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optionstrading

Registered: Dec 2011
Posts: 9

08-16-12 11:17 PM

Going on a big Jeff Augen binge at the moment, loving his stuff. Just finished reading this article and wondered what people think of getting into a trade like this on SPY now?

http://www.optionpit.com/node/386597

Trade setup something like this:

Sell 100 SPY @ $142
Sell 135 Dec put @ $3.85 - IV 19.36%
Buy 149 Dec call @ $1.98 - IV 14.36%

What are the advantages and disadvantages of this trade?

spy3.png
This has been downloaded 67 time(s).

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REI_Chris

Registered: Mar 2012
Posts: 30

08-17-12 05:11 AM

I personally like it that far out with vol this cheap, at these levels...I find it incredibly hard to believe we won't break out hard, or fall hard at this major double top, by December for that matter. Regardless of either direction, I'd look to cover on any giant move on way or another that allows me to freely ride the reverse direction. You can possibly do this with making some profit from whatever side that wins out on the short-term as well.

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donnap

Registered: Sep 2006
Posts: 675

08-17-12 08:26 AM

Quote from optionstrading:

What are the...disadvantages of this trade?

Um, dividends?

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MTE

Registered: Jan 2005
Posts: 3344

08-17-12 08:43 AM

Quote from optionstrading:

Going on a big Jeff Augen binge at the moment, loving his stuff. Just finished reading this article and wondered what people think of getting into a trade like this on SPY now?

http://www.optionpit.com/node/386597

Trade setup something like this:

Sell 100 SPY @ $142
Sell 135 Dec put @ $3.85 - IV 19.36%
Buy 149 Dec call @ $1.98 - IV 14.36%

What are the advantages and disadvantages of this trade?

Why not just buy 149 put and sell 135 put (i.e. put spread)? It's exactly the same position with less commissions and slippage.

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REI_Chris

Registered: Mar 2012
Posts: 30

08-17-12 03:26 PM

Never mind, it was late and for some reason I was reading what I wanted to. I thought you were implying a straddle for some odd reason. Either way, if the Greeks workout to your advantage (expecting the spy to be 40-50 points off from here in either direction by dec), I'd still try to capitalize on a strategy that profits from a fast moving market in either direction. We won't be here long, and vol is relatively cheap. I just don't like picking sides with options. We can either double top, or breakout and capitulate. Regardless, we won't grind here long.

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