Want to add that on put diagonal spreads in a black swan event, you have a great adjustment choices to roll the short to the next month and roll into a bear put spread at a small debit given the inflated premiums in the longer-term months, or you could roll into a credit spread in the long month or roll into a reverse calendar. I think the better adjustment potential makes the put diagonals easier to deal with in a black swan event, but in no way is hedged from such an event. Just my opinion in viewing what could be done if the market falls to fast.
You guys ran ahead for 2 pages while I was out, gonna take some time to catch up to the great discussion on diagonals. Not to pat ourselves on the back, but this thread has some of the best option strategy discussions I have seen anywhere when you look at the credit spreads and diagonal spread (thanks Murray) discussions. Not to mention the differeing views on each strategy and how to play them as well as risk management. Great contributions from newbies and advanced traders alike! Thanks you all for making me a better trader
I'm trying to stay out of the way and just read and learn, but I'm haveing a hard time with the abbreviations. I've tryed investor words.com but I can't seem to find most of them. Can someone tell me were I can find the definitions? Thanks
Hello everyone. I am interested in learning more about this SPX diagonal that some of you have been doing. I have been trading SPX spreads for a while, but my diagonals have been more like the following: BTO Dec 1300 STO July 1250. On occasion, I have traded diagonals similar to the ones many of you have been doing: BTO a September and STO an August, with the September being further out of the money. My questions are the following: 1) When is the best time to establish such a spread? i.e. closer to expiration or the full 4 or 5 weeks from expiration. (I've actually done this with success during expiration week in the past.) 2) Are any of you worrying about this "black swan" type of event where no adjustment would be possible? 3) How far out of the money are you going with these? 4) What is the % profit you are shooting for? 5) I know volatility plays a role, but so do current events. With all that is happening worldwide, do you believe that now is a particularly dangerous time to play this spread? Thanks in advance for any answers. AZD
Theoretical Options prices Website Needed? While facilitating this Mondays investment club meeting, I'm in need of a site which will pull option string quotes as well as theoretical values. (The University's firewall, where we meet, doesn't allow my regular account access for quotes) Does anyone know of a website which provides theoretical values? Thanks, M~
This depends on your market outlook and your personal risk tolerance. We look for opportunities rather than specific time frames. That is, enter when volatility is low, or relatively low, with your outlook that it will increase sometime between now and your expiration. This just allows VEGA to work with you, rather than against you. If the opportunity comes within the last week or two.. you may decide to move to the next month out or take two separate positions... it's a matter of personal preference. Each person has his/her own risk tolerance. My personal preference is % based on particular strategies, at least half of which are Black Swan proof. Cash is one such strategy! This really depends again on your personal risk tolerance. We strive to place one diagonal at where we feel the market may settle at expiration, then place another 25pts further out. It's just a matter of personal preference. Last month we placed three diferent diagonals.. all of the shorts expired worthless and longs profited. This again is determined by the market, not so much by the placement of the trade, although you can be more or less aggressive based on your personal tolerance level. Does anyone know what will happen tomorrow? The market is historical data... the instantaneous moment in time.... becomes historical, but it may create a relative opportunity. So it again is a matter of your personal risk tolerance. Usually, these are the times when most traders make most of their profits... think of it as an opportunity. In most cases... movement = money. Not necessary true for this forum.
Most of the abbreviations used are symbols for stocks or indexes. Examples: RUT, MID, RUI. Those are not abbreviations; they are symbols for the Russell 2000 Small Cap index, the S&P mid-cap 400 index, and the Russell 1000 Index respectively. Mark