j21, most definitely. I feel it would be cleaner to get out somewhere around the strikes if possible though. In a situation where IV explodes there may be no choice but to hedge with futures which may be what you are suggesting.
no problemmo, I can tell when someone is trying to help. Are you making money being long volatility? Why not just long a straddle?
I tend to focus on the overnight market. I profit from congestion of the overnight market and then try to get out of my long options positions during the volatility of the pit open. Often I can make half of what I risk per session(although I don't really risk that much).
That is very interesting. So you get in towards the end of the day or overnight and when the market opens you try to get out at a profit overcoming the spread and any time decay. Speaking of time decay, you use options for only one side of the straddle so you are only exposed to half the theta. What kind of risk adjusted returns are you getting?
Prevail, Just wanted to keep track of this trade -- similiar to following the SP thread by options coach. Are you still in both sides of the trade or have you made any adjustements? Is there a price at which you will adjust your positions and if so do you prefer to cover or hedge? Thanks, Sam
Prevail, I guess I lost track of this post To answer you question I have had months of where I never risk more then $700 with this strategy and have made $1300. The numbers look better close to expiry(risk $200 and make 3 ticks or about $90 in a day). Overcoming Theta is a big concern. However ZF options are cheap enough that a few trades in the overnight of the underlying will pay for them. At first I only traded overnight but now I am using more of the day to make money especially the 8:20 eastern pit open. I started out using the pit open to let me out of my last overnight trade and grew from there. I would like to segment the day into more time frames that I understand. So what I really do is trade from a limited risk position and use the daily predictable volatility of the pit open to overcome the problems of being long options.
ZFT, thanks very much, I'll have to ponder that for a while. Much of my development ideas are going into how to profit directionally with options. Nice work. I've traded for years in the sp and done well but this is my first fx trade which is why the position is so small. If you need expertise in this market you may want to ask someone who may have it . The % is derived from our software which measures actually market movements and thus violations of thresholds. We do this because, as you know, of the fat tails of the market. I chose to trade at the cme because I feel the exchange environment is the future of fx trading. There is simply no way I'm going to trade at a firm which both takes the other side of my trade and controls the data feed I'm looking at. Although I think with serious capital transparency is more accessible. I think the only reason to trade spot is if you have a really small account or a really, really large one. Other than that, and even then, I'm sticking with what I feel is more transparent. Hope it helps. How and where do you trade puts?
So you are trading the new electronic forex futures options for the Euro? Yen? On CME? Are you using IB? I just pulled up the option trader for the Yen and Euro and there is indeed something going on there. Kinda a new thing. I had forgotten about it!
Right, they are forex futures options at the cme although I was executed in the pit. I don't use IB but as you can see open interest is growing pretty quickly.