THANSK AGAIN! Yeah somewhere between $40k and $50k is what I thought with a haircut little less than that. Check out the max profit though and max risk.... pretty awesome r/r/.....
Not at expiration, but they'll do the job for a while. The puts are trading at around -20 deltas. In a 4x1 ratio, each straddle is about +20 deltas. As of today, the delta neutral point is at 1361. I plan to hold it for 2 weeks at the most. At that point, it will be delta neutral at 1351.
Coach: Can we do an analysis on the opposite position, i.e. BTO 25/STO 50/BTO 25 (since us retail guys can't do what you're doing). Presumably this would have involved about a $2.90 debit. I guess once the October 1400 calls expire, one would need to add another 25 long calls otherwise there would be 25 naked November calls. Also, the BTO 25 October calls really does very little except, I think, to provide one week of coverage for the naked shorts. So this opposite position does not seem very appealing. Am I missing something here.
If my position has a great R/R ratio then it makes sense that the opposite position is not very appealing....
Is selling the near term option for 20 cents what you really want to do? If SPX (or VIX) does not undergo a significant move in the next few days, how are you going to make any money? Mark
The worst scenario is if the market goes nowhere. Even so the loss is minimal. It is better to put this on with a little more time to expiration but I only have a week and want to test it out. I am looking at adjustments to make during the week if the market is going to go nowhere. If the market however has a nice move, the profits are pretty big comparatively.
ADDITIONAL ADJUSTMENT TO CROSS POSITIONS: Thanks to the discussions here, I was reminded that the DEC EW contract in the cross-fly will be priced off the MAR futures contract which will most likely have a 10 point premium and that would negatively affect the position. In order to correct the situation and give the position a better shot at a profit with the market continuing to move higher, I bought back the DEC EW 1385 short call and sold a DEC EW 1395 Call for a net debit of 6.00 or $7,500. (I believe Mo suggested the idea and it was a good one). It eats into my combined net credit but puts me in a better position for a profit at OCT expiration. So I am adding in that adjustment. 1. My original position 1385 25*50 Call Fly SHORT 25 OCT EW 1385 Calls @ 2.50 (+$3,125.00) LONG 50 NOV EW 1385 Calls @ 9.75 (-$24,375.00) SHORT 25 DEC EW 1385 Calls @ 21.00 (+$26,250.00) NET CREDIT = $5,000 or 4.00 * 25 2. I added the following: SHORT 25 OCT EW 1330 Puts @ 4.70 ($5,875) LONG 50 NOV ES 1330 Puts @ 10.50 ($26,250 SHORT 25 DEC ES 1330 Puts @ 17.25 ($21,562.50) NET CREDIT = $1,187.50 or .95 * 25 COMBINED NET CREDIT = $6,187.50 or 4.95*25 3. I added a short calendar near my call FLY strike. SOLD 15 NOV EW 1380 Calls @ 12.25 LONG 15 OCT EW 1380 Calls @ 4.85 Net Credit = $5,550 or 7.40. 4. Rolled my DEC EW 1385 strike into a DEC ew 1395 strike to reduce the effect of the DEC EW premium the options will trade at for a net debit of $7,500.. I think the cost is worth it given the profit potential. COMBINED NEW CREDIT OF ALL = $4,237.50
Looks like we've come a long way since this thread started. Time flies, right? (pun intented) I had to ask this fundamental question in the current environment: Are we getting paid enough for the risk we're assuming from selling call spreads? It's not the low VIX levels that bother me. VIX has been sub-twelve for years... but during those days, the market (SPX) was going sideways. So there was low risk, hence the low premiums were fine. But now, the market's been rallying like nobody's business and the VIX is sub-eleven! The cheap short call spreads are getting hammered. Is this an environment for iron condors or even (double) diagonals (where that elusive IV spike hasnt come for expirations together) etc? Murray recently put on a diagonal trade bcos "VIX was low at 14". VIX is now 10.75. Any thoughts / views on this? Thank you.
I've been doing some analysis on this and it seems like it would probably be preferable to use indices that don't have next morning expiration (i.e. SET for the SPX), particularly if these straddle/strangle swaps are put on within the last week or two. So as the underlying moves away from the peak on the expiration curve, the adjustment would be to buy back the straddle and sell a new straddle that moves the peak in the direction the underlying is moving (repositioning the tent pole). Is that correct?