July Weekly. Turns out it was the wrong weekly. The first entry, which was the end of the month expiration, when they don´t label it, was the one I should have been in. I just caught on to the problem. So scrapped that lost trade. I was wondering what was the problem. I remember now belatedly, that they don´t mark the WEEKLY option in the fourth week, because it coincides with the end of month weekly. So the one I was working in, turned out to be the early part of next week´s weekly.
Wasted the morning, well part of it anyway. I´m off to run some errands downtown. Need some things instead. At least it was an experimental paper trade.
Did look up some more on VEGA. I understand what they are saying, but just can´t correlate it to what I see on the screen for the option chain. Maybe after I play with the option calculator? Thankyou again.
__________________
Go Chicago Bulls
You can make it to the Hall of Fame getting base hits or home runs... but you gotta protect the plate!
Patient traders obtain better prices than impatient traders do because they are willing to search longer and harder to arrange their trades at favorable terms. Impatient traders pay for the privilege of trading when they want to trade... Larry Harris, Trading & Exchanges.
...it was never my thinking that made the big money for me. It was always my sitting. Got that? My sitting tight! I've known many men who were right at exactly the right time, and began buying or selling stocks when prices were at the very level which should have showed the greatest profit... their experience matched mine... they made no real money. Men who can be right and sit tight are uncommon... but it is only after a stock operator has firmly grasped this that he can make big money. The market does not beat them they beat themselves because though they have brains they cannot sit tight! Reminiscences (V)
Re: Re: Trying to understand VEGA.
Quote from iceman1:
...keep an eye on certain indexes and equities and see if they do not gravitate to and trade around certain prices during expiry week. Further option open interest will give you more input into probable price levels during said week.
one more thing
the OIH gapped up today
now, that gap will fill unless it is a runaway gap; even then there will come a time that it will head back there like a magnet.
I suggest this will occur on Monday - latest Tuesday morning; OIH will trade back under 150. Thus if you believe that is a likely move, you can buy deep ITM puts with a stop loss in $ or time. You can leg in IF OIH (or whatever equity you may choose to trade) moves away from said gap. Another example is RIMM. It's a miracle that it just happened to settle on 27.50 today. Must be a coincidence; but the play was to sell the 27.50 call when it popped up earlier this week. Now, I would not do that naked as it is possible RIMM could make an announcement or there 'could' be a buyout that would push this stock north of 35+. But with that caveat it was fairly certain Rimm would be marked to 27.50,
So long as you do not get shaken out too soon (when there is plenty of time value) these are high probability trades (provided you factor in sentiment, and major and minor trends.)
__________________
Go Chicago Bulls
You can make it to the Hall of Fame getting base hits or home runs... but you gotta protect the plate!
Patient traders obtain better prices than impatient traders do because they are willing to search longer and harder to arrange their trades at favorable terms. Impatient traders pay for the privilege of trading when they want to trade... Larry Harris, Trading & Exchanges.
...it was never my thinking that made the big money for me. It was always my sitting. Got that? My sitting tight! I've known many men who were right at exactly the right time, and began buying or selling stocks when prices were at the very level which should have showed the greatest profit... their experience matched mine... they made no real money. Men who can be right and sit tight are uncommon... but it is only after a stock operator has firmly grasped this that he can make big money. The market does not beat them they beat themselves because though they have brains they cannot sit tight! Reminiscences (V)
long straddles
The few times I tried it, the index closed way off away from pegging the busiest volume. Once only it worked.
Re: long straddles
Quote from falconview:
The few times I tried it, the index closed way off away from pegging the busiest volume. Once only it worked.
__________________
Go Chicago Bulls
You can make it to the Hall of Fame getting base hits or home runs... but you gotta protect the plate!
Patient traders obtain better prices than impatient traders do because they are willing to search longer and harder to arrange their trades at favorable terms. Impatient traders pay for the privilege of trading when they want to trade... Larry Harris, Trading & Exchanges.
...it was never my thinking that made the big money for me. It was always my sitting. Got that? My sitting tight! I've known many men who were right at exactly the right time, and began buying or selling stocks when prices were at the very level which should have showed the greatest profit... their experience matched mine... they made no real money. Men who can be right and sit tight are uncommon... but it is only after a stock operator has firmly grasped this that he can make big money. The market does not beat them they beat themselves because though they have brains they cannot sit tight! Reminiscences (V)
Forex Forex
You only bought one contract? Wow! I can´t even get the TOS platform to accept one contract. So I trade 2.
Yeah I checked before market opened and it was going to Gap a small gap. It did and I planned to do that other trade of yours in reverse for the GAP closing back at the beginning, which it did also, but somehow got in the wrong weeklies. Lucky for me it was a paper trade and nothing lost. I haven´t made that mistake for about 10 months when I used to trade credit spreads.
I see a pennant forming, I´m looking for the market to go up Monday or Tuesday and change trend. Good job I´m in long straddles, it doesn´t matter, only a question of time. Oh yeah! I forgot I have a paper trade in PUTS. Well we will see what we will see on Monday.
I was looking at Bollinger bands again, for the thousandth time. Wondering if one could trade long straddles when that narrows. You can´t predict direction is the trouble. Often they make a short change for three bars and then reverse into a longer trend as well. Never could get those suckers to work predictably. But maybe with the Long Straddle?
Long straddle volatility studies - conclusions
Just running my volatility studies and marking them down before the close.
Vega is puzzling. It has dropped from .10 to .9. That is supposed to help right? Meaning market will go up? What is it telling me?
The trend for IV is steadily but slowly increasing.
Long Straddles and pennants
10 mins before the Friday close. The market has broken out of the pennant to the upside. I didn´t think it would do that until Monday morning.
Re: Long straddle volatility studies - conclusions
Quote from falconview:
Just running my volatility studies and marking them down before the close.
Vega is puzzling. It has dropped from .10 to .9. That is supposed to help right? Meaning market will go up? What is it telling me?
The trend for IV is steadily but slowly increasing.
Re: Re: Long straddle volatility studies - conclusions
Quote from atticus:
Vega drops with time. A Jan12 straddle will have a higher vega than a Dec11 straddle, all other being equal.
__________________
I'm spending a year dead for tax reasons.
Vega and the square root
Wow, those two missives from SLE and Atticus were interesting. So basically you are hinting that my Vega drop is due to time and is not really telling me anything?
Long straddle trading lore.
I´m trying to work it, so I make a profitable once a week long straddle trade. That said, I didn´t make anything this past week. I am however holding two long straddles with real money.
Essentially, I´m trading the hourly chart. The movement is up and down within the longer weekly bar. Not making any money this past week doesn´t bother me, because at the hint from the lovely lady, DerivativesG, who said she makes money working for the hedge fund, with 3 rd month out options in long straddles, my one sample showed me that I could see my two long straddles I´ve accumulated this past week, could recover with IV ballooning in the second week. I did add a second long straddle, at 75 ticks apart successfully. I was tryiing for 1 strike apart, but didn´t get it. The only worrisome thing is that IV is increasing and the VIX is up to over 20. The spreads on the two long straddles I´m holding are overpriced, the ISE shows. Not much, but a bit. We have broken out of the intermediate term bull trend and are now in the growing range bound conditions between VIX 19 and Vix 25. Increasing IV means while my premiums are swelling ( already made the market makers spread debit on one long straddle and just under that in the other long straddle,) I have to still make back my commission costs. The second week should do it this coming week, as the prices gyrate up and down inside the weekly bar and I have already successfully moved to 3 rd month out options. We shall see what we whall see? If I can close both long straddles for a profit this week, that would keep me on track to gain 5% a week per bet, hopefully per single straddle per week. Long straddle profits this way run between 1% and 8% so far in training.
If however, the week to come, moves up slowly, my premium will deflate I think. If it surges I will profit. Not at all sure I can hold for 3 weeks to get a result? Hasn´t happened to me yet, so have no reference on this.
On the other hand, the DMI indicator is predicting a setup for a move of some kind. All three lines are below the 20 line and still going down. Which shows that some sort of move is imminent in a few days.
The index is between my two straddles, so I guess it doesn´t matter which way the move goes, up or down. It is just the acceleration, velocity and pressure that matters.
Compounding risks in trading.
Iceman1
I agree with you, the money is in directional trading. I plan to trade the long straddle and when it predicts a trend direction, then move to a straight buy in puts or calls. The money is in the directional trading for sure. Also in the compounding. Which is when you increase your bet size, as you add profits. Anybody whoever went from $5000 account to $1 million account in two or three years, traded this way.
I´m dithering and undecided so far, whether to just drop the one side of the long straddle and let it run, or parallel the long straddle and buy puts or calls seperately, once a trend is confirmed. So far, I´ve been doing badly buying directional trades and losing. Mixed bag though, some wins and some losses. ( paper trading )
Compounding though is a double edged sword. Ask Howard Cohodas on here with his credit spreads. You can make money, but you also lose a lot of money also.
ATR and TR for QQQ ????
I was looking for the ATR and TR of the QQQ, but couldn´t find it. So what would be a substitute for it? I would have preferred daily.
Re: Vega and the square root
Quote from falconview:
Wow, those two missives from SLE and Atticus were interesting. So basically you are hinting that my Vega drop is due to time and is not really telling me anything?
What did you say in English?
Forex Forex
You lost me completely on that one.
Atticus is the consumate professionals professional. Right to ask him.
Re: What did you say in English?
Quote from falconview:
Forex Forex
You lost me completely on that one.
Atticus is the consumate professionals professional. Right to ask him.
Long straddle trading
I´ve been wondering Forex Forex, why you are not trading that expiration Friday trade with REAL MONEY? Seems you have enough working samples of success now?
Square root of VEGA?
SLe
I accept there is something about VEGA that is supposed to be telling me something. What I don´t know yet? Haven´t seen anything so far, but then market movement is shallow.
SLE comment about using the square root was interesting. I just got to try it on .10 Vega. = .31. I am assuming that using the square root according to your comment, if I understood it, will actually give me some sort of hint of what VEGA is good for?
Long straddle trading ideas.
Pre Monday morning.
Well a look at things and formulating all this new knowledge, trying to make sense out of things for this novice. I see the market is going to drop on the opening? Wonder how much?
My record keeping reveals something interesting. I think I could and probably should be trading volatility trends, and not index trends? Anybody got anything to say on this? Of course in a buying nature of Long Straddles, I would be confined only to trading Bear trends if one uses volatility trends to trade by. You could trade the other way, but you would have to SELL premium the other way in a bull trend. I´m undercapitalized and don´t like the idea so much, for that. Still will experiment on paper, with some idea of trying the Bear trend trading by volatility, instead of by index market movement. See what happens?
Re: Long straddle trading
Quote from falconview:
I´ve been wondering Forex Forex, why you are not trading that expiration Friday trade with REAL MONEY? Seems you have enough working samples of success now?
Forex Forex
Thankyou for the clarification. Would it be right to say you are doing better with GOOGLE than with QQQ? Overall. I´ve heard that Google is a big swinging stock. Very volatile. What is it costing to do a Google trade I wonder?
How do you choose your underlying?
Quote from falconview:
Forex Forex
Thankyou for the clarification. Would it be right to say you are doing better with GOOGLE than with QQQ? Overall. I�ve heard that Google is a big swinging stock. Very volatile. What is it costing to do a Google trade I wonder?
__________________
If it is to be it is up to me.
Long Straddle
Forex Forex
I tried your overnight trade this morning. Will try it in QQQ each night this week. Made + $11.00 this morning. Probably make more as the day progresses. This is paper trade. Just curious. Can´t hold it long because of THETA being high.
I find my straight Calls and Puts are not doing too good, compared to the long straddles.
biased long straddle in bull trend
ATTICUS
Let me run this by you please?
The QQQ has reached the QQQ 90 strike. The trend has changed and is going UP. A breakout also has occured. I wish to use REAL MONEY and put on another long straddle. Since I believe we are now in a bull trend, very shallow as it may be and not much strength. I am contemplating using that + .25 Delta long straddle.
Looking at it, I pick the 58 Call at Delta + .56 and the 56 PUT at Delta - .29.
Just want confirmation I am doing this right, as to my thinking processes, thanks? Since I am not sure, might just do this in a paper trade, though if it is a right decision I would do it in REAL MONEY.
Long Straddle hedging
Well a bit of time on my hands here. I was wanting to learn a bit about hedging. A comment by Dolemite, confirmed by Derivatives G stayed in my mind. So went scrolling through the back posts on this thread. At the time I didn´t understand it. Not sure I do yet?
Basically the comment was to buy an SPX straddle, then cover the THETA by buying an OTM VIX CALL credit. To finance the THETA.
Re-reading it here, I still don´t understand it? The OTM VIX call would be---- betting that the market would go down?
So if the straddle went up?? Then what? Nope! Still don´t get it.
your problem is you are all over the place one day straddles next hedging, you never figured out vega which is basic. You need to stay focused on one thing at a time.
Straddles working opposite.
kinggyppo
Ha! Ha! Ha! Curious minds want to know and too many dull hours between having a straddle win it´s quota.
Which got me wondering. If you bought a long Straddle in both QQQ and VIX, you would average any profit or loss, since they work opposite?
Would this help you when you are in a dull slow Bull trend, when the Volatility is dropping and reducing your premiums? Would the VIX gain offset the reduced premiums in the QQQ bull trend.
vix and qqq are not related, correlated yes, vix is derived from sp500 options, I am not an expert in this. Generally, the vix should not be traded by retail folks due to the many issues involved, I would stay away from vix straddles unless riskarb or someone conversant in the issues explains how they are priced. Someone else could chime in on why vix options should be avoided. I know what you are saying though.
Question; if you are long a straddle does increasing volatility help or hurt your position?
What Does VIX - CBOE Volatility Index Mean?
The ticker symbol for the Chicago Board Options Exchange (CBOE) Volatility Index, which shows the market's expectation of 30-day volatility. It is constructed using the implied volatilities of a wide range of S&P 500 index options. This volatility is meant to be forward looking and is calculated from both calls and puts. The VIX is a widely used measure of market risk and is often referred to as the "investor fear gauge".
"The VIX is the square root of the par variance swap rate for a 30 day term initiated today. Note that the VIX is the volatility of a variance swap and not that of a volatility swap (volatility being the square root of variance). A variance swap can be perfectly statically replicated through vanilla puts and calls whereas a volatility swap requires dynamic hedging. The VIX is the square-root of the risk neutral expectation of the S&P 500 variance over the next 30 calendar days. The VIX is quoted as an annualized variance."
huh?
http://en.wikipedia.org/wiki/VIX
Dynamic Hedging of the Long Straddle
Dynamic Hedging of the LONG STRADDLE
This continuous resetting of an option trading position's delta value to zero is Dynamic Delta Hedging or simply, Dynamic Hedging.
____________________________________
I guess from this you adjust your delta neutral position by adding or subtracting PUT or Call options, to achieve delta neutral?
_____________________________________
I´m not quite sure how one profits from this if the market moves one way or the other. I can understand an Implied Volatility explosion though.
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Re: Straddles working opposite.
Quote from falconview:
kinggyppo
Ha! Ha! Ha! Curious minds want to know and too many dull hours between having a straddle win it´s quota.
Which got me wondering. If you bought a long Straddle in both QQQ and VIX, you would average any profit or loss, since they work opposite?
Would this help you when you are in a dull slow Bull trend, when the Volatility is dropping and reducing your premiums? Would the VIX gain offset the reduced premiums in the QQQ bull trend.
Dynamic hedging of Long straddles, Delta neutral
I´m with you Eudaman.
Let me see, I have a long straddle (CASH MONEY) put on at QQQ 57. 2 contracts.
The delta was neutral when put on. Currently the market has moved and that straddle now has a skewed Delta. If I buy 2 more PUT options at -.28 Delta, which would be the QQQ 56 PUTS, I would be Delta Neutral again.
Now how does this help me?
At the moment the long straddle is still working on paying off the commissions. It has paid off the market maker spread.
Since the long straddle is working, and it is in CASH and I don´t know what I am doing. I can just theoretically add 2 contracts in the 56 PUTS to see what happens in a paper trade. Think I will do that.
Yea verily. Apparently subtle questions aimed at gaining focus go unanswered. Oh well.
Quote from kinggyppo:
your problem is you are all over the place one day straddles next hedging, you never figured out vega which is basic. You need to stay focused on one thing at a time.
__________________
If it is to be it is up to me.
Re: Dynamic hedging of Long straddles, Delta neutral
Quote from falconview:
I´m with you Eudaman.
Let me see, I have a long straddle (CASH MONEY) put on at QQQ 57. 2 contracts.
The delta was neutral when put on. Currently the market has moved and that straddle now has a skewed Delta. If I buy 2 more PUT options at -.28 Delta, which would be the QQQ 56 PUTS, I would be Delta Neutral again.
Now how does this help me?
At the moment the long straddle is still working on paying off the commissions. It has paid off the market maker spread.
Since the long straddle is working, and it is in CASH and I don´t know what I am doing. I can just theoretically add 2 contracts in the 56 PUTS to see what happens in a paper trade. Think I will do that.
Re: biased long straddle in bull trend
Quote from falconview:
ATTICUS
Let me run this by you please?
The QQQ has reached the QQQ 90 strike. The trend has changed and is going UP. A breakout also has occured. I wish to use REAL MONEY and put on another long straddle. Since I believe we are now in a bull trend, very shallow as it may be and not much strength. I am contemplating using that + .25 Delta long straddle.
Looking at it, I pick the 58 Call at Delta + .56 and the 56 PUT at Delta - .29.
Just want confirmation I am doing this right, as to my thinking processes, thanks? Since I am not sure, might just do this in a paper trade, though if it is a right decision I would do it in REAL MONEY.
Dynamic hedging for long straddles
Thankyou Atticus
I think what I plan to do, is put on another CASH MONEY Long Straddle at QQQ 90 thereabouts, Delta Neutral. Then to see what would have happened, will put on a "paper trade" using your ( Atticus ) biased +25 Delta Strangle. Then I can compare one against the other in performance and learn something.
In my myriad columns of stuff volatility relevant. The only two columns with actual forecast ability, seem to be the ISE over and under IV and HV calculations and the TR ( true range ) I don´t have a TR for QQQ, but am using the OEX which I can get and they run parallel, at any rate. The TR and ISE figures seem to give the same indicators of when to buy a long straddle. That may be of use to somebody.
The P & F chart seems to be indicating we will meet resistance at QQQ 60, be interesting to see if it breaks out. Currently the QQQ index is 58.85 and it should stall out another point up. I want to get out if I have a profit when it stalls. It may not be enough? I´m holding two CASH money, LONG STRADDLES. I´m also planning to add a 3 rd long straddle, which more or less uses up all my gambling cash availability, unless that QQQ 57 Straddle turns profitable and I can close it out, to release more cash.
Even though the index is going up, slowly, the IV is also slowly dropping, which reduces the premium one gets. Though the ISE calculation, says this is the time to buy the long straddle as it is underpriced. Interesting to see I´m getting some information out of these volatility studies. Whether I´m interpretating it properly remains to be seen.
Kind of forgot to put on the long straddle overnight trade in the weeklies yesterday. But did it this morning using closing figures, to see what will happen. This is experimental paper trading.
One of my experiments in paper trading, in puts, lost -$157. So I have reversed that trade to CALLS and will see what happens. Trying to find some sort of rythm here I can use straight CALLS and PUTS.
I put on a paper trade with the 56 PUTS in QQQ, to balance by dynamic hedging the 57 Straddle I´m holding in cash. I can´t figure how it is going to help? It seems to be an insurance policy in case the market reverses at QQQ 60 which is possible the P & F chart says, in which case I can keep holding the 57 Straddle and any gain on those PUTS would offset the loss of TIME DECAY or THETA experienced by the two weeks holding the 57 STRADDLE. This is the theory behind it I presume?
Can you ride 3 horses at the same time, if they are not your horses?.
Too many fingers in the pie.
Ha! Ha! Ha! Eudamon
I get your point. Still I´m trying to calculate what is the best way to go and people throw terminology and jargon at me, that I do not understand. So attempting to do them in paper trading is my way of at least acquainting myself with the terminology. On the other hand, it is a process of elimination of data people disseminate, for which I have no reference and wonder if I am missing something?
By the way, got a question for you? How long have you been trading your long straddle system, with cash money?
Vega trends for long straddles
VEGA
I see by my straddles that Vega on the CALL side has dropped from .10 to .09 and today .08. I have no clue what that is telling me?
On the other hand, my TR ( true range ) figure seems to give me something the same as VEGA? I´m getting a trend, but what kind of trend? What is the nitty gritty of this stuff?
Re: Too many fingers in the pie.
Quote from falconview:
Ha! Ha! Ha! Eudamon
I get your point. Still I´m trying to calculate what is the best way to go and people throw terminology and jargon at me, that I do not understand. So attempting to do them in paper trading is my way of at least acquainting myself with the terminology. On the other hand, it is a process of elimination of data people disseminate, for which I have no reference and wonder if I am missing something?
By the way, got a question for you? How long have you been trading your long straddle system, with cash money?
longevity of long straddles.
Hmnnnn! Thanks! That gives me some confidence on my own calculations then and expectations.
Re: Vega trends for long straddles
Quote from falconview:
VEGA
I see by my straddles that Vega on the CALL side has dropped from .10 to .09 and today .08. I have no clue what that is telling me?
On the other hand, my TR ( true range ) figure seems to give me something the same as VEGA? I´m getting a trend, but what kind of trend? What is the nitty gritty of this stuff?
Vega as it effects the Long Straddle
Ahhhh! That makes sense thinking of it that way.
"Think of vega as synthetic time. There is less time for the move implied (in the premium) to materialize. "
Definitely I don´t think there is much time to make enough move I want, when bucking against the overhead resistance at QQQ 60.
Thankyou!
Learning straddles.
Well the market is slow and I didn´t bother to enter a Straddle on the high. Want to close one straddle first, of the two I have open. Bit nervous about the money.
To those of you who sent me some private emails. I just more or less discovered them. Been going through them this morning. I certainly apologize if you were looking an answer earlier. I hadn´t thought anybody would even bother to send a novice like me, an email privately. Not having anything useful to contribute at this point.
Some confusion on my part with professional jargon, others take for granted. A fly I take it is a butterfly? Single options I think I understand. But an outright, I don´t.
Other than that I am sweating my long straddles into their 2nd week. Did use Sept. options, so believe I have the THETA time available. The slow market has played havoc with things at the moment.
Just when I thought I was getting a handle on things, some new information sent to me, lets me start back at the beginning again. Sheesh! However the challenge is what it is all about. Measured of course in your account balance, or my account balance, which is not yet doing so good so far.
Re: Learning straddles.
Quote from falconview:
Well the market is slow and I didn´t bother to enter a Straddle on the high. Want to close one straddle first, of the two I have open. Bit nervous about the money.
To those of you who sent me some private emails. I just more or less discovered them. Been going through them this morning. I certainly apologize if you were looking an answer earlier. I hadn´t thought anybody would even bother to send a novice like me, an email privately. Not having anything useful to contribute at this point.
Some confusion on my part with professional jargon, others take for granted. A fly I take it is a butterfly? Single options I think I understand. But an outright, I don´t.
Other than that I am sweating my long straddles into their 2nd week. Did use Sept. options, so believe I have the THETA time available. The slow market has played havoc with things at the moment.
Just when I thought I was getting a handle on things, some new information sent to me, lets me start back at the beginning again. Sheesh! However the challenge is what it is all about. Measured of course in your account balance, or my account balance, which is not yet doing so good so far.
Atticus
Thanks!
Atticus
Sent you a private email.
Re: Dynamic hedging of Long straddles, Delta neutral
If you hold the existing position as is and QQQ drops several pts, you'll have a straddle that's worth less because of time decay.
Quote from falconview:
Let me see, I have a long straddle (CASH MONEY) put on at QQQ 57. 2 contracts. The delta was neutral when put on. Currently the market has moved and that straddle now has a skewed Delta. If I buy 2 more PUT options at -.28 Delta, which would be the QQQ 56 PUTS, I would be Delta Neutral again.
Now how does this help me?
Making a straddle Delta neutral as it moves
Spindro
I kind of got it and had sort of figured out something similar there. Nice to have it confirmed.
Hedging insurance.
Thanks a lot.
I´m still contemplating the biased STRANGLE, or whatever it is called doing it + 25 Delta. Don´t know whether to do it in paper trading, or just jump in and use cash. I´m expecting a breakout upside for a new trend. Since a bull trend would see premiums shrinking due to dropping IV, I was wondering if that biased bull STRANGLE would resolve any losses involved with a bull move?
There is nothing special about 25-delta. It will become "aversion therapy" as you will continue to bleed when buying these things.
Please trade something else. If you want to be long(short) then start with some bull(bear) vertical spreads.
Re: Making a straddle Delta neutral as it moves
Your first consideration with long straddles/strangles etc. is direction (UL price change). Not far behind that is time decay. AFAIK, for an index option, change in IV is far less imp't than the first two.
Quote from falconview:
I´m still contemplating the biased STRANGLE, or whatever it is called doing it + 25 Delta. Don´t know whether to do it in paper trading, or just jump in and use cash. I´m expecting a breakout upside for a new trend. Since a bull trend would see premiums shrinking due to dropping IV, I was wondering if that biased bull STRANGLE would resolve any losses involved with a bull move?
C'mon man. 25-delta is kinda like halfway to 50-delta!
Quote from atticus:
There is nothing special about 25-delta. It will become "aversion therapy" as you will continue to bleed when buying these things.
Well I appreciate the candid input. I am looking at some different things. Haven´t got far enough long on my looking though, to talk about it. Under certain conditions I can see where the Straddle will work.
I got out of the 57 long straddle and only made about $5 or $6 on it net profit. At least I didn´t lose anything. Something like 1/2 of 1% or something. Bit disappointing, but the market has been stalled a few days under a resistance line. I´m still holding the 58 long straddle. I can go next week on that one, I think. The big cost in long straddles are the commissions.
I´m re-thinking buying straight calls and puts. And have worked out a couple of new scenarios to do so. Looking at a few other things Atticus mentioned.
Trying to remember right now. Some kind of Vertical spread when you are in a very slow bull trend and the dropping IV and slow climb of the index, doesn´t allow for making any money in a Bull trend, using straight Calls. Man I am forgetful. Will have to check around and see what I can see. Unless somebody wants to chime in?
Just closed a couple of paper traded CALL trades. Made +$34 on one, which was 10% and the other made +$20, which was + 5%.
Couple of days in the trades. Trying out a different way of forecasting market direction. I need to make a lot more money than I´m doing.
Quote from falconview:
I am looking at some different things. Haven´t got far enough long on my looking though, to talk about it. Under certain conditions I can see where the Straddle will work.
Everything works under certain conditions
I´m still holding the 58 long straddle. I can go next week on that one, I think. The big cost in long straddles are the commissions.
The big cost in long straddles is the time decay (find a deep discount broker that charges less than a buck per contract).
Long Straddle/Strangle, CALLS, Vertical Call spread
Well market has closed. My wall clock has quit working. Computer clock has a wierd time.
Still holding a CASH money, Long Straddle QQQ 58
Holding paper money
1 Spy Sept 134 Call
1 Sept. Strangle 59 QQQ
1 Sept QQQ CALL
1 Vertical Bull Call Spread, Sept. for debit of .67 cents
So will see how that works out next week.
TRYING TO PREDICT DIRECTION and then confirm what is the best way to trade a short BULL Trend.
cONCLUSIONS ON LONG STRADDLES
My conclusions on LONG STRADDLES.
Trade 3 month away options.
Trade ONLY when expecting a BEAR TREND.
or TRADE WHEN EXPECTING AN EARNINGS REPORT IF USING STOCKS
Do NOT trade a bull trend with a long straddle. Only a BEAR TREND expectation.
________________________________
I´ve learned a lot about VOLATILITY and the effect on premium prices.
___________________________
I´ve traded IRON CONDORS before. Just figured out how to put on an ordinary CONDOR, which is sort of a LONG STRANGLE using Vertical Spreads. Have no idea yet, about WHEN and the use of this idea yet.
______________________
Re: cONCLUSIONS ON LONG STRADDLES
Quote from falconview:
Have no idea yet, about WHEN and the use of this idea yet.
______________________
Re: cONCLUSIONS ON LONG STRADDLES
Many of your conclusions are inconclusive.
Quote from falconview:
My conclusions on LONG STRADDLES.
Trade 3 month away options.
Trade ONLY when expecting a BEAR TREND.
or TRADE WHEN EXPECTING AN EARNINGS REPORT IF USING STOCKS
Do NOT trade a bull trend with a long straddle. Only a BEAR TREND expectation.
Re: cONCLUSIONS ON LONG STRADDLES
Quote from falconview:
My conclusions on LONG STRADDLES.
Trade 3 month away options.
Trade ONLY when expecting a BEAR TREND.
or TRADE WHEN EXPECTING AN EARNINGS REPORT IF USING STOCKS
Do NOT trade a bull trend with a long straddle. Only a BEAR TREND expectation.
______________________
Long straddle/strangle stocks favorites.
Iayyyyiii Dolemite!
Well skipping that helpful bucket of cold water thrown on me at this point ( grin ).
Would any contributors care to share those big volatile stocks, that they use the Long Straddle on, to trade earnings reports? The only one I know was contributed by Fortis Fortis. That was google
I´d like to have a list of stock candidates most favored and will start looking up the earnings report dates on the internet. Got to start someplace.
________________________________
Found I had a Vertical Spread calculator in my bookmarks. Having tried them before, without much success. I want to run some of this again. See how long it takes of a move to make them profitable. Think it is a fixed profit type thing?
____________________________
In the meantime, I`m working on my forecasting direction capability, for straight puts and calls. An amateurs refuge when everything else overwhelms the brain power.
¨¨¨¨¨¨¨¨¨¨¨¨¨¨¨¨¨¨¨¨¨¨¨¨
I can´t remember the reason for choosing a vertical bull or bear spread. Does it negate the THETA effect? Especially in a slow bull trend.
________________________
Long straddle discussions.
Dolemite
Good question about the directional versus the non directional. I have already experienced the unexpected turnaround, at least in small trend runs, using the hourly charts. I´m gravitating to the daily and weekly charts now though. so, the straddle, or strangle is insurance against a market reversal. In the QQQ I´m finding that I need a movement of roughly 5 strikes to cover flutter, using hourly charts within a weekly bar chart, to get me the premium change over say, 3 strikes actual.
I´m in the process of turning to daily charts though, based on a weekly trend. Can´t say I have all the answers yet, but am identifying things to avoid at least. Wonder if we will get volatility next week, from the default.
__________________________
I was thinking how nice it is, this Saturday night, to have such a bunch of nice guys on this forum thread. Everybody is so helpful and cracking the odd joke now and then. What a difference to some of the other threads. This is definitely nice, warm cosy feeling. NOW I WILL GET FLAMED.
______________________________
Vertical Bull Call Spread
Had my five hours of sleep and at 2.30 a.m. on a Sunday morning.
Fresh mind! Took a look at the Vertical Spread calculator. Entered my stuff. Index QQQ at 59.56
sell the 59 Call at $1.97 and buy the 58 Call at 2.64, with a debit of .67 cents. Hope I got the set up right? This is in paper money. I think I´m doing a Vertical Bull Call Spread. I may not be?
It says my maximum profit is 47% at .33 cents. The rest of it didn´t make any sense. The Break even was 58.67 which is obviously nonsense, or I did something wrong. Anyway, lets assume it calculated in reverse, then my Break Even is roughly 1 strike move?
I get that I let the thing run, until it gets close to .33 cents and then close it. NEVER ever succeeded in making a Vertical Spread work before when playing with them.
Comments by anybody familiar with trading them?
______________________
Been thinking of the LONG STRADDLE in cash I´m holding. The P & F charts using 1 strike boxes, about a week ago, had enough of a swing as it entered congestion sideways to cover my 57 long straddle, ( 5 strike swing ) but as the market moved sideways ( QQQ ) the flutter, or internal swings got shorter. So nothing doing for my two long straddles pretty much over two weeks of sitting around waiting. The P& F chart showed we were forming a pennant, with the bottom sloping upward and we are bucking an overhead resistance line. I expect a breakout UPWARD into a BULL run. So I am still sitting on one Long Straddle, which I now know is not a good thing, in a bull trend, as the IV or VIX moves down, the implied volatility also reduces the premiums. Still my TR + index calculation shows a breakout confirmed upward at QQQ 61.5. Long way from there yet. Still in the 59.67 level of the QQQ. On the other hand, the VIX did break downward past the BULL TREND 18 number and went into VIX 17.50 thereabouts indicating a bull trend was in the making. Some of the index bar charts already show the resistance was broken with new highs. Maybe Fed budget default news will give me a volatility balloon on Monday? Letting me close out the Long Straddle. This is definitely a BULL slow trend. A Fed budget default would make the market plunge into a BEAR trend though they say on the news.
In line with my conclusion to trade when I have indications of a bear trend with the long straddle, looking at the P & F charts, that would mean trading when you get 0´s running down in that type of chart, which works only by price movement and not by TIME. the X´s line running upward would not be very good for long straddles due to dropping IV and dropping premiums.
I was thinking about my experience experimenting with Pairs trading, in which you trade an index when it is going up and take an opposing set of options in the VIX options, because they gain premium at the same time, because the VIX is going down. I was trying to figure some way you could increase the number of Long Straddles entered. As my original premise was using hourly charts, I could try to catch a trend and complete a long straddle trade once a week. This didn´t work out, because in some kinds of congestion, as showed on P & F charts, the congestion forming a bull penant, or flag, will not have the necessary strength, or wide enough swings to make a short term Long Straddle work. What you need is when the market has a BEAR PENNANT, or FLAG.
However, I do my best thinking when I´m sleeping. There is something nagging at the back of my mind, that says in PAIR TRADING, premiums go up in VIX options, in a bull trend. And Index options also go down in premium value in a bull trend. So would it work that you could increase the number of long straddle trades, if in bear moves, you you traded Long Straddles in index options and in bull moves if you traded VIX options, the premiums moving opposite to each other? Will have to try it with a paper trade and see how it works out I guess.
Long straddle volatility trading.
Early 2 a.m. on Monday morning my time. Old man up before the birds.
Seeking information on volatile stocks, I ran across an explanation of Beta, that finally taught me what it meant.
BETA EXPLANATION Beta 1.0 is in lock step with the markt. BETA measures stock volatility. The bigger the number, the more volatile. So index QQQ running around .10 is not much good for volatility trading. Even when it drops to ,08.
So heaven forbid I started looking up Stocks with Beta 2.0 and greater. It making sense if you are trading a volatility trade like the Long Strangle or Straddle, you would want a volatile strock. There are actually some lists of such stocks. Don´t know where this is leading, but I find it interesting.
tradng long straddles in stocks
Well an hour later in early morning research. Looking up BETA stocks more than 2% daily moves.
Then that sort of morphed into stocks by percentage and started eliminating everything less than a daily 2% move. Reason for that, in the back of my mind I have heard some of you guys on here talking about 1.5% moves with indexes and some stocks. I get the implication, if not the nuances.
Took a look at the spreads. I got the feeling that I´m missing something here. Probably in the market maker spread + commission costs?
Anybody care to summarize their experience in the direction this is leading. Short cut a lot of trial and error?
chit chat on a dull trading day
About an hour before close on Monday. This dull market is only good for credit spread traders.
Nothing much happening.
I got mixed up over the weekend research with BETA and GAMMA in trying to bone up on studying them. Just forget them for now.
I have tried a paper trade on a stock, called MOD that is supposed to move 2% in a day. Not doing a darned thing right now and one quick look at the market maker spread, says it is not going to do anything either. Still, I try and see what will happen, it is all educational.
QQQ 59P / 60C strangle - Live trade in progress.
Re: tradng long straddles in stocks
Look for an edge
Quote from falconview:
Anybody care to summarize their experience in the direction this is leading. Short cut a lot of trial and error?
Interesting! Will watch it. THANKS
Long straddle months in options by VIX
Had one of those EUREKA moments this morning swinging in my hammock, while waiting for the sun to come up over the nearby valley ridge.
The application of the correct month in which to apply a long straddle, as dictated by the VIX ( Volatility )
For VIX 15 to 18, which is a long slow shallow Bull Trend. You probably require a 3 rd month out options.
For VIX 19 to 25, you can use second month options. Still weak market moves. For VIX 26/28 and above, you use SAME MONTH options. You have the volatility representing market action.
Think I will be putting on a QQQ 60 long straddle as well Forex Forex, if I get the ISE volatility buy signal.
weekly long straddles
Forex Forex
I take it this must be a weekly option if last day of trading is July 29th. Just hit me as I re-read your post.
Long straddle experimental trading.
Well my experimental paper trade on MOD, a manufacture stock, failed. One side of the STRADDLE went to 0.00, the PUT side and the other made a bit, but the spread lost $76, since there were no offers for PUTS. Must have been too thinly traded or something?
What was the lesson learned then?
___________________________________
Playing with a WEEKLY STRADDLE using Vertical debit spreads instead of a put and call. See what will happen? In QQQ. Maximum profit occurs if QQQ expires between the QQQ strike at 61 and strike 59 on Friday. Have no idea of how to calculate the profit yet. Paper trading.
_________________________________
Paper traded a Sept spy calls, from yesterday, but it lost money, even though the index went up. Closed it off.
____________________________________
Must have gone through one of those algorythms that calculate and adjust TIME DECAY in the QQQ weekly?
I´ve been tracking today, the IV for the QQQ 59 option from TOS and to compare the IV coming from ISE, along with the QQQ 59 CALL ASK price. The premium dropped from the $2.09 level, to .89 cents. While the noon hour market has slowed a lot and doesn´t seem to be going anywhere, the IV trend in both, from TOS QQQ 59 quote and the ISE quote have both been trending down. I was experimenting with seeing what kind of fast trade you could make in a WEEKLY type trade, if you entered when the IV current number became less than the historical IV of yesterday. After seeing the drop from time decay in the straight CALLS, it is obvious you can´t hope to catch a quickie profit, if you got underpriced options in straight option buying. Would be playing Russian Roulette. So, we shall see how the experimental STRADDLE or STRANGLE with the Vertical DEBIT STRANGLE will work out. I believe the question has already been answered, when I asked does the THETA effect a Vertical Debit Spread before and nobody answered and I couldn´t find anything in the literature, but since the spread seems to be holding it´s own, even though the QQQ index isn´t really going anywhere yet. The spread using Verticals must not suffer from Time Decay, THETA adjustments.
I guess if you had the inclination to bet on a straight CALL, you would then bet with a Vertical Bull Call Debit spread instead using weeklies. Must try that, when this IV trend bottoms out, see if I can do it inside this week before Friday.
Long Straddle seems the most consistant?
My usual 3 or 4 a.m. studying. Been studying Vertical debit spreads. The many times I have studied them, I still have not got a clear understanding of how they profit. Seems they have to expire to work profitably. Maybe good for weeklies? Expire every Friday.
Wednesday morning. Happy to say only the Long Straddle trade has been continuously successful, of all my experiments. Though in this low volatility environment and slow, slow bull trend, this is not the best place to be holding a long straddle for any length of time.
Volatility
Hi, I have little bit newbie question...
Why there is so much volatility in weeklies puts on Amazon after realesing earnings and not in calls? Could someone explain me?
Thanks a lot
Quote from ForexForex:
07-25-11 03:36 PM
QQQ 59P / 60C strangle - Live trade in progress.
- QQQ @ $59.53
- Buy QQQ Jul 2011 59.00 Put @ $0.4002 http://finance.yahoo.com/q?s=QQQ110729P00059000
- Buy QQQ Jul 2011 60.00 Call @ $0.3802 http://finance.yahoo.com/q?s=QQQ110729C00060000
- Total debt $78.04 commissions included.
- Last day of trading July 29, 2011.
- Will update when I close position.
How come you only update winning positions and the losers are ignored?
Quote from ForexForex:
UPDATE - POSITION CLOSED
- Sold the QQQ Jul 2011 59.00 Put @ $0.92 http://finance.yahoo.com/q?s=QQQ110729P00059000
- Sold the QQQ Jul 2011 60.00 Call @ $0.05 http://finance.yahoo.com/q?s=QQQ110729C00060000
- P/L $16.91 / + 21% commissions included.
Long Straddle trading by a novice.
Nice trade Forex Forex
I´m still kind of waiting, trying some various experimental trades. Mostly with the Vertical debit spread, trying to learn how to do it, paper trading.
My cash long straddle was in the money a few cents the first of the week, but now it is back debit again. It didn´t have enough, to merit closing. I ´ve decided to hold it for another week and see what happens with it.
I´m also playing with a paper trade or two, in WEEKLY options. Just put on a Long Condor this morning in the WEEKLY. I only know it is going to expiration on Friday. Been having trouble mentally trying to figure out how it profits. So a real time paper trade will have to do the teaching.
I´m beginning to think 2nd or 3rd month Long Straddles are the cat´s meow. They do work eventually. I´m sort of contemplating that if I miss a week and fail to put one on, I would increase the SIZE of the trade, by one contract, to three, to make up for any loss of time in dull sideways markets, when I do put one on the next week. See if one could keep compounding the account that way.
