Who says a 25% High Prob. return is crazy. Trading an index with 2000 stocks smooths out the day to day news.
Monday, June 16, 2008
Wednesday, June 11, 2008
High Gas Prices. Bear Markets.
Updates this weekend. My condor is looking GREAT! Nice roll over in the market. We took that forecast stance after last Fridays price action.
Found this Pic surfing some forums. Kind of funny!
Sunday, June 8, 2008
Going Against the Tide/Trend
Well I never really like fighing trends which is bullish/up as of late but we have reached a 50% retracement point on the RUT and the SPX. Both backed down and both have overbought indicators turning over. This bullish move has been pretty fast. While my Magic 8 ball is still at Spencers (need to buy it), so it is of no help,, I'm looking for a downward turn in the market or at least some 'chop' action which is fine for my RUT Condor.
Up or down is fine with me. I'm just calling what I see,,, and I see us rolling over. Please see the charts for reference. They are weekly charts since for me they hold more weight.
Up or down is fine with me. I'm just calling what I see,,, and I see us rolling over. Please see the charts for reference. They are weekly charts since for me they hold more weight.
Friday, June 6, 2008
Wednesday, June 4, 2008
Everything Setting Up Just Right
Futures are down this morning. EUR/JPY is down overnight and profitable.
UPDATE: I was stopped out. EUR had 'interest rate' news overnight. Must have been pretty good.
Tuesday, June 3, 2008
Short EUR/JPY
Since I'm thinking we are heading sideways to down I'm taking this Forex trade. 87 PIP Risk for 200 PIP Reward (1st Target).
The Bears Are Showing Up. Bulls are Tired.
On the weekly charts but the S&P and the Russell 2000 Index are both overbought and turning over. At the same time they are both stopping at the 50% retracement mark.
Monday, June 2, 2008
Pivot Point Charting Video: John Person with TOS
http://mediaserver.thinkorswim.com/demos/2008/TOSDemoPlayer.html?vidSource=/transcripts/2008/20080528.swf
Comedy: Stupid Human Tricks
Every once in a while I run across a funny video. This one is just too funny.
A Nice Home Run In Play
So I had $40 at risk and this morning that Forex trade is up $361! More to come and I believe this is just the start. The price action in red on the chart is todays action.
Saturday, May 31, 2008
Current Open Trades. Weekend Review
My July Condor is looking great. Interesting that we had a high of 850ish and a low of 650ish and we are getting toppy around 750ish.. About a 50% retracement of the market correction.
After trading this a few times early in the morning and at night I'm only risking $40. I'm short 3 mini's. Stop at 164.35
Thursday, May 29, 2008
Monday, May 26, 2008
Closed GBP/USD
I closed the GBP/USD trade last week for a nice profit. I didn't catch the closing price.. Being out of town and late at night might have something to do with it.
So
So when we have our meetings on Thursday evenings I often use my paper account and actually take some of the trades. I would say about 30% of them. Well I checked that account today and interesting enought I found some pretty good returns. Now that 775% return was not a penny stock buy currently a $49 one. I just use options as a trading vehicle most of the time.
Friday, May 16, 2008
Long GBP Short USD
Took this trade the other night as the price was right at a support point with linited risk.
Monday, May 12, 2008
RUT July Iron Condor
My May condors were closed from standing orders today. I’m all cash right now. Looking at July Short 800, long 810, short 630, long 620. This order is going into tonight. This would be a 25% return in 66 days. I did look at June but if we break out here(north) we could run 770-780 and I would need to roll at that point if I wanted a decent return in the first place. Don’t care to roll!
760, 770,780, 790 and 800 are real strong resistance point and 700, 680, 650 on the support side.
I’m attaching my RUT weekly chart and the data I’m using to calculate my risk. I’m to exit at the latest by July 14th.
On the data chart I’m including the Gamma Risk this round. When the Gamma starts to explode so does my risk at the very end. I’m camping out for a happy medium Gamma and price.
Update: I was filled at 2.05 as shown in the charts above.
.
A link to a video of what this trade is all about.
and
Sunday, May 11, 2008
Friday, May 9, 2008
S&P 500 Battleground
Notice how we hit that 1425 mark and stalled. That line also happens to be the 50% retacement line. It will take a lot of bulls to push the SPX beyond the 1425 mark if you ask me.
Friday Close Review of my Active trades
(Above chart) I went short USD/JPY early this week and have moved my stop to breakeven. I'm up about 150% up on risk and up 250% ROE so far.
