Thursday, May 16, 2013
Hi all, Well this time I am really back and looking forward to posting my trades, answering question and getting the Blog back to producing winners. I am still on a BOD and have some other duties but now I am trying to make the blog a bigger part of my duties. I love the interaction and trading ideas offered here. I apologize for being absent so much but other duties have distracted me and now I am back on track.
First of all I have again changed directions. As most of you know I started trading daily around 15 years ago. I have made a fortune and lost a lot of it. I have been up and down as I tried different methods. I have settled on a method that I now feel offers some great rewards with as little risk as can be expected.
I get many request and notes asking how I started with selling puts and now do spreads. The answer isn’t simple but mostly it revolves around the ability to trade weekly options. When I started there were no weekly options. Most of the rules I suggested were pointed toward how to trade monthly options. The stocks I now use (listed below) work best with weekly options and offer a good ROI (return on investment). I try for 1% a week and will show how I bump that up some.
OK, so what do I do now, it is nearly always CONDORS. I have quit doing the longer term spreads. They work but I find that all too often the stock moves a bunch and then I’m trying to catch up and then the stock fall and I caught up for nothing. That of course is condensing it but now it is Condors pretty much total. That of course has me trading both puts and calls.
So my rules for selling puts as outlined in my book still apply and give me some basic rules and guidelines.
For those that do not know condors. Here is a simple explanation,
Say the stock is at 500. I buy the 550 put and sell the 555 put. I hope to make .05
I then or in a combination if your brokerage offer that. I will sell the 545 calls and buy the 550 calls. So this condor has 4 legs. I buy one put and sell the next put & and I sell a call and buy a call. Only one side needs maintenance as only one side can end up in the money. If your condor has strikes that are 5 points apart, as above, then the maintenance is 5 for each option. If you have an account of 10K then you can do 20 options. If you can make .04 on each side that is .08 total in two or three days for 1.6% ROI in a week.
I get request often for what stocks I am now using. Well for the current condors I use –AAPL, GOOG, NFLX., AMZN, XOM, TSLA.
These stocks offer decent premiums and have weekly options.
One golden rule for those not used to doing condors is (and this apply to most positions) open position no sooner than Wednesday. Don’t violate this rule.. you can make plenty of money waiting until Wednesday and you will avoid losing your bankroll. Example I was looking at GOOG on Monday and thinking maybe I will open a positions. Well on Tuesday goog moved a bunch and yesterday it moved 27 or so points. If I had done the Monday position I would be losing many thousand. I was thinking of doing 90 of them. But when I look today there are good positions and only a day or two left! With the politics and the rest of the world situation there is no reason to push the envelope.
Tomorrow I will write on how to correct a bad position.
Good to be back
Jerry
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1 – 200 of 264 Newer› Newest»My SPX ICB 1625/1655/1685 just closed for my 150 profit. Got in yesterday ~10:45AM, got out just now for 3% on total 3K maintenance or 12.35% on at risk (3000-1785 credit on sale). 1 contract only, still not comfortable but will take my bite of cheese each week.
HI Tax, great to see you are still making some money. I am a believer in waiting until Wednesday to open new spreads especially with volatile stocks except….
However, and this needs to be understood, I opened some GOOG puts in ½ of a condor today for next week. I will open the Call side of the condor on maybe Monday. But what I did with GOOG trading around 905, was that I opened some 810 and 815’s. So I bought the 810’s and sold the 815’s. I made a nickel and will probably make that on the call side. The idea is to not end up with these. If GOOG moves up on Monday I might go to the 820/825 and if on Tuesday it moves more I might rotate into the 830/835 and on Thursday I will roll again and even Friday morning. If in total I can make .03 on ea. side I will net .06 each time. If I can do that 4 times with safety staying always a long ways form the current stock price I might make .24 total. That is 4.8% a week. Now conditions do not always work this way but even if you can rotate up just twice you will make around 2% a week. So that is how jerry is trading GOOG at this time.
As always trade safe and if there is a full week left then leave 90+ points when opening the first stage of the layered condor.
Good luck all and fun to be back. Jerry
Tax, I am paper trading this one each week with solid results. I like the limited risk and big starting credit. Thanks for sharing! This week, even though the SPX had moved up only ~8 pts I went ahead and rolled up the call side 20 points. This cost 7.95. My initial credit was 16.90 so I'm left with 8.95 credit. I now have an I/C and have put the closing BTC orders at 7.45 (-1.5) and 11.95 (+3). The new I/C is trading at 9.55 so I have a paper loss of 0.60. The net price needs to move down 2.10 (9.55 to 7.45) which could happen on Mon if there isn't a big move on the open. Just trying to understand how the rolling process works. Definitely expensive on comms and I haven't factored that in yet...
Jerry,
Great to see you back, hopefully for good.
Sure defined risk is better than undefined, of course it returns less than being naked.
By waiting as long as you do to enter with weeklies, you are really cutting your cushion down to minimums, I would imagine in most cases single digits. How are you protecting yourself here or are you letting it ride out and then rolling if nessecary?
Hey Jerry, been selling calls successfully against my PSX leaps for several months now. Works well in an 'up' market, but then again, what doesn't? Are you still doing these or are you completely back to the spreads?
A more careful reading of the above post informs me that you have basically answered my question, tho I am somewhat surprised when your basic strategy changes. Think the sold calls against LEAPs works best with a gradually ascending stock...but of course the question is, which ones?
HI all, My goog's all expired this week and still well in the money.
..M& waiting until the last few days with most stocks would require close strikes ..not with GOOG.. you can open one on Wed and maybe Thur and still get 1% or better when done with a I/C and have 40 points on Wed and maybe 30 on Thurs. So no need to move to close to the current stock price. Cushion!
Ihaveoptions; Yes I do change strategies now and then. Part is that I find another I want to try and sometimes in some markets the previous one doesn't fit well? Just me, and for those that have a plan that works no need to switch until something goes off track.
This week I am again going to use goog. Depending on the open on Tuesday I like the I/C of – GOOG at 873 put side 820/815 and call side 920/925.
I might wait until Wednesday or later if goog is moving fast. And of course adjust the strike used accordingly. My plan is doing what I call a layered Iron Condor. I open the first set of options pretty far from the stock and try for 1+% then in a day or two roll those a strike or two closer to the stock for another 1% if possible And on Friday morning I will do my final roll to try for and other ½% if possible. For the last few weeks I have been getting better than 3% a week doing this and still trying for safety with lots of cushion. A couple of times when goog moved up or down I only rolled the safer side up (or down)
Good luck all
Jerry
Jerry - did something similar with the SPX. Placed my normal put spread on Tues, then around 10:30/11AM Fri after getting a feel for what the market might be doing, I placed a 1625/1615 put spread for .45 @ 1639. Just didn't see a 14 point drop coming in the SPX. Then around 2PM with SPX @ 1647, I placed a 1640/1635 spread for .25. By then everyone went home for the holiday.
Jerry and/or others,
With respect to the weeklies SPX, AAPL and GOOG puts, how much, in your experience, do they move on a weekly basis? I guess if you know the average true range on a weekly level, then you can try to set up your positions with a bit more accuracy, correct? or do you base your strikes on a pure delta play, ie go for deltas that are say 0.1 or lower (90% or higher probably to not hit).
Sai
On my index plays, I will look at delta first and keep it around
.06/.05, then I will also look to see what the recent weekly moves have been. I also try to target a 1% roi will placing the position on a Tues/Wed. With today's pop, I have been looking at call spreads for Rut, NDX & SPX but I'm not getting enough cushion to feel comfortable. I placed some 2850/2825 NDX put spreads on Fri to take advantage of Mon close and Tues bullish scenarios. Its working.
Placed sopme AAPL 465/470 May5 call spreads and trying to deceide on 425/420 or 420/415 put side.
is this blog still alive?
Barely
Too bad, I use to enjoy reading the diffrent strategies as I am a avid options trader. Does anyone know of any useful option sites or blogs?
I have found http://inthemoneytrades.blogspot.com/
Is really good and they interact quickly to posts..And a new one I just joined...
http://tastychat.boards.net/
I used to love this board, but Jerry is MIA to much. No flow anymore.. Honestly Taxman should start one I would be there stat..
Sory to see the potential demise of this blog. Really enjoyed everyone's input. Market popped and its a summer Fri. I just did the following lottery play
SPX 1625/1615 put for .40 @ 1638
1650/1660 call for .30 @ 1638
I have .70 to cover whichever side goes south.
Tastytrade is now free for anyone interested, best trading info online IMO.
https://www.tastytrade.com/
Hope everyones trading is going well, this pullback was great, hope we get some more.
Damo.
New to this blog myself, but have enjoyed everyone's input. Would be interested in continuing on a forum somewhere. Let me know where you go, or I can start a freebie forum online for us.
Wrote SPX BeCS at the high today for a gamble: 1645/1650 for 1.00. :)
Josh, For this week?
Nice Josh altho SPX closed at 1643.
Gave you a little heartburn??
My SPX IC mentioned above closed without incident and made me a cool $500 on 8 contracts.
Why can't we just stay here!!!
Do we really need to create a new thread every so often???
Tax, I've been doing same spreads/IC as you the past couple weeks, just a little bit out more for cushion. 1655/1660 and 1620/1615 for obviously much less return but this is still on the edge of comfort for me. What is your exit plan?
Vos - After watching the open and the market go stagnet @ 1638, I figured the probability of SPX dropping 13 points to 1625 was slim especially on a summer Fri so I placed my 1625/1615 spread. Then I saw the market start to rally and saw the premium avaliable on the 1650/1660 with 12/13 points cush. Again I figured prob low of a 12 point pop. That gave me .65 cents after commish to close out a threatened side. To be honest, I had no exit strategy because I felt the cushion would never be threatened. I probably would have closed the threatened side if the price approached .65. To me it was a lottery play and I would have been willing to take a small loss if I had to. I had a very successful trading week and the risk/reward looked good. Especially for a summer Fri.
This was the third week I did this trade. The previous two were only put spreads. But then I saw the opportunity of placing the call side to give me more $$ to protect a threatened side and still leave me a profit.
Agree with taxman, let's keep this blog going. Quality vs quantity blogs is the key
Hi to all. I have been trading Jerry's method outlined in his book, using an app called Optionspro which has now been removed. Can anyone recommend ANY software or website which can screen stocks using Jerry's method?
I was thinking it would be a 25-30 point move on the jobs report. Also, the previous Friday I think the market tanked fast and hard the last hour, which is why the premium was pretty high for you at that hour.... Opened some 1565/1550s today for 0.15 at 1 PM and then the market dropped 10 points. Crossing my fingers.