One question? What was your decision making situation to putting on that Long Straddle in this WEEKLY.
Long Straddles in the weeklies
Forex Forex
I see you made that WEEKLY trade decision Monday about 3:30 p.m. late afternoon. I went back to check on what might have prompted it. You might have used an oscillator? Nothing that I am using anyway. I do see it was a new shallow high, that was weak. In my 15 mins. charts I possible could have had the signal. I certainly thought about it. But with the slow bull market as weak as it is, just ignored it.
In the sense, that a Monday, or early week Long Straddle would be efficient, for trading the weeklies. I sort of had been planning on it also, but using ISE, which never gave me a lower IV than HV signal during the week. So I had been playing with trying to learn the nuances of using a Vertical Debit Spread. Also I cleaned up some of my outstanding paper trades, that made something, if not much.
Some things became obvious. Not to trade straight options in the WEEKLIES, I learned this week.
In paper trades I´m still holding a Sept Vertical Bull Call Spread,also a long straddle for Sept also. Got a cash money long straddle still holding also. In the last hour I put on an August Call 59. at $1.15. I´m trying to decide which way to go, for more intensive cash trading. I also have a WEEKLY LONG CONDOR and confess I have no clue at all how that will work out, so it is paper trading, but is an expiration Friday trade.
______________________________
Ran through the battery of indicators on FREE CHARTS. Did found one that would have given such a signal for weekly direction this week. Got it marked. Will use it from Friday to Tuesday and see if any more Long Straddles pay off in the weeklies. Good idea of yours. Faster, more frequent trades.
___________________________
trading long straddles
Welll the increase in volatility allowed me to close two trades in paper.
The QQQ Sept. long straddle, 59 strike. It cleared after commissions only 1%
A straight August Call in QQQ done just this morning, very short trade. Cleared after commissions $33 or 28%. IV did it!
I´m out of Long Straddles. Been setting up a direct long trade in he QQQ, and the new system took me 6 weeks to get it up and running. I´m trading CASH MONEY, but QQQ which is the Nasdaq
Whoops! Must have hit the wrong key, kicked me out.
Anyway, got actual trading last half of August, and 3 or 4 successful trades so far. About 6 or 7 % profit on each bet. Small bets though, only two contracts. Plan to increase bet size as I get more confident.
Serependity Option Trading Method
One month of trading new system
SEREPENDITY TRADE METHOD - OR- THE SERENDIPITY OPTION TRADING METHOD
START: Mid August, 2011, trading in cash. Balance: about $7187
1) 2 Sept PUTS -50 – @ Buy $1.85, Sell $2.04 ( + 7%) + $26 New balance: $7213.77
2) 2 Oct CALLS -49- @ Buy $4.05, Sell $4.42 ( +7% ) +$62 New balance: $7275.95
3) 2 Oct PUTS -52 - @ Buy $2.85, Sell $3.10 ( +6%) +$38 New balance: $7314.13
4) 2 Oct CALLS -52- @ Buy $4.42, Sell ($4.22) ( -5%) -$52 New balance: $7262.13
5) 4 Oct Puts -59- @ Buy $4.74, Sell $4.99 ( + 4% ) +$76 New balance: $7338.12
September, 2011
6) 3 Oct PUTS - 59 - Buy $5.94, Sell $6.24 ( +4% ) +$72 New balance: $7410.95
7) 6 NOV CALLS -48- Buy $4.04, Sell $7.36 (+ 6% ) + -$156 New Balance: $ 7583.57
8) 2 NOV CALLS -48 - -Buy $7.38, sell $7.58 (+ 1.8% ) +$28 New Balance: $7595.64
9) Sheeet! Made a writing mistake on the order form. Put in a limit order to sell, intending to raise the price a dollar for the day. Insteady of $7.58 I sold at $6.58 and it cost me about (-$210), Had to re-establish my position again. ( No. 10 )
9) 10 NOV PUTS -60 - Buy $6.73, sold $6.58 (- 3% ) ( - $210 ) New Balance:$7385.64
10) 10 NOV PUTS -60 - Buy $6.64, sold $ 7.65 (+14%) +$950 New Balance: $8335.64
**** EXCHANGE FLAGS me as a day trader because I close out and take my profit at the end of the day. Instruct me to HOLD MY TRADES OVERNIGHT, or raise my CASH balance to $25,000.
11) 2 NOV CALLS - 48 -QQQ- Buy $6.48, sold $6.96 (+5%) + $72 New Balance: $8449.75
SEREPENDITY TRADING Account gain = + 16.5 % (4 week mark ( ONE MONTH) since starting.)
Serependity Trade method, blog.
Whoops! If you want more emotions, philosphy and such, here is my BLOG on the SEREPENDITY OPTION TRADE METHOD as I go along and develop it.
http://tradingoptionsfordummies.blogspot.com/
E Mini symbol for FreeStockCharts.com?
E Mini chart ?
I was curious if I could pull up an E Mini chart on FREESTOCKCHARTS.com
Anybody know if there is a symbol that works?
http://www.barchart.com/commodityfu...00_Futures/ESZ1
Re: E Mini symbol for FreeStockCharts.com?
Use SPY, substract 0.5 and multiply by 10, ish...
Quote from falconview:
E Mini chart ?
I was curious if I could pull up an E Mini chart on FREESTOCKCHARTS.com
Anybody know if there is a symbol that works?
Substituting SPY for the EMINI chart reading
I notice the E Mini has lots of fast movements back and forth. Perhaps more so than the SPY? Would that be a factor in reading indicators?
Thanks for the reply by the way.
Re: Substituting SPY for the EMINI chart reading
Quote from falconview:
I notice the E Mini has lots of fast movements back and forth. Perhaps more so than the SPY? Would that be a factor in reading indicators?
Thanks for the reply by the way.
es ?
I didn´t get the spread from es to something goes to zero comment?
Sorry! Thanks for contributing.
Re: es ?
Quote from falconview:
I didn´t get the spread from es to something goes to zero comment?
Sorry! Thanks for contributing.
Kinggyppo
Thankyou for the contribution to my education. Think I had read some of this stuff before, but had forgotten it. I just had an idle moment while my options were down -$700. Told my wife when she popped in and she had the usual sarcastic comments. I was waiting out the testing of overhead resistance. See if I am going to lose or recover later this week. My trade yesterday didnt work out so well this morning, complying with the EXCHANGE order to hold overnight. Think I made an ENTRY too quick. Going to have to refigure that technique.
There was a reason I picked options, now that you mention it again. Futures can cost you your house comment.
I was a bit bored and wondering if my proprietory indicators would read on the EMINI and if there was a chart I could test them on, with FREESTOCKCHARTS.com
Nothing serious here, just killing some time. You have been around a lot of years, as I recognize your name.
I´d figured out a way to get more volatility in my trade. So was trying it. Unfortunately it is a two edged sword. Nice if I got the direction picked right. Unfortunately, I jumped too soon apparently, so now have to have NERVES OF STEEL. Great description that, for what is going on here with me.
I think I´ve made a poor trade, this week, but if it recovers to break even, might just opt to cash out. Can´t do anything until the market moves considerably in one direction or the other and I know what to do.
Re: Re: es ?
Quote from kinggyppo:
es is the future contract from the link I sent you. It expires every few months, there is also spx contract known as the big due to the large tick size, this is a contract traded by institutions and deep pocket locals. spy is more like a stock and is what you should focus on. You can lose your house trading futures if you do not understand margin.
spy and its derivative options are extremely liquid. I have seen many times someone drop 5,000 lots and not move the bid one tick. You can't beat spy in terms of liquidity. Es mini is heavily traded by all the players, retail institutional etc. spy and es are two different animals.
http://seekingalpha.com/article/172...index-spy-vs-es
philosphy
Ahhh! Interest rates.
You know after spending two years messing with spreads and learning GREEKS, and volatility trades, Gap trading. credit spreads, debit spreads, long straddles and all that other stuff about selling premium is better and everything.
It is just nice for this simple character, to just buy straight forward, option contracts and forget all that complicated stuff. Other than mildly curious, I think I´ve burned out on complicated trading deals. Now all I have to do is make a profit each trade, if I can. Much simpler. A whole lot faster in finding out if you did it right or wrong. Far as I can see so far, a whole lot safer too.
Somebody once said, the death of a thousand cuts, and I laughed about that. That complicated stuff is sure that.
Re: philosphy
Quote from falconview:
Ahhh! Interest rates.
You know after spending two years messing with spreads and learning GREEKS, and volatility trades, Gap trading. credit spreads, debit spreads, long straddles and all that other stuff about selling premium is better and everything.
It is just nice for this simple character, to just buy straight forward, option contracts and forget all that complicated stuff. Other than mildly curious, I think I´ve burned out on complicated trading deals. Now all I have to do is make a profit each trade, if I can. Much simpler. A whole lot faster in finding out if you did it right or wrong. Far as I can see so far, a whole lot safer too.
Somebody once said, the death of a thousand cuts, and I laughed about that. That complicated stuff is sure that.
Long or short
I´m short holding PUTS. Should have held longer before entering. In hindsight I can see my mistake. Still until a breakout above resistance I´m going to hold. Still some time left in this week to get my move.
there is a double top on spy on the 60 minute, that said you should be thinking about where to cover if the mkt goes against you. Good trading.
Double top on SPY
Double top on SPY, means down. In QQQ I´m getting that now. Guess I´m going to hold overnight looks like.
I´m about a dollar negative now, so my - $700 reduced to - $400.
If the QQQ will move another strike down, I will be okay. Going in the right direction anyway.
I need it to reach the mean regression, midway to break even. Looking good so far.
Losing streak hurting bad.
Man o´man! I´ve not been able to switch from DAY TRADING with a winning system, to overnight multiple day trades as required by the EXCHANGE.
I´m on a ruddy losing streak that is hurting bad.
This has been a tough market to trade, are you trading options? longs are tough due to high vol and you can't short sell without large $$$
Can´t take a quick profit each day.
Yeah I´m trading QQQ options. If I was still doing my day trading I´d be making out like a bandit. But they have warned me off as a DAY TRADER, or PATTERN TRADER. Can´t take a quick profit each day. By day trading with more contracts it was really getting good. Then I ended up doing 4 trades in a week, and they lowered the boom. Overnight multiple days is a different strategy or kettle of fish. Haven´got it yet!
15% or 40% how much tax does an option trader pay?
Having an argument with an accountant. She insists that I will only pay 15% on profits for short term index option trading. I have been told 40% by somebody on here. Now I´m really confused?
Quote from falconview:
Gap Trading was very lucrative with 4 months of funny money trading. Made 297% in four months. But when I opened a $10,000 cash account, I won the first trade, but lost the next three, which has put me down 30% of cash account. So now I must put it aside for now, though I know the error.
Quote from falconview:
Why the long straddle? Well I knew a guy in South Miami did very well at it. Started his own brokerage, started his own bank and both himself and his wife traded long straddles. I never found out what he was doing, just got titillated by my discount broker at the time over the phone.
falconview...
do you ever 'leg' into spreads
do you always trade the same months; or do calendars
ever trade weekly options?
__________________
Go Chicago Bulls
You can make it to the Hall of Fame getting base hits or home runs... but you gotta protect the plate!
Patient traders obtain better prices than impatient traders do because they are willing to search longer and harder to arrange their trades at favorable terms. Impatient traders pay for the privilege of trading when they want to trade... Larry Harris, Trading & Exchanges.
...it was never my thinking that made the big money for me. It was always my sitting. Got that? My sitting tight! I've known many men who were right at exactly the right time, and began buying or selling stocks when prices were at the very level which should have showed the greatest profit... their experience matched mine... they made no real money. Men who can be right and sit tight are uncommon... but it is only after a stock operator has firmly grasped this that he can make big money. The market does not beat them they beat themselves because though they have brains they cannot sit tight! Reminiscences (V)
Chit chat
I´m no longer trading the long straddles ICEMAN. I tried legging in, but it didn´t work too well
I´m trading straight buying, of puts and calls.
I understand the risk management being offered and am well aware of it. Just beating my own drum for a while. I´m a person learns the hard way. But thanks for the heads up. It´s only money! ( grin )
I being the original poster, or op, just using this forum to chit chat.
A very useful lesson I learned this month. Was when on a winning streak, ride it as much as you can, say a higher risk percentage, with higher risk. What I have just learned, is when you take two losses in a row, assume the worst that the market has turned, or your method has quit working, or pyschologically you are out of rythm for some reason, and IMMEDIATELY switch to 1 contract in options, and since I was trading deep in the money, go to out the money contracts. This lets you keep trading until you figure out what went wrong, and get back in the winning streak, or rythm again. ( minimum funds at risk ) Then start scaling up size and premium value, once more. See what happens next cycle? Right now I´m back on the winning streak again and going to start scaling up in size Monday.
I´m still hoping somebody will give me a source on tax obligations for short term index option contract trading.
Re: 15% or 40% how much tax does an option trader pay?
Quote from falconview:
Having an argument with an accountant. She insists that I will only pay 15% on profits for short term index option trading. I have been told 40% by somebody on here. Now I´m really confused?
Re: Chit chat
Quote from falconview:
I´m no longer trading the long straddles ICEMAN. I tried legging in, but it didn´t work too well
I´m trading straight buying, of puts and calls.
I understand the risk management being offered and am well aware of it. Just beating my own drum for a while. I´m a person learns the hard way. But thanks for the heads up. It´s only money! ( grin )
A very useful lesson I learned this month.
__________________
Go Chicago Bulls
You can make it to the Hall of Fame getting base hits or home runs... but you gotta protect the plate!
Patient traders obtain better prices than impatient traders do because they are willing to search longer and harder to arrange their trades at favorable terms. Impatient traders pay for the privilege of trading when they want to trade... Larry Harris, Trading & Exchanges.
...it was never my thinking that made the big money for me. It was always my sitting. Got that? My sitting tight! I've known many men who were right at exactly the right time, and began buying or selling stocks when prices were at the very level which should have showed the greatest profit... their experience matched mine... they made no real money. Men who can be right and sit tight are uncommon... but it is only after a stock operator has firmly grasped this that he can make big money. The market does not beat them they beat themselves because though they have brains they cannot sit tight! Reminiscences (V)
GAMBLING hot and cold runs philosphy
It´s much harder trading multiple days. With the EXCHANGE putting me at a disadvantage. I hate letting a profit run overnight and I also hate not being able to close a short trade with a profit, because I´m not allowed to, forcing a loss by holding overnight.
Trying SWING TRADING, and so far it is working on minimal contracts, of one contract, but have lost my freedom of choice.
Certainly a different way of trading, even though I´ve got 4 wins now on minimal amounts. Have to step up my trade size to earn bucks.
OPINIONATED PIECE FOR NEWBIES ON SPREAD TRADING
Thought I´d just pass this on, for comparison sake, for a lot of newbies. This is an article for traders in the country of Belize. Mostly USA retiree types. You will notice the paragraph, lower down, and my opinionated piece on SPREAD TRADING.
__________________________
Friday, November 4, 2011
Belize Bond trading news updates, November, 2011.
http://www.cbonds.info/em/eng/emiss...params/id/11101
This is the URL site for trading in Belize Bonds.
Yesterday afternoon I received in Hillview a phone call from the Chinese wanting to buy Belize Bonds. My Smart cell phone had trouble with the connection here in my suburb on the side of Green Parrot Valley in Western Belize. After a number of phone calls, and disconnections, I finally managed to understand the query from the caller and it turned out they wanted to trade in Belize Bonds. I had no knowledge of trading in Belize Bonds and told them so. To a point at one time, and they were referencing a Western Belize Happenings, BLOG SITE article, about trying to start a market in trading Belize Bonds, written in 2009 by myself. That attempt never managed to get off the ground though, as I could not then find any Belize Bonds for sale. The above web site gives the trading in Belize Bonds and it looks like they are selling at par?
The interest debt payments covered by the BONDS is rumored to jump to nearly a $100 million dollars, though I am not sure if that is USA or Belize currency? I believe it is US currency? The interest on the Belize Bonds is going to cost the very small government of Belize, about one quarter of the Government revenues in 2012?
I have evolved to become a specialist trader in INDEX OPTIONS and for the last half of this year have specialized in trading the QQQ which is an index TRUST, covering NASDAQ type stock trading. My speciality is short term trading of option contracts. Usually less than one week. At the moment I only have four months in trading the QQQ options contracts. I spent the previous 18 months learning and specializing in various type of INDEX OPTION, SPREAD TRADING methods, and finally discarded these supposedly SAFER methods of trading, as not so, nor particularly lucrative in the total. My goal for 2012 is to double my money every six months. That was happening up to about a month and a half ago, when the EXCHANGE RULES marked me as a PATTERN TRADER and forbid me to do one day trading anymore. This wrecked my trading method I had evolved, by long research and trial and error, and subsequently I have had a big drawdown, trying to figure out how to trade according to the new EXCHANGE RULES of mulitiple days of holding a trade, by trial and error.
It was only this past week, I seem to have hit on a new successful methodology of trading these contracts and am looking forward to covering my drawdown by January the first of the year, and starting to work on doubling capital again, in six months, the first half of next year. It is an interesting career and occupation. There are probably up to 20 traders in Belize trading, but usually are expat retirees. I have not been able to get anybody to train, competent coming from the University system in Belize, so shortage of trained staff for world international trading is a problem here in Belize, as is internet access, speeds and bandwidth. Only one company is offering internet service in the country of Belize, capable of handling the data flows needed for international trading around the world. (BTL ) Unfortunately, the wireless connection is SHARED by others in the community and when everybody is on, it slows down the data flow considerably and is an inconvenience when urgently trying to implement a split second, buy or sell order, and you cannot do so. My trading room uses four computers. Two of which are running almost all the time. I have battery and inverter emergency backup electricity services also, as brownouts used to be common earlier this year.
Posted by A Professional BEACH BUM retires! at 4:00 AM 0 comments
Well it´s December 19th today a Monday. Not only did I NOT make back my losses mid year, I was unable to get back to my original starting capital of $10,000.
Nearly did it, day trading, closing trades before the close. But ran afoul of the EXCHANGES and they say I am not allowed to day trade as a pattern trader, but MUST trade overnight. Though if I raise my gambling balance to $25,000 they will allow me to day trade. I can´t see the difference myself. It being my money and whatever the difference between $10,000 and $25,000 qualification. I don´t get it at all.
Anyway, after they handicapped me, my game went to hell. Too much swing or noise and price changes in multiple day trading. I´ve designed and tried a dozen or more methods, but no luck. This past week, I lost anything I had ahead over the past 5 months and ended up just $21 over my starting balance of 5 months ago. Going to halt trading now for two weeks and resume in January fresh start, with my new year balance at $7208.
Lost 26% of my account in six months trading for 2011.
WELL I LOST 26% OF MY ACCOUNT THE SIX MONTHS PRACTISING TRADING WITH REAL MONEY DURING 2011. MOSTLY I BELIEVE, TO THE EXCHANGES BLOCKING ME, WHEN I STARTED TO MAKE MONEY VOLATILITY TRADING ON A WEEKLY BASIS. THEY SAID I WAS A PATTERN TRADER AND CAN ONLY TRADER MULTIPLE DAYS. FOR 2012, I WAS TRYING TO DECIDE WHETHER TO QUIT OR NOT, DUE TO THE HANDICAP THEY PUT ME UNDER FOR 4 MONTHS, BUT SOMEBODY ONLINE RECOMMENDED I TALK TO MY BROKER. I DID AND THE BELOW IS THE WAY IT STANDS NOW.
________________________________
I´m now trying to re-figure after 4 months, how to do that straight buying and selling volatility trading again, that was successful back then 4 months ago, before the EXCHANGES BLOCKED ME.
Sunday, January 1, 2012
THE EXCHANGES DAY TRADER HANDICAP RULE IN THE USA.
THE DAY TRADER RULE FOR OPTION TRADERS
Option trading being a wasting asset, when the price melts on you, called TIME DECAY, the Day Trader rule set by the EXCHANGES is a real set back and difficulty for straight buying and selling OPTION TRADE CONTRACTS.
The basic requirement seems to be the EXCHANGES, want to penalize amateur traders, the small retail trader. You can open a trading account with as little as $2000 depending on your broker. However, the EXCHANGES in their WISDOM, or something else; have designated that if you do not have $25,000 in your account, should you DAY TRADE too much, you will be penalized and forced to trade with such a smaller account, in multiple day trading.
Given that trend followers, where the money is made, need to CLOSE at the END OF THE DAY, and put the profit in the bank, the overnight requirement by the EXCHANGES is a HANDICAP. The way it works I´m told by advisors with THINK or SWIM brokerage is that if you make 3 day trades per 5 day period, you are clear, but if you make a fourth trade, same day, you will be BLOCKED from day trading. At least that is what I thought, when I got a box on my screen that said I AM JUDGED TO BE A PATTERN TRADER and prohibited from closing a trade the same day, unless I increase my $10,000 account to $25,000.
Now I can´t figure out, why one can day trade with $25,000 and not with $10,000, or $2000, but that is the RULE from the EXCHANGES.
In the latest advisory from my broker, I am told I CAN day trade, or practice the art of closing a winning trade by the END OF THE DAY. Or closing a losing trade. I can do it TWO TIMES for the week, but I must otherwise hold my trade into multiple days,not knowing what the heck is going to happen. Lose more often than not. Due to not being able to cut my losses short, or correct a mistake by closing and reversing, or put a profit in the bank at the end of the day.
So much, for cutting LOSSES SHORT, or rectifying a mistake and closing and reversing your trade. If you make that Fourth trade in a week of 5 trading days, you get blocked.
However the latest advisory is that I can close a day trade up to twice in a 5 day period. Other trades must be held into multiple days. I´ll have to think about that as a strategy a LOT. As the OPTIONS ON INDEXES, I TRADE, are a MELTING ASSET. They lose premium each day due to TIME DECAY. If you are in the last week before the monthly EXPIRATION DATE, it gets even worse.
Just got an update from my BROKER. Said that I am only allowed TWO DAY TRADES per 5 day period. The THIRD TRADE must be multiple days, overnight holding. A FOURTH TRADE WOULD BE BLOCKED, REJECTED.
Anyway, as a budding beginning amateur OPTION TRADER, that is my current understanding of the EXCHANGE DAY TRADER HANDICAP SYSTEM. January 1st, starting 2012.
Lets see if I go broke this year?
Posted by A Professional BEACH BUM retires in Belize! at 10:02 AM 0 comments
Hi falcon...just a note..futures OPTIONS...ES, NQ YM are NOT subject to the day trading rules. Since the VIX is low right now (compared to 2011 average) you might try trading one contract straddles (long). The mini's are perfect as they are liquid (atm options are at least) and cost wise affordable. The last two weeks of the option cycle while theta bleeds the delta/gamma can more than make up for it...actually a pretty good time to daytrade.
Quote from falconview:
Well it´s December 19th today a Monday. Not only did I NOT make back my losses mid year, I was unable to get back to my original starting capital of $10,000.
Nearly did it, day trading, closing trades before the close. But ran afoul of the EXCHANGES and they say I am not allowed to day trade as a pattern trader, but MUST trade overnight. Though if I raise my gambling balance to $25,000 they will allow me to day trade. I can´t see the difference myself. It being my money and whatever the difference between $10,000 and $25,000 qualification. I don´t get it at all.
Anyway, after they handicapped me, my game went to hell. Too much swing or noise and price changes in multiple day trading. I´ve designed and tried a dozen or more methods, but no luck. This past week, I lost anything I had ahead over the past 5 months and ended up just $21 over my starting balance of 5 months ago. Going to halt trading now for two weeks and resume in January fresh start, with my new year balance at $7208.
__________________
gulfspiller
Richards advice on trading EMini Options
Richard
Thanks for the tidbit. I´m afraid to try the EMINI. I have not been able to predict it at all, when exploring the idea. Since my account is almost the lowest it has been since the six months I started, I am being conservative and doing my best to make something back, before I increase my RISK. Right now I´m trying to re-discover my volatility trading method I was using 4 months ago, when the EXCHANGE blocked me from day trading. SINCE CLARIFIED for the NEW YEAR.
But thankyou for the heads up. Will probably revisit the EMINI. I would need to see it on my FREESTOCKCHARTS.com, so I can work some of my own indicators. Or BIG CHARTS. I don´t know enough to trade without some sort of backup indicator technical indicators. Nor do I know how to get the EMINI chart real time on these charting programs with indicators I make myself.
LOST 26% OF MY ACCOUNT FOR 2011. THE STORY HOW!
My year end results, for 2011 after six months of trading all kinds of strategies trying to find one that worked.
LOST 26% of my account. Woud quit if I lost 50%.
http://tradingoptionsfordummies.blogspot.com/
This is my private BLOG, for my grandchildren´s education.
New trend indicator.
Well got myself re-organized and trading again, starting with a value of .73 cents a share, as of January 1st, 2012. End of January the account had grown only 2%. Share value .75 cents. Trades too small, but risk more controlled. Plan to get bigger on my trade bets, but this market moves so little and I´m expecting a pullback in February and right now we seem to be erratically diddling with a top?
Been moving to my summer residence ( down here ) this week, so got out of sorts and carrying a desk top computer around is a bit clumsy and trying to get an internet hookup. Finally got a trade in on Friday. Seem to have found a new trend indicator, while fiddling around also. Will try it out. Hoping to get in some fishing and sailing, though so far it has been raining. Holding a bet over the weekend now though. ( small one )
Still trading the QQQ. Until I start making some money doesn´t seem much sense in changing? I looked at SPY and OEX. The OEX seems to be more or less paralleling the QQQ? Different movements, but clearing commissions and percentage versus market move seem to work out the same, so decided to stick with the QQQ. Been trying paper trading CREDIT SPREADS, but anyway I ran the numbers, the risk to reward ratio, does not seem to match that of direct betting on direction. So guess I will stick with the QQQ direct betting. The paper trading in the OEX worked though the last few weeks on the weeklies. Sort of tempting, but think QQQ betting is better.
Guess I'll keep shorting straddles then. It has been profitable lately when combined with proper risk management in form of delta hedging etc.
Shorting long straddles
Interesting! SHORTING straddles. I did the buying long straddles bit, but too little money and too slow. Never thought of shorting them. How does that work? I´ll try to look it up on the internet. Never crossed my mind. Care to give me a glimpse at the strategy?
Ray
selling the short straddle in low volatility bull market
Aaaah! Just looked up the short straddles. Selling and unlimited risk are not my cup of tea.
Quote from TskTsk:
Guess I'll keep shorting straddles then. It has been profitable lately when combined with proper risk management in form of delta hedging etc.
Re: selling the short straddle in low volatility bull market
Quote from falconview:
Aaaah! Just looked up the short straddles. Selling and unlimited risk are not my cup of tea.
Quote from Robwynge:
I wonder how delta hedging works with straddles since a delta hedge removes directional risk, but with a short straddle, you lose if the underlying breaks out to EITHER side. So do you go long or short the underlying?
Re: Re: selling the short straddle in low volatility bull market
Quote from TskTsk:
If you're short a straddle, to delta hedge, you have to go long the underlying if price goes up, and short if it goes down. So buy high sell low, which indeed loses you money. A long straddle is the exact opposite.
Talebs fair alpha measure can help in deciding wheter to sell/buy an option. I use it a lot.
1. Fair alpha = 1/2 x IV^2 x S^2 (S=Spot movement) (IV=Annualized IV)
2. Alpha = Gamma/Theta
3. Alpha < Fair alpha = Long | Alpha > Fair alpha = Short [/B]
Re: Re: Re: selling the short straddle in low volatility bull market
Quote from Robwynge:
Ok, so it's dynamic - you keep adjusting to get your delta back to zero. I should have realized that. So is this a short IV trade or are you gamma scalping?
delta hedging the short straddle
Very, very interesting. Thankyou for the contribution. I don´t think I´m going to do this though. With all that work, I might as well just play directional? Does sound interesting though. I wonder what the risk to reward ratio would be? If I remember right, the long straddle returns about 3%?
With directional you can if you close and reverse, more or less do something similar and the rewards are potentially higher.
Re: delta hedging the short straddle
Quote from falconview:
I don´t think I´m going to do this though. With all that work, I might as well just play directional? Does sound interesting though. I wonder what the risk to reward ratio would be? If I remember right, the long straddle returns about 3%?
Re: Re: delta hedging the short straddle
Quote from falconview:
Very, very interesting. Thankyou for the contribution. I don´t think I´m going to do this though. With all that work, I might as well just play directional? Does sound interesting though. I wonder what the risk to reward ratio would be? If I remember right, the long straddle returns about 3%?
With directional you can if you close and reverse, more or less do something similar and the rewards are potentially higher.
Quote from Robwynge:
Gamma scalping is an entirely different strategy than a simple directional bet. It requires active and frequent adjustments (how often and how much is part of the art). It's not normally a strategy adopted by retail traders because the commissions can get pretty high. Tsk may be a pro or perhaps has negotiated lower commissions due to his volume (just guessing here). And it's not usually adopted by retail traders because, well, you really have to know what you're doing and most retail people don't. It's also a short IV trade, so you need some method/system/model to give you an edge in trading vol.
Re: delta hedging the short straddle
Making money year in and year out is a lot of work. It's not play.
Quote from falconview:
I´m going to do this though. With all that work, I might as well just play directional? Does sound interesting though. I wonder what the risk to reward ratio would be? If I remember right, the long straddle returns about 3%?
Re: Re: delta hedging the short straddle
Yes, gamma scalping requires frequent adjustments but it isn't impractical at a low commish broker.
Quote from Robwynge:
Gamma scalping is an entirely different strategy than a simple directional bet. It requires active and frequent adjustments (how often and how much is part of the art). It's not normally a strategy adopted by retail traders because the commissions can get pretty high. Tsk may be a pro or perhaps has negotiated lower commissions due to his volume (just guessing here). And it's not usually adopted by retail traders because, well, you really have to know what you're doing and most retail people don't. It's also a short IV trade, so you need some method/system/model to give you an edge in trading vol.
Painful death syndrome, or death of a thousand cuts.
I know that slow painful death syndrome having in a previous re-incarnation traded stocks. I like much better options on indexes, which are over with, win or lose, in five days or less. Suits my temperament better. Plus the risk is defined at the outset. Getting the edge through timing, or some other wise gimmick is what makes it work though.
I don´t know the technical names for some of the stuff I´ve evolved for my own trading style. Generally I am using ( I think ) gambling theory. Using runs, I´m sliding with the action if it trends somewhat, but being options I don´t like to hold over five days and three is my preference. In a gambling run, when you are hot, you increase your bet each time. When you get hit, I drop back to one contract again. Until I have a couple of wins that tell me I have my edge, or timing skills back again, on whatever change the market has made to what it is doing. Then gradually start increasing bet size again. Usually measured by some parameter of money available above 50% of account capital, divided by the price of the contracts. Because of commissions, I first simply stick to one contract and buy IN THE MONEY, and keep increasing the in the money value of premium for as long as practical and then go to multiple contracts. This to allow commission costs to be as low as possible,when you are recovering from a hit. Waiting to get the rythm back in the market circumstances that have changed. If I can get a trend I like it. But otherwise will simply scalp with a fixed buy and sell order. Watching the volatility mostly, to tell me when to EXIT. The Day Trader rule caused me a lot of grief when they slapped me with the restriction. But I do believe I´ve adjusted to it now? We shall see as the next few months pass.
Whenever I trade long straddles, its almost always only with QQQ or SPY. And when I trade them, I always have to use more than 1 contract each, or else commission will eat too much into my profit.
For example. On Tuesday morning I did a long straddle with the SPY. I bought SPY March 135 calls @2.61 and bought SPY March 135 puts @2.86. Total investment: $547 per contract not including commish.
At this very minute, my total straddle is worth $598. Thats $51 profit and if you're not using IB assuming you're retail, you're looking at $20 min for comissh. Thats 40% of profits !
Therefore, when I place straddles, I always use at least 4 contracts.
If you are trading real money, 1 contract on a straddle IMO, is barely worth your time !
I don´t trade straddles anymore, but you made money at it?
Thats interesting thankyou for the contribution. I´m over on Ryan Patricks forum right now with a thread on direct buying and selling contracts. His thread is MY OPTION TRADING. I don´t trade straddles anymore. But since you made money in such a short time, it sort of sounds interesting again? I will keep that 4 contracts for straddles in mind. Or try to! It was a good volatility play this morning. I wonder how you predicted it, or if you did?
Options pages
Wonder if any of the experts here would recommend a first class
option page (or 2) for trading underlyings like FXE - QQQ - GLD etc.
- The only one I know is Yahoo/finance. -
Thanks for taking your time!
GG.
Options pages
Wonder if any of the experts here would recommend a first class
option page (or 2) for trading underlyings like FXE - QQQ - GLD etc.
- The only one I know is Yahoo/finance. -
Thanks for taking your time!
GG.
Free charting programs.
Goal Getter
I trade QQQ and the OEX. Which are indexes and I use
free BIG CHARTS and free freestockcharts.com
Big charts is delayed and freestockcharts gives assumed data, for that 15 min. delay required by the exchanges.
At the level of buying trigger signals I use freestockcharts.com and for figuring where I am in the market I use BIG CHARTS.
Re: Free charting programs.
Quote from falconview:
Goal Getter
I trade QQQ and the OEX. Which are indexes and I use
free BIG CHARTS and free freestockcharts.com
Big charts is delayed and freestockcharts gives assumed data, for that 15 min. delay required by the exchanges.
At the level of buying trigger signals I use freestockcharts.com and for figuring where I am in the market I use BIG CHARTS.
Re: Options pages
Quote from Goalgetter:
Wonder if any of the experts here would recommend a first class
option page (or 2) for trading underlyings like FXE - QQQ - GLD etc.
- The only one I know is Yahoo/finance. -
Thanks for taking your time!
GG.
Re: Re: Options pages
Quote from kinggyppo:
You may want to get a demo of Think or Swim platform and go thru the basic tutorials. This walk you thru the basics. Don' spend 2 grand on a seminar which shows you how to flip a coin. Good luck.
Re: Re: Re: Options pages
Quote from Goalgetter:
gyppo thank - good idea. I'll have a look later on.
However, I'm more interested in pages which list options of all kinds
with all the details needed - no trading advice.
Re: Trading Long Straddles
You are going about this all wrong.Pardon me if someone else has brought this up,But do you have a method/system for trading the underlying?
Do you have a distribution of those returns?
Unless you are a very experienced option trader,you dont stand a chance with your current method.
What I would do is backtest/simulate your startegy and look at the distribution of your returns.MAE,MFE,average return,drawdown etc.Then see if implementing options make sense vs trading the underlying.
Heres a simple stupid example.Say you trade a MA strategy with no stops or exits.You see that your return is ZERO.But you see that half your trades were up 50%,and half your trades were down 50%.Would you trade options or the undelying in that scenario?
Depending on your answer,you than can decide the optimal option position.You may want to download Option Oracle which is an excellent Option program and can perform simulations..And its FREE
Quote from falconview:
Having failed at credit spread trading, Gap trading and straight buying of options. I´m now trying LONG STRADDLES in options. Got one week in it now, but probably run through the month. Any body got any advice on making money with lONG STRADDLES?
Re: Re: Trading Long Straddles
Quote from taowave:
You are going about this all wrong.Pardon me if someone else has brought this up,But do you have a method/system for trading the underlying?
Do you have a distribution of those returns?
Unless you are a very experienced option trader,you dont stand a chance with your current method.
What I would do is backtest/simulate your startegy and look at the distribution of your returns.MAE,MFE,average return,drawdown etc.Then see if implementing options make sense vs trading the underlying.
Heres a simple stupid example.Say you trade a MA strategy with no stops or exits.You see that your return is ZERO.But you see that half your trades were up 50%,and half your trades were down 50%.Would you trade options or the undelying in that scenario?
Depending on your answer,you than can decide the optimal option position.You may want to download Option Oracle which is an excellent Option program and can perform simulations..And its FREE
Luv u too!
Re: Re: selling the short straddle in low volatility bull market
Quote from TskTsk:
Talebs fair alpha measure can help in deciding wheter to sell/buy an option. I use it a lot.
1. Fair alpha = 1/2 x IV^2 x S^2 (S=Spot movement) (IV=Annualized IV)
2. Alpha = Gamma/Theta
3. Alpha < Fair alpha = Long | Alpha > Fair alpha = Short
What´d he say?
Sorry I dont understand Greek, or Chinese! Or Mayan hyroglyphs. Or sumerian writing.
summary of long straddles
Let me summarize what I´ve learned about LONG STRADDLE TRADING SO FAR.
LONG STRADDLES ARE SEDUCTIVE. WHY?
They are non-directional. The market can gyrate around and sooner or later you will win with a long straddle. They are also limited risk and unlimited reward in theory.
In reality I have found LONG STRADDLES to be slow performers and the returns are about the same as credit spreads. 3% to 5% thereabouts. You are probably looking at a blind LONG STRADDLE taking a month, or three weeks to return you 3%. A lot depends on the VIX reading. Over VIX 25, long straddles work quicker.
Going in blind on a LONG STRADDLE, only requires that you
a) buy far enough out in distance, 3 months, or leap options, to make money of some sort.
b) That you pick a time to enter, when the market is quiet and volatility is low. Kind of like congestion periods in the market with no trends.
You will make money going in blind, at least once a month on a LONG STRADDLE. Your return though, is small about 3%.
If you look at it as 12 monthly trades of 3%, you will make 36% gross for the year on your savings. Pay the IRS their 40% at the end of the year and your savings will grow annually 21.5% net income. This presumes you invest ALL your savings in trading a monthly LONG STRADDLE. Better than the bank right now in 2012.
A LONG STRADDLE PRETTY MUCH has to move 3 strikes in the QQQ index to make that 3%. Each month the QQQ moves about 5 strikes.
The losers in using LONG STRADDLES are the short time traders. Sometimes they win, but they often lose too. You have to be far out in months, to give your trade time to work. Just watch it gyrate up and down and eventually you will either get a trend for the month, or you will get a volatility boost from some big moving stock, that has a news announcement, or good, or bad earnings report. AT least in trading indexes.
PATIENCE is the key to trading LONG STRADDLES. That and entering when the market is dull.
The TRICKS to trading LONG STRADDLES ARE:
If you trade individual stocks with a LONG STRADDLE, that is a different ball game, more speculative.
Dont buy a straddle when volatility is HIGH. Or whatever you are trading is trending. Wait until the trend collapses and goes into congestion. You want low volatility for an entry. A choppy dull market is perfect for an entry.
Keep an eye on your Long Straddle, a couple of times a day. Because the unexpected can happen and you get a volatility spike. If and when you should LUCK OUT, and actually get an unexpected volatility spike for some at present unknown reason ( the reason is not important ) Take your PROFIT and get out.
LONG STRADDLES ARE VOLATILITY TRADES. THEY REQUIRE A VOLATILITY PREMIUM BALLOONING FROM SOMETHING HAPPENING.
Some big moving stocks, like RIMM, APPL, or GOOG for instance, have volatility spikes over news announcements, or earnings, and since they are big daily percentage swingers anyway, they can give you a nice volatility bounce and a profit quickly inside of a day.
Some of the stuff recommended on this thread I haven´t tried, or experienced yet. But here are a few of them suggested.
You can GAMMA SCALP a LONG STRADDLE ?
If you should be bothered by TIME DECAY, because you bought too short in your months, first or second month options, you can finance that TIME DECAY with a 6 strike OTM Credit Spread.
For the GREEK afficianados, Vega reading may be helpful.
One large FUND MANAGER says she ( DerivativeG on here ) trades LONG STRADDLES SUCCESSFULLY.
The problem with option traders in a general sense, is they are adrenaline junkies. They do not have the patience to trade successfully. Plus like the pilgrams that went over the CHILKOOT PASS during the KLONDIKE GOLD RUSH in the 1800´s, most of the time, they are consumed by GREED and GOLD FEVER.
{LONG STRADDLES ARE VOLATILITY TRADES. THEY REQUIRE A VOLATILITY PREMIUM BALLOONING FROM SOMETHING HAPPENING.}
That statement is why extrapolating a 3% monthly return and saying you can 36% annually is a mistake. Volatility seldom cooperates. It can contract for months on end and your return will get progressively smaller. Its not that option/vol traders are impatient (they are but thats beside the point) simply put vol trades are almost by definition a shorter term trade. It helped me to be told (and understand) vol is synthetic theta (time). It can speed or slow the effects of theta.
There is NO ONE PERFECT trade ALL the time. Its helpful to know/understand which trades have more going for them and thats why playing with the various types during various market conditions is so helpful. SIM trades do this without costing you $$$
Good point.
I had discarded the long straddle as trading. Not enough ooomph I thought.
I´m not getting a enough moves in the market for straight buying. My directional skills are okay, but the moves are too shallow. Often too shallow to pay the bid ask, and commissions. So having picked up a bit of minor experience since I had quit writing to this thread with other stuff, I got interested again in the Long Straddle. Had a lot of notes, so was re-reading them. I like the Long Straddle best of all, just don´t know how to make money consistantly with it, in the amounts would satisfy me.