(Above three charts) All Looking great. USO is still making higher highs which will increase the price of gas at the pump. RUT and SPY condors are almost fully profitable (about 90% so far).
Sunday, May 4, 2008
Where to next
Check out Peters charting and view point.
http://www.shadowtrader.net/videos/sunday050408st2.html
http://www.shadowtrader.net/videos/sunday050408st2.html
S&P
Turning off the drama news and just look at action the bulls are at a resistance point. My hat is off to the bulls for making a 50% retacement in such a short period of time. Our SPY and RUT Iron Condors are still in tack and looking great. So this is the current weekly chart.
Wednesday, April 30, 2008
Non-Event Fed Day
IF I didn't know the fed was releasing a statement and might drop the rate today,,,, but the movment or lack there of was a flat day if you ask me. Good for my account as time ticked away. We actually moved down some and my overall delta is coming closer to a neutral position.
Sunday, April 27, 2008
Managing Delta
Looking at my account I can see if I'm too bullish/bearish and adjust accordingly just by looking at my delta number. I found this article below which helps explain Delta.
Going Beyond Simple Delta: Understanding Position Delta
by John Summa, CTA, PhD, Founder of OptionsNerd.com (Contact Author Biography)
Email ArticlePrintComments
The article Getting to Know the Greeks discusses risk measures such as delta, gamma, theta and vega, which are summarized in figure 1 below. This article takes a closer look at delta as it relates to actual and combined positions - known as position delta - a very important concept for option sellers. Below I begin with a quick review of the risk measure delta, and then proceed to explaining position delta, including an example of what it means to be position-delta neutral.
Simple Delta
Let's review some basic concepts before jumping right into position delta. Delta is one of four major risk measures used by option traders, all of which are outlined in figure 1 below. Delta measures the degree to which an option is exposed to shifts in the price of the underlying asset (i.e. stock) or commodity (i.e. futures contract). Values range from +1.0 to –1.0 (or +100 to –100, depending on the convention employed). For example, if you buy a call or a put option that is just out of the money (i.e. the strike price of the option is above the price of the underlying if the option is a call and below the price of the underlying if the option is a put), then the option will always have a delta value that is somewhere between 1.0 and –1.0. Generally speaking an at-the-money option usually has a delta at approximately 0.5 or -0.5.
Vega Theta Delta Gamma
Measures the impact of a change in volatility. Measures the impact of a change in time remaining. Measures impact of a change in the price of underlying. Measures the rate of change of delta.
Figure 1 - Delta and the other "Greeks".
Figure 2 contains some hypothetical values for S&P 500 call options that are at, out and in the money (in all these cases I am using long options). Call delta values range from 0 to 1.0, while put delta values range from 0 to –1.0. As you can see, the at-the-money call option (strike price at 900) in figure 2 has a 0.5 delta, while the out-of-the-money (strike price at 950) call option has a 0.25 delta and the in-the-money (strike at 850) has a delta value of 0.75.
Keep in mind that these call delta values are all positive because we are dealing with long call options, a point to which we will return later. If these were puts, the same values would have a negative sign attached to them. This reflects the fact that put options increase in value when the underlying asset price falls. (An inverse relationship is indicated by the negative delta sign.) You will see below, when we look at short option positions and the concept of position delta, that the story gets a bit more complicated.
Strikes Delta
950 0.25
900 0.5
850 0.75
Note: We are assuming that the underlying S&P 500 is trading at 900
Figure 2 - Hypothetical S&P 500 long call options.
At this point you might be wondering what these delta values are telling you. Let me offer an example to help illustrate the concept of simple delta and the meaning of these values. If an S&P 500 call option has a delta of 0.5 (for a near or at-the-money option), a one-point move (which is worth $250) of the underlying futures contract would produce a 0.5 (or 50%) change (worth $125) in the price of the call option. A delta value of 0.5, therefore, tells you that for every $250 change in value of the underlying futures, the option changes in value by about $125. If you were long this call option and the S&P 500 futures move up by one point, your call option would gain approximately $125 in value, assuming no other variables change in the short run. We say "approximately" because as the underlying moves, delta will change as well. (To understand this relationship, Getting to know the Greeks.)
Be aware that as the option gets further in the money, delta approaches 1.00 on a call and –1.00 on a put. At these extremes there is a near or actual one-for-one relationship between changes in the price of the underlying and subsequent changes in the option price. In effect, at delta values of –1.00 and 1.00, the option mirrors the underlying in terms of price changes.
