LionOption

FEB/MAR 09 trades

2009-01-14T08:56:00.000-08:00

Put on a few postions yesterday (see pic). Some trades are closing existing trades or risk management. Put on a bearish bias SPY trade with pos vega, put on a slightly bullish QQQQ trade and a OIH trade for long oil spec. Also played a slighly bullish XLE vertical on. Oh yeah and a RUT iron condor for some good measure.
I wanted to have more of a positive vega exposure as the vix was at a support level and just was so unlikely that it would dip under the 40 mark. Well, today 1/14 Vix is up to the 50's again and if I was able to put the postions on with some more pos vega my losses would of been mititgated. taking a bit of a hit today as the market is all down 2-4% respectfully.

interest rate bubble play

2008-12-30T08:40:00.001-08:00

this trade will give me a time cushion if I'm still early with the 20 year T-bill correcting.

To fund my 110 JUN09 put I will short puts in the front months.

1/09/09 update
mark is approx 112, so the direction has been in my favor and with true textbook performance my short Feb 110 put has been deflated by the vega decrease and my further dated long 110 put has stayed relatively the same. This has resulted with me being up $70+ and the standard deviation for Feb does not go outside my P/L graph on this trade, Im safe up or down 15% on this one. I also have rolling capabilities/options with this one. Great trade thus far. I will get out of the trade if I up 30% on risk.
1/13/09 update
mark is app. 113, up only 1 tick from last update but the vols have come in considerably doing some damage to this P/L graph. The biggest hurt is to my JUN 110 PUT the vols upon placing trade were trading at 37 today there at 29. My short put has offset some of that damage but the P/L graph has shifted from making close to $400 on max profit to now only making only half of that.

Take Away, mitigate the vol risk when placing contrarian trades, cause if you are right the vol will most likely go against you and take away some gains.

JAN08 Trade Log

2008-12-17T15:34:00.000-08:00

SPY ratio IC trade with bearish bias, executed the trade 12/1/08
12/10 closed the call side out as my bias turned bullish short term.
closed call side out for a .16 loss (2)
12/17 closed out 1/2 of the put side for .09 = .13 (1) gain
trade balance is -.19 with 1 contract left on the put side 74/73 for .21
Trade will most likely be a wash...
take away: Because I was wrong initially I panic closed my call side and in hindsight I would of been better off keeping it on. Again another reason to be more mechanical in this market by setting a mental stop on the trade if it goes against you to this amount take this action if it works take profits at this amount. Adjusting this pre-set plan as the trade moves along must be done with a detailed rationale. Underlying methodology should be not loose more than 1.5x your cash flow or 1.5x your avg. gain on a trade, the idea being that you don't want your loosers to engulf your winners.

12/12
QQQQ and EEM IC trades are biased bullish for year end rally and or trading range: Q's trade was placed on 12/12 and the EEM was placed on 12/15 both are approx up 10%.
12/18
EEM mark25.47 ratio IC:
shaved off some pos deltas by closing out 1 of 3 EEM 21/19 put vertical for a +.19 profit, position is now a little more even on a p/l graph (lowered my downside risk as my opptimism is running thin for a year end blast!)
12/29 mark 24.11
closed postion for a total gain of $100 on $400 of risk or 24% Return.

QQQQ mark 29.91 ratio IC:
shaved off (1 of 1) 28/27 put vertical for a +.10 profit
still biased bearish but just reduced some downside risk in the trade.
Volatility has been vacuumed out over the past few days and has profited my pos theta I>C trades! off about 10points in the VXN or approx 20% to the 45 level, the vix is trading at the same price but has seen a larger % move down during the same period.
12/30 mark 29.35
closed out completely for a $82 profit or 23% return on risk ($350)

Light trading for Jan08 proved profitable as my negative vega, income postions blossomed with the vix/vols falling to the low 40's from the high 50's when placing the trades. Also the range has been tight letting my trades collect theta decay and vega premium drop.

DEC 08 trade log

2008-11-25T11:40:00.000-08:00

DIA,
had an iron on with a butterfly blend at the downside.
11/25 closed out the short call sides netting $63 = %20 ROR / with 8 commission ($12)= +$51
Still holding the stretched out butterfly:
+1 78 put / -1 80 put / -1 81 put / +1 83 put
for .20 debit.

XLF / XLE
ratio iron condor concept to be long one and short the other. I was still heardly bearish on XLF as it broke under 10 and thought the sell off in engergy was over done! This lead to a short put vert in the XLE mark 42.5 and a short call vert in the XLF.
trade done with 2 point spreads for a total credit of .95
11/25 update
XLF posted a 3 day rally with strong upmove, even today with the markets trading negative XLF is showing some resilience. I thought I would get out b/f losses would over take the XLE potential to still make me money overall. XLF side closed for a -$.23 loss today the XLE side is still open trading at a .33 gain.
Will continue to hold the XLE vert till it trades at .10
12/8/08 mark 46.34 XLE
xle continues up move and fills my limit .10 btc order allowing for a .48 credit gain. Overall ratio trade closed for a .25 gain or 12.5% gain. commission account for 1/2 profits at .12

qqqq
traded a ratio ic biased bearish was able to yank it b/f dec started at 50% of max credit making 64$ on 260 risk

NOV 08 trade log

2008-11-19T10:33:00.001-08:00

IWM trade consisting of verticals in NOV and DEC relied on a bottom putting most of my risk to the downside. Meaning I skewed the trade to have less risk if IWM jumped up and more risk if it failed to the downside. Just yesterday I was mildly profitable on this trade and actually have been for the past week or so, but of course greed kept me in against my rules of not holding a postion into expiration week. For this reason the extreme fluctuations of the gama cause deltas to swing wildly. I was to close to a downside threat and today nailed me only 2 days from expiration. I had to close out with a $74 loss ($45 commissions) being that if IWM dropped anymore my losses could quickly go to 200-300!
Takaway is to plan more decisevly and not trade into expiration week. IF i closed this trade Fri. last week I would have made a small $gain.

NYX slingshot NOV08 start

2008-11-13T11:28:00.000-08:00

+100 shares @ 25.27
+1 long JAN09 25 put @ 3.95
-2 vertical DEC08 30/35 calls @.82 (2) credit

11/19 NYX mark 21.07
NYX along with the market is taking a bath, making dramatic lows:
I rolled the -2 vertical DEC 30/35 calls down collecting .58 (2) = +$116
initiated new -2 vertical DEC 25/30 calls for .82

11/20 mark 18.67
stc -1 Jan09 25 put @8.05 for a gain of 4.10
bto +1 JAN09 20 put @4.55

11/21 mark 17.08
btc +2 verticl DEC 25/30 for .31 for a gain of .51 (2) = 1.02
sto -2 verticl DEC 17.50/20 for .94

Nov expiration status
stock has accumulated massive losses of -$820
gains on DEC and JAN short delta hedge postions = +$628
postion as of NOV is down $192
currently holding 100 shares at 25.27
-2 short DEC call verticals 17.5/20 for .94
+1 long JAN 20 put for 4.55 debit
given the proactive rolling and hedging I have avoided $800+ in losses and mitigated it to only $200, below is a P/L graph for DEC expiration.

12/10
sold the Jan 20 put to capture the remaining premium as NYX is making a move upward. pulled out 1.13 of credit = -3.42 loss
gain total is 2.86 for hedge postions with -2 vertical dec 17.5/20 calls currently at max loss of 3.12 for 2 contracts.
12/15 mark 26.54
With NYX up above my original cost I am profitable in the trade. I will initiate the sling shot again for Jan expration in the next day or so.

As of 12/30 NYX mark $24.90
my hedging has been profitable by 5.17 (including the debit from the (+1) 22.5 JAN put @ an 0.88 debit current mark .74)
my original cost basis for the 100 shares is 25.27

AIG / SPY combo trade

2008-09-16T14:00:00.000-07:00

9/16/08
AIG on the brink of bankruptcy or rocket up
SPY on the brink of a breakdown or rubberband like launch
bot +200 shares of AIG at 3.95

bot +1 SPY 122 PUT @4.50
bot +1 SPY 117 PUT @2.56
avg. 3.53

using spy as a hedge should be efficient as a AIG b.k. would mean a break down in the market (SPY).

scenario 1:
AIG goes b.k. US looses 116,000 jobs and the $1T in assets will be unravelled with God knows what kind of wrath.
I loose 3.95 x 200
I (should) win with the SPY atm and otm puts
The spy vix is at 30+ which allows for a large move, bigger than the cost of my 200 shares of AIG. That being said scenario 2 could be an easier win

scenario 2:
AIG gets funding and is re-established it finds its capitulation low and rockets back up 200% ++++
The spy can't possibly go down as many points as AIG can go up, therefore this scenario has the higher likelyhood of BIG profits.

scenario 3:
worst case is that the market finds some resolution and AIG gets some temporary reprieve some how or it doesnt rebound or fall as much as my Spy hedge therefore leaving me at a loss, the SPY vols will also influence the trade.

UPDATE 9/16:
in aftermarket trading the spy and aig contracts are trading in parity both down about 2 points.
Fed announced to offer the 85B to bail out and take 80% of the company

Update 9/17
next day market is slammed hard...UGLY!
SPY finishes the day making a new low..down $5.50 or 4.5%
AIG finishes the day down only 1.72 but equal to a 45% down move!
With respects to my trade this is a fantastic spread!
I closed out half of the postion and wait for maybe a furtherance of the move or sickening snap back, short covering explosion. This would possibly send AIG off to the moon while the SPY will not likely keep up with move creating a nice spread going the other way.

Trade results as of 9/17
200 AIG at 3.95 sold 100 for 2.12 = -1.83 (100 shares)
SPY 117 puts at 2.56 sold for 4.40 = +1.84 (100 share contract)
result is even...
WHY????
A 3.78 spread in the underlyings and a volatility boost in the SPY (helping my naked Put) didn't create a profit...
Well if I would of straight shorted the SPY and bought AIG this would of been true dollar for dollar, BUT b/c I bought 2 different put strikes and involved the greeks the deltas were not equal and therefore the moves didn't match up accordingly. If I were to of bought -200 deltas worth of SPY puts my outcome would of proven profitable.
Interesting lesson learned.
Lets look at the balance of the position as of the close today:
AIG at 2.03 = -1.92
SPY at 116.61 122 put at 7.75 = +3.25
You can see with the ITM put the deltas are more equal to the 100 shares of AIG and thus giving us a closer relation to the spread, also helping is the vega increase in the put contract.

*note AIG traded 1.2 BILLION shares today!!!

