Would you trade this?

Discussion in 'Options' started by matador04, Nov 10, 2009.

  1. Looks good for long term, eh?
     
  2. Assuming it's not currently at 3 with a yearly range of 0.1, a daily volume of 100, and wasn't created with MS Paint, I might consider it.
    What the heck is it, some kind of straddle?
     
  3. Long term Iron Condor expiring Jun '10, long strangles for Nov, Dec, Jan, and Mar.

    Max loss 1345
    Max gain on downside (bankruptcy) is 8445
    Max gain on upside unlimited

    Credit 590
     
  4. mike007

    mike007

    How is it a max loss of 1345? Your graph shows a max loss of less than 1000.

    It would help if you gave us the underlying, then options strikes.
     
  5. ptrjon

    ptrjon

    how much would you be paying in commissions for this position?

    Also, you have to ask yourself if you wwant to tie up your money for that long... there's a lot of opportunity risk here, and I prefer to trade in more short-term options, .5 - 3 months.
     
  6. I increased the size to get max loss of 1345.

    Details:

    June 2010 IC
    Long 20 put k=3
    Short 20 put k=4
    Short 20 call k=5
    Long 20 call k=7

    Nov long 10 put k=3, long call k=5
    Dec long 10 put k=3, long call k=5
    Jan long 10 put k=3, long call k=5
    Mar long 10 put k=3, long call k=5

    Citi closed at 4.18 yesterday.
     
  7. spindr0

    spindr0

    No, I wouldn't trade it. Too many legs, too much slippage, too many commissions, too much premium wasted on near term long options which expire soon and leave you with a widening break even each month.

    If you have to trade something like this, just buy 20 of the Mar 3/5 strangles as a hedge for the Jun condor.
     
  8. Also, if you look at the trading ranges over the last 8 months, it reels in your chart edges a bit (more likely to hang out between 2-6 than rocket to 9 or plummet to 0). There's some pretty decent support around 2.5 and it hasn't been tested for a while, so that hamstrings your downside direction as well.
    Seems like a lot of commissions and effort to set this baby up. You're basically buying a ton of cheap OTM options and hoping for a big move. And this one would be expensive to unwind if you decide that you want to bail. With the government more likely to bail out a big institution than let it fail, I'd guess speculation to the upside would be higher probability than downside, but I'm guessing that C bounces around or slowly trends up/down for awhile while your options slowly erode.
     
  9. Thanks for the points...
     
  10. erol

    erol

    what is "slippage" i keep reading it...
     
    #10     Nov 11, 2009