One memo I wrote to myself, was don´t trade a Long Straddle in a bull market. Below VIX 25. The daily and weekly moves in the QQQ are just not enough. As someone else said, you just bleed your account to death.
Another note, was, you could bias a long straddle, by placing it + 25 delta. That sounds like a strangle to me, but never tried it. Supposedly would work in a Bull trend.
I´ve got a note here, that says GAMMA SCALPING. Which I believe if my memory serves me right is buying or selling one side to keep the long straddle Delta Neutral. But I´ve forgotten how to calculate delta neutral again in a changing straddle. Don Bright told me, but it has slipped my mind and didn´t make a note.
Another note says to do a Thursday, Friday weekly expiration with a long straddle. Losing on one side but gaining on one side. Presume you would close the winning side before 10.30 a.m.? Will have to look at that again. Think I did before, but discarded it for some reason.
One note idea was to compound, by adding more long straddles as the index gyrates through the ATM strike. Build up a bank, for the eventual volatility balloon, or longer market direction.
I sure know a lot more now than when I started this thread. Credit spreads, debit spreads, Calendars, but I´m still losing money. So none of the learning has shown up in a bigger equity balance. Maybe it´s the water I´m drinking?
Phoned the wife last night and told her I was thinking of quitting. Throwing in the towel. Got to have a profit, or I´m not cut out for it. Get back serious in real estate, where whatever money I have made has been. Just that real estate is even slower than trading options. About 7 years for a turn-a-round and at 75 years old doubt I have the time left to see results. A man has to stay busy and mentally challenged though, or life is no fun.
Last time I say this. I promise.
You are learning the wrong way. You are learnings which situation to use which option strategies in. Thing is that every situation is different in some way. Either the market is different or the options in play are different.
Instead if you first learned some options theory then you will find your own situations to trade and you will see profits.
Instead you see someone do something and you apply the same strategy to another scenario where there is some similarity. You miss the differences in the scenario because you don't know to look for them.
This is why you aren't seeing the success you can.
Quote from option_vixen:
{LONG STRADDLES ARE VOLATILITY TRADES. THEY REQUIRE A VOLATILITY PREMIUM BALLOONING FROM SOMETHING HAPPENING.}
That statement is why extrapolating a 3% monthly return and saying you can 36% annually is a mistake. Volatility seldom cooperates. It can contract for months on end and your return will get progressively smaller. Its not that option/vol traders are impatient (they are but thats beside the point) simply put vol trades are almost by definition a shorter term trade. It helped me to be told (and understand) vol is synthetic theta (time). It can speed or slow the effects of theta.
There is NO ONE PERFECT trade ALL the time. Its helpful to know/understand which trades have more going for them and thats why playing with the various types during various market conditions is so helpful. SIM trades do this without costing you $$$
Quote from Riffraffpatrol:
I'm sorry but you are looking in entirely the wrong time frame for straddles. Do yourself a huuuge financially life changing favor and study trading strangles/straddles in high beta/high ATR equities with high volume and tight bid/ask weekly options on Thurs/Fris and sometimes Weds...the returns are phenomenal, the probabilities for success are extremely high, and even much higher if you know how to read a chart and the patterns that help signal a price move outside of 1-2 std deviations.
absolutely DISagree that options are good INTRAday vehicles. I actually do trade the weekly and monthly ES options and have done well doing it..using PA and couple other indicators.
Agree that volatility trades are shorter term than what falcon is looking at.
Everyone has to find their own comfort zone...yours is NOT mine. GL in your trades.
Quote from option_vixen:
absolutely DISagree that options are good INTRAday vehicles.
Tonight the cost of 1 AAPL straddle is ATM (605) is $2253 + $6 in commish. So you are saying the OP should buy...(selling can't happen in his account because he started with $10K) On Monday AM or whenever the magic ball says to then close it for a profit the same day?? Obviously you would leg out...but what if you are wrong? good money management won't always bail you out.
So AAPL & GOOG and even BIDU are to expensive for a $10K pot.
IBM? with a sub 20 vol its too slow to make any money.
I just have not seen anyone make money consistently trading straddles on a daily basis. If you do then more power to you.
Basically I don't want to HAVE to be at the computer watching my indicators every second to work out of a trade. Its too stressful. If your looking for just a $100 or $200 for each trade then the commish and slippage is usually to much.
So it is just personal preference. The only time I have daytraded options is on the ES if I have made more than 50% on a trade that day I'll cash in. Most of the time I hold for at least a few days. Also I almost always sell the options..very rarely I will buy some OTM...but most of the time its just insurance and usually eat them.
Quote from option_vixen:
Tonight the cost of 1 AAPL straddle is ATM (605) is $2253 + $6 in commish. So you are saying the OP should buy...(selling can't happen in his account because he started with $10K) On Monday AM or whenever the magic ball says to then close it for a profit the same day?? Obviously you would leg out...but what if you are wrong? good money management won't always bail you out.
So AAPL & GOOG and even BIDU are to expensive for a $10K pot.
IBM? with a sub 20 vol its too slow to make any money.
I just have not seen anyone make money consistently trading straddles on a daily basis. If you do then more power to you.
Basically I don't want to HAVE to be at the computer watching my indicators every second to work out of a trade. Its too stressful. If your looking for just a $100 or $200 for each trade then the commish and slippage is usually to much.
So it is just personal preference. The only time I have daytraded options is on the ES if I have made more than 50% on a trade that day I'll cash in. Most of the time I hold for at least a few days. Also I almost always sell the options..very rarely I will buy some OTM...but most of the time its just insurance and usually eat them.
Quote from Riffraffpatrol:
I'm sorry but you are looking in entirely the wrong time frame for straddles. Do yourself a huuuge financially life changing favor and study trading strangles/straddles in high beta/high ATR equities with high volume and tight bid/ask weekly options on Thurs/Fris and sometimes Weds...the returns are phenomenal, the probabilities for success are extremely high, and even much higher if you know how to read a chart and the patterns that help signal a price move outside of 1-2 std deviations.
Quote from TskTsk:
Towards the end of the weeklies also has the most time decay though, which is a problem. And if stock has high ATR, that just means higher volatility, which would be priced in via higher IV, no? Not sure if I see any edge here...not that EMH has merit anymore, but just saying.
Quote from Riffraffpatrol:
Time decay on expiration day in the last 2 hrs of trading presents some challenges-- which is why I avoid it. Again-- you must be familiar with all aspects of how time decay functions intraday. High ATR does NOT mean high IV!
Folks-- until you study the intracacies of what I am talking about, and put in the screen time involved to understand and confirm first hand, it comes as no surprise that u will formulate an uninformed an erroneous view.
Quote from TskTsk:
Towards the end of the weeklies also has the most time decay though, which is a problem. And if stock has high ATR, that just means higher volatility, which would be priced in via higher IV, no? Not sure if I see any edge here...not that EMH has merit anymore, but just saying. Also transaction cost, B/A spread and etc matters a lot more in intraday trading than larger timeframe...
Quote from Riffraffpatrol:
With it being said that time decay in last 2 hrs is challenging, it is not without it's opportunities... consider the 610/605 straddle in AAPL at around 2:45 pm-- the cost was around .62....by 3:15 it was $ 1.10. The call side couldve been closed out for $ 1.01... a 65% rtn or so, with free puts to hold for potential reversal... which is exactly what happened-- the last 10 mins of trading saw aapl go near lows-- those puts traded at .50 bid...
Helllo...anyone listening...?
thanks
for the example. In this approach does this mean that you have to focus only on a handful of stocks since you have to be more precise in your timing as opposed having position on 20-30 tickers using longer term positions?
__________________
Mushin.... state of mental clarity and enhanced perception known as pure mind, produced by the absence of conscious thought, and prejudices.
My bad, I thought you said last 2 days until expiry, not last 2 hrs until expiry...last 2 hrs probably offer some interesting opportunities.
Re: thanks
Quote from MushinSeeker:
for the example. In this approach does this mean that you have to focus only on a handful of stocks since you have to be more precise in your timing as opposed having position on 20-30 tickers using longer term positions?
Quote from Riffraffpatrol:
With it being said that time decay in last 2 hrs is challenging, it is not without it's opportunities... consider the 610/605 straddle in AAPL at around 2:45 pm-- the cost was around .62....by 3:15 it was $ 1.10. The call side couldve been closed out for $ 1.01... a 65% rtn or so, with free puts to hold for potential reversal... which is exactly what happened-- the last 10 mins of trading saw aapl go near lows-- those puts traded at .50 bid...
Helllo...anyone listening...?
Quote from TskTsk:
My bad, I thought you said last 2 days until expiry, not last 2 hrs until expiry...last 2 hrs probably offer some interesting opportunities.
Quote from Riffraffpatrol:
What I am saying for an optiom that expires on Friday-- there are exceptional opps that occur on Thurs and again on Friday....and on rare occasions Wed. Friday can be difficult in the last 2 hours due to rapid time decay...but in right circumstances such as the example there is merit...albeit much higher risk as well.
Quote from TskTsk:
But this was thanks to it moving outside 610/605 within the last hour...how often does that happen? had it not moved you'd have wasted $62.
Quote from Riffraffpatrol:
No...incorrect. Look at the chart-- price was in a channel from 607.50 - 610 for a good portion of the day...entry at support was perfect for middle of strikes which allowed for lowest premium paid...all stock had to do was return to the resistance in the range, and you had opp to close out both sides for 1.10...or close the call side for 1.01 and ride puts for free to closing... only on break of channel did this later scenario provide another .41 premium...which was extra gravy.
Quote from TskTsk:
Hm I see, what kind of signal are you using? if you have some kind of charting indicators/timeframes that you monitor and act upon, then obviously the edge you have is most likely in that, rather than in option market irrationality, which was my original understanding of your post...
Quote from TskTsk:
this is what i thought...your edge is in reading things like channel, support/resistance etc....which is subjective by nature. in other words, the edge isnt really from the option market in itself, which is what i thought you implied previously...such subjective things can be difficult to run statistics on because its hard to quantify...so not my cup of tea, but interesting nontheless
augen
have his books as well but at the time of publishing it was about the earnings play and expiration Friday-not to mention that the spread he proposed was a ratio 1:2 which has open ended risk or backspread which has vega risk But I don't think weeklies were trading then so I put it in the backburner since I want to start something sustainable and not a 4x per year event(earnings) and a monthly event (expiration friday(. Now that there are weeklies it gets more interesting since I would think the weeklies would tend to be sold by traders who use them as the short leg of calendars. Someone has to be on the bid side right?
__________________
Mushin.... state of mental clarity and enhanced perception known as pure mind, produced by the absence of conscious thought, and prejudices.
Quote from Riffraffpatrol:
Well it's both. Using tech analysis increases probabilities of success...but by nature of option properties itself near expiration makes it all possible...so much so that success can atill be achieved with no knowledge of TA.
Have you read Jeff Augen on the subject? Amazing stuff-- highly recommend him relative to trading options at expiration. I read all of them, understood the theory...and now have real world screen time and trades to validate the concept.
Quote from TskTsk:
I just read review of one of his books on amazon, seems he doesnt present an actual, practical trading strategy but rather the framework to help people develop an edge on their own. again this adds a bit subjectivity to it, and personally im more of a math and statistics type of guy...what im interested in is what you said "success can still be achieved with no knowledge of TA", which i assume is less subjective. but how does one achieve this success? do you have an easily backtestable example? for example long ATM straddle 2hrs before weekly expiry on AAPL over the last year...would this in total give me profit? and so on.
Quote from Riffraffpatrol:
Look--I'm not sure what review you are reading, but I couldn't disagree more with your assessment of Augen material.
Get "Trading Options at Expiration: Strategies and Models for Winning the Endgame" and "Day Trading Options: Profiting from Price Distortions in Very Brief Timeframes"...this is the best advice I can give you... If you are not convinced after reading these to pursue this further with hands on backtesting of your own, then it's probably not for you.
Quote from TskTsk:
It's several reviews, on amazon...
http://www.amazon.com/Trading-Optio...howViewpoints=1
Look at the top reviews, some quotes:
"not practical for the average option trader".
"will NOT give you any strategy you can USE"
"If you are looking for anything of practical value, look elsewhere."
"The problem is that all of the trades are just that - theoretical. They are all created based on old data. No insight is really given on how to make trades in real time. No information is given on safe stop levels "
"Not easy to apply for the average or even the advanced trader.High quality minute by minute option data is needed to construct volatilty decay curves.The data is often plagued by "noise" as a result of unwinding of large positions that tend to form spikes in the curves that makes quantitative application of the concepts difficult."
Also look at the Michael Orr review...he spesifically states that he built an excel model to backtest the concept but couldn't make it work.
Quote from Riffraffpatrol:
Don't rely on others... do yourself justice: read them and formulate your own review. If not-- perhaps these will help:
--Ralph J. Acampora, CMT, Director of Technical Analysis Studies, New York Institute of Finance
_
“A fantastic, insightful book full of meticulously compiled statistics about anomalies that surround option expiration. Not only does Augen present a set of effective trading strategies to capitalize on these anomalies, he walks through the performance of each across several expirations. His advice is practical and readily applicable: He outlines common pitfalls, gives guidance on timing your executions, and even includes code that can be used to perform the same calculations he does in the text. A thoroughly enjoyable read that will give you a true edge in your option trading.”
--Alexis Goldstein, Vice President, Equity Derivatives Business Analyst
_
“Mr. Augen makes a careful and systematic study of option prices at expiration. His translation of price behavior into trading strategy is intriguing work, and the level of detail is impressive.”
--Dr. Robert Jennings, Professor of Finance, Indiana University Kelly School of Business
_
“This book fills a gap in the vast amount of literature on derivatives trading and stands out for being extremely well written, clear, concise, and very low on jargon--perfect for traders looking to evolve their equity option strategies.”
--Nazzaro Angelini, Principal, Spearpoint Capital
_
“Instead of considering macro-time strategies that take weeks to unfold, Jeff Augen is thinking micro here--hours or days--specifically the days or hours right before expiration, and harnessing grinding, remorseless options decay for profit. He builds a compelling case for the strategy here. The concept of using ratio spreads plus risk management for as brief a period as one day--open to close--to capture expiring premium is worth the price of admission alone. A superb follow-up to his first book. Must-read for the serious options student.”
--John A. Sarkett, Option Wizard software
Quote from TskTsk:
Hm, interesting...then I suppose you wouldn't mind sharing a spesific strategy or set of guidelines from his book (I assume you read it), that performs well without any use of TA. I have access to a decent database of historical data and it'd be interesting to test some of his strategies. Or maybe you have some statistics or backtest results from implementation of his strategies that you'd be willing to share?
sell weeklies on mon and cover late wed
Riffraffpatrol, using the same observed price decay, would you do the opposite and sell the front on Monday anchored with a back month for margin purposes and gamma protection and cover it when the decay slows down on thrusday?
This would present a better alternative for the trader type who prefers 15 winners overcoming 5 big losers (short juice) vs. 15 small losers being overcome by 5 big winners (long juice). I am of the former type.
__________________
Mushin.... state of mental clarity and enhanced perception known as pure mind, produced by the absence of conscious thought, and prejudices.
Re: sell weeklies on mon and cover late wed
Quote from MushinSeeker:
Riffraffpatrol, using the same observed price decay, would you do the opposite and sell the front on Monday anchored with a back month for margin purposes and gamma protection and cover it when the decay slows down on thrusday?
This would present a better alternative for the trader type who prefers 15 winners overcoming 5 big losers (short juice) vs. 15 small losers being overcome by 5 big winners (long juice). I am of the former type.
Quote from Riffraffpatrol:
Lol u r a piece of work.
Of course I've read them!
Look-- if u want to know more...pay your dues like I have... get his books and read them. Then put the time in and rack up the screen time for empirical first hand experience on how these perform.
I've spent enuff time on this subject here and have already shared plenty. Time for you to pony up and get to work if u wanna pursue this further. Good luck.
Quote from TskTsk:
Don't get me wrong, I love buying books as much as the next guy. But before I buy something, I usually want to see some results. Is that too much to ask? I want to see at least ONE person who has implemented his ideas and can PROVE that they work. You said yourself the strategies are straight-forward to implement, with little room for subjectivity, and that they are all explained in his book, so it's not like there is room for "secrets" anywhere.
Quote from TskTsk:
.such subjective things can be difficult to run statistics on because its hard to quantify
__________________
I'm spending a year dead for tax reasons.
Quote from TskTsk:
Don't get me wrong, I love buying books as much as the next guy. But before I buy something, I usually want to see some results. Is that too much to ask? I want to see at least ONE person who has implemented his ideas and can PROVE that they work. You said yourself the strategies are straight-forward to implement, with little room for subjectivity, so it's not like there is room for "secrets" anywhere.
Quote from traderlux:
tsk,
i have several of augens books and they are not easy reads, however the guy is good when it comes to end of life option trading.
i have been to several webinars where he has presented and he continually refines his ideas.
he has published a number of articles for SFO magazine which you can get for free on-line if you register.
also he completely blows away conventional t/a and uses tick charts and some other phase indicators he has developed.
regards
Quote from sle:
Actually, there is a fair number of reliable statistical studies you can do to detect short-date opportunities (not really intra-day, but e.g. pre-expiration or pre-event). The key difference is not to get hung up on a small subset of names, but scan across a large universe of stocks.
straddle, strangle, calendar lore
Interesting reading. Picked up some opinions seem worthwhile.
I´m leaning toward choosing a strangle over the straddle. Longer mid term. Say two weeks trading.
I¨ve debated the idea that instead of the traditional strangle used on OTM, instead of going ITM. The reasoning being, that when volatility strikes, you get a better move and a target profit faster. The downside being that OTM strangle is cheaper in capital, and seems to be slower in profitabliity, vs a more intensive use of capital, to go ITM.
Don´t know if anybody has done anything on this? OTM or ITM for more effective profit taking using strangles.
I did pick up, that high beta and high ATR stocks are better choices for straddles, or strangles vs the QQQ I am currently trading with my small capital. That makes sense for sometime in the future, but not right now as the QQQ is stodgy enough to teach me things without a great deal of expense in losses.
I cannot trade intra day, much as I prefer, so anything day tradng is verboten to me by the exchanges.
I also picked up that bidu , amzn and appl are good straddle or strangle type stocks.
Somebody mentioned using a weekly Calendar, with long out month, and getting in on a Monday selling and exiting on Thursday.
I just learned with TOS that they do not really close straddles or strangles, or the calendar, if one side is less than .25 cents. Which backs up my limited experience, plus what somebody on here contributed in saying you should close on Thursday, not on a Friday. I´m currently trying to learn the weekly calendar.
Test trades.
I just finished experimenting with some SIX trades. For the week, on paper. Limited test, but needed to see how they would do.
1) A Long Calendar in XOM exited Friday morning had a net profit after commissions of +.28 cents.
2) Long Calendar in the QQQ had a net profit of +$1.85
3) Weekly Condor had a net profit of $1.00
4) A JUNE condor lost money, (- .17 cents )
5) A GOOG butterfly experiment given to me by a friend earned + $15.50. Expensive trade to get into.
6) QQQ Weekly butterfly earned + $1.30
________________________________
The problem with these are that I closed them Friday morning, an hour after the open. Expiration for some of them. I have since learned they have to be closed ( some of them at minimum .25 cents, or they get assigned ) So that looks like it would be closing these type of trades on a Thursday for less money probably? Will have to run them again and test the stuff with a Thursday close, or .25 cents value, depending which comes first on some strikes On weeklies. Some of these strikes had .01, or .02 value on them.
________________________________
I now have some suggestions for more trades than I have money for, in my small account. I am thinking to trade this coming week with a STRANGLE. Maybe also a small value CALENDAR. Both of these in cash real money. If I can squeeze them in, some more paper trades with butterfly and condor for testing purposes. I think this week is now over for me, unless I can get a strangle in today?
_____________________________________
closing trades less than .25 wth TOS
Falconview, what exactly do you mean that TOS won't allow you to close if one side is .25cents. Could you please direct me to that rule? Thanks.
__________________
Mushin.... state of mental clarity and enhanced perception known as pure mind, produced by the absence of conscious thought, and prejudices.
Expiration Friday and assignment
Well I´m not sure where I read that. But week before last, I was trying to close a calendar. The short side was either a couple of cents on a late Friday, or zero. I was trying to close the trade as a complete trade, using their list of trade types that places those orders. I spent a couple of hours trying to get a fill in TOS, but even though I would CANCEL the order and keep changing the spread, could not give it away, much less close it. Not knowing what to do, I let it expire. I simply ran out of time unable to get a fill on the trade. A week later I see I´m showing in TOS a QQQ order still open with a small profit. I call the HELP desk, by finger typing and they told me, because I had not closed the trade, I was forced to do it piecemeal, that that side was still open. It wasn´t stock, so I was not assigned stock. It was the indexs, which I did not understand and they did not explain very well. After some haggling, I just asked the guy to close whatever it was that was still open. Over a week later.
To make a long story short, I started reading up on assignment in indexes and there was something I read someplace that said they were assigning to stock, if you were doing stock, if it fell under .25 cents on an expiration Friday. In this case a weekly expiration. Then on one of these forums somebody else mentioned it, also. That you were vulnerable if doing spreads on stocks to be assigned the stock if you were under .25 cents on an expiration Friday. That you had to close on THURSDAY. So even though I am not at all clear on this way it works, I will close any such expiration Friday spread on late Thursday in future.
I suppose you could piecemeal the trade and sell the zero value side of whatever spread had a zero leg open. That might work? Thats all I know. I´m a novice and amateur so don´t know too much about such things.
_______________________________
The difference between paper trading when learning and then going to cash trading can bring up some quirks unexpectedly. Today Friday, I decided to place a real cash trade for a CALENDAR. To try it again. I wanted a short April Weekly and a long JULY. The TOS automatic listing for such things, I clicked on the CALENDAR, but it defaults to force you to take a weekly April and a LONG MAY. It has provision to change the long month to July. but the box for the spread value doesn´t change. AGAIN, I played with that for a while, but am very nervous, as I tend to forget their default is 10 contracts, when I only want two contracts. So after playing with it for awhile, and I was having trouble with my internet connection as well. I just gave it up in disgust. It was too late in the trading session in getting assistance from any of my friends on here and ask if I could leg into a CALENDAR, by going LONG JULY and then short the April as a follow up, seperately? That question is still open, if somebody would answer it? I may try again on Monday. In the meantime I simply wrote down the ask premium prices and did it on scratch paper as a trade. Figuring I would get some advice next Monday, perhaps from TOS, or some of my friends on here. I´m testing classical strategies trying to learn them.
I was trying to either get a cash money trade either in CALLS or in a STRANGLE, but the market would not agree on Friday afternoon, for July options. I ended up putting on a cash trade as a STRADDLE instead, for $2500, for 5 contracts. We shall see how that works out, as my chart reading shows we are not finished with downside pressure quite yet, but sideways pressure. Rather than lose the week by not being able to trade in the weekly, I chose to use next week to trade a STRADDLE instead. The other two weeks ago, I did that successfully and so fairly confident I can do it again. Rather than waste this coming week, because of market TIMING not agreeing with the strategy I was particularly willing to test in CASH money, instead of on paper. I´m just learning a lot of this stuff brand new. Between the TOS order platform and my ignorance I make the occasional mistake, which sometimes costs me a bit of money.
Mix up
I think u got it mixed up w auto exercise which used to be less than .25 but is now just a penny.REad up on auto exercise.TOS as well as other brokers even give customer incentive incovering those cheap short options by lowering commission in order to reduce risk so u suprised me when u said they wont liquidate cheap options.They want u to get rid of themdue to risk.As far as doing them thru spread, I don't know.The position stayingin your sheet is probably only if ur doing ondemand simulations not real account.
__________________
Mushin.... state of mental clarity and enhanced perception known as pure mind, produced by the absence of conscious thought, and prejudices.
Re: Expiration Friday and assignment
Quote from falconview:
The difference between paper trading when learning and then going to cash trading can bring up some quirks unexpectedly. Today Friday, I decided to place a real cash trade for a CALENDAR. To try it again. I wanted a short April Weekly and a long JULY.
Ha! Ha! Ha! Thanks for the input. Hope it is good coffee?
Yup! The risk bothers me also, thinking about it. Have no idea what would happen if there was a Black Swan 10% market drop, while holding a CALENDAR? Anybody know?
Mushin
It was real cash money. First time trying it. I will talk to TOS help on Monday.
Quote from falconview:
Ha! Ha! Ha! Thanks for the input. Hope it is good coffee?
Yup! The risk bothers me also, thinking about it. Have no idea what would happen if there was a Black Swan 10% market drop, while holding a CALENDAR? Anybody know?
Good answer Hoop 121
I hadn´t quite thought of it that way yet.
Quote from falconview:
Good answer Hoop 121
I hadn´t quite thought of it that way yet.
STRADDLE STRANGLE TRADE SECRETS
I´m enamored of strangles and straddles. I´ve heard from two people who are making money at it. So still seeking the TRADE SECRETS of how to do it.
Far as I can figure, there is the standard way and a second way. The standard way earns about 3% a month net. I´m not finished experimenting with the second way yet. I´m still trying to fix it with bells and whistle, tweeks and stuff. But figure it should return 10% a month. Much of the criticism coming in, apparently is because people are trading front month and second month options in a straddle or strangle. I´ve learned you need to trade 90 day straddles or strangles. I´ll at least pass that on to you. ( GRIN )
The big thing with this type of trade, is there is NO RISK. Very slow conservative, neutral strategy. Takes about two weeks to a month, depending on market movement via lady luck, to work your way of a strangle or straddle.
I´m in a big cash straddle right now, ( for my current account level ) to see how my theory works out in reality. Done some straddles before but the old fashioned way. They work but very slow.
I am also doing a lot of experimental paper trading on many other classical strategies. They do make money. But there is alway some RISK. That is the difference between anything else and the NO RISK straddle/strangle. Other strategies mostly to do with selling premium, have to consider risk and so they trade a smaller portion of their equity account. These make more money, faster, but carry risk. Because of the trade off, between RISK strategies seems to be a balance of trading smaller, it takes longer to increase the equity balance. I´m getting into my theory implications here right now, as empirically I am in the process of doing it and no hard results in hand.
Listening to reports on here, about results for annual RETURN ON INVESTMENT ( ROI ), I hear people claim anywhere from 30% to 300%. Larger returns carry more risk and often blow up, they certainly have drawdowns and losses. The MARKET WIZARD book claim a 40% return ROI for a year, is a top reward ratio to shoot for. One correspondent friend claims a 60% return per year, ROI.
The trade off for a straddle / strangle seems to be NO RISK, vs RISK, but higher reward by anything else. I´m a novice amateur so my thoughts are not necessarily correct here. Take WARNING!
My thinking, not yet backed up by real life, is that a straddle / strangle can return 30% to 100% per year on your equity balance. The trade off balancing act is that with a NO RISK strategy, you can trade ALL your account each time. What we call COMPOUNDING. Whereas those that are claiming 50% or so ROI, have to allow for RISK and trade smaller amounts of their accounts, to cover losses.
I´ll toss those speculative thoughts out for comments. This is at the moment only theoretical thinking and I´m just starting on the process of proving I´m right with REAL MONEY TRADING. The FUTURE KNOWS. I´d love to start with a $200,000 in a NO RISK STRATEGY, because you probably could live off it as income?
Re: STRADDLE STRANGLE TRADE SECRETS
Quote from falconview:
I´m enamored of strangles and straddles. I´ve heard from two people who are making money at it. So still seeking the TRADE SECRETS of how to do it.
Far as I can figure, there is the standard way and a second way. The standard way earns about 3% a month net. I´m not finished experimenting with the second way yet. I´m still trying to fix it with bells and whistle, tweeks and stuff. But figure it should return 10% a month. Much of the criticism coming in, apparently is because people are trading front month and second month options in a straddle or strangle. I´ve learned you need to trade 90 day straddles or strangles. I´ll at least pass that on to you. ( GRIN )
The big thing with this type of trade, is there is NO RISK. Very slow conservative, neutral strategy. Takes about two weeks to a month, depending on market movement via lady luck, to work your way of a strangle or straddle.
I´m in a big cash straddle right now, ( for my current account level ) to see how my theory works out in reality. Done some straddles before but the old fashioned way. They work but very slow.
I am also doing a lot of experimental paper trading on many other classical strategies. They do make money. But there is alway some RISK. That is the difference between anything else and the NO RISK straddle/strangle. Other strategies mostly to do with selling premium, have to consider risk and so they trade a smaller portion of their equity account. These make more money, faster, but carry risk. Because of the trade off, between RISK strategies seems to be a balance of trading smaller, it takes longer to increase the equity balance. I´m getting into my theory implications here right now, as empirically I am in the process of doing it and no hard results in hand.
Listening to reports on here, about results for annual RETURN ON INVESTMENT ( ROI ), I hear people claim anywhere from 30% to 300%. Larger returns carry more risk and often blow up, they certainly have drawdowns and losses. The MARKET WIZARD book claim a 40% return ROI for a year, is a top reward ratio to shoot for. One correspondent friend claims a 60% return per year, ROI.
The trade off for a straddle / strangle seems to be NO RISK, vs RISK, but higher reward by anything else. I´m a novice amateur so my thoughts are not necessarily correct here. Take WARNING!
My thinking, not yet backed up by real life, is that a straddle / strangle can return 30% to 100% per year on your equity balance. The trade off balancing act is that with a NO RISK strategy, you can trade ALL your account each time. What we call COMPOUNDING. Whereas those that are claiming 50% or so ROI, have to allow for RISK and trade smaller amounts of their accounts, to cover losses.
I´ll toss those speculative thoughts out for comments. This is at the moment only theoretical thinking and I´m just starting on the process of proving I´m right with REAL MONEY TRADING. The FUTURE KNOWS. I´d love to start with a $200,000 in a NO RISK STRATEGY, because you probably could live off it as income?
Hoop 121
Let me reverse the question. If there is a risk, what is it? Where is it? I don´t see it.
Quote from falconview:
Hoop 121
Let me reverse the question. If there is a risk, what is it? Where is it? I don´t see it.
In one sense you are correct. But what is the risk of you losing your premium? Far as I can see with 90 day options trading in QQQ, any loss is zero.
The QQQ moves 5 strikes in a month, or four weeks, or 20 days. It takes in the standard straddle, or strangle, about 3 strikes to make the move profitable, however small. Usually at the same time as price movement there is a volatility spike that allows you to exit with a profit. This is presuming you are working on the standard application of a straddle or strangle, which is the change in the SPREAD.
There are other ways, at least one, of working that same trade. You have three months, monthly bars themselves alone are enough to make a profit. But even so, multiple monthly bars, will move even further away from the original straddle and give you your profit.
Re: STRADDLE STRANGLE TRADE SECRETS
Quote from falconview:
I´m enamored of strangles and straddles. I´ve heard from two people who are making money at it. So still seeking the TRADE SECRETS of how to do it.
Far as I can figure, there is the standard way and a second way. The standard way earns about 3% a month net. I´m not finished experimenting with the second way yet. I´m still trying to fix it with bells and whistle, tweeks and stuff. But figure it should return 10% a month. Much of the criticism coming in, apparently is because people are trading front month and second month options in a straddle or strangle. I´ve learned you need to trade 90 day straddles or strangles. I´ll at least pass that on to you. ( GRIN )
The big thing with this type of trade, is there is NO RISK. Very slow conservative, neutral strategy. Takes about two weeks to a month, depending on market movement via lady luck, to work your way of a strangle or straddle.
I´m in a big cash straddle right now, ( for my current account level ) to see how my theory works out in reality. Done some straddles before but the old fashioned way. They work but very slow.
I am also doing a lot of experimental paper trading on many other classical strategies. They do make money. But there is alway some RISK. That is the difference between anything else and the NO RISK straddle/strangle. Other strategies mostly to do with selling premium, have to consider risk and so they trade a smaller portion of their equity account. These make more money, faster, but carry risk. Because of the trade off, between RISK strategies seems to be a balance of trading smaller, it takes longer to increase the equity balance. I´m getting into my theory implications here right now, as empirically I am in the process of doing it and no hard results in hand.
Listening to reports on here, about results for annual RETURN ON INVESTMENT ( ROI ), I hear people claim anywhere from 30% to 300%. Larger returns carry more risk and often blow up, they certainly have drawdowns and losses. The MARKET WIZARD book claim a 40% return ROI for a year, is a top reward ratio to shoot for. One correspondent friend claims a 60% return per year, ROI.
The trade off for a straddle / strangle seems to be NO RISK, vs RISK, but higher reward by anything else. I´m a novice amateur so my thoughts are not necessarily correct here. Take WARNING!
My thinking, not yet backed up by real life, is that a straddle / strangle can return 30% to 100% per year on your equity balance. The trade off balancing act is that with a NO RISK strategy, you can trade ALL your account each time. What we call COMPOUNDING. Whereas those that are claiming 50% or so ROI, have to allow for RISK and trade smaller amounts of their accounts, to cover losses.
I´ll toss those speculative thoughts out for comments. This is at the moment only theoretical thinking and I´m just starting on the process of proving I´m right with REAL MONEY TRADING. The FUTURE KNOWS. I´d love to start with a $200,000 in a NO RISK STRATEGY, because you probably could live off it as income?
Quote from falconview:
In one sense you are correct. But what is the risk of you losing your premium? Far as I can see with 90 day options trading in QQQ, any loss is zero.
The QQQ moves 5 strikes in a month, or four weeks, or 20 days. It takes in the standard straddle, or strangle, about 3 strikes to make the move profitable, however small. Usually at the same time as price movement there is a volatility spike that allows you to exit with a profit. This is presuming you are working on the standard application of a straddle or strangle, which is the change in the SPREAD.
There are other ways, at least one, of working that same trade. You have three months, monthly bars themselves alone are enough to make a profit. But even so, multiple monthly bars, will move even further away from the original straddle and give you your profit.
straddle risk
Falconview, all positions have risk. If there was 1 magic position with zero risk all reward no one would take the other side of it. One truism of markets is that edges, once discovered gets arbed away. Your risk in straddles is that even if underlying moves 5 strikes, you might still lose $ since the "good side" pnl does not cover the bad side premium you paid for.
Just look at a risk graph of a straddle and the risk is fairly evident.
__________________
Mushin.... state of mental clarity and enhanced perception known as pure mind, produced by the absence of conscious thought, and prejudices.
Quote from hoop121:
i'll let some of the more experienced guys on here explain some of the more advanced theory in calculating these options. but for one thing, the value of your long options decrease in value every day due to theta. the QQQ might move 5 strikes every 20 days, but unless it does this the very next day or week, the value of your spread will decrease on a day-by-day basis.
the strategy of the straddle or strangle is trying to capture that move in a short enough amount of time to where the remaining value of your long options are still profitable.
don't forget that almost 90% of options expire worthless.
Re: straddle risk
Quote from MushinSeeker:
Falconview, all positions have risk. If there was 1 magic position with zero risk all reward no one would take the other side of it. One truism of markets is that edges, once discovered gets arbed away. Your risk in straddles is that even if underlying moves 5 strikes, you might still lose $ since the "good side" pnl does not cover the bad side premium you paid for.
Just look at a risk graph of a straddle and the risk is fairly evident.
I´m enjoying the feedback, and hoping you will point out the faults in this.
A straddle, or strangle needs to be implemented at a time of consolidation. I do that. This means volatility is at a low. If you do otherwise, then of course there would become volatility shrinkage as part of the risk. I was not thinking of entering any other than consolidation times. I somehow didn´t think it was necessary to point that out. But see now, I didn´t explain myself clearly.
As to time decay. That is one reason you go to 90 day options to give you the time. So far in my limited experience, it has not effected the spread at all. You are waiting for directional price movement and a volatility spike from faster action. A small trend so to speak. There is a trend every week. I trade them directly when the VIX is higher.
Again, from only limited experience, it seems a straddle or strangle profits in 2 to 3 weeks. Not the 90 days you have taken the options out for. The only question so far, in my mind, is how to boost the returns.
Quote from falconview:
I´m enjoying the feedback, and hoping you will point out the faults in this.
A straddle, or strangle needs to be implemented at a time of consolidation. I do that. This means volatility is at a low. If you do otherwise, then of course there would become volatility shrinkage as part of the risk. I was not thinking of entering any other than consolidation times. I somehow didn´t think it was necessary to point that out. But see now, I didn´t explain myself clearly.
As to time decay. That is one reason you go to 90 day options to give you the time. So far in my limited experience, it has not effected the spread at all. You are waiting for directional price movement and a volatility spike from faster action. A small trend so to speak. There is a trend every week. I trade them directly when the VIX is higher.
Again, from only limited experience, it seems a straddle or strangle profits in 2 to 3 weeks. Not the 90 days you have taken the options out for. The only question so far, in my mind, is how to boost the returns.
Well I´m waiting for facts, not cliches.
The point about time decay, or theta, apparently the writer is ignoring that the purpose of a spread is to negate theta effects. For how long that spread would hold off theta I don´t know in a 3 month options? Be interesting to find out.
So far, you have not put forth any concrete evidence that the assumptions are wrong? I do appreciate the effort though. If there are factual weaknesses I want to know them. I currently have a third of my small account invested in a long straddle. CASH MONEY.
I am also curious, what makes grown men, play with this forum on a Sunday. ( grin ) I´m very old, whats your excuse?
Quote from falconview:
I´m enjoying the feedback, and hoping you will point out the faults in this.
A straddle, or strangle needs to be implemented at a time of consolidation. I do that. This means volatility is at a low. If you do otherwise, then of course there would become volatility shrinkage as part of the risk. I was not thinking of entering any other than consolidation times. I somehow didn´t think it was necessary to point that out. But see now, I didn´t explain myself clearly.
As to time decay. That is one reason you go to 90 day options to give you the time. So far in my limited experience, it has not effected the spread at all. You are waiting for directional price movement and a volatility spike from faster action. A small trend so to speak. There is a trend every week. I trade them directly when the VIX is higher.
Again, from only limited experience, it seems a straddle or strangle profits in 2 to 3 weeks. Not the 90 days you have taken the options out for. The only question so far, in my mind, is how to boost the returns.
Quote from Riffraffpatrol:
falconview...u explained yourself perfectly crystal clear. I didnt mention consolidation factor because u didn't.
Here is a perfect example where your perceived setup fails:
On 3/20 QQQ closed at 67.11. Perfect consolidated pattern. The June 67 straddle with 87 days remaining to expiration cost $ 4.70. The VIX was at 15.58... some of the lowest volatility we've had in long while.
On 4/20 the position could be liquidated for 4.30... almost a 9% loss. The VIX is at 17.44. If volatility didnt rise the position would be in double digit % loss.
In an approximate 2 week time frame- on 4/4 the position was at 4.22...over a 10% loss. VIX at 16.44.
At 3 weeks on 4/10- 4.45 with VIX at 20.39... a big jump in vol. Still down almost 6%.
There is your risk in a real world scenario.
Quote from falconview:
The only question so far, in my mind, is how to boost the returns.
Quote from falconview:
Well I´m waiting for facts, not cliches.
The point about time decay, or theta, apparently the writer is ignoring that the purpose of a spread is to negate theta effects. For how long that spread would hold off theta I don´t know in a 3 month options? Be interesting to find out.
So far, you have not put forth any concrete evidence that the assumptions are wrong? I do appreciate the effort though. If there are factual weaknesses I want to know them. I currently have a third of my small account invested in a long straddle. CASH MONEY.
I am also curious, what makes grown men, play with this forum on a Sunday. ( grin ) I´m very old, whats your excuse?
__________________
"People assign much higher probability to the truth of their opinions than is warranted. It's one of the reasons people trade so much in the market, generally with bad results."
-Daniel Kahneman
Riff raff
Well indeed! That is food for thought.
_____________________
Hey babu how u doing mon? Wrong forum no?
Okay Riff Raff, you certainly produced some interesting stuff.
Have no idea how you could get those premiums and dates together like that. How did you do it?
The March 20, 4.70, then April 4, 4.30, then April 10 4.45 was very interesting. Not knowing how you could acquire that info. I can only applaud.
I kind of know the spread will gyrate. As the market goes up and down in small gyrations. I´m aware if one waits long enough to get a directional monthly move in one direction including the gyrations, it will evenually profit. At least from my limited experience. When many months ago I tried overlapping straddles, I noticed that. But that didn´t change the fact that eventually the market would start gyrating in a longer direction, making the monthly bar. In the months I tried that, it always eventually gave me a profit. The time waiting was the only variable really.
It is your next post about reducing the TIME FRAME, to remove premium and a jump in the spread of a weekly that I found more interesting. As you said, THETA would be a big effect in a weekly trade. So what conditions set up for you to get that jump in volatility would be interesting to know? That sure sounded like a risky trade? Probably an hourly trend for four hours? You can predict those, so it raises interesting possibilities if one knew the specific conditions necessary to take the gamble. I think I´ll look for that in the weeklies and paper trade some ideas to see what happens. Unless you can offer the specifics?