Vos - I sit at a desk all day, so I can watch the markets. After the opening gap, the markets didn't do much, you also have to be aware of how slow things get in the market on a summer Fri. So I started looking at various spreads and premiums. Since the market had an upward bias I looked at the put side which always gives more premium. The 1625/1615 gave me 13 points of cush which I translate into the Dow moving 130 points. That wasn't going to happen. Once placed, I checked the call side just to see if there was any premium to be found and lo and behold 1650/1660 gave 12 points of cush and decent premium. Once placed, I now had .65 to close a threatened side, so I watched and nothing happened. Everything expired worthless. I snatched away my hunk of cheese from the big boys. I'm happy and lived to strike another day.
I try to nibble away with small positions in a variety of areas. I always play NDX, RUT & SPX. I am now playing the weeklies on aapl & tlt(10yr tbill rates) and I play monthly calls on VIX. AAPL & TLT juice my weekly roi to almost 2% now. I will not trade aapl near eps tho. I also still have my aapl leap that has now broken even and I still have some 30 weeks to sell weekly 450 covered calls against at an average of 250-300 per week. Nice as long as aapl stayes within its 425-460 range.
Taxman, curious what position you are holding on aapl leap, I play aapl and spx weeklies and thinking of getting a appl leap now that aapl has settled into the 450 range.
Luvpa - Bot a Jan 14 450 leap call in late Jan and been selling weeklies against it ever since. Have already recoverd my 5000 initial investment and still have some 30 weeks left. Would love to see aapl get and stay above 450. Have to keep selling weeklies at 450+.
Might have a bit of excitment at this weeks settlement. My shorts on the weekly put spreads are SPX 1575 and NDX 2875. Raises the blood preasure just a tad.
Been placing aapl 450-455 & 410/405IC's today for ~.33 with aapl @ 434
Not placing any TLT with the FOMC and Bennie's clarification on tapering QE3 on the agenda. MIght/should affect t-bill rates a bit.
Placed RUT 935/915 puts and 1020/1040 calss for .20 per side. Also VIX July 23/28 calls for .37
Dipped my toe into a TSLA June put spread. A seg of my newsletter gave me an idea and I noticed the Jerry commented on it in his write up. With tsla ~100 I placed a 90/85for .20. tsla did me a favor today closing at 103. Need to figure if they are weeklies or monthlies.
Hi Tax, no weeklies in TSLA.
Damo.
For what its worth - don't know if anyone is out there anymore but I've placed the following this am.
NDX 2725,2700 for .25 @ 2867
RUT 910/890 for .20 @ 957
SPX 1515/1500 for .20-.30 @ 1587
Trying to take as much cush as possible in this volatile market.
Some of us are still out here ! I got filled this afternoon on RUT 920,910 for .20 at 962 NO fill on spx though. Thanks for the post!
Taxman I follow all of your posts and duplicate many of them. Hope you stay on the blog
Still here
I still check in every now and then digging for something of value.
I trade similar to Jerry's original publication. I post my trades on twitter under the alias, @strangleprofits
for anyone out there I just placed the following lottery play for this week on SPX
SPX 1615/1620 Call for .25
1590/1585 put for .30
SPX ~ 1603 Watch and wait
Don't place that trade - just got fries
Were did every one go? Found a good one on Tasty for any buyers out there.
http://www.tastytrade.com/tt/shows/MT/episodes/130618_MT
Tasty Trade is now FREE best dam value on the plant!!
taxman. Good trade, I usually do 10 options on my spread, what number do you usually use?
Tax,
I am normally opening spx/rud/ndx on Tuesday afternoon, or weds morning. With the July 4 holiday, would you go a day earlier to monday afternoon ? Thanks in advance..
Luvpa - On those Fri lottery plays I usually trade 8-10 contracts. My 1615/1620 got fried on that late morning pop. Closed it at a pretty good loss. Once the short gets threatened you have to act, you can't hope for a selloff into the close to save you. So I closed it. Reopened a 1625/1630 to get some of the loss back. Was entirely to close to the current price and placed it way too early.
NA - I've been debating that issue all weekend. Markets are closed Wed PM & Thurs. Big thing is the jobs report Fri AM. I'm assuming the normal Fri AM settlements on NDX & RUT will take place like normal, so that means I have to be comfortable with the Wed afternoon closing values. Market bias should be up this week, so I will most likely place put spreads on Mon morning. Might place more SPX than RUT/NDX since SPX will trade on Fri while I have no control on the others once the market closes on Wed. I'll post my trades.
Might want to look at TLT weeklies. Placed some 106/103, 105/102 spreads on Fri PM for some good prmium. 10yr rates are up this AM, so TLT is dropping. TLT never made it much below 108 with the FOMC QE3 comments 2 weeks ago.
Trades
SPX 1555/1535 @ 1623 for .20
1550/1530 @ 1621 for .20
Not feeling comfortable about ANY trades with the short week, vacations and jobs report. But with ~70 points cush which I convert into a DOW drop of 650/700 points, I don't think will happen.
NDX not giving me any comfort up 35and the only spread giving any premium is the 2825/2800. Thats 120 points cush with the index up 35. SO if it reverts to the mean you're back to 85 cushion.
Taxman your coment above that 70 spx points = 700 Dow points, is this simply a 10 to 1 ratio nomatter what both indices are at,would high volatility in one but not the other make any difference? Thank you, Cliff
Cliff - Unless the NDX makes a huge move without the DOW, 1 SPX usually equals 9-10 DOW points.
Todays Trades
SPX 1565/1555 @ 1621 for .15
1560/1540 @ 1620 for .20
NDX 2850/2825 @ 2942 for .20
Around noon monday I opened SPX and RUT, on both Put/Call sides.
Tax - It looks like you stick mostly to the Put side; I know you've said before you have been burned more on the Call side.
I look at the 5 day before opening anything. They both were trending up the 5 days before i opened my position, so I was more comfortable with the Call side since it seemed less likely to keep running up w/o pulling back.
NA - What is your plan now that Egypt & Portugal seem to be in play again. What are your short strikes and will you BTC before the market closes today or ride the RUT into Fri settlement. I know SPX will trade all day Fri
Unless the markets tank today, my closest shorts are 5 NDX @ 2875 and 10 SPX @ 1565 and I will probably ride them into Fri. I am somewhat hedged with 10 call contracts on TZA which is the 3X RUT bear ETF.
My closest are RUT 940/1010 now at 986 and SPX 1555/1675 now at 1610.
I dont like the friday setup. Alot of traders will be out so it should be dead traditionally, but it also means a few can really swing things. I'll BTC RUT 940 at .05/.10 if i can and would like to do the same on SPX, but dont think i'll get a good price so it will probably ride.
Do you all use a Stop Loss on every position, ALWAYS ?
Learn from my mistake...about a month ago I was short 20 Puts naked with a 20% cushion going into the final friday. The market and my stock opened flat. Nothing to worry about. Got a call about 10:30 from the wife of a friend saying my buddy had a heart attack and was in the ER. I hopped in my car and raced to the hospital.
About 5pm that afternoon I got the first chance to check the market. An unexpected court ruling had come out, and the stock was done over 30%. I lost 1/3rd of my account in 2 hours that day.
If someone asked me if i used stops, like i think most of us, i would have answered almost always. Now i answer ALWAYS, no exceptions, and they are set w/in 30 seconds of opening a position.
NA,
Hate to hear it when it happens.
What was the stock?
You should have been put the stock so you should now have shares of it. You should be selling covered calls against it while you have it and also selling more puts.
Hopefully the stock will run up and you will get called out and profit on your original position and then also make extra on your puts.
Good luck
Na, did it gap down? If so a stop might not have helped. In any case i agree that you always use stops. More difficult with options but if you cant watch the market then its better than nothing. The other defense is size of position. I lost most of my account in aapl options and am now committed to diversifying positions and using stops.
I posted a topic about gaps on my blog. Thought I would share some of my thoughts regarding how to avoid and protect against gaps.
http://strangleprofits.blogspot.com/2013/07/gapping.html
Didnt gap down, it opened flat. Judge's decision came out at like 2pm and it went straight down. No one was expecting it, so it took people a litle while to figure it out. I didnt spend a lot of time analyzing the daily, but it was a pretty vertical drop, lol.
Strangle - I didnt get put the stock, and i dont remember why. Its an account on IB and I just took the hit. I have a couple accts and I didnt logon to that acct or trade again for an entire month. I'm not sure if it margin called or what transpired. I didnt even think of it at the time, but i should have gotten put.
On a more recent note..Tax - I waited too late this week. RUT 980/960 for .22 at 1018 and SPX 1600/1580 at 1650 for .25 I wasnt able to get either of them at the Call side; Weds morning was just too late. Going to look at mid-day Tuesday going forward.
NA - Same here. I waited for market reaction to FOMC minutes and with todays gap up I also was late. Placed some
SPX 1640/1620 for .20 @ 1670
NDX 2995/2970 for .20 @ 3035
I'll try to play an SPX lottery IC tomorrow afternoon ~5/10 points either side of SPX index. Has worked pretty well last few weeks. No one around Fri PM
I placed a condor a couple weeks ago when SPX was bottoming around 1580 or so. Figured it wouldn't rise >100 points in 2.5-3 weeks. Well, it was the 1700 spreads and got absolutely burned with my gains for the year with the speech last night.....rolled to 1715 today hoping to gain some premium but still mostly a loss. Crossing my fingers for a couple down days or else the bloodshed continues!
As the Taxman said before, it is call spreads where most of our losses have been.
To clarify = was the Jul 18 1375/1350 put spreads that worked out wonderfully but then added the 1700/1725 call spreads where the market had just a huge rally after the Taper Tantrum.
Vos
I feel some of your pain. After the gap open I placed a July2 NDX
3050/3075 call spread for 2.20 @
3030 thinking the market would gap/crap had to close for 4.00 shortly thereafter. Fortunate it was only 2 contracts. Then I placed a 12 SPX 1690/1710 for .20 with SPX at 1665 again thinking that after the gap, SPX wouldn't continue to grind upwards. Well it closed at 1675. So I'm hoping SPX doesn't have another 15 point rally in it Fri. I just can't seem to stay away from calls. This market is just a relentless grind upward.
Need a little help here.
Just signed up with TastyTrade.com
Those of you who follow TT, what do you follow. I was on live watch with SLM and the 2 guys that follow SLM. I also checked out trade ideas. So far, not to impressed because I can't be watching TV all day at the job.
Tax, you want to be watching GetTasted, with Tom & Tony.
If you can't watch live during the day it's all archived, at the top of the main page click on Shows and go from there.
Damo.
Tax check out Last Call segment the last 20 minutes. They put on interesting earnings and pairs trades. But watching the way you trade they dont trade that way.
@Taxman - Question do you ever do a credit spread further out than a week? I was looking at the SPX about 4 weeks out, with 8% cushion( which I think is reasonable). Wondering you're thoughts before I pull the trigger.
Also do you participate on any other boards (or social media, twitter, etc). I like following your input/feedback.
