absolutely, when regular trading resumes. that is why i do not and will not put on any new positions on until certain criteria is met. of course i look forward to starting new positions, just cannot yet..... risk, never took it as sarcastic, i understood you immediately. really, for all the time i have done this and imo, all the people i am connected to in this business; i never thought i would be selling premium only. i really am gonna try a simple route on this shot. i theorize that i can manage things better with this strategy.
updates below. one position change. account value: 86,530.97 positions: all er2 and short sept 06 615 put -10 @ 3.73 value .50 sept 06 610 put -10 @ 2.86 value .40 sept 06 762.5 call -10 @ 1 closed at .40 (net .6 x 10) sept 06 760 call -10 @ 1.3 value .55 sept 06 750 call -10 @ 1.8 value 1. i do plan on closing positions when the opportunity arises. no new positions are anticipated until next week.
update account value:87,360.89 i am showing available funds for after hours, because that is all that matters really. 58,520.30 positions: all er2 and short closed positions are from friday 8/25 sept 06 615 put -10 @ 3.73 closed @ .20 sept 06 610 put -10 @ 2.86 closed @ .15 sept 06 760 call -10 @ 1.3 value .48 sept 06 750 call -10 @ 1.8 value .83 i will probably close the calls out this week and sell october.
I wouldn't recommend you continue selling gamma convexity in ER2 strangles. The "safe" strike offers little to mitigate the risk on the strike at risk. It is far more sound to simply sell ER2 puts and get flat deltas in ER2 futures. Even hedged weakly is preferable to your current course of action. You may also want to consider selling 1/5 the size in atm straddles as an alternative. Compare your short puts to the running atm straddle/2. This is the risk you assume with no blip in implied vols. Now imagine the market reaches your short puts at a rise of 1000 basis on the vol-line. At least with a weak synthetic straddle you may walk away without injury. Traded strong [1x2] and you'll earn. There is no adequate hedge for these strangles. I don't recommend anyone sell naked combos unless they're willing to take the risk on the notional futures position. Unfortunately there is vega risk as well.
Hi Arb, is this just a disclaimer or are you saying it is bad practice to short combo's? I've been reading your writings for several years now, much of it had to do with selling straddles. Or are you just saying that you must be aware of the near equivalent risk as in being long the future? I btw agree with your stance that selling strangles is in fact more dangerous that selling ATM straddles. Ursa..
firstly, i cannot tell you how much i appreciate your input. it mean's more when it is about one's self, instead of simply reading about others. i understand some of the ways to be delta neutral, just not ready yet. like you said "there is no adequate hedge for these strangles" i would like comments if possible on this comparison: spx credit spread 1305/1315 put on for 1pt when market is @ 1260....then the market some weeks later is @1300 and you are marked at say 5 or 6pts to get out. then you cannot "roll" into a 5 pt spread(from a 1pt or .75) unless you change distances or increase the amount of contracts significantly. as opposed to: an er2 750 call at 1.83 when market was @ 695, then market moves to 740 and the call is 8pts but i can sell october 765 for 9 pts. this is what i consider my hedge. i believe a simple order , approach and being outside certain barriers may work......until... my trades are even further out than many others have posted. so my real question is; can an argument be made that naked trading futures is as safe or safer than trading spreads? i am further out, there are limits on daily movement, and are easier to manage? i know this sounds like first grade options trading, but don't your hedging strategies mentioned carry some of their own backfire possibilities also?
update closed sept 06 760 call -10 @ 1.3 +10 @ .25 11:16 am closed sept 06 750 call -10 @ 1.8 +10 @ .60 10:24 am new positions: -10 puts october 610 @ 2.00 value 1.43 -10 calls october 795 @ .95 value 1.25 open sept positions -10 puts 610 @ 293.35 value .13
domestic- For a novice, would you please explain your notations in your positions. For instance in the above example, I'm square with the following: sept 06- Month 750 call-Strike price -10-quantity I assume that the 3.1 refers to the premium you collected, but what does 1.8 represent? I am enjoying this thread and I thank you in advance
Bounded risk is enticing, but one can lose more under expected vols than in an unbounded position. The vertical trader usually received a very small premium for the gamma incurred. A short put position can be easily adjusted long or short delta. I would suggest selling higher delta strikes and hedging more aggressively from the outset. You may be able to add alpha to the position if you're successful at gamma trading around your primary, passive short gamma portfolio.