9/19
btc spy 122 put for 2.74 = -1.76 loss
AIG is currently trading at 5.39 = +$139
resulting in a unrealized loss of $40 or so.
I will continue to hold AIG throug this rockiness in hopes it will emerge and get back to double digits then close.

disclamer: this trade was a recommendation from 1option.com:
http://www.1option.com/index.php/global/comments/this_is_going_to_be_reolved_this_week_buy_aig_and_buy_spy_puts/

May08 wfmi earnings trade (+185 +308%)

2008-05-13T10:08:00.000-07:00

5/13/08
bot +1 may 32 put @.60 with 3 days till expiration.
5/14/08
sold for 2.45
total gain +1.85 +308%
Whole Foods Market Inc. (WFMI) reports earnings for the fiscal second quarter on Tuesday (After Market Close). As much as I loved to shop when I was in Austin, TX, I would love to be wrong if they deliver good results. It has seen its double-digit profit growth starting to erode due to costs associated with opening new stores and to buy its smaller rival Wild Oats Markets. Now that the deal has closed, the company is facing costs for cutting Wild Oats jobs and increasing the wages and training of the Wild Oats employees.
Whole Foods is also facing a slowdown in consumer spending in the U.S. A loyal customer base should help but how much? There is a positive argument as well, that it’s customers might not have been yet hit by slowdown in consumer spending as they are little middle to high class. But how much moat? Margins might be squeezed as well…
This is from one of OPN subscriber-
Whole Foods is my favorite company on the planet, but everytime I go in I can clearly see a difference in the amount of people that are there and what they are buying. I usually let loose and buy everything in sight, but I’ve even tamed myself a bit. Rising food prices, lower spending and their tiny margins–plus the way other grocers have been doing….
The company has not offered any guidance for the quarter so it may work out in their favor (sort of). The estimates for the organic food grocer from First Call are $0.30 EPS on $1.89 billion in revenues. Next quarter estimates are $0.35 EPS on $1.96 billion in revenues. Estimates for fiscal Sept-2008 are $1.28 EPS on $8.27 billion in revenues. The company expects total sales to grow 25 percent to 30 percent for the year, with comparable store sales rising 7.5 percent to 9.5 percent.
I like bearish position on WFMI. And I like Wal-Mart (WMT) for exactly the opposite reason with a bullish bias.
Disclaimer- Pls do your own due diligence before investing. My past wins doesn’t mean this will be win as well. This is not a recommendation and directional trades are speculative by nature. You may lose your investment completely.

Profitable trading, OP

MVL may08 Spec (+40% +$200)

2008-05-02T08:17:00.000-07:00

5-2-08
MVL spec trade based on Iron Man opening and earnings
5/5/08
closed trade for total profit of $200 profit or 40% profit
entered trade on Fri. 5/2 and closd monday 5/5 (holding period about 1 working day).
IV got crushed and worked in the favor of the put credit spread and price moved up %7+ pushing both spreads into positive teritory, recognized a %80+ return on the call debit spread.

MAY bidu butterflys

2008-04-25T10:51:00.001-07:00

4/24/08
placed 3 butterflys on Bidu for earnings lottery ticket.
placed one ATM and the other two butterflys at the expected price move up/down.

total debit: 1.75

4/25/08
earnings came out and price is at my B/E point for the ATM buterfly (mark 358)
b/c the butterfly is flat vega my position wasn't subject to the deflating of IV's.

APR08 income trade results (+$368 / +9%)

2008-04-18T15:01:00.000-07:00

APR 08 income trades result in +$368 cash flow or 9% ror.
4 total income trades, 3 wins, 1 loss.

APR Rimm earnings spec play (-max loss)

2008-04-02T12:53:00.001-07:00

pic on right shows the IV readout for the options b/f earnings.
Goal Post trade on Rimm earnings.
immune to IV risk and playing the 10% rule for earnings. Placed at strong resistance and strong support so hopefully it will hover around these #'s close to expiration.
Looking to net a 100% return on this one.
4/3/08
day after earnings, RIMM got a kick up but only about 6% or 6-7points to 123. Bringing it closer to my 130 butterfly. The crush in IV for the shorts was about 24 points of IV per each short 100 and 130 strikes. But the beauty of it is this postion is still unaffected by the IV crush, still a very sane trade and in a good postion to profit as we approach APR expiry.
4/18/08
expiration day rally, but not enough, basically realized max loss minus .33 salvage value from the 125/130/135 CALL butterfly

APR08 DIA income trade (+84 +25%)

2008-03-19T15:38:00.000-07:00

3/19/08
Placed 3 different short verticals and 1 butterfly
see screenshot for details (mark 122.53)

Trade is biased bullish but fairly neutral with a 52% prob of expiring. This postion should offset some of my other income trades with neg delta. short puts are at key capitulation lows and should prove to be stable. Can shave off some risk if the short puts get challenged. Will not loose more than 1.5 of cash flow.

4/03/08
took off the widest spread my PUT vertical:
BTC 117/115 PUT vertical @.10
original credit @.42
+$0.32 gain (1) contract

4/04/08
BTC (2) 116/115 PUT vertical @.03
original credit @.21
+0.18 gain (2) contracts

4/16/08
closed out of the whole trade (see pic for reconcile)
Result +.84 credit overall on ~$325 margin risk = 25% ror

NYX slingshot

2008-03-10T14:31:00.000-07:00

3/7/08
bot +100 shares for 60.27
bot +1 APR 60 PUT for 3.78
sold -2 APR vertical 65/70 CALL for 1.15 (2)
total debit 61.75 for trade approx +20 deltas

APR inventories
4/10/08 STC -1 APR 60 PUT @.30
loss - 3.48

4/18/08 (mark 68.89)
BTC =2 vertical 65/70 CALL for 3.87 (2)
loss - 2.72 (2) = -5.44

Total APR inventory losses = -8.92

MAY inventories
4/10/08 Bot +1 MAY 65 PUT @3.40

4/21/08 mark 67.83
sold -2 vertical 70/75 CALL @1.42

FEB income totals -8% (-$860)

2008-03-06T14:17:00.000-08:00

10 income trades for FEB (excluding earnings plays and directional debit trades)
total loss of $860 for FEB or average of -8% loss on margin

APR spy condor (+$144 on $800 margin) +18%

2008-03-05T16:21:00.000-08:00

3/05/08
sold -3 vertical APR PUT 118/115 @.25 (mark 133.71)
sold -3 vertical APR CALL 145/148 @.27
.52 credit 2.48 margin X 3 contracts
124/142 are the 20 delta strikes to adjust on.
dont risk more than 1.5 to 2x the max credit on trade. take profits/tighten the noose at 60% of credit.

3/10/08
btc +3 vertical APR CALL 145/148 @.06 (mark 128.98)
net gain +.21 X (3) contracts
3/10/08
sold -3 vertical APR CALL 141/144 @.21 (mark 127.81)

3/20/08
sold -1 vertical APR CALL 140/141 @.21 (mark 132.58)
sold -1 vertical APR PUT 127/126 @.21

3/31/08 (mark 131.89)
btc +3 vertical APR PUT 118/115 @.09
3/05/08 original credit .25
net gain +.16 x (3) contracts

btc +1 vertical APR PUT 127/126 @.21
3/20/08 original credit .21
net gain 0.00 (1) contract

btc +1 vertical APR CALL 140/141 @.09
3/20/08 original credit .21
net gain +.12 (1) contract

btc +3 vertical APR CALL 141/144 @.14
3/10/08 original credit .21
net gain +.07 x (3) contracts

Total Trade Reconcile
+ $144 on $744 margin = +18%

APR08 iwm condor (-$202 / -18% loss)

2008-03-05T09:57:00.000-08:00

3/05/08
sold -4 vertical APR 60/57 PUT @.31 (mark 68.27)
sold -4 vertical APR 76/79 CALL @.23
62/74 are 20 delta strikes to monitor

3/07/08
bot +1 vertical APR 63/61 PUT for .51 debit

3/10/08
btc +4 vertical APR 76/79 CALL @.06 (mark 65.03)
net gain +.17 X (4) contracts
3/10/08
sold -3 vertical APR 71/74 CALL @.32 (mark 64.45)

3/20/08
sold -2 vertical 64/63 PUT @.22 (mark 67.87)
shaved off some neg deltas w/ this addition and added +theta. Still running into some solid resistance at 70-72 range, will start to adjust at 70...

3/25/08
hit 70 yesterday and has held all day, decided to do some massaging on the deltas:
btc +4 vertical 60/57 PUT @.10 (mark 70.26)
net gain +.21 X (4) contracts
btc +1 vertical 71/74 CALL @1.15
net loss -.83 (1) contract
stc -1 63/61 PUT @.16
net loss -.35 (1) contract
btc +2 vertical 64/63 PUT @.13
net gain +.09 X (2) contracts
*totals as of 3/25/08 = +.52 with (2) CALL verticals still open at 71/74 for +.32 credit
placed a stop order at 1.42 to prevent from loosing more than approx$175 on the trade. Still feel confident that 72.50 will hold as resistance.

3/26/08
bot +1 calendar Apr/May 68 PUT @.97 debit (mark69.61)
4/18/08
sold -1 calendar @.65 (mark 72.16)
loss -.32

4/04/08
BTC (2) 74/71 CALL vertical @1.43
original credit .32
Loss - 1.11 (2) contracts

total reconcile of trade = -1.70 w/ only a Apr/May 68 Put calendar still in play.

-2.02 Total loss / -18% loss on 1082 margin risk

Orig. Plan:
when the delta of the options are at 20 you are starting to feel some pain depending on the volatility, take off some and roll down or close. When placing this trade look and see what strikes put/call have .20 delta, then set your plan to adjust the trade when that point is hit. Can also midigate risk by overlaying a put/call debit spread to protect the side you are concerned about. For example on the put side 60/57you may want to overlay a 61/58 to reduce risk to the down side. This would be on a ratio basis, you would have 5 contracts of the condor and 1or2 of the debit spread.

MAR income trades closed for +12% (+$456)

2008-03-04T11:35:00.000-08:00

MAR income trades all closed by 3/04/08

played 3 seperate portfolios
IWM condor
SPY condor/diag
RUT condor
totals
margin $3979
profit $456
% gain +12.6%

APR aapl +-verticals (+11% or +$140)

2008-03-04T10:54:00.000-08:00

3/04/08
bot +2 vertical APR 130/135 CALL @1.51 (mark 122.32)
sold -2 vertical APR 100/95 PUT @0.56
total margin 5.95 (2)

3/12/08
stc -2 vertical 130/135 @1.92 (+.41)
btc +2 vertical 100/95 @0.27 (+.29)
total profit +.70 (2 contracts)= + $140

The greeks are neutral for vega and gamma, theta is positive and delta is positive 25 (biased bullish)
plan to risk 150 to make 150 total on trade.
If stock gaps I risk a greater loss, but AAPL is beaten up and I believe the gap up is a better possibility.

MAR iwm condor (+11%) $51

2008-02-22T18:07:00.000-08:00

2/19/08
sold -3 condors in IWM
64/62 PUT @.24
76/78 CALL @.24
.48 credit 1.52 margin

2/28/08
took off trade for .31 debit
+ .17 gain per contract = $51
11% gain
trading plan:
you are only in this trade for 7-17 days, once you have 10%+ you start tightening the noose, taking profits. Max loss 15-16%. You are taking in more theta, faster, in this trade vs. the high prob condor discussed here.
Adjustment: (specific criteria with 5 contracts on) Max risk 15% don't loose more than this. Taking profits at 12-15% of margin, protect profits.
with 5 contracts on, when down 11-12% of the margin/risk, take off 40% or 2 of the loosing side. When it gets to the short strike take off another 40% or another 2, then the other 1 when your down more. this will protect you when the market runs then backs off. were trying to stay in the game, don't want to get shaken out of the game.

X1 QQQQ MAR inventories (+1.07)

2008-02-13T13:31:00.000-08:00

DEC-FEB credits, total reduction in cost basis is equal to 3.90

2/13/08
bot +2 MAR/APR 41/43 PUT Diagonal @0.94 debit (mark 44.50)
3/04/08
sold -1 for 1.46 (mark 42.19)
gain of +0.52 (1 contract)
sold -1 for 1.49 (mark 42.09)
gain of +0.55 (1contract)

2/15/08
sold -1 PUT vertical 40/37 for .29 credit
3/04/08
bot +1 for 0.30
flat
MAR INVENTORIES YEILD ANOTHER +1.07 TO ADD TO THE ALREADY 3.90 OF CREDITS FROM DEC-FEB....NEW TOTAL CREDITS FOR DEC-MAR = +4.97

FEB bidu butterfly

2008-02-12T10:15:00.000-08:00

bot +2 PUT butterflies 240/230/220 @.73 debit (mark 257.95)
bot +1 CALL butterfly 260/270/280 @1.05 debit
butterly strangle of sorts, play on earnings.
Will be interesting flat delta and vega with + 17 theta going into earnings.
Expiration in 2 days.

