what are the risk of this combo?

Discussion in 'Options' started by newguy05, Apr 6, 2011.

  1. Thinkorswim virtual trading.
     
    #11     Apr 8, 2011
  2. + BOT 2 GOOG APR 15 '11 + 605 Call + 555 Put Strangle 8.000
    + SLD 2 GOOG MAY 20 '11 580 Straddle 42.900

    closed it out, bleh trade made 250 bucks :p I did not expect the front month IV to go from 44 to 100 in 4 days!!!! holy batman.

    --------------------------------------

    Opened the following going into goog earning

    + BOT 5 GOOG APR 21 '11 575 Straddle 31.900
    + SLD 3 GOOG APR 15 '11 + 585 Call + 570 Put Strangle 20.200
    + SLD 1 GOOG APR 15 '11 + 595 Call + 560 Put Strangle 12.600

    I couldnt decide between which backmonth to use, apr 15 or may. Apr has close to double the IV(50) as may(30) which is bad for the vol implosion that will ensue, but it's 40% cheaper to open(good). In the end decided to use apr as it will be better if goog really gaps like last time (think it went 60 pts over night).

    Looking to close everything out tomorrow
     
    #12     Apr 14, 2011
  3. doh didnt work.

    the long 5x 575 straddle i used as hedge ended up flat after goog dropped $37 as the price didnt gap enough + vol implosion, but the price did gap enough to turn my short strangles into a loss.

    closed 1x 560P at 16 and 3x 570P at ~28 for a net loss of ~28pts ($2800).

    Left the 5x weekly apr 575C as a $100 lottery ticket.

    Hindsight 20/20, anyone know a better way to play the front month 100 IV going into goog earning?
     
    #13     Apr 15, 2011
  4. spindr0

    spindr0

    Double reverse staddles and strangles are interesting if 2nd month IV is inflated and/or you expect a large move in the UL. take a look at a short Apr/long ATM double straddle.

    If back month isn't very elevated but there's large skew, long doubles are interesting.

    In both cases, slightly ratioing one month can help tweak the P&L graph.

    It takes a lot of screening and modeling to find good candidates. All are a bit scary when the EA is post 4 PM the day before exp. because you have only 1 day to get it right. Intraday exit usually provides better returns than EOD because IV implosion isn't equal in the AM.
     
    #14     Apr 15, 2011