@Everyone - Which brings up another question - since almost everyone left this blog what other blogs/posts is everyone following?
Tax,
Here's where i came out this week
SPX 1610/1630 for .20 1720/1740 for .20
RUT 985/1005 for .25 waiting on call side
NDX 2975/3000 for .35
Was hoping for 4% cushions, but got closer to 3%. With the markets so high i'm probably more comfortable on the call side, hard to imagine big rally to the upside at these levels. But, i've been wrong before !
ED - A newsletter I stil sub to places monthlies exclusively. I rarely place monthlies anymore. Got lulled into a false sense of security with them. Felt that as the market would move against me, it would eventually correct back to the mean and usually never did.
Took some major hits with them. Weeklies FORCE you to move if the market goes against you because you only have 4-5 trading days. If you are going with monthlies, the sub usually recommends deltas around 8-9 and close the position if the delta reaches 22-25. DO NOT hope the market will correct back if it goes against you. Just look at year to date activity. Call spreads could be dangerous to your health if you don't stick with your plan.
NA placed the following past 2 days
SPX 1620/1600 for .15 @ 1680
RUT 995/980 for .15 @ 1040
NDX 2990/2965 for .20 @ 3083
Also did IC's on TLT & AAPL and a 110/105 put spread on TSLA which I had to close this AM since TSLA fell thru the floor.
I am getting more conservative lately. Afraid of the major correction that is never coming. Won't do call spreads with this unrelentless grind upwards.
TSLA - a perfect example why I don't like to trade spreads on individual stocks. I had been following tsla for a couple of months. After reading about the float, the massive short position and that it was added to the NDX index, I started to trade Bull Put Spreads for the past 3-4 weeks. Did very well, great weekly roi. Well I had a 10 contract 110/105 put spread with tsla at 126. A 13% cushion for ONE week. Goldman comes out with an analysis saying the stock is worth 85. TSLA tanks $18 to 108. Fortunately I close at 118. Yesterday some other brokerage says its worth $200 and tsla gaps up to 120. GO FIGURE. I think I'll stick to indeces.
YOU TT followers
Was just watching SLM on Tasty and his stock and market analysis as to direction over the next 5-8 months was very interesting. Do any of you follow his recommendations?? and with what kind of results.
Tax, Great point on the indices. That and the tax advantages make a powerful argument for staying with the 'big picture.'
It looks like http://strangleprofits.blogspot.com/ can only be read by invite only
I have been following that as well.
NA - Need your thoughts - After this week expires worthless I was thinking about creating a spread for the SPX for August17 at 1500/1550. I don't want to dabble in individual underlying during earnings season. My trade would give me about 8% cushion and around 3% payday (which I'm wiling to accept). Any thoughts?
Strangleprofits is back up.
Technical issues
Tax, SP and all, Looked at SP's blog and saw Tax there as well. Seems we are all seeking alternative to this dying stream. Anyone found anything else interactive to help with the ideas, and interchange we once had here?
@ihaveoptions
regards other sites, a yahoo group I belong to is,
conservative option strategies
the main focus is on monthly csp on IWM. there is also a running simulation on weeklys for IWM and TLT.
New post up on the strangleprofits blog
Trader Lux
How do you hook up with that Yahoo group. I trade the RUT, TNA & TZA(RUT 3x ETF's) and TLT. Would be interested in traders opinions.
To everyone else: Even if Jerry is AWOL, this venue is already set up, why can't we continue to share ideas. If Jerry does come back occasionally the better.
So Tax, its funny you brought up TSLA. I've been taking a timeout since my mega-loss on selling puts, so i'm only trading indices right now. But, before i stopped I had 5 successful monthly trades with TSLA using Jerry's old method. Right now, i'm so happy with indices i'm not sure i'm going back.
Here's some of my reasoning: selling monthly puts took up alot more time reading charts and searching for good setups. Weekly indices takes very little time. I'm compounding weekly instead of monthly. I am 100% out of the market over weekends. With monthlies i need to be alert three weeks a month so its tough if i'm out of the country for work one week. Much easier to only trade indices when i travel one week a month.
Selling puts I can really only utilize 60% of my margin since i need to keep some cushion. With weekly indices I'm going close to 90%. All of these things is leading me to much better returns.
Ed - honestly i dont like the look of any chart more than a week right now. That is part of the reason i'm almost more drawn to the index calls right now. If we were to have a 10% correction in the next month, it would not surprise me at all, and i think the analysts would just describe it as a pause in the upward trend. However, i dont see any scenario where the market rallys 10% in the next month.
And I have really enjoyed being out on the boat weekends with the kids fishing - and knowing my money (trading accounts at least) is sitting in cash and I dont have to worry about something stupid happening with the markets, NKorea, MEast, China, Oil leaks, etc...
taxman,
here is link to group, you can go to yahoo groups and find it also, the guy who runs it is retired military, long time options trader and great teacher, will give you the short no bs answer on any options question, I think you would like it. you just have to ask to join and you are in.
http://finance.groups.yahoo.com/group/ConservativeOptionStrategies/
VIX too low, nothing out there I consider safe. AAPL EPs, no trade.
Nothing there for TLT @ 108.50, have to get within $1.00 to get anything decent.
Did place the following:
NDX 2950/2925 for .25 @ 30042
SPX IC 1655/1640 & 1720/1735 for
.20 per side @ 1693.
Not really liking the cushion.
Hi traders, how quickly another round of earning reports came.
Taxman is right, it'll be great if we keep sharing the ideas and keeping the blog alive. Thanks to all those who shared. I have taken almost half a year off, being inactive. Wow, I missed the rally train.
Didn't like what I see for trading spreads or naked put. In June, with Ben's hint for easing the current QE, TBT rose quite a bit before he changed his tune in July. Up went the market to SPX 1700.
Not in of the trade due to earnings.
Tax - trades below
NDX 2950/2925 for .25 and 3125/3150 for .15 at 3040
RUT 1020/1000 for .15 at 1053
SPX 1650/1630 for .15 at 1695
Was at the Dr tues morning so i opened tues afternoon. Didnt like anything i saw and gave up premium to get more cushion. Been having a good month and didnt want to throw it away getting too aggressive. Dont like the way this market is trading right now.
Been watching Slim on TT the last 2-3 days. Really like his ideas.
Placed the following aapl & goog Aug1 trades today per Slim:
aapl 460/465 calls for .18 @ 438
goog 925/930 calls for .20 @ 891
My other Aug1 trades:
RUT 1000/990 puts for .20 @ 1050
TLT 104/100 puts for .18 @ 107.20
Had a great July4 1.3% roi
Hi all, nice to see this blog still going. I hadnt checked in the last few weeks and thought it was dead. In any case, I've been averaging 3.5-5% ROI for the last couple of weeks. Started trading the RUT lately and having some mixed success. Like playing earnings - had success with BPS on AAPL and IBM earnings. a friend of mine is claiminng making 170% on his options investments, but his strikes are far closer (65%) probs and he claims that his returns are usually 2x his risk. He also has the time to manage his trades since he doesnt have a regular job (unlike me - I dont have time to sit in front of the computer or TV all day). So basically he's in a trade for a handful of days, takes his profits when the direction is in his favor and closes out immediatley when it starts look the other direction. Says he does this many times a day. I guess I can see the logic and math of doing that, but I'm still not comfortable with strikes that are <10% away from the price. Too low of a cushion for me. I'm trying to stick with Jerry's 20% cushion rule but obviously have to wait till expiration to realize gains. However gotta say - 170% ROI cant be ignored either.
In any case, I got burned a little on the RUT last week - got into 1030/1020 weekly and started panicking when it moved close to the 1040s on Thursday. Of course it rebounded to 1050 and then fluctuated to 1040. B/c you cant trade the RUT past Friday, I had to close out Thursday AM and that took a little bite out of my proceeds. Want to know how you guys, esp. Taxman, handle weekly index option positions as it comes closer to the end of the week/expiration if it goes against you? I have optionsxpress and they say that they will close out positions on Fridays before 12 pm if threatened. What happens if the position is close to the strike on Friday? can you still roll it out ON FRIDAY????? that's the big question, as not knowing the answer to that caused me to close out Thurs AM and reduce my profits.
So I wanted to give my friend's startegy a shot - picked strikes that are 80-85% away (TXI 55 naked put, AGCO 50 naked put - yes I'm totally aware that earnings ae coming up, but if you look at trendlines, it is on the uptrend,and JOY 45/42 BuPS). Lets see how that goes.
Also, anyone watch the bozos on CNBC and optionsaction? any thoughts on what their track record's been? problem w/ their trades are they're always at a long position ie either get into a long call spread or long put spread, which requires laying out cash. the reason we're with Jerry;s strategy is b/c we get paid premium 1st and is a net intake strategy, rather than put money out (ie buy spreads) and hope for an event to take place where the strike moves in the desired postion. They never really talk about selling naked puts or seling put/call spreads.
I will check out tastytrade.
btw I picked strikes 80-85% away b/c 65% prob is still too close for my comfort!
taxman, since you got into the rut 1000/990, what do you think about the r2k showing reversal signs and heading down? It showed some resistance at 1054 since that's the all time high. In any case, I might take that same position this week but might wait till tuesday/wed.
Sai
I was in a RUT 1020/1010 put spread last week and did not feel threatened at all. I agree a Fri AM settlement is "unsettling" with htat helpless feeling since you can't do anything about it. You just have to go with gut feeling and recent daily movments. i also check open put/call open interest to see where the MM's might want to pin the index. Bottom line if to close the postion if you don't feel comfortable.
I am in the 1000/990 put spread for this week. Newsletters that I sub to have RUT support at 1040,1025(21dma), 1000(50dma, and 980. I also have 18 Jan14 25 puts as a hedge. I stillfeel safe about the 1000 level. It had a delta of
~5 when I placed it which is within my parameters. I will close if threatened which is also in my plan.
recent daily movments in
Sorry about that last post. I was trying to talk to someone in my office while typing. Can't walk and chew gum at the same time. Hope you all got my drift. That hedge is 18 Jan14 TZA calls, not puts. Tried to delete and retype but didn't work.
Tax, I got a good laugh (ironic) from one of your recent posts. I started with the 'book method' but have switched over to your wkly indices method. July was my best month with a 4.5% gain. Much of which i attribute to not having to maintain any margin cushion. And now, I read your post and you are looking at individual stocks, AND opening your index calls on the prior thur/fri !!
I just find it funny that I'm adapting to your method, and you're looking at other methods.
NA - I've been following Slim on TT lately. he has a 1 hr show from 1-2PM EDT. He analysis equities and indeces using charts and something called cycle brackets. Very interesting. I've taken some of his recommendations. I also have gotten somewhat bolder with the dips constantly being bought. I will place spreads on Thurs/Fri IF I feel I have enough cush AND the are always PUTS.