2/15/08
had to close it down on expiration for a loss, finished up in the middle of my money pyramids. Realized about a 50% loss.
Theta and vega did work for me but only if price was in my 2 profit ranges...
I would try this trade again!

MAR/APR spy condor/diag (+16%) +$221

2008-02-11T12:06:00.000-08:00

2/07/08
bot +1 SPY Diag. -MAR/+APR put -130/+133 @2.33 debit
3/04/08
sold -1 for 3.10
net credit +0.77 (+33%) +$77

2/11/08
sold a ratio condor on SPY for MAR
sold -4 MAR 120/117 PUT @0.33 (2.67 margin X 4)
sold -2 MAR 145/148 CAL @0.32 (2.68 margin X 2)
total risk to the downside is $1,000 to the upside $400
but need to factor in the DIAG trade which softens the downside and diversifies the vega of the overall trade.
Will put an alarm on 142.50 as 145 will need to be an adjustment point.

2/26/08
btc +4 MAR 120/117 PUT @ .08
net credit = +.25 (4 contracts) +$100 / +9%

2/29/08
btc +2 MAR 145/148 CALL vertical @.10 (mark 134.56)
net credit = +.22 (2 contracts) +$44 / +8%

MAR rut condor (+11%) $184

2008-01-31T12:12:00.000-08:00

1/31/08
sold -2 iron condor RUT MAR 800/810/590/580 CALL/PUT @ 1.57 credit (mark 715.08)
800/810 verticle @1.02
590/580 verticle @0.55
770 & 650 are the 20 delta points to adjust at.
Plan:
80% plus probabilities going 45-55 days out. picking short strikes at approx. 7-10 deltas and setting adjustments at the 20 delta point or when loss equates to 1 or 1.5of cash flow. Plan to take half of the position off when points are triggered. If you take off all of the loosing position, wait 24 hours then place twice the number of contracts 1 more standard deviation from price and challenge the market to do it again!!
Profit plan: looking to take about 50-70% of total cash flow on these trades. Get out before expiration week.

2/14/08
BTC +1 Condor @.76 original sold for 1.57
realized gain for 1 contract + .81 or 9% ROR
Still holding 1 more contract on this condor, to take off at 12% return or btc condor at .55 (set my limit order at .55)

2/19/08
BTC +1 Condor @.54
realized gain for 1 contract +1.03 or 12%ror

Total return avg. .92 or 11% return

FEB goog butterfly (69% loss)

2008-01-31T11:41:00.000-08:00

1/31/08
bot +1 butterfly goog FEB 570/600/630 CALL @ 5.75 (mark 562.03)

analysis:
GOOG has been beaten down and I believe the earnings should prove solid. I don't see them guiding lower as I would think that interent marketing would increase b/c it is cheaper and still effective. YHOO had weak earnings yesterday and I think GOOG could prove to be still gaining ground in the core business.
I learned a lesson with AMZN today and the crush in vols that destroyed the trade. This trade is -vega and will profit from such a crush. I did choose to go bullish on this trade so a gap down will prove devistating for this trade.

2/1/08
sold -1 butterfly for 1.80
originally bot for 5.75
total loss = 3.95 or 69% loss!

FEB amzn ratio b-spread for E. (-loss)

2008-01-30T15:10:00.000-08:00

1/30/08
bot +1 2/3 backratio AMZN FEB 85/75 @-6.31 (mark 74.20)

1/31/08
sold -1 2/3 backratio AMZN FEB 85/75 @-11.09 (mark 74.51)
Total loss is 4.78
Worst case scenario and the total loss was WAY MORE than I expected. Very interesting and a very good reason to paper trade your curiosities. The P/L graph looked to good to be true when I put the trade on: not loosing much at all if stock stayed relatively still and making alot if stock gapped!
The big key element was the VOLS
original vols b/f earnings: average 92% for the options used
after earnings: 54%
Crush in Vols = -38%
With the +VEGA so high on this trade, the trade got killed!

FEB VMW call back ratio

2008-01-28T11:00:00.000-08:00

1/28/08
Placed a ratio call backspread on VWM for their earnings after the bell today. Took a bullish bias willing to take 50-100% loss on debit of the trade or close upon initial spike up tomorrow best case for above 100% return.
bot +2 call ratio backspreads 80/85 (-2 80 / +4 85) CALLS for an 0.85 debit. Plan to close by end of week if VMW opens up tomorrow down a little up little or down alot. Will wait to see if stock reverses to my favor to close for less of a loss or small gain. Will not hold past Friday as the Theta and gama risk will intensify going into Feb expiration. Can get into a big loss scenario at that point.

some Double DIAG notes

2008-01-24T15:08:00.000-08:00

The double diag is a positive vega play.
Take the vega amount multiply by 3 then compare that number to your margin amount.
IF that vega x 3 is greater than 10% of your margin passs on the trade.

FEB GOOG vertical 500/490 (+19%)

2008-01-23T11:10:00.000-08:00

1/23/08
sold -1 vertical GOOG FEB 500/490 PUT @3.05 (mark 533.65)
GOOG down aprox $50 today -8%
note GOOG doesn't move this much on their earnings...whats the deal!!
500 a good past support level

1/23/08
BTC +1 vertical GOOG FEB 500/490 PUT @1.75 (mark 555.40)
originally sold for 3.05
net credit 1.30 per contract (1) $130 gain
Intraday trade, I placed a limit order in and got filled.
Figured a 20% gain would be sufficient for this trade.

JAN08 wreckage

2008-01-18T14:56:00.000-08:00

my FEB postions are getting wrecked and I am posting this to show the extreme nature of the markets and show that risk management doesn't mean you will never loose money it just keeps you from loosing all or large amounts of it. I would hate to peek at a naked long portfolio after this amount pain...The following is a breakdown of the major indexs and high flying stocks I watch and their % moves from JAN 1 2008 (18 days)

SPY -9%
DIA -9%
QQQQ -10%
IWM -13%
$RUT -12.5%
AAPL -19.5%
GOOG -14%
BIDU -31%
RIMM -21%

FEB SPY call vertical (-16%)

2008-01-18T14:30:00.000-08:00

1/18/08
sold -1 SPY 140/144 CALL vertical @0.86
margin = 3.14
Prob of Success = 78%
Idea behind this trade was to pump some negative deltas into my overall SPY postion. Had to shed off the PUT side of my FEB condor at a pre-determined loss, resulting in a 20% overall loss on that condor! Will hope to get back to break even by FEB expiration with the remaining SPY trades being closed at their profit points.

This vertical will require little monitoring, but will close if the loss is equal to the credit I can recieve (.86) or if I like the overall delta postion of my FEB SPY inventories I may keep them on. This is a trading plan with my personal judgement making the final decision.

1/31/08
btc for 1.36
originally sold for 0.86
total loss .50 or 16% loss

FEB08 IWM (30day) Condor (-22% loss)

2008-01-16T10:59:00.000-08:00

1/16/08
sold -5 vertical IWM FEB 75/78 CALL @.38 (mark 69.78)
sold -5 vertical IWM FEB 65/62 PUT @.44
total credit = .82
margin =2.18
72% prob.
1,090 buying power reduction for 5 contracts.
have the following stop orders in:
btc+2 75/78 CALL @.75
btc+2 65/62 PUT @.82

btc+2 75/78 CALL when IWM hits 75
btc+2 65/62 PUT when IWM hits 65

The remaining 1 contract tbd

Trading Plan:
put it on with 30 days to expiry get off in 14-17 days, making 10-15% reward. Now instead of selling a 7 delta strikes (high prob), sell 20 delta strike options, this will equate to a 60% prob of success) This is a different animal, you are only in this trade for 7-17 days, once you have 10%+ you start tightening the noose, taking profits. Max loss 15-16%. You are taking in more theta, faster, in this trade vs. the high prob condor discussed here.
Adjustment: (specific criteria with 5 contracts on) Max risk 15% don't loose more than this. Taking profits at 12-15% of margin, protect profits.
with 5 contracts on, when down 11-12% of the margin/risk, take off 40% or 2 of the loosing side. When it gets to the short strike take off another 40% or another 2, then the other 1 when your down more. this will protect you when the market runs then backs off. were trying to stay in the game, don't want to get shaken out of the game.

1/18/08
BTC +2 vertical 65/62 PUT @.83 (mark 66.62)
original credit @.44
debit loss for 2 PUT contracts = .39

1/22/08
BTC +2 vertical IWM feb 65/62 PUT @1.19 (mark 64.54) triggered my stop condition if IWM trades below 65 get me out.
originally sold @ .44
debit loss for 2 PUT contracts = .75
still holding 1 short PUT vertical contract and 5 short CALL verticals

1/23/08
BTC +5 vertical IWM FEB 75/78 CALL @.10
orig. sold @.38
net credit per contract (5)= .28
only holding the 1 short PUT vertical with a contigency stop order if it hits 55

2/11/08
BTC +1 vertical IWM FEB 65/62 PUT @.05
orig. sold @.44
net credit per contract (1) =0.39

Entire trade = -0.49 loss per contract -22% loss or (-$245)

NVDA slingshot stock (-65 loss)

2008-01-16T08:32:00.000-08:00

1/16/08
bot+100 shares of NVDA @24.11
bot+1 FEB 22.50 PUT @1.40
sold -2 FEB vertical 25/27.5 @.85
debits 25.51
credits 1.70
total debit = 23.81
will not let my long put expire worthless will roll up or roll down to capture value, to the downside this should leave me flat as well as reduce my cost basis, to the upside b/f FEB expiration my P/L is gradually upward.

2/13/08
btc -1 FEB 25/27.50 vertical for 1.35
original credit of .85
loss of -0.50 for 1 contract
2/14/08 stc -1 FEB 22.50 long PUT @.22, original debit 1.40
loss for long PUT = 1.18
Expiration Fri 2/15
FEB 25/27.5 Call vertical expired worthless
1 contract +.85 credit
FEB inventories result in -0.83 loss

MAR inventories
(2/13/08)sold -1 vertical MAR 27.5/30 @0.92 credit
(2/15/08) btc +1 vertical MAR 27.5/30 @.18
gain for 1 CALL vertical + .74

(2/13/08)bot +1 MAR 25 PUT @1.53 (mark 26.66)
(2/15/08)rolled the MAR 25 PUT down to lock the gain
STC MAR 25 PUT for 3.60 -- original basis 1.53
gain for Long PUT +2.07
(2/15) BTO 1 MAR 22.5 PUT for 1.95
3/07/08 STC 1 MAR 22.5 PUT for 2.55
gain for Long PUT + .60

(2/15) STO 2 MAR 25/27.50 CALL verticals @ .42
(3/03/08) BTC 2 MAR 25/27.5 CALL verticals for .06
gain for (2) CALL verticals is .36 (2) = .72

MAR inventories result in a +4.13 gain

APR inventories
3/07/08 BTO +1 APR 20 long PUT @ 1.50
4/10/08 STC -1 APR 20 long PUT @ 0.87 (mark 19.69)
lloss -0.63

3/26/08 STO -2 vertical 22.5/25 CALL @.19 (mark 19.72)
4/15/08 BTC +2 vertical 22.5/25 CALL @.01 (mark 17.70)
net gain = +.18 (2) contracts = + .36

total APR = -0.27 loss
cummulative total +3.03

MAY inventories (earnings ~5/14)
4/10/08 BTO +1 MAY 20 PUT @1.75 (mark 19.69)
5/2 STC @.27 (mark 21.98)
loss -1.48

4/10/08 STO -1 MAY 22.5/25 CALL @0.40
Add another vertical if NVDA rallies up to 21.
Apr. expiration stock taken at 22.50 + .40 credit
bot stock at 24.11 sold at 22.5 =
4/15/08 BTO +2 MAY/JUN 17.50 PUT calendar @.48 debit (mark 17.70)
earnings vol play, IV's are relatively low and we are at a base DB support.
4/21/08 STC -1 MAY/JUN 17.50 PUT calendar @.40 credit (mark 19.94)
1 contract = -.08 loss
sold -1 @.27 = loss - .21
JUN inventories
5/2/08 bot +1 JUN08 20 PUT @.85 (mark 22.00)
5/22 sold -1 @.15

Total trade closed out for a $65 loss.
loss-.70

FEB RUT condor (-22% loss MN trade)

2008-01-15T11:35:00.000-08:00

Trade Summary

RUT at 697.48
29 days to Feb expiration.

