Craig does a such great job going over his Condors let see if this helps explain it..
Tuesday, April 22, 2008
Current Iron Condors
I rolled my lower May leg up and started entering in June. My Credit for June was $2.10 with shorts at 800 and 640. Since the trades are longer in length and are selling time I’m using weekly closing prices before making any adjustments.
The chart above shows my trades. The Green brackets are a 23% Return in 57 days.
Sunday, April 20, 2008
Building a June SPY Iron Condor Position
I’ll be starting to moving into June in the coming weeks with the following Strikes.
Are The Bulls Back For Real?
Set aside the never ending higher cost of oil, gas, milk, well everything and the Fed saying we will just give you money and you have no worries. At some point we shall pay the price and the market will adjust but for now the bulls are back with higher highs and higher lows.
Thursday, April 17, 2008
Theta
Option Theta
Theta shows how much value the option price will lose for every day that passes.
An option contract has a finite life, defined by the expiration date. As the option approaches its maturity date, an option contract's expected value becomes more certain with each day.
This Time Value, also called Extrinsic Value, represents the uncertainty of an option.
Theta is the calcuation that shows how much of this time value is eroding as each trading day passes - assuming all other inputs remain unchanged. Because of this negative impact on an option price, the Theta will always be a negative number.
For example, say an option has a theoretical price of 3.50 and is showing a Theta value of -0.20. Tomorrow, if the underlying market opens unchanged (opens at the same price as the previous days close) then the theoretical value of the option will now be worth 3.30 (3.50 - 0.20).
The above graph illustrates the effect on a OTM call option as it approaches maturity date. The increment as each day passes is what the Theta calculates.
You will notice that in the last remaining days of an option's life, it looses it's value quite rapidly.
This is one of the concepts traders use as a reason to short option contracts - to take advantage of this rapid rate of decay in an option's value as each trading day passes.
Theta shows how much value the option price will lose for every day that passes.
An option contract has a finite life, defined by the expiration date. As the option approaches its maturity date, an option contract's expected value becomes more certain with each day.
This Time Value, also called Extrinsic Value, represents the uncertainty of an option.
Theta is the calcuation that shows how much of this time value is eroding as each trading day passes - assuming all other inputs remain unchanged. Because of this negative impact on an option price, the Theta will always be a negative number.
For example, say an option has a theoretical price of 3.50 and is showing a Theta value of -0.20. Tomorrow, if the underlying market opens unchanged (opens at the same price as the previous days close) then the theoretical value of the option will now be worth 3.30 (3.50 - 0.20).
The above graph illustrates the effect on a OTM call option as it approaches maturity date. The increment as each day passes is what the Theta calculates.
You will notice that in the last remaining days of an option's life, it looses it's value quite rapidly.
This is one of the concepts traders use as a reason to short option contracts - to take advantage of this rapid rate of decay in an option's value as each trading day passes.
Credit:
Long EUR, Short USD
I'm Long the EUR and Short the USD. This is a new high plus a hedge against my other trades. With all the bullish in the market my portfolio delta is just slightly negative. Meaning my neutral trades while very much right where they need to be would be perfectly happy if we dropped some. Seeing how GOOGLE blew away earnings I see the market heading up Friday which will devalue the US dollar.
Weekends
Heading into the weekend = Options Time decay. My RUT and SPY trades are looking good. Not much happening this week. I did have an XLE iron condor that was run over on a 52 week high breakout. I rolled the bottom up and added twice as many lower spreads along the way. This certainly helped out in taking a much smaller loss.
Tonight Matt held an online meeting as Nicholas's baseball team had a team to beat as Ernie or I couldn't make it tonight! Sounds like I missed a great meeting.. Below are notes Matt posted to our Yahoo group. Thanks Matt!
"Below is a list of topics that we discussed during the online group meeting tonight. Please feel free to ask any questions that you may have.
Tickers:
MOO - Agricultural ETF (Tracks stocks like POT, MOS, etc.)
XME - Metals and Mining ETF
POT - Not a whole lot to say about this one other than it's bullish and earnings are coming up. The 190/185 Bull/Put Vertical has a nice credit if it can stay above these levels (I'm personally expecting a pullback before earnings).
CAM - Looking for a pull back; bumping up against resistance at 50; earnings coming up.