I have also been following the 10yr rates and will IC the TLT and of course AAPL since it seems to be trading in a 420-440 range. Altho lately it's popped to 440-450
I think I am still very cautious and will lighten up on trades during potential market moving events like FOMC & jobs reports. Was burned BIG time on the April jobs report when I held NDX calls overnight, the jobs report was above expectations and the NDX settled 32 points higher than Thurs close. I ended up 15 points ITM. OUCH.
Thanks Tax, appreciate the background as always. I'm okay on the internet during the day, but cant listen to the webcast. Will listen to slim a few nights when i get home and check it out.
Again, this week i'm still more comfortable on the Call side, My calls would all require new highs to ITM and my gut just tells me there are too many worries out there now to justify it.
NDX 2975/2050 for .20 3150/3175 for .35
RUT 1000/990 for .15 (last friday) and 1070/1080 for .26
SPX 1620/1600 for .30 and 1730/1750 for .15
Opened RUT last friday, had been toying around for a couple weeks on trying to open earlier, then when you did it i followed. Wanted to see how my comfort level changed over the course of a week. I'm at 95% margin any given week, so i dont have anything available to open on thursdays prior.
Hi -
I setup the same trade on Monday for SPX 1620/ 1610. Tax mentions the jobs report on Friday, are you nervous at all?
Looks like there is still about 3.8% cushion.
Setup this week:
SPX 1620/1610
AMZN 285/275
ED - Jobs report have been higher than expected over past 3-4 months. Suprises have led to upside moves in the market. I have only put positions right now with a decent cush, so I'm not real concerned. I'm more concerned over reaction to GDP & FOMC.
My current postions are:
RUT 1000/990 vs 1043 with major support at 1040 and TZA calls as a hedge.
NDX 2975/2950 vs 3085
SPX 1635/1620 vs 1685
I've mentioned before that I listen to Slim on TT. He did an analysis in GOOG yesterday with charts and his cycle brackets and indicated goog should drop some
60-70 points over next 6-8 weeks. I placed a Sept 880/870 BePS for a net debit of 3.88 to possibly make 10. If you haven't joined TT you need too, some very interesting commentary.
This could be a great week. ADP/GDP came out better than expected and markets gapped up along with 10yr rates. Once it hit exhaustion I did the following calls
NDX 3150/3175 calls for 1.00 @ 3109
SPX 1725/1740 calls for .35 @ 1694
TLT 103/100 puts for .18 @ 106
Don't get excited with NDX only 4 contracts.
Finally spx went over 1700.
SPX 1650/1625 still pending
NDX 3175/3200 for 17c
NDX 3050/3025 for 16c
Feel rusty after 6 months not trading the crumbs...
Going to be a long day. All my calls are around 1.2-1.5% cushion right now. Heading into an August friday though I'm still expecting some profit taking at these levels. Its the stupid jobs report tomorrow i dislike the most.
Well I'm going to be up early watching the futures !! On my calls I have cushions of
0.77% on NDX
0.94% on RUT
1.3% on SPX
In hindsight though, I'm not sure I would have done anything differently.
Na, I'm curious. Why are your cushions so close to the strikes? Is it for the premiums? Seems very risky, no?
NA/SAI
Based on your .77% cushion on NDX, i assume you had the same 3150/3175
call spread I did. I closed mine out Thurs PM for .44 after getting
1.00 when placed. Looks like NDX will settle <3130.
Sai - I think NA had sufficient cush when placed but NDX gapped up
26-30 points in yesterday's rally.
That is why I closed my position. NDX closed Thurs at 3126, giving only 24 points cush for todays settlement.
Correct. When i open my positions I usually get 3-4% cushion on the Put side. On the Call side it's typically 2.5% to 3.5% and they are march harder to get opened on NDX and RUT. This was a rare week, I got Put/Call opened on all three indices. Being able to double-dip on the margin really juices the returns, so I got 2.4% for just this one week. And that is 2.4% on my ENTIRE account value, not just my individual trades. I point that out because trading the Taxman strategy I dont have to leave any margin cushion.
I'm going to continue this pattern for another couple weeks and see how my returns/risk are trending and then I'll re-evaluate my strategy. I've considered doing 100% SPX because you can typically get better cushions and the Call side is much easier to open.
Hi,
Selling options for a while. Introduced my own custom strategy in March. So far so good, almost doubled account :) Started a blog on my trades and strategy. Pls, check it out. I am really curious what you think about it.
http://sellingoptionshu.blogspot.hu/
Option Guy
Tues PUT Trades:
RUT 1020/1000 for .15 @ 1052
RUT 1030/1010 for .22 @ 1061
SPX 1645/1630 for .20 @ 1695
NDX 3050/3025 for .25 @ 3132
Looking for more SPX puts today.
Actually placed NDX call 3175/3200 for .25 @ 3119.
Also did puts on TLT 104/100. Looking to place calls today in the 107.5-108 area. Closed calls on ERY(oil bear)for a nice profit. Oil should be dropping into the fall until winter demand heats up.
Staying away from aapl for now. Got burned last week on thur/fri rally. Gave back my whole weeks profits. Hoping for further weekness.
Been hooked on TT lately. Listen to Tony/Tom while desk bound. Try to never miss SLM. Really like his analysis.
So I basically stayed out of the market this week. Opened a RUT call position that was a bit of a lottery play on monday, it moved in my favor quickly so i closed it out for a good profit tuesday.
I decided to take a week off, the returns i was seeing were just too low for how close i had to get. I think the market will be very range bound now until it corrects some.
guy options
Have been following your blog and have done some of the trades. Concern is that small profit can go south with one bad trade.
Luv Tpa
Two weeks in a row. AAPL calls wiped out my profits last week and NDX calls did the same this week. Three down days, market rolling over, enough cush on my puts, so I place NDX 3150/3175 and 3145/3170 call spreads with NDX at 3113 and ONE trading day to go. What happens, market rallies NDX gets up to 3137. I am not going to go into a Fri AM settlement that close to my short strike, so I close and it again cleans out my weekly profits.
When will I ever learn to stay away from the call side?????
Here are my trades this week
NDX 2975/2950 PUT at 3126 for .20 (call side still unfilled)
RUT 990/908 PUT for .20 and 1080/1090 Call for .25 at 1048
SPX 1600/1580 Put for .15 and 1735/1755 for .25 at 1690
I'm opening trades a little earlier this week. If i can get through a stagnant early mon/tues it should give me more cushion going into the latter part of the week. Just experiementing some, my logic being most news comes out later in the week and this would give more cushion for news.
Tax - I'm still doing calls, but I try to get them at a point where they would need to be 2% over the all time high to hit me. I had one close one, and prefer to have 1% cushion on ndx/rut going into friday open. I can't remember too many opens gapping a full 1% up; although I havent run the numbers.
NDX 2950/2925 PUT for .33 at 3089
RT 980/970 PUT for .18 1060/1070 Call for .25 at 1029
SPX 1565/1545 for .20 at 1662
All opened last friday. I really like how the friday opens played out last week. If you can get through the weekend w/ no major news its giving me 5% or so going into the week. Even after the 2% drop mid-week, I still had 3-4% cushion on every Put going into the last two days.
I did the same thing with the RUT. for the weeklies, i got into 970/960 but couldnt get decent premiums on the upper 1085/1080. so i had to get into the monthly for 1085/1090. however b/c of the dips that's already dropped in value and hope to get out of that this week and then have the lower weekly expire on friday. i'm in the same camp as you - i think getting into the weeklies on the friday before gives you premium and plenty of cushion (5%). since i hadnt tried an all-condor trial period yet, this month is all about just that for me. I'm already loving the fact that there's only 1 margin tied up and 2x the premium intake. Jerry's strategy got me started, but waiting a month for options to expire is a little too long exposure for me (although certainly not abandoning it!). also i really love the ~23% tax implications for index options. So let's see how this works out.
Sai - Like you, I'm finishing up what I'd call a trial period - will post my results end of week. Agree on your 2x comment - but in reality it's more than that. On the naked puts i could only use 60% margin. On the indices I'm getting to 90% X2 for 180% effectively. So i'm pulling in 3X the returns and compounding weekly.
Question: what do you mean about 23% tax for index options ?? I'll plead ignorance here, but I assumed these weekly premiums were treated just like any other short term trade.
23% b/c indexes are cash settled broad based options and so are considered as 1256 contracts. here's the link to an explanation -http://www.tradelogsoftware.com/trader-taxes/options/broad-based-index-options/
but if you trade the corresponding etfs its still the noirmal 35% income tax. so a big distinction there.
also 1256 contracts means 60% long-term (ie capital gains 15% rate) and 40% short term (regular 33% income tax) - average of this is ~23%
ok got into the 980/970 and 1060/1070 for 0.44 for next week; ~3% on the call side, ~5% on the put side. keeping fingers crossed! figure it should be light next week. Not too much economic activity next week. Of course, with many folks going off to vacation, that's when light volume can be very dangerous in moving mkts. let's hope it seesaws more to the put side! I'm looking to collect 60% of profit. If I get that, i'm oooouut before expiration.
on the RUT that is! what do folks think of 1019 as the new support for the RUT? mid term support is still the 950/960-ish area...
Placed
NDX 2975/2950 for .25 @ 3118
RUT 990/980 for .18 @ 1035
My newsletters show RUT support at
1040 now R for a possible "kiss goodbye", 1028 at gap bottom, 1020 at gap close and 1000 round number.
You guys need to look at UVXY which is 2X leveraged VIX ETF. Man does it move and you gotta see those premiums on the weeklies. Been trading them the past 2 weeks.
Everyone left on this blog has got to sign up with Tasty Trade. SLM is great(gave me UVXY) VIX went from 12-16 and UVXY went from 34 to 40. In the June swoon, UVXY topped 75. Check it out.
Tax, so you mean that RUT is headed for a fall? although I'm not seeing 1040 as a support/resistance. if anything at 1013, it made a new short term support. if you draw the trend line going back 6-8 months, you see a straight line hit all the major lows and can see how they are all higher lows. granted volume is really low at 1013. could you explain a little more? do you mean that RUT will not be able to break 1040? I actually did adjust my call spread from 1060/1070 to 1070/1080. 25 pts was too close for comfort for me.
thanks for the uvxy - will take a look. what have you been doing with them? put spreads?
Sai - per the RUT, I was looking at horizontal support levels and my newsletters and charts were showing ~1040 as support. Once broken it becomes resistance with the possibility of failure on a subsequent test. Well today it moved above 1040. Will it stick tho.
On uvxy, I'm mostly doing weekly covered calls and making 3-4%. I'm also long looking for swing trades
Tax, i saw on tastytrade some time back that doing calendars on VIX (and i would assume uvxy) is quite different (and risky) from calendars on any other intrument. Doing CC calls should be safe, i think. Is that why you went this route? Otherwise wouldn't DITM leaps have been more profitable?