Sell RUT Feb 760 Call
Buy RUT Feb 770 Call
Sell RUT Feb 630 Put
Buy RUT Feb 620 Put

For a net price of $2.20 Credit or better. [tos auto-trade participants were filled at $2.20]
Total margin required/total risk: $780 per entry.

Trade Analysis

The best time to initiate an iron condor trade will be a day like today, where implied volatility spikes higher. Actually, we were queuing for a SPX iron condor for a little diversification in our portfolio. But we simply couldn't get it filled despite shaving off $0.30 off the mid-price! As we were waiting, this RUT iron condor got filled.

This is our second RUT iron condor for Feb expiration. Our breakeven points for this trade are 762.20 on the upside and 627.80 on the downside. Looking at the P&L chart below, we can see that this trade currently has a probability of being successful of 72.9%, which is more than 1 standard deviation of 68%. This trade is very neutral at the moment with only -1.05 delta.

This iron condor has a profitable range of more than 130 RUT points. The daily chart of the RUT looks terrible. The Jun and Aug 2006 highs at around the 700 level seems to be the next support level to be tested right now. If RUT were to close below 700, then the next support we can see will be from the lows in Jun and Aug 2006 at around 670 level.

Since every broken support becomes a resistance, there are multiple resistance levels for the RUT. The bulls will have a hard time trying to break through all these resistance levels.

It is widely expected that the Fed will cut interest rates again in the upcoming FOMC meeting at the end of this month. Therefore, we should expect some wide swings after the meeting.

Since we are risking $780 to make $220 for each position we put up, the risk/reward ratio (R3) of this trade is 3.55, which makes this iron condor a high R3 iron condor. As usual, with high R3 comes more proactive management.

We shall set our alarm at about 30 points (approximately 4% of current price) away from our short strikes. Since we are short 760 call and 630 put, we shall be ready to adjust this trade when RUT trades higher than 730 or lower than 660.

When the need for any adjustments arises, I'll inform you accordingly. For now, let's enjoy time decay!

1/22/08
btc +1 vertical RUT FEB 630/620 PUT @3.85 (mark 657.41)
orignally sold @1.05
total loss for PUT 2.80

1/23/08
btc +1 vertical RUT FEB 760/770 CALL @.20
originally sold @1.25
net credit 1.05 for CALL
Condor postion yeilded a 1.75 loss per contract (1) or -22% loss
Adjustments were mine not MN advisory, MN rolled the PUT vertical down in FEB and is still holding the CALL vertical.

AAPL vertical with adjustments (LOSS)

2008-01-15T11:20:00.000-08:00

1/15/08
sold -1 vertical AAPL FEB 150/145 @1.35 credit (mark 167.91)
MacWorld today and another sell off brought aapl -10 ponts. Earnings is next Tues. would ideally like to see a bounce and run up b/f earnings and buy it back for half price b/f earnings event.
IV's are above their record highs (above 60)
150 is an old support (NOV 07 sell off)
150 is also the 200 day EMA
150 good entry point for stock if assigned in FEB

Will re-evaluate b/f earnings whether to ride this trade through

1/22/08
AAPL dropping like a knife day of earnings decide to speculate with this trade and add another short PUT vertical @ 140/135 PUT for 1.29 credit(mark 156.61)
total credit for both (2) short verticals trade = 2.64
margin = 2.36
Can be 5-10% wrong on this trade before getting hurt. AAPL after earnings will see a deflate in IV and options premiums so even if stock still drops a little, no problem. Primary exit obviously if AAPL gaps up after earnings and IV drops off.

1/23/08
WOW! stock got WACKED HARD, worst drop % in aapl shares in 5+ years. down almost $30 or -18%. At least I wasn't just long shares...
Anyway trying to figure something out here with stock ownership. Will assume I take shares at 150 and 140 for a cost average

closed out full position at a - 14.09 total loss
do the math on balance statemnt from AAPL transactions

FEB SPY condor (MN trade) (-49% loss)

2008-01-15T10:49:00.000-08:00

SPY at 141.42 (+1.26)
31 days to Feb expiration.

Sell SPY Feb 147 Call
Buy SPY Feb 149 Call
Sell SPY Feb 134 Put
Buy SPY Feb 132 Put

For a net price of $0.90 Credit
Total margin required/total risk: $110 per position.

Trade Analysis

this iron condor will decrease in value very rapidly if there is no major movement in the SPY.

Our breakeven points for this iron condor will be 147.90 on the upside and 133.1 on the downside. This iron condor has a profitable range of more than 14 points, which is equivalent to 140 SPX points. As long as the S&P 500 index trades between these 140 points for the next 31 days, we'll have a very profitable trade.

From the P&L screenshot above, you can see that we have a profitable probability of about 57.34%. This trade is one of the very few iron condors that offers us a positive expected returns. More specifically, this trade offers us a positive expected returns of $4.68 per position [($90X0.5734) - ($110X0.4266)].

Since we are risking $110 to make $90, this iron condor has a low R3 of 1.22. Even though this iron condor has a low R3 reading, we should still give it a trading plan.

As a guide, we should be ready to adjust or close this position when it is trading at or above $1.15. This figure represents a loss of about 20-30% of the maximum possible loss. However, we don't want to be stopped out unnecessarily. Depending on the number of days left to expiration and the distance from our breakeven points, we may reduce our positions and hold on to the position until a more suitable time. Ideally, we should close this trade as soon as it trades at or below $0.25.

Low R3 condors normally requires minimal management and interference. But current market conditions are not normal times. We will keep a close look at this trade and inform you accordingly when the need to do anything arises.

1/22/08
stoped out on this iron condor:
btc +1 iron condor spy FEB 147/149/134/132 @1.44 (mark 126.77)
originally sold @ .90
loss (3 total contract)= .54 or $162 (49% loss)

FEB/MAR diagonal SPY (+61%)

2008-01-09T13:50:00.000-08:00

1/09/08
bot +1 -FEB/+MAR -135/+138 PUT SPY diagonal @2.77 debit
The use for this trade was to add some negative deltas and some extra cushion to the downside. Will watch the upside as today we did get a whiplash to the upside in the final hours of trading. will take off when my positive deltas get out of whack. But will want to try and keep my postions biased to the short. This trade is fairly dosile and won't need very close watch.

2/11/08
sold -1 feb/mar 135/138 PUT spy diag. @4.48
originally bot for 2.77
net profit = 1.71 or 61% yeild

X1 QQQQ trade FEB08 (+0.90)

2008-01-07T15:17:00.000-08:00

Credits accrued since DEC = +3.00
Goal is to pay for JAN10 60 long put debit of 11.81
extrinsic value is paid for, now working on paying down the rest of the intrinsic value (8.81 to go)

1/07/08
Placed an Iron Condor at:
sold -2 FEB08 43/40 PUT verticle @.27
sold -2 FEB08 52/55 CALL verticle @.34
total credit for Condor is @.61
80% probability on a 3 wide spread, margin required is 2.40 per leg.
I plan to place a PUT diagnol to add bearish bias and/or possibly 1 more CALL credit spread. Would like to wait for a rally bounce to sell into.
Will not loose more than $150 on any given month as this is the average monthly credit I have recieved for the last two months.

1/08/08
bot +1 JAN/MAR 47 PUT calendar @1.29 (mark 48.62)
plan is to roll JAN 47 put (.35 credit) when it reaches approx .10
would like to roll to FEB 46 or less making it a PUT diagnol.

1/15/08
adjustment to JAN/MAR 47 PUT calendar
sold-1 diagnol JAN/FEB 45/47 PUT @.11 (mark 46.76)
by selling this diagnol I btc the JAN 47 short put and rolled it to FEB 45 short put collecting a .11 credit
This has produced a beautiful P/L graph (above on right) including my already 10% profitable condor in the QQQQ's (10% b.e. points up and down with the bias to the downside.)

1/16/08
btc +2 FEB 52/55 CALL vertical @.06
orginal credit sold -2 @.34
Net credit = 0.28 x 2 = .56
still holding the 2 PUT verticals and 1 PUT diagnol

1/17/08
sold -2 FEB 49/52 vertical @0.32 credit

1/22/08
btc +2 vertical QQQQ FEB 43/40 PUT @1.04 (mark 42.88)
orignially sold for .27
total loss per contract(2) = -0.77 (2) = -1.54

1/23/08
btc +2 vertical QQQQ FEB 49/52 CALL @.07
originally sold @.32
net credit per contract (2) = .25 (2) = .50

Added short PUT vertical
sold -2 vertical FEB 39/36 @.40 credit (mark 42.21)

1/24/08
btc +2 vertical FEB 39/36 @.12
originally sold (yesterday) @.40
net credit per contract (2)= .28 (2) = .56 credit

2/05/08
stc (1) the 47/45 put diagnol for 2.00 credit
original debit on a JAN/MAR 47 put calendar was 1.29
rolled the short put JAN to FEB 45 for a .11 credit
total trade profit (1) contract = + 0.82

Closed out of all FEB inventories for total profit of 0.90

TOTAL credit from DEC & JAN credits is 3.00 therefore relieving all extrinsic value and risk from the position. Next goal is to pay down the cost of the JAN10 long put total debit is 11.81 (subtract 3.00 credits = 8.81 left)
Now with the DEC-FEB credits, total reduction in cost basis is equal to 3.90

MER slingshot stock (long term)

2008-01-04T11:15:00.000-08:00

1/04/08
LONG term holding in Merrill Lynch (MER)using protective options until there is some stability. Will guard the downside like a hawk but keep the upside ready for the sky! will do this by using the Sling Shot hedge:
bot +100 shares of MER @49.89
sold -2 verticle FEB08 55/60 CALL @.90
bot +1 PUT FEB08 50 strike @3.40
total debit 51.49 cost basis
total risk on trade is only $150 till FEB08 upside is unlimited.
Earnings 1/17

2/12/08
rolled the FEB08 50 PUT to MAR08 50 PUT for a 2.15 debit (sold feb@.40 & bot mar@2.55)
btc 1 55/60 call FEB @ .18 (mark 50.96)
btc 1 55/60 call FEB @ .08
average .13 each originally sold for .90 each
realized gain .77 per contract (2) = 1.54
inventory balance for FEB = (-1.46 loss) 3.00 loss on the put and 1.54 gain on the 2 verticles

MAR inventories
bot 1 MAR 50 PUT @ 2.55
3/10/08
sold 1 MAR 50 PUT @7.05
net gain +4.50
sold 1 MAR 55/57.50 CALL @ .85 placed 2/12
sold 1 MAR 55/60 CALL @1.57 placed 2/13 (mark 52.78)
3/7/08
btc both verticals for .15
2.12 total net gain
6.62 total net gain for MAR inventories
6.62 - 1.46 (loss in Feb) = +5.16 new balance going into APR inventories

APR inventories
bot 1 APR 42.50 PUT @4.00 (mark 43.08)
4/07/08 STC 1 APR 42.50 PUT @1.00 (mark 47.47)
loss -3.00
sold -2 APR verticals 50/55 CALL @1.00
3/31/08
btc +1 APR vertical 50/55 CALL @0.38
net gain on (1) contract = +0.62
4/15/08
btc +1 APR vertical 50/55 CALL @.10
net gain on (1) contract = +0.90
APR results in a -1.48 loss
+5.16 - 1.48 = 3.68 profits from option inventories
MAY inventories
bot 1 MAY 45 PUT @3.01 (mark 47.47) 4/7/08

sold -1 MAY 50/52.50 CALL vertical @.56 credit (mark 44.41)
sold -1 MAY 50/52.50 CALL vertical @.44 credit (mark 42.89)4/15/08

FEB/MAR goog dbl calendar (-18%loss)

2008-01-03T11:00:00.000-08:00

bot +1 dbl calendar FEB/MAR08 640/720
640 put calendar @ 7.40
720 call calendar @ 9.20
total debit: 16.60 (mark 681.20)
screenshot to the left is P/L as of 1/03 today
screenshot above is P/L on 2/1/08 with everything the same.