FWLT - Shorting opportunity; 64 appears to be good resistence
FLR - Shorting opportunity? A pullback could be in order and there are visible signs of divergence with the MACD (higher high's on less momentum; 160 is resistence
TSN - Broken above 200 MA on good volume. Today's action was extremely bullish with BIG volume and BIG white candle. Also, thanks to Terry, he pointed out that it's resting SMACK-DAB on 50% Fib line from the swing high of June 07 to the swing low of Jan. 08...Will it keep going?
$VIX - Last but not least....what's this thing going to do? I personally have it breaking below the uptrending support line and resting on a horizontal support line at ~20.35 (today's low). You can argue that MACD is getting weaker and this thing is going lower (divergence).
So where we go from here who knows, just manage your risk; Plan your trades and trade your plans..."
Tonight Matt held an online meeting as Nicholas's baseball team had a team to beat as Ernie or I couldn't make it tonight! Sounds like I missed a great meeting.. Below are notes Matt posted to our Yahoo group. Thanks Matt!
"Below is a list of topics that we discussed during the online group meeting tonight. Please feel free to ask any questions that you may have.
Tickers:
MOO - Agricultural ETF (Tracks stocks like POT, MOS, etc.)
XME - Metals and Mining ETF
POT - Not a whole lot to say about this one other than it's bullish and earnings are coming up. The 190/185 Bull/Put Vertical has a nice credit if it can stay above these levels (I'm personally expecting a pullback before earnings).
CAM - Looking for a pull back; bumping up against resistance at 50; earnings coming up.
FWLT - Shorting opportunity; 64 appears to be good resistence
FLR - Shorting opportunity? A pullback could be in order and there are visible signs of divergence with the MACD (higher high's on less momentum; 160 is resistence
TSN - Broken above 200 MA on good volume. Today's action was extremely bullish with BIG volume and BIG white candle. Also, thanks to Terry, he pointed out that it's resting SMACK-DAB on 50% Fib line from the swing high of June 07 to the swing low of Jan. 08...Will it keep going?
$VIX - Last but not least....what's this thing going to do? I personally have it breaking below the uptrending support line and resting on a horizontal support line at ~20.35 (today's low). You can argue that MACD is getting weaker and this thing is going lower (divergence).
So where we go from here who knows, just manage your risk; Plan your trades and trade your plans..."
Saturday, April 12, 2008
Forex and Spring Boards
For the last 4 months or so the Forex market has been making strong moves and becoming oversold or overbought real quick just like the US market. A one week move might just take a day or hours. Being on the right side of the trade this first time makes it that much more critical as a move against me is not unheard of and is usual but hitting my stop and then going in the original direction just draws down the account. So as of late I'm taking profits after a quick oversold/over bought move then going back in once the spring board is back to it's normal self with defined risk until the market finds some stability when a trend is more stable.
S.O.H.
Sit On Hands! Well the trades in my account are working just fine. All that needs to happen is time to tick away for about 4 weeks for the full credit but instead I'll roll out into June in about 3 weeks depending on where my positions are and opportunities at that point.
Thursday, April 10, 2008
Closed GBP/JPY and EUR/JPY
Closed 6:50am this morning with a 120% ROI. 150% on risk. These are bear market trades and the market is pretty bullish as of late.
Wednesday, April 9, 2008
Silver Update
After looking at silver last night I belive it has been oversold and will rise BUT I have too much overall direction risk currently so I shut it down.
Sunday, April 6, 2008
Saturday, April 5, 2008
The Best is always different. Email from Thinkorswim (Trading Broker)
Hello swimmers-
Our programmers are smart. Very smart. As babies, they reverse engineered the jack-in-the-box and turned their cribs into lowriders. As children, they arbed the lottery to earn enough money to buy new parents. As teens, they commandeered satellites with their laptops to share their secret anti-acne formulas with their super-genius/hormonally-challenged brethren. And in college, well, let's just say it wasn't your IT guy who averted a Y2K meltdown. Now as adults, they build thinkorswim. But don't be nervous. They're on your side.
We will be releasing version 1084 on Saturday, March 29, at 5:00 am CDT. New features include:
New Futures Format including quotes for Options on Futures
We now offer a new futures layout that displays all the tradable months and the corresponding option series. Please note that trading options on futures will not begin for approximately another two weeks. The new futures user interface will use the root symbol for each product such as S&P 500 (/ES), Russell 2000 (/ER2), MidCap 400 (/EMD), Eurodollar (/GE), Nasdaq 100 (/NQ), Corn (/ZC), Gold (/ZG), Silver (/ZI), Soybean (/ZS), Soy Meal (/ZM), Soy Oil (/ZL), Oats (/ZO), Wheat (/ZW) and Fed Funds (/ZQ), and will expand from there. ...................................................................................