Sunil
I have only been following uvxy for about three weeks. With its volatiltiy, I would not want to be a long term holder of this stock. I mostly trade weeklies and a weekly CC on uvxy more than meets my 1-2% roi. A good plan would be to buy when vix is ~12-13 and sell on pops. I trade an account for my daughter and have to be very conservative with it. I spoke to my son/law this past weekend about uvxy and said I might want to dabble in it. Well I finally bot 300 shares yesterday at 34.58 and immediatly sold that weeks 34.50 CC for 1.35. Was very happy with the return. I could let it get called away or roll it out. Well uvxy closed yesterday at 38.01 and is >40 premarket. That would have been a great trade for them - 5.50 in 2 days. I would stay short term with this stock and just swing trade it with movements in the vix.
Tax, Thanks for the reply. Saw that it really jumped today
Week didnt turn out too bad. Of my 4 positions, I decided to close a large RUT Put position on tuesday to limit my exposure in case the markets responded to a Syria strike.
I will probably stay out of the market for a week, or only open call positions. I think a Syria strike is already priced in. But, if the US has to go it alone I think we'll take another dip. And if Syria responds with an attack on Israel I think we'll take a much bigger hit. I think I've been on a good roll so I'm not going to press my luck and will take the week off. Good luck all.
You guys need to start trading uvxy. CC's are giving great roi's as are put spreads. I placed 33/29,
37/34, 35/32 spreads all over the palce getting .25/.30. I cant see uvxy dropping from its current 47.50 in the next week, especially if things light up in Syria.
I don't agree on using chems on anybody much less your own peeps, but we can't go it alone again and why should we be the worlds police force. We will be damned if you do OR don't. It failed in Iraq, Afg, Lybia and Egypt so why should it work in Syria. Sorry
Hey everyone-
Been hooked on TT lately. Yesterday on their Maket Measures Segment they talked about managing winners.
Any thoughts here? I'm just curious if you are managing your winners wont the loser burn you?
Segment: http://www.youtube.com/watch?v=iUNhFD-Xf2Y&feature=share&list=UULJiSMXJ9K-1AOTqIqdXJgQ
Last few weeks I strayed away from Jerry's teaching and did a few earnings plays. I did a few IC WAY out of the money and got burned by a few. Still ahead but 90% profits for the month are gone. I am debating if I want to give the method TT recommends.
I was going to give what TT recommends but instead of a Strangle use a IC (limit my risk); 45 days out and 66% expire out of the money.
Any thoughts?
ED K
I semi listen to Tom/Tony and ALWAYS listen to SLM. I would never trade T/T recomendations - there short strikes are too close and they don't trade many contracts. Profits must get eaten up by commish. I listen for market theory and understanding. As for SLM, I listen for short term market direction. I have placed some of his recommendations and have been succesful. I WILL not place an earnings trade. Since I trade mostly weekly index spreads I like SLM cycle bracket analysis pertaining to indeces, oil, & slvr.
Don't even listen to Jny. I do like the market wrapup.
ED K
Sorry, completely missed the winner management. I take profits whenever I have them. Saw them evaporate to many times. Never lose money taking profits. I leave a lot on the table, but as soon as a trade meets my roi I take it.
Take a recent UVXY trade. I bot 300 shares on Tues for 34.85, sold a 34.50 CC to make 400 for the week. A nice 3.8% weekly roi. It got called away yesterday. Have you seen where uvxy is today??? 47.00!!! I left 3,000 on the table.
tax,
I have had uvxy on my radar for awhile, do you have game plan rules? only doing cc?
Hi Taxman,
Thanks for responding. I completely understand winners a little better now. I was listening to some of their earnings trades and put as much cushion as humanly possible when selling my IC’s. I was doing well this month until 2 burned me (ANF & DKS). Luckily for the month I am only down $56.
I have been using Jerry’s method from Jan to July and did pretty good. Only issue for me is that it ties up too much capital. (Example: Setup on Tuesdays or Wednesday - AMZN selling a spread and obtaining .10 for a $10 spread) Considering I want to make some decent credit above and beyond commissions –I usually sell 10 or 15, hence tying up 10K- 15K. Then I usually do the same with SPY.
I was listening to TT and they made some good points about probability. I usually take their advice with a grain of salt and if I set something up I incorporate Jerry’s rules (Cushion). I am looking to setup a few more trades with diff underlying (spread the risk from one biting me based on news, etc).
I figure a way to reduce my capital required and risk do to do a ETF and IC. ( SPX, SLV, VXX, etc)
Any thoughts.
Thanks for the advice you provide on this board.
Oh yeah - I sometimes watch LIZ / JNY but mainly for educational purposes.
hey all, I've been doing the all RUT iron condors this month and so far so good. Mostly all weeklies, with one 1085/1090 monthly call spread which I put in by mistake, but so far, working well since that's going down in value. for this week, I got into the 1050/1060 call spread for the upper condor arm. i'm waiting for Tuesday to see which way market goes to get into the lower arm. i'm not too concerned about the put premiums if I get into the positions 3 days prior to expiration, since volatility is high due to the Syria tensions and likely to get even higher as the trading week starts. lots of economic events also taking place, which will further fuel volatility. the rut broke its 1013 support and is at 1010 and so I expect significant downward movement to 950 which is its mid-term support. i'm also thinking of giving up a small % of my premium from the put position and buying into a closer-to-ATM put position (just 1 or 2 puts) to capitalize on the downward moves as the lower put condor position sails towards expiration. want to see how that works out. nce thing about the labor day holiday is you get the 1 free day of no trading. good luck to all this week - lots of action as the traders get back from vacay. good luck to all!
TraderLux. I'm still developing a strategy for uvxy. once I saw the premiums, I placed the CC but then saw the price volatility and wished I just went long. Thinking the market will stay volatile in the near future, I looked at put spreads. I placed many Sept1 37/34, 33/29 & 34/31 put spreads with .25/.30 credits. I think uvxy stays above the 40 area this week.
Ed K My problem with some of TT IC recommendations is that they are too close to the underlying s price. They wanted to place an IC 3 points away from a stock that had a 65 percent success. I would never place anything that close. My parameters is a delta of 5-10 or less. I try for a net 1 percent roi per week.
Even tho I think the market will tank thru Sept, I still think you should be careful placing call spreads. We are still in a bullish uptrend, call spreads need to be much closer to the underlying to get a decent premium and you can get the same premium further away on the put side.
Also watch out for spreads on equities vs indexes. A brokerage can come out with upgrade/downgrade that can really affect the price. I got burned on a TSLA trade recently G'S said it was worth only 85 and the next day someone else said it was worth 200. I got blown out of my put spread on the first downgrade only to see it rally 20 points the next day.
tax, totally hear you on the call spread and the net bullishness of the market. even though there's no trading today I saw that ex-US markets rallied, so I have to keep an eye on my rut 1050/1060 spread this week. its a 3-4% cushion; obviously i'd like for the cushion to be a lot higher, but its the game of running out the clock vs. the price. If it goes vs me than I'll have to roll it. I'm waiting to see how the rut does tomm before getting into the put side of the condor. the high volatility is giving some nice premiums on spreads as far as 960/950 and even 950/940, so i'll get into one of those tommorrow. I'm with you on ROI - if I can squeeze at least 2% on my capital, i'm happy since that'll get me to 2x my money on an annual basis.
Also hear you on TT's IC suggestions - they're faaar too close for my comfort.
Tax and Sai -
Thanks for the input. For the month of September I think it's back to the 'old' ways. (i.e. Cushion and anything less than 1%).
Would you guys mind posting your trade on uvxy. I'm trying to look at this as well. Why not trade VXX?
Trades
UVXY 38/35 @ ~42.75 for .22 & .26
NDX 3200/3225 C @ 3111 for .15
3175/3200 C @ 3107 for .47
2975/2950 P @ 3107 for .21
Bot UVXY @ 42.70
I'm not doing any uvxys, just the RUT condors. for this week
1050/1060 for 0.27
970/960 for 0.12
my monthly RUT call spread which I got into by mistake (although profitable so far and will likely expire worthless)
1085/1090 for 0.47
so all in all, not too bad. let's just hope no sudden movements this week. next week will be interesting when congress votes. expect volatility to spike.
even now, dow was up triple digits and now it gave back most of its gains. let's see...~45 pt cushion vs. the lower arm; 35 pts or so vs. the higher arm.
All - I'm curious on the uvxy discussion, and the push for better returns. In general, for your total account - what monthly return are you happy with ?? The last two months I got 4.6% and 5.7% total return, trading only index ICs. I'm pretty happy with that, and it is fairly low risk and volatility. I was just wondering if others out there are looking for something more.
I used to play poker semi-professionally, and for those that have seen Rounders, I'm what you call a Grinder. Slow, consistent, predictable small wins.
thanks
NA - uvxy is just one more tool in the shed. I often place VIX monthly call spreads, so when SLM mentioned uvxy, I checked it out.
Since I think the markets will tank/vol go up during Sept with everything on the books, I wanted to trade the vix and uvxy is great.
I swing/day trade it. Buy 200-400 per account, write OTM put spreads or ATM CC's. The ones I placed this AM are giving a 7% weekly roi. Nice return to juice the account. My weekly roi target is ~1.5%. I am not trying to be greedy, just dabble. I'm also not all in uvxy. I am placing my RUT/NDX/SPX positions also. I am short the 38's mostly. So even if uvxy moves thru the short, I will just keep rolling out to next week. Eventually uvxy will pop. I have been in trouble with TLT lately and do the same thing. It has eventually moved above my short strike.
I bot 5000 sh in my bosses account this AM and have over 1.00 profit. I will probably close it out later today. Looks like the market want to gap/crap.
ROIs - wow how my views have changed on this the more I dabble in options! I started with the attitude that anywhere >2.5% per month of an ROI would be awesome, with ample cushion and holding monthly positions till expiration, based off of Jerry's book. then as I got into it more and realized that its better to take profits off the table earlier than expiration and then just repeat the process to further increase your ROI/month. I also started dabbling in playing earnings and had some good success there as well. Obviously the more you start thinking that its better to stay in a position as short as possible, the more you realize that perhaps weekly options are the best way to go. Initially I was very hesitant to go the index-option way, since my rationale was that they're too prone to geopolitical events and macroeconomic factors. But then I tried a RUT position that was very far OTM and got good premiums on it which caused me to rethink my position. Once I found that trading the indices also means a significant tax advantage (1256 contracts), I've totally shifted my strategy to just indices. Rigth now its just the RUT and i'm starting to get comfortable with its weekly range. I was also hesitant to do condors before but once you do it, you realize that is stupid to not profit on both sides of a given stock. Jerry's put spreads are great and work well, no doubt about that. But they're one-sided. I realized that you can be very conservative (which I am) and still almost double your ROI on any position if you play the other side as well. Hence my recent full fledged foray into condors. As I mentioned before, like you NA, this will be my 1st month of just doing all index option condors. so far so good.
