Hi James, thanks for your suggestions - please don't get me wrong but here are my views:
>> Buy 2 x calls at 23 strike for 0.05 each
Absolutely nothing wrong with this.
>> Sell 4 x iron flies at 20/21/22 strike for 0.65 each
With LOW around 21.90, it is probably better to sell 22 calls. This will make use of two important things which Michael often highlights - (1) selling ATM premium (2) playing a contra move to the marker. Due to this, selling couple of 22 calls may be a better adjustment than selling 21 iron flies. As always, options give us options so several adjustments are possible and each one has their pros and cons.
Having said that, I am not likely to go ahead with selling 22 calls either due to the points mentioned below:
(1) Given that bulls have taken the marker higher slowly and steadily over the last few days, I am not too sure if I would like to bet against them and/or bet against the effect of negative gamma during next week.
(2) Next week is triple witching which may lead lead to increased volatility and options expiration week usually (not always) has bullish bias to it.
(3) Most of my open positions for Sept are delta negative and I am looking at closing 1 or 2 of them by Friday. I may do this even if I have to take small losses as the other positions (e.g. FXI, USO) can easily absorb these losses.
Will wait to watch what happens towards the close on Thursday or Friday.
Truly appreciate your time and effort in sharing your thoughts on LOW position.
Cheers
Viky
If you are going to dust off Charles's book, why don't we try and combine the risk graphs and dissection approaches on your LOW trade for Sep expiry.
I notice that you have carefully legged into your current position with 4 seperate trades, so why not consider legging out of the position over a number of trades as the market ziz-zags around.
Your position may exactly reflect your current market forecast, in which case nothing to do, but let's play the game and see if we can explore alternatives.
Let's ignore position dissection for the moment; and consider the raw position; +2p 19 / -2p 21 / -2c 21 for credit $170
Current Butterfly prices with LOW at 21.70 are approx priced at;
19/20/21 0.05
20/21/22 0.35
21/22/23 0.35
Why not try the following trades in your position analyser;
Buy 2 x calls at 23 strike for 0.05 each
Sell 4 x iron flies at 20/21/22 strike for 0.65 each
I would be interested in seeing the risk graphs ...
Cheers
James
--- In OptionClub@yahoogroups.com , "vikas_basantani" <vikas.basantani@...> wrote:
>
> Hi Charles, thanks for coming by and sharing some of your thoughts.
>
> Based on what I have said so far, I am not saying that synthetics or position dissection are not useful. I understand the importance and relavance of both of these to options trading.
>
> My point (which got partially missed out I think) was that for simple positions e.g. LOW +2 19P/-2 21P/-2 21C, just how far can you go with using dissection to reveal the risk that you can't possibly see through risk graphs?
>
> If one had a complex position (long and/or short calls and/or puts spread over multiple strikes and/or months), I am 100% convinced that position dissection can reveal more than what the naked eye or risk graphs may show.
>
> In any case, I have taken out your book out of the closet once again. I am bound to have some queries which I will highlight on this blog and/or riskdoctor forum. Hope you will chime in to help and clear my doubts as their arise...
>
> Appreciate your comments and help.
>
> Cheers Viky
>
> --- In OptionClub@yahoogroups.com , "charlescottle@" <charles@> wrote:
> >
> > --- In OptionClub@yahoogroups.com , Viky <vikas.basantani@> wrote:
> > >
> > > Hi Chris, as I feared earlier, personally for me the presentation wasn't any
> > > easier to digest than some of the most difficult chapters in Charles'
> > > book:-)
> > >
> > > Having said that, thank you very much for taking the pains to arrange the
> > > webinar. It doesn't happen very often that you get to hear from such
> > > experienced traders and that too for free...
> > >
> > > May it is time that I revisited his book (bought a few years ago) to make
> > > another attempt at understanding/improving my knowledge about dissection
> > > etc...
> > >
> > > Happy loooong weekend to all...
> > >
> > > Cheers Viky
> > >
> > > http://options101.wordpress. com
> > >
> > >
> > >
> > > On Sat, Sep 5, 2009 at 7:21 AM, Ricky Jimenez <rickyjim@> wrote:
> > >
> > > >
> > > >
> > > > Chris, in the future, I hope you can suggest to the speakers, to
> > > > explain their modifications by showing how they change the trade's
> > > > expiration diagram. I think Charles assumed the viewers had greater
> > > > vizualization capabilities than most of us have.
> > > >
> > > >
> > >
> >
> > To Help with that Viky, I don't know if you know about the free course at the RiskDoctor Home Page that gets you though Chapter 1 with all sorts of exercises. Keep at it and it will click for you.
> > Charles
> >
>
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