The intra-day business is because my account is too small. I´m allowed about one, perhaps at a pinch two day trades in a five day period.
There must be a specific unique situation to be able to put a straddle on, in a day trade during a high THETA environment ? What was the specific situation? Curious minds would like to know.
Babu your commentary is scary. But so far, I´ve never lost on a straddle. So while your comment is scary, have to stick it out for now. I´m working on diddling with the straddle to get some oomph out of it. Have to try this in the real money world. So will go through with it.
Quote from falconview:
Riff raff
Well indeed! That is food for thought.
_____________________
Hey babu how u doing mon? Wrong forum no?
Okay Riff Raff, you certainly produced some interesting stuff.
Have no idea how you could get those premiums and dates together like that. How did you do it?
The March 20, 4.70, then April 4, 4.30, then April 10 4.45 was very interesting. Not knowing how you could acquire that info. I can only applaud.
I kind of know the spread will gyrate. As the market goes up and down in small gyrations. I´m aware if one waits long enough to get a directional monthly move in one direction including the gyrations, it will evenually profit. At least from my limited experience. When many months ago I tried overlapping straddles, I noticed that. But that didn´t change the fact that eventually the market would start gyrating in a longer direction, making the monthly bar. In the months I tried that, it always eventually gave me a profit. The time waiting was the only variable really.
It is your next post about reducing the TIME FRAME, to remove premium and a jump in the spread of a weekly that I found more interesting. As you said, THETA would be a big effect in a weekly trade. So what conditions set up for you to get that jump in volatility would be interesting to know? That sure sounded like a risky trade? Probably an hourly trend for four hours? You can predict those, so it raises interesting possibilities if one knew the specific conditions necessary to take the gamble. I think I´ll look for that in the weeklies and paper trade some ideas to see what happens. Unless you can offer the specifics?
The intra-day business is because my account is too small. I´m allowed about one, perhaps at a pinch two day trades in a five day period.
There must be a specific unique situation to be able to put a straddle on, in a day trade during a high THETA environment ? What was the specific situation? Curious minds would like to know.
Babu your commentary is scary. But so far, I´ve never lost on a straddle. So while your comment is scary, have to stick it out for now. I´m working on diddling with the straddle to get some oomph out of it. Have to try this in the real money world. So will go through with it.
I´m holding 5 contracts QQQ July 66, straddle at a spread of $5.07
Actually I don´t plan to trade the spread itself, but the wings or whatever you call the sides of the straddle. The last and only time I did that with real money, it worked like a charm. There is apparently an element of LUCK in this, so doing it real time is my effort to figure out how to do it right. See if it can be repeated?
I do thank one and all for the concrete commentary, that one can use.
It is hard to try and figure out real world happenings from some of the posts on elite trader, because many of the writers do not explain how they have arrived at conclusions, or advice. Riff Raff you did it right. Again thankyou!
I´m still wondering how, so many grown men can be sitting on a Sunday at their computers when it is not a trading day and at least here on a Sunday, with bright sunshine, and warm trade wind.
Re: STRADDLE STRANGLE TRADE SECRETS
Quote from falconview:
I´m enamored of strangles and straddles. I´ve heard from two people who are making money at it. So still seeking the TRADE SECRETS of how to do it.
Far as I can figure, there is the standard way and a second way. The standard way earns about 3% a month net. I´m not finished experimenting with the second way yet. I´m still trying to fix it with bells and whistle, tweeks and stuff. But figure it should return 10% a month. Much of the criticism coming in, apparently is because people are trading front month and second month options in a straddle or strangle. I´ve learned you need to trade 90 day straddles or strangles. I´ll at least pass that on to you. ( GRIN )
The big thing with this type of trade, is there is NO RISK. Very slow conservative, neutral strategy. Takes about two weeks to a month, depending on market movement via lady luck, to work your way of a strangle or straddle.
I´m in a big cash straddle right now, ( for my current account level ) to see how my theory works out in reality. Done some straddles before but the old fashioned way. They work but very slow.
I am also doing a lot of experimental paper trading on many other classical strategies. They do make money. But there is alway some RISK. That is the difference between anything else and the NO RISK straddle/strangle. Other strategies mostly to do with selling premium, have to consider risk and so they trade a smaller portion of their equity account. These make more money, faster, but carry risk. Because of the trade off, between RISK strategies seems to be a balance of trading smaller, it takes longer to increase the equity balance. I´m getting into my theory implications here right now, as empirically I am in the process of doing it and no hard results in hand.
Listening to reports on here, about results for annual RETURN ON INVESTMENT ( ROI ), I hear people claim anywhere from 30% to 300%. Larger returns carry more risk and often blow up, they certainly have drawdowns and losses. The MARKET WIZARD book claim a 40% return ROI for a year, is a top reward ratio to shoot for. One correspondent friend claims a 60% return per year, ROI.
The trade off for a straddle / strangle seems to be NO RISK, vs RISK, but higher reward by anything else. I´m a novice amateur so my thoughts are not necessarily correct here. Take WARNING!
My thinking, not yet backed up by real life, is that a straddle / strangle can return 30% to 100% per year on your equity balance. The trade off balancing act is that with a NO RISK strategy, you can trade ALL your account each time. What we call COMPOUNDING. Whereas those that are claiming 50% or so ROI, have to allow for RISK and trade smaller amounts of their accounts, to cover losses.
I´ll toss those speculative thoughts out for comments. This is at the moment only theoretical thinking and I´m just starting on the process of proving I´m right with REAL MONEY TRADING. The FUTURE KNOWS. I´d love to start with a $200,000 in a NO RISK STRATEGY, because you probably could live off it as income?
__________________
jeff alvinson
Quote from falconview:
I´m holding 5 contracts QQQ July 66, straddle at a spread of $5.07
Actually I don´t plan to trade the spread itself, but the wings or whatever you call the sides of the straddle. The last and only time I did that with real money, it worked like a charm. There is apparently an element of LUCK in this, so doing it real time is my effort to figure out how to do it right. See if it can be repeated?
I do thank one and all for the concrete commentary, that one can use.
It is hard to try and figure out real world happenings from some of the posts on elite trader, because many of the writers do not explain how they have arrived at conclusions, or advice. Riff Raff you did it right. Again thankyou!
I´m still wondering how, so many grown men can be sitting on a Sunday at their computers when it is not a trading day and at least here on a Sunday, with bright sunshine, and warm trade wind.
Quote from hoop121:
cause i'm at work.
i'm still a little confused though. can you explain more by what you mean by these "wings"?
when i think of a basic straddle i think of a long call and a long put of the same strike.
do you mean that when the call goes in the money you sell it and then wait for the market to trace back the other way and sell the put, and vice versa?
Quote from Riffraffpatrol:
A more accurate description of what he is referring to is legging out.
Most of the time one side will be ITM...the key for success however is determining at what point has price made a significant move in one direction where a significant technical reversal is imminent..as opposed to a mere pause at short term support/resistance before a resumption of the prevailing trend...much easier said then done.
This is where trading intraday weeklies become more attractive as well near expiration when using a leg out approach. Since premiums are so low, it doesnt take much of a move for one side to appreciate to the total cost of both sides... If this hapoens let's say with an overshoot of a bband into supply...its a no brainer to sell the call...the retreat back to the mean will be additional profit on the free put u own.
Take a look ar bidu on fri at open-- price came down to 145...the straddle was 1.25...within 1 minite the call was 1.19 bid out .44 bid. If u sold call at resistance u wulda picked up another .20 or so on retreat back down. Or u simply say im up 30% on whole position iin 3 mins-- close both sides and move on.
Quote from hoop121:
ok, that's what i thought he was talking about.
this defeats the purpose of the spread, though.
why not just wait until a significant where you think a reversal is significant and then purchase play it that way? by buying the straddle and waiting for the move you risk losing the premium on both of them where as if you just wait to bet against a move you will only lose premium on one of them if you are wrong.
Quote from Riffraffpatrol:
The logic makes sense until u look at what typically takes place. I want to be in prior to a big move...if a move has already taken place and then u get in, u may not get much of a retracement...and unless markets are screaming a slow drift upward for the rest of day is not uncommon. Since u r always entering atm- this will kill your premiiums on both sides. Im typically looking to a directional deep ITM option w/ .9 delta or higher for the reversal with a tight technicsl stop instead at that point. Not worried about theta or vol decay at that point.
Riff Raff has it almost right.
Since I´m developing this in my own mind. I´m playing with variables. I don´t know the technical lingo to call it, or explain it. Perhaps Babu with his expertise in GREEKS can put it into Greeks.
Really I´m sort of using a trending approach to trading the straddle. With order flow, volume and volatility thrown in. It has nothing to do with the spread. The straddle is just the framework to work with and a starting point. I figure three moves should see my straddle finished and out.
Just got back from my swim at the beach. Nice day indeed.
Jeff
I guess I mean account balance in correct English. I don´t care what size of percentage you trade. I´m talking ROI as gain on TOTAL account. Not per trade. In annual terms.
Re: Trading Long Straddles
Quote from falconview:
Having failed at credit spread trading, Gap trading and straight buying of options. I´m now trying LONG STRADDLES in options. Got one week in it now, but probably run through the month. Any body got any advice on making money with lONG STRADDLES?
Interesting opinion Light
Tell me, can I leg into and leg out of a calendar?
Lights
When you refer to Verticals, you mean a Condor right? Two opposing debit spreads, ITM puts and calls?
Quote from falconview:
Riff Raff has it almost right.
Since I´m developing this in my own mind. I´m playing with variables. I don´t know the technical lingo to call it, or explain it. Perhaps Babu with his expertise in GREEKS can put it into Greeks.
Really I´m sort of using a trending approach to trading the straddle. With order flow, volume and volatility thrown in. It has nothing to do with the spread. The straddle is just the framework to work with and a starting point. I figure three moves should see my straddle finished and out.
Just got back from my swim at the beach. Nice day indeed.
STRADDLE TRADE
I closed the PUTS this morning RIFF RAFF for a net profit of +$285.
I have since plowed most of the money back into buying CALLS. Have 10 CONTRACTS in total now and need $2.35 to break even and cover commissions on the CALLS.
I missed another $100 on the PUTS, but since this is my second time at this, still struggling with working out the adjustments, tweeks and variables. Hopefully another time around will capture the extra $100 I missed. I made a note of what I did wrong there.
_____________________________
Also gone into a real money, first time CALENDAR, just one contract though in PUTS. Got several paper trade calendars as well. Experimenting and learning here.
Quote from falconview:
STRADDLE TRADE
I closed the PUTS this morning RIFF RAFF for a net profit of +$285.
I have since plowed most of the money back into buying CALLS. Have 10 CONTRACTS in total now and need $2.35 to break even and cover commissions on the CALLS.
I missed another $100 on the PUTS, but since this is my second time at this, still struggling with working out the adjustments, tweeks and variables. Hopefully another time around will capture the extra $100 I missed. I made a note of what I did wrong there.
_____________________________
Also gone into a real money, first time CALENDAR, just one contract though in PUTS. Got several paper trade calendars as well. Experimenting and learning here.
Quote from eudaemon:
Start with 1000 one dollar chips, and physically do it (sim it in EXCEL). Life will simplify after that. I promise. Remember 2 numbers are ruled out (maybe more if you are skilled, but let's not go there), and you bet in the other 35 numbers an equal bet in each.
How much do you make per roll?.
It's so simple that people don't see it!.
The post quote from Eudamon was interesting. It didn´t go into enough detail though.
As to your question. I haven´t a clue, it is a case of the blind asking the blind to lead them.
I don´t know what I´m doing. I only think I know what I´m doing. That is no recommendation to ask for an opinion.
For me, it is trial and error learning as a novice.
_________________________________
Well Riff Raff raised a worrisome point. I hadn´t thought of it myself.
What if the market goes down today?
A straddle is not a short term trade as I am doing it. I have two months I can adjust the straddle. These are three month 90 day options.
I´m sort of looking for a short covering bounce to get my breakeven. I don´t have to make money on a weak counter trend trade with the CALLS. I´m happy with a breakeven on the CALLS, as that will simply exit the straddle and leave me with a 11% gain for five days on the straddle as a whole, from the PUTS.
But supposing as RIFF RAFF suggested, what if the market goes down? Looking through other postings I see that APPL earnings comes out tomorrow Wednesday. As APPL goes, the QQQ goes as it is the dominant stock in the NASDAQ. I double checked the chart on AAPL and both QQQ and APPL are mirror images right now. Appl already dropped 10% and the QQQ has dropped 2% pre-earnings for Appl.
If the market drops today and I cannot EXIT my CALLS, I guess I will hold. An adjustment would have to be made, ( I´ve been thinking about it ) The adjustment would be to return to a STRADDLE by buying PUTS. Can´t buy PUTS right now, as the premium ballooning, or volatility on the PUTS is still swollen. Would have to wait for things to settle down. But I guess that would be my choice. As it is at the moment I´m looking for a sideways market, range bound with the monthly and weekly charts. Thats a lot of possible movement or swings in the shorter time frames of hourly charts. I have to remember I can adjust and work my way out of a STRADDLE or a STRANGLE. It would just take TIME. At the moment on TIME, I am way ahead of the game. TIME I have plenty of. So long as I re-establish the STRADDLE, or STRANGLE to take away any loss from THETA , time decay.
time
falconview, do your pnl a favor and don't mask "hoping and praying" with "time" very slippery slope....
__________________
Mushin.... state of mental clarity and enhanced perception known as pure mind, produced by the absence of conscious thought, and prejudices.
Quote from falconview:
If the market drops today and I cannot EXIT my CALLS, I guess I will hold.
Quote from Riffraffpatrol:
So you go from what you perceive to be "no risk".... to a very speculative high risk directional overnight play?
Makes no sense whatsover falcon.
Riff Raff
If necessary this is a month long trade. It is you guys who are fixated on short term fluctuations in the market, the noise or flutter if you will. I´m trying not to trade flutter and noise. I´m not watching the premiums dance around, you guys are.
I´m looking at the trend and the trend within the trend. We have two different mind sets here. I´m responding to your comments, because I really thought you were interested. You don´t seem to be interested, except in a quick time frame, like one day or something? It is one thing to take a quick profit in a short time frame, but another extrapolation to assume this is the end all, of a three month straddle. Think at least one monthly bar, or maybe two.
I´ve been trying to look at your comments and opinions and then checking with the market things I would normally never do. To figure out where you are coming from? I´m not worried, why should you be? I see commenting on daily stuff, or intra-day stuff only obscures things. I think I´ll just skip that and let the thing go as needed, whatever time frame that is, or becomes.
e.g. as an example haven´t even looked at my cash long CALENDAR this week yet. Don´t plan to either, before Thursday. It´s a 4 or 5 day trade. Why watch it?
Sorry about that, but we are on different wave lengths, or cycles, or whatever they call it. I appreciate your concerns though.
Quote from falconview:
Riff Raff
If necessary this is a month long trade. It is you guys who are fixated on short term fluctuations in the market, the noise or flutter if you will. I´m trying not to trade flutter and noise. I´m not watching the premiums dance around, you guys are.
I´m looking at the trend and the trend within the trend. We have two different mind sets here. I´m responding to your comments, because I really thought you were interested. You don´t seem to be interested, except in a quick time frame, like one day or something? It is one thing to take a quick profit in a short time frame, but another extrapolation to assume this is the end all, of a three month straddle. Think at least one monthly bar, or maybe two.
I´ve been trying to look at your comments and opinions and then checking with the market things I would normally never do. To figure out where you are coming from? I´m not worried, why should you be? I see commenting on daily stuff, or intra-day stuff only obscures things. I think I´ll just skip that and let the thing go as needed, whatever time frame that is, or becomes.
e.g. as an example haven´t even looked at my cash long CALENDAR this week yet. Don´t plan to either, before Thursday. It´s a 4 or 5 day trade. Why watch it?
Sorry about that, but we are on different wave lengths, or cycles, or whatever they call it. I appreciate your concerns though.
Riff Raff
I don´t accept your intrepretation at all. Whether Appl goes up or down tomorrow, only means one thing to me. If it goes up, I will be closing off the straddle as a completed deal. If it goes down, then I will not be interested in any adjustment until the trend finishes and the volatility dies down, so I can lock in the difference by buying PUTS. That scenario would maybe mean a day or two, perhaps longer. At some point that down trend will stop, the volatility will start to die off, from the PUTS and I can then re-establish the straddle, though it most likely will be a STRANGLE then. Once back in either a STRANGLE or a STRADDLE I can buy and sell and adjust the sides. I´m already ahead by 11%. Now I would work it by adjusting to get it up to 20% possibly.
If you can do 20% a month, I think that is a pretty good return? Not there yet, but I´ve done this with overlapping straddles for several months, using them solely as straddles, which returned about 3%. Never lost. The whole point is not to take a loss. The straddle, strangle is perfect for that.
Like a tennis ball, the market bounces up and down. It does so in short term fluctuations. But overall, the average of those bounces follow a trend, either a longer one, up, or perhaps down. This works out to the high/ low of your monthly bar. Which in the QQQ is about 5 strikes. Now we are in a sideways market and maybe heading for a bear market. The bar might be longer. It doesnt really matter, either way. Thats why you trade a strangle or straddle. The strategy stops theta decay pretty much. With that on your side, you can buy and sell either side to balance it off.
Thats my current theory anyway ( laugh). I´ve noticed when trading overlapping straddles, that a strong trend move will occur sometime, mostly unexpectedly. It´s just a matter of waiting. Keep your buys at low volatility, your sells at swollen premium, and it should ( fingers crossed ) work out. ( grin )
Stop bothering me with short term bounces and movements please. It is distracting. I don´t care if I´m winning or losing $200 on an intra day fluctuation. When it gets to be a $400 or $500 fluctuation, THEN I´M INTERESTED, but only to SELL to take a profit.
I don´t think there is going to be any market movement today at all. Everybody is waiting on APPL earnings to move the market.
I´m reading a couple of books and checking every hour or so, to see what is what? Be interesting tomorrow.
Quote from falconview:
Riff Raff
I don´t accept your intrepretation at all. Whether Appl goes up or down tomorrow, only means one thing to me. If it goes up, I will be closing off the straddle as a completed deal. If it goes down, then I will not be interested in any adjustment until the trend finishes and the volatility dies down, so I can lock in the difference by buying PUTS. That scenario would maybe mean a day or two, perhaps longer. At some point that down trend will stop, the volatility will start to die off, from the PUTS and I can then re-establish the straddle, though it most likely will be a STRANGLE then. Once back in either a STRANGLE or a STRADDLE I can buy and sell and adjust the sides. I´m already ahead by 11%. Now I would work it by adjusting to get it up to 20% possibly.
If you can do 20% a month, I think that is a pretty good return? Not there yet, but I´ve done this with overlapping straddles for several months, using them solely as straddles, which returned about 3%. Never lost. The whole point is not to take a loss. The straddle, strangle is perfect for that.
Like a tennis ball, the market bounces up and down. It does so in short term fluctuations. But overall, the average of those bounces follow a trend, either a longer one, up, or perhaps down. This works out to the high/ low of your monthly bar. Which in the QQQ is about 5 strikes. Now we are in a sideways market and maybe heading for a bear market. The bar might be longer. It doesnt really matter, either way. Thats why you trade a strangle or straddle. The strategy stops theta decay pretty much. With that on your side, you can buy and sell either side to balance it off.
Thats my current theory anyway ( laugh). I´ve noticed when trading overlapping straddles, that a strong trend move will occur sometime, mostly unexpectedly. It´s just a matter of waiting. Keep your buys at low volatility, your sells at swollen premium, and it should ( fingers crossed ) work out. ( grin )
Stop bothering me with short term bounces and movements please. It is distracting. I don´t care if I´m winning or losing $200 on an intra day fluctuation. When it gets to be a $400 or $500 fluctuation, THEN I´M INTERESTED, but only to SELL to take a profit.
Riff Raff
You make me think alright. I did make 11% on the puts of the value of the trade and the trade is still ongoing. Until it is closed there is no loss. But there we differ. Give me a month and lets see how this works out. I´m tired of debating this. You may be right but until I try it for the second time, I won´t have a more clear idea.
Buying PUTS is to stop theta decay. Then you can also Delta Neutral the trades. Which changes the whole trading scenario.
Quote from falconview:
Riff Raff
You make me think alright. I did make 11% on the puts of the value of the trade and the trade is still ongoing. Until it is closed there is no loss. But there we differ. Give me a month and lets see how this works out. I´m tired of debating this. You may be right but until I try it for the second time, I won´t have a more clear idea.
Buying PUTS is to stop theta decay. Then you can also Delta Neutral the trades. Which changes the whole trading scenario.
Re: Trading Long Straddles
I buy OTM options either call or put, sofar so good, almost a year now. my feeling is the simpler the better.
not the cmore complicated the better.
try aapl 650call or 480put in the earning, you will see simple buy OTM is pretty awesome. you will not lose much, but if you win, you win multiples of risk, at least 2, even 10, 100.
Quote from falconview:
Having failed at credit spread trading, Gap trading and straight buying of options. I´m now trying LONG STRADDLES in options. Got one week in it now, but probably run through the month. Any body got any advice on making money with lONG STRADDLES?
Re: Re: Trading Long Straddles
Quote from trader198:
I buy OTM options either call or put, sofar so good, almost a year now. my feeling is the simpler the better.
not the cmore complicated the better.
try aapl 650call or 480put in the earning, you will see simple buy OTM is pretty awesome. you will not lose much, but if you win, you win multiples of risk, at least 2, even 10, 100.
trader 198
I´ve heard this several times, but never actually spoken with anyone making any money at it. At least confirmable. I also wonder which months. Plus I´m guessing you are talking big moving stocks like Bidu and Appl ? Can you give more technical details and the results you experience in the time frame please?
Just looked it up. A STRANGLE, 16 strikes OTM in AAPL.
Be interesting to see what happens to it.
I get the AAPL 650 call at $10.95, 480 PUT at $10.05
___________________________________
hi beta stox
Hi Riffraff, got a couple of questions if you don't mind.
These hi beta/atr stocks like appl /bidu/amzn often have really bad alphas i.e. gamma/theta. Does that not bother you when you put on these intra day positions? If I buy premo I always have been conditioned to put on long juice trades with an alpha above 3. Stox with low iv/low stock prices < $50 tend to have alphas > 3 . BUT BIDU with 2 days before exp has a gamma =17 and theta of 50 which means alpha of .34! AAPL is even worse. you don't even look at alphas..just curious.
Furthermore I find that the best time of get in on these trades is no earlier than 10am and obviously no later than 2pm since you need some time to get out of the trade due to intraday nature.
Any insights please?
__________________
Mushin.... state of mental clarity and enhanced perception known as pure mind, produced by the absence of conscious thought, and prejudices.
Re: hi beta stox
Quote from MushinSeeker:
Hi Riffraff, got a couple of questions if you don't mind.
These hi beta/atr stocks like appl /bidu/amzn often have really bad alphas i.e. gamma/theta. Does that not bother you when you put on these intra day positions? If I buy premo I always have been conditioned to put on long juice trades with an alpha above 3. Stox with low iv/low stock prices < $50 tend to have alphas > 3 . BUT BIDU with 2 days before exp has a gamma =17 and theta of 50 which means alpha of .34! AAPL is even worse. you don't even look at alphas..just curious.
Furthermore I find that the best time of get in on these trades is no earlier than 10am and obviously no later than 2pm since you need some time to get out of the trade due to intraday nature.
Any insights please?
b'spreads
Riffraff, do you ever do the backspreads which is dovetailed in Augen's chapter on Straddle trading? Seems like a little lower return BUT u don't have that time pressure of getting a move in 3-5 hours but is spread out over 2-4 days. Furthermore , what about putting on these straddles with 7-5 dte (after all weeklies are introduced prior thrusday giving you 8 days till exp)not just 2-1 dte which is the thursday/friday.If you are getting rid of them at day's end, why does it have to be 1-2 days to go. My guess is that the 1-2 dte gives you the most gamma ?
__________________
Mushin.... state of mental clarity and enhanced perception known as pure mind, produced by the absence of conscious thought, and prejudices.
Re: b'spreads
Quote from MushinSeeker:
Riffraff, do you ever do the backspreads which is dovetailed in Augen's chapter on Straddle trading? Seems like a little lower return BUT u don't have that time pressure of getting a move in 3-5 hours but is spread out over 2-4 days. Furthermore , what about putting on these straddles with 7-5 dte (after all weeklies are introduced prior thrusday giving you 8 days till exp)not just 2-1 dte which is the thursday/friday.If you are getting rid of them at day's end, why does it have to be 1-2 days to go. My guess is that the 1-2 dte gives you the most gamma ?
gamma
What I meant about buying the weeklies 5-7 days out is to still keep it as a daytrade. I am not advocating buying on monday and holding till wednesday. Lower gamma BUT lower theta rate-so it evens out.
I can definitely see the cheapness though since I have a measure of straddle cost / projected sigma move 5,4,3,2,1 day(s) out and what I have found is from monday-Wed noon the ratio hovers 1.4 which means on a stock with a projected 1 sigma move of $1, the straddle is 1.4 Once wed noon hits, the ratio starts plunging down to about .85 thursday 10am.
That being said, using your reasoning, buying mondays with a ratio of 1.4 seems ok as long as you sell it same day still on a ratio of 1.4.
Will "TOS ondemand" that today.
BTW I got sigma charts on TOS using thinkscript . It calculates variance ratios between Op-Cl/Cl-Cl and PrevCl-Op HistVol. U want it? say the word..
__________________
Mushin.... state of mental clarity and enhanced perception known as pure mind, produced by the absence of conscious thought, and prejudices.
Quote from falconview:
I don´t think there is going to be any market movement today at all. Everybody is waiting on APPL earnings to move the market.
I´m reading a couple of books and checking every hour or so, to see what is what? Be interesting tomorrow.
Well I´m out of my 10 contracts Straddle at $2.37 Not sure how I ended up profit wise. But around 11 to 12% in 6 days. Will know by the end of the day.
I also learned that Riff Raff is trading price, while I´m trading trends. So a conflict in approaches seemed natural.
For my second time around I got to practice morphing, a straddle into some other classic strategy. Several contributors on another forum have advised me to learn how to avoid losses by changing the strategy and at least in the STRADDLE it is working out. Some people call it RISK CONTROL or adjustments.
Apparently, I could have returned 16% if I had my TIMING better. Timing was done by different charts and the best one seems to be for the bottom of a trend the 10 minute chart. There was also a double bottom on the hourly chart in QQQ which pointed to an OPEN GAP up this morning. I saw on Big Charts that the last daily bar which apparently reflects AFTER HOURS trading yesterday, closed Gap up yesterday afternoon and had jumped 75 ticks in the QQQ. That amounts to about .42 cents so I was looking for a $2.13 open in my 66 strike. Pleased to see I got $2.37. If there was anymore I will have missed it, but don´t care too much, as the EXIT was simply to preserve the profit from the PUTS earlier in the life of the STRADDLE. ANYWAY I´M OUT AND SMILING.
Quote from falconview:
Well I´m out of my 10 contracts Straddle at $2.37 Not sure how I ended up profit wise. But around 11 to 12% in 6 days. Will know by the end of the day.
I also learned that Riff Raff is trading price, while I´m trading trends. So a conflict in approaches seemed natural.
For my second time around I got to practice morphing, a straddle into some other classic strategy. Several contributors on another forum have advised me to learn how to avoid losses by changing the strategy and at least in the STRADDLE it is working out. Some people call it RISK CONTROL or adjustments.
Apparently, I could have returned 16% if I had my TIMING better. Timing was done by different charts and the best one seems to be for the bottom of a trend the 10 minute chart. There was also a double bottom on the hourly chart in QQQ which pointed to an OPEN GAP up this morning. I saw on Big Charts that the last daily bar which apparently reflects AFTER HOURS trading yesterday, closed Gap up yesterday afternoon and had jumped 75 ticks in the QQQ. That amounts to about .42 cents so I was looking for a $2.13 open in my 66 strike. Pleased to see I got $2.37. If there was anymore I will have missed it, but don´t care too much, as the EXIT was simply to preserve the profit from the PUTS earlier in the life of the STRADDLE. ANYWAY I´M OUT AND SMILING.
Re: gamma
Quote from MushinSeeker:
What I meant about buying the weeklies 5-7 days out is to still keep it as a daytrade. I am not advocating buying on monday and holding till wednesday. Lower gamma BUT lower theta rate-so it evens out.
I can definitely see the cheapness though since I have a measure of straddle cost / projected sigma move 5,4,3,2,1 day(s) out and what I have found is from monday-Wed noon the ratio hovers 1.4 which means on a stock with a projected 1 sigma move of $1, the straddle is 1.4 Once wed noon hits, the ratio starts plunging down to about .85 thursday 10am.
That being said, using your reasoning, buying mondays with a ratio of 1.4 seems ok as long as you sell it same day still on a ratio of 1.4.
Will "TOS ondemand" that today.
BTW I got sigma charts on TOS using thinkscript . It calculates variance ratios between Op-Cl/Cl-Cl and PrevCl-Op HistVol. U want it? say the word..
Re: Re: gamma
Quote from Riffraffpatrol:
Gotcha.
I have studied performance on Mondays and Tuesdays and it seems unless there are extreme moves the premiums erode rather quickly intraday.
Wednesdays are doable... for instance today aapl 610 straddle produced a respectable 10% profit from 9:38 est to 9:53 approx this morning... that same move however on Thurs or Fri is easily 20-30% or more.
Although I havent studied with 7-8 days expiration...I suspect performance will even be worse than M/T unless a parabolic rapid move out of normal distribution curve takes place... like 6 or 7 std deviations. Otherwise the chop will bleed rapidly.
Thanks for the offer on the sigma charts. I would love to check them out.
great point
on the big difference between 6-7 dte vs. 1-2 dte trades.
On the subject of getting the free ride trade, I was thinking about this yesterday . In a case where you own straddles (ex $50 straddle when XYZ=$50, XYZ goes up to $52.5 one hour later, sell the 50/52.5 call vertical leaving you long 50P and long 52.5c with the $ of the 50 c in your pocket.
IOW, starting w a straddle gives you the flexibility to bank $ and turn it into a strangle for next 3-5 hours so if xyz keeps running ur in on either direction still....
Thinkscript is forthcoming thru pm .
__________________
Mushin.... state of mental clarity and enhanced perception known as pure mind, produced by the absence of conscious thought, and prejudices.
getting too fancy?
How is this for getting too fancy. Being that you already own the ATM straddle and will get rid of it by day's end, BUt stock goes away from it early but not a lot which means ur sitting on a little profit, but it is still early in the day, would you sell something in the back months-a vertical perhaps to move your delta back to flat?
__________________
Mushin.... state of mental clarity and enhanced perception known as pure mind, produced by the absence of conscious thought, and prejudices.
Re: getting too fancy?
Quote from MushinSeeker:
How is this for getting too fancy. Being that you already own the ATM straddle and will get rid of it by day's end, BUt stock goes away from it early but not a lot which means ur sitting on a little profit, but it is still early in the day, would you sell something in the back months-a vertical perhaps to move your delta back to flat?
RiffRaff quick question if u don't mind.
Did a TOS simulation on an AMAZON Nov4 2011 215 straddle . IV at 38 w/ AMZN around 215 around 11AM.
AMZN hung around 215 for next 1.5 hours and IV got hammered down to 33 and position on a 1 lot straddle went -40 .Is there a way you can play this better ? I don't mind losing but $40 seems outsized to the other losses on other straddles (10-20$) on other tickers .
Do you consider the IV levels of the straddle relative to the hi/lo of the year?
IOW, would you put on a straddle having a 50 IV if the hi/lo of IV for the year is let's say 30/50?
__________________
Mushin.... state of mental clarity and enhanced perception known as pure mind, produced by the absence of conscious thought, and prejudices.
Quote from MushinSeeker:
RiffRaff quick question if u don't mind.
Did a TOS simulation on an AMAZON Nov4 2011 215 straddle . IV at 38 w/ AMZN around 215 around 11AM.
AMZN hung around 215 for next 1.5 hours and IV got hammered down to 33 and position on a 1 lot straddle went -40 .Is there a way you can play this better ? I don't mind losing but $40 seems outsized to the other losses on other straddles (10-20$) on other tickers .
Do you consider the IV levels of the straddle relative to the hi/lo of the year?
IOW, would you put on a straddle having a 50 IV if the hi/lo of IV for the year is let's say 30/50?
Quote from optionbull:
Hello
What's youre opinion using options instead of futures in the following
Lets say ihave a fut's model that goes long short swing trading. Sometimes for a day but usually a few days. Most a week
Would it be better or worse to buy a strdl or put / call in the direction of my futures?
Example my model says I want to buy gold. What's a good option choice at the moment given directional bias for 2-3 days? Thnx
Re: getting too fancy?
Quote from MushinSeeker:
How is this for getting too fancy. Being that you already own the ATM straddle and will get rid of it by day's end, BUt stock goes away from it early but not a lot which means ur sitting on a little profit, but it is still early in the day, would you sell something in the back months-a vertical perhaps to move your delta back to flat?
Thanks for the insight
I think ur right on that one, once a move happens I guess you can start selling front month verticals and turn it into a wider and wider long strangle so ur booking pnl and owning a strangle which expires in 2-4 hours that are 2 sigmas out. Ex. XYZ at 50, own $50 straddle, XYZ goes to 53, sell 50c(book pnl) buy 55c. You now own 55c/50p strangle.
I still have to test whether there is something about selling the back month verticals precisely for the reason that u mentioned-lower gamma. I wonder if you can put on these ATM straddles on the front month and take them on.off for the next 5 days -paying a little theta each day (avoiding the overnight decay) and use the front month ATM straddles as a way to sell back month verticals really expensive. Kinda like gamma scalping.Prob too much commission to be worth it.
__________________
Mushin.... state of mental clarity and enhanced perception known as pure mind, produced by the absence of conscious thought, and prejudices.
Quote from optionbull:
Hi any takers on my question above? Thnx
Quote from optionbull:
Hi any takers on my question above? Thnx
The only thing I know about futures is that they are open ended, no end to the losses. Whereas options are limited to your debit.
Quote from Dolemite:
I have seen a lot of traders that are very successful just trading verticals. If you have a bias of where it is going then buy an option 1 strike in the money and sell an option 1 strike out of the money. If the conviction is strong, buy an otm vertical (provided the short option makes a difference). If you have a bias of where you think it won't go, sell an otm credit spread. Verticals have a way of reducing the risk of other greeks so you can focus on the delta which is what you want in a pure directional play.
I have no idea the problem with elite trader? But I try to comment on another forum I follow and every time I post it kicks me back to LOGIN again. Anybody have a clue? Is it because my thingy is only working on this forum, but thus will not allow me to work on another one?
time stops
Riffraff,
I think timestops are very critical in this trading scenario. If you think stock is at a critical point and it does not happen in x minutes or hours. Would u agree that u gotta get out instead of waiting for end of day?
__________________
Mushin.... state of mental clarity and enhanced perception known as pure mind, produced by the absence of conscious thought, and prejudices.
Quote from optionbull:
Can u elaborate on. Provided short option makes a difference. Thnak you
Re: time stops
Quote from MushinSeeker:
Riffraff,
I think timestops are very critical in this trading scenario. If you think stock is at a critical point and it does not happen in x minutes or hours. Would u agree that u gotta get out instead of waiting for end of day?
alphas are somewhat impt
In my testing I've found out that trades w bad alphas get stale really fast while stocks that have good IV's which result in higher aplhas has a little bit more shelf life. Case in point Nov 11 2011 weekly - AAPL and MA had really bad alphas, both of them sat for about 2 hours, huge pnl down on straddle. Contrast w another stock with an alpha of 1 has a little bit more staying power before it starts to head south/Buy trader an extra 1 hour to wait for move.
__________________
Mushin.... state of mental clarity and enhanced perception known as pure mind, produced by the absence of conscious thought, and prejudices.
Quote from Riffraffpatrol:
If you're system has you with firm conviction in a particular direction, there is no reason whatsoever to do a straddle. If volatility is low-- buy calls. When IV is high-- sell puts. Based on a 2-3 day timeframe and want some wiggle room-- look to a new weekly series (every Thurs)... If u feel strongly thr move is imminent at present-- do the front weekly. I
Prefer deep ITM-- but if your willing to take the risk and u get your move-- the returns can be phenomenal on ATM/OTM.
When you look at an option chain, you will have a choice of April Weekly, May first month, June second month, July third month, all the way out to yearly options called LEAPS. Depends on how much time you need to trade your strategy.
Quote from Dolemite:
Just saying to be careful if you are buying an OTM debit spread and the short is only worth .10-.25 for example. You are capping your gains instead of just owning the outright long option.
On a separate note, I see so many traders keep a credit spread on way too long trying to wait for that last 10-20 cents decay. A short option that is 1.00 will drop to .50 a lot faster than a .10 short option will drop to .05
Quote from falconview:
When you look at an option chain, you will have a choice of April Weekly, May first month, June second month, July third month, all the way out to yearly options called LEAPS. Depends on how much time you need to trade your strategy.
Quote from Dolemite:
I have seen a lot of traders that are very successful just trading verticals. If you have a bias of where it is going then buy an option 1 strike in the money and sell an option 1 strike out of the money. If the conviction is strong, buy an otm vertical (provided the short option makes a difference). If you have a bias of where you think it won't go, sell an otm credit spread. Verticals have a way of reducing the risk of other greeks so you can focus on the delta which is what you want in a pure directional play.
Re: Trading Long Straddles
Quote from falconview:
Having failed at credit spread trading, Gap trading and straight buying of options. I´m now trying LONG STRADDLES in options...
Quote from Dolemite:
I have seen a lot of traders that are very successful just trading verticals. If you have a bias of where it is going then buy an option 1 strike in the money and sell an option 1 strike out of the money. If the conviction is strong, buy an otm vertical (provided the short option makes a difference). If you have a bias of where you think it won't go, sell an otm credit spread. Verticals have a way of reducing the risk of other greeks so you can focus on the delta which is what you want in a pure directional play.
Verticals and morphing.
Traderlux
I find the discussion on verticals interesting. But whatever it is you are saying is apparently way over my head. I´d like to know how you can adjust verticals and morph into other things for instance?
I´m trying to put on my first BUTTERFLY trade in TOS, but I don´t seem to get any order form, when I click on anything, with the butterfly index? Is there a trick to this?
falcon spend some time on the chats offered on how to use the platform they will walk you thru it.... go to the help screen on the bottom they have a series of chats
Thankyou Richard
I spent a couple of hours with the TOS HELP desk and they walked me through it. By that time, for this week, the spread had gone too small. However using the same knowledge I was able to put on a CONDOR which uses the same setup. Apparently I was having server problems and that also slowed things down as I could not download the order form.
Took me most of the day, but I did get in a small CONDOR, a Calendar, several accumulative directional buys and I will probably do a straddle later in the week.
Too bad my account is so small. But call it a learning week, as I enter some new types of stragegies for me, with small amounts, to test the waters and learn the quirks, so to speak.
Quote from optionbull:
Than you.
If I buy ATM what strike to choose Otm and why? and I am guessing this is better than a bet on the futures if and when I have a strong directional bias on the underlying itself for a few days or week.... Not a opinion about volatility IV or otherwise
Quote from falconview:
Thankyou Richard
I spent a couple of hours with the TOS HELP desk and they walked me through it. By that time, for this week, the spread had gone too small. However using the same knowledge I was able to put on a CONDOR which uses the same setup. Apparently I was having server problems and that also slowed things down as I could not download the order form.
Took me most of the day, but I did get in a small CONDOR, a Calendar, several accumulative directional buys and I will probably do a straddle later in the week.
Too bad my account is so small. But call it a learning week, as I enter some new types of stragegies for me, with small amounts, to test the waters and learn the quirks, so to speak.
Quote from Dolemite:
You probably already know this but you should really understand the TOS platform before you start putting on trades, especially multi leg short gamma ones like a condor. Do you have a plan in place if the underlying makes a strong move and you are not sitting in front of your computer? Are you comfortable with that white T+0 line curving that far down on either end on your risk profile screen? A big move is not the time you want to try and figure out how to get out of a trade quickly. And I can tell you from personal experience, contingent orders to close things out will kill you if things start moving.
Well I am following the threads here, and on my option trades. There are so many variables I don´t know, that I don´t even have enough knowledge to ask a question.
On the other thread they talk about V and bps, or something. I haven´t a clue what they are talking about, yet.
My CONDOR has gone outside the parameters and seems to be losing money right now. The middle sold strikes were 67 and 66. We did touch about QQQ index 66.50 at one time. And I noticed I could have made +.38 cents. Now we are above 67 strike, I seem to be losing -.26 cents. Got two days for it to drift down though. From this cash trade, I am perhaps understanding, that I would get the best performance out of my CONDOR if it passes through the middle of my two sold strikes again? I theeeenk?