Plan is to take off trade b/f GOOG earnings on 1/31/08
will not take more than a 20% loss on margin or 3.30
Very wide B/E points for FEB expiration, good support at 650 and then at 625 for the downside and 725 and 750 (all time high) for the upside.
Risk is more apparent to the downside, so will keep an eye on that. Also will be interesting to see how IV affects this trade as we get closer to earnings. The trade has positive vega and positive theta so theoritically should work ideally for a 1 month holding time and expected IV increase. I do understand that the IV will increase the most in front month FEB options which are my shorts (not good) hope to see IV increase proportionately for MAR as well or this trade could get ugly..we will see.

1/09/08
Hit my adjustment point yesterday and remained weak this morning before the prices reversed and shot back up late in the day...wild day!
I executed this adjustment b/f noon and rolled my 720 Call Calendar down to a 650 Put calendar:
sold FEB/MAR 720 CALL calendar @ 8.10
bot FEB/MAR 650 PUT calendar @ 9.00
adding .90 debit to my original trade
16.60 + .90 = 17.50 debit for double PUT calendar trade (new P/L graph looks like a volcano)

1/17/08
closed out of trade for a loss:
sold double calendar for 14.35
creating a total loss of 3.15 (18% loss)($315)

FEB/MAR nyx double calendar (+38%)

2008-01-03T07:32:00.000-08:00

1/3/08
bot +1 dbl calendar NYX FEB/MAR08
90 FEB/MAR Call calendar
80 FEB/MAR PUT calendar
debit 2.55 (mark 83.85)

Plan to take off trade b/f earnings in Feb 1-5 date not yet confirmed.
If underlying stays relatively in the same spot will yield approx. 50%

1/07/08
NYX dropped down btwn my short put and FEB expiration b/e point. Made the following adjustments:
STC -1 the 90 FEB/MAR Call calendar @.89
originally bot for 1.30
total loss debit for 90 feb/mar call calendar = .41

rolled the call callendar down to closer ATM:
bot +1 FEB/MAR 75 call calendar @1.31 (mark 77.63)
leaving a double calendar at 75 CALL and 80 PUT
current debit for trade (including roll debit) = 2.97
(see left picture for current P&L graph for position)
Placed a STOP order in @1.85 (approx 40% loss) plan to close b/f this is hit if market keeps falling. Will want to see NYX settle into some sort of range, ideally in the 20% range I have calendared btwn. 70 and 85

1/31/08
sold -1 dbl calendar to close out the trade before earnings tomorrow:
sold for 4.11
debit on trade is 2.97
Total profit is 1.14 or 38% roi

Dan Sheridan 1/2/08 TOS chat

2008-01-02T13:48:00.000-08:00

low prob condors
look for:
30 days out
enough volatility (20-30% vols) to take some premium
trades in pennys, tight bid/ask
take a 16-20 delta in the calls and puts should give you approx. 1 standard deviation for a low prob condor with 30 days till exp. To figure out prob of success take the short put delta plus short call delta then subtract from 100.
can adjust bias up or down by shorting a higher delta on one side over the other

Scale out or tighten the noose when taking or protecting profits at around 10-15%, not willing to go back to zero, goal is to make 10 to 20% a month on these.

On loosing side, take a % of your contracts off at -10% of margin another portion at -15% and the rest at -20%. Limit losses to approx -15% of buying power reduction/margin. Idea is to not get bumped out of your trade. You can figure the adjustments quickly by taking the credit recieved minus the distance btwn strikes X the % loss. (ex. 3 credit on a 10 point spread = 7 margin) take 15% of 7 equals 1.00 So if your condor is trading then at 4 you are at a 15% total loss. Can't be taking big losses on these Condors since your winning trades are not yeilding high %. .
For this trade may want to trade something like the IWM instead of the RUT b/c 1 RUT is equal to 10 IWM. You will be able to do the scaling with the IWM with less capital.

Double Calendars:
Criteria:
stocks over 70
generally under 32 vol, more stability

Plan:
max loss 25%
take profits at 20% tighten the noose, start taking off some of your contracts, may be able to milk up to 40-50%
keep your profit and loss similar
Calendars are more dosile than credit spreads

Adjustment process for 40 day double calendar:
1st 20 days
keep it simple make adjustment point at short strike and half way to expiration b/e
2nd 20 days
between half way to your b/e to your b/e at expiration.
example if GOOG goes to the upside of your call side 710 strike b/e point 740 so:
The first 20 days in the trade will adjust this btwn 710 and 725.
In the 2nd 20 days will adjust btwn 725 and 740.
Will be rolling 1/2 of your put calendar contracts up to approx. where the stock is. This will cut the deltas down.
Need a plan when you will adjust these calendars. If you start to get too much short deltas as price goes up when you adjust this you will be cutting down the negative deltas.
A good way to tweak and play with the calendar spreads is to check the pricing of the front month calendar. For example the FEB/MAR Goog dbl calendar is trading at 17.7 the JAN/FEB (front month calendar at the same strikes) is trading for twice the value. This means that in 30 days you can be up 100% if goog stays still. You can also tweak the stock price and see the dollar move the postion can withstand in 30 days. For this example the stock can move 50-60 points up/down to b/e

VIPES when looking at double calendars in stocks:
V volatility need vols in lower 1/4 or 1/3 of 6-12 month range
I industry stay away from wacky biotechs etc.
P price chart look at the chart basics and see what it has done in the last week, month and 3 months in regards to large moves...
E earnings short shouldn't be in earnings month
S skew btwn IV in months.

In the world of an iron condor ut is landing in the middle of the shorts you are making a bold straight forward front month bet on price. The world of Double Calendars is making the same front month bet but with a cushion beyond the shorts. You spend more money up front and risk more with dbl cal. than condors. but b/c you pay more you have the potential to make more, 1 to 1.5 times of what your paying on the trade.

FEB 08 DIA Butterfly/Vertical postion (+14%)

2008-01-02T12:58:00.000-08:00

1/02/08
Placed a FEB 08 DIA butterfly and verticle postion:
bot +2 butterfly DIA FEB08 124/130/136 CALL @1.34 debit (mark 130.38)
sold -1 verticle DIA FEB08 135/138 CALL @ .94 credit

verticle placed to take a more bearish bias on DIA and fund some of the income butterfly postion, my adjustment point is 135 on the upside and downside is fairly open for profit until close till FEB expiration when the max loss is $174. Need to guard against a up move, there are alot of resistance points, first at 133 then 135 and each point again till 140. Fortunately price doesnt gap up like it gaps down, so it is typically more safe to be exposed to more risk on the upside then the downside. Plan to take off CALL verticle once it hits .10/.15 cents and taking off half of the butterfly postion once it hits 100% and re-evaluating thereafter.

1/15/08
btc +1 vertical DIA FEB 135/138 CALL @.20 (mark 125.81)
originally sold @.94
net credit = 0.74
Holding the 124/130/136 butterfly for .60 debit
this is giving my portfolio some positive deltas.

1/23/08
stc -1 butterfly DIA FEB 124/130/136 CALL @.91 (mark 118.50)
originall bot @1.34
loss for (1) contract = -.43

2/05/08
stc -1 butterfly DIA @1.70
originally bot @1.34
net credit = .36

Total position (1vertical and 2butterflys yeilds a +0.67 credit or 14% return on 4.74 margin

FEB 08 RUT CONDOR (-6% loss on margin)

2008-01-02T12:31:00.000-08:00

1/2/08
Placed a FEB 08 Rut condor with 43 days till expiration:
sold -2 vertical RUT FEB 08 840/850 CALL @1.02 (mark 755.17)
sold -2 vertical RUT FEB 08 640/630 PUT @ .65
total credit for condor: 1.67
short call @ 840 with a .10 delta
short put @ 640 with a .07-08 delta
trouble/adjustment points at the .20 delta points: 690 - 820

1/07/08
btc +2 vertical RUT FEB 08 840/850 @.20 (mark 719.86)
initial credit received 1.02
realized credit from CALL side = .82
still holding 640/630 PUT side @ .65
placed a stop order at 2.00 to guard against loosing more than 100$ if RUT continues to slide...currently trading at .85

1/09/08
btc +2 vertical RUT FEB 08 640/630 PUT @1.95
originally sold @ .65
debit loss - 1.30
credit gain + .82
total loss = .48 for trade
-6% loss
10 day chart attached showing the accelerated 8% down gap of the RUT I was in this trade for 7 days and was able to mitigate my risk to only -5% down (about a $100 for the whole position) My adjustment point was 690 and I had my stop order in that got hit at the lows for the day. Market did bounce after but I am not upset on this trade as this move was extraordinary.

JAN Condor review (all + w/ avg+9%)

2007-12-28T14:43:00.000-08:00

placed 6 total condors for JAN expiration and have taken them all off before we even reached into JAN. closed all six for positive returns from 5% to 14% return on margin per trade. This is an average return of +9%

FEB 08 SPY Condor (-17%loss)

2007-12-28T14:33:00.001-08:00

12/28/07
Placed a high prob condor in the SPY with 49 days till expiration:
sold -3 verticle SPY FEB08 133/129 @ .33 (mark 147.46)
sold -3 verticle SPY FEB08 160/164 @ .26
total credit @ .59 x 300 = 177
total margin @3.41 x 300 = 1023

1/04/08
btc +3 verticle SPY FEB08 160/164 @ .04 (mark 141.96)
origianlly sold for .26
total 160/164 CALL credit realized = .22

sold -3 CALL verticle 151/155 @.67
also holding the -3 PUT verticle 133/129 @.33
new postion with a 1.00 credit and 3.00 margin requirement
Will not loose more than I can make on this trade = $300
placed a GTC stop order in for the PUT side, figure this out by taking the potential credit and realized credit taken in from the trade= 1.22credit +amount willing to loose .50 = 1.72 stop order

1/18/08
btc +3 vertical PUT 133/129 @1.72 (mark 131.51)
originally sold for 0.26
net loss debit = 1.46 for PUT
placed a GTC limit order for the 151/155 CALL vertical @0.05
assuming I get filled @.05 for the remaining CALL vertical, I will take a total loss of .62 per contract or $186 or 22% loss on margin

1/22/08
btc +3 vertical CALL 151/155 @.03
originally sold @ .67
total credit = .64
.57 total loss for postion or $171 (-17% loss)

AAPL JAN trade (closed $92 loss)

2007-12-24T10:42:00.000-08:00

12/24/07
Christmas Eve trade on AAPL
sold (1) 195/240 CALL verticle for 11.10 credit
bot (2) 200/220 CALL verticle for 6.37 debit
total debit for trade is 1.64

Plan for trade is to close for 100% approx $200 profit and not loose more than $150
Observe the screen shot to see the death trough at 200 and bad area around +15%
need to keep an eye on these areas and be ready to close/adjust trade to avoid these risky areas.
The 200 point will not start to show unfavorable for till close to JAN expiration.

