Trading Journal Could you find time to tell me if ASSIGNMENT is a danger to a butterfly spread in the OEX? I believe it is, but not sure. Well the BULL TREND is still going strong!
Wow that morning opening drop caught me by surprise. I was all set to buy some CALLS. Still may, but not until things shake out and settle down. No warning on that drop at all.
Hi, if concerned about assignment then use the xeo. The entire trade is viewed as a credit, the long wings are not considered a stand alone debit. They can be exited at any time. Normally the profit occurs in the last few days, I try to hold them as long as possible with a trailing stop. Keep it up.
Elite Trader Thankyou on that tidbit. I think I´ll actually do them when I do them in the XEO not the OEX.
Falconview: I have been busy with others things. Stopped just for you to see how you are doing. As for Stanford, I exchanged an email with him on the eve of the drop, and as I mentioned to him in that email, the models were saying a drop is coming the next morning, and they further said that a down gap is most likely. I did not believe the models on the eve, but they were right the next morning. As for your question on assignment, if the option is an american style, exercise is always a possibility even if the options is out of the money. One should think about the impact of the exercise, rather than whether there will be one. I noticed your asked this question a number of times. You may want to reflect on it more, or simply use European style options, but I would stay clear from those options that follow the price on the open on Friday. I once had an option that settles using DJS, and they played games with it on Friday---DIA traded at a price way lower than DJS (which if I recollect well is calculated using the averages of the open on stocks in the dow index). Regards
Trading Journals Guess I missed that one and must remember to double check the USD and the EUR before the close each day and see if I can predict the opening gaps.Thanks! For Elite Trader Was checking the Butterfly. I´m running several variations and only confusing myself. But I did the calculations early this morning, with a market, or index drop on the weekly and I see that the DEBIT Spread side in CALLs made money. If you would close it on a market index down move of a strike. The Credit Spread in PUTS also made a bit, not much though. So essentially I get your earlier comment now that working this thing as a bouncing straddle might be one way to work it. I was thinking of buying straight options in a straddle then realized that wouldn´t work as the TIME Decay goes exponential in a weekly. I´m beginning to realize at least in one application that the BUTTERFLY is a straddle without the margin requirement. Now we look at whether the market index will bounce and we can see what happens to the other wings of the Butterfly and then on Friday to see what happens near expiration. With the complications of the index moving up and down and the Time Decay being rapid day by day, and approaching Friday expiration, it is certainly a complex trade, that seems to have multiple possibilities. Makes my head spin!
Just a commentry. I´m looking for sure fire win trades. Monthly or weekly doesn´t matter, so long as the likelihood of winning is extremely high, and if you don´t win, then the cost of losing much is very small. I´ve only got one strategy so far. The Weekly Credit Spread. I might have more in the straight buying of options, though those type of trades do not come up all that often either. the reward ratio versus capital risked is higher though than credit spreads. These being average of 3%. I certainly like Michael´s idea of multiple credit spreads on a monthly, with adjustments on the losers, which in his limited practice as been a small percentage. The emphasis being that if you must lose on two out of eight trades, by adjusting as the market moves up and down, and basically only lose a little bit and commissions, but gain more on the successful credit spreads, you get a sure fire monthly income return. I don´t think it would work in a bear plunge, but I´d expect you should see that coming. The only thing with me, is that it seems wasteful of capital tied up in margin, which does not allow you to take other opportunities that pop up. I´m finding the butterfly interesting. Still learning the basics and contemplating the possibilities. What I am enthralled about is using the butterfly on the weeklies. I love getting into a trade for a few days and being out of it. Leaving you with capital to do another one. Be a few weeks yet though, before I get anymore ramifications out of this thing. Right now it just makes my head spin, when you use the BUTTERFLY as a CHANNELING trade as in an Iron Condor. Aaaaah well! Makes life interesting and challenging and so we have fun! Now if I can just figure out how to use a butterfly on a solid 100% winner situation, it would be great.
TJ, or anyone, which of the european options on indeces do not follow the opening price on the Friday? thanks Michael My practice trade near the money at closing showed me that the NDX does! Michael
First real paper trade for the week. 5 Nov. 530 CALLS sold for $700 - $36 commissions = + $ 664 net profit.