Bobby really enjoying reading your Journal. I see you have a 50% profit target and Timed exit 24 days after entry. If a spread goes against you, do you plan on exiting the spread at a loss or adjusting the position like Karen does? Keep up the great work.
Thanks. The plan is to close the positions at a loss equal to two times the initial cred received. So if I receive $1 in credit, I will close it when it reaches $3. I am also giving myself permission to roll the untested side of the trade up/down one time only and I can roll the entire position out in time once only to extend duration if needed. I have given myself these rolling parameters just in case I need them, but I really don't contemplate many rolls at all. We shall see!
OK, just bought back my puts @3.30 Gross profit = $1790; round trip brokerage fees = $10; I want to wait and see before deciding on next trade. The SKEW index is at 129.28. It is probably safer not to do anything over the long week end. The market makers are not very friendly today. They are pricing in the high SKEW. Any order easily filled today would most likely not be a good deal.
Bobby you have automatic close date of 24 days after entry, why did you select 24 days I have watched the 4 Tasty Trade videos off Karen, she says her fund sells puts on a down day and calls on a up day and doesn't trade spreads. She also says she loves to trade like this because its non directional. If the SPY/SPX is in a trading range this works great but if you have price action like the last 2 months when the SPY/SPX went up most days, it doesn't give you a lot of opportunity to sell the puts. Also price action like this makes it tricky to sell the calls.
Good job! In my experiment, I am placing at least one trade per day. My thought is that I don't care if the market is up, down, or sideways. I'll be waiting on it with a trade in hand ready to go.
Bobby the way you are trading makes sense because you are trading strangles, just cant get my head around how Karen's fund trades. Maybe I need to watch the videos again. The way I am looking at it is - if you only trade puts on a day down and calls on a up day, you cant really say you are non-directional because if you are in a bull market you wont be trading many puts.
If you have the gall for a gamble, here is some food for thought. BUY +1 VERTICAL SPX 100 (Weeklys) 15 JUN 16 2150/2025 PUT @52.15 LMT Since the IV for this series is at 13%, it is still near the low end. A debit spread with a +ve theta of nearly $35 per day is a tempting proposition. The reward/risk ratio is about 3/2. If SPX plummets by 50 points, and VIX spikes up to 28%, this spread is still profitable before expiration. If SPX stays below 2096 at expiration, the trade is a winner. As I am an old chicken, let me consult my sister's Feng Shui master for his aureate wisdom.
Karen trades puts and calls separately and manages each side separately. My hybrid approach calls for selling ratio strangles instead and managing the trade as a complete package. I sell more puts to calls on down days and more calls than puts on up days. Now that's a general statement because I am actively watching my Greeks. I just like having a little action on both sides on any given trade. There may be days that I only sell calls or only sell puts. Right now I am pretty much maxed out on the call side after looking at the analyze tab. Is none of my trades come off, I may be limited to just puts for a few days.
As Pat Dye, former football coach of the Auburn Tigers, once said -- "Hindsight is 50/50." My little experimental account is overly maxed out on the call side. And, it is now almost maxed out to the put side. When I'm at my day job 3 days a week, I don't have access to the analyze tab. I don't think I can see it on my mobile phone either. I guess I'm going to have to get a tablet and tether the internet from my phone. If any of you have any suggestions, I would appreciate them. In retrospect, I should not have put on the SPX trades this week. I should have stayed with SPY. I did make one trade today. I sold 3 of the 15 JUL 16 183 puts. The experiment is up $ 208.78 today. Theta is 120 , delta is -119, and vega is -786 . Happy Memorial Day Weekend! Bobby
Meaning your position will completely blow up in your face if Monday morning equity markets open up just a few IV vol points higher. Quite a risk over the weekend. Do you mind sharing how much you have funded your account with in order to better understand how much risk you put on?