I think you also have to ultimately ask yourself what your trading goals are - are they just to make some extra income, or do you want to do something more ambitious with this? for me, I want to turn this into my livelihood. This is why I want to be able to prove to myself that at the very least, I can double my capital on an annual basis. I think a 100% ROI is a good start, even when you're being conservative and as low-risk as possible. This is also my 1st full year of doing this with a small portfolio. if I have my proof of concept that I can consistently do this, I will increase my portfolio size and go for larger positions and see how that works out. I'd like to be at a position where i can be fulltime trading in 5 years. Not planning to quit my day job anytime soon!
Btw from a business perspective, index options allow me to keep >75% of my earnings after taxes. The concept of not paying income tax on one's earnings is also a big part of this. I figure that I can be really conservative and go for lower returns, but still will come out on top when it comes to paying taxes when compared to non-index options and higher ROI. 23% on index options; 33-36% (or even more!) on non-index options. Obviously I'll see how this works out in reality when it comes tax time next year, but for now I like the tax angle, at least in theory!
Sai - Please be careful and stay conservative. I traded monthlies(before weeklies came out) for many years, got complacent at times, traded with a work buddy and we used to project out our compounded roi to 7 figured account sizes and got burned big time. Weeklies work well for me because they force me to act if something goes wrong. I know how the adrenaline can get you going, but please stay safe. I traded options in 2008 and 2011 and it was not pretty. Spread yourself over several positions and try to never lose more than your weekly profit. I have 6-7 positions in my main account.
thanks Tax - yup that's what I plan to do and how I've planned things so far and continue to plan to do so. appreciate you sharing your experience though. its also that aspect of complacency you mentioned that's also a reason for going w/ the weeklies. you have to stay vigilant always. if something starts movng vs. you, you have to act - as they say, hope is not a strategy. But I also like looking at things from the weekly time frame rather than monthly.
To your point w. multiple positions, currently I'm indexed a bit heavier on the far OTM call side than the put side with the RUT. I realized that it would take some major economic events to really push beyond 1062 which is why I'm sort of glad I got into my monthly RUT call spread (albeit by mistake) of 1085/1090. Probability of hitting that amidst all this Syria chaos is very low (~1.5%). So that's my hedge if the RUT really blows through my put spreads.
No but I do hear what you're saying. This is why I'm not getting greedy and am sticking with my 2% ROI per week. hItting this means I'm on track to 2xing my capital, which is fine by me. I have friends that go with 65%probability trades - waaaay too close for me. I like my 90%+ prob trades. Like I said, test is to see if I can hit my 100% annual ROI goal being conservative.
Hello,
I'm new to spread selling. I've read Jerry's book, but have questions concerning risk management.
When using spreads on weeklies, what do you do to manage loosing positions ? Do you buy the entire spread back when the total value of the position has doubled, or when the short option's prime has doubled, or when the stock is at the strike of the short put ? Or do you do something else ?
Many thanks in advance
Vai: others may have different opinions, but you could 1 of a couple things:
- do nothing and take the loss and move on to the next trade (many times, this is the best thing to do)
- roll out to lower/higher strike prices and longer expiration times (avoids taking a loss but ties up your capital)
the couple of times the position went vs. me, I've done the former and just taken the loss. however I never let it get to the point where it was 2x my premium. so you have to always watch it and take action if it starts getting close to your strike. with the weeklies, you are forced to constantly watch it b/c your strike may be closer and cushion not as high as the monthlies. my suggestion for you though is to start with jerry's strategy and go with the high cushions - at least 20%. you'll find many stocks with such high cushions and very low risk and get good premium. just my opinion, but I wouldnt start on weeklies if I were you. alternatively you can start w/ the monthlies and papertrade the weeklies to see how you do and how you handle it. good luck!
Thank you !
When you say you never let it go to the point where it is 2x your premium, are you talking about the short option on the spread, or the total credit of the spread ?
no the total credit. reason I say that is b/c you'll find that very often volatility can cause the short option to really spike to the point that it will be far higher value than the long spread. that can happen for a million different reasons (earnings, buybacks, analyst upgrades/downgrades, govt action, the sun rise etc etc). if that's your criteria for getting out of a position, then you may find that your positions are getting closed out far too often. It all depends on how much you can stomach a drawdown and volatile movements. This is why you start with a solid, high cushion - at least 20%. my criteria for selection always considered 52 week lows (assuming the stock isnt too near it!) and seeing if I can get decent enough premiums for strikes going as close to that low or possibly even lower and many times I was able to do so. if things are mostly stable with the company (no events etc), then there shouldnt be too much volatility. I would just stick with jerry's rules - it takes many of the things I mentioned here into account. At the end of hte day, his strategy is very simple and tries to be as conservative as possible.
Ok, thank you !
I'll start paper trading condors and follow the rule : buy back the entire spread when the total credit received has doubled ... and maybe play with this rule if I get out too often (short option strike not met).
Vai
Each trader has their own rules. As you may already know, I trade mostly indeces and stay away from equities b/c any news report can affect price. My parameters on weeklies is to place spreads with deltas <5-6 and close when the delta gets around 25-28. On indeces, I close the trade, take the loss. On stock, I will try to find out why the trade failed and most likely will roll the spread out to the next week. Usually within 2-3 weeks the stock price will correct back to the mean unless there is a major reason for the price change. This has recently worked for me with TLT and AAPL. I usually only trade spreads on aapl, tlt, uvxy and maybe tsla & nflx. I also try to target a 1-1.5% roi so that usually gets you pretty far away from the underlyings price. I never trade earnings and will keep a close eye on positions if there is a big economic announcement looming - ie JOBS, FOMC, GDP. At any given time, I will have 5-6 positions open, so I may let a looser run longer since I can offset it against other profits. I will close positions early in advance of an announcement. Hope this helps. Start with as much cushion as possible and tweek it as you gain experience. Don't try to trade everything, but get to know the patterns on 6-10 stocks/indeces.
Thanks a lot for all the info
Got to look at Sept2 uvxy put spreads. I have been placing 37/34 spreads for .40/.45 @ 42. Even if the jobs report is great tommorrow, I cant beleive uvxy trades to 37. Even if it does my plan is to keep rolling the 37/34 spread out until it gets back above 37.
I assume we are all playing it safe until the POTUS speaks on Tuesday.
I placed a small # of NDX 3225/3250
call spreads on today's pop for .45
Bot some uvxy on the drop, also a 37/34 put spread for .30
With all the potential issues out there, I don't know where this rally comes from. Bulls must have gotten the bears scared and this is one heck of a short squeeze. I expect some major vol if the pres goes it alone.
yea I totally dont get this rally at all. waiting to see what today's volume was. I got into my upper IC arm of the RUT at 1070/1080 CS on Friday. I was expecting it to be a down day today so that I could get into the lower arm at 970/960 but now that's not giving much premium since it moved up. I do expect it to move lower tomorrow and perhaps on Wed, altho senate's vote which will mostly not be for approval will lead to mkt going up a little. so i expect some see-sawing this week. I'm guessing today's events (if you believe the analysis) that drove up this rally are apple's hyped event for tomorrow, china's news and the possible out for syria with russia's proposal to hand over weapons to int'l control. but i'm not sure obama;s going to be satisfied w/ that. let's see what he says in the interviews and in nation address tomorrow. seems that after so much hyping, he almost has to have some kind of strike to save face.
actually today's vol very 20% lower than normal - 83 M vs 104 M average for the SPY, for example. most major indices are well below average volume by ~20%. so volume doesnt support price movement which has been the case for a while. I'd suspect a down day tomorrow. most money still on sidelines if volume is any indication. I'm reading this excellent book by Anna Coulling called A Complete Guide to Volume Price Analysis - great insight IMO into really the only 2 true tangible pieces of data in the markets, ie volume and price. Would highly reco!
Hi,
please help me a bit with the weekly spread strategy.
Jerry had very well defined exit (stop loss) rules for the naked put selling strategy. Do you have such exit rules (or at least some guidelines) for the weekly spread strategy as well?
This part is missing for me, as the risk must be managed properly, otherwise 1 bad trade could wipe out about 100 winners (considering the 1% approx. return per trade).
I'm glad to receive everyone's oppinion on this.
I dont have any such rules. every situation is different. For me, i decide if I either will roll the position or just close and take the loss. If the loss is small enough, I may just close it and take it and move on to the next trade. If its more than that then I'd roll it. actually I have that potential situation coming up - I have a 1070/1080 RUT weekly call spread which expires Friday. RUT was in the 1030s last Friday when I got into the position, but given all the positive news with Syria and China over the last couple of days, I fully expect this market to rally (albeit on low volume), with the RUT rising further. It was at 1046 yesterday. Its very probable it'll go to the 1050s today. If it keeps going higher and approaches its all-time high at 1064 by Thursday, then I'll have to make a decision as to roll out or take a loss. I'll most likely roll out. Although I'll probably make that decision on wed rather than thurs. A lot of this is what you can stomach.
ok I couldnt take it anymore and exited my 1070/1080 weekly CS giving back some of my profit. I'm still up ~3-4% this month, but as this was supposed to be my 1st all index IC month, was hoping to take in 1.3 to 1.5% per week and looks like I wont be hitting that (at least at this time - we'll see what kind of opportunities next week which is monthly expiration, provides). Of course as it is w/ murphy's law, the RUT will fall back down again after the economic news tomorrow, obviating my need to having exited. I still have my 1085/1090 monthly CS open, so hopefully there'll be some healthy pullback.
I really dont get this market. I get that IBM's the main reason dow is up today, but not seeing why the other indices are also rising, esp. the R2k. There wasnt much economic news today either, except for Apple and while that's taken a toll on the nasdaq, even that is showing some signs of regaining what it lost. I thought you couldnt artificially manipulate indices, but guess I'm wrong...
All these increases and NO freaking volume!!!! I guess this has been the story of this year...
also I'm wondering if perhaps Mondays are the best days to get into the weekly index positions. Problem with the 1070/1080 that i just exited was that I got into it last Friday when it was a down day thinking that Syria would create downward action, rather than a rally. Actually the bigger damage was done by China's data which is why the RUT rose 16 on Monday. If i'd waited Monday, would've chosen the 1080/1090 CS.
My strategy of 1.3 to 1.5% per week is based on compounding that ROI over 52 weeks, which leads to doubling your money in a year. I think I should be able to eek that out while being ultra-conservative with deltas of 0.05 or less.
I've also noticed the R2K moves quicker than the S&P due to small caps being cheaper to buy. Anyone have any other thoughs on this or how to IC indices on a weekly basis?
tax, i'm curious - how're your VIX options doing, given that volatility's been rock bottom?
