The few times I tried it, the index closed way off away from pegging the busiest volume. Once only it worked.
it's less predictable than the old days... but it's there; only change is we now have dollar increments.
Forex Forex You only bought one contract? Wow! I can´t even get the TOS platform to accept one contract. So I trade 2. Yeah I checked before market opened and it was going to Gap a small gap. It did and I planned to do that other trade of yours in reverse for the GAP closing back at the beginning, which it did also, but somehow got in the wrong weeklies. Lucky for me it was a paper trade and nothing lost. I haven´t made that mistake for about 10 months when I used to trade credit spreads. I see a pennant forming, I´m looking for the market to go up Monday or Tuesday and change trend. Good job I´m in long straddles, it doesn´t matter, only a question of time. Oh yeah! I forgot I have a paper trade in PUTS. Well we will see what we will see on Monday. I was looking at Bollinger bands again, for the thousandth time. Wondering if one could trade long straddles when that narrows. You can´t predict direction is the trouble. Often they make a short change for three bars and then reverse into a longer trend as well. Never could get those suckers to work predictably. But maybe with the Long Straddle?
Just running my volatility studies and marking them down before the close. Vega is puzzling. It has dropped from .10 to .9. That is supposed to help right? Meaning market will go up? What is it telling me? The trend for IV is steadily but slowly increasing.
10 mins before the Friday close. The market has broken out of the pennant to the upside. I didn´t think it would do that until Monday morning.
Vega drops with time. A Jan12 straddle will have a higher vega than a Dec11 straddle, all other being equal.
I've found that it is useful to think in terms of root-time vega (vega divided by the square root of time to expiry). Brings options of similar maturities to the same scale.
Wow, those two missives from SLE and Atticus were interesting. So basically you are hinting that my Vega drop is due to time and is not really telling me anything?
I´m trying to work it, so I make a profitable once a week long straddle trade. That said, I didn´t make anything this past week. I am however holding two long straddles with real money. Essentially, I´m trading the hourly chart. The movement is up and down within the longer weekly bar. Not making any money this past week doesn´t bother me, because at the hint from the lovely lady, DerivativesG, who said she makes money working for the hedge fund, with 3 rd month out options in long straddles, my one sample showed me that I could see my two long straddles I´ve accumulated this past week, could recover with IV ballooning in the second week. I did add a second long straddle, at 75 ticks apart successfully. I was tryiing for 1 strike apart, but didn´t get it. The only worrisome thing is that IV is increasing and the VIX is up to over 20. The spreads on the two long straddles I´m holding are overpriced, the ISE shows. Not much, but a bit. We have broken out of the intermediate term bull trend and are now in the growing range bound conditions between VIX 19 and Vix 25. Increasing IV means while my premiums are swelling ( already made the market makers spread debit on one long straddle and just under that in the other long straddle,) I have to still make back my commission costs. The second week should do it this coming week, as the prices gyrate up and down inside the weekly bar and I have already successfully moved to 3 rd month out options. We shall see what we whall see? If I can close both long straddles for a profit this week, that would keep me on track to gain 5% a week per bet, hopefully per single straddle per week. Long straddle profits this way run between 1% and 8% so far in training. If however, the week to come, moves up slowly, my premium will deflate I think. If it surges I will profit. Not at all sure I can hold for 3 weeks to get a result? Hasn´t happened to me yet, so have no reference on this. On the other hand, the DMI indicator is predicting a setup for a move of some kind. All three lines are below the 20 line and still going down. Which shows that some sort of move is imminent in a few days. The index is between my two straddles, so I guess it doesn´t matter which way the move goes, up or down. It is just the acceleration, velocity and pressure that matters.
Iceman1 I agree with you, the money is in directional trading. I plan to trade the long straddle and when it predicts a trend direction, then move to a straight buy in puts or calls. The money is in the directional trading for sure. Also in the compounding. Which is when you increase your bet size, as you add profits. Anybody whoever went from $5000 account to $1 million account in two or three years, traded this way. I´m dithering and undecided so far, whether to just drop the one side of the long straddle and let it run, or parallel the long straddle and buy puts or calls seperately, once a trend is confirmed. So far, I´ve been doing badly buying directional trades and losing. Mixed bag though, some wins and some losses. ( paper trading ) Compounding though is a double edged sword. Ask Howard Cohodas on here with his credit spreads. You can make money, but you also lose a lot of money also.