# Option trading journal - atrp2biz



## atrp2biz

As many on the forum know, my wife and I are generally buy-and-hold types. It can get boring at times as my only decisions are what to buy--never what to sell. I've (We've--I'll likely use the terms interchangeably) have decided to allocate $150k of our portfolio to option trading. My goal is to produce long-term returns of 12% pa--1% per month--with a very low beta. I'll generally use +theta, market neutral strategies such as long calendars, short straddles and condors depending on IV rank.

I will post my trades immediately after execution and use this thread as my trading journal to

1) memorialize ex-ante thinking to evaluate ex-post;
2) keep myself honest;
3) generate open discussion; and
4) provide learning opportunities for myself and others.

I'm looking forward to this challenge and the thoughts of this forum through this journey.


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## BoringInvestor

Good luck. What broker are you using?


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## atrp2biz

IB


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## 1980z28

Good luck

I play with 100k

Have been
buying mining and selling as many as 10 trades a day

To close to retirement to gamble with more than that


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## nobleea

Will be an interesting thread. What % of your portfolio does $150K constitute?


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## atrp2biz

I won't lose any sleep over it. I'd say <5%.

Hmmm...although if I allocate more $, it could help with the snoring--must discuss side benefits of higher risk.


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## seko

atrp2biz said:


> I won't lose any sleep over it. I'd say <5%.
> 
> Hmmm...although if I allocate more $, it could help with the snoring--must discuss side benefits of higher risk.


Wow !!! that's a portfolio of over 3 Million. Kudos to you and your wife for staying on track and having a hefty portfolio. Thank you for starting the journal I too have started some basic option trading ( selling covered calls). Hope to learn form the masters.


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## atrp2biz

Ok--position #1 is now open. I legged into the GOOGL calendar spread below for a net debit of $7.10. I like calendars given the low IV of 20.1% (six month range of 17.2-40.2). I chose calls simply due to improved liquidity vs. puts. What are others' views of calls vs. puts? GOOGL closed today just under $715 which is also close to my entry point earlier in the day.









My exit points are:
1) $11;
2) IV improves to >25% or;
3) early week of expiry of front month contract

I'll make adjustments/exit if GOOGL hits 700/730.


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## atrp2biz

Legging into an AAPL calendar/diagonal. I'll open the short side early next week. Volatility got hit late in the day as AAPL recovered half of the day's earlier losses--but those are the risks of legging vs. immediate spreads.

View attachment 10050


GOOGL moved up to $725 today. Spread didn't move much (closed 7.50 - 9.50) but the spread is now +delta. I'll have to do something if GOOGL moves up higher.


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## atrp2biz

Opened up the short side of the AAPL calendar/diagonal using a mix of 94 and 95 strikes. The AAPL and GOOGL calendars have me slightly bullish on AAPL and slightly bearish on GOOGL.

I also opened up another calendar with MCD, but went to July on the back-end and a mix of May/June for the front. IVs are pretty low right now, so sticking with these calendars for now. Strikes have me slightly bearish on MCD.


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## atrp2biz

Added a couple of short strangles.

Sold a SLW May strangle (18/19) for $0.95 (x3). IV of 51% vs. 6-month range of 43%-62%.

Sold a POT May strangle (15/16) for $0.43 (x3). IV of 37% vs. 6-month range of 30%-53%.


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## atrp2biz

I've decided to memorialize my trades here. It will be a little friendlier for inserting images. I made a couple of trades over the past couple of days but not much change to the portfolio value. I have links to my core equity holdings and updated P/L.


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## humble_pie

atrp2biz said:


> Sold a POT May strangle (15/16) for $0.43 (x3). IV of 37% vs. 6-month range of 30%-53%.



have i understood this ok? you sold 3 may $15 US puts in potash? plus you sold 3 may $16 US calls in potash?

yikes, this is not so much a strangle, this is a chokehold. Good luck.

ps as of ce soir the chokehold is looking good .each:


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## Jaberwock

I have a much simpler option strategy, which I have been using for about 2 years now. I have returned about 12% per year based on what I consider my "at risk" money of $100k.

I sell out of the money SPY puts, and hold them till they expire. If they go into the money, I choose to either sell them or let them get assigned, based on what cash I have in the "at risk" account. Once they are assigned, I sell covered calls until the calls get assigned, then I go back to selling puts.

This is what I have in my "option strategy" account as of today:

Long 400 SPY at $204.76 = $81904
Short 1 SPY call at $211 May 13, expired today
Short 1 SPY call at $212 May 20, value -$1
Cash $18,195

Total $100,000

Here's the challenge - let's track our portfolios and see who does best


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## atrp2biz

Yeah, it's pretty much a short straddle. I'll be using straddles more often. Iron flys as well to preserve margin capital.

HP, what do you do in these low IV environments?


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## atrp2biz

Jaberwock said:


> I have a much simpler option strategy, which I have been using for about 2 years now. I have returned about 12% per year based on what I consider my "at risk" money of $100k.
> 
> I sell out of the money SPY puts, and hold them till they expire. If they go into the money, I choose to either sell them or let them get assigned, based on what cash I have in the "at risk" account. Once they are assigned, I sell covered calls until the calls get assigned, then I go back to selling puts.
> 
> This is what I have in my "option strategy" account as of today:
> 
> Long 400 SPY at $204.76 = $81904
> Short 1 SPY call at $211 May 13, expired today
> Short 1 SPY call at $212 May 20, value -$1
> Cash $18,195
> 
> Total $100,000
> 
> Here's the challenge - let's track our portfolios and see who does best


Sure, I'm up for that challenge. I'm using this portfolio to stay more engaged in the market. The short put/covered call rolls is a fairly conservative strategy which I generally like. How far out do you roll? Looks like you are using weeklys which I avoid.


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## Jaberwock

I'm a conservative guy, not a gambler.

I usually go out five or six weeks with the weeklys. I usually sell two put contracts for each week for 5 weeks, which, if they were all assigned would require about 2 x my "at risk" capital to cover. I close the positions if it looks like I won't have the cash to cover them.

The 400 SPY in my account are left over from January, the average buying prices was less than $200. I have taken a break from option trading for a few months, but I will pick it up again from now for the rest of the year.


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## atrp2biz

During the time frame you've been doing this, how have the returns compared to the SPY itself? You said you sell OTM puts--what about the calls after the puts are assigned? Do you write them ITM (equivalent strategy of short OTM puts) or do you write them OTM as well?


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## humble_pie

atrp2biz said:


> Yeah, it's pretty much a short straddle. I'll be using straddles more often. Iron flys as well to preserve margin capital.
> 
> HP, what do you do in these low IV environments?



re iron flies, does IB grant margin for holding long options? at one point in the distant past the TD granted a little margin for long puts or calls, but no longer. I'm told the increase-margin regime was only very temporary.

as for what i do, it's lightyears removed from you flashy guys who are doing the short-terms & the earnings vols. I just plod along selling naked puts & covered calls, like Liza selling her little bouquets of lavender outside covent garden. I'm always much farther away from the money than you flashy guys, plus i'm usually much farther out in time. 

in canada, i have dividend paying stock to cover the calls because i like canadian dividends & their tax credits. But in the US, i wish to avoid US dividends in non-registered, so what covers the short calls are long LEAPs. Those are diagonal call spreads.

here & there i sell naked puts - hopefully not as stupidly as mister tuckson - plus in CNQ i sell naked US strangles, gulp. 12 of them, gulp. Even for me, that's a lot of naked calls in CNQ, gulp. Still, i've been selling these CNQ strangles for at least 10 years. Rolling them over & over. I've never been assigned. They have been lovely profitable.


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## atrp2biz

Wow, never assigned in 10 years? Do you hold them through expiration. If not, that could be why you've never been assigned (barring being too far ITM). 

As for the margin on the flys, I'd assume they do--I haven't put any wings on yet but will certainly enter into some positions next month getting ready for the Junes.


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## Jaberwock

atrp2biz said:


> During the time frame you've been doing this, how have the returns compared to the SPY itself? You said you sell OTM puts--what about the calls after the puts are assigned? Do you write them ITM (equivalent strategy of short OTM puts) or do you write them OTM as well?


Always OTM, puts or calls. Last year SPY was flat, I was up 12%, based on my "at risk" money. 

2014, SPY was up about 20%, I was up about 12%, which included trading some individual stock options earlier in the year. I didn't really get into the strategy with SPY until later in 2014.


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## humble_pie

atrp2biz said:


> Wow, never assigned in 10 years? Do you hold them through expiration. If not, that could be why you've never been assigned (barring being too far ITM).



no of course i don't hold them to expiration! my key to never being assigned is to monitor things far in advance & roll myself out of the way in time.

recently the 12 short calls in CNQ were getting dodgy. Not too long ago, when oil was troughing, i'd sold jan 30 calls of 2017. Of course, as oil rose & CNQ recovered to climb past 30, these turned dodgy.

i would scrutinize the 30 call bids with that famous formula i've posted here so many times. The idea is to see if there is any premium - any theoretical value premium whatsoever - in the ITM bid price. If there's no premium, look out, there's a risk of early assignment.

my short 30 calls had enough premium at all times to, theoretically, prevent an assignment, but the situation was touch-&-go. If that premium had disappeared, i would have had to roll the short jan 30s in a rescue operation.

what happened next is that, very recently, canadian oils have declined once again. US CNQ is presently below 30 so i have a little reprieve. However, TV in those call bids is declining & will continue to decline as we go forward in time to expiration, so sooner or later i shall have to do something to rescue the calls.


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## atrp2biz

Straddle management

This video says to exit a short straddle trade at 25% profit and 150% loss (relative to initial credit). 

I wish I had the raw data to do research like this, but it's just too expensive for us retailers. It would be pretty easy code to write if I just had the data. I'd like to test this theory with other underlyings and profit points.


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## humble_pie

re the well known sell-puts-until-assigned-then-start-selling-calls strategy.

i've never done this. Does it really work?

not long ago a party in a put-selling thread in the forum said he had been assigned 100 shares of AAPL at 110 pursuant to a short 110 put exercise.

what kind of calls can that party possibly sell now? his cost is $110. With AAPL in the $90 range, there is no premium in calls at 110 or above, so he will have to sell calls at strikes below 110. In other words, he's scripted to lose capital. There's no way out.

of course, he should have seen that early exercise in AAPL coming (it was an early assignment, prior to expiration date) & he should have gotten his short 110 put out of harm's way.

on a larger scale, the failure of the sell-puts-until-assigned-then-sell-calls strategy also destroyed GOB's pilot project in AAPL put selling a couple years ago.

the recent turkson story is only an extreme version of the same story. Turkson's margin calls were normal events. The only atypical aspect in turkson is that he failed to understand the reality of the contracts he had signed with the broker, so - stupidly - he sued.

turning back to SPY puts, it's clear that jabberwock keeps cash to cover in the account, so the risk of a margin call is not present.

i don't do SPY options so i'm asking out of ignorance: Is it possible that a major index option such as SPY will somehow be exempt from a scenario like the AAPL put/call scenario above? ie, if assigned at a high put strike price, is it possible that an index position will continue to have calls to sell that will have favourable strikes close to or above the assignment price?

the way i see it, if the underlying drops, a put assignee at a higher strike will not have any calls to sell at his cost base level. If he sells cheap calls, he risks to lose capital if these calls get assigned at low strike prices.

all he can do is hold the high cost underlying & wait for it to climb out of the trough. At the very least, by not selling any loser calls, he is avoiding crystallization of his loss.

but perhaps the story goes better with an index put/call strategy though?


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## atrp2biz

I hate referencing Tastytrade so much, but here is their study on this question.

My feeling is you have to be consistent with the strikes. Either always ATM or slightly OTM (with the calls) or slightly ITM (with the puts).


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## humble_pie

atrp2biz said:


> I hate referencing Tastytrade so much, but here is their study on this question.
> 
> My feeling is you have to be consistent with the strikes. Either always ATM or slightly OTM (with the calls) or slightly ITM (with the puts).




thankx, tastytrade is always a premiere reference, i'm always happy to see a Tasty link.

now look at this video. It's what i've been saying forever & ever. Sell above the money. Look at their 30 delta sell results, this one is the winner.

i for one don't find consistency necessarily the numero uno criterion, although a mathematician such as yourself would probably like it better than a wild-pattern fair isle knitter like myself.

if i'm starting a new stock & feeling my way, i'll sell calls closer to the money. I'd also sell OTM puts (the strangle) & start by buying fewer shares than i intend the overall position to become, if it turns out to be successful. All this by way of feeling out the startup.

at the other extreme i have old holdings with high notional or paper gains, so the vital criterion is to prevent call assignments with their heavy tax consequences. Automatically this means higher OTM strikes. Less premium received of course, but meanwhile the actual value of the holding is creeping upward with the market. Strangles also work in these cases. Meanwhile i have a useful strategy for jacking up the cost base. It's all good.


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## atrp2biz

humble_pie said:


> at the other extreme i have old holdings with high notional or paper gains, so the vital criterion is to prevent call assignments with their heavy tax consequences. *Automatically this means higher OTM strikes. * Less premium received of course, but meanwhile the actual value of the holding is creeping upward with the market. Strangles also work in these cases. Meanwhile i have a useful strategy for jacking up the cost base. It's all good.


Is it automatic? Couldn't you still pick longer duration calls with strikes closer to ATM and monitor the intrinsic value? Then if the short calls get to more than 90-95% intrinsic, roll/exit.

Jacking up the cost base (through the put assignments I'm assuming) works to a certain point until the underlying accounts for more of your portfolio than you're comfortable with. Also tax triggers don't have to be all-or-none. You can drip feed your capital gains by selling a fraction of the calls closer to ITM and the rest more OTM. If you allow the former ones to be assigned, you have more room to add from any short put assignments while increasing the average cost base of the underlying.


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## humble_pie

^^


no i don't mean jacking up the cost base with put assignments. What i do has a similar effect, although the routine is far more controllable than drifting with random put assignments at the whim of market fortune.

to raise cost base & thus lower ultimate capital gains disposition, one sells a small number of shares every single year. There will be a small capital gain that one can probably offset with a loss, if not one should be careful not to push one's taxable income including this gain up into the next tax bracket.

one tries to sell on a downtick so one can then buy back the missing shares at a slightly lower price. When one does buy the replacement, presto the cost base increases slightly. Repeat the following year & every year thereafter.

also your idea - staggering the option strike prices so only a few might get assigned - goes along the same lines. Everything considered, though, i'd rather just plain sell 200 shares to get the job done PDQ, than fool around with the options.

in recent years i've been donating shares to charities instead of selling them, then replacing the donated shares in the holding. There are no tax consequences to donated shares, so the number of shares donated can be higher than a few hundred. The effect of raising cost base is the same. Coupled with the charitable tax receipt, the procedure works wonders on the tax return.


