OK here is another problem for you analytical types to work out.. I have been testing out adjustments with ToS on the cross FLY to see what I can leg into to deal with the loss part of the curve if the market moves lower slightly. Here is what I got so far, assuming on SPX you did the 25/50/25 1375 SPX spread for a credit of $2.00 or $5,000 (try to make it as close to mine as possible). The market is falling into the loss part of the curve. I want an adjustment that pushes the downside breakeven point lower or raises the dip part of the curve. THis is an idea to do with expiration a week away. As the market moves a little lower, sell an ITM OCT/NOV Call calendar. Rationale is that you bring in a large amount of premium since the OCT is losing time value and the NOV still has a good amount of time value. The spread is ITM so if the market keeps moving slightly lower in the original loss portion, any profit from the calendar will offset most of it when you combine the short calendar net credit and the cross-Fly net credit. If the market is at the shrot calendar strike, the profit from the cross-FLY offsets the loss in the short calendar so you are still net positive.. Try this on ToS and OV. Assume you did sell the 25/50/25 cross 1375 FLY on the SPX for a credit of 2.00. Now with the SPX at 1350 and moving into the loss dip, sell 10 OCT/NOV 1370 Call Calenders. Look at what happens to the risk graph below. Any thoughts on the adjustment?
I'm very happy with it. I think it is a good investment. It does everything you expect from your typical analysis tool, but it also understands options on futures, including span margins. It is also a portfolio manager so you can see the effect new positions would have on your existing portfolio. This includes the pnl, greeks, cash flow and margin requirements. The trader finder is very good and can also take into account your existing positions and how much more margin you want to use. It is very useful to get delta neutral or transform your position when your expectations change. I also have the optional backtrader module which lets you enter trades in the past and follow them. Very useful to test new strategies and see how adjustments would really work. Documentation is good and support is excellent. My only complains is that it doesnât support EW and ER2 out of the box yet. EW is not a big deal because you can just define the new strikes you need for ES. I haven't tried to define ER2, but I suspect it will involve more work.
Forgot to add to the above that vol changes could have negative affects. That is why it should only be considered close to expiration when the market is squarely in the loss zone on the downside...
I got something very similar to you. Looks good even with a 10% increase in volatility - the dip gets deeper and wider, but risk/reward stays about 1:1. The yields with regT margins are not good, but will probably be very attractive with haircut. I'll see how it looks with span.
I am watching the stock - RNVS its implied volatility is over 200 I want to establish a position that can benefit from an evaporation of the IV I am looking for a combination of positions that will be: 1. Delta neutral (without having any naked calls or naked puts) 2. Negative Vega to benefit from an evaporation of IV Any ideas? I guess I should also be concered about the Gamma (because of the expectation of serious volatility) but is their a position that meets the two criteria above.
For the position I put on, my daily sheets show a haircut right now of about $6,000 so the return on haircut is so much better than Reg T lol. Adding the short calendar gives some options but it depends on when it is added. Still simulating it before I am convinced....
Span for equivalent on ES cross fly at 1385 and short calendar at 1360 is $9,268 initial and $8,518 maintenance. Taking into account the credit received, span will vary from $1,030 to $5,600 depending on when and where ES trades. RegT goes as high as 1.5M :eek: