Hey Mo: I just started reading riskarb's new journal. Ugggh! What's it gonna cost me to have you translate
Coach: Whew! I have been sweating bullets the last two days. I had sold 30 1245/1255 bull put spread on 5/15 when the SPX was at 1290. I had a partial SPY hedge on but not near enough to cover my total margin risk. Once the market started to move south, I should have closed or rolled the position but the market was moving too fast at the time and I would have been at the mercy of the MM's and would have had to take a substantial loss. Yesterday, I also had the same feeling that the market would level off and that there was no news coming out today which would give us a mild set. I was lucky you had the same short to provide insight. Your post yesterday reaffirmed what I was thinking. What I never anticipated was the 10 point drop after 3:30PM yesterday. At that point I would have had to take about a $6,000.+ loss. In the end though, I think it just came down to dumb luck(emphasize dumb) on my part and it's not something I would want to go through again. I also will have a post it on my computer - Remember 1245/1255-May 19, 2006. Thanks again coach for you foresight and input to this thread. I also want to thank all other posters, (Mo, Rally, Riskarb, Cache, etc.) whose insight and critical evaluation has taught me to seek other means and methods besides credit spreads to increase my overall awareness of the options.
Ha! Well since, Riskarb is charging for educating me, I'll just pass on the costs to you for translation services LOL. Have a good day all, I'm off. Aardvark, I'll get back to your questions tomorrow if OK. MoMoney.
Here is a 2 year chart on the SPX. For those who have followed my posts the past few months, i wasnt comfortable opening put positions until we got our correction. I think the correction is now here. There is maybe a lil more room to go down(if the 200 MA doesnt hold) but i do not see us dipping below 1240 and staying there, if we go that far. 1240 is not only a major support area for this bull market but is also the breakout level of the October's rally. I'd say this is a pretty good entry no matter how far from the market you position yourself. Of course, all this TA mumbo jumbo goes out the window if this is the end of the bull market and bad news keeps coming out. I am going away for a few days. Everyone have a great weekend! May results: 1335/1340 for $1.6 credit = worthless Return on Risk 47%. June positions: 1235/1240/1355/1360 IC for $2.95 credit.
Looks like my caution might have caused me to miss the boat. Still, better to not chase a trade an receive a really poor credit. I gotta say, the fills on the put side have been horrible the last several months.
Riskarb, In your previous post, you recommend closing out the shorts with less than 2 weeks left to reduce gamma risk. On diags, would you recommend the same thing ? What happend if the shorts is not in the money but expensive to buy back ? Do you scalp against the delta using stocks or future or what ? Thanks, -Nick
Hi Nick, hows your double diagonal going? Not quite as sideways as you'd have liked this week huh? Nice to see the journal is still ticking along. RE: gamma scalping - this really is best done in the last two weeks when kurtosis kicks in IMO so I would say the recommendation does not apply to the time fly position. You can always scalp with options too. Right, really must go damnit! MoMoney.