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## humble_pie

atrp2biz said:


> Is it automatic? Couldn't you still pick longer duration calls with strikes closer to ATM and monitor the intrinsic value? Then if the short calls get to more than 90-95% intrinsic, roll/exit.



yes, i could! but you see, i'm not as good at this as you are, plus i'm getting lazier as i get older. Remember i'm just a dumb crumb, so i don't want to encumber my poor old baking sheet with all these tracassements.

i've said this before, but what i have is curated stock - what i hope & believe is good old stock - with a grid of fairly long-term calls & puts that lies on top of the stock like a GIC ladder. I keep a lazy eye on intrinsic vs TVs but really only sweat these numbers when Oops, one of the options goes DITM & becomes at risk of early assignment.

otherwise, i start eyeing how to roll my short options a month or 2 before expiration. My favourite time to roll is after serious decay has eroded some or even most of the premium in the one i have to buy back, but the last-minute frenzy to sort out the open positions - along with the concomitant hard stance of the market makers - has not yet set in. A momentarily falling market will help out, too, as gamma/theta depress the price of the near option faster than the far option ... the result of this is that i'm happiest in falling markets, go figure.

upon reflection, i think my approach is only a slightly different version of your approach. I mean, i have some good old stuff that plods itself along, but for fun & entertainment i keep options going on the reins & harness ...


.


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## Jaberwock

humble_pie said:


> re the well known sell-puts-until-assigned-then-start-selling-calls strategy.
> 
> i've never done this. Does it really work?
> 
> not long ago a party in a put-selling thread in the forum said he had been assigned 100 shares of AAPL at 110 pursuant to a short 110 put exercise.
> 
> what kind of calls can that party possibly sell now? his cost is $110. With AAPL in the $90 range, there is no premium in calls at 110 or above, so he will have to sell calls at strikes below 110. In other words, he's scripted to lose capital. There's no way out.
> 
> of course, he should have seen that early exercise in AAPL coming (it was an early assignment, prior to expiration date) & he should have gotten his short 110 put out of harm's way.
> 
> on a larger scale, the failure of the sell-puts-until-assigned-then-sell-calls strategy also destroyed GOB's pilot project in AAPL put selling a couple years ago.
> 
> the recent turkson story is only an extreme version of the same story. Turkson's margin calls were normal events. The only atypical aspect in turkson is that he failed to understand the reality of the contracts he had signed with the broker, so - stupidly - he sued.
> 
> turning back to SPY puts, it's clear that jabberwock keeps cash to cover in the account, so the risk of a margin call is not present.
> 
> i don't do SPY options so i'm asking out of ignorance: Is it possible that a major index option such as SPY will somehow be exempt from a scenario like the AAPL put/call scenario above? ie, if assigned at a high put strike price, is it possible that an index position will continue to have calls to sell that will have favourable strikes close to or above the assignment price?
> 
> the way i see it, if the underlying drops, a put assignee at a higher strike will not have any calls to sell at his cost base level. If he sells cheap calls, he risks to lose capital if these calls get assigned at low strike prices.
> 
> all he can do is hold the high cost underlying & wait for it to climb out of the trough. At the very least, by not selling any loser calls, he is avoiding crystallization of his loss.
> 
> but perhaps the story goes better with an index put/call strategy though?


It is not a risk free strategy, though it is much less risky using an index rather than individual stocks. 
There is a certain amount of market timing involved. I have no idea what the market will do tomorrow, but I do know what it did yesterday and the day before. I have a rule where I never sell puts when the market is up, and never sell calls when the market is down.


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## humble_pie

Jaberwock said:


> It is not a risk free strategy, though it is much less risky using an index rather than individual stocks.
> 
> There is a certain amount of market timing involved. I have no idea what the market will do tomorrow, but I do know what it did yesterday and the day before. I have a rule where I never sell puts when the market is up, and never sell calls when the market is down.



yes, i can see how the put/roll/call strategy could be more successful with an index option.

re market timing, is this why you hold 400 SPY but have only sold 2 calls? (although i might be wrong in imagining that there could be 4 potential calls)


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## atrp2biz

MCD un-contango'd

The underlying moved as I had hoped. Why did my position lose money? Horizontal skew (or the reduction of it).


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## Jaberwock

humble_pie said:


> yes, i can see how the put/roll/call strategy could be more successful with an index option.
> 
> re market timing, is this why you hold 400 SPY but have only sold 2 calls? (although i might be wrong in imagining that there could be 4 potential calls)


The 400 SPY come from puts that were assigned in January and February. I took a break from options trading and rode the stock up until mid-April, when I sold 4 call contracts, spread over four weeks. My timing was lucky in that I sold them at a peak, and 3 have expired, the last one will likely expire next Friday. If the market is down on Monday, I will likely sell some puts. If it goes up significantly, I will likely start the call sequence again.


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## atrp2biz

See the link in my signature. Lots of activity today. I'll probably end up regretting my GOOGL set up, but we'll see how tomorrow morning goes. AAPL did well for my positions which I closed today. I added to my MCD given my thoughts in post #32.


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## humble_pie

atrp2biz said:


> AAPL did well for my positions which I closed today



but it appears you rolled calls by selling a whack of june 95s? very nice roll btw, looks like something north of $2200 credit

i've lost track of the original AAPL spread, is there a long aapl position somewhere


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## atrp2biz

It wasn't a roll--just an exit. I was short May and long June. Today, I bought back May and sold June.

Have a look here for all of my open and closed positions.


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## humble_pie

^^

o i c

still, a nice exit, $486?
nice


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## atrp2biz

atrp2biz said:


> See the link in my signature. Lots of activity today. I'll probably end up regretting my GOOGL set up, but we'll see how tomorrow morning goes. AAPL did well for my positions which I closed today. I added to my MCD given my thoughts in post #32.


That was fortuitous. I got out of my long GOOGL position (June 715 calls @ $28.50) at the open with GOOGL +5 and with the typical bump in IV at the open. I'll provide more details after today's close.


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## Nerd Investor

Awesome thread! I went out and bought some land which means options trading for me until I build up a respectable amount of margin again. Until such time, I will live vicariously through this thread .


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## atrp2biz

Great start to to the day this morning. I sold my June 715 calls @ $28.50 when GOOGL was at $735. GOOGL closed today at $720, so I dodged that bullet. I still have a long 730/740 call spread which I'll ride. It's just one lot, so not too concerned about the outcome.

I sold some straddles in SPY and QQQ. I know IV is low, but it has picked up over the past week. I'll only enter into straddles on down days. Conversely, I'll enter calendars on up days. My plan is to enter into a straddle on either SPY, QQQ, RUT or TLT every week with 30-35 DTE if IV is sufficiently high. I'll take profits at 25-30% or cut my losses at 1.5x the credit. For greater clarity, if credit is $2, I'll cut loss if spread goes to $5.

Today's trades:

-Sold GOOGL June 715 call @ $28.50 x 4
-Sold SPY June 206 straddle @ $6.82 x 1
-Sold QQQ June(03) 106 straddle @ $2.75 x 2
-Sold MCD May 128 put @ $0.92 x 2


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## atrp2biz

Closed the SLW 18/19 strangle for a nice little gain. The market drop following the FOMC minutes brought the underlying into the sweet spot in between my strikes. I also added more MCD short puts. *I need an emoji that bangs itself in the head with a hammer*

-Bought SLW May 18/19 strangle for $0.39 (initial credit of $0.95) x 3
-Sold MCD June 125 put @ $2.48 x 3


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## atrp2biz

It's been a busy week of adjustments and I'll try to summarize my activities over the weekend. However, I'd first like to discuss a mini-dilemma.

I'm long a GOOGL June 710/730 call spread with an initial debit of $10.30. Although GOOGL dropped today tightening the markets, when the spread was deeper in-the-money, the markets were quite wide. Instead of trying to get out by offering slightly below the mid-market, I contemplated simply 'closing' the spread by opening up an identical long put spread with a much tighter market. I would then just let it play out at expiry. [Aside: There is no fee with exercise/assignment at IB.]

What are the perils of this aside from early assignment and locking up capital?


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## humble_pie

^^


just to confirm, are you long the 710s & short the 730s? that's the only way i can see how you arrived at a debit ...

ps these are the jun 17s right?


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## atrp2biz

Yes--initial debit of $10.30 on Victoria Day Monday when GOOGL was around $718. 

Yes, the standard June expiry which is the 17th.


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## humble_pie

took a very hasty peek at the june 17s, does not look too good ...

but ottomh do you not have GOOGL shares already? so an exercise of the long 710s to cover the short 730s that look likely to be called away from you might mess up your gain/loss position for 2016 as well as altering your cost base in the shares?


EDIT: i guess something or maybe even a lot depends on what exercising the 730s against you does to your cost base in GOOGL ... how you report short sales, i mean ...


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## atrp2biz

We have GOOGL in registered accounts and corporate account. The account with the spread is in a non-registered personal account with no position in the underlying.

Yeah, the spread is now in the range of $14.60 - $16.20, so I have an unrealized profit of ~50%. I'd likely have to offer 0.10 to 0.20 under the mid-point to get filled, so it could be more efficient to open a vertical on the put side.


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## humble_pie

atrp2biz said:


> I'd likely have to offer 0.10 to 0.20 under the mid-point to get filled


true, i was thinking 15.20, maybe 15.40 with luck




> so it could be more efficient to open a vertical on the put side.


i'm ok with 3 legs but i never could manage quad positions. Vertigo sets in. What kind of put spread we talking about here?


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## humble_pie

(crumb is trying to think) cost to cover the 730 short will be 720.30 (710 + 10.30), leaving profit of 9.70. There is also the risk that googl price falls below 730 by friday 17 june.

whereas you could close the spread now for, say, 15.40.
the difference is 5.70. You are saying you can wring more than 5.70 out of a 710/730 put vertical? i canna see it mon ...


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## atrp2biz

The objective is better execution. I would buy the 730 put and sell the 710 put. No matter what happens, I would be buying GOOGL at 710 and selling it at 730 at expiry (barring pin risk). The exercise and assignment are commission-free.


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## humble_pie

atrp2biz said:


> The objective is better execution. I would buy the 730 put and sell the 710 put. No matter what happens, I would be buying GOOGL at 710 and selling it at 730 at expiry (barring pin risk). The exercise and assignment are commission-free.



yes, but you wouldn't be receiving the full $20 though. This amount still has to be worked down by the cost of the put spread, no? those prices - the 710 & the 730 - don't look particularly negotiable, the B/As are fairly tight.

the way i see it, 20 less 4.60 in net put cost is right back down to 15.40, which is what you might have received if you had closed the call spread today.

also, what if GOOGL ends up between 710 & 730 on expiration day? would anything be exercised? sorry if i'm missing the obvious, it's a friday evening


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## atrp2biz

Exactly. The B/A is tight on the put side and net of the put spread cost, I should net slightly better than closing on the call side. If GOOGL ends up between 710 and 730, I exercise my long 710 call and long 730 put. Wherever GOOGL ends up, I get a credit of $20.


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## humble_pie

atrp2biz said:


> If GOOGL ends up between 710 and 730, I exercise my long 710 call and long 730 put


you're right! i overlooked that one




> Wherever GOOGL ends up, I get a credit of $20.


here i'm not so sure. What about the original 10.30 debit? what about the new cost of the put spread which one might estimate at 4.40-4.50? by one calculation should one not include them, for a return that might be as dismally low as (20-10.30)-4.40 = 5.30?

i run across this paradox in diagonal call spreads all the time. They seem to be more profitable if closed prior to maturity, less profitable if allowed to exercise on one side or another.

the only times i go to exercise is when one leg of a diagonal is a long DITM option with a bid that's far below intrinsic value. Then it makes sense, even with commissions like $43 to exercise, to buy the short call to close, short the stock & exercise the long call to cover.


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## atrp2biz

$20 - $4.60 = $15.40 which is similar to the call spread credit if I exit the calls. However, I will likely have to give up at least $0.20 from the mid price to get filled. If I go to the put side, I'd only have to give up a nickel at most to get filled on the OTM put spread given the tight B/A. Like i said, this is all about better execution. In the end, I save maybe 0.15 or so, but it's risk free--no? So why not go to where the liquidity is and let things settle on June 17.


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## humble_pie

what happened to the original 10.30 debit though


plus your euclidean geometry depends upon your own broker's unique policy. No fee exercise for US options. Alas no one else has it so good.


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## atrp2biz

On the diagonal, I'm playing with exit points. I currently have a diagonal with FB. Long July 115C and short June(10) 118C with an initial debit of $3.28. So far so good. Right now the long delta is greater than the short delta. My exit will be when the deltas equalize. The overall delta is still positive, so I'll happily collect my theta while FB continues its uptrend.


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## atrp2biz

Ignore the inital debit. It doesn't matter right now. What matters is the credit I can get going forward. I can either sell the call spread for $15.40 (optimistically), or buy the put spread for $4.60 (likely better) and wait until expiration to get my $20. Going through the puts nets me $20 - $4.60 or better (could get it for 4.40 or 4.50 as you allude to).


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## humble_pie

couldn't you please stick with the googl? i don't really want to get into another play.

i'm still wondering what are we doing with the original 10.30 debit in googl. Is it not supposed to be subtracted from $20, just like the put spread was subtracted ...


EDIT: he said ignore the initial debit. Phhhhhtt just like that. Ignore. the. debit.

me i'm still left back-of-the-yards & i'm asking _what do we do with the debit ?? _


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## atrp2biz

Ok. Let's do it your way and not ignore the initial debit. 

If I just exit the call spread:

$15.40 - $10.30 = $5.10 profit. Remember, the $15.40 is optimistic. 

If I exit the position synthetically with puts:

$20 - $4.60 - $10.30 = $5.10 profit. Remember, I can probably do better than $4.60 with the puts given the tight B/A. 

What I'm saying is that I can get a better result through better execution on my exit by going through the puts.


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## humble_pie

i see your point. As you say, the 15.40 is optimistic. I was posting upthread that 15.20 was likely while 15.40 would be a lucky price.

suppose we use 15.20 minus the 10.30 debit, we get 4.90, a result that makes the tight pricing on the put side even more attractive.

this is quite beautiful, thank you so much. I'll start looking for put structures when comes time to wind up diagonal call spreads. 

i don't do very many put strategies because, as i mentioned, i never could wrap my head around 4-legged iron positions. I quite often sell naked puts but seldom do put diagonals. I might do 200 or 300 call diagonals before ever doing one with puts.


.


