Coach: I know you have purchased VIX May calls for hedging against a black swan type event. To take this one step further, what do you think of placing a contingent order to sell the calls if the VIX reaches a predetermined amount. This is all hypothetical but for example: Say you have sold the 15 May 1215/1225 put bull spread where margin at risk is $15000 and also purchaced 15 VIX May 20 calls. Also assume you placed a contingent order to sell the VIX May calls at 10.00 if the VIX reached 30 or greater. OX lets you place this type of trade. If there was a black swan type of event and assuming the above contingent order was filled if the VIX shot up to 30 or more, the full amount of your margin at risk would be protected. Thiis assumes the calls will be worth 10 if the VIX is at 30 or more. I know we don't really know what will happen to the calls and there are a lot of ifs, but what do you think? Thanks for you response.
we're doing REALLY cheap gamma here its not necessarily better its just that with his short put strike at 1225 the probability of that expiring ITM is 6% (as of today) which I would be quite comfortable with so why not widen the strike to get more $$. More margin at risk but very high probability of success. Then his short call is like your's only 5 pts apart (on the 1345/1350) which is pretty manageable.
Also as Coach has said many times in this journal there are so many ways to do this and the individual has to do what feels right to them...ie what lets you sleep at night. I don't think any of us trade identically.
On the commercial break from my radio show But you all knew that because you are listening intently right? www.washingtonbusinessradio.com LOL... Jim Pos, will get to your question shortly
Coach, You PROP traders are killing us retail guys..... we used to be able to count on you for market direction (at least a sure change in direction)... but his scalping is really confusing the Market Makers.... Now we don't have any edge! Murray
OK I will say hi to you then! Sorry it is on stock and options and not credit spreads lol,, got to cater to everyone LOL
here is your picture http://www.elitetrader.com/vb/showthread.php?s=&postid=938887&highlight=Jessica+Alba#post938887
actually I did do a stock/call 1 by 2 call ratio spread with a time component and its working out nicely