1/04/08
Plan did not go according to plan and is showing weakness, even if they blow minds at MacWorld and their earnings my theta decay around 200 is painful and I don't want to rely on a 15-20% move to make money. therefore, closed the trade for a small loss of $92.

JAN/FEB SPY Calendar (-73% loss)

2007-12-21T15:44:00.000-08:00

12/17/07

Bot (2) jan/feb 144 put calendars in the spy for 1.33 debit.

Trade was put on when my portfolio had strong negative vega and not enough profit/protection to the downside. Calendars are a good way to hedge your vega and downside risk.

Primary exit is 50% ror, I will hold as a downside hedge and will not close until over 50% loss. I will take off 1 contract if closes above 150.

1/09/08
Adjusted this trade not on the upside but on the downside believe it or not. SPY has fallen.....to the downside of the b/e and I am getting close to JAN expiry and losses will accumulate quick at this point if drop continues. Took off half of the postion so not to have too much downside risk. I am also considering that a few of my condors are getting a little stressed to the downside.
sold -1 JAN/FEB 144 PUT calendar for 1.27
originally bought for 1.33
.06 loss debit
still holding 1 contract of this trade and fortunately SPY rallied after I took this one off. If we can have a good up day tomorrow I may be able to pull of a =20% or so out of this trade.

1/18/08
No updays in sight straight down market, just gruesome.
closed up the final contract of this calendar for loss on expiration Friday.
STC JAN/FEB SPY calendar @0.42
originally bought for 1.33
net loss = 0.91 + loss from other 1 contract of .06
Total net loss on postion = 0.97 or approx $200
73% loss

IWM Butterfly (DEC) (+86%)

2007-12-19T16:02:00.000-08:00

12/4/07
Initiated a butterfly DEC IWM
75/77/79 (2/4/2) ratio (2) contracts
debit .38

12/19/07
sold (1) of the butterflys for .63 credit
Planning on closing the remaining butterfly tomorrow if the market is up. Will hold till expiration if needed, not worried about the .38 debit of risk...
(screenshot shows remaining postion)

12/20/07
sold (1) remaining butterfly for .80 credit
.71 average of both butterfly sales, purchased for .38 = .33 profit or 86% (ror)

DIA 30 day condor JAN (+7%)

2007-12-18T08:47:00.000-08:00

12/18/07
DIA Condor
121/124 PUT @.40
138/141 CAll @.55
(3 contracts each)
.95 total credit
205 margin per postion or 615

12/21/07
BTC 121-124 PUT @.17
BTC 138/141 CALL @.63
(3contracts)
.80 debit
.15 total credit recieved on Condor
7% return on margin.

(NOTE) This trade was accidentially closed. I meant to shave off some of the postion but accidentially sold all 3. I decided to just take off the whole postion as it was entered as a condor I didn't want a one sided trade. At least it didn't loose me money to take off accidentially early!!!!

JAN RUT condor +31% (market neutral trade recommendation)

2007-12-18T08:41:00.000-08:00

RUT (Russell 2000 Index) Iron Condor initiated on 18 Dec 2007

Trade Summary

RUT at 742.85 (+3.82)
29 days to Jan08 expiration.

Sell RUT Jan08 810 Call
Buy RUT Jan08 820 Call
Sell RUT Jan08 680 Put
Buy RUT Jan08 670 Put
(1 contract condor)

For a net price of $2.55 Credit

Trade Analysis

Be patient with this trade but try to have it filled before market closes today. We've been queuing for this trade for the whole morning and finally managed to get it filled at $2.40. Its current mid-price is $2.45. This price will be unattainable in a few days' time. With only 29 days left to expiration, this iron condor is priced very nicely. This is the second RUT iron condor that we put up for Jan08. I gave up trying the SPX after 2 days and personally I prefer the RUT better.

Looking at the P&L chart below, we can see that our breakeven points are at 812.4 on the upside and 677.6 on the downside. This position has a probability of about 71.56% to be successful. This is a higher probability than the 1 standard deviation that we always look for. This iron condor has a profitable range of about 134 RUT points. At current price, RUT is currently about 67 points away from our short call and about 62 points away from our short put.
The technical aspect of the RUT is somewhat bearish. From what we can see from the 6-month daily chart below, there is only one viable support at the 736 level.This support was tested twice in the past 6 months. Once on 16 Aug, when RUT touched 736 and bounced off. The second time was on 26 Nov when RUT closed at 735 and then bounced off the next day. It looks certain that the 736 level is going to be tested again very soon. Will RUT hit 735 and then bounce off again like it had done for the past 2 times? Or will RUT break the support and go down lower? Today's close will be a good gauge of what is to come.
This iron condor has a risk/reward ratio (R3) of about 3.17, which makes it a 'high R3' iron condor. What this means is we have to be watchful over this position and be prepared to make adjustments when the RUT is trading at about 3% from our short options. In this case, we shall watch out when RUT is trading at 30 points away from our short options. We have to be prepared to make adjustments or take losses when RUT is trading at more than 780 or less than 710.

Total margin required: $745

12/24
BTC the 680/670 PUT verticle for .13
originally sold for 1.45
total realized credit: 1.32

810/820 CALL verticle: 1.10 credit
currently trading around 3.90-4 dollars
1.32 + 1.10 = 2.42 currently loosing approx. 1.50 on this condor.
placed a stop order in a 4.55 (will limit my total loss to approx $200 for the codor)

1/04/08
btc the 810/820 CALL verticle for .10
originally sold for 1.10
total realized credit: 1.00
condor total realized credit = 2.32
7.45 margin 2.32 credit = 31% return

X1 qqqq Trade JAN (closed +1.50 credits)

2007-12-17T11:55:00.000-08:00

12/6 STO (2) JAN 46/49 PUT credit spread @.46
12/17 BTC (1) JAN 46/49 PUT credit spread @.67
equals a .21 debit

STO (1) JAN 52/56 CALL credit spread @.84
STO (1) JAN 53/56 CALL credit spread @.39
STO (1) JAN 54/58 CALL credit spread @.41

Total credit potential (with adjustment loss) = 1.89
Screen shot analysis is graph of JAN inventories only (excluding the main postion of long 100 qqqq stock and long JAN10 60 PUT)

I was able to capture 1.51 of the 2.20 potential credit for the DEC inventories. 2.57 is the extrinsic value/risk for the core X1 trade (long stock with LEAP long put) 2.57 - 1.51 = 1.06 extrinsic value risk remaining. JAN inventories carry potential of 2.36 credit. My goal is to eliminate the extrinsic value this month. Then trade very conservative thereafter, therefore holding a risk free long position in the QQQQ's.

12/21
We got a Santa Rally in the markets today and I am postioned to experience some pain around the 53 strike. I will take off my 52/56 verticle if Q's close above 53. This should be an approx. $100 loss point. My plan is to not loose more than I can take in for any given month. Took in 1.51 credit last month.

12/26/07
BTC (1) JAN 49/46 PUT verticle for .13
originally sold for .46
total credit .33
debit from (1) other 49/46 PUT verticle closed 12/17 for .21 debit
equals a credit of .12 for JAN so far.NOW holding only CALL credit spreads, negative deltas...still mentally keeping 53 as an adjustment point.

1/03/08
BOT +1 QQQQ JAN 08 54 CALL @.08 to close
did not sell the long call portion of the verticle as it is worthless, will keep on for a lottery ticket play
initial credit for 54/58 verticle was .41
total credit closed 54/58 CALL verticle for: .33
still holding:
(1) JAN 52/56 CALL credit spread @.84
(1) JAN 53/56 CALL credit spread @.39

Extrinsic Value to cover for married put postion is 2.57
DEC inventories took in a credit of 1.51
leaving .94 of extrinsic value/risk left to cover.
So far with JAN inventories have realized a .45 credit leaving only .49 left to gain this month for a risk free married put postion in the QQQQ's.

1/04/08
btc (1) 53 CALL @.11
credit realized for 53/56 CALL is .28
still holding:
(1) JAN 52/56 CALL @.41

1/07/08
btc (1) 52 CALL @.07
credit realized for 52/56 CALL is .77

TOTAL JAN CREDITS = 1.50
Potential credits for JAN were 2.56

TOTAL credit from DEC & JAN credits is 3.00 therefore relieving all extrinsic value and risk from the position. Next goal is to pay down the cost of the JAN10 long put total debit is 11.81 (subtract 3.00 credits = 8.81 left)
FEB inventories were placed today, will include on a new, seperate post dated 1/07/08

RUT jan (40 day) Condor (+5%)

2007-12-10T09:40:00.000-08:00

12/10/07
sold -2 verticle RUT Jan 08 880/890 CAll @.54 (mark 791.76)
sold -2 verticle RUT Jan 08 700/690 PUT @.90
adjustment points 740 & 840 (approx 20 delta strikes)
both of the shorts were placed at approx 10 deltas.

12/14/07
btc (2) veritical RUT JAN 08 880/890 CALL @.08 (mark 753.72)
original credit: .54
Total credit for CALL side: .46

12/18/07
btc (1) verticle RUT Jan 08 700/690 PUT @2.05 (mark 744.86)
original credit: .90
debit for PUT 1.15

Still holding 1 contract of 700/690 PUT

Placed a stop order in for this PUT verticle at 2.65, don't want to loose more than $200 on this condor.

12/24/07
btc the remaining put verticle 700/690 PUT for .20
original credit: .90
profit .70

Condor P/L
.46 (2)credit
1.15 (1)debit
.70 (1 credit
.47 total credit from trade
8.56 margin / .47 credit = 5% rom

5-6k live account guidelines

2007-12-07T15:30:00.000-08:00

5-6 months of trading at this level
You should trade 4-6 trades 1-3 contracts per month
use indexs and some stocks
commisions 1-1.50 per contract
make sure you have some up/down markets during this period to prove you are ready to increase your size.
Always remember to SLOW DOWN! take your time...
Stay small, work on the craft, after 8-9 months if your still excited and in the game, NOW you are something and have the potential to make a living at this.

Calendars (Dan Sheridan notes)

2007-12-07T12:51:00.000-08:00

adjust guerilla calendars (ex. Jan/Feb calendar) by taking off the postion when it hits the BE point if 20+ days till expiry. If less than 20 days monitor closely and be ready to close it. Refer to earlier post in Nov defining the parameters of a guerilla calendar.

With campaign calendars, (ex. Jan/Apr calendar, extra months btwn the long and the short) you can adjust to a double calendar if you feel the market is still in a stable mode or a diagonal spread if you feel like taking a directional risk.

Calendars are volatility plays, you want the vols to increase after you place it, if price runs up on you to your upside BE point putting on a double calendar will be a cheap adjustment as vols come down as price rallies.

X1 qqqq Trade (DEC +1.51 credit)

2007-12-06T12:09:00.000-08:00

12/5/07
Took off the Put Credit Spreads,
DEC Inventory:
47 strike (1) short put 0.53 Credit (initiated 11-20)
46 strike (1) short put 0.48 Credit (initiated 11-27)
43 strike (2) long puts 0.15 debit (initiated 11-27)

12-5 take off inventory for 0.57 credit or $57 dollar profit.
BTC (1)47 for .11
BTC (1)46 for .07
STC (2)43 for .02

Risk/Return was not attractive at this point, so I puked the positions, locking in the profits.