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## atrp2biz

Thanks. I'm glad we're on the same page. But this works well with IB given commission free exercise and assignments. Not sure about other brokers. 

Now to diagonals. I like using puts if I have a bearish bias. I'll use an ITM long back-month put with an ATM/OTM front-month put. If the trade works, IV should increase which will benefit the long ITM put (which has a higher vega than an OTM put). 

I'm currently doing his with AAPL. Long July 95p and short June 92.5 put. This hasn't worked out well but I've added a call caledar with 97.5 strikes. I like AAPL's retracement this week and am looking for it to slip in between my short strikes. The lower the better not only due to delta but for the IV bump as well. 

I don't see how you can exit a diagonal synthetically like my GOOGL situation without involving stock prior to expiration. You could certainly exit synthetically just before expiration though. If you're short a DITM put (call), you can buy a slightly ITM put (call) just before the close which would have a tighter b/a and let the positions wash over the weekend while you're just debited for the difference.


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## humble_pie

.


atrp2biz said:


> Thanks. I'm glad we're on the same page. But this works well with IB given commission free exercise and assignments. Not sure about other brokers.



yes, same page. Taking advantage of the tighter spreads in puts is something i had not thought of. I'm going to start looking around, thankx!

however IB is the only broker where execution can be efficient at very small cash increments. Exercise/assign at other brokers can run from $43 at the big green - i believe questrade is lower at something like $26 - to as high as full agent-handled commish at most other brokers (highway robbery, but that's another topic.) Plus the other commissions involved in a synthetic takeout are much higher at other brokers as well.




> ]If you're short a DITM put (call), you can buy a slightly ITM put (call) just before the close which would have a tighter b/a and let the positions wash over the weekend while you're just debited for the difference.


good idea





atrp2biz said:


> I'd first like to discuss a mini-dilemma ... What are the perils of this aside from early assignment and locking up capital?


well u did start out by asking us to think about your perils .each:


.


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## atrp2biz

Why I shorted puts in US Steel


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## atrp2biz

Today was a roll day.


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## Jaberwock

This is how my option strategy has worked out this month

All of the call options I sold in April expired in May, so I still have the 400 SPY in my option trading strategy account

I sold SPY covered calls for Jun 10,17,24 and 30 at strikes of 207,208,209,210
I sold SPY puts for Jun 10,17,17 and 30 at strikes of 202,199,198 and 193

Total receipts minus commissions were 981, leaving me with 19,167 cash in the account.

The unrealized value of the options is -$1505

The value of the SPY shares has increased to 84,576.

Total value of the account is 102,238 versus 100,000 last time I reported on May 5th.


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## atrp2biz

What were the credits for each of these options at each of the strikes? 

All is well and good with those in a bullish environment. I'm trying to do something uncorrelated with the rest of the market and thus with the rest of my portfolio. I try to have an equal number of +delta and -delta positions. And besides, the SPYs get kinda boring. 

I look forward to your updates and being my 'control'.


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## atrp2biz

Jaberwock said:


> I have a much simpler option strategy, which I have been using for about 2 years now. I have returned about 12% per year based on what I consider my *"at risk" money of $100k*.
> 
> I sell out of the money SPY puts, and hold them till they expire. If they go into the money, I choose to either sell them or let them get assigned, based on what cash I have in the "at risk" account. Once they are assigned, I sell covered calls until the calls get assigned, then I go back to selling puts.
> 
> This is what I have in my "option strategy" account as of today:
> 
> Long 400 SPY at $204.76 = $81904
> Short 1 SPY call at $211 May 13, expired today
> Short 1 SPY call at $212 May 20, value -$1
> Cash $18,195
> 
> Total $100,000
> 
> Here's the challenge - let's track our portfolios and see who does best


Exposure to 8 SPY contracts (re: post #64) is _*slightly *_more than $100k at risk. For all intents and purposes, you are quite levered. Should work well in an uptrend, but...a 10% drop over the course of a month would mean SPY at $190 and your puts would be ITM by $12,9,8 and 3 which is worth $3200. Your long SPY would be down $8400. Total of $11,600 which is still manageable for $100k. 

But 15% would put the puts ITM by $7200 and the long stock down by $12,660. Total of $19,860.

I just can't justify blindly selling naked puts on the SPY with the current IV. Things seem too 'calm'.


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## humble_pie

atrp2biz said:


> I just can't justify blindly selling naked puts on the SPY with the current IV. Things seem too 'calm'.




i'm hoping things are "too calm." I'm finding it hard to believe canadian bank prices. Like james4 i've been thinking they should be in retreat. I thought they'd have une crise cardiaque over Brexit.

bad jobs report last week? banks laughed it off. Onwards & upwards they rolled, like armoured tanks.

would you believe i'm short jan 74 calls in RY, jan 76s in BMO & jan 54s in TD. Thousands of them. Everything is DITM. Fortunately there are no dividends coming up & there is still premium in the bid prices, but like fort mcMurray i'm praying for rain clouds & a storm of dropping prices.


.


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## atrp2biz

Postmortem: Long SPY calendar spread

Things got interesting on Friday. I'm hoping things get more interesting in the next few weeks so that we can get some more premium in these options.


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## atrp2biz

Expiration week. 

Finally closed the June(17) 710/730 call vertical. Debit of $10.30 and closed for $18.10.

MCD adjustments are working well. The pull back at the end of the day definitely helped. I'm currently short June(17) 122 and 123 puts while long July(17) 130 puts which has a delta near unity. I just want MCD to continue to drop. MCD closed today at $122.25. I think I'll roll my shorts a week or two over the next two days. If I can roll while below $122, I'll be pleased as punch.

Over the past couple of days, I've entered into small ATM short straddle positions in IWM, GLD, BABA.

My short puts in X from last week worked well. After X shot up, I decided to strangle it off. So I'm strangled at 15/19 in July(17).

I'm bearish in Citigroup (US banks in general) for the short-term, so I sold a July(17) 40/45 call spread @ $2.42.

It's been a fun week!


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## atrp2biz

Well that was an exciting day. 

I exited my MCD position save for a few orphan naked puts which I might just let get assigned. I got out leg-by-leg with 5 lots in each leg over the course of the day. About 30 minutes into the day, I shorted VIX as a dirty hedge to lock in the MCD gains from the down move. MCD and the SPX both crept up during the day which affected some of my exits. Once I completed my exit, I bought back VIX for a gain of $0.70.

My only other move for the day was rolling the June(17) 97.50 calendar in AAPL by another week.

*My P/L* since I started on May 5 is $3310.

Current open positions:

-short MCD June(17) 125 puts
-long AAPL double calendar at 95 and 97.5 strikes; long July(15), short June(24)
-long FB diagonal; long July(15) 115 call, short June(24) 116 call
-short X 15/19 July(15) strangle, ratio'd 10 puts x 8 calls
-short IWM June(30) 114 straddle
-short BABA July(15) 77.5 straddle
-short GLD July(15) 123 straddle
-short C July(15) 40/45 call spread


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## humble_pie

i'm still digesting pinning the tail on the donkey

do you remember how, as a kid at birthday parties, one would be blindfolded, then spun around several times, then gently pushed off towards the donkey picture on a wall while holding a paper tail in one's eight-year-old hand?

all the other children at the birthday party would be watching. Blindfolded, one could navigate more or less by their breathing. Their tiny gasps. Their faint inhalations.

more noise meant that one was stumbling in a wrong direction. Greater silence meant that one was more or less heading in the right direction. Once one got to the wall, one could feel around for the large piece of paper with the donkey picture. One could sort of remember how big was the donkey, where was likely to be its rear end that was waiting for the tail.

most of the time, this approach worked. If only options were so easy.


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## atrp2biz

*Updated P/L post Brexit.*

+US$2700 with CA$100k which translates to +3.5% since the beginning of May.

I actually made money on Friday. Despite the market direction, market volatility helped my calendars and I scalped some VIX.

Earlier last week, I jumped into TSLA with some short puts following the SCTY announcement, but I was a little premature. Still hanging on to them and hoping for some time decay and some positive price movement.

The portfolio is a little +delta heavy. My bearish position in C helped slightly though. If the market can rally a bit this week, I'll be in a good spot.


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## james4beach

Awesome stuff!


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## atrp2biz

Two thumbs up for today's action. I've reduced my delta slightly and have exited all of my calendars except for the SPY calendar. I also closed the BABA straddle for 32% of maximum gain which was a 13 day trade. I only have short volatility positions right now. Volatility is getting absolutely _crushed_ today. Today has been one of the best P/L days since I've started. Below is a summary of the greeks of my remaining positions.


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## james4beach

Wow congrats, one of the best P/L days ever... that's worth celebrating!


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## atrp2biz

What is going on with this market? I wasn't anticipating a V-bottom. I was -delta on the SPY going into today and bought some SPY to level out my delta. I sold these at the close so now I'm -delta again. 

US banks have made a roaring comeback over the past couple of days. I thought about closing my C position on Monday, but my portfolio was positive delta overall so I elected to keep it in place. Now my C position is back to even but I guess I can't complain since the overall portfolio has gained over the same period.

A large contributor to my portfolio gains is TSLA. It's been on fire since Monday. I bought the July 200 puts to turn my short put position into a short put spread which freed up some capital to allow me to make the SPY adjustments.

Can we please have a down day tomorrow? Thanks.

Portfolio is *+US$5569* for a gain of 7.2% since the beginning of May.

EDIT: Oops.


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## atrp2biz

*June summary*

Overall, June was a pretty good month at +12.4%. The performance was much better than I would have thought (which is somewhat concerning) and makes me wonder about the level of risk given the size of the portfolio. The portfolio has very little correlation with the rest of the market and my core portfolio which is a nice perquisite.


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## Jaberwock

atrp2biz said:


> Portfolio is *+US$5569* for a gain of 7.2% since the beginning of May.
> 
> EDIT: Oops.


You appear to be well ahead of your "control" portfolio this month.

All of the June Put options that I sold, and three of the four Calls expired, the other call was assigned at 208.

My SPY holdings are now down to 300.

In June I sold the following SPY options:

Calls for July 8, 15, 22, 29 at strike prices of 211,212,212 and 213. All but one are covered.
July 8 put at a strike of 197.

Net income from sales of $638, value of sold options as of today -$412.

Total portfolio value is now $103,190 - a 3.2% increase from May


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## atrp2biz

You had a lot more puts with your last update. How do you decide when to sell puts? How OTM are you going with you calls and puts? Were you able to sell some options no Brexit Friday or the following Monday?


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## atrp2biz

July is off to a decent start. At the close today, my P/L since the start is +$6000. It could have been much better except my SPY calendar roll on the short side was disastrous. With SPY at 200, I rolled down my short 207 calls to 204 while keeping the long 207s. The roll did not end well with SPY closing at 210 last week. I'll try to make some time to scribe a more detailed account of this bad roll in my blog.

But many things went well in June. I had a nice result with my short puts on US Steel (X) which I transitioned into a short strangle. My GOOGL vertical was a big winner. Hopefully my winning ways with GOOGL continue with my short August 700 straddle I opened up today. I intend on closing this position well before earnings release at the end of the month.

My daily theta is currently $350. I'm pretty comfortable with this level as I'd like to get generally between 0.1% to 0.5% of my net liquidation value. If I need more margin flexibility, I'll add some wings to my GOOGL straddle which will bring down the portfolio theta a bit.


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## humble_pie

atrp2biz said:


> July is off to a decent start. At the close today, my P/L since the start is +$6000.
> 
> It could have been much better except my SPY calendar roll on the short side was disastrous. With SPY at 200, I rolled down my short 207 calls to 204 while keeping the long 207s. The roll did not end well with SPY closing at 210 last week. I'll try to make some time to scribe a more detailed account of this bad roll in my blog.



awesome profits since startup

6 weeks waiting for SPY update is a long wait though. what happened? SPY is cash settled i believe?

now is the time to entertain with stories about how you a) hastily raised the cash or b) rolled SPY into another call that's farther out iin time


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## atrp2biz

Wow. So much has happened, but I stopped updating because I didn't want a soliloquy (I can't stand those kinds of threads). 

On this trade specifically, I just rolled up the short side to 209 which recovered some of the loss. I ended up closing with a loss of $3300 between all the adjustments. My lesson learned--don't roll a one of the legs of calendars. Just hold or exit.

I'll follow up with a summary of all the trades since then, but unfortunately there won't be a story behind them.

BTW: SPX is settled in cash--SPY is settled with...SPY.


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## atrp2biz

*Current positions:*

Long AAPL Sep/Oct 105 call calendar b1.95
Short GOOGL Sep 790 straddle @35.50
Short IWM Sep 120 straddle @4.70
Short TGT Sep 70 puts @1.41

*Recent history:*

_Some earnings plays_
-Long ATVI Aug5/19 41 call calendar b0.25; @0.61
-Bunch of stuff with GOOGL, generally short straddle/strangle with rolls; ($3400 realized); current position excluded
-Short TSLA Aug(5) 220/235 strangle @7.90; b1.37

_Other stuff_
-Short C Jul 40/45 call spread @2.42; b4.30
-Short DIS Sep 95 straddle @4.77; b4.60
-Long MCD Jul/Aug 120 put calendar; short expired worthless before earnings which left me just long the puts; MCD dropped like a bag of potatoes after earnings and I sold the Aug 119 puts; all-in +$1500
-Bearish Aug 137/142 call vertical @2.38; b1.77
-Bullish TSLA July 200/210 put vertical @6.07; b2.75

Overall +3628 since May.


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## humble_pie

atrp2biz said:


> Wow. So much has happened, but I stopped updating because I didn't want a soliloquy (I can't stand those kinds of threads).




this thread was never a soliloquy! i showed your linked blogspot to a few options traders, i thought it was going to be an excellent resource.

doc your how-it-works on calendar spreads was illuminating. No high falutin language, just an analytic that anybody who'd ever been a child that attended a kids' birthday party could understand.

i was waiting for the SPY treatment. Thankx for the heads-up that it doesn't settle in cash.

.


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## atrp2biz

HP--thanks for the kind words. I'll start updating the blogspot which I'll restructure slightly. My thought is to have a page on the blog for each open position/spread. Once closed, I'll move it to an archive.


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## humble_pie

atrp2biz said:


> My thought is to have a page on the blog for each open position/spread.



i think that would work very well.

the thing is, no one here is at your level. I appreciate your blog because it's lively & clear & well-written, so option traders at many different levels can log in & all will be able to learn something.

me i'm happy to study someone else's example when it involves one underlying or one related strategy, although the latter can have multiple legs. It's the posters who bombard the forum with streams of option citations but no explanation, while at the same time i'm not familiar with their underlyings, that i can't really spare the time to follow.

as mentioned, your pin-the-tail-on-the-donkey explanation of calendar spreads is a good read. I'd never previously understood calendar spreads. Even with your explanation i'm still left preferring combos that are more open-ended, less driven to precisely perfect forecasting, though.

for sure open-enders such as diagonal spreads will always be less profitable. Still, the greater probability of getting something at least partly right appeals to me.