The learning process is slow. I just hope it is not expensive as you suggest. In that sense, QQQ moves more stodgy than some of the stuff I see others on here trading. My bets are relatively small at two or three contracts.
I´m going to chat with the TOS help desk tomorrow and find out which arrow on which TOS strike I have to click to get the right order form to close this CONDOR properly? I made an unholy mess of that CALENDAR today Wednesday and it´s the second time. It was winning too. Apparently it cost me my winnings from my long straight trades.
I´m currently holding the CONDOR. And a long position in CALLS. If one thing I am learning, it is to diversify my trade strategies.
Quote from falconview:
Well I am following the threads here, and on my option trades. There are so many variables I don´t know, that I don´t even have enough knowledge to ask a question.
On the other thread they talk about V and bps, or something. I haven´t a clue what they are talking about, yet.
[QUOTE]Quote from Dolemite:
If it is for a few days, you might be better off just buying the futures or an ITM option. Every time you add an option, you are paying the bid/ask spread and you are altering the greeks of the position. Unless the options are overpriced, you really won't get much help from that short option (except possibly buffer an adverse move). I often find it is easier to adjust my positions with the underlying than add long/short options to what is open. The underlying is pure delta, you don't have to monkey with the gamma/vega/theta etc. impact [a couple days o
Thanks
I get the itm. Option but when do verticles make sense
Quote from optionbull:
[QUOTE]Quote from Dolemite:
If it is for a few days, you might be better off just buying the futures or an ITM option. Every time you add an option, you are paying the bid/ask spread and you are altering the greeks of the position. Unless the options are overpriced, you really won't get much help from that short option (except possibly buffer an adverse move). I often find it is easier to adjust my positions with the underlying than add long/short options to what is open. The underlying is pure delta, you don't have to monkey with the gamma/vega/theta etc. impact [a couple days o
Thanks
I get the itm. Option but when do verticles make sense
Anyone using TOS or any platform that shows risk graph needs to know that while the expiration date graph that those platforms produce are accurate to the bone, what's important to us retail customers is what happens between now and expiration (i.e., that white line in TOS)
I don't consider myself past the beginner stage yet. I still like fooling around with option combinations and where I think the biggest drawback lies (regarding these trading front end software) is combinations where multiple expirations are involved (i.e. Calendars, time flies, etc).
I've been fooled numerous times. Also, these packages used models to give you approximate theta decay and effect of implied volatility change.
So take the risk graphs with a grain of salt. They do a really good job of it but still you have to be careful.
And falcon, you really need to be absolutely certain on how to use the software man. TOS in my opinion is the easiest package out there in terms of sending combination orders. Like closing orders is a joke... literally..
__________________
"People assign much higher probability to the truth of their opinions than is warranted. It's one of the reasons people trade so much in the market, generally with bad results."
-Daniel Kahneman
logical progression
Falconview, do yourself a favor and learn options from the ground up. Get books by McMillan,Natenburg then Cottle. Once you read and mastered all of them go to TOS and use OnDemand for weeks trading simple long calls/short call/(and puts) then move to 2 sided spreads, then to 3 then to whatever. Don't short circuit your journey by getting into 4 sided position with real $ . Furthermore don't combine positions. If you have condors , then calendars, then .... on 10 tickers, and ur looking at your pnl, how are u going to learn the nuances of each strategy? They will all bleed into each other!
__________________
Mushin.... state of mental clarity and enhanced perception known as pure mind, produced by the absence of conscious thought, and prejudices.
Quote from Dolemite:
I would choose a vertical if the volatility is up and the price is high. Especially to the upside. You will find that as a stock goes up the volatility typically comes out so the short you sold against the long drops in price and you will realize your profit faster.
Quote from optionbull:
Hmmm.... not sure I follow. The short leg will be slight otm when the position is initiated. So if the commodity, gold in this case goes up within a day or two the OTM vol will decrease you think ?
I simply thought it was case of the ATM I buy will increase almost 1:1 and the OTM with a delta of 25 will increase less, hence make the spread.
Of course depending on exact movement of underlying and buying of Vol. will determine how the spread acts but that is gist of it ?
Well all my trades are cleared out. I´m waiting for a bottom in this index move QQQ then will go long CALLS on the start of an eventual strangle.
Quote from falconview:
Well all my trades are cleared out. I´m waiting for a bottom in this index move QQQ then will go long CALLS on the start of an eventual strangle.
I really went into CALLS in a big way for me in size. DOWN a lot and see people are crapping their pants on my other interesting " my option trader thread".
At 90 day options, I´m just going to sit tight on this for now, ride it out and see where this market goes. I have 2 std deviation already on this downside. The most I figure this will do is a 3 std deviation. Been debating buying PUTS as I did not complete my strangle. Think it is too late now and need to do something else and thinking about it. But sitting on my hands seems like a good choice. Sit and watch and see when I can work my way out of this to some kind of profit.
Falcon,
Are you still trading long straddles?
Not in the sense of trading a straddle per se. I am using the straddle situation for a set up to trade. Then I plan on a STRANGLE. Going 2 OTM strikes, to leverage the available cash. This past week, I got started by entering the movement breakout of the STRADDLE on one side, and it reversed on me, and never did complete the strangle. So after I get out of this trade, will do the next one as a complete strangle from the beginning. Though the movement this past week has been nothing to write home and talk about. The QQQ spent all week bouncing between .30 cents. I would like .40 cents to complete a trade. As 8 or 10 cents are commission.
In one sense I did get up to 15 contracts in CALLS, but they have not recovered yet. Probably not until next Wednesday? This was July options, but will move to August options next time around. This is a very slow way to trade, more like a six day swing trade. The hardest thing to do is sit on your hands and do nothing. Im still figuring out the nuances on how to do this. When it starts off right, it is a pleasant feeling though, to get a chunk of money in one shot.
Thanks for your reply Falcon,
I have sent you a private message.
A technical question.
A technical question. If are trading weeklies and trying to project where your trading vehicle will be in one week. I have had no problem while trading while the market was going sideways. But now we are in a BEAR TREND, I find it exceedingly difficult to project 7 days into the future. Other than the regression lines, in this down trend, I wind up with guesses all over the map. I´m wondering if anyone has a trick to doing this that works most of the time in a trend?
Re: A technical question.
Quote from falconview:
A technical question. If are trading weeklies and trying to project where your trading vehicle will be in one week. I have had no problem while trading while the market was going sideways. But now we are in a BEAR TREND, I find it exceedingly difficult to project 7 days into the future. Other than the regression lines, in this down trend, I wind up with guesses all over the map. I´m wondering if anyone has a trick to doing this that works most of the time in a trend?
__________________
Don Bright (not an alias)
Bright Trading, LLC
http://www.stocktrading.com
Don Bright and musing.
Thanks for the inpùt Don.
In another week I will be approaching my two years of trading options. One year was paper trading, the second year was trading with CASH.
I´ve been mulling over whether I want to go into a third year and if so, what approach to take. My account was $10,000 and I´ve ended up at $7000. So I´ve lost $3000 in the learning process. So I´ve lost 30%. I´m busy mulling over the lessons learned. I can write off the $3000 as it is cheaper than buying an outboard for the boat to go fishing. Educational and learning wise, it has been fun. The most difficult part is dealing with the wife.
I´ve learned a lot of things. Do I want to go on with this, and if so, in what format?
_______________________________
Some conclusions: 1) The most profitable successful trading firms I know, make only 1 or 2 trades per year. Perhaps 3. They trade size.
2) The most successful trading method, for gambling addicts, is quick close and reverse, tape reading, ( or option chain watching ) learned by practise and becoming instinctive. Basically trend following. The bad part about this is the EXCHANGE RULE of minimum $25,000 to do day trading. By forcing small retail traders, to hold overnight, they are simply treating trading by small retail traders like you would slot machine gamblers. The EDGE is with the CASINO EXCHANGES. Or Sunday BINGO players on Indian Reservations. You can recognize a trend pattern and play it, but trends are not predictable for duration and length, or strength. You have to be in and out, as there are many false starts. Apparently somebody ran the numbers and a few day traders were making oodles of dough regularly on small accounts. They had to change the ODDS in pattern trading.
3) There are repeatable spread strategy methods that work most of the time, under certain market conditions. If you trade these, then SIZE again becomes important. You need size to make a living off it. Size means compounding. If you don´t compound then you are basically a quarter in the slot machine, type player. A gambling addict.
4) Which brings us to the HIGH RISK HEDGE FUND idea. Whether by an individual, family funds, or with a few clients. I may be wrong, but I have formed this impression. HEDGE FUNDS expect to eventually to run into a streak of bad luck, or their gambling run peters out. Then they go broke. The way I understand it, you set up an account with say $100,000, or more. At the end of each month, you take off the profit if there is any. If you have clients, you take your 20% of the monthly winnings. A losing month would pay you nothing. Either way the client is forced by agreement to take his or her funds in excess of the original starting account, out of the business, end of month. The gamble then becomes, how long you can use a pattern, or spread strategy and trade it successfully, week after week, or month after month, compounding your bet sizes, according to a formula based on the available account size. You could bet 50% of the account intra- month. Or say 100% of the account. This is compounding. You can double the total account money if you run into a streak of luck, in 5 months. You have to pay the IRS 40% of year end profits so you would need slightly less than a year to double your money as net profit. There are some spread trading methods that even do better than this. The bad part is a BLACK SWAN event will wipe you out. Then you must start over. If you were able to run over a year, your clients would come back.
The question then is, how to deal with a Black Swan dive event and could you, devise a way of closing out early? Haven´t got there yet!
Getting back into STRADDLES probably?
Well I´m mulling over my choices. First off, I´m cleaning this beach apartment, doing some carpentry repairs and getting ready to leave after 4 months here for my health. Going back home.
I´m waiting for some feedback, from a new friend and it looks like I may have my new strategy worked out? Pending a few questions and points I would like clarified. But I expect I will probably trade next week. Not likely this week, though maybe? Got some packing and travelling to do and to finish up the stuff around here in cleanup mode.
I expect I will go back into STRADDLES with a twist and conversion in light of some new information I have. We will then see how it goes.
Re: Getting back into STRADDLES probably?
Quote from falconview:
Well I´m mulling over my choices. First off, I´m cleaning this beach apartment, doing some carpentry repairs and getting ready to leave after 4 months here for my health. Going back home.
I´m waiting for some feedback, from a new friend and it looks like I may have my new strategy worked out? Pending a few questions and points I would like clarified. But I expect I will probably trade next week. Not likely this week, though maybe? Got some packing and travelling to do and to finish up the stuff around here in cleanup mode.
I expect I will go back into STRADDLES with a twist and conversion in light of some new information I have. We will then see how it goes.
__________________
Don Bright (not an alias)
Bright Trading, LLC
http://www.stocktrading.com
Re: Getting back into STRADDLES probably?
Quote from falconview:
I expect I will go back into STRADDLES with a twist and conversion in light of some new information I have. We will then see how it goes.
Thankyou for the nice comments friend Don Bright
In a rather subjective review over two years. The straight option buyers did better than the option sellers. Admittedly, we didn´t get any kind of measuring returns from most sellers. The straight option buyers and these were small traders, who have no use for the amateur trading forums, were trading $5000, to $10,000 and even $30,000 in one case and were Washington, D.C. Federal employees with discretionary cash. They traded once or twice a year and favored stock companies in natural gas and coal. In one case also oil. All traded options on stocks using ONE YEAR and TWO YEAR LEAPS. They tried to pick the season for company profitable movement. Their returns over two years using their WHOLE ACCOUNT ( 100% ) was reported between 80% and 120% for the year. They were straight buyers and used LEAPS to avoid THETA decay. One guy and his wife just spent 4 days using my pull out sofa, at the beach apartment. He took his wife to see the progress on the second story, of their vacation house under construction out West here, across the Mopan River, white water rapids, from Xunantanich Mayan temple ruin. He has built this property over the last few years using his profits from his trading LEAPS and buying options.
The exception to the rule was Ryan Patrick trading Behavioral Trading on large swinging stocks on earnings reports. His return over six months was somewhere between 400% to 500%. This method requires an intimate knowledge of company stocks over perhaps 3 years earnings reports, to predict behavior. He was straight buying.
The best spread trading reported was 70% for a year on account. These were mainly sellers of options strategies. Most selling traders, were reluctant to report actual account balances. Sort of the temperature guage as an analogy, to measure cold or hot. Going by reports of individual trades on elite trader, spread traders as a group, did not perform well. This may be, because it is the nature of conservatism to limit losses, which also limits profits, using spreads. Profitable and losing trades fluctuated, but did not seem to indicate any sort of sustained revenue stream.
People consistantly using credit spreads and iron condors, seem to get wiped out once, or twice a year.
One player using LEAPS was trading multiple debit spread verticals, over a diversified stock portfolio, reported making money, but gave no percentage of account equity growth, so there is actually no way to judge this one.
Butterflies seemed a favorite of a number of players, this is a selling THETA strategy. In only one case was any sort of return reported, which was 70% for the year. The others seemed to win and lose in erratic, but rather equal amounts. Insufficient data on returns to judge this strategy.
Buyers of options seemed to do far better with fewer trades and long term LEAPS, than short term buyers acting on short term action. Based on the results of the equity curve over a year.
So what does a newbie, or novice like me get from this?
a) It is important to limit losses.
b) It is more important to trade much less frequently, but WIN. Choose your moment carefully.
c) The equity curve growth, if any, is the ultimate proof of trading competency and strategy choosing.
d) The winners, seemed to think that Elite Trader forums were counter productive to winning. Too much time spent on discussing intricacies of different strategies, which hid the fact that the most productive was straight buying and selling. This required TIMING. The promotors of selling strategies claimed better success than buying and selling. The actual results using equity growth, indicated LEAPS for buyers and few trades, but using all your account was a better productive dollar earner.
What will I do this next year if I trade. Change to far out months. At least nine months, maybe a one year leap. Trade less. Still working on that method.
One of the interesting debates was that between chartists and indicators, tape readers, and greek option traders. Many strategies of spreads used the greeks. My own opinion was that it did not matter much whether you used the greeks, or graphical charts and indicators. Tape reading was a seperate method and intuitive through practice, like learning to play a violin. Neither the greek method or the chart method forecast the future. They only reported where you were in the present and in some sense gave you a historical context. The future did not do what either method promised on any consistant basis.
Trading straddles method.
STRADDLE TRADING REVIEW after two years.
I still like STRADDLES. You can get two trades a month out of STRADDLES earning a net profit of 3% each time, with little or no risk.
I did some experimenting and haven´t finished with this yet. To get more OMMPH! out of a STRADDLE as far as returns.
The method that works best is to let a STRADDLE run, fluctuating, until you get enough to make it worthwhile. In the QQQ the monthly bar was about 5 strikes and you needed a 3 strike move to get your profit. This is about the same as a Vertical Debit spread. The return was similar.
A couple of times I tried the 1/2 STRADDLE with success. In the half straddle trade, instead of closing the STRADDLE, you closed only the WINNING SIDE. Profit was much greater. This leaves you with a bunch of one sided options that are OTM and very cheap. The two times I had it so, I averaged down and eventually recovered the losing side at very small profit past breakeven.
I´ve done some thinking since then and come up with several alternatives of treating the pile of cheap OTM contracts left over. You need to break even on them, to keep the profit on the winning side you collected.
One method is to re-establish the straddle by buying back some options on the winning side you sold. Then go into DELTA NEUTRAL trading with the straddle. The second method was to average down and lower your break even point on the losing side. In averaging down, I played with Delta Neutral scenarios for calculation how to average down. ( the straddle may continue for a while in the same direction ) Ultimately I came up with a more accurate method of averaging down than delta neutral calculations. If your straddle started out with one contract, then after you have sold your winning side, you DOUBLE your contracts on the losing side, using the same STRIKE you started with. The trick was to double each strike, the momentum kept going the same way, per strike. So lets say you have 1 strike after you sold the winning side. You would then buy 2 contracts. Leaving you with 3 contracts. At the next strike in the same direction ( these options are getting cheaper as the direction trends ) You double again. In this example you buy cheaper same strike 6 contracts. If it moves down another strike you double again buying 12 contracts with very cheap options. Lowering your breakeven point on a rebound tremendously. In the QQQ the monthly bar is about 5 strikes in total and if you had sold the winning side, you probably would be at one extreme or other of the monthly bar. Since it takes 3 strikes on average, to get a winning side on the straddle. You might have to double twice, at the most 3 times? Never tried this as it never quite worked out that way. But the straddles paid off many increments of profit this way.
Mr. Falconview. Perhaps I am mis-reading you. You talk about "buying in short options" and yet you go into detail about buying long straddles. Am I missing something?
One method is to re-establish the straddle by buying back some options on the winning side you sold.
Are you now selling straddles instead of buying them? Or you're saying you want to buy first, then sell, then buy back? That's, well, kinda crazy and very costly don't you think? I know you had a tough year, that 30% loss and all, and was hoping you learned enough to know better.
you DOUBLE your contracts on the losing side
Doesn't seem like a good plan, IMO.
Don
__________________
Don Bright (not an alias)
Bright Trading, LLC
http://www.stocktrading.com
straddle discussions
To Don and diaooptions
Your comments are well taken. I dont find the straddle a bad performer at all. It is rather slow and doesn´t earn any more than a debit or credit spread. I have not experienced with my experimenting anything like losing money with a straddle. It is a very conservative strategy. It is not a trade suited for adrenaline junkies and action gamblers.
For entry you wait for congestion and when you have the ATM equal in value on both puts and calls, when the volatility is low, you place the straddle. Now I am not talking about quickie players here. You may make money in 3 days, it may take 3 weeks, but it will make money sometime during a month. It only has to move enough in either direction. A lot of players seem to think the straddle is a good one, for earnings reports placed before the report. Looking for the volatility move. I haven´t tried that yet, but it sounds good. Sounds like more possible trades that way. If Behavioral Traders were to use a straddle, they would make less, but be more secure. The only advantage to this that I can figure ( no experience yet ), is that you would certainly during earnings seasons, get more trades per month. More trades equate to more profits. Presuming you had a list of big swinging percentage wise stocks on earnings reports, like APPL.
I more think for conservative trading, presuming you would complete one straddle per month, ( 60 days or 90 days out ) you would earn 3% net profit after commissions and allowances for IRS taxes. This is hardly strenuous trading. No boring watching the computer, or adrenaline rush, or junkie slot machine type trading. You could even just use a tv monitor, watching CNBC ticker tape ( I´ve done that ) and be able to work your other job. On 3% that is 36% per year. If you got two straddles completed within one month ( dependent on market movement ) ( my only reference is indexes ) So you are looking at net of a 21% ROI per year. My testing base is small and only on indexes, but I don´t see anybody losing on a straddle, just taking time. As a conservative income earner, it is hard to beat. Now a lot of people trade a lot of things, but I wonder how many of the short time traders on elite trader are doing better than +36% a year? It´s the losses that kill them. Lets assume you were able to complete two straddles per month, you are talking an income stream of 20% to 40% per year, net profit. I´ve heard butterfly traders earn about 70% per year on account. Not sure if that is net or gross return.
I would think straight straddle trading and doing NOTHING else, would be a good return and better than the bank, particularly on indexes. You could sleep at night, and do your other job at the same time. It is the sort of trading, you would use 100% of your account, without messing with little trades, and the higher element of risk, as in churning. If you were managing money, it is a calmer way to go. You could offer your clients 20% return and pocket the rest. ( grin )
On the OOMPH! suggestions, I´ve only tried the averaging down. It works. Though I don´t in principal believe in averaging down. Not having actually sold a 1/2 straddle, the winning side and replaced it again, to renew the straddle, I can´t comment on that yet. It was an idea, to just keep the straddle running and do delta neutral trading, every 2 strikes or something. It is not self defeating. You just took out say $400 profit for your account and simply kick started the straddle yet again. Allowing the market to go either way. I did something like that just once, but was looking for lower volatility and premium and waited, and didn´t get it, and missed a further runaway move that would have paid more, going in the same direction. The lesson learned was to re-start the straddle and make both sides delta neutral for a fresh start. You would need less contracts on the winning side, you just collected your profit from.
Just re read Don Bright. The question was about shorting a straddle. The answer is NO.
Let us say you start a straddle with 15 contracts in puts and calls at a strike.
You get a good 4 strike move and have a pile of money on the winning side. If you close the Straddle, maybe you will make $70. If you just sell the winning side, you clear $400. The choice is yours, play it safe and take the lesser, or go for the bigger.
What I´ve learned is to take the bigger profit and re-start the straddle.
That means figuring the same original strike price using your now lonely losing 15 contracts that are way OTM and cheaper. Calculate the Delta and buy enough new, on the now zero balance side to equal your deltas. In practice for me that was holding OTM 15 contracts losers and then having to buy 8 contracts at the higher premium on the zero side, you cleaned out the larger profit. Giving me the old straddle at the old strike, BUT EQUAL DELTA. Except I now have 15 contracts in CALLS and 8 contracts in PUts. But equal DELTA. Or neutral .50 on both sides. I¨m not shorting anything.
Basically you are taking a bigger profit and restablishing the old straddle at the same strike with same delta on both sides. Continue to play the game with the straddle. You are just Delta Neutral trading, but not necessarily with the intention of closing the straddle as a complete trade yet. Depending on far out you were in days, or months for your trade, this could go on for a while. At least getting two more trades out of the existing straddle setup. If you wanted to bias the trade, when the monthly bar showed a bottom or top by other indicators, simply double up, those cheap OTM options, since the trend would probably be the other way.
Quote from falconview:
Thankyou for the nice comments friend Don Bright
In a rather subjective review over two years. The straight option buyers did better than the option sellers. Admittedly, we didn´t get any kind of measuring returns from most sellers. The straight option buyers and these were small traders, who have no use for the amateur trading forums, were trading $5000, to $10,000 and even $30,000 in one case and were Washington, D.C. Federal employees with discretionary cash. They traded once or twice a year and favored stock companies in natural gas and coal. In one case also oil. All traded options on stocks using ONE YEAR and TWO YEAR LEAPS. They tried to pick the season for company profitable movement. Their returns over two years using their WHOLE ACCOUNT ( 100% ) was reported between 80% and 120% for the year. They were straight buyers and used LEAPS to avoid THETA decay. One guy and his wife just spent 4 days using my pull out sofa, at the beach apartment. He took his wife to see the progress on the second story, of their vacation house under construction out West here, across the Mopan River, white water rapids, from Xunantanich Mayan temple ruin. He has built this property over the last few years using his profits from his trading LEAPS and buying options.
The exception to the rule was Ryan Patrick trading Behavioral Trading on large swinging stocks on earnings reports. His return over six months was somewhere between 400% to 500%. This method requires an intimate knowledge of company stocks over perhaps 3 years earnings reports, to predict behavior. He was straight buying.
The best spread trading reported was 70% for a year on account. These were mainly sellers of options strategies. Most selling traders, were reluctant to report actual account balances. Sort of the temperature guage as an analogy, to measure cold or hot. Going by reports of individual trades on elite trader, spread traders as a group, did not perform well. This may be, because it is the nature of conservatism to limit losses, which also limits profits, using spreads. Profitable and losing trades fluctuated, but did not seem to indicate any sort of sustained revenue stream.
People consistantly using credit spreads and iron condors, seem to get wiped out once, or twice a year.
One player using LEAPS was trading multiple debit spread verticals, over a diversified stock portfolio, reported making money, but gave no percentage of account equity growth, so there is actually no way to judge this one.
Butterflies seemed a favorite of a number of players, this is a selling THETA strategy. In only one case was any sort of return reported, which was 70% for the year. The others seemed to win and lose in erratic, but rather equal amounts. Insufficient data on returns to judge this strategy.
Buyers of options seemed to do far better with fewer trades and long term LEAPS, than short term buyers acting on short term action. Based on the results of the equity curve over a year.
So what does a newbie, or novice like me get from this?
a) It is important to limit losses.
b) It is more important to trade much less frequently, but WIN. Choose your moment carefully.
c) The equity curve growth, if any, is the ultimate proof of trading competency and strategy choosing.
d) The winners, seemed to think that Elite Trader forums were counter productive to winning. Too much time spent on discussing intricacies of different strategies, which hid the fact that the most productive was straight buying and selling. This required TIMING. The promotors of selling strategies claimed better success than buying and selling. The actual results using equity growth, indicated LEAPS for buyers and few trades, but using all your account was a better productive dollar earner.
What will I do this next year if I trade. Change to far out months. At least nine months, maybe a one year leap. Trade less. Still working on that method.
One of the interesting debates was that between chartists and indicators, tape readers, and greek option traders. Many strategies of spreads used the greeks. My own opinion was that it did not matter much whether you used the greeks, or graphical charts and indicators. Tape reading was a seperate method and intuitive through practice, like learning to play a violin. Neither the greek method or the chart method forecast the future. They only reported where you were in the present and in some sense gave you a historical context. The future did not do what either method promised on any consistant basis.
__________________
Don Bright (not an alias)
Bright Trading, LLC
http://www.stocktrading.com
A long STRADDLE with a long contract and a debit spread
Ha! Ha! On the sellers Don.
Just to make things a bit more interesting. There is a guy on the internet with a webpage that uses a STRADDLE in a different way.
He bets directional with a long option on one side, but the other side of the STRADDLE is a DEBIT spread going out the other direction. I've looked at this method a couple of times, but really haven't figured it out yet, to the nuances of making it work.
The idea is you are looking to make money on the long contracts in your directional bet, but you insure with a debit spread on the other side. I"ve thought about it, but never actually worked this, either on paper, or real time. I would presume if you could get OTM debit spread not to far away. This OTM and the fact of a cheaper debit spread would minimize your directional bet effects and would only take place if the market decided to go contrarian to your view. Any comments on anybody using this STRADDLE would be interested to hear about it. It sure sounds like a winner, but the devil is in the details. The tricks and nuances of timing and applying it.
He said he was doing so well, his option club group started ignoring him in shame. Which I thought was a cute pitch. Be nice to hear from anybody using this?
Re: A long STRADDLE with a long contract and a debit spread
Quote from falconview:
Ha! Ha! On the sellers Don.
Just to make things a bit more interesting. There is a guy on the internet with a webpage that uses a STRADDLE in a different way.
He bets directional with a long option on one side, but the other side of the STRADDLE is a DEBIT spread going out the other direction. I've looked at this method a couple of times, but really haven't figured it out yet, to the nuances of making it work.
The idea is you are looking to make money on the long contracts in your directional bet, but you insure with a debit spread on the other side. I"ve thought about it, but never actually worked this, either on paper, or real time. I would presume if you could get OTM debit spread not to far away. This OTM and the fact of a cheaper debit spread would minimize your directional bet effects and would only take place if the market decided to go contrarian to your view. Any comments on anybody using this STRADDLE would be interested to hear about it. It sure sounds like a winner, but the devil is in the details. The tricks and nuances of timing and applying it.
He said he was doing so well, his option club group started ignoring him in shame. Which I thought was a cute pitch. Be nice to hear from anybody using this?
__________________
Don Bright (not an alias)
Bright Trading, LLC
http://www.stocktrading.com
Since realized vol tends to be below implied, yes option sellers have an edge. Is the extra implied vol rational? Well, sellers face jump risks, transaction costs, tail risk etc that isnt accounted for in the BSM assumptions, thus it gets priced into the implied volas. However I believe there's more than that, humans are more fearful than greedy, herd mentality etc...if the market corrects the slightest bit everyone is in the news predicting the end of the world. index puts inflate to the max...and after 1-2 weeks the world goes on, like it always does. And I do believe theres an exploitable edge there. But thats just me.
debit/credit
Credit Debit spreads has been discussed extensively . There is very little material difference betwen them much like a fly is a debit spread but an iron fly is a credit spread . Their pnl is pretty close. As far as OTM/ATM/ITM, again the mkt is very efficient. Kinda like saying which auto insurance is better $100 annual premium with a $500 deductible or $200 premium with a $250 deductible.
__________________
Mushin.... state of mental clarity and enhanced perception known as pure mind, produced by the absence of conscious thought, and prejudices.
We are into the 100 th page and were still discussing long straddles. you guys do realize it could make up a small book ?
__________________
"People assign much higher probability to the truth of their opinions than is warranted. It's one of the reasons people trade so much in the market, generally with bad results."
-Daniel Kahneman
Quote from TskTsk:
Since realized vol tends to be below implied, yes option sellers have an edge. Is the extra implied vol rational? Well, sellers face jump risks, transaction costs, tail risk etc that isnt accounted for in the BSM assumptions, thus it gets priced into the implied volas. However I believe there's more than that, humans are more fearful than greedy, herd mentality etc...if the market corrects the slightest bit everyone is in the news predicting the end of the world. index puts inflate to the max...and after 1-2 weeks the world goes on, like it always does. And I do believe theres an exploitable edge there. But thats just me.
__________________
Don Bright (not an alias)
Bright Trading, LLC
http://www.stocktrading.com
Well last week, I squeezed in a short two day trade using the CALENDAR. Though one guy wrote me, that he lost a bundle trying to trade Calendars. We didn't go into detail, so I don't know if it was a weekly trade, or a monthly trade.
Perhaps Don Bright would be so kind as to mention those SELLING type strategies that he favors and trades regularly? For the perusal of us novices.
The attraction of the STRADDLE is; it is a neutral, no brainer strategy.
Either direction works. If it doesn't move enough in one direction, you just sit it out, until it goes enough, in the other direction.
Buying 90 day out has worked in the past for me. While I was contemplating doing 5 contracts on a CONDOR this coming week, The predictive possibilities on a weekly trade, say for 3 or 4 days still leaves a lot of RISK potential, that the market will move against you. True, the weekly butterfly is going to take some losses occasionally and we hear on here, from other amateurs. You are selling though and when it clicks it clicks good.
I'm not at all sure what the losses would be like, if you were wrong and didn't find the range. The drawback with the STRADDLE, is you only get one or two trades a month, though if you buy 9 month out options, I cannot perceive of any losses. For the conservative trader trying only to beat bank interest rates that is hard to beat. If you factor in, losing trades in the butterfly game, a selling strategy, I am not at all sure how your end result over a year would come out?
ATTICUS is the consumate Butterfly trader. Rarely, if ever makes a mistake. I've been looking up my notes and I see that I've noted the Butterfly while a selling strategy is also two Debit spreads, while the Condor is a debit and credit spread? I will have to think about that for a bit. I am not at all sure what the advantage is in doing the Butterfly? The tricks and nuances escape me. Being dumb and beginning at this. Though I like the sound of the two debit spreads. I'm not at all sure how this effects your risk and loss profile if your projection in a weekly was off a strike?
Among my many notes on the table top, I note that someone suggested doing a Long Straddle in the weeklies. Put it on Thursday and swallow the cheap loss on Friday. I guess since they both expire the next day, you should show a profit? That would make a weekly trade worthwhile. Haven't tried this yet. Not sure if you would have to close the winning side? Whoever mentioned that one, wonder if they could bring us up to speed with the performance of this? Could you gamma neutral adjust, in a weekly straddle for increased performance? You would get 4 trades a month that way. Wonder if anyone has any information profit and loss wise to share, on this, in the real world?
Reading my notes I find the idea that the BUTTERFLY is two debit spreads, whereas the Condor is a credit spread and a debit spread intriguing. One wonders which would lose more in real world practices? As you can see, I am struggling to find out would be my best choices here. Like us all I suppose?
Quote from falconview:
Perhaps Don Bright would be so kind as to mention those SELLING type strategies that he favors and trades regularly? For the perusal of us novices.
__________________
I'm spending a year dead for tax reasons.
falcon,
i would be interested to know more about the trader who hedges his straddles with a debit spread on one side, do you have a link?
Quote from sle:
(1) You can make money selling options or you can make money buying options (i mean "net risk premium"). First one is easier, second one is safer. Selling one is perfectly suitable for private investor/trader under assumption that
(a) you are not as concerned about short-term fluctuations in your account,
(b) you do not over-leverage yourself and
(c) understand that you will take losses every once in a while.
(2) It's not the strategy that matters, it's how you determine when you want to do it. You can sell straddles, flys or iron condors, but the key question is still - when are they rich so you'd want to sell risk premium and when do you want to stay on the side-lines.
Sit down, trying to think of simple statistical analysis that will tell you that some option strategy is overpriced. You can use volatility, you can use break-even ranges, you can use historical simulation - but you can not make it "mechanical daily strategy" as you said originally. It has to be tailored to the environment. I will send you a few things in PM, very simple stuff, but it will get you thinking in the right direction.
(3) Trade paper money or back-test before you start trading real cash. You will save yourself a lot of headache for yourself.
__________________
Don Bright (not an alias)
Bright Trading, LLC
http://www.stocktrading.com
My computer is on the glitch and have to borrow a computer at inconvenient times. Sorry for the delay.
But to the query on the long call, debit spread hedge, STRADDLE, it was A.J. Brown. Claims to have gone from $5000 to a million.
I couldn't find the URL right now, but did confirm his name. Look him up and you will probably find the particular URL he mentioned. He's selling lessons, so I take that with a grain of salt, as one does not expect million dollar winners, to be selling lessons.
I'm reminded of Joe Ross and Wilder some thirty years ago, who were king of the system sellers at that time. Times have changed and I see nowadays we get teachers offering online classes. I guess while I was away for a couple of decades, something must have happened to make the system sellers market prohibitive and now it is all teaching, with no guarantees. Must be some new laws and regulations?
I'm puzzling over the Butterfly and the Condor. Total novice at this and just trying to get my feet wet by learning the TOS entry and exit system for these more complicated trades. That cater to small retail beginners. These being touted as low risk and low profit trades. I'd like to get a copy of the " One Strategy for ALL Markets by J.L. Lord. " The hype makes it sound interesting. He also says the two best strategies are the broken wing butterfly and the unbalanced condors.
I've been getting confused over the weekend, as one of my notes mentioned that the butterfly was two debit spreads. While looking at it from an unfamiliar amateur view, one side seems to be a credit spread? Haven't figured that out yet. The Condor I am taking notes as a credit spread and a debit spread? I sure don't like credit spreads. But these strategies are touted to be for those who don't have the margin capability like Don Bright, to just sell. So you need these selling, or collecting time decay strategies, to go along with Don's strident message that selling is the end all, to beat everything. ( grin ) Just having fun picking on you Don, a bit. Your message is received loud and clear. It was nice to get somebody in there talking about buy options as a sometime wiser choice for beginners. A balanced discussion is always good.
Thankyou all for contributing to the thread.
Quote from falconview:
........ Claims to have gone from $5000 to a million.........He's selling lessons......
A fly is simply a condor in which neutral delta = the center strike. A condor is neutral delta between the *two* central (or inside) strikes. A 10-point condor encompasses 30-points, while a 10-point fly is 20-points.
Fly: 1 x 2 x 1
Condor: 1 x 1 x 1 x 1
An IBM call fly -> long 190C, short 2 200C, long 210C. Dissected, it's a long 190/200 call spread and a short 200/210 call spread. Or you can sell the 200 straddle and buy the 190P/210C strangle. The fly is neutral delta to 200 -- THE BODY STRIKE.
An IBM call condor -> long 180C, short 190C, short 200C, long 210C. Dissected, it's a long 180/190 call spread and a short 200/210 call spread. Or you can sell the 190/200 strangle and buy the 180/210 strangle. The condor is neutral delta to 195 -- MID STRIKES.
Call condors = put condors = iron condors. Same goes for flies.
Ugh.
Ha! Ha! "Ugh!" I was hoping an expert like you would chip in ATTICUS.
As a novice I´m going to think about your words of wisdom a bit. Right now it is sort of going on FAITH in your words of wisdom, not so much my learned process of thinking about it. Anyway sounds good from somebody I respect, so that is enough.
I´ve been off the internet for five days, due to internet connection protocol LAN problems and finally got it working on this Tuesday night. I mean with my own computer. Can´t say I´m a tech whiz though. Was just trying numerous different things, clicking here and there and everywhere and suddenly the darned thing started connecting and working and have internet back again. What I did haven´t a clue, but I´ll settle for it is working. Whatever miracle occured. Think I´m too late to trade the weeklies this week. Though I might paper trade the late Thursday, into Friday suggested STRADDLE trade, to see what happens, on a weekly. Arrived back home on last Thursday evening. 7 hour trip from the island. Only a 120 miles, but it is third world traveling. Chicken and pig bus and all, carrying backpack and big bag with my desktop computer gear. Tight fit on the seating, stop and go letting off passengers and picking them up local type schoolbus.
In the interests of staying in theme, of the LONG STRADDLE.
I had read that a Long Straddle can be worked using two CALENDAR spreads. Since I did my first CALENDAR on my own, using the entry and exit in TOS I take that as a milestone in my learning process. A week ago. At any rate, I noted that a CALENDAR can be done on CALLS, or PUTS. So in a STRADDLE I presume therefore you would be straddling both a CALL and a PUT CALENDAR. I found this interesting, because on my CALENDAR TRADE, I closed out early Thursday morning past, so I could catch an earlier water taxi from the island to the mainland, so I quit early for the week. At any rate I noticed that the CALENDAR earned less than my paper trades in the CONDOR and the BUTTERFLY. So far just one of each and it was more a learning lesson on how to enter and exit using the TOS platform as a unit, than the trade itself. Anyway, to make a long story short, it would seem a LONG STRADDLE composed of using CALENDARS ( two of them, PUTS and CALLS ) would give you the same return for selling THETA, or collecting TIME DECAY, as both the CONDOR and the BUTTERFLY. Which seemingly in this amateurs observations be a better deal.
Then I looked up a bit of reading and it was insisting on doing this stuff during a horizontal, or congestion place in the market action. Then I reflected back on watching ATTICUS bouncing all around the market trading multiple butterflies on stocks. Now I´ve avoided stocks, for some earlier conviction it was dangerous. Now I´m not sure how that came about. So I´ve only concentrated on learning on indexes, the QQQ and the OEX. Small account and I figured if I couldn´t learn there, it didn´t make sense messing around with things like stocks that I didn´t understand. But on these TIME DECAY collecting strategies using weeklies, that just perhaps my novice thinking, might look up stock earnings reports, as in an earlier venture studying the kING of TRADERS, Ryan Patrick. and the talk about earnings reports leveling out before the EARNINGS REPORTS I should be able to look up some stocks that the earnings reports are 10 days out, and thus eligible for a butterfly or two. Just a thought, if I can get my computer room back in action again. Stocks seem to level out and go sideways during that time period.
I´m not quite clear what the difference would be in dollar performance between a CALL CALENDAR and a PUT CALENDAR. I presume there would be some difference? Possible a loss of .30 cents on one side or something? Seeing as how to get maximum profit you want to EXIT when the market crossed the initiation of the underlying trade number, but in the real world, these may not happen and you would be a bit off when having to EXIT.
Quote from falconview:
Ha! Ha! "Ugh!" I was hoping an expert like you would chip in ATTICUS.
I´ve been off the internet for five days, due to internet connection protocol LAN problems and finally got it working on this Tuesday night. I mean with my own computer. Can´t say I´m a tech whiz though. Was just trying numerous different things, clicking here and there and everywhere and suddenly the darned thing started connecting and working and have internet back again. What I did haven´t a clue, but I´ll settle for it is working. Whatever miracle occured. Think I´m too late to trade the weeklies this week. Though I might paper trade the late Thursday, into Friday suggested STRADDLE trade, to see what happens, on a weekly. Arrived back home on last Thursday evening. 7 hour trip from the island. Only a 120 miles, but it is third world traveling. Chicken and pig bus and all, carrying backpack and big bag with my desktop computer gear. Tight fit on the seating, stop and go letting off passengers and picking them up local type schoolbus.
In the interests of staying in theme, of the LONG STRADDLE.
I had read that a Long Straddle can be worked using two CALENDAR spreads. Since I did my first CALENDAR on my own, using the entry and exit in TOS I take that as a milestone in my learning process. A week ago. At any rate, I noted that a CALENDAR can be done on CALLS, or PUTS. So in a STRADDLE I presume therefore you would be straddling both a CALL and a PUT CALENDAR. I found this interesting, because on my CALENDAR TRADE, I closed out early Thursday morning past, so I could catch an earlier water taxi from the island to the mainland, so I quit early for the week. At any rate I noticed that the CALENDAR earned less than my paper trades in the CONDOR and the BUTTERFLY. So far just one of each and it was more a learning lesson on how to enter and exit using the TOS platform as a unit, than the trade itself. Anyway, to make a long story short, it would seem a LONG STRADDLE composed of using CALENDARS ( two of them, PUTS and CALLS ) would give you the same return for selling THETA, or collecting TIME DECAY, as both the CONDOR and the BUTTERFLY. Which seemingly in this amateurs observations be a better deal.
