Hey when i read about setting up and adjusting ic they always say to have a target profit of half the credit and and when u reach the first third u make the first adjustment and 2nd third you make the next one and by half you sell it. but my question is that if IV goes up the option price will go up as well and i still might have 5-10% till the breakeven points so do you have any other good rules out there? or deeper thought about it happy new years
Most of those are sitting short vol all the time...bad idea.. try back testing over a certain vol number shorting vol with IC you can't just sit short vol all the time.. most of those guys recommend rolling out the calendar and farther out strikes as vol increases.. which eventually leads to a blow out as vol moves in power laws or at least a huge draw down
I thought the whole idea of IC is it's best used in a non trending environment? Rolling is a defensive adjustment when things go contrary to what was anticipated, no?
Yes, this is the idea, but "guessing" when you have a non trending situation is as hard as guessing when yo have a trending one. By using the "" marks I mean you can use whatever indicators or guidelines you please, but it will still be a guess.
These are just my thoughts ... have no experience trading ICs(or options in general). You are only setting up IC for 30-50 days, right? So you don't need to guess overall trend, just that there will be no significant movement within that time period. Maybe right after a significant move? To me, it's kind of similar to PEAD strategy ... the big event just happened and everything was re-priced based on new info ... how likely is it for new info to come out within 30 days of that?