.


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## james4beach

What kind of rate of return on your capital is this? Say as an annual % return


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## atrp2biz

Call it 12-13%. But annual % returns don't mean much until you get a few years of data. My focus is actually on the return vs. risk side by looking at Sharpe/Sortino ratios. I don't have a particular goal in mind but I should establish a target once I have a few more data points.


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## james4beach

That's a good point, and you'll especially have to go through a rough period (like a bear market or high volatility) to see how it all pans out


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## atrp2biz

Actually, I'm generally delta negative. So my options portfolio would do better in a down turn. I've been scraping by through the recent post-Brexit rally by selling premium as we've had several weeks of sideways action.


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## james4beach

You're in the same boat as all the hedge funds in the world  Everyone has had trouble with the US's crazy rally since 2009, straight up with no corrections. Hedge funds have had a horrible time beating those returns.


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## Jaberwock

I didn't anticipate the big increase in the index for July.

I was on vacation for all of July and part of August, and I have not been trading any options.

The put option I had at the beginning of July expired, and the four call options were all assigned at 211,212,212 and 213 leaving me with $125,405 in cash and short 100 SPY for a total net value as of today's close of $103,508, an increase of $3,508 since we started tracking this last May.

Readers will probably point out that I would have been better off just to buy SPY. My strategy works best when the market is trading sideways, I lose when there are big swings either way.

My next move will be to buy cash covered puts. However, I am waiting for a correction before I jump back in.


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## humble_pie

atrp2biz said:


> So my options portfolio would do better in a down turn.




my options portfolios definitely do better in downturns, as long as there are intermittent up hiccups & the slow general trend is up.

right now markets have gone up more than i anticipated for the short term, so i'm mostly putting out brushfires & rescuing DITM options from assignment.

doc i apologize if i'm off-topic in your thread. But i believe i might have invented a strategy for preventing early assignments in DITM calls.

as all know, these tend to occur when TV has been extinguished, when - typically - the option bid is even lower than intrinsic value. In these situations, a looming dividend can tempt a counterparty into exercising early to collect the dividend, instead of selling his long call into the market where a normal premium would pay him better ... except in these kinds of cases, there is no normal premium.

the strategy is to place a buy order - a bid - a nickel or a dime above intrinsic value. This will be just enough to prevent a counterparty from exercising. It goes without saying that one has to track the underlying stock throughout the day & adjust one's bid price up or down as the price of the stock fluctuates.

in a hypothetical example, let's say the intrinsic value in a call is 3.05 while the existing bid is only 2.90 (the ask could be something like 3.35-3.55, but this strategy is not concerned with the ask.)

i would offer to buy at 3.10. If one had a level II options quote, the market would show my bid at 3.10 with the next lower bid being the other party or parties at 2.90.

no one wlll sell to my bid, of course. It's too low. But my recent experiences are that such a bid does serve to prevent counterparty assignments.

in the off chance that some fool would lose his mind & would indeed sell to my bid, i would be ecstatic. I always have the opposing Sell trade in mind, so capturing the short option first at a rock bottom bargain price would be a gift.

.


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## atrp2biz

james4beach said:


> You're in the same boat as all the hedge funds in the world


By definition, that is exactly what my options portfolio is intended to do with respect to my core buy-and-hold equity portfolio. My 'options hedge fund' does well in markets that grind down or moves sideways. It can also hang on and snuff out a small profit in slow, grinding up moves with delta adjustments.

HP, what is your concern with call assignment? Realizing capital gains on the underlying? Other than taxes and perhaps hefty assignment costs at some brokerages, I generally don't concern myself with early assignment. If I want to get rid of a call (put) that is DITM, I just look at the DOTM put (call) to determine the extrinsic value of the offer and add that to the intrinsic value of my bid since the DOTM options should have a tighter b/a spread. The bid should generally be hit this way.


----------



## humble_pie

atrp2biz said:


> HP, what is your concern with call assignment? Realizing capital gains on the underlying?



killer capital gains.

i manage them by selling a few shares every year, promptly re-buying in order to boost the cost base. It's a lifetime discipline. I work to prevent large holdings from being suddenly all called away together on assignment.

you're describing a good technique to help determine a fair bid price, but i'm not looking to determine a fair bid price. I don't wish or intend to buy the DITM calls back, not unless i were to receive a much-better-than-fair price ... a remote possibility that i did mention as some poor fool flying totally out of his skull. This does occasionally happen, as you know.

all i wish to do, as the dividend X-dates parade past, is block a counterparty from exercising. The objective is quite different from just dusting off an awkward DITM call.

.


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## atrp2biz

What about the risk of an even slight after-hours move up that can't be mirrored through the options market? Wouldn't it just be easier to get it over with and close the position?


----------



## humble_pie

atrp2biz said:


> Wouldn't it just be easier to get it over with and close the position?



astronomical costs to just close.

besides - laugh though you will - my idea is actually very easy to do. It's an aitch of a lot easier than breaking the wallet with a plain buy-to-close.


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## atrp2biz

Sorry, I meant close the option--not get assigned.

But only the near-to-expiry options would be at risk of assignment. You'll have to do something about it soon enough--non?


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## humble_pie

atrp2biz said:


> Sorry, I meant close the option--not get assigned.


yes i understood close the option! i was replying that the costs of buys-to-close are astronomical, at least for me. I always look to offset these costs by selling another option farther out in time, in a standard normal kind of rollover spread. To be continued below ...





> But only the near-to-expiry options would be at risk of assignment.


... continuing from above ... in my experience more than just the near-to-expiry options are at risk. Sometimes many more. DITM calls whose underlyings have lucrative dividends get dangerous as the X dates parade past. They're at risk of early assignment when a counterparty conducts a dividend play to grab the dividend. He - the counterparty - will only do this when the option bid is significantly less than intrinsic value. Happens fairly often with DITMs.

other events that also trigger early assignments are re-orgs of the underlying. 

one of my most illuminating experiences was a re-org of ING in amsterdam, which of course impacted its US-traded ADRs. The re-org included a rights issue in amsterdam that wasn't allowed to be given to ADR holders in north america unless they were accredited investors. I don't suppose anybody in north america grasped the assignment risk (one would have had to be following ING in euro markets.)

but the option pros in amsterdam had us all for breakfast. One morning short call sellers in north america woke up & pffffffft! nearly all of their ADRs had been grabbed away by the laughing dutch in amsterdam. The pros must have had an arbitrage opportunity. We never knew a thing.

.


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## atrp2biz

It's been a while, but I've added to the blog. I've described my rationale for a TSLA short straddle. I have a few other positions on as well which I hope to get to.

EDIT: Also added my long BABA put calendar


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## atrp2biz

I came into today very delta positive. I should have sat on my hands today. My options portfolio is up US$5600 since May (but dammit, should be a lot higher if not for my adjustments today!). In any event, it was still a good day and I’m ~$1300 away from my high-water mark (established Friday morning). Today’s gains were primarily due to the volatility crush that killed my short options.

I was pretty active today as I entered into the following new positions:

-	Sold a GOOGL October 795 straddle this morning while IV was still high. Volatility really came in throughout the day and I did something I very rarely do—I added wings. So I’m now long the 770/795/820 iron butterfly for a credit of $21.85. Not bad considering my max risk is $25-21.85 = $3.15

-	I’m feeling dovish so I bought the GLD call diagonal (long October 125, short Sep23 126) for $1.47

-	I was very active in the ES and my deltas are now essentially flat and long theta


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## humble_pie

atrp2biz said:


> Sold a GOOGL October 795 straddle this morning while IV was still high. Volatility really came in throughout the day and I did something I very rarely do—I added wings. So I’m now long the 770/795/820 iron butterfly for a credit of $21.85. Not bad considering my max risk is $25-21.85 = $3.15
> 
> -	I’m feeling dovish so I bought the GLD call diagonal (long October 125, short Sep23 126) for $1.47




i like googl options. For years i was always selling one put in GOOG. He was my Lonesome Goog & a hero at that. Always faithful, never wandering off on an assignment, reliable, responsible, low-maintenance, easily good for at least a thousand dollars a pop.

lately in GOOGL i've added a 2nd put, so now my lonesome hero has turned into one of a settled-down old married pair.


wondering if you could explain a bit about the GLD diagonal though. The way i see it, the most you could collect is $1, so i'm not quite seeing the divine harmony in the $1.47 cost. Perhaps the idea is to have another go at it after the sep 126 expires?


.


----------



## atrp2biz

humble_pie said:


> wondering if you could explain a bit about the GLD diagonal though. The way i see it, the most you could collect is $1, so i'm not quite seeing the divine harmony in the $1.47 cost. Perhaps the idea is to have another go at it after the sep 126 expires?
> .


Considering the following upon September expiration while the long option has 4 weeks remaining until expiration. I've assumed IV remains the same which makes the current October 7 options as a proxy for the value of the October 21 calls on September 23. Today's close was $125.80.

GLD; short September 126 call; long October 125 call; net credit

Minimum net credit = $0
.
.
.
122.8; 0; 1.20; 1.20
123.8; 0; 1.54; 1.54
124.8; 0; 1.98; 1.98
125.8; 0; 2.47; 2.47
126.8; 0.8; 3.10; 2.30
127.8; 1.8; 3.75; 1.95
128.8; 2.8; 4.50; 1.70
129.9; 3.8; 5.15; 1.35
.
.
.
Minimum net credit above strike is $1.00 (ie. max loss = $1.47 - $1.00 = $0.47)

















I should draw out the P/L graphic which would better illustrate the B/E points, but the position maximizes its profit if GLD is at $126 at expiry resulting in the short call having a value of zero while the long call would have a value of ~2.50. The maximum loss on the high side is $0.47, while the maximum loss on the low side is the full $1.47 debit. The diagonal skews the B/E points and losses.


----------



## humble_pie

^^

thankx!

from time to time i return to gaze at those numbers. I'm not quite getting the Aha moment yet but i sense that enlightenment has something to do with the 2nd kick at the can as the septembers expire ...

this is a lovely creative options thread & blogspot, i hope others are appreciating.

.


----------



## Mukhang pera

HP,

While not saying it pertains to this thread or to anything else in particular, I have today endeavoured to send you a pm and was thwarted in my effort. I received the following response from the elves that run things here behind the scenes:

"The following errors occurred with your submission
humble_pie has exceeded their stored private messages quota and cannot accept further messages until they clear some space."

Hoping you'll come across this message here, I would ask that you take a peek at your inbox and see if there is anything there that can be relegated to the dustbin so that my cheery missive can take it place. Pretty please!


----------



## humble_pie

reste tranquil, on se joindra bientôt


----------



## atrp2biz

atrp2biz said:


> Sold a GOOGL October 795 straddle this morning while IV was still high. Volatility really came in throughout the day and I did something I very rarely do—I added wings. So I’m now long the 770/795/820 iron butterfly for a credit of $21.85. Not bad considering my max risk is $25-21.85 = $3.15


I'm kind of regretting those wings now. IV has been annihilated. I opened the straddle with a credit of $45. It's now already [email protected] Oh well, I guess I'll just have to wait longer.


----------



## atrp2biz

New position in AAPL. Sold the October 115 straddle.



> Hooray for the iPhone 7! Does it really not have a headphone jack? Anyways, pre-order sales have been stronger than expected which has driven AAPL higher over the past week. Oddly enough, IV has risen as well. We all know what that means—straddles!
> 
> I opened up an October 115 short straddle at $6.30 when IV was ~21.5%. I actually got filled at $6.305 (yay for dark pools!). I’ll be targeting $4.30 as an exit, hopefully in the next 10-14 days.



http://100koptionsportfolio.blogspot.ca/p/hooray-for-iphone-7-it-really-not-have.html


----------



## atrp2biz

I've updated the P/L link in my blog. +US$7864 to date. Below is the breakdown of the realized P/L by underlying and position.

As an aside, commissions to date are $2090! With any other broker, those costs could easily be 2-3x higher.

*Underlying	P/L*
AAPL	$698 
ABX	($316)
AMZN	$509 
ATVI	$1,348 
BABA	$565 
C	($1,518)
CAT	$136 
DIS	$447 
ES	($2,453)
FB	($925)
GLD	$201 
GOOGL	$2,042 
HD	$740 
IBM	$311 
IWM	$658 
MCD	($2,635)
NFLX	$770 
POT	$15 
QQQ	($228)
SLW	$162 
SPY	$678 
TGT	($187)
TLT	$1,595 
TSLA	$2,301 
VIX	$3,801 
X	$1,579

*Static positions	*
Short straddle	$4,262 
Short strangle	($448)
Short straddle/strangle	($3,462)
Long calendar	$5,676 
Long calendar/diagonal	$44 
Long diagonal	($1,970)
Put ratio	$790 
Short put	$574 
Short vertical	($1,065)
ES	($20,621)
ES options	$12,098 
ES bear put	$6,070 
Long call	($1,020)
Long vertical	$413 

*Dynamic positions	*
Delta adjustments	$538 
Long calendar >> short vertical	$1,504 
Short vertical & short put	$1,212 
Short put >> vertical	$1,017 
Short put >> strangle	$879 
VIX covered call (via VXX)	$264 
VIX	$3,536


----------



## atrp2biz

The steep market decline two Fridays ago and the increase in volatility that accompanied it provided an opportunity to aggressively sell premium in the E-mini S&P futures (ES). The notional value of the ES is the equivalent of 500 shares of SPY. I like using the ES for a couple of reasons. The essentially trades 24/5. It closes between 4:15 pm to 4:30 pm and from 5:00 pm to 6:00 pm (EST). This allows me to monitor/adjust my delta (if necessary) if there is a large after-hours move in the market (eg. Brexit) which irritates nahc. The size of the ES and the transaction costs are also more favourable. These attributes along with the extremely high liquidity are why the ES and its options make up a good part of my portfolio.

The ES premium I sold earlier in the month had expiries of September 23 and September 30. We are now in the week of the 23rd and IV is relatively high in these weekly contracts as we await central bank policy announcements from not one, not two, but three central banks. The Bank of Japan kicks things off tonight, the Fed is scheduled for tomorrow and the European Central Bank closes things off on Thursday (although the ECB won't be addressing policy at its event). It will be an interesting 48 hours. As a result of the increasing IV, theta drip has been slow to roll off of my short options and theta has ramped up. My theta numbers are about double where they were two weeks ago. The conservative approach would be to reduce some positions and bring down theta/gamma or alternatively extend the duration which would also reduce theta/gamma. However, I feel the volatility crush will be significant over the next two and a half days and irrespective of the direction of the market, I’ll be in a good place (barring a 300+ move in the DOW). I feel the risk to the downside is greater than the risk to the upside so I’m positioning my deltas slightly negative because any upward movement in the market will accentuate the volatility crush.