Then I looked up a bit of reading and it was insisting on doing this stuff during a horizontal, or congestion place in the market action. Then I reflected back on watching ATTICUS bouncing all around the market trading multiple butterflies on stocks. Now I´ve avoided stocks, for some earlier conviction it was dangerous. Now I´m not sure how that came about. So I´ve only concentrated on learning on indexes, the QQQ and the OEX. Small account and I figured if I couldn´t learn there, it didn´t make sense messing around with things like stocks that I didn´t understand. But on these TIME DECAY collecting strategies using weeklies, that just perhaps my novice thinking, might look up stock earnings reports, as in an earlier venture studying the kING of TRADERS, Ryan Patrick. and the talk about earnings reports leveling out before the EARNINGS REPORTS I should be able to look up some stocks that the earnings reports are 10 days out, and thus eligible for a butterfly or two. Just a thought, if I can get my computer room back in action again. Stocks seem to level out and go sideways during that time period.
I´m not quite clear what the difference would be in dollar performance between a CALL CALENDAR and a PUT CALENDAR. I presume there would be some difference? Possible a loss of .30 cents on one side or something? Seeing as how to get maximum profit you want to EXIT when the market crossed the initiation of the underlying trade number, but in the real world, these may not happen and you would be a bit off when having to EXIT.
__________________
"People assign much higher probability to the truth of their opinions than is warranted. It's one of the reasons people trade so much in the market, generally with bad results."
-Daniel Kahneman
Quote from babutime:
Stick to butterflies falcon.
The wider the fly the more gamma and vega exposure you incur. You trade flies to limit the risk of a straddle.
OTM (long) flies are marginal long gamma
Neutral flies are short gamma
ATM flies are (typically) neutral gamma
One way to look at flies trade directionally is via the gamma-modality. You're bullish on XYZ but the vol is too high to go long an OTM vertical or outright call and you want a better R/R than the bull put spread. You don't want the convergence risk or bleed of a long back-spread, so you buy an OTM fly for change and XYZ touches neutrality. This will often result in a double within days. This is due in part to the bimodal nature of gamma in the position. The spread becomes more enticing as it approaches neutrality in terms of decay and distribution (neutral delta target). The demand is obviously seen in it's initial delta as well, but not so much in the initial gamma.
Quote from atticus:
The wider the fly the more gamma and vega exposure you incur. You trade flies to limit the risk of a straddle.
OTM (long) flies are marginal long gamma
Neutral flies are short gamma
ATM flies are (typically) neutral gamma
One way to look at flies trade directionally is via the gamma-modality. You're bullish on XYZ but the vol is too high to go long an OTM vertical or outright call and you want a better R/R than the bull put spread. You don't want the convergence risk or bleed of a long back-spread, so you buy an OTM fly for change and XYZ touches neutrality. This will often result in a double within days. This is due in part to the bimodal nature of gamma in the position. The spread becomes more enticing as it approaches neutrality in terms of decay and distribution (neutral delta target). The demand is obviously seen in it's initial delta as well, but not so much in the initial gamma.
How do I get to private mail? Can´t seem to find it.
Okay, found private mail on here.
It has been a week of soul searching. I´ve decided to start trading with Long STRADDLES/STRANGLES. Probably pull a CONDOR or Butterfly if the QQQ goes into a range, congestion also. I don´t have much in the way of money in the account, so will start with one contracts and see how it goes?
These latter two were useful in a trial and error way of guess estimating the weekly high and low.
I´m going to give the Straddle and Strangle a go, based on the comments and experiments I´ve made with adjustments. This morning I noticed that I did not have a STRADDLE on the option chain, but there is a STRANGLE, one strike apart. Going to think about that differential a bit, and how to adust using such a trade.
There was a suggestion by Whispering Leaf who trades LEAP type Vertical Spreads, about 50 + at one time running. He suggested I trade almost any type of trade I like, ALL are good, when used properly with TIMING. The important thing is become familiar with the strategy and learn all the tricks and nuances. I thought that was a good suggestion. I think I will trade 90 day STRADDLES/STRANGLES with my own idea of adjustments. One thing he said, he dropped Butterflies, Condors and Calendars, because of losing too much money. From that he inferred it is better to trade something you are familiar and comfortable with. Sounds like a good idea.
Holding 1- Aug. STRADDLE, QQQ, 62 @ $5,51
Calls and Puts at $2.26 each.
Quote from falconview:
Holding 1- Aug. STRADDLE, QQQ, 62 @ $5,51
Calls and Puts at $2.26 each.
Long Straddle , sold half the straddle, the PUT, as I put in a price target sell order and had to go do business elsewhere, running errands. It got filled while I was away for four hours, a gain of .80 cents. Less .10 cents commission, + $70. ( +12% )
However I am now holding a long call, now OTM. I'm probably going to AVERAGE it down and buy 2 more, about 2 strikes down. That would be then 3 - 62 CALLS, all together, intended to lower my breakeven on any re-bound. I am waiting for the next STRADDLE to equalize PUTS AND CALLS, hopefully around the 60 STRIKE. Then I will buy another straddle. That's the plan, at the same time, expect that would be when I also buy another 2 OTM 62 Calls to lower that breakeven.
The 62 Calls right now are about $2.03.
If I had closed the STRADDLE it would have grossed $16. So by closing the winning side it made gross $80. It would lose for such a small move as a long straddle and needed to move 2.5 or 3 strikes. Just using the winning side, I could price target the market action and forget it.
I'm looking to put on another STRADDLE if the PUTS and CALLS come even again, somewhere around the 60 or 61 STRIKE.
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I did a paper trade on the overnight WEEKLY Thursday/Friday STRADDLE. Closing the failing side, at a half hour into the market for .04 cents. The winning side just closed it ( paper theoretically ) for a gross gain of +.55 cents. I'm not convinced this is a good trade yet, so will probably only paper trade it each week, to see how it runs over more samples.
---------------------------------------------
CONDOR
With a down trend, I was very scared to guess the STRIKE or index for a CONDOR TRADE. But it would have made money had I done so, as if I remember rightly my guess for the CONDOR was in 61 strike range. I sort of wanted it on Thursday, but it did do that on Friday for expiration weekly. A trade never made unfortunately.
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LONG STRADDLE TO THE HALF STRADDLE TRADING.
The method of trading the Long Straddle as a unit, for entering, but exiting by using the half straddle, has it's own problems. The Straddle being a non directional trade, is a fine trade. You sit and wait for the market to come to you, at your price targets. No guessing. The trouble with it, is that entering and exiting as a full straddle trade, it doesn't earn much, about 3%. Takes long sometimes to cover the fluctuations also in market movement. In the QQQ it takes about 3 strikes. If treated as entering as a UNIT, the Long Straddle, the exiting with a fixed target profit, occurs much faster, and more profitable. You can sell off the HALF STRADDLE winning side for a bigger profit, faster at about a 1.25 strike movement in the index. This half straddle profit earns about 12%. The other variable, is how many times can you repeat with it?
Then you are stuck holding a half straddle, LOSING SIDE. What to do with it? About the only two ways I have so far tried and figured out, is to either AVERAGE DOWN, the losing HALF STRADDLE, to lower the breakeven point. With one side winning 12%, the other side only has to break even, and does not need a profit. Or re-establishing the profit side you just cashed in. Using DELTA NEUTRAL to figure out how many contracts you would need. In another 1.25 index strikes, you would have a profit again and repeat ad finitum. At some point I suppose you would have to let the Long Straddle run for the full 3 strikes needed to close it again as a UNIT. I would think, just guessing, you could get three, ONE HALF WINNING PROFITABLE trades out of a LONG STRADDLE, before going to the trouble of letting it trend, to exit as a unit. In order to eliminate TIME DECAY as a factor using 90 day options.
I'm at that point where I am dealing with what to do with the left over LOSING HALF STRADDLE. A work in progress. My original intent, or mission goal, was to create a trading system, that had absolutely NO LOSING TRADES. Ignoring any GREED FACTOR in building equity. I sort of thought if I could, after paying the IRS 40% of the profits at the end of the year, and end up with 18% to 20%, I would be in business, conservative and safe, and far better than the 1/2 of 1% my savings account is currently paying me stateside.
Quote from falconview:
. My original intent, or mission goal, was to create a trading system, that had absolutely NO LOSING TRADES.
Ha Ha Richard. This is a work in progress. Just follow the bouncing ball. If your not old enough to remember Saturday movies, that had sing alongs, with a bouncing ball, well, what the heck can I say.
My views on what to do next, change nightly. As I dream about it.
I'm rather amazed that any of you long term traders, would even read the gibberish of a novice? I'm being forced to trade by the option chain, I can see in this building experiment of a trading system. The charts are sort of interesting, but it is the prices that dictate the next action. Something new I've learned.
I sort of posted on here, so you EXPERTS would kibbitz and catch some of my errors. So far, it has been DEAD SILENCE. I haven't a clue how to interpret that?
Can't speak for anyone else but honestly Falcon I don't read most of your ramblings. Just glance thru and shake my head...sorry...and quite surprised anyone else esp. Atty bothers. There is NO substitute for experience, even if its just paper trading for a year. Most people don't have the patience, they want to get their money to WORK NOW. After a number of years I'm still a bloody novice...still get caught with my pants down. The only difference is I have learned to take my loss before it becomes unmanageable and live to trade another day. Perhaps one of these days I actually WILL go away in May.
Having said all of this, what you are going thru has been gone thru by many and these forms have a ton of info. Most just don't want to bother re-hashing all the talk that has gone on before. What I did was pick people and go back and look at old posts and threads that covered the topics I'm interested in and wade thru all the crap. Over the years....and I repeat...YEARS...I've actually picked up a few bobs of gold.
here...read these two for starters
http://www.elitetrader.com/vb/showt...uying+straddles
http://www.elitetrader.com/vb/showt...&threadid=49586
Aaaah well! This novice keeps on trying, until I lose some money.
Just reading one of those threads of Richard done my Maverick. It was interesting reading. It was about a butterfly front month and a wrangle on the back month. CALENDAR. It was sort of interesting, then it got too convoluted. As a novice, I just want one or two strategies that I would learn well, with all the adjustments, tricks and nuances solved and learned. Then repeat endlessly. It's the nuances that are the problem under different market conditions. All strategies seem to work under their best conditions of playing. Identifying instinctively, or by finding something that fits the framework, like a stock seems to be the secret to applying strategies on a regular basis.
I was fascinated by the LEAPS, vertical debit spread system, but lack the money and TIME to get into it at this point. I have to build back my cushion with some wins, before I experiment much more learning. The idea that you could make four trades, and 2 would win, 2 would fail and you still would PROFIT 200% from that particular one trade was fascinating. Or one win, and two lost trades and you break even. So you can hit many vertical debit spreads if you go OTM for under $1 spreads. That sounded like a good system. Perhaps in the future.
Right now I'll keep persueing my LONG STRADDLE system until I either get it to work the way I envisage, or lose some money and become discouraged. Got a bit of time invested in this idea over the past two years of learning different strategies. I'm also in favor of condors and butterflies. Just not yet ready to go wandering around the stock universe looking for congested range bound prices. My small capital is invested in the LONG STRADDLE, until I either make it work, or fail. I like KISS methods.
Monday morning review.
I'm looking to put on another LONG STRADDLE. If I can get matching PUTS and CALLS in prices. Decided not to average down on the first straddle yet, in which I'm holding OTM CALLS on the losing 1/2 straddle side. Market seems to have some downside to it yet?
Looking at ten days out company earnings, settled on SFD and will do a 'paper trade' condor at 61 high and 60 low and see how it plays out over the week? This is for SFD.
Otherwise, just to sit and wait patiently!
Added a new LONG STRADDLE
1 Aug. 60 LONG STRADDLE, QQQ @$5.85. Puts and Calls at $2.93 each.
- Still holding 1/2 straddle, the OTM CALL on the 62 Straddle.
_______________________________
Note: Was reading some old notes and you can do a LONG STRADDLE superimposing two Vertical Debit Spreads for long options. I wonder how that would work out in the world of dollars and cents, gained or lost?
_______________________________________
Kind of interesting with a dead undecided market. At least for long straddles. Nothing much doing. The big thing to resolve with my strategy is how successful I can be in breaking even on the losing side of the straddle. I'm estimating about 5 weeks maximum to get the breakeven, by one way or another. The profit comes easy. Keeping it is the real story. I'm only trading 1/2 as many long straddles that are available. In the interest of trying to work things out thoroughly. See if I have a working system?
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Been perusing RANDOM WALK web pages on various adjustments to the butterfly. Something they call the 1,2,3 and another unbalanced one called the 1 to 5. Got to learn the basics first before I try to get more advanced. The broken wing butterfly and the unbalanced condor seems straight forward variations, that simply need more study and practice.
__________________________________
Wednesday morning. Made a stupid mistake. Instead of a waiting sell order, at a picked strike price, put in a buy order in error, and ended up with another CALL at a bad price, giving somebody $50 at my expense. Reset the order to sell, at my target price of $4.08. At the time, I was reasonably far away. But as I got closer, decided to couple them together and cancelled my sell order and replaced it with a sell order for two CALLS at $4.08. Will accept the loss of commissions of $10 on that if I get a fill. The STRADDLE CALL will make a $100 bucks, so thats okay.
I got involved in doing experimental research on a Long Straddle with Vertical Debit spreads. I couldn't make it work. Went ITM, ATM and up to 3 strikes OTM. But could not get a price low enough on the debit spread to make it worth while. In the QQQ with .10 cents for round trip commissions and a strike width in a debit spread only covering .60 cents, there just was not the ability to get a real low price on the debit vertical spread. So gave that idea up as a failure.
In the meantime, with all this stuff this morning, I forgot to put on another Long Straddle at the 62 strike. Have to watch that for a while and see if I can catch it. Think I'll go out another month too. From August to September.
Open an IB account and wire them $10k. The front-end is a spreadsheet, but powerful. A lot of embedded functionality that takes some time to learn, but you can place complex orders very quickly. I can't stand the TOS middleware and latency.
I make some mkts with IB and Lime and IB's fills are excellent by comparison.
I've looked at IB, but while I'm losing on my current account with TOS, cannot get my wife to agree to another $10,000 yet, to open an account with IB. Thats their minimum and I probably have $7100 right now in TOS and working my way back up, albeit slowly. A happy home life is more important ( grin .
TOS or IB.... or OH?
I am fairly new to options... 3-4 months and a few books.
I opened my account at Option House and have been happy... Maybe I do not know what I am missing.
Platform seems fine... price structure over 5 contracts at $8.50 plus $.15 per contract.
I am still learning how aggressive I can be on fills...
Am I missing something?
When I started a year ago. In cash. I tried Options Xpress, Option House and TOS. I found the platform for TOS to be more friendly and the help chat line, excellent. I went with TOS. My friend ATTICUS a professional trader swears by IB. I never heard of them before, and by the time I heard of them, my $10,000 was down below their minimums. So one day, I think I will probably move to IB based on my professional friends recommendation. At the moment it seems to be more trouble than it's worth. I'm just getting the hang of this trading and platform on TOS.
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Wednesday. June 6, 2012
Okay sold my winning side of the Aug. 60 STRADDLE, which was CALLS and had made a mistake, with my original sell order. Put BUY
instead. Anyway, I have come out at the end of the day smelling like ROSES. + $114 net on the winning side, plus selling the mistake call I ended up buying.
I'm now HOLDING 60 STRADDLE PUT and a 62 STRADDLE CALL which has to be worked out, adjusted to Breakeven, before these two STRADDLES are completed. I also got FILLED with a new 62 LONG STRADDLE before the CLOSE. So still in the game here. It's going okay so far. Will know better by the end of the month.
I've got three paper trades to tend to for Thursday and Friday. See how they go?
Still a work in progress on this new trading method for me. I'm getting better I think, at tweaking and adusting any variables. I think I'll give it a new name.
EBB AND FLOW - TRADEOPONICS !
In a very small circle of tropical vegetable market gardeners, I'm reasonably famous and referred to, for a book I did on a three year study of Tropical Agriculture in vegetables. My specialty being self taught, trial and error learning in hydroponics. So TRADEOPONICS sounds like a nice title. * If it works in another 5 weeks? Then we will know.
Re: TOS or IB.... or OH?
Quote from webicknell:
I am fairly new to options... 3-4 months and a few books.
I opened my account at Option House and have been happy... Maybe I do not know what I am missing.
Platform seems fine... price structure over 5 contracts at $8.50 plus $.15 per contract.
I am still learning how aggressive I can be on fills...
Am I missing something?
OptionHouse Rates
Rate structure for OH (options)
Options... $5 per contract up to 5 then an additional $1 per
Or a fee of $8.50 per transaction plus $.15 per contract.
Spreads are $10.00 for up to 10 contracts and $1.00 per contract over 01.
Or a fee of $12.50 plus $.15 per contract.
Hope this help...
I am happy with their customer service....
Still learning how aggressive I can be on going after the mid-point
Well it is kind of confusing with my BLOG. THE SEREPENDITY TRADING. They re-did the BLOG format and now the entries I used to put in a column by number, no longer line up neatly for reading. They all run one after the other in a continuous line. Doesn't seem anything I can do about it? A flaw in the system I think.
I started my Ebb and Flow Tradeoponics method I'm trying to build, with a starting account balance of $7058. So far, I've got 3 straddles in two weeks past, until now. The first STRADDLE completed today, for a gain of +$86 net profit. The second LONG STRADDLE is still half unfinished, but have taken a profit out of it, of $114 net profit, so far. $17 of that was a single CALL trade I did by mistake. It worked, but I can't take credit for it. But I still have half the STRADDLE to complete yet, another week away, I imagine? The THIRD LONG STRADDLE IS open and no progress yet.
My personal calculated BALANCE for my account is now $7273. However, TOS running balance is only showing $7151. I'm guessing that is because I have two trades still open that have not yet been completed? For the difference! We shall see down the line here, I guess.
Experimental Learning:
Will be completing 3 'paper trades' this week. Two CONDORS and 1 LONG STRADDLE, as experiments, to see what happens? These were WEEKLY type trades. Not that anybody is particularly interested I suppose?
Re: OptionHouse Rates
Quote from webicknell:
Rate structure for OH (options)
Options... $5 per contract up to 5 then an additional $1 per
Or a fee of $8.50 per transaction plus $.15 per contract.
Spreads are $10.00 for up to 10 contracts and $1.00 per contract over 01.
Or a fee of $12.50 plus $.15 per contract.
Hope this help...
I am happy with their customer service....
Still learning how aggressive I can be on going after the mid-point
Falcon, I suggest you get a hold of Hull and Taleb. Reading those books will save you years of years of experimenting and they would answer 99% of the questions you ask in the thread
Quote from TskTsk:
Falcon, I suggest you get a hold of Hull and Taleb. Reading those books will save you years of years of experimenting and they would answer 99% of the questions you ask in the thread
Tsk Tsk
Hull and Taleb??? Will look it up. Thanks!
Bought 1 Aug. 60 PUT at $1.60, to bring down my breakeven to $2.27 including commissions on an open leg of a straddle I have. The 1 contract STRADDLE already made +$114. Now I'm like the mafia. Just want to get rid of the loose end.
Interesting my STD condor is right on target and collecting Time Decay. Who knows, do this a couple more times, and might change from a paper trade to real money on that CONDOR WEEKLY?
Re: Trading Long Straddles
The biggest misconception about the long straddle is that you are playing price. YOU ARE PLAYING VOLATILITY. The expected move is already built into the trade so you need a bigger than expected move to make money, not just a move up or down.
Its just like the over/under bet in sports. The Lakers and spurs are expected to score 200 points which is the line. If you bet the over and they score over 200 pts. you win. Under than you lose.
A short straddle is playing the under. It's not about price but about volatility. So the key is buying low volatility and selling high. Easier said than done.
Quote from falconview:
Having failed at credit spread trading, Gap trading and straight buying of options. I´m now trying LONG STRADDLES in options. Got one week in it now, but probably run through the month. Any body got any advice on making money with lONG STRADDLES?
Tsk Tsk
I downloaded a pdf file from Taleb on lots of different egghead subjects. Now I know you and ATTICUS are poking fun at me. It wasn't like there were a half dozen words with over 8 letters. Over half of 8 mgbytes were big elongated words. Couldn't get my tongue around them even if I tried. I counted, many of them had eleven or more letters in a single word. There were not just a dozen or two, there were hundreds, if not thousands of such words. Do people actually speak like that?
It read like a politician's speech, running for office.
If he was selling used cars, I could kind of pick up on it. It sounded more complicated than the stuff a friend of mine says, trying to build a plasma, tiny 5 hp fusion operating generator. I was hoping he could get it working strong enough to stick in a flying saucer, to use for a round the moon trip. I'd love to go to an Experimental Aircraft Convention, flying a saucer with space capabilities, using a small compact plasma fusion motor. But TALEB on options trading? Yeesh!
If there was anything useful in those articles covering 8 mgbytes, I didn't find it. I'll look up Hull shortly, see what that has? If you and Atticus got anything out of that stuff, you are certainly better men than me.
Falcon, you probably stumbled upon a research paper. I meant books written by Hull, spesifically http://www.amazon.com/Options-Futur...n/dp/0131499084
This book doesn't require any knowledge whatsoever about derivatives before you start reading it. You will understand more and more as you read through it, it's highly recommended.
Ha! Ha! Okay TSK TSk. Thanks for the clarification. And the reference. I will maybe get to this weekend to look up.
I was just having a bit of fun with you guys. Playing my country, boy, ignorant, grass chewing straw in the mouth routine. Aw shucks and all that !
Curious to see how my two condors will come out this morning. One on a stock that looks to be a winning selection trade method? One on the QQQ which is looking hairy before the OPEN, but actually might fall between QQQ 60 and 61 this morning. Though doubt it. Both paper trades are teaching me lessons of a sort.
The expiration Friday, LONG STRADDLE, paper trade, haven't a clue how that is going to turn out this morning yet? Another learning experience.
The sample three trades is still too small to draw conclusions for the 'Ebb and Flow trading method'. But looking good indeed. Another month if it stays successful, will double up the contracts. This one is CASH MONEY. The nuances and tricks, particularly the ADJUSTMENT section needs to be worked on a bit and fine tuned. I'm feeling cheerful this morning. My wife and I were chatting and I casually put in as a feeler, that things were starting to go well, and if I actually made my $10,000 by XMAS. I might throw another $20,000 in the pot so to speak. She was not outright laughing, or complaining, so that speaks well.
Parliament. On the volatility discussion.
The Ebb and Flow developing TRADE METHOD, is based on volatility. I think it was ATTICUS lit the light bulb over my head, when he described the option contract as a package of volatility.
Anyway, the EBB and FLOW method is entering, buying LOW VOLATILITY and SELLING HIGH VOLATILITY, as described in PREMIUM BALLOONING. However the system is pretty much mechanical, or automatic in a sense. You still have to make the decision to enter, or exit, but basically works on different characteristics of the trade. I suppose the GREEK afficianados would have identifying situations with the GREEKS to those entries and exits? I'm using the OPTION CHAIN, to enter and the charts and a favorite indicator to exit. Do not either need to calculate, or figure out the volatility. It occurs naturally, like rain, or shine.
1) Sheesh! Hour into the Friday and the STOCK Condor, made money.
2) The QQQ index condor lost I think? Only targeted the price range, didn't figure the premiums for an actual condor paper trade.
3) The Expiration Friday, Long Straddle was making money, now losing money, see on it later in the day.
The Expiration Friday, weekly Long Straddle test. I tried it on the QQQ 62 strike and the 63 strike, as at the time the index was in the middle of the two strikes.
The 62 strike ended up zero, at breakeven figuring in commissions.
The 63 strike ended up losing ( -.22 cents) adding on the commissions.
Nothing reliable about that Expiration Friday trade at all!
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In my long Straddle ( ebb and flow ) outstanding PUTS, added another long PUT, bought at $1.59 OTM. This is the 60 August QQQ PUTS. Now holding 3 contracts and average Break even price is now. $2.02. Down from the original $2.93. All I need is a medium strong pullback, and will clear that Long Straddle and keep what profit I took already. These are the adjustment trades. Think I cleared a $117 profit on that one and now trying to keep it. If I get my breakeven in a move, will show a ROT of 19% on the trade, which cost in total $605.
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Well while I wait for those days to get enough movement in my EBB AND FLOW will try 3 CONDORS paper trading this week.
QQQ Buy 63 - .21
Sell 62 - .63
Sell 61 - .1.33
Buy 60 - 2.22
SCS Buy 15 - .15
Sell 7.5 - 1.30
Sell 17.5 - .15
Buy 10 - .05
ORCL Buy 26 - 1,15
Sell 27 - .35
Sell 28 - .05
Buy 29 - .02
What made you decide to do ORCL?
Just the chart and the research that showed an earnings report was due in bout 10 days. So I figured it would stay fairly steady this week. Within condor parameters. At any rate, I'm just experimenting with some ideas. Paper trading.
I don't think my Ebb and Flow method is going to work in a Bull trend environment , with VIX below 20, in the teens. It likes range bound, sideways or bear markets with lots of swings. So, I'm trying to gain some paper trading experience with the butterfly and condor. So I will have an alternative method to fall back on.
Come on Falconview, why bother posting "paper trades?"
Like posting my "paper" guesses on the lottery.
I don't want you losing real money either, so just admit that this is not a strategy you feel comfortable enough to test with real money.
Not trying to be mean or even critical, just don't understand the point of this pointless exercise,
Don
__________________
Don Bright (not an alias)
Bright Trading, LLC
http://www.stocktrading.com
Well Don I posted them because I'm bored. Several days of a tightening range bound market. It's my thread, so I feel free to do so. At least one person asked a question on the Condors, so it must be useful to at least one person. Novices express curiousity. Much of this is new to them, as it is to me. It is very hard to sit on your hands and do nothing. I figured if I did something wrong, you experts would jump all over me. Didn't happen, so it must be okay? Probably close them today if I get the chance.
Quote from falconview:
Well while I wait for those days to get enough movement in my EBB AND FLOW will try 3 CONDORS paper trading this week.
QQQ Buy 63 - .21
Sell 62 - .63
Sell 61 - .1.33
Buy 60 - 2.22
SCS Buy 15 - .15
Sell 7.5 - 1.30
Sell 17.5 - .15
Buy 10 - .05
ORCL Buy 26 - 1,15
Sell 27 - .35
Sell 28 - .05
Buy 29 - .02
Quote from falconview:
Parliament. On the volatility discussion.
The Ebb and Flow developing TRADE METHOD, is based on volatility. I think it was ATTICUS lit the light bulb over my head, when he described the option contract as a package of volatility.
Anyway, the EBB and FLOW method is entering, buying LOW VOLATILITY and SELLING HIGH VOLATILITY, as described in PREMIUM BALLOONING. However the system is pretty much mechanical, or automatic in a sense. You still have to make the decision to enter, or exit, but basically works on different characteristics of the trade. I suppose the GREEK afficianados would have identifying situations with the GREEKS to those entries and exits? I'm using the OPTION CHAIN, to enter and the charts and a favorite indicator to exit. Do not either need to calculate, or figure out the volatility. It occurs naturally, like rain, or shine.
First item on the condors.
ORCL closed just now with an +.81 cent profit. I didn't understand Atticus critique. I'm trying to figure out any nuances by paper practise, as my capital is tied up in Long Straddles right now.
QQQ also closed with +.59 cents profit.
SCS gave trouble. I' not sure why or anything. When I put it on, I thought the strike numbers were squirrely a little. It stayed within the $8 range, though had four days down. At any rate it lost - .90 cents. I kind of think there was something wrong at the implementation? I kind of think the 17.5 strike and the 10 strike prices were reversed, but not sure why, as that was the way I read it from the option chain.
I'm generally satisfied with the results though on QQQ and ORCL choices. Also more important the choosing process, to decide on doing the Condors in the first place. Will do it again next week.
Of 12 earnings reports, only SCS and ORCL fit my requirements for a CONDOR and SCS look conspicuously wrong at the time of implementation, so apparently I missed something there? Being paper trades and a learning process, it is okay.
Atticus is talking about volatility calculations.
Well in my novice experience, when I put on a LONG STRADDLE it is at the strike and the prices for both puts and calls is the same, whatever price it is. The ATM strike I read is the lowest volatility. So I am buying low volatility without having to know anything else. I will take a 2 cent or 3 cent differential sometimes between puts and calls. If I haven't got that figured right, please tell me.
When I sell, I use an indicator that tells maximum volatility for a premium. I've done this dozens of times, and know if I use the right indicator at the right time, I get the MAXIMUM swollen premium. The index may go up, or stock, but because of the slowness, or slowdown of the price action, by TIME, the premium starts to shed value. Index or stock can go up still, while the premium price starts shrinking, or goes sideways in value. Am I calculating premium volatility. I believe so, but graphically. You can see it on the screen. Atticus I presume watches changing gamma and vega. I'm more comfortable with my price curve line.
Hope that answers the questions.
QQQ is moving in a pennant formation and probably will break out next week. I expect a down breakout, but it doesn't matter to me. The Ebb and Flow method reacts to what the market does, AFTER it does it. Predicting direction is not part of the knowledge required.
I don't have enough sets of this in action, so drawing conclusions is probably not a good thing to do. I'm assuming things will go alright into the future as it is based on slightly other factors. I'm thinking of raising the ante and moving to 2 contracts next time around and if successful probably 3 contracts the first week in July.
By then I should be maxed out on my account availability. So I cross my fingers and tap the wood table and we shall see how it goes. The past week has been difficult as we are in a market congestion period. Lot of waiting around for something to happen and any moves too little, to hit any of my parameters for action. Sit and wait! The market changes and I hope to get 3 to 4 trades per month. This week so far, has been a dry week. Nothing happening.
Quote from falconview:
First item on the condors.
ORCL closed just now with an +.81 cent profit. I didn't understand Atticus critique. I'm trying to figure out any nuances by paper practise, as my capital is tied up in Long Straddles right now.
QQQ also closed with +.59 cents profit.
SCS gave trouble. I' not sure why or anything. When I put it on, I thought the strike numbers were squirrely a little. It stayed within the $8 range, though had four days down. At any rate it lost - .90 cents. I kind of think there was something wrong at the implementation? I kind of think the 17.5 strike and the 10 strike prices were reversed, but not sure why, as that was the way I read it from the option chain.
I'm generally satisfied with the results though on QQQ and ORCL choices. Also more important the choosing process, to decide on doing the Condors in the first place. Will do it again next week.
Of 12 earnings reports, only SCS and ORCL fit my requirements for a CONDOR and SCS look conspicuously wrong at the time of implementation, so apparently I missed something there? Being paper trades and a learning process, it is okay.
Quote from atticus:
The critique is that you received an additional penny to trade the condor over the vertical. You should have simply traded the vertical as there was no juice in the wings. You received a penny or less, after commissions, to short the 28/29 vertical (otm spread of the condor).
IOW, the vertical is a unimodal (always +delta) bull-trade. Never condor-off a vertical for a penny! You would have lost your debit if ORCL had somehow traded >$29 while the 26/27 vertical would have hit max gains. You limit your upside for a penny after fees.
Good: $1.80 x $0.75 x $0.40 x $0.10
Bad: $1.10 x $0.55 x $0.12 x $0.06
The wings in the first example bring in a 30-cent credit. The latter only bring a credit of 6-cents.
DO NOT trade these if you don't understand why it was imprudent to trade that ORCL condor. Hobbyists can make money, but it's the exception. I build Class A monoblock amps and R2R DACs in my spare time, but I am sure my per-hour rate is under minimum wage. I wouldn't want to have to make a living selling amps.
some stocks with e/r's next week
fdx, adbe, jbl, bbby, kmx, orcl
got to be a straddle/strangle candidate or two?
Quote from smilingsynic:
You always leg out of flies/condors if one of the spreads trades in pennies?
Hope things are well. I miss fattail.
traderlux thanks for the list of stocks, but I'm only doing straddles in QQQ for the time being. Indexes anyway, as there are no unexpected surprises and you can set parameters better.
For the butterfly, condor, business that this novice is learning and obviously does not understand at all yet. I'm using two weeks out stocks, from earnings, not next week, to choose candidates.
Atticus
On your explanation, I only grasp a bit of what you are saying. To tell the truth, I do not know what the two spreads Verticals are, say in CALLS. One looks like a debit spread, the other what? That might help me understand what is happening. You might name them and then I can look them up.
Like all amateurs, I traded only the whole shebang as a unit. Not understanding the individual parts, and the way they interact. I'm going to have to re-read ATTICUS commentary, in order to see if I can grasp intuitively what he is talking about.
I forgot to take off .40 cents on those condors for commissions, but still the two did make a profit less commissions. So I am happy.
I build Class A monoblock amps and R2R DACs in my spare time, but I am sure my per-hour rate is under minimum wage. I wouldn't want to have to make a living selling amps.
Haven't a clue what these are? Anything like the fun I used to have hunting big sharks with a bang stick and shot gun shell in the open blue water Gulf Stream, when younger. Same thrill it sounds like ( grin )
ORCL
Buy 26 - 1,15
Sell 27 - .35
Sell 28 - .05
Buy 29 - .02
Okay! I'm re-reading this stuff. Instead of doing a Condor, should have just done the Vertical. Got that. Hmnnnn! Going to think on that a bit. I can see 5 cents wasn't enough to bother about. Then again, busy trying to learn the Condor, or butterfly, it hadn't crossed my mind, to analyze the different parts. Something new learned. Now I have to figure out what that vertical is? Probably a debit spread? Except in this case I'm really selling to gain time decay from a debit spread? A weekly trade, so the buy side would shrink also, and I buy it back cheaper, as well as the sold side, I would sell off for whatever. Strange that, I was only thinking in terms of the sold side and knew something was going on with the debit side, but didn't know what. Too busy concentrating on the condor as a unit.
Except in this case I'm really selling to gain time decay from a debit spread? A weekly trade, so the buy side would shrink also, and I buy it back cheaper, as well as the sold side, I would sell off for whatever.
Alright I got that wrong. I bought it, so I have to sell it. Hmnnnn! Selling cheaper doesn't sound right somehow? Have to get my dunce cap again. I gain a bit on credit, but lose on what I bought. ???
Quote from falconview:
Except in this case I'm really selling to gain time decay from a debit spread? A weekly trade, so the buy side would shrink also, and I buy it back cheaper, as well as the sold side, I would sell off for whatever.
Alright I got that wrong. I bought it, so I have to sell it. Hmnnnn! Selling cheaper doesn't sound right somehow? Have to get my dunce cap again. I gain a bit on credit, but lose on what I bought. ???
Re: A long STRADDLE with a long contract and a debit spread
Quote from falconview:
Ha! Ha! On the sellers Don.
Just to make things a bit more interesting. There is a guy on the internet with a webpage that uses a STRADDLE in a different way.
He bets directional with a long option on one side, but the other side of the STRADDLE is a DEBIT spread going out the other direction. I've looked at this method a couple of times, but really haven't figured it out yet, to the nuances of making it work.
The idea is you are looking to make money on the long contracts in your directional bet, but you insure with a debit spread on the other side. I"ve thought about it, but never actually worked this, either on paper, or real time. I would presume if you could get OTM debit spread not to far away. This OTM and the fact of a cheaper debit spread would minimize your directional bet effects and would only take place if the market decided to go contrarian to your view. Any comments on anybody using this STRADDLE would be interested to hear about it. It sure sounds like a winner, but the devil is in the details. The tricks and nuances of timing and applying it.
He said he was doing so well, his option club group started ignoring him in shame. Which I thought was a cute pitch. Be nice to hear from anybody using this?
Traderlux
Now YOU brought up an interesting idea. I was never able to make his method work. But I simply opened with a long option on one side and a vertical on the other side. I had never thought of converting a Long Straddle on the losing side with selling something, to convert it into a vertical. That makes a bit of sense, or at least different. Let me see if I can remember so long ago. Darn, I'm not sure what I did back then. Nor am I at the moment familiar with the types of vertical spreads. I seem to have forgotten the differences. Will have to re-read again on them.
Right now, I'm still confused with ATTICUS contribution. With dropping one side of a condor, or butterfly. I know that they are made of two verticals, with the sold side in the middle. But can't picture in my mind since they would be both CALLS, or PUTS. What do they name those Verticals in a Condor, when both are CALLS? Then I can look them up and freshen my memory. Maybe I can figure out how they work mentally.
_____________________________________
webnickell
Credit spreads, I traded for about 7 or 8 months over a year and a half ago. You compound your account, by using all of it and you double your account in about 5 months. The fly in the ointment; is that in my case, there were two or three corrections. There were more but they came back into the channel so it worked out, but when it didn't, total disaster. ATTICUS explained it at the time, sort of. Something about accelerating volatility on the premium. I never understood that exactly, but the practical side was it WIPED YOU OUT, YOUR WHOLE ACCOUNT. You could be tootling along, happy as a lark with a doubled account, then whammo, in one day, EVERYTHING gets wiped out in an hour or two. In a market drop, things move too fast. Your left gasping like a fish out of water, the thing is running away from you so fast. Usually you have on an Iron Condor. I've thought about that often. If you could exit at the mid point of the channel, you might save something. Trouble is, psychologically it doesn't work out that way.
Quote from falconview:
Traderlux
Now YOU brought up an interesting idea. I was never able to make his method work. But I simply opened with a long option on one side and a vertical on the other side. I had never thought of converting a Long Straddle on the losing side with selling something, to convert it into a vertical. That makes a bit of sense, or at least different. Let me see if I can remember so long ago. Darn, I'm not sure what I did back then. Nor am I at the moment familiar with the types of vertical spreads. I seem to have forgotten the differences. Will have to re-read again on them.
Right now, I'm still confused with ATTICUS contribution. With dropping one side of a condor, or butterfly. I know that they are made of two verticals, with the sold side in the middle. But can't picture in my mind since they would be both CALLS, or PUTS. What do they name those Verticals in a Condor, when both are CALLS? Then I can look them up and freshen my memory. Maybe I can figure out how they work mentally.
_____________________________________
webnickell
Credit spreads, I traded for about 7 or 8 months over a year and a half ago. You compound your account, by using all of it and you double your account in about 5 months. The fly in the ointment; is that in my case, there were two or three corrections. There were more but they came back into the channel so it worked out, but when it didn't, total disaster. ATTICUS explained it at the time, sort of. Something about accelerating volatility on the premium. I never understood that exactly, but the practical side was it WIPED YOU OUT, YOUR WHOLE ACCOUNT. You could be tootling along, happy as a lark with a doubled account, then whammo, in one day, EVERYTHING gets wiped out in an hour or two. In a market drop, things move too fast. Your left gasping like a fish out of water, the thing is running away from you so fast. Usually you have on an Iron Condor. I've thought about that often. If you could exit at the mid point of the channel, you might save something. Trouble is, psychologically it doesn't work out that way.
ATTICUS
I'm an old man. It is dark here at night. What the devil are you doing sitting at your computer on a Saturday night?
Thanks for the bull vertical and a bear vertical.
Both I presume debit spreads? I'll look it up, but not clear on that yet.
I am sort of getting the picture but not to the point it is natural yet. Like picking runs on the banjo, it takes a lot of practice. I certainly ADMIRE YOUR FACILITY and familiarity with all the intricacies and ins and outs of everything. I'll get there though.
WEBNICKELL If you are doing credit spreads, the only thing I can tell you, is CLEAR OFF YOUR PROFITS, at the end of the calendar month, and start fresh with your beginning account for the next month. One of those months are going to take all the money you got in speculation.
YIKES! Just delving into the Condor Verticals. Darn I feel so ignorant.
Don't know a darned thing.
___________________________
"The Condor Spread is an option strategy that is still confusing many option traders and option trading information websites. Almost 90% of the websites out there today (March 2007) still confused Condor Spreads with Iron Condor Spreads. Iron Condor Spreads are credit spreads while Condor Spreads are debit spreads. "
____________________________
Oooookay! The lower spread in the CONDOR is a debit spread. You sell the strike and buy the lower strike.
What the devil is the upper spread then? It says in the quoted paragraph above, that it should also be a debit spread. My looking at it, says it is a credit spread?
Which is it then?
Quote from falconview:
YIKES! Just delving into the Condor Verticals. Darn I feel so ignorant.
Don't know a darned thing.
___________________________
"The Condor Spread is an option strategy that is still confusing many option traders and option trading information websites. Almost 90% of the websites out there today (March 2007) still confused Condor Spreads with Iron Condor Spreads. Iron Condor Spreads are credit spreads while Condor Spreads are debit spreads. "
____________________________
Oooookay! The lower spread in the CONDOR is a debit spread. You sell the strike and buy the lower strike.
What the devil is the upper spread then? It says in the quoted paragraph above, that it should also be a debit spread. My looking at it, says it is a credit spread?
Which is it then?
Well I ordered one. Being international, it will take a few weeks, or months, to get here if it ever does. Not much luck with ordering books by international mail.
Did pretty well with my desktop the other week. Only took me ten days to get a mother board and power supply, to replace the one not working here. It ain't easy retiring in the third world, but it has it's compensations.
Traderlux
Since you understand the A.J. Brown long straddle. The one where one side runs, and the other side is a vertical as insurance. Please explain it to me. In the process you will learn it stronger and I will get an idea of what is involved from your viewpoint.
Appreciate it. Blind men, got to help each other mon!
Us novices got to stick together.