Our programmers are smart. Very smart. As babies, they reverse engineered the jack-in-the-box and turned their cribs into lowriders. As children, they arbed the lottery to earn enough money to buy new parents. As teens, they commandeered satellites with their laptops to share their secret anti-acne formulas with their super-genius/hormonally-challenged brethren. And in college, well, let's just say it wasn't your IT guy who averted a Y2K meltdown. Now as adults, they build thinkorswim. But don't be nervous. They're on your side.
We will be releasing version 1084 on Saturday, March 29, at 5:00 am CDT. New features include:
New Futures Format including quotes for Options on Futures
We now offer a new futures layout that displays all the tradable months and the corresponding option series. Please note that trading options on futures will not begin for approximately another two weeks. The new futures user interface will use the root symbol for each product such as S&P 500 (/ES), Russell 2000 (/ER2), MidCap 400 (/EMD), Eurodollar (/GE), Nasdaq 100 (/NQ), Corn (/ZC), Gold (/ZG), Silver (/ZI), Soybean (/ZS), Soy Meal (/ZM), Soy Oil (/ZL), Oats (/ZO), Wheat (/ZW) and Fed Funds (/ZQ), and will expand from there. ...................................................................................
Does 41% Return in 39 days with a high probability sound good?
Here is a trade I'm taking with on Monday. ETF of the S&P 500.
The shorts/longs are 2 points apart. So short 145/Long 147. Short 125/Long 123
Friday, April 4, 2008
Monday, March 31, 2008
The VIX
The VIX is the fear in the S&P 500(Your 401K money)... With billions being injected into the market and lowing of the prime rate we don't seem to be going back to easy street!
The market is still pricing in bearish moves from this chart.
Sunday, March 30, 2008
Pricing Volatility---Excellent Video From TOS
http://mediaserver.thinkorswim.com/transcripts/2008/20080312.mov
From the guys who priced options and were market makets. Who better is able to teach with inside info and experience.
If you need a player for the .MOV file See the link below.
http://www.videolan.org/mirror.html?mirror=http://mirrors.optralan.com/videolan/&file=vlc/0.8.6e/win32/vlc-0.8.6e-win32.exe
From the guys who priced options and were market makets. Who better is able to teach with inside info and experience.
If you need a player for the .MOV file See the link below.
http://www.videolan.org/mirror.html?mirror=http://mirrors.optralan.com/videolan/&file=vlc/0.8.6e/win32/vlc-0.8.6e-win32.exe
Friday, March 28, 2008
The Pros Teaching Iron Condor Trading and more..
http://www.sheridanmentoring.com/demonstrations/20071107TOSChat/
This is the way I trade and taught by the Pros.
This is the way I trade and taught by the Pros.
Thursday, March 27, 2008
Tonights Meeting Notes:
Thanks Matt!
We talked taxes at the beginning of the meeting and we have Terry to thank for that.
Items Covered: -We discussed a good bit about a 'Delta-Neutral' strategy (more specifically with POT as the vehicle).-
We talked about an April Iron Condor for POT 190/195/140/135 for a $1.05 credit (Or moving the top leg down to 185/190 for a $1.20 credit); Both give you about 20-23% return (22 days to expiration).-
Shorting AMZN: Directional or a Bear/Call spread at the money; (70/72.50 Bear/Call spread is a 1/1 Risk Reward)
We talked taxes at the beginning of the meeting and we have Terry to thank for that.
Items Covered: -We discussed a good bit about a 'Delta-Neutral' strategy (more specifically with POT as the vehicle).-
We talked about an April Iron Condor for POT 190/195/140/135 for a $1.05 credit (Or moving the top leg down to 185/190 for a $1.20 credit); Both give you about 20-23% return (22 days to expiration).-
Shorting AMZN: Directional or a Bear/Call spread at the money; (70/72.50 Bear/Call spread is a 1/1 Risk Reward)
Wednesday, March 26, 2008
Education Starting Points
CBOE Free Classes
http://www.cboe.com/LearnCenter/courses.aspx
Investools Coaching
http://www.investools.com/popups/videoPreview.swim
Option Planet/Thinkorswim classes:
http://www.optionplanet.com/assembled/list.html
http://www.cboe.com/LearnCenter/courses.aspx
Investools Coaching
http://www.investools.com/popups/videoPreview.swim
Option Planet/Thinkorswim classes:
http://www.optionplanet.com/assembled/list.html
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