Also bear in mind that this simple example assumes no change in other variables like the following: (1) delta tends to increase as you get closer to expiration for near or at-the-money options; (2) delta is not a constant, a concept related to gamma, another risk measurement, which is a measure of the rate of change of delta given a move by the underlying; (3) delta is subject to change given changes in implied volatility.
Long vs. Short Options and Delta
As a segue into looking at position delta, let me say a few words about how short and long positions change the picture somewhat. First, the negative and positive signs for values of delta mentioned above do not tell the full story. As indicated in figure 3 below, if you are long a call or a put (that is, you purchased them to open these positions), then the put will be delta negative and the call delta positive; however, our actual position will determine the delta of the option as it appears in our portfolio. Note how the signs are reversed for short put and short call.
Long Call Short Call Long Put Short Put
Delta Positive Delta Negative Delta Negative Delta Positive
Figure 3 - Delta signs for long and short options.
The delta sign in your portfolio for this position will be positive, not negative. This is because the value of the position will increase if the underlying increases. Likewise, if you are short a call position, you will see that the sign is reversed. The short call now acquires a negative delta, which means that if the underlying rises, the short call position will lose value. This is getting us closer to an actual discussion of position delta.
Position Delta
Position delta can be understood by reference to the idea of a hedge ratio. Delta is in effect a hedge ratio because it tells us how many options contracts are needed to hedge a long or short position in the underlying. It is a very easy concept to grasp.
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For example, if an at-the-money call option has a delta value of approximately 0.5 - which means that there is a 50% chance the option will end in the money and a 50% chance it will end out of the money - then this delta tells us that it would take two at-the-money call options to hedge one short contract of the underlying. In other words, you need two long call options to hedge one short futures contract. (Two long call options x delta of 0.5 = position delta of 1.0, which equals one short futures position). This means that a one-point rise in the S&P 500 futures (a loss of $250), which you are short, will be offset by a one-point (2 x $125 = +$250) gain in the value of the two long call options. In this example we would say that we are position-delta neutral.
By changing the ratio of calls to number of positions in the underlying, we can turn this position delta either positive or negative. For example, if are bullish we might add another long call, so we are now delta positive because our overall strategy is set to gain if the futures rise. We would have three long calls with delta of 0.5 each, which means we have a net long position delta by +0.5. On the other hand, if we are bearish, we could reduce our long calls to just one, which we would now make us net short position delta. This means that we are net short the futures by -0.5.
Conclusion
This article explains the concept of simple delta and then proceeds to explain how position delta is a measure of how net long or net short the underlying you are when taking into account your entire portfolio of options (and futures).
Original Article Link:
http://www.investopedia.com/articles/optioninvestor/03/021403.asp
Going Beyond Simple Delta: Understanding Position Delta
by John Summa, CTA, PhD, Founder of OptionsNerd.com (Contact Author Biography)
Email ArticlePrintComments
The article Getting to Know the Greeks discusses risk measures such as delta, gamma, theta and vega, which are summarized in figure 1 below. This article takes a closer look at delta as it relates to actual and combined positions - known as position delta - a very important concept for option sellers. Below I begin with a quick review of the risk measure delta, and then proceed to explaining position delta, including an example of what it means to be position-delta neutral.
Simple Delta
Let's review some basic concepts before jumping right into position delta. Delta is one of four major risk measures used by option traders, all of which are outlined in figure 1 below. Delta measures the degree to which an option is exposed to shifts in the price of the underlying asset (i.e. stock) or commodity (i.e. futures contract). Values range from +1.0 to –1.0 (or +100 to –100, depending on the convention employed). For example, if you buy a call or a put option that is just out of the money (i.e. the strike price of the option is above the price of the underlying if the option is a call and below the price of the underlying if the option is a put), then the option will always have a delta value that is somewhere between 1.0 and –1.0. Generally speaking an at-the-money option usually has a delta at approximately 0.5 or -0.5.
Vega Theta Delta Gamma
Measures the impact of a change in volatility. Measures the impact of a change in time remaining. Measures impact of a change in the price of underlying. Measures the rate of change of delta.
Figure 1 - Delta and the other "Greeks".
Figure 2 contains some hypothetical values for S&P 500 call options that are at, out and in the money (in all these cases I am using long options). Call delta values range from 0 to 1.0, while put delta values range from 0 to –1.0. As you can see, the at-the-money call option (strike price at 900) in figure 2 has a 0.5 delta, while the out-of-the-money (strike price at 950) call option has a 0.25 delta and the in-the-money (strike at 850) has a delta value of 0.75.