----------



## atrp2biz

I've made zero trades over the past two days. The S&P closed virtually unch'd on Monday and now today. Theta came in nicely on my ES positions yesterday. My ES positions are actually unchanged today! Zero premium decay--nada, zip. Today's ES vega impact matched the theta impact. I think this presents a significant crush opportunity later this week. With ES at 2131, the September 23 2130 straddle is bidding $31!. IV in the September 23 options are 19% as compared to 14% for the October 21 options.

The next couple of days are going to be interesting!


----------



## atrp2biz

atrp2biz said:


> Considering the following upon September expiration while the long option has 4 weeks remaining until expiration. I've assumed IV remains the same which makes the current October 7 options as a proxy for the value of the October 21 calls on September 23. Today's close was $125.80.
> 
> GLD; short September 126 call; long October 125 call; net credit
> 
> Minimum net credit = $0
> .
> .
> .
> 122.8; 0; 1.20; 1.20
> 123.8; 0; 1.54; 1.54
> 124.8; 0; 1.98; 1.98
> 125.8; 0; 2.47; 2.47
> 126.8; 0.8; 3.10; 2.30
> 127.8; 1.8; 3.75; 1.95
> 128.8; 2.8; 4.50; 1.70
> 129.9; 3.8; 5.15; 1.35
> .
> .
> .
> Minimum net credit above strike is $1.00 (ie. max loss = $1.47 - $1.00 = $0.47)
> 
> View attachment 11577
> 
> 
> View attachment 11569
> 
> 
> I should draw out the P/L graphic which would better illustrate the B/E points, but the position maximizes its profit if GLD is at $126 at expiry resulting in the short call having a value of zero while the long call would have a value of ~2.50. The maximum loss on the high side is $0.47, while the maximum loss on the low side is the full $1.47 debit. The diagonal skews the B/E points and losses.


I just sold this GLD diagonal for a credit of $1.95 hitting my 33% profit target. Overall, I scratched out a small profit today despite the post-Fed move up being more than I wanted to see. It's nice to see a new high-water mark for the fourth consecutive day.


----------



## atrp2biz

atrp2biz said:


> It's been a while, but I've added to the blog. I've described my rationale for a TSLA short straddle. I have a few other positions on as well which I hope to get to.
> 
> EDIT: Also added my long BABA put calendar


I closed the TSLA short straddle at $16.00 (originally sold for $22.70 back on September 1). It's $2 off my initial target, but I'm a little concerned about volatility returning next week after being crushed this week. But I'll take a 30% gain from the initial credit.

This is getting boring. Anyone here to talk to? I guess I'll just go back into my hole.


----------



## avrex

@atrp2biz wait right there! 
Don't stop this thread. 

I've been away from the forum for awhile, but I'm back now. 
For me, this is one of the most interesting threads that I've noticed, since I returned.

I haven't done much options trading this year, but I'm always *interested in how other people trade options.*
There's always different approaches to understand and learn.

I haven't gone through the whole thread yet, but please, keep posting. 
Also, I like the spreadsheet (via your blog) that shows your trades. This is also very helpful.

As I get back into trading options, I'll chime in with questions/comments.

Your returns look great this year. Keep going. :encouragement:


----------



## atrp2biz

I had a beer league hockey game tonight and after a couple of pops in the dressing room and driving back home, I’m completely wide awake. So I figured I’d flip on the computer and do something different in this thread—talk about my home setup. Below is a picture of my trading setup. 









*Desk*
The desk is Ikea’s sit/stand Skarsta desk. I really like this desk as it allows me to mix up my postures on those days I’m in front of the computer for an extended period of time. I have a couple power bars zip-tied to the leg that moves up and down with the desk surface. 

*Screens*
I have four monitors on the go. Don’t ask what kind of video card I have—I have no idea. Interactive Brokers’ TWS platform allows me to have a number of windows open which I have spread out over three of the four screens. My reference points in the picture are more-or-less self-explanatory but ‘active’ means the last security I clicked in my watch list. The other charts are static. 

Window ‘H’ displays the historical and implied volatility of the active underlying. My decision to go short volatility (short premium) or long volatility (calendar spread) are based on the current IV relative to the previous six months.

Window ‘I’ displays the volatility term structure which shows the implied volatility of various option expiries of the active underlying through time. I definitely use this window to help me with entering/exiting calendar spreads and picking the ideal expiry to work with in general.

I didn't label the window below ‘B’ which shows me my working orders and fills.

Window ‘E’ is probably my most important window and contains a plethora of information. This window shows:
•	risks within my portfolio and allows me to understand my theoretical drawdown in the event of a market move or change in volatility
•	all of the Greeks for each position and my portfolio as a whole
•	Net liq
•	daily P&L
•	margin availability

Alright--time to try to go to bed. I think the family and I are going to Ikea in the morning for their $1 breakfast.

*Updated P/L*


----------



## Spudd

I'm glad to hear you like the desk! I was eyeing that desk for myself, haven't decided yet whether to pull the trigger or not. 

I know nothing of options so i will remain silent otherwise.


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## humble_pie

atrp2biz said:


> I had a beer league hockey game tonight and after a couple of pops in the dressing room and driving back home, I’m completely wide awake. So I figured I’d flip on the computer and do something different in this thread—talk about my home setup. Below is a picture of my trading setup.
> 
> View attachment 11689
> 
> 
> 
> ... couple power bars zip-tied to the leg that moves up and down with the desk surface ... a number of windows open which I have spread out over three of the four screens ...
> 
> ... the historical and implied volatility of the active underlying ... My decision to go short volatility (short premium) or long volatility (calendar spread) are based on the current IV relative to the previous six months ...
> 
> ... Window ‘E’ is probably my most important window and contains a plethora of information. This window shows ... risks within my portfolio ... theoretical drawdown ... all of the Greeks for each position and my portfolio as a whole ... Net liq ... daily P&L ... margin availability ...
> 
> ... I think the family and I are going to Ikea in the morning for their $1 breakfast.




oh, thank you so much. I _love_ this post. Seriously, i am sincerely admiring. This post is even more beautiful than your recent explanation of the GLD calendar.

would you believe that somehow, before i ever even reached the internet, i'd already become quite, ah, _well-off,_ though. I couldn't say grâce entièrement aux options, but it was largely option trading that had put me over the top. 

even today i squeak by with just a lil laptop sitting on an 18th century quebec pine farmhouse table (the table has actually appreciated in value more than the portf)

doc do you suppose that if i upgraded to at least some of your equipments i might succeed better ...


.


----------



## atrp2biz

humble_pie said:


> even today i squeak by with just a lil laptop sitting on an 18th century quebec pine farmhouse table (the table has actually appreciated in value more than the portf)


You should post a picture of the table!



humble_pie said:


> doc do you suppose that if i upgraded to at least some of your equipments i might succeed better ...


The toys are just ways to engage myself in the trading. They're mostly fun to have but I wouldn't say they improve success. But it's important to create an environment that is enjoyable as it naturally breeds success. However, I do feel strongly about having access to information on volatility which provides insights into skews and whether or not volatility is cheap or expensive for various underlyings.

My next project is to use IB's API feature to create code that screens the entire market for underlyings with certain volatility characteristics. nahc's undergrad background is in comp sci so she said she'd help me out with that.


----------



## humble_pie

atrp2biz said:


> You should post a picture of the table!



i did, once. It's a standard quebec pine refectory table of the era, there are hundreds that have survived, although this one is a large one. They are easy to recognize because they all have the same thick turned lathe legs. A pleasing & harmonious design, the legs, but they were lathe turned from solid pine posts that were 6 inches by 6 inches ... impossible to find these days.

the table was in the basement of the house because the ancestors used it as a carpentry work table. I imagine the great grandfather bought it secondhand for maybe 50 pennies.





> The toys are just ways to engage myself in the trading. They're mostly fun to have but I wouldn't say they improve success. But it's important to creating an environment that is enjoyable as it naturally breeds success. However, I do feel strongly about having access to information on volatility which provides insights into skews and whether or not volatility is cheap or expensive for various underlyings.
> 
> My next project is to use IB's API feature to create code that screens the entire market for underlyings with certain volatility characteristics. nahc's undergrad background is in comp sci so she said she'd help me out with that.


the project sounds fascinating. There's a broker rep who does this, probably not exactly the way you are planning but something along the lines. He gets up at 2 am every day to trade futures & survey the meta data. He's still only in his 20s but i imagine he's already a millionnaire. Can you believe he held 10 puts in chipotle the weekend before the e coli news broke.

i'm glad avrex has appeared to join your cheering squad. Now if we could only recruit lephturn, theta & the gobster, the auld gang would all be back again. Plus rusty of course.

please don't be discouraged if no one replies pronto. You are levels above most of us, so we are sitting here like pudding heads saying to ourselves Heh do i really Want to risk Posting on there myself.

me i find your blogspot is an excellent accompaniment, as you are taking the trouble to explain your positions & your moves there. Altogether this thread plus its journal is an emerging indie option classic.

.


----------



## avrex

humble_pie said:


> i'm glad avrex has appeared to join your cheering squad. Now if we could only recruit lephturn, theta & the gobster, the auld gang would all be back again. Plus rusty of course.


thx humble. I've been gone for awhile, and yes, I think many of our other options traders have left this forum over the past couple of years.



humble_pie said:


> please don't be discouraged if no one replies pronto. You are levels above most of us, so we are sitting here like pudding heads saying to ourselves Heh do i really Want to risk Posting on there myself.


Yep, this is me.  
atrp2biz knows his greeks, so I'll need to ask more questions and learn.


----------



## avrex

@atrp2biz, I also like your desk and screen setup above.

*Would you be able to provide a screenshot of your 'Window E'?*



atrp2biz said:


> Window ‘E’ is probably my most important window and contains a plethora of information. This window shows:
> •	risks within my portfolio and allows me to understand my theoretical drawdown in the event of a market move or change in volatility
> •	*all of the Greeks* for each position and my portfolio as a whole


I think sharing this screen would help me with some questions that I have around portfolio safety.

When I started, I mostly sold options for credit. In 2014-15, I started doing more spreads to protect myself further in upside/downside markets.
I would keep track of my holdings in a spreadsheet. I would then run stress tests on my holdings to see what would happen in various scenarios. 
For example, if the general markets went down 30%, I knew I would suffer losses because I still had several naked short options.

Going forward, in the above example, I want to better ensure that my portfolio leans more delta neutral.

I also use Interactive Brokers. If I could set up one of my windows, similar to your 'Window E' (showing the greeks), this might help me better understand my overall portfolio risks and allow me to make smarter adjustments to my portfolio. thanks.


----------



## humble_pie

.

in 1982 i interned briefly as a finance journo student at a then-well-known option trading house on the CBOE. I was the ignorant gopher in the research department. 

first hour on the job, the research chief told me that the firm had totally disproved Black Scholes. Later i would read that michael greenbaum, the curly-haired managing partner who sat a few feet away from us in our crowded research corner, was indeed instrumental in blowing black scholes out of the water.

first day, research also told me that an option which trades in tandem with its underlying is a 100 delta option. Later this would come to be called a zero delta option, but they are the same. Usually indicate a DITM option. 

most of what the option firm was doing flew over my head, but the delta part i got. OIC deltas rise & fall in a progressive numeric relationship with the underlying, i said to myself.

later i would grow fond of 100 delta options as LEAPs long legs in diagonal call spreads. One is actually buying the stock for a fraction of its price, albeit sans dividend & for a limited period of time, without paying any premium for the option. 

.












.


----------



## atrp2biz

Here is a snapshot of my window 'E' which is the portfolio risk window.









I've circled a few key things I look at (starting from left to right):

1. ES positions: The main part of the portfolio is currently through ES futures. I'm short 3 futures, 1 call and 5 puts. This is synthetically equivalent to being short 2 puts and 4 calls. I like maintaining this 1:2 ratio.

2. ES delta is -69. I like keeping this in the range of -25 and -100 for two main reasons. The first reason is I'm generally negative vega, so if markets go down, volatility typically goes up so I'd be taking a hit there. The negative deltas more than offset the vega risk. The second reason is it provides _some _protection for a gap down. If markets gap down 5%, the negative deltas will help for a while, but the gamma will flip the deltas to positive during this move. I expose myself to the risk of a gap *up*, but those are rare and a risk I'm willing to leave exposed. The worst possible scenario is a significant gap up and an increase in volatility.

3. Further to the delta I mentioned above, in the event of a 100 point gap down, my deltas would go from -69 to -69 - (100)(-3) = +231. This would be much more positive if I didn't initially carry negative deltas. This is just an approximation as gamma would change as well.

4. I like to carry positive theta of 0.3% to 0.7% of my portfolio. With theta of +322, if the markets froze and time moved forward one day, I would expect to make $322. My current theta is below my target range so I'll be looking to add some more positions in the coming week. If the market starts off weak and volatility increases, I'll likely add some straddles/strangles. If the market starts off strong and volatility decreases, I'll likely add some calendars.

The graphic at the bottom shows potential losses. I focus on my loss in the event of a -10% gap down or a 5% gap up. I'm comfortable with the values I have circled. I concern myself with gaps because if the markets move ±300 points on day and then another and another, I'm able to make adjustments along the way. But in the event of gaps, I'll have no opportunity to make adjustments so I have to understand my risks in that event.


----------



## atrp2biz

> ES delta is -69. I like keeping this in the range of -25 and -100 for two main reasons. The first reason is I'm generally negative vega, so if markets go down, volatility typically goes up so I'd be taking a hit there. The negative deltas more than offset the vega risk.


Today was one of those days that I'm glad I have negative deltas. VIX surged today to pre-FOMC levels. The VIX surge ate into the profits made from my negative deltas. It was still a profitable day to the tune of $700 or so, but it was one of those days where I thought my P/L would do better. It would certainly have been a losing day if I came into the day flat. My deltas were flattening throughout the day (down to about -25) so I sold an ES call to restore some more negative delta.


----------



## atrp2biz

Here's an updated look at my Window 'E'.









I added an additional short ES contract to go along with the short call. My negative deltas are larger than they were a day ago. I'm looking for the downward to continue. The major indices have looked above a the high point of the post-September 9 range and have failed sharply which leads me to believe that it will test the low end of the range at around 2110 for the ES. I'm not a technician, but this is just my directional bet. 









It'll be interesting to see how the overnight market moves during tonight's debate.