Well I'm taking a bath on uvxy put spreads. They kicked Syria down the road and fabricated great economic results out of China and yes the vix dropped like a rock and ALL is well with the world.
Most of my PS were the 37/34 kind, so I closed for 1.90/2.20 losses and rolled down to next week 36/31 and 35/31 to get back my 2.00. I will keep rolling down and out for break even until something hits the fan and uvxy climbs back above my short put. I think UVXy at 34 with a CC program is a great deal.
In this uptrending market I really try to stay away from call spreads. The relentless grind higher will always catch you.
One more clarification. I WILL roll violated equity positions BUT never an index position. Just my way of trading. TT will just keep rolling until whatever moves above the short strike.
sorry to hear that - yeah as mentioned above, i chose to close out the 1070/1080 and give back 1/3rd of my profits for the month. for the RUT we're hitting resistance now. So either this is a double top or head and shoulders or whatever it looks like and should head south but as you said it, lots of cooked up data to move things higher. once again, volume was a little higher than yesterday but still lower than average. And def lower for both the SPY and DIA. This is a weak market. I would think you'd need some strong volume to break through resistance.
i'm thinking about the 995/990 for the put spread part of the condor. think i might have better luck w/ that. but waiting on a downward move tomm to get into that. weekly jobs come out tomorrow so perhaps it will be lower data.
I took a bath on the UVXY as well. I closed out my position at 2.5. I did the 37/34 as well lst week. Who would have thought the world would be fine this week.
Only down $40 for the month.
Other trades going on for the week:
SPX: 1615 / 1590 -
RUT : 1010/ 1000 -
AMZN : 285/ 280 -
AAPL : 445/ 455 & 490/ 500 (setup the Put side yesterday and got close today so created the call side) - only 12 pts :(
Only thing that looks a little scary is the AAPL, otherwise I'm sitting good. Cushion is around 4.4 - 4.9% on the rest.
David - the rule i use is when the premium doubles. So if i get into a trade for .35/-.10 for a credit of .25 I am closing out at .70 Usually the bottem option doesnt move in the same proportion so i'd probably only get .15 for it. So....i go from a credit of .25 to a debit of .55 (.70-.15)
In practice I give it a little more than double, so if it was .35 on the upper end, I'd set my stop to close the short half of the position at .80
Thanks for all the help!
Hello every one
Sai, Taxman, Thank you so much for sharing your experience in this exciting field !
However, reading your comments calls me a questioning :
Since you apply a strict money management and a caution strategy exit, have you ever thought about the relevance of treating strangles rather than IC, allowing U to collect much larger premiums ... ?
Jérôme
Jerome,
by strangles you mean selling just the OTM calls and the puts, correct? first, that's too much risk since I do ICs on index options. unless you're level 5 (i'm level 4), optionsxpress (my broker) and most other brokers wont allow you to place naked call/puts on indices. its just far too much risk. period. indices can be subject to extreme moves either way, so too much risk. by placing spreads, your risk is capped. i'll take that any day over the premium. i can always make more premium, but recovering capital much much harder to do.
btw, Tax or anyone else, do you know which INDEX options (if any) are american-style expiration? i know more index options are european and the corresponding ETFs are american style, but i like the tax advantage of trading index options and so dont want to deal with etfs. reason I say this is to have the flexibility to trade that extra 1 day before expiration, since most of the index options cease trading on the thursday before expiration friday. I'm starting to absolutely realize the value of having that 1 extra day of trading with index options. ANyone have any thoughts on this?
Actually looks like the OEX fulfills my criteria of being both American-style and a broad based index that's treated like a 1256 contract for taxes.
Looks like its also a heck of a lot more liquid than the RUT - daily volume is in the billions, rather than the RUT which is only in the 10s of millions.
After reading through the comments I am planning to start with the following strategy.
SPY, QQQ, IWM (the ETFs of SPX, NDX and RUT), TLT + VXX, AAPL
I will do Iron Condors with short deltas at or below 5-6, trying to enter the trades on Tues, Wed with a ROI tartget of 1% per position.
I will use about 90% of my bankroll as this strategy requires no margin cushion.
I am planning to have 5-6 positions every week and spread my account balance among them.
Risk management: I will exit the trade and take loss if 1 of the following happens:
short delta reaches 25-28 OR the short premium doubles.
This is what I want to start with, please feel free to comment on it and highlight the faults if you find any.
Btw. I looked at OTM options with deltas around 5-6 and there is not much liquidity in them and if I simply go with the bid and ask prices it is hard to receive credit.
Is it hard to get filled in between with such OTM strikes? What is your experience?
And should the profit target of 1% be a net figure (commissions deducted)? As IC has 4 legs and I have an account at IB, so 0.7 x 4 is the commission for an IC.
Thanks for all the help and comments,
David
Here are my trades for the week (filled last friday)
NDX 3025/3000 for .25 3300/3275 for .25
RUT 990/980 for .12 1095/1105 for .10
SPX 1610/1590 for .20 1740/1760 for .15
1.6% for the week (if successful!)93% of margin utilized
David - if i may... if this is your 'starting' point - I'd do the indexes only and avoid stocks in the beginning (aapl) If you read the history on the board you'll notice more people have lost money on aapl then probably all indices combined. Just one persons 2cents. Good luck.
Sai - I may try OEX next week to see how it plays.
my trades this week - still all RUT
- waiting for my monthly 1085/1090 to finally come to close and expire
- got into a weekly 1095/1105 this AM during the open for 0.26 (got a decent fill)
- got into the weekly 1010/1000 for 0.11 or so.
The spike in the markets this AM was exactly what I expected, esp. with the RUT. didnt think RUT would have enough to push through its resistance which it didnt and came back down to the high 1050s. I expect it to fluctuate here tomorrow and wed. I think it'll end up closing somewhere in the 1040s by expiration EOW. let's see. Once i'm done this week with all the RUTs, will diversify into OEX and maybe the NDX as well. After watching these indices move, its now clear to me that while they generally move in the same direction, on a weekly basis, they all have distinctly separate movements. I'm loving this learning curve! made a whole bunch of mistakes this month, got out of positions far too early out of panic, mistimed getting into some unnecessary put positions - lots of good stuff to learn from. If this week works out the way I hope, I'll come out with my highest ROI yet, even with all my mistakes. NA, I'm rethinking entering into the weeklies the Friday before the new week. I think that waiting for monday AM to enter, or better yet Tuesday AM is better for volatile markets. perhaps the friday prior may be ok for times where there isnt much news expected, but times like now, I'm really glad I waited till today (the 1095/1105 I opened on the RUT has already decreased 40-50%). Let's see what the fed does over the next few days.
Sai,
On the friday vs tuesday thing...i dont disagree with you, as I am not 100% wedded to my opinion yet.
But here is my logic at this point. It is not out of the ordinary for the markets to open up/down 1% (note today). So...that means that I need at least 1% cushion going into the thursday night close to feel comfortable that i wont risk a loss at the friday open (RUT/NDX)
The biggest weekly move in the markets this year is 3%. So over the course of 5 days, its not likely they will move more thant 3%. Its also highly unusual to have multiple 1% days/ without a pause or minor reversal.
When I open on Friday, my cushion is 4%. If I get through Monday with no major move....that means the market would have to have a record run tues-thur just to get within 1% (my risk tolerance). Mathematically that is not likely.
And....if there is a bad monday like today - I still have 3% cushion. That means it would take a string of days at 1% before I start to worry going into the thursday close.
Tuesday Open - If I open mu positions on Tuesday/Weds in order to get a 1%ROI I am usually only getting around 2.5% cushion. That means I only have 1.5% of a move to tolerate before I violate my 1% rule for thursday night. That's not a lot of room! And while it may not be probable the market will move 1.5% tues-thurs, it would not be highly unusual.
Yes, I'm in the market over the weekend. But it would generally take a black swan event for me to bust that 4%. Although this week is going to be a good test !! And each string of weekly wins just adds to that opinion. If my positions get through this week, which may shape up to be a worst case, I'll be pretty confident in Fridays.
In the end, we each need to trade the plan that makes us the most comfortable. And I'm sure there are others who would not be comfortable with my approach.
agree with you on all your points. My panic moment came last monday when the RUT rallied 16 pts and then kept climbing. even if it wasnt anywhere close to my strike of 1070/1080 CS, it was still quite an emotional rollercoaster, which then caused me to get out of the spread, giving back some of my gains over the last 2 weeks.
I hear you on the cushion and the increase in premium you get due to the time value that the friday adds to it. In my case, I really dont like the fact that euro-style options cant be traded on fridays. I think its due to this that I dont like to be exposed for very long (even that 1 extra day).
But I'm still in testing and learning mode, and evolving my trading plan from selling equity put options to index ICs. I'm now reading a book by Dennis Chen called "The Options Trader's hedge fund" which has already clued me into many risk management techniques. All of these trial and error things are hopefully going to help with solidifying my trading plan. heck as you read above, i just only discovered the merits of the OEX! so still a ways to go for me...
Uggghhh.
Fed announces things are worse than we thought => Markets rally.
I am not so concerned about the current move, but want to see if it holds into the close; 90 minutes from now. If it continues to ralley into the close, then i'll panic. I suspect tomorrow is going to be one of those long days trying to decide how to leave things for the friday settlement.
I hear ya. So with my 1085/1090 being close to the RUT, I got rid of it and gave back my profits of a month and half. So now my returns are back where it was at the middle of August (still up 33% for the year, but that's not what my target was). So my 1st foray into all condors - 90% wins, but with 1 huge loss.
I did evaluate rolling out, but didnt want capital to be tied up and with this bull market, no strike is high enough. Another difference w/ today was volume - lots of volume backed up the move. NA, i'm also in the 1095/1105 with you. right now I'm still 50% profitable on that spread. like you will wait till tomorrow to see what to do. I dont know if there's enough juice today for it to go up another 20 pts...
This is one of my biggest losses over the last year and half. I had multiple chances to close out that spread during the month and take profits. heck I had chances all the way till today right before 2 pm. Moral of the story - ALWAYS TAKE PROFITS WHEN YOU CAN!!!!!
tomorrow's jobless claims may put a damper on things a little.
Good luck to all of us!
What happened to Jerry????????
Jerry doesnt post up here much.
As for the RUT, its down ~ 4 pts as I write this and hovering around 1075. So my panic was for naught. The 1085 position is still in threat (had I stayed in it) till tomorrow, but its significantly cheaper now that the fervor has dropped. Exiting it out today would have been the smart thing to do. I dont think I'll exit the 1095 as its 20 pts away and there' no more economic news today or tomm; even if there were I doubt there'll be a further 20 pt rally. Moral of the story, other than profit-take-when-you-can, is....I dont really know what the moral here is. There was significant volume that if followed through today would've signaled the start of a fresh bull trend. I really dont know where this market is headed. as for next week, I'm now looking into diversifying into OEX and the RUT and maybe NDX weeklies. let's see. still evaluating if its better to do the monthlies, get strikes that are far away and let decay take its course and get out with capturing 55% of the premium, or if to stick with the weeklies....