Quote from falconview:
Well I ordered one. Being international, it will take a few weeks, or months, to get here if it ever does. Not much luck with ordering books by international mail.
Did pretty well with my desktop the other week. Only took me ten days to get a mother board and power supply, to replace the one not working here. It ain't easy retiring in the third world, but it has it's compensations.
The motherboard was in-country, in a different small town district capital. Phoning around found it. Getting it delivered and paying for it were the complications. Nothing in computer parts available were in our local twin towns district capital. ( about 30,000 people )
For example, tomorrow Monday, have to make a journey in my pickup truck to the capital of the country called BELMOPAN. It is 25 miles away. The journey takes about 1 1/2 hours on a windy road. We don't measure distances by miles, but by time required to travel it. Got an appointment at the US Embassy Fortress in the capital, at 1 p.m. to renew my US passport, which expires in two weeks. Will leave home about 10.30 a.m. to 11 a.m. Expect to get back about 4 p.m. local time. Will have to put in a sell order in TOS before I leave for 3 options, if the opening Monday E Mini is encouraging.
______________________________
Been thinking about the JR BROWN straddle, using a long option and a bear debit spread.
I'm gonna think out loud here, because my knowledge of debit spreads is fairly zero. From my memory a debit spread is when you pay more for the bought side, than the sold side.
So you put on a Long Straddle and sit and wait for market movement. At some point ( I have a long straddle I'm sitting on for a week now doing nothing. Not moving enough)
At any rate, if the market starts to move strongly in one direction, you would sell the cheaper premium strike on the losing side. To make the losing bought option, a debit spread.
Now I'm trading QQQ. The QQQ premiums normally move .60 cents between strikes. Weekly ATR is around 1.20 strikes to 1.5 strikes in a higher VIX environment. My price targets are usually .80 cents and 1.15 cents to sell for a move. There is a .10 cent commission for each side round turn. I can on the moving side either clear net profit, .70 cents, or $1.05, if I'm wanting to wait for the longer move. At some point if I take the losing premium and sell the cheaper strike, making a debit spread, that should lessen the odds of the price paid for the premium overall on the losing side. How much I don't know, but something?
The losing side only has to swing one strike, versus the preferred side you thought would run further, before reaching the cap on a debit spread. Would run 1.5 strikes. There is .60 cents to play with here, of which .20 cents would cover the spread round turn commissions. So I need .40 cents or as close to it as I can get, when selling the cheaper premium to turn the expected losing long option into a debit spread. Market movement fluctuates, so I will either make a net of $1.05 on my chosen running side, less the cost of the debit spread. I see the insurance aspects of this trade, you will win either way, if the market moves in one week, 1 strike on the debit spread side, a small amount I expect? On the side you expect to run, you would make less, eventually if you wait. And or be left over with a long option.
JR Brown says you can leg out of the side that did not work. Not sure how you would do that? Wait for market fluctuation I guess?
Just thinking out loud here. Talking to myself.
I think I got the initials wrong. I believe it is A J Brown. He sells a course.
The original claim he made was some years ago, but cannot find that website again. Must have deleted it? Sorry about that.
Monday morning, bright and early. The jungle birds around the trees in this house, like to wake up and start chatting around 4:30 a.m. By 5 a.m. it is impossible to sleep for the ruckus. Some of them are very very loud.
I've picked out my CONDOR picks: APOL, WAG, LEN, MON, RMX.TO and QQQ. Did that Sunday afternoon. Got to look them up on charts and wait until market opens, which for me in my time zone is 7:30 a.m. That is the early morning chore, or one of them. Can't do anything before market opens though. Need the option chain.
To review what little I know about CONDORS. Think I have the difference between an IRON CONDOR and the CONDOR now in my mind clearly. The iron condor is composed of two credit spreads with CALLS on one side and PUTS on the other side. The CONDOR is either two call spreads, or two put spreads. ATTICUS tells me this is a BULL spread and Bear Spread setup. I haven't got it clear yet, but when I get the prices in an hour and a half, I believe I will find one is a credit spread, the other a debit spread. Not sure on that point yet.
My half straddle in which I am now holding 3 option contracts, that I want to break even, will depend on market direction today. Take a look at the E MINI about 7 a.m. local time. Am holding a Long Straddle. Ran across an interesting recommendation on the internet, which was to do what I am doing, using 90 to 120 away contracts. 3 to 4 months out. I am using 2nd, or 3rd month contracts, and certainly I agree with the use of 3 rd month contracts. Mostly because of the slow time involved with LONG STRADDLES, which can take a week to make a profit, but take up to 3 weeks to break even on the losing side. Time decay being the reason. Before you can close the trade completely.
I do have it in mind, that any side of a proposed WEEKLY CONDOR that has less than .15 cents credit is to be discarded. According to the recommendations on here, by you regular players. I'm not sure what kind of spread I would be left with, but think I can figure it out later. Thats my pre-morning work up, set, now I think I will go and do email. Helps me DON to think out loud and put my thoughts down in writing. BEFORE you complain. Just having fun with you.
Quote from falconview:
Monday morning, bright and early. The jungle birds around the trees in this house, like to wake up and start chatting around 4:30 a.m. By 5 a.m. it is impossible to sleep for the ruckus. Some of them are very very loud.
I've picked out my CONDOR picks: APOL, WAG, LEN, MON, RMX.TO and QQQ. Did that Sunday afternoon. Got to look them up on charts and wait until market opens, which for me in my time zone is 7:30 a.m. That is the early morning chore, or one of them. Can't do anything before market opens though. Need the option chain.
To review what little I know about CONDORS. Think I have the difference between an IRON CONDOR and the CONDOR now in my mind clearly. The iron condor is composed of two credit spreads with CALLS on one side and PUTS on the other side. The CONDOR is either two call spreads, or two put spreads. ATTICUS tells me this is a BULL spread and Bear Spread setup. I haven't got it clear yet, but when I get the prices in an hour and a half, I believe I will find one is a credit spread, the other a debit spread. Not sure on that point yet.
My half straddle in which I am now holding 3 option contracts, that I want to break even, will depend on market direction today. Take a look at the E MINI about 7 a.m. local time. Am holding a Long Straddle. Ran across an interesting recommendation on the internet, which was to do what I am doing, using 90 to 120 away contracts. 3 to 4 months out. I am using 2nd, or 3rd month contracts, and certainly I agree with the use of 3 rd month contracts. Mostly because of the slow time involved with LONG STRADDLES, which can take a week to make a profit, but take up to 3 weeks to break even on the losing side. Time decay being the reason. Before you can close the trade completely.
I do have it in mind, that any side of a proposed WEEKLY CONDOR that has less than .15 cents credit is to be discarded. According to the recommendations on here, by you regular players. I'm not sure what kind of spread I would be left with, but think I can figure it out later. Thats my pre-morning work up, set, now I think I will go and do email. Helps me DON to think out loud and put my thoughts down in writing. BEFORE you complain.
Tsk Tsk
"why would you discard a credit less than 15 cents? That depends entirely on context, the underlyer and the multiplier. Also, usually the less premium you take in the less risk there is of your option being hit..."
You got me there. I don't know! I was just refreshing my memory from the couple of people that said they wouldn't trade a few cents in one of the Condor spreads. Haven't thought it out yet. Didn't even know I had to?
Well I was running the CONDOR preliminaries.
QQQ 64, 6, 62, 61
APOL 35, 34, 33, 32
WAG 33, 32, 31, 30
LEN 27, 26, 25, 24
MON 80, 79, 78, 77
rmx.to 3.50, 3.25, 3.00, 2.75
These might not be the right strikes. Haven't looked at the option chain yet. Market hasn't opened yet, and just done the charts.
Quote from falconview:
Tsk Tsk
"why would you discard a credit less than 15 cents? That depends entirely on context, the underlyer and the multiplier. Also, usually the less premium you take in the less risk there is of your option being hit..."
You got me there. I don't know! I was just refreshing my memory from the couple of people that said they wouldn't trade a few cents in one of the Condor spreads. Haven't thought it out yet. Didn't even know I had to?
oKAAY! I trust ATTICUS advice, so if he says no it is no! On the 15 cents query. I'm a stupid novice trying to learn this stuff. I don't even know enough to ask a proper question yet. Trial and Error.
Well , my choices of WAG LEN, MON, got knocked out of the ratings. No weekly optins. RMX.to got knocked out also, as it had no options.
Leaving me for the weekly. QQQ and APOL condors.
QQQ buy 64 at .20, sell 63 at .54, sell 62 at 1.16, buy 61 at 1.97
APOL buy 35 at .13, sell 34 at .24, sell 33 at .59, buy 32 at 1.35
These would be paper trades. I'm just trying to learn this stuff and estimate the next Thursday, or Friday strikes.
_________________________________
I'm a bit laborious with the calculations.
QQQ comes out for a debit of (-.47 cents)
APOL comes out for a debit of ( -.65 cents )
That looks about right to me? Need debits, because will buy it back cheaper in 3 to 5 days. If I have that right?
_______________________________
Nothing moving with my Long Straddle cash stuff. Think I will put in my sell order for 3 contracts of the 60 half straddle puts I'm holding. As I need to close down and get a shower and prep for my expedition to Fortress USA Embassy in the capital Belmopan.
Re the question on 3 or 4 month out Long Straddles.
I believe you mentioned they can be slow movers. I KNOW they are most of the time.
I estimate holding the parts of a LONG STRADDLE for as long as 5 weeks, to close off just the one trade. The losing side is the one takes the long time to adjust and get out of without a loss. Therefore I need the TIME to let it work.
The monthly bar, runs about 5 to 7 strikes in the
QQQ. If I can get the break even, far enough away from the high or low of the monthly bar, in the center someplace, then given TIME say about 5 weeks in a worst case scenario, I should be able to close the trade with no loss. My GOAL is to have WINS but no LOSSES. IF I can make that happen, then the system is great. Remains to be seen. I can see me sometime getting caught in a long bull trend, which would force me to take a loss.
The sun is setting and I'm back at my computer. Monday evening.
Didn't have time this morning, but did want to discuss the condor Apol
with ATTICUS.
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APOL CONDOR CALLS
buy 35 @ .13
sell 34 @ .24 gives a credit of + .11 cents
I believe this top thread is a credit spread in the Condor and apparently if I use the recommended .15 credit rule, should not make it?
The bottom part of the condor was:
sell 33 @ .59
buy 32 for 1.35 So I end up with a debit of -.76 cents
I thought about this a bit this morning, but lacked the time to mess with it in detail, needed for this novice. Had to travel. The proper way to do this trade would have been just a lower debit spread and forget the upper credit spread part of the Condor? I think I'm right, and since this is paper trading practice will just chop off the upper credit spread of this APOL Condor and see how it works out. Be nice to get it confirmed though. See if my learning is taking hold? I would call this a condor NUANCE, OR TRICK maybe.
Quote from falconview:
My GOAL is to have WINS but no LOSSES.
Quote from falconview:
The sun is setting and I'm back at my computer. Monday evening.
Didn't have time this morning, but did want to discuss the condor Apol
with ATTICUS.
____________________________________
APOL CONDOR CALLS
buy 35 @ .13
sell 34 @ .24 gives a credit of + .11 cents
I believe this top thread is a credit spread in the Condor and apparently if I use the recommended .15 credit rule, should not make it?
The bottom part of the condor was:
sell 33 @ .59
buy 32 for 1.35 So I end up with a debit of -.76 cents
I thought about this a bit this morning, but lacked the time to mess with it in detail, needed for this novice. Had to travel. The proper way to do this trade would have been just a lower debit spread and forget the upper credit spread part of the Condor? I think I'm right, and since this is paper trading practice will just chop off the upper credit spread of this APOL Condor and see how it works out. Be nice to get it confirmed though. See if my learning is taking hold? I would call this a condor NUANCE, OR TRICK maybe.
diaoptions - cute! I thought I would have got more feedback, good or bad, mostly expected bad, but your reply was perfect.
Here is one for you this Tuesday morning early. Whats the difference between a NOVICE, amateur, or professional option trader?
I was thinking a novice is somebody like me, stupid, knows a little bit, but not enough to really count. As reflected in the account balance. ( - 27% )
An amateur would be somebody who knows a lot about options intellectually, but whose account cannot stay profitable through a year of trading options.
A professional option trader would gross at least $150,000 a year profit.
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Aiiyyy! Yiiii! ATTICUS my friend has a habit of throwing curve balls at me. Straining the grey matter. I was feeling really great now realizing that a condor was a credit spread and a debit spread. Then I looked at the credit spread and thought what the heck, I need .20 cents commissions in TOS to do that. So I would need .40 cents credit just to put that half of the condor. It delighted me no end, to figure out that this is the FIRST time ever, I saw a debit spread make money. I always thought of a debit spread, as the index passing through it, and had never actually made any money with one after commissions. But this is a new way of doing a debit spread collecting time decay on a weekly. GREAT IDEA and have some research now to do, for a method of finding the market conditions to use one. I have an idea, but going to have to trial and error it.
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ATTICUS contributions are most often profound. I find myself floundering around trying to understand his point. The most recent, for which I thank him, I'm still scratching my head. NEEDS THE DEBIT AT LEAST 25% UNDER THE NET DEBIT OF THE VERTICAL.
I take it that means the total debit of both spreads in the CONDOR vs the debit of the Vertical alone.
Quote from falconview:
diaoptions - cute! I thought I would have got more feedback, good or bad, mostly expected bad, but your reply was perfect.
Here is one for you this Tuesday morning early. Whats the difference between a NOVICE, amateur, or professional option trader?
I was thinking a novice is somebody like me, stupid, knows a little bit, but not enough to really count. As reflected in the account balance. ( - 27% )
An amateur would be somebody who knows a lot about options intellectually, but whose account cannot stay profitable through a year of trading options.
A professional option trader would gross at least $150,000 a year profit.
____________________________
Aiiyyy! Yiiii! ATTICUS my friend has a habit of throwing curve balls at me. Straining the grey matter. I was feeling really great now realizing that a condor was a credit spread and a debit spread. Then I looked at the credit spread and thought what the heck, I need .20 cents commissions in TOS to do that. So I would need .40 cents credit just to put that half of the condor. It delighted me no end, to figure out that this is the FIRST time ever, I saw a debit spread make money. I always thought of a debit spread, as the index passing through it, and had never actually made any money with one after commissions. But this is a new way of doing a debit spread collecting time decay on a weekly. GREAT IDEA and have some research now to do, for a method of finding the market conditions to use one. I have an idea, but going to have to trial and error it.
___________________________________
ATTICUS contributions are most often profound. I find myself floundering around trying to understand his point. The most recent, for which I thank him, I'm still scratching my head. NEEDS THE DEBIT AT LEAST 25% UNDER THE NET DEBIT OF THE VERTICAL.
I take it that means the total debit of both spreads in the CONDOR vs the debit of the Vertical alone.
Webicknell NOVICE ROLLCALL
Okay on the credit spreads. When they work they work well. EXITING when they work bad is the problem.
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I added 1- 63 Sept CALL at $3.09
Sort of to hedge against my old straddle holdovers, 3 contracts at 60 QQQ at $2.13 B/E. I'm looking to add some very cheap OTM 60 PUTS to that half straddle I'm holding, but around QQQ 65 strike. This market seems poised to go up. I was looking at a bunch of major players and they are all showing UP tendencies.
My LONG STRADDLE, needs another .80 cents or so, before I cash in the winning side. Want about $4.47 as a price target for the 62 QQQ straddle.
SOLD 1 August 62 Call from Long Straddle, for .80 cents, leaving + $70 net profit, after subtracting .10 cents for round turn commission.
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1) NOW HOLDING 3 QQQ 60 PUTS from an earlier Long Straddle at a Breakeven at $2.02. Including 2 PUTS used as adjustments.
2) HOLDING 1 QQQ PUT September -62- at $3.22 Breakeven. Remains of Sept. -62- 1/2 Long straddle
3) HOLDING 1 QQQ 63 Sept. CALL @ $3.09/
Quote from falconview:
SOLD 1 August 62 Call from Long Straddle, for .80 cents, leaving + $70 net profit, after subtracting .10 cents for round turn commission.
_____________________________________
1) NOW HOLDING 3 QQQ 60 PUTS from an earlier Long Straddle at a Breakeven at $2.02. Including 2 PUTS used as adjustments.
2) HOLDING 1 QQQ PUT September -62- at $3.22 Breakeven. Remains of Sept. -62- 1/2 Long straddle
3) HOLDING 1 QQQ 63 Sept. CALL @ $3.09/
Hahhh! Hahhhh! Gotcha. Will have to look that word up.
Added a long straddle
1 64 Long Straddle, at $5.14, or $2.57 each for put, or call.
_________________________________
I have a feeling we are approaching the top of the monthly bar. Around strike 65, or 66 in the QQQ?
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Yup! It is a bit difficult trying to keep up with the adjustments on the previous losing side of the Long Straddle. There are moments I myself doubt it will come out okay. However, it's my idea and will see it through. Could take 5 to 6 weeks? I've been working on tweaking the adjustments, by cash prices of premiums, rather than index numbers. Running various scenarios. This taking a long time, to work out, is a bit aggravating, but HEY if it finally works and makes me steady money. Could live with that.
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1) NOW HOLDING 3 QQQ 60 PUTS from an earlier Long Straddle at a Breakeven at $2.02. Including 2 PUTS used as adjustments. I plan to add more, if given the opportunity by market movement.
2) HOLDING 1 QQQ PUT September -62- at $3.22 Breakeven. Remains of Sept. -62- 1/2 Long straddle
3) HOLDING 1 QQQ 63 Sept. CALL @ $3.09/
4) HOLDING 1 QQQ 64 Sept. long straddle, put and call @ $5.14/ 2.57/2.57
__________________________________
In 1 and 2, I'm overexposed to PUTS. I figure the monthly bar will peak and reverse before the end of this month.
___________________________________
I sort of expect the QQQ monthly bar will hit the high between strike 65 and strike 66. Whatever it does, will not matter really. I just go with the flow. EBB AND FLOW TRADING.
I wasn't putting you down in the least. You leave out a lot of pertinent info that leaves it impossible to account for what's happening. Thanks.
We are friends Atticus. At least I look at it that way. No problema! You are not offending me.
If you really want order details, could do it by private email. I'm just summing up the results of the orders outstanding on here. There is only one or two fine details of entry, or exit I might discuss, that is not on here in the public forum. I doubt they would add anything to your knowledge that isn't already on here.
The whole theory relies on my being able to work the average balance toward the breakeven. On the losing side and I haven't got enough trades yet, to say whether it works or not. Next three weeks should show that one way or another. I'm just averaging down.
CAN AVERAGING DOWN USING THE MONTHLY BAR CHART, WORK AS A VIABLE PROFITABLE TRADING STRATEGY USING OPTIONS?
I'm trying it, but curious what others might think?
Quote from falconview:
CAN AVERAGING DOWN USING THE MONTHLY BAR CHART, WORK AS A VIABLE PROFITABLE TRADING STRATEGY USING OPTIONS?
I'm trying it, but curious what others might think?
Quote from falconview:
We are friends Atticus. At least I look at it that way. No problema! You are not offending me.
If you really want order details, could do it by private email. I'm just summing up the results of the orders outstanding on here. There is only one or two fine details of entry, or exit I might discuss, that is not on here in the public forum. I doubt they would add anything to your knowledge that isn't already on here.
The whole theory relies on my being able to work the average balance toward the breakeven. On the losing side and I haven't got enough trades yet, to say whether it works or not. Next three weeks should show that one way or another. I'm just averaging down.
Well the only question in my mind is the averaging, on the losing side. The accumulation of long options as you average. I've read up this morning a bit about it. People are all over the place as far as opinions.
The difficulty is in pin pointing the high, or low of the monthly bar. There is a problem averaging, if you go on too long in a trend. I'm watching my 60 PUTS accumulation right now with trepidation. This one is the real test. There is an edge, so to speak; in that I don't have to make a profit on this leg. I only have to break even, to keep the profits from the other winning side of the straddle. The other thing is to keep my spacing wide enough to stay within my ability of capital to do averaging. I'm allowing three trades, per monthly bar for averaging. Doubling up each time. I've done the arithmetic and that seems the best performer for averaging. The other blessing is that the further OTM you go, the cheaper the options get. I think I am going to be able to stay under $1000 total with this averaging leg. With the goal, solely of hitting breakeven at some point in a five week period.
_______________________________
I ran across this trading method by somebody named ( whoops didn't write his name down ) Anyway the Elite trader post was 2 years old. Said it was successful, but he was scalping. I checked the scalping idea, but while that might work, it would put me into day trading possibilities, which is verboten by the Exchange. If I widen the gap, to two strikes, it would fit in a weekly trading format. At any rate, the guy says he buys options 5 strikes out the money, both puts and calls, then scalps. I did some figuring on paper with it. It didn't seem too far different than what I'm inventing, for the losing leg of a straddle. In his case, he said to trade, or scalp DOLLAR AMOUNTS and not contracts. I'm trying a paper trading on the idea to what happens, with this. Of course going against such an idea is that OTM, or the further out you go, the smaller the premium moves. Looking at the QQQ this moment, the 69 CALL is at .48 cents and you would need 2 strikes to get .78 cents. That would earn .30 cents. ( About a ten day swing ) On the PUTS the 5 strike OTM is much higher in premium at $1.48. I'm sure the difference between .48 cents and $1.48 in premiums for 5 strike, OTM CALLS and PUTS is telling me something about the expectation of the market, but I do not recognize what that premium differential is saying? At any rate, I was looking for confirmation of averaging the monthly bar would work, if not to make another profit, but at least reach a new breakeven closer into the market action. With the idea of solely closing the whole long straddle altogether, keeping the original profit. The stuff I have been reading is not conclusive enough. So it will have to be trial and error, with my real cash money.
____________________________________________
As to candidates for Selling. No I don't need them right at this minute. I'm working on using the CONDOR, or the Vertical Debit spread. That study was really educational for me. Especially the tidbits, or tricks that people put in. Presuming all goes well, the condor, or debit spread, and the Long straddle if it works out, would be the basic core of my new endeavors. It takes weeks to find out, but no longer have the pressure of having to make money on my account, as I missed my $10,000 breakeven June deadline and the next deadline is Xmas. I'm relaxed and if the debit spread works out as 1/2 a condor, will probably switch in a week or two to cash trades. Until I fail at the cash Long Straddle, plan to keep doing it. It is slow and mechanical almost.
I know averaging works, but if you get caught in a trend, it doesn't. I remember 35 years ago when trading stocks, keeping three dogs in a stock trading method and it took me 9 years to trade them to 20% profitability. We shall see on this monthly bar thingy if it will work out? I think if you had a GAPPING monthly bar though in a trend though, you would lose money.
Credit Spreads
Falcon, you opened this thread stating that you failed at credit spreads.... do you mind if I ask what "rules" you used to enter those trades....
I have been working credit spreads successfully for a few months now...
Only trade on items such as IWM, RUT, NDX, SPX, etc.
No more then 40 days to expirations
Delta of less then then 5... looking for less then 4.
I have been close a couple times (within 10% of ATM)... Try to be far enough out so I so not have to "adjust" or dump the trade...
Have added over 5% to my account using this over the last few months...
I have done a few other things such as Naked Puts and Covered Calls that I have not been so successful at.
Knock on wood... I reamin so lucky...
I did credit spreads at or 6 STRIKES OTM.
You can compound the available capital and increase your take. Double your account money in about 5 months. the occasional Iron Condors boost your take.
The problem is a BLACK SWAN EVENT. Quick market drop. Volatility and premiums go through the roof. Wipes you out. It happens so fast. Some years you get a lot of BLACK SWAN MOVES, or market drops.
There really isn't any use in using credit spreads. Unless you compound your account. The risk, reward ratio is so poor.
That opens you up to wipe out with a Black Swan event. Lot of people think they can beat the catastrophic losses that occur with a Black Swan event. Seems to happen to everybody. You build up a lovely account, double, or even triple your account, then WHAMMO!
atticus confusion
Looking up trade history, on the EBB AND FLOW METHOD.
Started not to long ago. With the 62 strike Long Straddle, then the 60 Long Straddle, then the 62 Long Straddle, then the 64 Long Straddle. As you can tell, I'm putting straddles every 2 QQQ strikes.
The only one CLOSED completely was the first one, the 62 long straddle.
Currently OPEN with the 60, the ( 2nd time) 62 and 64 long straddles still.
paper money trading
CONDORS
QQQ
Took a look at the progress on the weekly condors. QQQ after commissions ZERO. Needs to run into tomorrow. So would let it run.
APOL
Showing a profit after commissions of .17 cents
_________________________________
Interestingly enough, if I had done just the debit spread alone part. The QQQ would win .57 cents on the QQQ. It would win after commissions on APOL with .46 cents, and both trades as verticals could easily run into Friday for better profits, because the market is favorable. So will check tomorrow morning, Friday expiration.
Lesson learned: Calculate the CONDOR for an entry, but only actually trade the Vertical Debit spread. Pays more and cheaper on commissions. Plus your losses are only what you spent originally if you go wrong. Controlled loss, and a good return. Think next week I will trade this in cash?
Thursday before the close.
Sold 1 CALL 64 QQQ Sept @ $3.37 = $80 -$10 comm = +$70
This is half of the 64 long straddle, September. leaving me with;
1 PUT 64, QQQ Sept. @$2.57
______________________________
Current positions OPEN. Remains of 1/2 straddles.
1) Holding 3 QQQ PUTS -60- @2.02 breakeven
2) Holding 1 QQQ PUT Sept. -62- @$3.22 breakeven
3) Holding 1 QQQ PUT Sept. -63- @$3.09 "
4) Holding 1 QQQ CALL Sept. - 64- @$2.57 "
- ** Looking for a 62 Long Straddle tomorrow Friday morning.
Straddles are a very simple option position, but you - falconview - have turned this thread into a confusing mess. This thread should be no more than 10 posts, not the 700+ posts it is.
Quote from diaoptions:
Straddles are a very simple option position, but you - falconview - have turned this thread into a confusing mess. This thread should be no more than 10 posts, not the 700+ posts it is.
I think all strategies, are SIMPLE, if you stick to the academic book version. The people making money have learned some tricks to apply to standard strategies. I don't think the LONG STRADDLE is immune to this tricks business.
I am somewhat worried that I am now overexposed with 4 long 1/2 straddles, that need to be adjusted and got out of, at breakeven, or .25 cents less. ( Will still give me a profit on the trade ) I am thinking I will not buy anymore Long Straddles until I can start clearing up the leftover debris. Those 4 long losing 1/2 straddles. Plus I want to go on vacation. Clearing the decks would be helpful.
For diaoptions: My twist, or tricks I am trying here, is based on a 35 year old CLASSICAL OVERLAPPING STRADDLE STRATEGY. What I didn't like about it, was that you took a loss, when the trend turned. So I played around with it, and am trying to do it without a loss. I'm vulnerable to TIME DECAY and a market that goes dead, or goes into a LONG BULL TREND.
My uncertainties are reflected in that I don't have enough experimental trades, to establish some rules about adjusting the losing side to breakeven. So, being over exposed and a few other reasons ( I want to travel without a laptop ), I'm going to concentrate on seeing if I can prove out, the adjusting side of the method in real time, with real cash. The ancient OVERLAPPING long straddle, STRATEGY boasts 30% return a year. ( I'm not doing that one. ) Got my own variation, or trying to do so.
_________________________________
In the meantime have been looking for CONDOR stocks, for next week. I get a good one, might give it a try in CASH instead of paper trading. Still got some points to clear up on Condors, in my pea sized brain. Haven't got the understandings quite down yet, particularly involving tricks.
_________________________________
Since this is my thread, I kind of take liberties with explaining what I'm doing, for other NOVICES that read this stuff, like myself. It's nice to know you are not alone. The numbers of strategies in options are so many, it would be ( for me ) impossible to learn them all at a level of professionalism, that they would become instinctive.
I envy ATTICUS, he has it all down pat instinctively. Doesn't have to think about it in depth, just react. Plus he is making GOOD MONEY, which is always impressive, from someone who trades options. I am still chuckling over diaoptions moving cartoon. That was a really good one.
Okaaay! Going to quit for the week. Just got out of my two paper traded CONDORS in the QQQ and APOL. Both were winners, however you wanted to arrange them.
Far as I can tell, the trick is in finding a stock with options going to go sideways for a week. Get that trick down pat, and you have a money maker.
I've got a list of candidates. To check over and see. If not today, maybe on Monday.
Quote from falconview:
Okaaay! Going to quit for the week. Just got out of my two paper traded CONDORS in the QQQ and APOL. Both were winners, however you wanted to arrange them.
Far as I can tell, the trick is in finding a stock with options going to go sideways for a week. Get that trick down pat, and you have a money maker.
I've got a list of candidates. To check over and see. If not today, maybe on Monday.
Interesting comments and opinion. It leaves so much to the imagination. WHAT DIRECTIONAL type trades are your best money makers?
Quote from falconview:
Interesting comments and opinion. It leaves so much to the imagination. WHAT DIRECTIONAL type trades are your best money makers?
TBH, you get a lot of good advice on your various threads. The positions I recommended on the other thread (5 total) made 30% ROC on average. You tried for days to execute one or more on paper and couldn't do it. I hope you see how people can get frustrated.
atticus,
i don't post much, but try to keep up and read when i can. would you mind pointing me towards the thread where you posted these trades?
Quote from hoop121:
atticus,
i don't post much, but try to keep up and read when i can. would you mind pointing me towards the thread where you posted these trades?
Quote from falconview:
Interesting comments and opinion. It leaves so much to the imagination. WHAT DIRECTIONAL type trades are your best money makers?
Quote from atticus:
ATM long flies if you're bullish.
Bullish XYZ. Spot at $46.
Buy 45/50/55 fly or,
Bull 45/50 vertical
Quote from newguy05:
atticus, want to clarify above, using your example spot at $46, you are really buying 1 strike otm 45/50/55 flies right?
Quote from newguy05:
And if your underly price target is say 55, you would buy 50/55/60 flies(2 strikes otm) instead?
THANKYOU VERY MUCH ATTICUS FROM THE HEART. REAL THING!
____________________________________________________
"
ATM long flies if you're bullish. OTM long calendars if you're bearish. If you're right on direction you'll make very good ROC. If you refuse or can't accept a position that flips delta then go with verticals.
Bullish XYZ. Spot at $46.
Buy 45/50/55 fly or,
Bull 45/50 vertical
Bearish XYZ.
Bear 40/45 vertical or,
Bear 45/50 diagonal calendar or,
Buy 42/42 calendar
Buy 45/50 back-spread
You want to be short vol + long delta on bull moves as index vol correlates downstream to single names, put simply. You want to be long vol + short delta on bear moves for the index correlation.
You want to go into long straddles; then long flies; then single calls... you're fixated on the tool and not the job. The spread/combo is simply a tool. 90% of winning is being accurate on price (underlying) or vol. The advantage to vanilla options is that they're forgiving."
Long straddles are not forgiving. You see this large premium and can't wait to get shaken out of one leg profitably, but then you're sitting on a prayer OTM shot at 20 delta or less. You take a non-directional gamma trade and morph it into a hail mary. Odds are against the 20D generating enough deltas, and wtf are you exchanging something generating a few -deltas into a hail mary call? It's a cautionary tale -- it's textbook of what NOT to do. STOP BUYING THE F*CKING STRADDLES.
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OKAY I STOP WITH THE LONG STRADDLES. ( grin ) STILL GOT TO GET OUT OF MY FOUR HOLDING LONG option LEFTOVERS THOUGH. I was reading on the internet trying to find if anybody did DELTA NEUTRAL, LONG STRADDLE scalping, using long option in short month and long option in further month? Couldn't find anything out about it. Sort of to shift the trade into another month, with more TIME?
_________________________________
I'm beginning to understand the stuff you talk about now. THIS STUFF YOU POSTED ARE THE TRICKS OF AN EXPERIENCED LONG TERM TRADER, THAT GIVE MEANING TO WHAT YOU TRY TO ACCOMPLISH. IT'S GOING TO BE MY MANTRA!
Glad I (novice) got to the point I can follow along.
That said: was prepared this coming week, to do VERTICALS on BIDU, GMCR, NFLX and POT. I did it differently a bit. I started the Vertical, one strike above ATM. I believe it should work? The reason was, I didn't know how to do the expensive vertical from scratch, so just plotted the CONDOR and took the Vertical part. ( think I understand it now )I was very nervous about playing with the TOS platform with a vertical in my CASH account. In case I made a mistake. So opted to use a dormant web based paper money account, to place the trades for this week. I wanted to be sure I got the TOS platform entry and exits for VERTICALS right. Without costing me money. End of next week I should know. I think I got it right, but it took a bit of experimenting before I figured it out.
Been reading up on DEBIT VERTICALS, but can't seem to find anything that tells me, if the Vertical is above the index ( CALLS ) at implementation and the index moves up through it ( debit spread ITM ), if that is the scenario when you max your profit, in this case should it pass through the sold side and reaches the higher priced bought side. Do I get my max profit? It is a bit confusing on the profit question, because with a 'weekly' you are going through rapid TIME DECAY happening at the same time of market action. Though in retrospect, I am supposing it is TIME DECAY I am shooting for and hopefully, delaying any actual possibility hopefully, of the Vertical being penetrated through by the index. Wanting the index to stay in a tight range.
BEFORE I sign off this piece, I do want to say once again, how appreciative I personally am for the tricks and experience you have offered to me and us ( readers ) above. Worth their weight in GOLD that is. Time will tell of course. As a NOVICE, the shortcut on a steep learning curve is invaluable. You are to be congratulated. Very much so!
Quote from newguy05:
atticus, want to clarify above, using your example spot at $46, you are really buying 1 strike otm 45/50/55 flies right?
And if your underly price target is say 55, you would buy 50/55/60 flies(2 strikes otm) instead?
thanks
Quote from falconview:
BEFORE I sign off this piece, I do want to say once again, how appreciative I personally am for the tricks and experience you have offered to me and us ( readers ) above. Worth their weight in GOLD that is. Time will tell of course. As a NOVICE, the shortcut on a steep learning curve is invaluable. You are to be congratulated. Very much so!
Just checking in... hope Mr. Falcon and Atticus are doing well.
Are you still beating the simplicity of options to death you guys, LOL.
Ah, that's ok, no worries..... I smile when I read so much detail into such simple concepts.... I guess the actual "lightbulb" hasn't quite gone on yet... nothing negative meant, not at all.
Good for you Atticus....
And, hey, I am hoping to be in Reno for Hot August Nights with my brother in law (two 56 Chevy's and my Caddy) - any chance of coming down for dinner as previously discussed? Aug 7-11 I think, let me know.
Don
__________________
Don Bright (not an alias)
Bright Trading, LLC
http://www.stocktrading.com
Got a question?
I seem to remember something about being assigned a stock, if the sold side of a vertical, or other spread got penetrated. Is that still true as an assumption? I was pondering the recommendation, that the sold side of yours, should be OTM in a spread. Versus what apparently is a mistake on my part, doing four verticals ITM.
Hey diaoptions. I'm playing with new thread forum title. How about "Tips, tricks of successful traders!"
Are you a professional?
Quote from falconview:
Hey diaoptions.
Quote from falconview:
Are you a professional?
Thankyou for the link diaoptions. I read quite a few familiar names on there.
I got the impression there was a 1000 ways to lose your money.
I liked the part about different styles, particularly the sideways traders, vs directional traders. Made me think a bit.
There was a comment about some friends of someone with big money trader friends. Of course, the only ones to me that matter really are people who are trading their own money, not other peoples money.
There is a big difference between someone well capitilized, able to trade naked options for instance, than the small undercapitalized retail trader who is forced to use spreads ( margin limitations ) at an extra cost, to achieve the same results.
I found the comments on IB and TOS account services interesting.
I'm now officially two years into this. I would have to say Babu, Atticus and Don, have been the most helpful on the forums. I think I'm of the opinion as a small trader and not likely to get over $250,000 to trade, I want to concentrate on a niche type of trading. I'm certainly leaning toward Atticus style of sideways market trading, selling premium. I want to pass this stuff, if I can ever make regular money at it, on to my children and grandchildren. ( five children living ) and about 14 grandchildren, already young adults ), one grandchild. Teach them something they can be independent with. So far, no luck. But I am certainly having a lot of fun, and as a hobby it is not too expensive yet. I like making good friends, in a new field too. I'm the sort who keeps real friends for life.
I've had sporadic short periods working for a salary in life, but mostly have been an entrepreneur. All my kids are millionaires in assets, if not in cash. So, something must be working right.
Interestingly enough, I was startled the other day, when a Chinese friend here, was telling me his woes about developing some New York real estate for rentals. Apparently he already has some, but I think that stuff comes from a CLAN of some kind, sort of like my own extended family relationships. Anyway, he said there was lots of money in China within his own clan, for new things in the outside world. He was lamenting about the 65% tax they pay over there, which they are trying to beat. He was listening about option trading. At the moment we are just swapping small amounts of currencies privately, for family enterprises operational needs, in different countries.
It is certainly an interesting world out there. Having fun is the name of the game though. I think I will start a new forum. For the next few months at least, I have my course of option trading action chosen. Now I need to see if I can improve that small account balance. That after all, is the bottom line and measure of success.
I'm still puzzling over the Vertical Spread straddling the index, or stock. What I keep wondering is, do you get assigned, if the vertical goes into the money with the sold side of the spread? I believe it does, but not too sure. Just a niggardly little point I'm not sure of as novice. Insufficient knowledge, or experience to know.
Gap down this morning. I think it has more to go.
Anyway I was looking at my Vertical trade in Bidu done on Friday. bought the 110 and sold the 115.
Now I probably did this wrong? Should have straddled the stock price. Is what I'm getting from ATTICUS examples.
Even so, for learning purposes on Verticals for a novice, who knows nothing, it will have to do. I see with the market gap down, BIDU went up into the middle of the Vertical between the 110 and 115. Trying to get an idea if it maxes out in profit at the buy price I started with.
I checked the value. The trade started with a premium in calls of $3.15, and right now that the stock has jumped into the middle of the vertical the premium is worth less right now. At +$2.34. I guess, won't know until it hits the buy price. In the meantime, THETA is taking effect as am in a WEEKLY.
Just talking out loud here, as I'm a stupid novice who knows nothing about this. It is not at all instinctive knowledge yet. Got to figure it out in my bones.
Just doing some figuring. I had run a paper trading experiment in Long Straddles one time, and I have it in my mind, that it grossed 3% on the 3 strike move. Usually done with a bit of a volatility move thrown in.
What I don't remember is; if that 3% was before or after commissions. Commissions are going to cost you $20, so I was re-figuring this out and you would have to get a 7% or better gross return. Most of the time when you close a long straddle, it is because there has been some kind of volatility move.
I think that experiment would have to be repeated to find out what gross percentage return is possible on a long straddle trading. When you are in the position and just waiting for something to move the market enough.
Good luck with your quest
Quote from falconview:
Just doing some figuring. I had run a paper trading experiment in Long Straddles one time, and I have it in my mind, that it grossed 3% on the 3 strike move. Usually done with a bit of a volatility move thrown in.
What I don't remember is; if that 3% was before or after commissions. Commissions are going to cost you $20, so I was re-figuring this out and you would have to get a 7% or better gross return. Most of the time when you close a long straddle, it is because there has been some kind of volatility move.
I think that experiment would have to be repeated to find out what gross percentage return is possible on a long straddle trading. When you are in the position and just waiting for something to move the market enough.
Still cleaning up my leftover trades, doing Long Straddles. Losing more than I like. Account now down -32 %.
Switched to the web based paper trading stuff. I am obviously out of sync with things. AGAIN!
Been reading up on ATTICUS stuff. Very interesting. Going to give some of it a try, but in the TOS web based paper trading account.
Found a web site teaching a lot of what ATTICUS has talked about.
http://www.dailytheta.com/intermediate-courses.html
I've really had trouble wrapping my head around debit spreads though. Which I prefer to credit spreads, as the losses are less, just what you spent. Whereas credit spread losses can go exponential. That said, I've had real trouble trying to understand the nuances of using the debit spread as a theta earning strategy.
Did you get that book yet?
Quote from falconview:
Whereas credit spread losses can go exponential. That said, I've had real trouble trying to understand the nuances of using the debit spread as a theta earning strategy.
Tsk Tsk
On the book no! My friend in Washington D.C. emailed me he is coming down the 26th. So if he has got the book, it is probable he will bring it then. He usually brings me assorted books to read.
Atticus
Well okay on my bad use of the world exponential. I am just now after 3 weeks, getting my picture in my mind what the differences are between debit and credit spreads.
This week I had a Eureka moment and figured out how to handle the sold strike, etc. Got a clearer idea of the play involved.
I'm trying to build up a list of stocks, over $2 billion capitalization, with good WEEKLY option chains, that have enough premium to trade with OTM. That is going slower.
At least as far as debit and credit spreads, I am understanding the play now.
I can even glimmer or see the potential of a calendar, or even a diagonal. This stuff is all new concepts to me, but after I put it in a frame of mental reference, I'm getting the picture. I see now why Don Bright keeps saying all this stuff is simple. On the other hand, neither the butterfly or the condor seem simple, yet.