PS: I also sold October 105 straddles x 3 in BABA (IV is pretty high) and got a partial fill on a GLD calendar spread.


----------



## atrp2biz

Well that didn't go quite as planned. Looks like Clinton is being priced into the market. At least volatility will contract if the markets stay up >10 points tomorrow.

Another hockey game tonight (life of a goalie--always in demand) so I'll be able to see what happens when Europe opens. We'll see if this strength lasts throughout the night. 

I missed an opportunity in TWTR today. I had a buy order for the 21/23 October call spread bidding $.90. If I had moved up a penny I would have been filled. It then popped later in the day when the news of DIS interest came out. Oh well...


----------



## atrp2biz

That was a volatile 24 hours. I added to my short position after the debate and unloaded at the open this morning. All in all it was a positive day. My Greeks are pretty much where I want them, including my theta at 0.33%. What would be a useful frequency to post my portfolio risk position below? Daily? Weekly?









PS: I can never understand the P/L. It never makes sense to me, so I just go with net liq.


----------



## atrp2biz

I guess I can't be green everyday. This morning was off to a good start, but things picked up throughout the day. The OPEC announcement capped things off and the markets closed near their highs of the day. I made a few trades today:

-Sold 1 ES @ 2159.50
-Bought back September 30--2160 put and 2170 call
-Sold AMZN Oct 14 825 straddle @ $28.18--IV has expanded as AMZN has done nothing but go up the past few weeks
-Bought GLD Nov 18/Oct 14 126 call calendar for $1.47--IV is in the toilet

My delta is pretty negative. I'd be happy if we get back into the range we've been in for the past couple of weeks.


----------



## atrp2biz

It was a good day today, but it could have been a lot better. I was very short this morning and closed some positions before the big drop. I'm certainly glad I closed the September 30 ES options yesterday. I bought back the September 30 2130 put this morning and sold a put and a call after the first drop. I like where my Greeks are at right now.


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## avrex

There it is. Now I see how you constructed Window E.
On the Analytical Tools menu, select Risk Navigator. Nice report/visual!

Thanks atrp2biz.


----------



## atrp2biz

So ends another month. +7.4% for September while the S&P 500 was more or less flat. Largest drawdown in the month was -2.11% on September 9. Although this 'experiment' remains in its infancy, I think there will be some changes in the coming weeks. Things are happening in the background and I'm looking to kick things up into another gear. Stay tuned. :eagerness:


----------



## atrp2biz

This week is expiration week for a couple of my short ES calls. All my other short ES options are on the put side with expirations a little further out. This imbalance made me think about a Greek that doesn’t get a lot of air time—charm.

Charm is the change in delta with respect to the change in time or DdeltaDtime. If all things remain the same tomorrow, the magnitude of the deltas of my short calls and the 2150 puts will more or less be the same since they are essentially at-the-money. However, my puts that are OTM will exhibit some delta decay. Therefore, I expect my short delta position in ES will be more short simply due to the passage of time all else equal.

As my options become more ITM or OTM, I’ll have to monitor the impact of charm more closely.









Now that I've talked about charm, you know I'm going to have to move on to vanna at some point in time.


----------



## Jaberwock

I sold 7 SPY puts in September for a total income of $750. Five have expired, the other two are Oct 7th puts at 204 and 206, which will likely expire Friday.

I am still short 100 SPY.

Total value of my portfolio sits at $104,515 after deducting the value of the short positions. A 4.5% gain since May, just ahead of the market.

I am treading carefully during October, I will not overextend myself because I think the market is fully valued and may experience a correction soon.


----------



## Jaberwock

Do you measure your asset values in CDN or in US dollars?


----------



## atrp2biz

Net liq is in CAD. My P/L log is in USD.


----------



## atrp2biz

Didn't do much today. YUM reported earnings after the close and I entered into a just-for-fun position just before the close.

-sold Oct 7 87 puts @ 0.87 x 10
-sold YUM @ $88.55 x 300









I'll close the position in the morning. If YUM stays around here, I should make a small profit. The closer it is to $87, the better.


----------



## atrp2biz

...and we're at $87.

Sit Boo-boo sit!


----------



## avrex

A Covered Put to play Earnings.
Interesting (I would never of thought of it). I like it.


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## atrp2biz

It's not quite a covered put, but it does have elements of one.

This is a synthetic ratio straddle which, in this case, is equivalent to 7 short puts and 3 short calls. I did this synthetically using stock because YUM isn't the most liquid underlying and I only want to worry about one options leg to exit. If I had two legs and want to exit as a spread, the illiquidity of the options would mean I would likely have to give up a little more than I'd like between the bid and offer.

My profit zone tomorrow morning will be around $85-91.


----------



## atrp2biz

That worked out well. Closed the YUM position this morning.

-bought back options for $0.48
-bought back stock for $87.35









Maybe I'll have KFC/Taco Bell for lunch.


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## atrp2biz

October is off to a great start. The *options portfolio* is up C$6680 for the week.

I didn't do a whole lot. 

-closed the AMZN and BABA short straddles that I had on for less than two weeks after reaching target of ~30% of initial credit
-YUM earnings play
-rolled out short ES October 7 2150 call to October 21
-short ES October 7 2155 call expired worthless

I don't have many positions on at all right now so I'll have to look at opening some new trades next week.

*GLD hammered*

With the USD strong and bonds weak, my position in GLD did not do well this week with gold down over 4% for the week. Luckily, I only had calendars which limits my losses. In an attempt to catch the falling knife, I bought a call vertical spread (November 18 118/122). My GLD calendars are down US$1700. My week could have been that much better if not for gold.









With the expiring ES call, my ES delta ends the week fairly flat at -19. I'd like to add another short call, especially if Monday opens up strong. Theta is currently at 0.2% (346/168,472) which is in the low end of the range. As mentioned above, I'll look to add some more positions next week which should bump up theta a bit.


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## avrex

wow. What a great week!

I see that your profit for AMZN, BABA, YUM was approx $700-$800 for each. 
I can't see where the remaining profit is from. Is the rest of the profit all from /ES positions?

A holiday for us on Monday (no work, yay!), but US markets are open. Awaiting to see your trades on Monday.


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## atrp2biz

^ Yeah, it surprised me, but the ES P/L for the week was US$3400 for the week.

I made the following trades this morning:

-sold Oct 28 2160 call @ $20.00
-bought FB Oct21/Nov4 put calendar for $2.80
-bought (to close) ES Oct 14 2130 put for $1.95
-sold ES Oct 28 2145 put @ $13.25

ES delta now at -81.

I think that's it for today as IV is really low so I'm not opening any short straddles/strangles today. It's snowing quite a bit here in YYC, so time to go tobogganing with the kids!


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## humble_pie

.

hello, i'm just stopping in with a gossip item that some might find handy, since doc's thread now seems to be the go-to place for options.

the Think or Swim gang now say Don't bother to fill out the TOS canada application form that's on the tasty trade website. Just fill out the regular application & drop it off at the branch, they say.

- but how will TOS know it's a tasty trade application that is supposed to benefit from commission discounts?

- when you phone to tell us you're a tasty trade client, we'll have some questions to ask you, says the nice lady.

ah, the power of the internet. Word must have spread too fast. Too many swashes must have been buckling up to the big green & claiming they were friends with tom sosnoff & tony battista, so could they please have those tasty commish discounts ...

.


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## atrp2biz

Interesting. How did you find out about this? Were you opening an account? Commissions are still high relative to IB otherwise I think I'd prefer the TOS platform and balance sheet of TD.

IV has expanded today so I've sold a couple of straddles:

-IWM Nov 18 122 @ 5.95
-HD Nov 4 127 @ 4.40 (I want to avoid earnings the week of November 18)


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## humble_pie

^^

i believe with the tasty trade discount that TOS commish would come close to IB. I believe that TOS tasty-style option commish have no base charge, only $1 or $1.25 per contract. Remember, too, that TOS stock trades will be a flat $7 whereas IB is, i believe, charging a penny per share when it comes to thousands of shares?

if i find out what the questions are i'll pmm you ... we consumers have to keep on our toes .each:

.


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## humble_pie

PS i have a much more exotic gossip item about the montreal exchange but since mx-ca is canada's option exchange the item is maybe not quite appropriate for your thread ...


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## atrp2biz

What's going on at the MX?


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## atrp2biz

Seems a little strange for me to go long on equities, but just bought BABA Nov 18 100/105 call spread for $2.45 x 10. It's also strange that BABA is trading at $102.90 when filled. Position (at the moment) is theta positive when max gain is greater than max loss. No dividend that I can see. Trying to figure out why the spread is so cheap...


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## avrex

The IV for BABA seems to be a bit high to me. 
(i.e. 78% of the days over past year, the IV has been lower)

I'm thinking of selling for the credit.


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## atrp2biz

BABA is now $103.48 but the Nov 100/105 call spread is still [email protected]

A real head scratcher for me. Usually the skew is to the OTM put side, but with BABA it's flat or even on the call side.


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## atrp2biz

I'm a little confused. *This *says earnings are coming out October 25, but the IV in the November 4 weeklies are saying that earnings are coming out later.

View attachment 12026


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## avrex

TOS also says earnings are October 25.
Yahoo Finance says Oct 24 - Oct 27 (Estimate)
So, definitely not November.


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## atrp2biz

What does TOS show for IVs on those weeklies?


----------



## avrex




----------



## atrp2biz

Bizarre! What are we missing?

To put some more money where my confusion is, I bought the Oct21 100/105 call spread for $2.92. Theta on my side.


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## atrp2biz

*Hiding P&L*

This morning was a bad start to the trading day. The ES was down 25+ points, my P&L was off and I felt the need to make adjustments to my positive deltas at the lows of the day. If I had just sat on my hands, it would have been a good day (even with the weakness in BABA). Instead, I gave back my gains week-to-date. Which gets me thinking about the following concept--ignoring my daily P&L during the trading day.

This is tremendously difficult to do. I just have that urge. But I think ignoring my P&L would allow me to focus on the mechanics of my setups without the burning desire to make up a loss for the day. It definitely prevents over-trading. It's something I've toyed with, but I think it'll be something I try more often going forward.


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## atrp2biz

A disappointing week after I fumbled the ball yesterday. Down $700 on the week. Today looked much better in the morning until the markets decided to end unchanged for the day.

*Current positions and P/L*


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## atrp2biz

*NFLX earnings tonight*

NFLX reports after the bell. I bought a October 21/28 100 call calendar spread for $0.30 x 30. I'm playing the crush of the volatility term structure and am looking for a relatively neutral reaction.


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## atrp2biz

*IBM earnings too*

Sold a put ratio spread:

-bought Oct21 155 puts x 3 for $3.29
-sold Oct21 152.5 puts x 6 for $2.25
-net credit of $363

I have no risk to the upside. Max profit if IBM is $152.50 at expiration.


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## Argonaut

atrp2biz said:


> NFLX reports after the bell. I bought a October 21/28 100 call calendar spread for $0.30 x 30. I'm playing the crush of the volatility term structure and am looking for a relatively neutral reaction.


Hey doc, I haven't looked at options in a while. How will this position work, you just lose the premium?


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## atrp2biz

This position works if the underlying stays close to the strike. At expiration of the short calls, if the stock is at $100, the calls are worth zero. The long calls will have some value dependent on the IV of the stock--say around $1. The bogey is to turn the $0.30 debit into a $1 credit.

NFLX exploded to $120 after hours so the spread will be worth nothing.


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## avrex

@atrp2biz. I was just wondering what you normally do for earnings plays.

Up thread you mention a calendar spread and a put ratio spread. 
Is this what you would normally do, to capture the crush in volatility?

I've put on a couple of earnings positions today with about a 1 standard deviation Strangle.
Yesterday, my NFLX Nov Strangle 90/125 did ok. Even though there was a big underlying move, I was still able to make a profit with the volatility crush.

Do you ever use Strangles or Straddles for earnings plays? or would you consider it a bad play because there is too much unlimited risk?


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## atrp2biz

I mix them up. I often do strangles which were quite successful last quarter--they are my go-to earnings play. If you look at my log, I had earnings strangles for GOOGL and TSLA. I also did an earnings calendar with ATVI and AAPL. All were successful except for AAPL.

Good job on NFLX. My GOOGL 740/805 strangle from last quarter was similar--GOOGL jumped 'close' to my call strike but still made money on the call side. The put side was a big winner which I let expire.

On your last point, I like undefined risk because that's what premium sellers are paid to assume.


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## avrex

I'll stop cluttering your thread soon and start my own. 

Until then, I just wanted to share some upcoming earnings plays that I'm thinking about.
My criteria is that the stock must have a high IV Percentile (measured against itself over the last year). 
Also the options have to be somewhat liquid (at least by my definition, maybe not by Sosnoff's definition).

IV...........Earnings........
Percentile...Date............ Stock
91...........2016-10-19...... AXP...American Express Co
90...........2016-10-19...... ABT...Abbott Laboratories
96...........2016-10-19...... EBAY..eBay Inc
95...........2016-10-20...... VZ....Verizon Communications Inc
85...........2016-10-20...... MSFT..Microsoft Corp
85...........2016-10-25...... T.....AT&T Inc
85...........2016-10-25...... UTX...United Technologies Corp
90...........2016-10-27...... TWTR..Twitter Inc
85...........2016-10-27...... CELG..Celgene Corp
87...........2016-11-01...... GILD..Gilead Sciences Inc
88...........2016-11-09...... M.....Macy's Inc
87...........2016-11-10...... NVDA..NVIDIA Corp
91...........2016-11-10...... JWN...Nordstrom Inc


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## atrp2biz

For the most part, earnings plays will naturally have higher IVs relative to its historical IV. The difficult part is trying to find underlyings with high IV percentile with no upcoming binary event impact.

STX reports tomorrow morning so I'm pondering doing something with that today.


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## atrp2biz

It was a very good day. One of those days where you wonder where the gains came from.









Let's do the good, bad and the ugly in reverse order.

*Ugly:*
NFLX earnings calendar was a dud. One minute after the earnings release last night, I wrote off my entire position in my head. Salvaged a nickel out of it.

*Bad:*
GOOGL really had a good day--too good. It has now breached the upper wing of my iron fly.

*Good:*
Everything else. ES deltas were skewed positive. BABA had a decent day (although gave back gains throughout the day). I had a small SPY position on which I closed today. IBM earnings put ratio is working so far. GLD was up. FB calendar approached the strike. Etc.









Trades:
-closed a few straggler GLD calls which were on from a calendar
-made some ES adjustments
-closed NFLX calendar
-sold a few BABA calls in the morning to protect some gains
-sold SPY position which was initially on as a delta hedge


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## atrp2biz

Closed IBM put ratio for a nice gain. Two more earnings plays tonight with AXP and EBAY. Short straddles on both.