Any thoughts?
NA and tax, I'm trying to figure the range for the movement on the nasdaq on a weekly basis. It appears that average movement is around 50-100 pts in a week. Is this what you've seen in your experience? also any other suggestions as to when to trade the NDX for weekly puts? next week will be my 1st foray into the NDX. I'll also be branching out to the OEX as well next week. planning on diversifying into OEX, NDX and RUT. For now, I'm looking at 1020/1010 for the RUT, 750/740 for OEX (~20 pts away from current price) and 3110/3100 for the NDX. Wont get into this till Monday though.
along the same vein, average OEX range is b/w 10 and 20. Obviously go for the 20 pt cushion.
Sai - I looked at the weekly charts for NDX and the biggest movements have been 100-110 points in a week. I like to have 100-125 points cush or better. That falls within my delta parameters of 5-6. With this market's ever grind higher I do not like placing call spreads - only puts. Usually 10-12 contracts 25 point spreads. I will place a 3-4 contract call spread to juice my roi. I usually place the spreads on Mon/Tues. I don't trade the OEX.
I curently am sweating out a 4 contract NDX 3250/3275 spread. I have 12 points cush. They wanted 1.50 to close that position yesterday and I did not want to pay that. MM's know when to squeeze you.
I emailed Jerry @ the putman address to start a new thread but I think he is AWOL with this blog.
tax, absolutely - the higher the cushion, the better. I'm targeting the 3110/3100 NDX put spread for next week. I'm still not sure about my OEX spread, since its only ~3% away from the current price. So I'm not a whole lot comfy with that, but will evaluate on Monday.
Good luck with the NDX today. But isnt it a little too late to do anytthing about your spread at this point, since the last trading day was yesterday? Also how do you make the decision to stay in the trade given that its so close to the price? As mentioned bfore, I had similar situation with the RUT and opted to get out in panic wed PM and ended giving up some of my gains of the year. of course, the RUT pulls back yesterday and I could've gotten out of my position yesterday for far less. But at this point, its water under the bridge.
I didnt make the best decisions, but am trying to get more educated with trade adjustments. How do you go through your decision process? any good books/websites that give good advice on this (other than taking profits early)?
So this is probably the only time i'll post this stat. But since i've been trading ICs on NDX/RUT/SPX my record is 44 wins 1 loss 1 tie. Credit to Jerry for getting me into crumbs, and much thanks to Tax since its really his method i have been copying. His strategy fits me well, and it corresponds with the trading style I need with work, computer access, etc...
As i've said before, I'm a grinder. Lots of singles, compounded weekly. No home runs, no big losses. And no individual stocks for me.
My one loss so far, was when the Syria conflict started and I just wanted to take some risk off the table incase bombs started flying. It was a small loss.
My tie was this week, closed out my SPX CALLs early when the market stagnated yesterday and the premiums dropped. After all the commissions, i actually still made $8 total.
RUT is easiest to fill, I usually get 5% cushion on PUTs and 4% on Calls.
SPX is usually 4% on Puts and 3-3.5% on Calls
NDX is hardest to fill. 4% on Puts, and 3% on Calls. If its less than 3% cushion on the Call side I dont fill it.
Right now I am filling NDX/RUT on fridays and usually SPX on mondays. Puts are usually easy to fill. On the call side I settle for 3/3.5% IF it is close to the 52 week high. I dont think its likely to break to a new 52wk high on the first try, and still rally another 2% beyond that.
Couple other stats, after commissions I have averaged 1.4% ROI per week. That's ROI on my TOTAL account value, not individual trades. My commissions are costing me 10.4% and I trade with IB
Sai - In this rising market I stay away from calls except for the aforesaid mentioned juicing. You have to get too close to the underlying to get any decent roi vs puts. I'm sweating out the AM settlement #. NDX opened ~3245, I'm short 4 @ 3250. Waiting for the settlement # on the CBOE site. Comes out ~11AM.
The problem is you go into Thurs with enough cush,things grind upwards and before you know it the MM's are goosing the premiums to close. Really anoying.
NA - I like your criteria. I find success when I stick with spreads on indeces. I get burned when I deviate to equities. I need to stick to the plan and be happy with 1-1.5 roi/week. What mutual/hedge fund gives that roi/year!!!!
Tax - well you'll recall my earlier post that I had a $xx,000 loss on my last equity option trade. Havent made one equity trade in the 4 months since.
1.5% ROI/wk is actually ~100%+ return on an annual basis compounded weekly! even 1% compounded weekly on an annual basis is ~ 72% ROI. Hedge funds would kill for those #s!
So I got some clarification as to settlement with the RUT this AM after speaking to OptionsXpress. They often times will get settlement #s Thursday PM as well, but mostly its Friday AM. When they do, they release the tied up funds. while the options actually take a day to disappear from the screen, its irrelevant at that point what the price movement is. I didnt know this (sorry if this is basic info to ppl, but I'm still learning!) and I absolutely would have not closed out as I did. So an expensive lesson for me. This actually will inform my decisions moving forward.
NA, your cushions are about right and what I've been doing. Although with the really low vol these days, I think the cushion will prob be lower - more like 4% or so. Right now that figures in the 1030/1020 put spread for next week for 0.21 at the current moment. the 1020/1010 is yielding 0.10. The NDX for now is even worse. no decent premiums until you hit 3150/3140 which sacrifices on cushion...
as for NDX on the call side, 3350/3375 for 0.04 is what I'm seeing for next week, although I'm not liking the 25 pts width b/w the spreads though!
Tax, you mentioned 11 AM settlement time for the NDX - is that when your funds get released at your broker? I think you'll be ok today. NDX is at 3244 as I write this...
Sai - would be curious to hear what your commissions cost is versus Interactive Brokers, who i use. For instance, buying 15 contracts on RUT is about $30. 10 on SPX is about $22.
i thought, may be wrong, that RUT/NDX used the opening tick on friday morning. Dont see how they could close them thurday night. Tax - ? I thought it was friday open and not thursday close that was the final price. I usually have enough cushion it doesnt matter, but i'll have to do some google to confirm.
my commissions w/ OX is 6.95 base + 0.65/contract. So 10 index spreads (20 contracts) would cost $21.95 (they chqrge a little bit more for indices). 10 equity spreads are 19.95. I called them up today and asked if I could get it lowered further to 0.5/contract with 6.95 base. They refused and said that would do that if I increased my activity and/or increased portfolio (which I plan to do next year).
As for settlement, I was in the same camp as you and thought settlement didnt come in till Friday AM and actually didnt finalize really till EOD. But apparently not. The signal is when you get your funds released (at least it is at OX). I've gotten mine released consistently Friday AM rigth after open, or just a little before. I did have it released once on Thursday PM right after market close a few weeks ago. perhaps it was a one time thing then (?)...
I should say that i didnt do my homework to see how much other brokerages charge (they did ask that) and what I was comparing to. Next time I ask for lowering commissions, I will have that info at hand.
Here is the lowdown on settlement.
Weeklies - Fri AM for NDX/RUT
Fri PM for SPX
Monthlies - Fri AM for NDX/RUT/SPX
Nothing settles Thurs PM.
I'm with Optionxpress and they release OTM puts @ the open. They still have my ndx calls lockedup even tho CBOE shows ndx settled at
~3245.
interesting. my OTM call (RUT 1095/1105) got released at the open...
Na and tax, where else are you guys hanging out in terms of forums/blogs? Seems that there's only the 3 of us posting here, with a couple of others joining every now and then. I've started listening to tastytrade but want to get more insight on weekly index ICs. just saw a short vid on moneyshow.com (http://www.moneyshow.com/video/VideoNetwork/100/9140/How-to-Trade-Weekly-Options/) about entering on thursdays and fridays for the weekly and how the speaker basically said that there's little theta decay over the w/e b/c the MMs know this and so keep volatility low on thurs/fri and then start jacking them up on mon/tues.
Another way to think about weekly ICs is to introduce the element of time decay in time - what I mean is instead of the weeklies, what about going to biweeklies, staying in the position for 1 week and then exit out. I'd have to look at the decay chart on these, but basically I'm trying to apply the principle of the monthlies to the weeklies here to minimize risk and exposure. Canonically, monthly ICs should be opened 6-8 weeks out with 0.1 or lower deltas, the position held for 2-4 weeks and then exit out as the time decay has taken its toll and you've captured ~50-60% of premium. So can we apply that principle to the biweeklies? open on a thur/fri, hold for a week and then exit out on the friday, thereby preventing the gamma spike as you get close to expiration? I'm going to look in to this. Also another way of thinking about this is to get into ICs 6-8 weeks out, but doing so 1 each week (or every 2 weeks), so that you can track along with the price. You'd have to wait 2-3 weeks to close out your initial one, but then you'd have 1 closing out every week following that, allowing you to stay flexible and capture some good premium. any thoughts/ideas?
Anyone also know of any free sites or software that lets you chart the theoretical decay of an option? OptionsXpress doesnt have such a tool (NOT the same as the trade and probability chart).
Sai - Only here and TT. TT seems to indicate that ~45 days out is ideal fir spreads.
for this week, I'm trying to get filled for RUT 1020/1010 and SPX 1640/1630 put spreads. Holding off on the call side...
NA - Thanks for posting your rules about the the SPX/RUT/NDX and your YTD winning percentage. You mention 1 Lose - was holding and rolling it in the cards?
Anyone using any other ETF that has high Vol? TT keeps mentioning EWW,but the thought of selling monthlies scares me. Given the success record for myself and NA I'll stick with a Index.
Ed - I dont roll anything. I should probably look into it some. But, I think mentally it helps me keep a clear head when i start from scratch each week. Probably a leftover bias from my daytrading days when i had a hard time getting away from losers because "I knew" they were worth more.
Pretty poor fills this week on my indices. RUT is usually my easiest and only got partials. 0.8 % so far, not a great week.
NA, i know exactly what you're saying. I'd been looking at premiums all day for the RUT 1020/1010 and 1030/1020, 3120/3110 NDX and 1650/1640 SPX and wasnt happy enough at all with any of them to pull the trigger. I'm hoping today will be a down day so that I can get at least 1%. lets see...
just got into the 1100/1120 call spread for the RUT for 0.09. that's ~3% cushion for 2 days. let's hope things stay within range. still shooting for 1020/1010 put spread. let's see...premiums are all crap, but the RUT is moving below as I write this...
got into 1030/1010 for 0.09 also. Not happy at all with my yield - barely 1% after commissions.
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