I suppose you are talking about buying calls/puts at support/resistance points and not naked selling? I am not really a big fan of buying theta on turtles like the SPX. Thanks for the input, i briefly glanced over those when you guys were discussing them but i havent had a chance to take a detailed look and study those. There are some very experienced people on this thread which certainly contributes to its quality. When the time comes i may just offer some pix of Jessica Alba and seek advice
When rolling out and doubling your contracts, what percentage of the time would you say that you end up on the short end of break even? I am curious because, while I have not been trading these spreads long, most of the time I have to more than double my WOTM positions in order to break even. Now that I think about it, maybe it's the fact that you start out closer to the money that enables you to only double your initial position to break even?
Donna, I have to agree. In my opinion, going WAY OTM is saying my strategy is Non-Directional. However, knowing you will most likely hedge or move positions seems to be more of a Directional strategy. I prefer the Non-Directional method knowing I will be required to hedge or roll once in a while. I do enjoy reading all the different views and strategies though!!!
Correct. My risk/reward with a spread 20-30 points away is usually at $3.5/$1.5. So when i double, i get $3 which almost covers my initial loss. You will not be able to do that with FOTM spreads. For example if you waited until your short strike is hit on a $.7/$9.3 risk/reward then you have to increase your size 13x to get the same effect. But again, that clearly wouldnt work because by then you will be way in the hole on your short contracts. To answer your question, out of 8 times my short was hit, 5 times i was able to close at breakeven +/-.10. I dont do it that day, i let it sit until i do.
Thanks for clarifying. This makes sense to me now. I look forward to following your posts and success.
Rally, I like your style. You and I have a pretty similar strategy with a few exceptions. Anyway, I look forward to more posts. Cache
Sorry I was not talking about buying calls or puts at resistance, i was saying that if someone was interested in doing this, they could start with 10-point wide spreads and do only 10 contracts or 20 5-point way contracts for a $10,000 margin for that $1.50 credit and therefore take a limited approach. I would not recommend going big they way I/we do for far OTM, but for those who are interested, I would recommend staying small. I still prefer to live way OTM but that is just a personal choice
First, did anyone watch the chartbender presentation on using their software to find IronCondor trading opportunities. It was pretty good, not Cboe quality, but there were some nuggets of info. I'll put the info at the bottom. For those of you who have used their software, or watched the presentation, what do you think? Is it worth it to give it a try? Could this help us in finding the right day to open our spreads do to IV? Coach, I remember your in really tight with the guys over their and participated in their "get together" what kinda of deal were you able to swing your fellow traders? Other stuff: #1) This is the second time I've heard that in a low vol environment, you should be doing double diagonals, and in a high vol environment, iron condors. Comments.... #2) I got filled on: SOLD 100 VERTICAL SPX APR 06 1245/1240 PUT @.30 CBOE, SPX MARK 1292.99 #3) I agree with Donna, that we sell FOTM spreads so we don't have to hedge unless necessary. I think sometimes "hedging" satisfy's the need to "trade" and not just sit and watch, but that's just my 2 cents. By all means, trade, hedge, box, butterfly, knock up the butterfly, and make baby butterflys the way you see fit. chartbender info: This past Thursday, March 23, Craig Faassen (ChartBender's Chief Option Strategist) gave another webinar on Iron Condors. If you weren't able to make the presentation, no worries. We recorded it and it is now available for download. The overall webinar is about 50 minutes long and contains some excellent information on using ChartBender's tools to find and profit from Iron Condors. The file can be downloaded at: http://www.chartbender.com/cbwebinar20060323.aspx sd
Ok guys, you got me intrigued on the diagonals and as me being the curious nature always looking for new ways i spent some serious time researching it and here are my thoughts. Sailing or anyone else -> here is my question and i will refer to your trade. From your post on 3/14/06: Now i am clear on the profit when the market stays the same, i am clear on the profit where we are slightly below or at your short(max profit for you). What i am not clear on is your statement that beyond the strikes(i suppose you mean above your 1350 strike?) it could even be better. Here is what i see. If the market closes at 1350 at APR expiration you will lose roughly $4,000. $21,000 loss on the short, that is the 30 point spread*7*100 $17,000 gain from the long, that is the $17 theta*10*100 =-$4,000 To break even at the long side you are assuming that the volatility will increase and bump up the at the money premium to $21+ per call with 4 weeks to expiry. Regarding the put spread. I could see that breaking even at your long strike because the ATM premium on the 1190 Put needs only $17.5 theta(5*35point spread) at APR expiration and thats quite possible. From your posts, you make it sound like adjustment won't be needed since you profit when we dont move, go to your short, long or even beyond your strikes. The way i see it, you having more long calls then shorts won't give you unlimited upside as you said in one of your posts cuz your call spread is too wide or ratio too low. The way i see it, an adjustment is needed somewhere between the short and long strikes. I looked at the current prices and i can get a 30 point diagonal spread at a 10:7 ratio like you did but i still dont see the profit at or beyong your long side. The only way i see it is if i lock in a 30 point spread at a 10:5 ratio but that seems impossible for even or a small credit. I would have to say though that picking the ratio is the most important part of the trade and i'd say the goal probably is to lock in a tighter spread at higher ratio as possible. I'd say the 10:5 for 35 point spread is pretty good. Anything lower on the ratio(like 10:6,10:7,10:8) or wider on the spread will introduce more risk. I will keep looking into it further, but i clearly dont see a win/win scenario where an adjustment isnt needed. You have had more experience with it so what am i missing? Have you had the price go through your long strike yet? On a final note, i am starting to like this setup and may try it out next month if i can find the good ratios/spreads i mentioned earlier and lock in a small credit. But those 35 point spreads will KILL my margin.
This started looking to me like it was too good to be true and as i know there are no free lunches i did further research to find the problem. Now it appears that getting a 30-35 point spread at a 10:5 long to short ratio is clearly an arbitrage. That is the only position that will give you profit at or beyond your long strike. Sailing -> you say you have this position at breakeven: 10 May 1190 Puts - 5 Apr 1225 Puts Hold onto it cuz you CANNOT lose no matter where the market ends at APR expiration. If you were to liquidate today even at the bid and ask you will make $.75 credit. If i were to buy your position today and split the Bid/Ask, the best i can do is a debit of $1.3. I dont see how you placed that trade at breakeven two weeks ago. Could it be a typo and you meant 7 short puts instead of 5? Or maybe you have 10 shorts and 5 longs since the may 1190 put price is twice the 1225 put price. The best i see possible is a 10:7 ratio on a 30-35 point spread and that will need adjustments with the SPX between your strikes. Anyone else see the same thing? PS If my math is off, excuse me, its kinda late and i should've had less coffeee today