Trade Discussion

IncomeLab Forum Forums Income Lab Trade Discussion

This topic contains 164 replies, has 18 voices, and was last updated by  Igor 3 years, 1 month ago.

Viewing 15 posts - 151 through 165 (of 165 total)
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  • #5714

    Igor
    Keymaster

    Igor, I made an error executing the latest JUL01 IC and entered in the monthly cycle (JUL14) using your strikes. These are around 13 and 12 delta there. I got insta filled for 2.05 credit per spread. Should I bail and enter in JUL01 or just stay in this one?

    #5715

    Igor
    Keymaster

    Andras,

    Dont rush out of it, you can manage this IC same way you’d manage any other IC. This is slightly ‘lower’ probability IC. Keep an eye on short delta, if it increases by 10 then you’ll need to hedge and if you can close it for 20% of credit in a week or so then it’s a good exit as well.

    #5718

    Igor
    Keymaster

    OK, so management begins if 13/12 (sold put/call) delta –> 23/22, right?

    #5719

    Igor
    Keymaster

    IF you get to 20-22 it’s time to start looking for adjustments.

    On the flip side, IF SPX churns sideways for a week or two and this IC gets to 53 days to expiration and short strike’s delta comes down to 10, this IC may be trading for 1.80-1.70 or 15% of credit (from 2.05 entry), you may consider taking it off then or continue with the same management plan.

    #5720

    Igor
    Keymaster

    OK and plan is to cut net delta in half if/when short strike delta goes to 22.
    Thanks for all your help!

    #5725

    Igor
    Keymaster

    Thanks Igor. Find your comments and prompt responses most helpful. I have noticed that the width of your trade seems to be considerably larger than one STD, but that your wings always seem to be 10. Can you provide some insight for me as to why you have chosen those particular widths for SPX? Thanks as always for your help. Lynn

    #5727

    Igor
    Keymaster

    Lynn,

    Thank you for your input. For my Iron Condors I pick short strikes with a delta around 10. These strikes are slightly outside of 1sTD which gives me a slightly higher probability of profit. I also choose to buy the wings 10 points outside of my short strikes because I dont think going wider provides a much greater return on capital. I also trade weekly expiration cycles and sometimes they dont have 5 dollar strikes available when going out far out of the money. I know that 25pt wide ICs would allow me to deploy more capital per 1 contract and I’d be receiving a higher credit, but I dont think that ‘extra’ credit is worth the extra capital that I’d have to put at risk. In a nutshell, whether you choose to do 5, 10 or 50 wide ICs the key is doing the same trade time in and time out. If you do the same trade over and over you will understand how it behaves, what credit to expect when entering, when fills to exit are realistic and so on. I do think there are times when going 5 wide vs 10 wide is more advantageous, but unless we’re talking about trading 10MM or more it doesnt provide too much of an edge.

    #5733

    Igor
    Keymaster

    I noticed yesterday that the 8 JUL 16 SPY weekly options are pricing in ToS with 25pt spreads, not the usual 10pt spreads. Are you guys seeing this too? How would approach or adjust the strategy to these wider strikes?

    #5738

    Igor
    Keymaster

    I’m seeing 25pt strikes too. I’d wait until they open 10pt strikes or avoid all together.

    #5979

    Igor
    Keymaster

    Igor,

    When do you plan on putting on the next IC? From what I’ve observed you generally go every couple weeks at about 60 DTE. If you do that here you would be going with July 5 weeklies and that would put you out of sync for the August monthlies. Do you like to keep in sync with the monthly options or is that not a consideration?

    #5980

    Igor
    Keymaster

    I may look to enter another IC in JUL5 as it nears 55DTE. Aug is 80DTE right now and when gets to 60DTE I may look to put on a trade there as well, depending what other trades I have open at the time. Remember, between JUL5 and AUG3 there will be AUG1 and AUG2 (they’re not listed yet). In general, I look at what OTM strikes are available, some weekly cycles have 25pt wide OTM strikes so I’d avoid those. Monthly usually have 5 dollar strikes open so those are a little easier to work with. You also want to pay attention to where SPX is and what your outlook for near term is. You dont want to have a bunch of short delta trades on if SPX looks like it’s about to break out of a range (to the upside).

    #6012

    Igor
    Keymaster

    For those that were asking “Why not do five 20 wide instead of ten 10 wide ICs”

    Source: https://www.tastytrade.com/tt/shows/market-measures/episodes/iron-condors-management-and-wing-width-05-09-2016

    #6139

    Igor
    Keymaster

    SPX weekly options that expire this Friday, June 24 are pricing in about 40 points in either direction. SPX currently sitting around 2090. I wanted to take a look at where all open positions be assuming this move (I will not count any volatility increase or decrease, but I assume volatility would decrease once this BREXIT is behind us).

    SPX JUL IC:

    SPX AUG1 IC:

    SPX AUG IC:

    All positions have a decent amount or room to the downside. On the upside, I’ll close the JUL4 call hedge and look to roll up the Bear Call spreads for JUL IC. For AUG1 IC, I’ll look to roll up Bear Call spreads and increase position size to full and AUG IC will hedge with OTM options IF/WHEN 2205 call’s delta reaches 20-23.

    #6143

    Igor
    Keymaster

    Also…

    here are some of my thoughts about the current option pricing:

    The Move In the VIX Doesn’t Matter

    #6201

    Igor
    Keymaster

    Interesting question came up in the chat:

    Q: Igor why did we go full size in the monthly AUG IC and only half size in the weekly?

    A: Positions that are closer to expiration are move sensitive to price changes (gamma) I didn’t want to be short more than ‘slightly’ in that position, if we jam higher I will roll up
    and add size. AUG position is less sensitive to price but more sensitive to vol, so P/L curve is smoother there even at full size.

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