Keep in mind that these call delta values are all positive because we are dealing with long call options, a point to which we will return later. If these were puts, the same values would have a negative sign attached to them. This reflects the fact that put options increase in value when the underlying asset price falls. (An inverse relationship is indicated by the negative delta sign.) You will see below, when we look at short option positions and the concept of position delta, that the story gets a bit more complicated.
Strikes Delta
950 0.25
900 0.5
850 0.75
Note: We are assuming that the underlying S&P 500 is trading at 900
Figure 2 - Hypothetical S&P 500 long call options.
At this point you might be wondering what these delta values are telling you. Let me offer an example to help illustrate the concept of simple delta and the meaning of these values. If an S&P 500 call option has a delta of 0.5 (for a near or at-the-money option), a one-point move (which is worth $250) of the underlying futures contract would produce a 0.5 (or 50%) change (worth $125) in the price of the call option. A delta value of 0.5, therefore, tells you that for every $250 change in value of the underlying futures, the option changes in value by about $125. If you were long this call option and the S&P 500 futures move up by one point, your call option would gain approximately $125 in value, assuming no other variables change in the short run. We say "approximately" because as the underlying moves, delta will change as well. (To understand this relationship, Getting to know the Greeks.)
Be aware that as the option gets further in the money, delta approaches 1.00 on a call and –1.00 on a put. At these extremes there is a near or actual one-for-one relationship between changes in the price of the underlying and subsequent changes in the option price. In effect, at delta values of –1.00 and 1.00, the option mirrors the underlying in terms of price changes.
Also bear in mind that this simple example assumes no change in other variables like the following: (1) delta tends to increase as you get closer to expiration for near or at-the-money options; (2) delta is not a constant, a concept related to gamma, another risk measurement, which is a measure of the rate of change of delta given a move by the underlying; (3) delta is subject to change given changes in implied volatility.
Long vs. Short Options and Delta
As a segue into looking at position delta, let me say a few words about how short and long positions change the picture somewhat. First, the negative and positive signs for values of delta mentioned above do not tell the full story. As indicated in figure 3 below, if you are long a call or a put (that is, you purchased them to open these positions), then the put will be delta negative and the call delta positive; however, our actual position will determine the delta of the option as it appears in our portfolio. Note how the signs are reversed for short put and short call.
Long Call Short Call Long Put Short Put
Delta Positive Delta Negative Delta Negative Delta Positive
Figure 3 - Delta signs for long and short options.
The delta sign in your portfolio for this position will be positive, not negative. This is because the value of the position will increase if the underlying increases. Likewise, if you are short a call position, you will see that the sign is reversed. The short call now acquires a negative delta, which means that if the underlying rises, the short call position will lose value. This is getting us closer to an actual discussion of position delta.
Position Delta
Position delta can be understood by reference to the idea of a hedge ratio. Delta is in effect a hedge ratio because it tells us how many options contracts are needed to hedge a long or short position in the underlying. It is a very easy concept to grasp.
Advertisement
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Get a free 21-page book on learning to trade options from the Chicago Board of Trade. If you are new to the option market, this booklet is designed for you! No cost or obligation. Click Here to get this book Today!
For example, if an at-the-money call option has a delta value of approximately 0.5 - which means that there is a 50% chance the option will end in the money and a 50% chance it will end out of the money - then this delta tells us that it would take two at-the-money call options to hedge one short contract of the underlying. In other words, you need two long call options to hedge one short futures contract. (Two long call options x delta of 0.5 = position delta of 1.0, which equals one short futures position). This means that a one-point rise in the S&P 500 futures (a loss of $250), which you are short, will be offset by a one-point (2 x $125 = +$250) gain in the value of the two long call options. In this example we would say that we are position-delta neutral.
By changing the ratio of calls to number of positions in the underlying, we can turn this position delta either positive or negative. For example, if are bullish we might add another long call, so we are now delta positive because our overall strategy is set to gain if the futures rise. We would have three long calls with delta of 0.5 each, which means we have a net long position delta by +0.5. On the other hand, if we are bearish, we could reduce our long calls to just one, which we would now make us net short position delta. This means that we are net short the futures by -0.5.
Conclusion
This article explains the concept of simple delta and then proceeds to explain how position delta is a measure of how net long or net short the underlying you are when taking into account your entire portfolio of options (and futures).
Original Article Link:
http://www.investopedia.com/articles/optioninvestor/03/021403.asp
Saturday, April 26, 2008
Friday, April 25, 2008
Current Layout
Since we seem to just jump around often lately I've change my account status layout. It seems to be much easier to trade this way. Also, when trading condors and spreads I'm using weekly closing prices.
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