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## avrex

A great few days for you. congrats.

I'll play along with you on the earnings.


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## atrp2biz

EBAY has bounced around quite a bit after earnings. Currently ~$30. AXP was strong and currently ~$64.

Hopefully, both come in a bit. AXP looks like a small loser while EBAY may work out. We'll see in the morning.

Aside from earnings, another good day for me overall. Closed my FB calendar @$3.35 in the afternoon for a 20% gain. Good day for my directional setups in BABA and GLD.


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## atrp2biz

Those two earnings plays really sucked! AXP spiked to $67 while EBAY fell to $29. 

I closed the October BABA bull spread for a $1100 winner. My short 106 calls 'hedge' also made $230. I also closed the HD straddle and rolled some ES puts. My theta numbers are very low again. I'm going to have to open some new positions tomorrow.


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## atrp2biz

*+$4277 for the week* but it was a very poor end to the week. The AXP and EBAY earnings plays cost me over US$3200. It would have been a spectacular week barring those trades. I guess I can't expect all the trades to work out.

Today's activity:
-bought AXP shares to cover call assignment (this is actually cheaper than closing calls because there is no cost on assignment)
-entered into a couple of new calendar spreads in MCD and NFLX
-bought back a straddle in IWM for a 26% gain
-rolled an ES call and sold another ES contract
-sold some GLD calls that were left over from a calendar
-rolled EBAY position into a synthetic straddle (once puts are assigned) by selling calls
-GOOGL iron fly is going to be exercised and assigned on the upper wing (795/820) for a small loss









I enter the weekend very short. I added short AXP November calls yesterday and my ES deltas are negative.


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## avrex

*ES Futures*

Agreed. All these plays are probability plays. We're going to win some and lose some. (Yep, I definitely lost money on my earnings plays.)
Seriously, what another great week for you. Excellent.

My next questions is about Futures.
I currently don't trade futures. 
I'm in the process of educating myself about them and their potential use/placement in my portfolio.
(There's a "Strategies for Trading Futures - Portfolio Management" video series that I'm checking out.)

I would like to ask you about how you structure the ES positions in your portfolio.








Do you consider your ES positions your core position in this portfolio and then you supplement this with further trading of equity options?
or 
Do you consider your equity options your main trading activity and then add/remove ES positions as needed to get your portfolio greeks and risk management graphs to your targeted levels?


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## atrp2biz

I think the former statement is more accurate in that I would consider the ES as my core. This is especially true as I've opened another IB account (corporate) and will focus on ES in that account. I just started trading this week. I'm ramping up the dollars in the corporate account to $500k ($100k max deposit per week, so I'll get there some time in November). If things continue to go well, we'll put some more in. I think my life is at an inflection point and continued success may allow me to transition out of my job. There are certainly lifestyle things to consider, but it'll make family life better for all--especially with another kid on the way. 

The crappy thing about the corporate account is that IB does not consider it to be a non-professional account (sorry about the double negative). This means that data fees are a couple hundred dollars a month. So for the time being, I'm logged in through my individual account for real-time quotes and execute through the corporate account.


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## humble_pie

atrp2biz said:


> but it'll make family life better for all--especially with another kid on the way.


mille félicitations! vous serez 5, donc?




> The crappy thing about the corporate account is that IB does not consider it to be a non-professional account (sorry about the double negative). This means that data fees are a couple hundred dollars a month.


i'm wondering how Think or Swim would handle it.

.


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## humble_pie

atrp2biz said:


> I think the former statement is more accurate in that I would consider the ES as my core.



i don't do futures either & -unlike avrex - i'm not studying them seriously.

so a couple rather ignorant questions. Does the above mean you'd be long a future but short an option in a calendar spread, for example? if so this must mean that futures are cheaper or easier to trade (??) if so why would one bother with options at all (???)


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## atrp2biz

Yes, we'll be a family of five. 

Futures are nothing special. Each ES future more-or-less represents 500 SPY shares. However, ES can be levered more than SPY. But I would never the futures to their full extent. Canadians aren't eligible for portfolio margin anyways--Reg T is fine for me. I also like that trading occurs around the clock. I think this better enables one to hedge. An example of this is Brexit. ES futures didn't gap down through the night. It was a gradual move down over a few hours so one could make adjustments along the way. This is not the case for SPY.

I am strongly considering TOS. We'll see how IB works, but I think commissions at TOS are still $5 minimums for options which is relatively expensive.


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## humble_pie

^^

thankx ... i can sure see how a busy career job plus 2 decimal something little ones in the house could lead to a few late-night sessions in the futures markets!

i see, too, how continuous trading can help to take the edge off brutal breaking news.

it sticks in my mind that futures aren't guaranteed by any exchange, the way that options are. They're OTC, one has one's counterparty, is that not so? such a thing would bother me

.


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## atrp2biz

The CME acts as the counterparty and clearinghouse.


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## humble_pie

atrp2biz said:


> The CME acts as the counterparty and clearinghouse.



ah i see.
but there must be some canadian futures that have no exchange juxtaposed for clearing?

i'm thinking of those horizons betaPro funds that hold futures with natBank. Those are canadian futures. To the best of my knowledge there is nothing between horizons & natBank.

i know i know, u are not doing those weird little canadian things ...:frog:

.


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## avrex

atrp2biz said:


> There are certainly lifestyle things to consider, but it'll make family life better for all--especially with another kid on the way.


Congratulations on the growing family.

And you've already answered my next question on what's next for this portfolio.

You have attained a certain level of financial independence. 
You have also proven (through this thread) that you have been able to successfully grow this type of portfolio.

So, yes, why not scale this portfolio upward, and continue to utilize the same trading methodologies that you've already been successfully with.

You'll have more time with the family. It's a win-win.

Congratulations.


----------



## lonewolf :)

humble_pie said:


> i don't do futures either & -unlike avrex - i'm not studying them seriously.
> 
> so a couple rather ignorant questions. Does the above mean you'd be long a future but short an option in a calendar spread, for example? if so this must mean that futures are cheaper or easier to trade (??) if so why would one bother with options at all (???)


 I think futures are great for traders that trade based on price pattern of the underlying. Option price do not track the underlying as well.


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## atrp2biz

Time does not fly in the urgent care waiting room. I'm just in follow up for a broken finger. 

Opened a couple earnings trades this morning in UA and V. I also have a working order for UA 39.5 calls x5 but don't mind if not filled. I like this company and its products so I don't mind being more bullish on it. 

Hopefully these go better than AXP!


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## avrex

Broken finger. Tobogganing accident?

I'm amazed that you are able to trade on the small smartphone screen.

You must be missing all of your desktop monitors.


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## atrp2biz

Slash from hockey.

I miss all my screens while at work. I guess I'll have to take care of that somehow.


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## atrp2biz

So I ended up getting filled on my UA calls. V reports after the bell while UA releases in the morning.









This is all I'll be doing. It's been a snoozer of a day.


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## humble_pie

atrp2biz said:


> The crappy thing about the corporate account is that IB does not consider it to be a non-professional account (sorry about the double negative). This means that data fees are a couple hundred dollars a month.



... apparently TOS doesn't charge data fees or other professional fees ...


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## atrp2biz

^ This is true, but their commissions are higher. I think I'll stick with IB for now. I'm quite used to IB's interface, although I have a feeling I'd like TOS'.

The bid-ask on V is 'straddling' my strike after hours.  Way to jinx myself...


----------



## atrp2biz

I'm a glutton for punishment on these earnings trades. Both UA and V trades remain open. V is working out well. UA was working until the conference call when they moderated their guidance. 

I setup my AAPL earnings trade this morning by legging into a slightly bearish diagonal. I figure everyone and their sister is long AAPL right now especially with the Samsung debacle. I'm not sure if AAPL has the capacity to make up for Samsung's lost market share--I figure GOOGL will be the big winner out of Samsung. However, given my track record this earnings quarter, the contrarian play is going long AAPL. 

The trade will be a winner anywhere below $116ish. Max profit at $114.


----------



## atrp2biz

An earnings trade winner in AAPL!


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## atrp2biz

Fairly active day:

-closed the AAPL earnings diagonal for a $0.68 profit
-added a put leg to the short AXP calls
-opened a ratio covered call (synthetic straddle) in TWTR for tomorrow morning's earnings
-opened a calendar spread and a bearish vertical in TSLA (I'm setup neutral to slightly bearish)
-sold an ES put
-sold a December NFLX straddle

Time to sit back and see how TSLA does tonight and TWTR in the morning.


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## atrp2biz

TWTR earnings trade worked great! TSLA would have worked great if I had waited a few hours to close. TSLA popped after hours last night and has given up all of their gains throughout the day.

Today's trades:
-opened a short December 31 put in UA
-closed TSLA, TWTR and UA earnings trades
-opened GOOGL 820 calendar for $1.75 x 8; max profit at $820; BE at $790 and $850 or so
-opened a broken wing butterfly in AMZN by selling 825 put and call and buying the 860 call (all Oct 28 expiry); net credit of $41.55; no risk to upside and BE at $784 on downside

I'm looking for no move in both GOOGL and AMZN.

It's been a poor earnings season for me, but GOOGL and AMZN can turn it around or put the nail in the coffin.

EDIT: just got filled for 4 more GOOGL calendars at $1.45 and butterflied AMZN at 775 and 860


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## atrp2biz

Holy smokes, the GOOGL calendars just made my month. Tomorrow morning cannot come fast enough.


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## avrex

Nice!
I had a GOOGL Nov/Dec Diagonal go my way. 
I won't get paid as much as you, but I'm pretty happy for both of us.


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## atrp2biz

Excellent. Let's just hope GOOGL stays right here. What are the details of your diagonal? Are you going to exit tomorrow or wait it out some more?


----------



## avrex

I was looking at the wrong row i.e. not a Nov/Dec. I had the Oct weekly, so yes, I'll have to exit.
I had a Nov 870 Call / Oct28 850 Call Diagonal.
I'll exit this position at some point before noon (not first thing).


----------



## humble_pie

woo hoo with the google.

i had a ho-hum day. Took in $1245 selling puts in gib dot a & dgc.

the only excitement was being stalked down, penny by penny, by the market maker when i went to sell 10 puts in bce. My price offer at 1.74 was too high, i knew. It was actually only intended to test the market. But the dealer was interested.

instead of countering with a higher bid (normal,) the dealer countered with an offer to sell one penny below my price (unusual.) Clearly he was trying to force my price lower.

I bit. I dropped my offer by 2 pennies. Back he came, with another offer to once again sell a penny below my price. I bit again. Round & round & down & down we went, until i stopped at 1.68 & refused to go lower.

i had gotten all the valuable information i needed though. Namely, a) the dealer has another party looking to set up a position that somehow includes or references my puts; also b) my high price is not too far from what they'll ultimately be willing to pay, since the dealer is working so hard on the case.

i'll probably go back tomorrow. Lavender! sweet lavender! who'll buy my bouquets of lavender outside covent garden aow ooh?


.


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## atrp2biz

^Where was the BCE action? MX or US?

Hopefully, it's not too premature since I still have to exit tomorrow morning, but I was thinking about how to celebrate GOOGL. I got to thinking about dinner and somehow my mind meandered to the Pickle Barrel of all places. I loved going to the Yorkdale PB in Toronto--something I miss here in YYC.

The thing about earnings calendars is you have no idea where IV will drop to. The difference between 15% and 25% IV on these options has a huge impact to profits. I'm hoping the IV number starts with a 2.


----------



## humble_pie

^^

happy supper. Pickle w maybe sausage & choucroute sound good right now (it's 6:30 pm in ET).

i don't know if i would call it "action" on the MX. BCE options are always comatose in both countries, as you know. Today's tiny ripple in bce was the kind of thing that karl marx once described as a small pimple on the vast plain of mediocrity ...


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## avrex

I've closed my trade. A nice tidy $400. I was very conservative with my spread, but am happy with the result.
@atrp2biz let us know how you did with your GOOGL. I want to see how BIG your winner is. 




atrp2biz said:


> I loved going to the Yorkdale PB in Toronto--something I miss here in YYC.


I'll date myself. I think Yorkdale was the only location and not a chain back then. In my first job in the big city, this was one of my favorite places to go eat lunch.


----------



## atrp2biz

It looked a lot better at the open that's for sure. It's still open and I'll watch it through the day. It's not going to be very BIG at all.  

I've downgraded from PB to Ikea.


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## atrp2biz

I got out of GOOGL over the past half hour or so as GOOGL retraced back towards my 820 strike. Average exit price was $4.17 (average initial debit was $1.65) for a nice US$3000 gain. Looks like I got out a little early as GOOGL is continuing lower, but hindsight bats a thousand.









Still a loss of $999 on all earnings trades quarter to date.

AAPL $1275
AMZN ($636)
AXP ($2008)
EBAY ($500)
GOOGL $3000
IBM $563
NFLX ($828)
TWTR $960
TSLA ($891)
UA ($3205)
V $538
YUM $733


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## atrp2biz

No other trades today. *+$4602* for the week. This week felt like a grind--even through this morning until GOOGL finally came through. Unbelievably, GOOGL closed the day by pinning the 820 strike. TSLA also pinned my 200 strike. If I had held both calendars until today's close, I'd be laughing. 

My theta is a little higher than usual at 0.41% (723/176645) because of the uptick in volatility this week. This is likely why the week seemed like a grind because theta slowed to a drip. I suspect volatility will remain elevated through the US presidential election, so next week may be yet another grind.

















The week could have been so much better/worse. Ending on a winning note makes the lack of trading over the weekend a little more bearable.


----------



## atrp2biz

*October results*

October is in the book. A very good result overall.









It certainly helps when the market goes sideways for the entire month. I drew some support/resistance lines back in post #125 (September 26) which have held up _until now_.









It appears November is starting a little more volatile. Things could get interesting with the election a week away. I may start rolling off some positions this week to reduce my exposure. VIX is all the way up over 19 now.


----------



## atrp2biz

It was a fairly active day today. 

-made a few ES adjustments to protect myself given the jump in volatility today
-eliminated some positions by closing my NFLX strangle for a small profit
-rolled the some EBAY calls to December
-small HLF earnings trade which is looking good post-earnings announcement after the close


----------



## avrex

Good update. Thanks for including your charts and Asset Allocation pie chart. Appreciate it.


----------



## atrp2biz

The grind down in the market continues which I'm set up to absorb (to an extent).