Was busy yesterday, my worker was short handed, and we are building a third floor addition, so lost most of my Monday unfortunately for trading stuff. Today Tuesday, I have to drive around buying building materials. GOOG seems to be working out as a trade, as I just checked at 4 a.m.
Closed two of my three leftover long straddle losing sides today. Both made a smidgen profit. One actually did quite good. Still holding a last one, a PUT that is a September. So it has time.
In review, it sort of looks like, doing LONG STRADDLES the way I was testing it would work, if I made the long straddles in 4 to 5 month out months. Then the losing side of the straddle was changed to a debit spread and just left for a month, to get hit. No hurry about it. When you use 2 month out long straddles, you just don't have enough time.
Quote from falconview:
Closed two of my ........ blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah ....... just don't have enough time.
Hey! You got a remote control. You don't like a tv program, you don't have to watch it.
Mods could you please ban falconview and close this thread?
Mods, also investigate if ForexForex is using multiple nicknames in violation of the TOS.
He Atticus!
I'm trying to understand that weekly GOOG debit spread this week. I've got something wrong here in my understanding? Can you explain it for me please?
I put on a DEBIT SPREAD in GOOG in TOS paper web based money on Monday.
Buy the 590
Sell the 595
On Monday for a $1.00.
Since I was collecting THETA I sort of understood, that my premium had to get smaller. Then buy back cheaper.
At any rate, the market ran away to the upside and I just closed it, for a profit. Think it went for $3.10. I thought it was losing money.
TURNS OUT I WAS WRONG, NOW I'M GOING TO HAVE TO CHANGE MY NOTES and assumptions. Would appreciate your technical explanation of where my misunderstanding was with this debit spread. According to my TOS account balance. Yeesh! I'm going to have to tear up my notes and make new ones in reverse.
____________________________________
diaoptions
Don't want to get into arguments with you. This is MY THREAD and it is for NOVICES like me, with technical assistance supplied by professional voluntary experts, acting as MENTORS.
There are dozens of threads on Elite Trader, it seems you would be happier if you found a thread you were interested in, more professional and suitable, where you are in trading knowledge and lore at your level of skills.
I have no patience with bullies, destroyers and such. People who get joy in tearing down things, or other people. I like builders, people who create and like to leave the world a better place for people.
I have no idea why you are even reading my thread. It certainly does not seem to be to help novices understand the classic option trading strategies? Why are you bothering me? In my seeking self education? Whatever your problem, why don't you go start your own thread for your own purposes? I haven't got the inclination, or desire to swap insults with you.
Quote from falconview the dipshit:
I'm trying to understand that weekly GOOG debit spread this week. I've got something wrong here in my understanding? Can you explain it for me please?
I put on a DEBIT SPREAD in GOOG in TOS paper web based money on Monday.
Buy the 590
Sell the 595
On Monday for a $1.00.
Since I was collecting THETA I sort of understood, that my premium had to get smaller. Then buy back cheaper.
Dia options.
Well that was a useful contribution. THANKYOU.! Gives me something to think about.
I call that useful techno stuff.
( grin ) Think you will miss me? I'm off on vacation this weekend, for an uncertain length of time. Traveling to the high sierras of colorful mountains and volcanoes, of the State of Chichicastenango in Guatemala. First goal is FUENTES GEORGINA'S HOT SPRINGS for a couple of nights. Located in a gorge on Volcano Zunil. ( it's on the web ) Lovely pine forests, indian villages at an altitude of 10,000 feet thereabouts. The loveliest lake in the world, Lake Atitlan. Georgeous mountain and volcano scenery.
Will take up trading again when I get back. Chou buddy!
Quote from diaoptions:
Dipshit ..... You are not collecting theta with a debt spread.
Quote from atticus:
XYZ at 100.
Is the 80/90 bull call spread + or - theta?
While my thread might be titled trading long straddles.
For now, I shall be concentrating on weekly VERTICAL DEBIT SPREADS.
Got back from my mountain holidays. Forgot just how cold high mountains can be, whether in Canada, or on the Equator. Brrrrrhhhh! Enough of that for sure. Beautiful scenery, but mon, I like my warm eternal spring weather.
I have no idea. I'm a novice technical trader, losing money.
My trades just finished putting on.
wmb 29/30 at .66 cents - stock at 29.70
aapl 630/635 at .34 cents - stock at 606.37
qqq 63/64 at .47 cents - index at 63.04
___________________________________
This is only my second try, at getting the order entries correct and to see if I have the root idea of what I'm trying to do. So these trades are in the TOS web based paper trading platform. I am still not totally comfortable, or clear about what is going on, with this.
_____________________________________________
Now, I have bank to go to, some shopping at the hardware store, post office and later a long trip to the lumber yard to buy some supplies. Not going to watch these anymore today. Chou!
ATTICUS
I do have a question? One of my three debit spreads, WMB 29/30 went above the 30 strike briefly today. The question in my mind,would be would that have triggered ASSIGNMENT the stock?
I'm not clear on that point, and the web based TOS paper trading probably would not show that either, I imagine. It is something I should be aware of though.
Quote from falconview:
ATTICUS
I do have a question? One of my three debit spreads, WMB 29/30 went above the 30 strike briefly today. The question in my mind,would be would that have triggered ASSIGNMENT the stock?
I'm not clear on that point, and the web based TOS paper trading probably would not show that either, I imagine. It is something I should be aware of though.
Of course! I'm a novice. Lots and lots of questions novices don't even know enough to ask the right question many times.
Quote from falconview:
Of course! I'm a novice. Lots and lots of questions novices don't even know enough to ask the right question many times.
Thanks Traderlux.
I do really appreciate people with a positive mind set, instead of this harass, insult and negative stuff. Warped minds I guess? At any rate, got you marked as a very nice guy, the kind of guy I WANT to associate with. Much obliged.
I had in the back of my mind, that if the stock goes .25 cents over the sold option price, it is assigned. The part that I was not clear on, was if it happened during the day and market hours, or if it happened after the market closed and the stock was above the SOLD side of a spread. I thought I could get a quick piece of information, without having to wade through a lot of stuff, from somebody more versed with this?
Just read your link TRADERLUX. Thankyou for the link. Some new factors I absorbed. I guess I was trying to fathom, at what point would I close the position, if the stock price approached the short sold side of a debit spread, which I'm learning and practicing with right now. I was trying to establish a rule on the trade, of if and when, to close the debit spread, as the stock approached the sold side.
I'm not at all comfortable yet about what to do, in a debit spread if the sold side is approached by the stock. Certainly I can see I might likely be holding too many contracts for my cash and margin requirements, so that I will hold in mind. I suppose for safety sake, if the stock pushes through the sold side of the debit spread, I would best to take a loss and close the trade? THAT I EXPECT WOULD BE THE BEST RULE TO MAKE?
Quote from falconview the dimwit:
Thanks Traderlux.
I do really appreciate people with a positive mind set, instead of this harass, insult and negative stuff. Warped minds I guess? At any rate, got you marked as a very nice guy, the kind of guy I WANT to associate with. Much obliged.
I had in the back of my mind, that if the stock goes .25 cents over the sold option price, it is assigned. The part that I was not clear on, was if it happened during the day and market hours, or if it happened after the market closed and the stock was above the SOLD side of a spread. I thought I could get a quick piece of information, without having to wade through a lot of stuff, from somebody more versed with this?
Quote from falconview:
Just read your link TRADERLUX. I suppose for safety sake, if the stock pushes through the sold side of the debit spread, I would best to take a loss and close the trade? THAT I EXPECT WOULD BE THE BEST RULE TO MAKE?
falcon,
lets back up a step here. you want to do debit spreads, do you have the basics down?
they can be bull, with calls, or bear, with puts.
to start you need a directional outlook.
if bull, you buy a call and sell a higher strike call, which because it is a higher strike it is less expensive than the call you bought,
so overall you are at a debit trade position.
this is the most you can lose on the trade.
the most you can make is the difference between the strikes, minus the original debit, IF the trade goes in your direction, up in stock price.
what a debit spread does is lower the cost of the trade, than if you just bought a call by itself, for this lower entry cost, now your gain is capped.
so yes you now have the obligation of that short call which can be exersized against you, but you have the long call as well, and as pointed out, if the short call goes in the money, the spread might be at max profit, and could be closed out.
also, you know a debit spread must be closed out to get any gain, or to avoid max loss.
there are a lot more considerations, but this gets us on the same page.
Both you guys, the nice one and the rude one. Thanks for the comeback. I had more or less just figured that out as well.
My trouble was, I came back from vacation, sick as a dog and not feeling too well. Got diagnosed with a tumor on a lymph gland node. Lot of pain. But wanted to put on trades for this past week. In review, watching it during this week, I noticed I had placed my debit spreads straddling the stock prices. This gave me too early results with market action. I should have seen it and realized it and I apologize. I didn't for whatever reasons. I have however, now got it fixed in my mind, that I would make the debit spread, one strike away from the stock price, or index action. Which will hopefully give the results I want. One more week of this and should have it figured properly.
Going to give it a go again tomorrow Friday. See if I can find any candidates to trade for next week. Of my three paper trades this past week, two are making money via time decay and one is losing. I'm going to let them expire and see how that works out. Find out the rules there by practice. You can learn that way, by trial and error. My thinking isn't too straight right now. Too many pain pills.
MUCH OBLIGED FELLAS, for caring and sharing!
Well Thursday before the close. Have to admit I was not on the computer much this week, and just reviewing, two of my debit spreads were beyond their sold prices. Think the QQQ was at 65 strike and the WMB was at 31 strike. Should have been closed at 30 strike WMB and 64 strike for the QQQ.
Consequently in the TOS PAPER TRADING ACCOUNT, these are not showing any assignment. Guess they don't do that in the paper trading account? So these two trades are showing profits, more than they should. Closed them.
But now have a reminder for myself, that when I make a debit spread, MUST watch that SOLD strike and close the debit spread when it approaches there. Otherwise I'm going to get a FALSE sense of money making, the way the TOS paper trading system works. The market went another strike further in each of the two cases and it looks like I am making more money than I would in the real world of trading money. At least thats the way I understand it right now.
Going to browse the stocks and see if anything there likely for a trade starting tomorrow. Try my reviewed and hopefully corrected way I have to do this, for next week.
there are several stratgies for every situation... its a way you expresss yourself.. if you feel volatility is being priced to highly you figure out a limited risk way to sell it.. like a butterfly.. which is basically a straddle with wing protection... plus you don't have near the margin requirement and the finanical risk is so much reduced.. you can't just rule out other types of strategies and say "i'm going to try trading straddles" Your basically sort of trotting along trying strategies and when they don't work you move on to the next.. ratio writes, backspreads... there are so many ways to express the way your thinking of trading right now with so many different risk profiles.. if your not delta hedging on a continuous time basis (which is near impossible) you can't hedge the short or long straddle for huge draw downs.
Thanks for the inputs this Saturday morning.
Put 5 debit spreads on, different stocks. It wasn't the way I planned, but seems to be evolving that way. Reminds me of the guy who said he was doing alright trading OTM debit spreads on stocks. I seem to be defaulting by accident to his system of trading. We shall see?
July 23
Got some big market movers the rest of this week. Wonder which way the market will go.
Still learning how to trade debit spreads and figure it with timing the market in paper money. Not yet ready to jump into cash trade with them yet.
Quote from falconview:
Still learning how to trade debit spreads and figure it with timing the market in paper money. Not yet ready to jump into cash trade with them yet.
Quote from traderlux:
aug 560/565 call bull debit spread, cost $440 (max risk), max return $60, 14% return, 3wks, 20 price points of cushion, 3.5%
Quote from cdcaveman:
wait.. this is a debit spread.. where is the max gain at? what happens when aapl is at 600 and both expire deep in the money and the spread to get out is wide?
Quote from cdcaveman:
wait.. this is a debit spread.. where is the max gain at? what happens when aapl is at 600 and both expire deep in the money and the spread to get out is wide?
Traderlux
Thanks for chiming in!
I'm not really following this? If I was to do a call debit spread right now with AAPL at 597, I would buy the 600/620, I theenk?
You are saying you are going further out the money?
To the 560/565.
You kind of seem to be saying, and I may not read this right, or understand it. You are figuring for an OTM credit spread and then doing a sort of Condor trade, but way out the money. Expecting to collect time decay on the August options. With a debit spread and credit spread combo. Which is a condor, though I just thought a condor was done around current market price? In reflection, there seems no way to object to doing one out the money like that? Something new to me. You are really looking to protect the credit spread apparently with the debit spread? Though I'm not savvy enough to figure that one out. With two weeks to go for expiration, and if it works out like you say, it would be something to watch out for regularly. Either way you are going to pay your commission costs, or make $500?
I'm in paper money trading right now anyway, I'll give it a try, to see if I can learn it by osmosis, hands on. ( grin )
Well I looked at the trade and when I tried entering a condor, the credit spread was closer to the price action and I didn't like that. I was trying to get the credit spread one strike away more, from the price action. Still learning how to do this order entry stuff. Anyway, I ended up with a debit spread 560/565 in August OTM for -$4.50. and a credit spread 560/565 in August OTM for +$4.50. Two weeks to expiry, something should happen but I don't exactly know what?
Fortunately this is paper money in TOS and we shall see? APPL PRICES SURE JUMP AROUND.
The regular debit spread from a timing viewpoint, looks good, which would be the 600/605. Let me see what I can do with that?
OKAY! I got that one as a debit, 600/605 Aug @ - 1.75
Looking at the debit and credit combo both at $4.50 it sort of looks to me you would break even less commission costs?
Quote from falconview:
Traderlux
Thanks for chiming in!
I'm not really following this? If I was to do a call debit spread right now with AAPL at 597, I would buy the 600/620, I theenk?
You are saying you are going further out the money?
To the 560/565.
You kind of seem to be saying, and I may not read this right, or understand it. You are figuring for an OTM credit spread and then doing a sort of Condor trade, but way out the money. Expecting to collect time decay on the August options. With a debit spread and credit spread combo. Which is a condor, though I just thought a condor was done around current market price? In reflection, there seems no way to object to doing one out the money like that? Something new to me. You are really looking to protect the credit spread apparently with the debit spread? Though I'm not savvy enough to figure that one out. With two weeks to go for expiration, and if it works out like you say, it would be something to watch out for regularly. Either way you are going to pay your commission costs, or make $500?
I'm in paper money trading right now anyway, I'll give it a try, to see if I can learn it by osmosis, hands on. ( grin )
Quote from falconview:
Well I looked at the trade and when I tried entering a condor, the credit spread was closer to the price action and I didn't like that. I was trying to get the credit spread one strike away more, from the price action. Still learning how to do this order entry stuff. Anyway, I ended up with a debit spread 560/565 in August OTM for -$4.50. and a credit spread 560/565 in August OTM for +$4.50. Two weeks to expiry, something should happen but I don't exactly know what?
Fortunately this is paper money in TOS and we shall see? APPL PRICES SURE JUMP AROUND.
The regular debit spread from a timing viewpoint, looks good, which would be the 600/605. Let me see what I can do with that?
OKAY! I got that one as a debit, 600/605 Aug @ - 1.75
Looking at the debit and credit combo both at $4.50 it sort of looks to me you would break even less commission costs?
Traderlux
I think I goofed? In re-reading my order entries, it looks like, instead of doing a debit spread otm, and a credit spread otm. I ended up making two seperate debit spreads. Oooh well! I give up for today on this one. Got too many trades too follow now anyway.
I had started with last week:
CSCO Call 17/18
DVN Call 60/62.25
ETP CALL 47.50/50
twc 87.50/90 call
WMT 72.50/75 CALL
QQQ CALL 63/64
The QQQ and the WMT made something, but I was not keeping my balance in TOS and so know it wasn't much. I'm still positive though.
Going to have to mark my TOS paper trading balance down.
Looking at it in the Vertical Debit Spread calculator, what I end up getting and what I expected are two different things. The commissions seem to eat up nearly half the profit? I'm out of WMT and QQQ for last week. But my TIMING seems to be lacking for the rest? Was working on that over the weekend.
I've now added:
UPL PUT 23/22 Sept.
5 QQQ Calls 66/67 ( trying out a new timing idea )
1 AAPL Call debit 600/605
and apparently in error I have now made two OTM debits in AAPL for 560/565
All of the above are DEBIT SPREADS.
TIMING seems to be my weak point right now. Nice though, you can just sit on debit spreads anyway, even when mistaken. I've moved to September month this morning.
Quote from traderlux:
falcon,
those are 2 separate trades, i just wanted to compare a similar risk debit spread with a credit spread.
i have given up on considering anything except verticals, debit or credit.
condors, flys, straddles, strangles, calendars, diagonals for me are just to complicated for the returns you can get and the hassle of fighting bid/ask spreads on multiple options getting into the trades and then again trying to exit.
Quote from Put_Master:
I couldn't agree more.
Sometimes I think investors try those other strategies for the simple reason that they are available,... as they tend to look better in "theory" than they tend to work out in 'reality".
And even a basic verticle bull spread can get you in BIG trouble, if you use more contracts than you have cash to buy if things go bad,... as you then have eliminated any kind of plan "B" to use as a back up.
SInce you don't have the margin capacity to buy, due to excessive contracts, you can not buy all the stock(s) (PLAN "B") , and wait for a recovery.
Thus, your only choice is to close the trade for a loss.
Very tempting to sell more contracts than one has capacity to buy when doing credit spreads, as the alternative is to not utilize all of ones cash.
Or to only do spreads on single digit stocks.
Temptation has ruined many a spread trader.
Too easy to think that because ones potential loss is "limited" with spreads, that it's ok to tempt temptation, and sell more contracts than one has the capacity to actually buy... even with margin.
TIMING SYSTEMS
I started getting some forum emails. About debit spreads. The point about having too many contracts is a valid one. However, the guy who got me interested in them does it differently. He is trading 50 debit spreads at a time. Usually out with 9 month options. I can see where diversification would be an asset. I've got up to 8 debit spreads now, but still find it a bit overwhelming. Nor can I easily find candidates. I'm just getting used to trading stocks, and look up their earnings dates before I buy a debit spread. Don't want any unexpected surprises. TIMING seems to be the thing. But only got two weeks on it so that opinion has no foundation.
Still 50 debit spreads running at a time, should reward you well, without worrying about holding too many contracts of any one thing. I think it was Whispering Leaf that tuned me in? Then I've accidently evolved from being interested in the Condor, to just using the debit spread.
I'm thinking of starting to trade the indexes basically, instead of stocks, unless I can get my timing better than I am right now. That way, I figure if I can TIME the entries, I can increase the contracts a bit, to make it worthwhile.
Anybody got any favorite timing indicators or anything?
Re: TIMING SYSTEMS
Quote from falconview:
I started getting some forum emails. About debit spreads. The point about having too many contracts is a valid one. However, the guy who got me interested in them does it differently. He is trading 50 debit spreads at a time. Usually out with 9 month options.
Re: Re: TIMING SYSTEMS
Quote from diaoptions:
That must be danshirley http://www.elitetrader.com/vb/showt...threadid=225849
i don't like that thread... go journal in the journal area is what i say.. he isn't nice anyway.. plus he argues for the sake of arguing.. (as if he is trying to help yea right)
Re: TIMING SYSTEMS
Quote from falconview:
I'm thinking of starting to trade the indexes basically, instead of stocks, unless I can get my timing better than I am right now. That way, I figure if I can TIME the entries, I can increase the contracts a bit, to make it worthwhile.
Well I closed the APPL trade with a small profit. Then I got screwed up with my QQQ trade. Being in the habit of doing 1 contract, I closed one contract for a profit. but then I remember doing it in Sept instead of August and for 5 contracts. When I checked it was so. So went back and closed the other 4 contracts. By that time the price had dropped. For some reason I cannot find the trades I did with Traderlux, that I messed up. Supposed to be Aug debit spread 560/565 way out the money. They are not showing on my TOS platform. Have no idea what happened there? They don't show so I guess I didn't make them?
It gets confusing, when you look at the monitor, because they don't clear the trades until the next day. I'm still holding:
CSCO, DVN, ETP, TWC and a UPL put. Some of these are just flipping in and out of profitability with market action. Not enough to cover commissions which is $20. The paper trading lags the market prices by 20 minutes, so that makes it a questionable proposition. I'm getting some much needed practice though, with order entry and closing.
Okay! Added another trade. TLM Sept PUT 12/11 @.35 cents
Just ran it through the debit spread calculator. Maximum gain is $100
Figure $20 for commissions. Can possibly make $45 net.
Wish I had time to scroll through stocks, to find more candidates. But I've construction going on here in carpentry, with a young 16 year old apprentice. So I have to be on top of things with the carpentry.
Your getting raped in commissions is sounds like.... Figure this. .. At Interactive brokers i'm paying. 70 per conract.. With no base.. A three legged four option butterfly is costing me
4 contracts
2 long
2 short
4x. 70 2.80 cents boom i don't know your commisions but that math right there is what gives me the speculation that your getting killed in commissions.. Plus thats crazy that you can't see the trades in your portfolio right after they execute..? You have to wait till they clear that night to see them? No good
cdcaveman
Yup! But have to stick with them until I can get my equity back above $10,000 the minimum for IB brokers. Plus I'm a bit leery right now of learning a new platform.
Kind of made a mistake yesterday afternoon. Did a debit spread in puts on TLM without checking the earnings date. Turned out it was today before the opening. Just checked and there has been hardly any movement in price, so guess that trade is going to go okay? I hope?
PAAAH! Ughhhh! Had a .23 cent profit net on APA, but before I could figure out my order entries, it went south and ended up only with .08 cents net profit, in the debit spread. Sheesh!
Since I've been fiddling with my TIMING, think I'm going to try my luck with straight buying, of puts and calls, see what happens, it being only paper trading anyway. Test the timing system now.
if your going to be straight buying premium.. you need to really consider stocks that aren't always over priced... look at a comparison of the historical vol compared to the implied vol.. see if you can find stocks that the implied sometimes breaks up to the historical.. that means the options are cheap.. obviously if historical always stays below implied.. they are expensive.. plus you can look for stocks that frequently make large deviation moves.. etc.. its a bleed slow and be patient strategy with otm .. and if you do in the money you can be a value investor.. buy writes excetera.. theres a cost to carrying a stock.. so sometimes DITM calls are better and less risky then the actual stock considering the cost of carry.. and the fact that you can buywrite.. or even buy overwrite
Re: Re: Trading Long Straddles
Quote from rmorse:
Rather than randomly selling or buying straddles, I look for opportunities on both sides. For buying there should not only be a catalyst, but also pricing that does not take that into account. For selling opportunities, look for vol. pricing higher than actual current vol, with little or no up coming catalyst. I like to do both.
In general, I find traders that only look for selling opportunities do better over time.
Just my opinion....
__________________
Free trading signals from the top trading bots in the world
Yea that isn't always true... the grave is full of untold short vol traders.. the most money is made being long vol when tail events happen.. rare events aren't actually that rare as studies show
Quote from cdcaveman:
Yea that isn't always true... the grave is full of untold short vol traders.. the most money is made being long vol when tail events happen.. rare events aren't actually that rare as studies show
I've got a bit of trouble reaing and understanding my MONITOR page in TOS?
There are three columns on the monitor page for all trades that are open.
One is lable p/l Day and I get that. It more or less is covering the profit since the open for the day.
p/l OPEN I'm not too sure how to read this one? At least from a profit view point, using debit spreads. I know in a debit spread I have a negative cost I'm carrying, plus my commissions of .20 cents cost. Does this profit figure in the column take account of my original debit when I put the spread on? I can mentally figure the commission costs, rounded up to .20 cents, in and out.
The last column says p/l ytd. Which means every time I have traded this stock, the amount given, I presume represents the total profit accumulated trading this stock, during the current year?
When the second one; P/L OPEN shows a figure, is that number representing the profit before taking out the original debit setting up the trade? Or does it take account and subtract the debit in setting up the trade? Giving me net profit before subtracting my commission costs?
I'm having trouble trying to figure out on the run, so to speak, whether the debit spread is profitable or not? By just looking at this trade monitor page. Not sure how to intrepret it.
Buddy... Pick up the phone make the customer service at TOS do their job... There is an Api you can drag down your porfolio to excel if you want to.. But learn how to go into the settings and adjust which columns you see so that you can tell what your realized pl is etc.. Definitly call tos
As you say with the little amount of data on rare events.. Its hard to say anything at all.. Besides any strategy that blows up at point isn't a good one.. Alot of times short vol trades can realize losses so quickly that it can take months and months to make up gains.. I personally like the idea of being long vol in single stocks... Small bets on big moves.. The wings theoretically can never be priced right based upon the little amount of data related to moves outside of 2 standard deveations. .. But i'm new at all this.. And i'm a big taleb fan.. So you can obviously see my bias.... Its easier to sleep at night being long vega anyway.. And i realize its not just short vol that can kill ya.. You can demoralize and bleed to death to obviously without some quanitative analysis about some parituclars its all just speaking in abiguities..
Quote from TskTsk:
Most papers I've read tend to favor short vol strategies over long, which shows the market actually overstate "rare events" rather than understate them. Obviously it's impossible to correctly price this since we can't really know the probs or impact of all black swan events, so the risk premia the market puts on for this is a bit of a "guess". This is where human psychology comes in.
As for long vol blowouts, just ask the longs in 2000 what happened if they didnt quicky switch to another trade. Or in 2008 where fundamentally long convexity positions (short stock) lead to total annihilation. This risk runs in every trade, it's not unique to short vol.
Quote from TskTsk:
As for long vol blowouts, just ask the longs in 2000 what happened if they didnt quicky switch to another trade. Or in 2008 where fundamentally long convexity positions (short stock) lead to total annihilation. This risk runs in every trade, it's not unique to short vol.
__________________
I'm spending a year dead for tax reasons.
Quote from sle:
The famous (actually, infamous) MSFT trade done by JPM in early 2000s was probably biggest vanilla equity option blow up I've heard about. It was on a long vol position.
Any strategy can blow out. It's not as simple as "short vol is bad", because there are so many ways to be "short vol", wrt your risk management, positions etc. If you're short calls and the market collapses, it's not a huge problem vs. being short puts, despite both being "short vol".
So your saying a 20 percent correction is coming
.. totally agree haha...
Well, nobody knows for sure. But it's my belief that people fear these "corrections" more often than they occur. You know what they say, economists have predicted 9 out of the last 5 recessions. If the market understated it, it would make sense to buy a "positve" edge lottery ticket with FOTM options. It's up to you to decide.
I am figuring on the lack of liquidity coming into elections and as well a combination of a year end sell off to some magnitude.. Atypical october retractment.. The market has gotten ahead of itself and it's growing faster than the actual economy is
Sure, there's always room for some retracement, but not neccessarily 20%. September seems to be one of the worst performing months over the last 20-50 years. Then it usually picks up steam approaching year end.
Very true... I just am position to make money in turbulence... but leave the black swan potential open to.. perma bear is no way to consistently profit
Well this novice contacted TOS help. Their answer was not clear enough for this dumb bunny. But I've been figuring it out this Monday morning on reading the Monitor page in TOS platform.
At any rate, I had not been putting enough information on my worksheet to go back afterwards and try to figure things out. This Monday morning, made a new work sheet and started off with a 10 contract IWM trade. Spent 45 minutes chasing the debit spread it went so fast and trying to watch live TOS and then put the trade on in paper trading TOS which has 20 min delayed prices is a confusing bunny. Finally got a paper trade for a .50 cent spread. Decided i didn't want to pay more than .50 cents.
So now I've written down on my worksheet the index price. Oct CALLS at .50 cents and deducted .20 cents round trip commission. Leaving me with a possible net profit of + $300 if I get the move in next three weeks. The vertical spread calculator says maximum profit on the spread is $100 a contract. Initial spread cost is $50 per contract. What I was trying to figure out was how much should I put a sell order spread in for, when it gets closer? That apparently would be .50 cents. Take off two cents to be more sure. My early sell order on the special day would be for .98 cents, is how I am now figuring it, for this novice. To prevent me going past my bought strike. Don't think it matters on indexes? But for stocks it would I expect be critical, or I could end up with stock? Will stick with indexes for the moment and see if I have this jigsaw figured out properly yet. Bit more of trial and error this month before I can move to cash trading. Some of my previous stock debit spreads exceeded the sold strike by quite a bit. Paper money didn't say anything about that, but got a funny feeling, I would get an unpleasant surprise if I did that with real money.
Pondering that IWM debit spread. I think the MONITOR page in TOS will only show as high as .50 cents profit for that spread, as they probably have deducted the .50 cents cost already? Which means my sell order would be around .48 cents I theeenk? Just have to watch it as it goes along over next three weeks and see if I have it figured right?
burn the paper trading bro.... you'll never trade like that in real life.. because its not real life... if your not an active participate in the market your not trading at all... all paper trading does is create illusions that is if your discretionary trading.. of course if your backtesting some mechanical signal trading or auto trading different story.. . all your going to do is create an illusion for yourself that you know what your doing... unlessy our using paper trading to get familar with your trading console .. ditch it! put your balls on the table.. trade very small realitive to your account size.. otherwise your wasting your time..
Appreciate your viewpoint. I have done it both ways many times. That's how come I'm down 30% on my portfolio. I'll just get comfortable with the debit spread and the TOS platform before I start with cash again.
Point taken the cash results are not realistic. Already know that.
But am getting a realistic grasp of what the debit spread does under different timing situations. It would seem the timing can be right, but the move not enough for the debit spread to work first time around, so basically confirming that one has to trade only with the trend. Steeper the trend the better.
Quote from falconview:
Appreciate your viewpoint. I have done it both ways many times. That's how come I'm down 30% on my portfolio. I'll just get comfortable with the debit spread and the TOS platform before I start with cash again.
Point taken the cash results are not realistic. Already know that.
But am getting a realistic grasp of what the debit spread does under different timing situations. It would seem the timing can be right, but the move not enough for the debit spread to work first time around, so basically confirming that one has to trade only with the trend. Steeper the trend the better.
Have to chime in here...paper trading is a great way to LEARN the bells and whistles of a trading program. HOW to do something...not the WHY of it. It takes so many trades...trial and error...to begin to intuitively understand the market and what you are trading. The P&L of course will always be bogus on the trading page but as long as you completely understand that then paper trading is a good way to learn.
I do use TOS and agree that their p&L layout is kinda stupid. I just do my own and not try and figure it out. However if you use the "alternative" layout you can get perhaps a clearer picture of how each trade is doing. Try that FV
Nice opinions and they run the gamut of different degrees of experience.
I accidently got into ETF's and have been looking them up. Other than the major ones. The biggest problem I find is that the cycle in a week is not really more than one strike. So one would have to trade for a portion of a debit spread, after allowing for cost and commissions. Just to be safer than doing stocks.
I've been actually trying to figure out my possible selling point on a debit spread. I suppose if you could rely on something, that was a profit, if not ALL the potential profit, it would be a good bet? Really, what I was trying to do, is get my TIMING right and at the same time, put in a SELL order early in the day and just leave it alone and see if it got hit, at the end of the day.
My nervousness comes from having some of my practice stock debit spreads surge and go through the sold side, while I was away doing other things. Not wanting to get assigned. So I kinda thought if I had a sell order in for a target within the debit spread range, it would enable me to trade stocks with debit spreads. I don't think the paper trading in TOS takes into consideration anything to do with assignment, and I can sure see myself being rudely surprised if I started doing it in cash. That said, I believe the OEX does get assigned as an index, though from what little I remember from reading it, the OEX was the only index to act so?
this is what is confusing me.. you say i'm selling a debit spread... doesn't make sense.. your putting on the spread for a debit.. or your buying a debit spread.. debit means its coming out of your pocket.. credit means your getting credit. in your pocket.. you sell credit spreads.. buy debit spreads..
Aaaah well! Sorry about that. As a beginner learning, my vocabulary may be found wanting. Yes the debit spread is one you buy with a debit to your account. A credit spread is one you Sell one side that is more expensive and end up with a credit to your account.
The way this novice remembers them is:
Debit spread, buy the expensive strike and sell the cheaper strike.
Credit spread, sell the expensive strike and buy the cheaper strike.
My own experience with credit spreads has been usually 6 strikes OTM or so. You don't want to get hit by index or stock. If you can find the premium to sell, for safety.
Debit Spreads I'm putting on in the nearest strike. You wanna get hit by the stock or index and go through your spread.
Well I'm cashed out ( paper trading ) of APA, DVN, CSCO,TWC UPL. Only thing I'm still holding in the August months is an ETP Call debit spread. That one will have to expire tomorrow and I'll watch what happens to it.
CURRENTLY holding:
TLM Sept PUT 12/11 at .35 cents cost
QQQ Sept PUT, single bet @1.49
IWM Oct Call debit spread 80/81 @.50 cents cost
EEM Nov. PUT debit spread 40/39.50 @ .20 cents cost
I learned a bit from the others. 1) I had to make a more comprehensive work sheet, to understand the trade and costs and profit calculations.
2) My method of making a TIMING decision didn't seem to work all that accurately. At least there was no instant gratification from it.
3) I'm rather thinking of going back to a day trading method and if it goes into the second day, using straight buys and taking the profit, and if it fails and I'm not allowed by pattern trader rules, to close it, same day, then change it to a debit spread maybe?
4) Did some looking at indexes and credit spreads, using weekly stuff expiration and my timing system. Bit hairy that, can't get far enough out, and the risk / reward seems highly disproportionate.
5) Forecasting direction seems to be getting more and more difficult?
Paper trading all, in TOS paper money.
EEM 10 Nov PUTS @ .20 cents 40/39.50
TLM 1 Sept PUT 12/11 @ .35 cents
QQQ 1 Sept 64 PUT @ $1.49 straight
IWM 10 Oct. 80/81 Calls @ .50 cents
ETP 1 AUG CALL 47.50/50
IYT 2 CALENDAR CALLS AUG/SEPT 90/90 @ 1.55
SPY 2 CALENDAR CALLS AUG/SEPT 140/140 @ 1.64
There really doesn't seem to be much predictability, on making debit spreads? So, I've been going out 3 to 4 months.
Trying some calendars to see if I can develop something faster working and remunerative. Most amateurs claim CALENDARS don't work well for them?
IWM made + $300 in paper money.
I finally learned that the TOS PAPER MONEY ( PROFIT LOSS column in the MONITOR section0, has to have the initial debit it cost to put on a debit spread, plus the cost of commissions ( .20 cents ) deducted from the profit it shows. To give you an actual profit figure. Now I know that, I can make more sensible decisions.
Looks like my two Calendars in IYT and SPY are both going to lose money. Disappointing that! I thought I had them figured, but apparently not. Chuck the CALENDAR trading then.
A losing QQQ PUT trade is going to expire today too. Looks like things revert to debit spreads, far out in months.
I kind of have spent the last month or two trying different stuff in paper trading in TOS. I'm kind of trying now to go into IWM the S&P 500 as it swings wider than apparently others, particularly indexes. With movement you can make something is the theory. At any rate figured out a scenario to try out. So next week, in we go using only IWM.
The win loss ratio on debit spreads for the IWM.
1 loss breaks even with 3 profitable trades. Wipes them out.
To win, the win loss ratio has to be four to one.
I was kinda thinking to enter the IWM with two debit spreads. But after going over this win loss ratio, I think it would be only one trade. Even if I did 10 contracts on the first trade and scaled in with a second trade at 5 contracts. The win loss ratio, makes that second trade iffy, and ups the RISK PROFILE too much. What alternative pray tell? The only way I can think of right now is go to one trade, and look for more profit by increasing the size, if the system timing proves correct.
JUST THINKING OUT LOUD HERE.
falcon,
aj brown is giving a straddle webinar on thurs 8/23 at 9pm eastern
lux
traderlux
A J bROWN? Now that is interesting. Is that TOS? Not even sure how you get on to the webinair thingy. He was the guy used the debit spread and the straight bet, in a straddle configuration, if I remember rightly, which nobody I ever met, could make work?
Quote from falconview:
traderlux
A J bROWN? Now that is interesting. Is that TOS? Not even sure how you get on to the webinair thingy. He was the guy used the debit spread and the straight bet, in a straddle configuration, if I remember rightly, which nobody I ever met, could make work?
falcon,
i was on the aj brown webinar, i thought it was good. i will post some hi-lites as i review my notes. i was also on a john ondercin webinar and i will post some notes from it also.
lux
Hi,
I read the first 25 pages and wanted to ask what about long synthetic straddles on mid-term expiry? The goal here is to create a delta neutral portfolio made up futures and options. Say an ATM put has -.5 delta to create a risk free ptf I will buy 1 future (+1 delta) and go long 2 put options (-.5 delta x2) that sums up my position delta to zero. Suppose, both options and future maturities due to dec12. I understand this is a minor volatility play compared to classic straddles (+p+c). Future is to gain/loose, say, 10 usd per point while the option will follow a non linear path. Gamma is shabby and so is theta, hopefully. I should paper trade that before putting real money. I guess a 4-month synthetic is to be closed out 1 month later at the most.
After all, this is the basic idea behind the bsm formula; a risk free ptf needing continuosly re-heding.
PS: instead of 2 puts with -.5 delta, I could use 10 puts with -.1 delta that still makes a neutral position delta, along with the long future.
Quote from marameo:
Hi,
I read the first 25 pages and wanted to ask what about long synthetic straddles on mid-term expiry? The goal here is to create a delta neutral portfolio made up futures and options. Say an ATM put has -.5 delta to create a risk free ptf I will buy 1 future (+1 delta) and go long 2 put options (-.5 delta x2) that sums up my position delta to zero. Suppose, both options and future maturities due to dec12. I understand this is a minor volatility play compared to classic straddles (+p+c). Future is to gain/loose, say, 10 usd per point while the option will follow a non linear path. Gamma is shabby and so is theta, hopefully. I should paper trade that before putting real money. I guess a 4-month synthetic is to be closed out 1 month later at the most.
After all, this is the basic idea behind the bsm formula; a risk free ptf needing continuosly re-heding.
PS: instead of 2 puts with -.5 delta, I could use 10 puts with -.1 delta that still makes a neutral position delta, along with the long future.
Quote from cdcaveman:
Options on futures??? What's the underlying
I gotta learn the greeks on futures
Quote from cdcaveman:
I gotta learn the greeks on futures
Traderlux
I look forward to your essence of those webinairs.
Quote from falconview:
Traderlux
I look forward to your essence of those webinairs.
Thanks
I'm right now trading straight options on IWM. Just got my first trade in. Will try three and if it works will go to cash.
Quote from falconview:
Thanks
I'm right now trading straight options on IWM. Just got my first trade in. Will try three and if it works will go to cash.
nibbling strategy
No strategy. Just technical TIMING for a straight buy and a small nibble in cash of .30 cents profit, without trying to chase the prices. Once bought, just enter a sell order and let it ride. Too soon to tell, but give it two months and will know more.
My theory is to see if I can get a high win to loss ratio, enough to start piling on contracts. Slow business, about one trade a week, or two.
Re: nibbling strategy
Quote from falconview:
No strategy. Just technical TIMING for a straight buy and a small nibble in cash of .30 cents profit, without trying to chase the prices. Once bought, just enter a sell order and let it ride. Too soon to tell, but give it two months and will know more.
My theory is to see if I can get a high win to loss ratio, enough to start piling on contracts. Slow business, about one trade a week, or two.
Black Jack Trading system.
Oooookay! On my second bet using the new system, I closed out too soon. I won a $100 and could have expected to win $300. But was scared out, and working on the hypothesis, that winning something and not having a loser was better for me. As the day progressed, I would have earned my $300, which it did just now. So I learned something about how my new indicators and signals work. I hope? One more paper trade after this and if I have a third winner, will move to cash trading.
Guess I will call this Black Jack Trading system in which you count the cards, or moves. Really hope it works long term.
"Really hope it works long term."
uhmmmmm..."hope" is NOT an OPTION (trade)
Re: Black Jack Trading system.
Quote from falconview:
Oooookay! On my second bet using the new system, I closed out too soon. I won a $100 and could have expected to win $300. But was scared out, and working on the hypothesis, that winning something and not having a loser was better for me. As the day progressed, I would have earned my $300, which it did just now. So I learned something about how my new indicators and signals work. I hope? One more paper trade after this and if I have a third winner, will move to cash trading.
Guess I will call this Black Jack Trading system in which you count the cards, or moves. Really hope it works long term.
Some people just never learn. They carry an "I'll throw the dice on this idea" attitude and just keep spinning their wheels getting nowhere...
LEARN SOME FU*KING FUNDAMENTALS FOR A CHANGE AND YOU'LL BE AMAZED HOW MUCH MORE SIMPLER THE TECHNICALS CAN PINPOINT A SOLID TRADE, WHETHER ITS A STOCK< FUTURE< or OPTION TRADE.
Weell, I missed this run up. It started and I missed it. Thought of chasing it and decided not too. For the PUT losers on "my option trades", not trading is a good decision too. ( grin )
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