Still holding the Call credit spread inventory: watching closely to see if price will close above 52 (my short call strike price and adjustment point)

12/6/07
QQQQ have rallied again today, triggering my adjustment point, what a kick in the gut!
Added the following inventory for JAN08
sold -2 verticle JAN08 49/46 put @.46 credit (mark 52.12)
sold -1 verticle JAN08 55/58 call @.54 credit (mark 52.15)

keeping the 52/55 2:1 ratio call spread on until it hits my break even point of 53.50 then will take off the risk.
I am waiting till after Dec. 11 (fed intrest rate decision) to make further additions to my JAN income spreads.

12/14/07
QQQQ have pulled back, deflating premium out of my DEC 52 short calls.
Was holding 52/55 2:1 ratio call spread.
Shed the extra short 52 contract for debit of .40 (mark 51.31)
originally sold for .93
yeilding a .53 total credit
(1.10 is the running total credit for the DEC inventories)
Still holding the DEC 52/55 Call spread at .57 credit
current quote: .24
Plan is to close on Monday for less than .20
12/14/07
added a JAN(1) 54/56 Call credit spread for .38 credit

12/17/07
Now closed out of all DEC inventories: (according to plan)
BTC DEC 52/55 Call @.16
initially sold @.57
total credit .41

TOTAL DEC CREDITS = 1.51

X1 Trade (concept from Jeff Mcalister

2007-12-05T11:43:00.000-08:00

I am new to this group today, and have a few thoughts on the X1 as
well as a paper trade for the strategy:
A few recomendations to better soften the edges of this trade:
1. trade an index ETF like QQQQ, IWM, DIA, SPY
They don't have the extreme volatility or gaps like some individual
stocks, b/c they are diversified vehicles
They have extremely rich liquidity trading 50-200+ million shares a
day = (tight bid/ask)
They trade in $1 strikes
No earnings to worry about (enables you to short options in every
month)
Decent extrinsic values OTM to sell

2. instead of the naked strangle or "envelope" place twice as many
contracts of an iron condor to avoid the naked risk. placing twice
as many contracts of Iron Condors as the underlying should bring in
close to the same credit as the short strangle without the naked risk.

*Another positive thing to note, appears when you disect the trade:
Long stock with Long put, synthetically you are
holding a Long call or in this instance a LEAP long
call. This position or synthetic position carries
high positive volatility/vega risk, (vega decreases LEAP value
DECREASES... )
When you add a short strangle or iron condor to the
trade you will be carrying a short vega risk. When you
combine the two positions you have a more diversified
vega risk; slightly positive vega overall, and as time
passes the positive vega of the LEAP will slowly diminish
bringing the vega risk closer to neutral.

Trade example with adjustment:
I placed a paper trade on the QQQQ with a slightly diferent
application of X1 trade:
entered trade 11/20/07
buy 100 shares QQQQ at: 50.55 debit
buy 1 Jan10 Leap 60 put at: 11.87 debit (2.57 extrinsic value/risk of married put postion)
sold 1 Dec 47 put for: 0.53 credit
sold 1 Dec 52 call for: 0.82 credit
sold 1 Dec 52/55 bear call for: 0.67 credit
basic Jeff Mcalister application with one extra bear call thrown in.
(at this point carrying naked risk up/down)

11/27 adjusted trade to protect naked downside risk:
sold 1 Dec 46 put for 0.48 credit
buy 2 Dec 43 puts for 0.15 debit (extra contract to cover my short 47
put; leaving me with a 2 contract bull put with 46&47 as the shorts
and 43 as the long.)
(after adjustment carrying naked risk to the upside but still very
tolerable, as of today, if QQQQ rally 10% and break all time highs,
still only down $250...
Also note that if my Dec options/shorts expire worthless I will have
brought in 2.20 credit. This ellimantes all but 0.37 extrinsic value
of the LEAP long put. Leaving me with virtually a risk free position
on the QQQQ after one month.

Lower Prob Condor Plan

2007-12-03T11:40:00.000-08:00

30 days till expiration put on a iron condor with a 60% prob of success. Then plan your adjustments at approx 12% loss on margin, you will take off 40% of the loosing side. For example on a $4 credit condor with $6 margin requirment and a 5 lot trade you will take off 40% (2 contracts) when the trade moves .72 against you moved from 4credit to 4.72 credit, then if price moves to the short strike take off another 40% and if it moves $5 ITM past your short strike take off the rest.
Profits, take off when your up 10-15% within 7-18 days.

When picking an index etf to place trades, observe how the indexes are fairing for the year. Look for skews between the indexs, look at which ones are trending above or below and watch out for those to come to parity with the rest.

High Prob condor expirament

2007-12-03T10:53:00.001-08:00

Last four entries are a high prob longer range iron condor. 80% plus probabilities going 45-55 days out. picking short strikes at approx. 7-10 deltas and setting adjustments at the 20 delta point or when loss equates to 1 or 1.5 of cash flow. Plan to take half of the position off when points are triggered. If you take off all of the loosing position, wait 24 hours then place twice the number of contracts 1 more standard deviation from price and challenge the market to do it again!!
Profit plan: looking to take about 50-70% of total cash flow on these trades. Get out before expiration week.

I will post when I make adjustments or take profits.

RUT JAN08 (50day) Condor (+14%)

2007-12-03T10:27:00.000-08:00

12/3/07
Put placed at a 7 delta or 640 price (640/630 PUT @.62 credit)
adjust at 20 delta or 700 price
call placed at an 11 delta 860 price (860/870 CALL @.97 credit)
adjust at 20 delta or 830 price
84% probability trade
2 contract condor
total credit 1.59

12/11/07
bot +2 verticle RUT Jan08 640/630 PUT @.20 (mark 786.83)
initial sell of this 640/630 PUT verticle at .62
total credit from PUT .42

Still holding the Jan08 860/870 CALL @.97

12/17/07
bot +2 vertical RUT JAN 08 860/870 CALL @.20 (mark 746.52)
initial sell @.97
Total credit from CALL .77

Condor total credit 1.19 on 8.41 initial risk (14% ROR)
$238 for 2 contract trade!

IWM jan Condor placed 12/3 (+9%)

2007-12-03T07:44:00.000-08:00

12/3/07
Initiated an IWM condor
65/60 PUT @.34 credit
85/90 CALL @ .33 credit
2 contracts each
20 delta strikes: 69 and 83
placed short deltas at 10 for puts and 13 for calls
86% prob

12/18/07
btc (2) 85 short calls @.07 the 90 long call worthless at this point, no reason to sell and pay commisions.
originally sold verticle @.33 credit
Total credit for CALL .26 credit
btc (1) 65/60 PUT verticle @.23
orinially sold verticle @.34
Total credit for PUT .11

Still holding (1) contract of the 65/60 PUT verticle
If we rally again tomorrow will try to close it for .10
Will not let this condor turn into a looser will manage this remaining PUT verticle closely to not let the risk ruin my hard earned gains.

12/20/07 (closed)
my limit order was filled for the (1) 65/60 PUT verticle @.10 debit
originally sold for .34 credit
total credit .24

Total credit for (2) CALL .26
Total credit for (2) PUT .17 (average of .24 and .11)
Condor credit .43 for 2 contracts = $86
credit .43 / margin 4.33= 9% return on margin

SPY JAN08 Condor (+14%)

2007-12-03T07:31:00.000-08:00

12/3/07
Placed condor at 134 (15 delta) and 160 (11 delta)
adjust at 20 delta strikes to adjust at: 157 and 138
82% prob
134/129 PUT for .55 (2 contracts)
160/165 CALL for .35 (2 contracts)

12/11/07
Filled on my limit order for the put side
134/129 PUT @.14 (mark 151.06)
initially sold for .55
total credit from PUT side .41

12/14/07
Filled on my limit order for the Call side
160/165 CALL @.15
initially sold for .35
total credi from the CALL side .20

*Condor closed for .61 credit on 4.10 of risk = 14% ROR in 11 days
for two contracts total return is $122 minus comissions $24 (1.50 per contract)
$98 take home

DIA Jan 08 Condor (+7%)

2007-12-03T07:21:00.000-08:00

12/3/07
placed short options at approx. 7 deltas 117 and 144, per dan sheriden's guidlines. Then observed the 20 delta strikes at: 125 puts and 141 on the calls. At these points will need to take off half of the trade.
87.5% prob

12/10/07
Had placed a stop limit GTC order in on DIA and was filled on the PUT 117/113 side this morninig for .08 debit
Initialy sold it for .24 credit
total credit from PUT side .16

Still holding the CALL side 144/148 for .26 credit
Have a Stop .60 Limit .15 GTC order in.
current quote at .49
down .23
credit from put side .16
overall position at negative .7

12/11/07
bot +2 Call verticle 144/148 @.15 (mark 136.02)
initially sold it for .26
total credit from CALL side .11

total credit from condor .27 on 3.73 of risk = 7% ROR (8 days in the trade)

Abu Dhabi

2007-11-27T13:37:00.000-08:00

11/27 the markets are getting swatted by the credit issues, bank wright downs and subprime sludge have a hold on the markets making for volatile trading and much uncertainty.
This morning we get news out of no where, Abu Dhabi, think Garfield! They are injecting a few billion into Citi bank, a troubled super banker. This established a little faith in US markets and investments and brought the bulls into the game.

The Point:
When you feel like you figured out the markets and want to pick a direction, something from Abu Dhabi may come out of no where and knock you upside the head.

Application:
Keep yourself hedged to the upside and downside, don't use naked options, manage your risk accordingly, plan your trade, trade your plan. period.

condor check list

2007-11-25T20:06:00.000-08:00

1. Has the short delta hit around 22-25 or put 20-22? Take off bad spread. Wait 24 hours then roll both spreads up on upside or down on downside
2. Never add new short calls over 10 deltas on calls or puts!
3. Have credit spreads shrunk to $0.15 - .20? Take off.
4. Have profits hit 50-60% of cash flow? If yes, "tighten noose" - that is, change your adjustment points from breakeven to proit-protect, ignore delta
5. Has loss hit one or one and a half times cash flow? That is the most you should let the condor lose. Take it off, come back to play another day.

Heavy Income Business (Condors)

2007-11-21T11:48:00.001-08:00

Must have a plan when you trade!
Keep the probabilities on your side,
therefore run your business heavy on income trades.
Debit, or speculative naked options have the probabilities stacked against you and margins can kill you!
Back to your plan:
In times of peace make your adjustment plan, so when war is upon you, you will execute as planned. (period)
With Iron Condors, need to be consistent with your execution.
ex. go 50-55 days out will be able to create a spread that is 90% probability low yield, low risk mngmnt.
or ex. every 30-40 days with 70-80% probability, better yield but more risk mngmnt.
RISK MANAGEMENT RISK MANAGEMENT RISK MANAGEMENT!!!!!!!
With condors if you loose one of these you will be hurt bad!
This is a craft, you need to work at the risk management!
When price goes against you, step 1 buy in the bad side, then wait 24 hours, to let emotions settle down. Then step 2 go another standard deviation out and sell 50% more contracts there. Then you challenge the market to do it again. If it does throw up the white flag.
Will close b/f expiry b/c risk/reward is not attractive the closer to expiration you go. You must have a solid risk management to control your losses.
Look to diversify your price and volatility by having 5-7 income trades in your portfolio using calendars, condors, double diagonals.
Remeber to look at the skews of the ATM calls in front month and next month options. If there is a positive skew the market is pricing some event or move in, investigate.
5 point strikes minimum .35 credit each side
10 point stikes minimum .60 credit each side
You need to blend your trading with you job, put in automatic stops, contingency order if underlying hits your adjustment point.