-BABA earnings came out this morning with BABA popping to $105 but then dropping like a rock at the open closing at ~$98.50. I sold a November 97/102 strangle to help offset negative theta from my 100/105 call vertical.
-closed HLF earnings trade for a small profit
-I used SPY to adjust delta in the morning
-took some ES risk off the table
-opened a FB earnings calendar


----------



## atrp2biz

VIX has been on quite a run and is on a 9-day up streak. The VIX was in the pre-teens only a week and a half ago and is now at 22.5.









The options portfolio is *+$2139* on the week. I'm a little mystified given the volatility explosion but I'll take it. I had a few earnings winners and losers but the week's big winner was the NFLX calendar I took off this morning for $2.55 (initial debit of $1.45) with the short leg expiring today. I've rolled off a number of non-index positions this week and end the week with long deltas. I'm planning on entering the election with long deltas and will look to manage the position through the night.


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## avrex

NFLX. Nice work on the NFLX long calendar. I just can't figure out how you were able to maximize the profit.
You must have timed your exit on that NFLX 04NOV16 125.0 P perfectly (near the underlying's high) on Friday.

Holy Long Delta! I don't think I've ever seen it that high for you. 
In any case, it should bode well for you, looking at tomorrow's expected opening.


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## atrp2biz

Wow, that's some great investigative analysis on my NFLX calendar! Fortuitously, that's exactly what happened. I was watching NFLX very closely on Friday. NFLX went up to $123.30 or so when the offer on my calendar was lifted. You can also see I rolled the dice getting out of the FB calendar by closing the short side first and selling the long side in tranches. I just felt that FB (along with the rest of the market) was in a bit of a down trend so I elected to leg out of the position.









My ES delta going into the weekend was only slightly positive. It became negative at the Globex open at 4pm MT so I bought one contract to make it positive again. It'll be interesting to see how the non-index +deltas work out for me in the morning. GLD is going to take a hit though.


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## atrp2biz

I thought it would be good to post my positions and Greeks going into election night.

















Theta is clearly quite high as we'll get a vol crush over the next 24 hours. I don't have any ES futures positions--only options. I'll have to delta hedge with futures if ES goes up to 2150. I have much more room on the down side and will sell (if necessary) at ~2100. The perfect scenario for me is if we bounce between 2110 and 2130 throughout the night. On Friday, I was planning on going into tonight with long delta, but since we've had such a strong two days, I'm playing the buy-the-rumour, sell-the-news game. 

I'll be brewing a pot of coffee tonight and plan on posting updates to my position through the night.


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## atrp2biz

ES currently at 2148

Bot at 2141.50, 2142.25, 2 x 2131.75
Sold 2 x 2133.25

6:24 pm MT update: bot 1 x 2144.75


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## avrex

atrp2biz said:


> The perfect scenario for me is if we bounce between 2110 and 2130 throughout the night.


I'm about the same. I need between 2060-2160. These are Nov 11 options. Sold an Iron butterfly.
Damn. We're below 2100 now. Adjustments?


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## atrp2biz

I've been making them all night. LOL.


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## atrp2biz

The night is still young. Crazy!


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## avrex

I don't understand. Are you scalping or making adjustments?
I can't wait to see how your night ends. 

I've left my condor alone. I'm not experienced enough to scalp futures. 
My short premium equity options portfolio will take a big hit tomorrow morning.


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## atrp2biz

I'm scalping around a flat delta. So both.


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## atrp2biz

My gold bullish call spread is looking good!


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## atrp2biz

I should have bought some Depends. I have to pee but can't leave my screen.


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## avrex

atrp2biz said:


> I should have bought some Depends. I have to pee but can't leave my screen.


LOL


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## atrp2biz

ES just hit its circuit breaker.


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## atrp2biz

Update. IB P/L is a little bit funny, but I'm showing a P/L for the evening--for now. I've been playing some fierce defence all night. Tomorrow is gonna hurt my individual equity positions so I'm trying to build as much cushion as possible.

View attachment 12690


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## atrp2biz

Wow. What an incredible reversal in the markets. There's still a lot of premium in my short ES options. I'll have to close some positions otherwise I won't get any sleep!


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## atrp2biz

I closed all of my ES positions except for the 2130 put calendar. Incredibly, my short options ended the night with MORE extrinsic value than when the regular markets closed today. 

I'll let the dust settle and re-establish a position later in the week. I aggressively defended my position through the night and had some good scalps.









+$1551 for the night. Goodnight!


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## avrex

atrp2biz said:


> +$1551 for the night. Goodnight!


Not bad for a night's work. Better than a lady of the night. 

The world didn't end this morning. A big Vol Crush this morning. My portfolio is actually up.


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## atrp2biz

Put up your hand if you thought the ES would be at 2155 ten hours ago when it was 2030.


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## atrp2biz

Well done, Avrex. It's nice waking up to a surprise like that. I slept on my ES-less position for five hours and then sold Nov 11 and Nov 18 2100/2130 strangles when the ES was 2110. I'd like it to come back down!


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## peterk

avrex said:


> The world didn't end this morning. A big Vol Crush this morning. My portfolio is actually up.


Bah, I wish it had for a few days at least... I had bought SPY puts and ABX calls, things were looking great at midnight when I went to bed, now I've gone bust.


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## atrp2biz

Just got back from date night--saw the Accountant. We really enjoyed it.

I can't put up screenshots of my portfolio right now because IB is doing its Friday night maintenance. The week was pretty good through the election and promptly crashed for me the rest of the week. My ES positions were fine, but most of my non-index positions were annihilated. Down about $6k for the week.

-Gold and tech were crushed this week--not good for my bullish spreads in GLD and BABA
-Financials soared--not good for my AXP straddle which already had negative delta going into the election
-NVDA earnings play was a disaster. I sold 200 shares at $68 and sold 5 puts (Nov 11, S=66). NVDA soared to $88. A US$3200 dagger to the portfolio. Gotta rethink these earnings plays.

On the positive side, at least I got out of my NFLX positions last week. Also, I started trading the corporate account and am planning on sticking with just ES for the time being. Up $2700 since October 20 in that account. Over the weekend, I'll start a Google spreadsheet for that portfolio and will try to link it to my signature. This way the updates will be close to real time.


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## avrex

atrp2biz said:


> Just got back from date night--saw the Accountant. We really enjoyed it.


For a second, I thought maybe the date night was actually to see your accountant....., perhaps to discuss the tax implications of trading options/futures in a corporate account. What a boring date night that would have been for your spouse. lol. 

I'll need to check out that movie too.



atrp2biz said:


> I'll start a Google spreadsheet for that portfolio and will try to link it to my signature. This way the updates will be close to real time.


Looking forward to it. thanks.


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## atrp2biz

I'm a stubborn fish swimming upstream as the rally continued this week. Not a good week with account down to $166k.

I'll post a more complete update later, but I just wanted to test my link in my signature to the ES spreadsheet I promised earlier.


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## atrp2biz

Retry.


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## atrp2biz

Not enough room for both links. I'll try this for a bit.


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## humble_pie

atrp2biz said:


> I'm a stubborn fish swimming upstream as the rally continued this week. Not a good week with account down to $166k.



your designated option account was "down to $166k" on friday 18 nov/16?

pretty fantastic return since your launch date 6.5 months ago, if you ask me. Mille félicitations. Even with the recent small drop, you are surpassing your goal - you're well north of the target 1% return per month - & doing famously. Thankx for sharing.




atrp2biz said:


> [post dated 29 april/16] As many on the forum know, my wife and I are generally buy-and-hold types. It can get boring at times as my only decisions are what to buy--never what to sell. I've (We've--I'll likely use the terms interchangeably) have decided to allocate $150k of our portfolio to option trading. My goal is to produce long-term returns of 12% pa--1% per month--with a very low beta. I'll generally use +theta, market neutral strategies such as long calendars, short straddles and condors depending on IV rank.


.


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## atrp2biz

LOL at this rally. Not good for the options portfolio. Still up since May but all but $5k of the gains have evaporated. The buy-and-hold portfolio more than makes up for it and net worth is up, but psychologically, I'm attached to the performance of the options portfolio.

For the past month I've expressed a bearish view on the markets which haven't worked out well. I want a system where I don't have to think, but rather just do. So here it is.

I've reduced my positions to just the ES and am now short 5 contracts. I'm short two -40 delta puts for each Friday expiry from December 16 to January 13. So short 10 puts in total.

Rules:

1) Close front-week puts on the Monday/Tuesday of expiry. Roll 6 weeks out (so next Monday/Tuesday, I'll buy back the December 16 puts and sell January 20 puts) to the -40 delta puts.

2) Roll if any of the puts break out of the delta range of -25 to -60 (Remember--all puts are opened at -40). If it happens to be the front-week puts and it's Mon/Tues/Wed, roll to the -40 delta puts of the same expiry. If it's Thurs/Fri, roll 6 weeks out to the -40 delta puts (ie. if tomorrow, the December 16 puts break this delta range, I'll roll 6 weeks out immediately as opposed to Mon/Tues of next week).









This should be completely mechanical. I'm hoping this system keeps my positions in check as opposed to hoping for reversals. Let's see how this goes.


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## avrex

atrp2biz said:


> LOL at this rally. Not good for the options portfolio. Still up since May but all but $5k of the gains have evaporated. The buy-and-hold portfolio more than makes up for it and net worth is up, but psychologically, I'm attached to the performance of the options portfolio.
> For the past month I've expressed a bearish view on the markets which haven't worked out well.


This is the same for me. My main buy-hold portfolio is doing great. My small options portfolio is actually negative for the year.



atrp2biz said:


> I want a system where I don't have to think, but rather just do.


I've been wondering the same thing. When I have a dozen positions on, it seems like I'm always juggling/adjusting positions.



atrp2biz said:


> This should be completely mechanical. Let's see how this goes.


You new mechanical approach is very interesting.
My first thought is, wow this is scary. You core position is 5 short ES futures. If my math is right, that means that you are short -500K notional amount.
However, it's not that scary, because you are constantly selling premium against this core position.

This is interesting because you are using a series of laddered puts. I looked at the risk profile on ThinkorSwim for your initial positions. It graphs as a nice smooth curved 'straddle/strangle' or whatever you want to call it. 

Looking at your strike selections, you have taken a slightly bearish direction with this portfolio. I'm curious, what is the delta for this ES portfolio?
This offsets the large positive delta of your main buy-and-hold portfolio.

I'd like to follow along to see how this laddered approach performs. 

I might try to paper trade a variation of this. Perhaps a portfolio with both /ES and /ZB, as they would have a negative correlation. I'll have to think about this.

Also, your new method has rules, making it more mechanical, which means much less work for you.

Good luck. I'll follow along.


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## humble_pie

atrp2biz said:


> LOL at this rally. Not good for the options portfolio ... For the past month I've expressed a bearish view on the markets which haven't worked out well.



samesame. As all know i have a much longer timeline than the earnings blast traders. But around the beginning of 2016 i thought markets would plateau or drop so began selling options that were closer to the money.

lol ever since then i've been running after them to prevent assignment like a mother hen whose chicks keep misbehavin.


.


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## atrp2biz

*End of 2016*

So ends the first calendar year of my active options portfolio. Over the past several weeks, I've only been in the ES so it's been kind of boring from the posting perspective. 

The portfolio is up US$3685 or about 3.5%. The melt up in the markets since the election evaporated most of my gains. I'm not too pleased about that, but I guess if you go back to my OP, the objective of the portfolio is to provide uncorrelated returns relative to my core buy-and-hold portfolio. The core portfolio has kicked some serious butt over the past two months so overall I should be pleased--but I'm not!

*Detailed transactions from 2016*

*P/L breakdown from 2016*

I've gone into 100% cash in the options portfolio just to make things easier from a tax perspective. I'll re-enter some positions tomorrow. I do have some takeaways from my experience over the past 8 months or so. I'll try to think of some others over the next few days to memorialize.

1) Although the ES/S&P represents the broader market, only have positions on the ES is not very diversified. Therefore, I will diversify my options positions with multiple underlyings in the New Year. This should make posting more interesting so hopefully I'll be more active on that front once again.

2) Setting up a system to be as mechanical as possible is key for me. This prevents increasing my delta by adding to losers 'thinking' that a reversal is imminent, but rather reduces delta by adjusting strikes. Sometimes the markets trend up/down for quite a while which is what has happened since the election.

3) I'd like to establish more positions in gold, bonds and other non-equity related equities--for diversification purposes.

4) Trade auditing is a PITA. My account balance tells me my USD profit should be ~US$4500 so I'm missing something in my spreadsheet.


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## mordko

Yeah, that's not a great return on a $150k investment. What kind of tax will you have to pay on 3.6k? How much time did this take?


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## atrp2biz

My account balance tells me I'm up 4.2% (see point 4 in my revised post above). I guess that's ~7% annualized. It was a lot prettier before. 

As for how much time it took, it's hard to tell. Probably a few days worth, but I put time into it because I enjoy it--not because I have to.

EDIT: Found the missing transaction. P/L = US$4463


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## atrp2biz

mordko said:


> What kind of tax will you have to pay on 3.6k?


Why are taxes relevant?


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## mordko

atrp2biz said:


> Why are taxes relevant?


Because taxes will be higher than buy and hold. Returns should be compared net of taxes.


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## atrp2biz

Taxes aren't higher/lower, but rather deferred. However, I agree in principle with your notion if the pre-tax returns are the same relative to the benchmark.

To compare the portfolio performance relative to a benchmark, I would have to compare the returns of:

Benchmark: (1+r)^n - t[(1+r)^n) - 1]

Portfolio: [1+r(1-t)]^n

I'll have to check in a number of years if the options portfolio return exceeds the benchmark. At the very least, it reduces the standard deviation/variance of my overall portfolio as it is generally negatively correlated with my buy-and-hold portfolio and benchmark. Given the negative correlation and the SPX +9.7% since I started, I guess I'm happy with the 4.2% return.


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## mordko

How are you deferring? Aren't you constantly buying and selling and realizing your gains and losses?


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## atrp2biz

Sorry, I was referring to buy-and-hold. Taxes under B&H aren't necessarily higher/lower, but are deferred.


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## mordko

Ah, ok. That's true. Unless Maxime Bernier becomes Prime Minister.


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## Jaberwock

I ended the year with $105,900 in my option trading account. A gain of 5.9% for the eight months since May 1st. not bad, but not good either, considering the market was up about 7.5% in the same time period.

Last time I commented on this thread, I was short 100 SPY and 200 SPY options.

The options expired, and I covered the short when I had a put option assigned at 214.

I sold 700 puts and 100 calls during October for a total of $883. One was assigned at 209, and sold later (an assigned call) at 214, for a $500 gain. The rest expired.

I gave up on option trading after the Trump rally got under way, because I think the market expectations are not realistic. I am sitting on a pile of cash, waiting for a better entry point.


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