X1 Trade by Jeff McAlister (STS)

2007-11-20T11:13:00.000-08:00

Buy long stock add a long put deep ITM with furthest LEAP series available. LP to have less than 30% extrinsic (time) premium. Then add a short strangle front month to pay down the LP. To establish the risk of long stock with long put you must take the time premium minus the total credit from the short strangle. You will incur risk with the short strangle but only on the down side with the naked short put, the short call can be covered by the stock. Look to place shorts at key support & resistance levels.

Adjusting: roll the entire strangle (envelope) when adjusting to lock in profits and minimize losses.
In case of a gap up or down will need to work at mitigating the losses over time, should still be able to come out ahead by the end of the LEAP LP.
Can also add verticles to the trade to maximize current trend, or replace the short strangle with a iron condor etc.
Doing this trade with an ETF makes sense, since the risk to zero is irrelavent. Also as a diversified product, gaps up/down are less common and not so severe when they happen. You may also short strangles/verticles against underlying each and every month, not worrying about earnings or announcements with an individual stock.
The picture above is a snapshot of the analyzer for a QQQQ envelope trade with additional bear call at the 52 strike.

Income Strategies Gorilla Calendars (Dan Sheridan)

2007-11-19T16:52:00.000-08:00

Favored Income Strategies:
Calendars
Double Calendars
Condors
Double Diagonals
Butterflies

Guidelines:
Vols less than 30
Predictable industry (no bio tech/drugs)
Look at the price chart (see if moved over 10% last month and why)
Don't place in earnings month or fixed announcements

Gorilla Calendars:
What are they: sell one month and buy next month out
Income spread b/c looking for near term short option to decay faster than back month's long.
How to find: IV is btwn 14-28. Looking to pay as little as possible
Most desired time to put on: 25-35 days from expiration
Execution is crucial! don't accept more than .05 off the mid, be patient for fills.
How much to pay: .10-.50, which is great. But nothing wrong with paying up to .90
Remember the Gorilla Calendar idea is to set up a one-month calendar take a small profit and run for the hills.
Time Premium: you want time premium of short option more than 50% of long option
Minimum to receive from short option: at least 0.30, which will usually be all time premium. Just remember the time premiums short should be at least 50% of time premium of long. That means if you sell an option for .30 you won't pay more than .60 cents.
When to take off profits: up 40% vs what you paid or debit. If you pay .50 take off for .70 typically in 2-4 weeks.
IV to be in the mid to low range in last one to one/half years. If at the high end make sure to stress test the calendar in the analyzer
Industry: no oils, bio techs, or other vol industries
Price: when trying to detect too much speed in the underlying vehicle:
?determine if the underlying moved more than 5% last week in one direction?
?last month was there more than a 10% move in one direction?
?in the last three month, was there more than a 15% move in one direction?
?in the last nine month, was there more than a 25-30% move in one direction?
**If you answered yes to any of these four questions consider waiting...

Look out for earnings months, no trade.
Skews: There should be no positive skew over four to five points b/f you put on a position. If one develops after putting on the position take it off.

Risk Management:
If you pay less than .40 for the gorilla calendar, leave it alone till expiration day unless you take off for 40% profit or more any time b/f that. On expiration day, take off the complete spread on both sides. Be careful if short option is ITM and time premium hits .05; you may get exercised on the short call. If you pay greater than .40 for the gorilla calendar take off when time premium of short options hits .05 unless you take off for 40% or more any time b/f that.

LONG TERM Calendars (Portfolio Plan cont.)

2007-11-16T15:18:00.000-08:00

Long Term part of the Portfolio
Long Term Calendar:
you can use a well diversified index or ETF with vols below 25. This stuff will compete with the long term retirement portfolio. Mildly bullish play
Example: MNX calendar
every 30 days put on a OTM calendar (3% OTM) (mildly bullish calendar 3% OTM every 30days) Don't trade anything w/out a plan, prepare for a battle in a time of peace. Plan out your adjustment prices, when to take out profits (up 10%) when loosing when down 5% take off half when down 10% take it all off. This is a craft, work at it.

Summary:
When to put on: 30 days to expiration
What:Well diversified indexs or ETFs
Plan: down 5% take off half down 10% take off the rest up 10% take off all.

Porfolio Plan by Dan Sheridan

2007-11-15T14:48:00.000-08:00

Look at the Whole Portfolio , do not focus on individual trades get a broad outlook. Divide your portfolio into Long Term, Income Trades, and Speculative (see picture graph).
Its not how much you make its your YIELD! What % did you yield on invested capital.
Long Term positions have Long bullish positions to take advantage of the overall bullish movement of the markets

Income trades take advantage of the grinding ranging behaviour of the markets. This is similar to insurance companies that take in income when nothing is happening.

Earnings plays: look at the last earnings and see what movement occured: http://optionslam.com/ (good website to track historical earnings movement) Also consider the volatilities!
Can play earnings with a double calendar: look at the straddle and the % move needed to break even, or the movement the street is pricing in. Then set your calendar break evens to take advantage of these points. The skew in volatilies should work in your favor as long as the stock doesn't explode up/down. Now, instead of having a straddle where you need the stock to move big to make money, you have a nice realistic range where you make money. Good example is from Goog earnings play (see pictures above) This trade would go into the speculative part of your portfolio.

Calendars & Condor income spreads: these last few months have seen volatilities greater than what we have seen in over 15 years! This is a code red for income traders, extreme vols and difficult for credit spreads, calendars etc.! If you have negative vega positions in your portfolio (meaning if vols go up you get hurt) So, for individual postions, don't put on a neg vega trade when vols are fluctuating huge, but if you have too much positive vega it makes sense to add a neg. vega trade to balance the portfolio.
To place a calendar trade first look at the IV and make sure the vols are tame or average w/out large skews btwn the front and back month option. If there is a large skew the market is pricing a big move in one of the month.

Dan Sheriden (TOS) Condors

2007-11-12T13:58:00.000-08:00

Need to divide your portfolio into catagories:
~short term 1or2 month income
~long term
~spec trades

throw in 4 things into monthly (1or2 month) theta income trade recipe:
*Credit spreads
*Calendar
*Double Diaganol
*Condor
Combining credit spreads with calendars, diversifies the strategies and the greeks. For example the positive vega calendar and negative vega verticle. This maximizes theta and neutralizes vega impact. Diversify price and volatility risk.

2 types of condors: High Probability (80%+) vs. Low Probability condor
Look out for volatility.
$$$High Prob condor(RUT example)
Place these trades 35-50 days (4-7 weeks) b/f expiration
Selling high volatility is not always the correct answer. It is only correct when you think volatility is going down. HIgh volatility is not a license to sell. The nature of volatility: 17-24 is a mid vol level, great trading vol level.
30,35-40 vol range is scary, dangerous. You will get compensated for selling high vols but it is risky.
(note) Call spreads trade 40% richer than equal distant put spreads, so it is optimal to place a condor into a rally opposed to a sell off. When a rally ensues you may want to consider placing a 2 strike wide call spread by 1 strike wide put spread, this will take in considerably more premium.

$Risk Management / Dont ever trade without a plan. Look at the maximum risk $840 and return $160 (80% probability condor). If you loose once in a year you will be a big loser with a max risk at $840. Put a plan in place when entering any trade, just like running a business. Don't loose more than 1.5 - 2x your max reward, on this trade get out of this trade at approx. $300 loss.
Also how will you handle profits, when will you take profits???
tighten the noose when you are up approx 60-70% take some off or get out of the trade, book profits.
*Adusting this trade: if you sell this at approx 7/10 delta, when the delta of the short put is at -20 you are starting to feel some pain depending on the volatility, take off some of the puts and roll down. When placing this trade look and see what strikes put/call have .20 delta, then set your plan to adjust the trade when that point is hit. Can also midigate risk by overlaying a put/call debit spread to protect the side you are concerned about. For example on the put side 50/47 you may want to overlay a 51/48 to reduce risk to the down side. This would be on a ratio basis, you would have 5 contracts of the condor and 1or2 of the debit spread.
$$$Low Prob Condor (60-63% prob risk reward 1:1.5 or 2)
will trade this differently, put it on with 30 days to expiry get off in 14-17 days, making 10-15% reward. Now instead of selling a 7 delta strikes (high prob), sell 20 delta strike options, this will equate to a 60% prob of success) This is a different animal, you are only in this trade for 7-17 days, once you have 10%+ you start tightening the noose, taking profits. Max loss 15-16%. You are taking in more theta, faster, in this trade vs. the high prob condor discussed here.
Adjustment: (specific criteria with 5 contracts on) Max risk 15% don't loose more than this. Taking profits at 12-15% of margin, protect profits.
with 5 contracts on, when down 11-12% of the margin/risk, take off 40% or 2 of the loosing side. When it gets to the short strike take off another 40% or another 2, then the other 1 when your down more. this will protect you when the market runs then backs off. were trying to stay in the game, don't want to get shaken out of the game. At the end of the year, look at your 12 trades over a year, how much did you make in a good month vs how much you lost in a bad month. DONT LET YOUR BAD MONTH OUTWEIGH YOUR BEST MONTH.
****notes When you look at how the indices have performed this year, consider the inversions btwn the indices and skew your postions. For example: the nasdaq was trading well above the other indices espicially the Russell. so to skew condors accordingly makes sense. All Indices will gravitate towards parity, one still may outperform but the gravity will have an impact over the term.
***find a strategy and approach that works for you, observe the criteria used and method you employed to achieve sucess, then master it. Don't get yourself going in a million directions, focus on the strategy and underlying that works for you.
**Look at this business like insurance companies, you're in for the long run.
*January expiration month is generally the busiest month, a ton of open interest (Jan LEAPs still open, back from holidays) January is a great trading month b/c of liquidity.

"Early" New Years Trading Resolution Plan

2007-11-12T13:09:00.000-08:00

http://www.optionpundit.net/market-psychology/trading-plan-resolution

Option Pundit is my hero, I wish one day to achieve his market prowess and deliver his monthly returns. The above link is a meaty new years resolution to glean from.

*Notes from TOS chat for 2007 New Years Trading Resolutions*
On an overall risk management outlook, do not risk more than 25% of your total capital in overall maximum risk. For example if every trade position you have on goes completly against you and you must assume max risk, do not let this amount be greater than 25%. You don't want to get blown out of the game.

JMD's Quest

2007-11-12T13:01:00.001-08:00

Investing my time and passions into an education has taken me on a journey to find a consistent trading plan. Finance and investing offer a world of information and complexity beyond any one person's ability to digest. My goal is to distill this information into a trading vehicle that will navigate through the stresses and volatility of the markets.
I will glean from my experiences in specific trades and share all their little delicacies. This will be my exposition.

Sell Crap & Manage Risk

2007-11-12T12:58:00.000-08:00

Sell Crap and Manage Risk!

3 Criteria to follow when selling options (crap):

1. Massive liquidity / Tight markets / High open interest
Be the smallest fish in the biggest pond.
2. Sell verticle/time spreads 4-10 weeks before expiration. The closer to expiration you get, your theta decays faster but gama will outweigh. Gama will explode delta all over you! If you let your options expire worthless you are stupid.
3. Place verticles with 50-70% probability of success, if experienced up to 85%. Figure your probability of success by dividing the risk by the spread. For example an 80/75 put verticle with 1.80 credit and 3.20 risk would have a 64% probability of success (3.20/5.00)

*note
spread your inventory out over several strikes, don't over allocate yourself.

These notes were taken from a Think or Swim educational conference in Irvine by a professional market maker / trader.

Intro

2007-11-12T12:48:00.001-08:00

Contrary to popular belief, Options’ trading is not easy. As Dan Sheriden says, it’s a craft and it takes time. One needs to learn the craft, readjust and master it before you start sailing in the sea.