From: Joules <jouless360@yahoo.
To: OptionClub@yahoogro
Sent: Mon, December 21, 2009 5:04:21 PM
Subject: [TheOptionClub.
Well...I can see that I have a lot to learn either way. How about a cheat sheet that I can look at that says...based on the market volatility at this time: put on these types of trades, ie, butterfly, calendar, iron condor, diagonal etc etc. Something to keep me out of trouble. Just a wish list for Christmas.
:) Thanks,
Joules
--- In OptionClub@yahoogro ups.com, rvd <rvdidit@... > wrote:
>
> Paul, I looked at the definition and you are right - I was interpreting wrong.
>
> But now I look at the definition, I still think an IC is not a very good example of a market neutral strategy because the risk to reward can be so high.
> True an ICÂ has both bullish and bearish sides to it, but it still is a directional position.
> While a pairs trade is market neutral because in a market downturn both stocks should go down therefore unaffected by the market turn.
>
> Anyway, Im happy to drop this now - lesson learned..
>
> From Investopedia; .
>
> What Does Market Neutral Mean?
> A strategy
> undertaken by an investor or an investment manager that seeks to profit
> from both increasing and decreasing prices in a single or numerous
> markets. Market-neutral strategies are often attained by taking
> matching long and short positions in different stocks to increase the
> return from making good stock selections and decreasing the return from
> broad market movements. Market neutral strategists may also use other
> tools such as merger arbitrage, shorting sectors, and so on. There is
> no single accepted method of employing a market-neutral strategy.
>
> --- On Mon, 12/21/09, Paul Seifert <paulseifert@ ...> wrote:
>
> From: Paul Seifert <paulseifert@ ...>
> Subject: Re: [TheOptionClub. com] Re: Iron Condors ...3 fold question.... ?
> To: OptionClub@yahoogro ups.com
> Date: Monday, December 21, 2009, 12:15 PM
>
>
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> 
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>
> You are not interpreting the term MARKET NEUTRAL
> correctly.Â
>
> ----- Original Message -----
> From:
> rvd
> To: OptionClub@yahoogro ups.com
> Sent: Monday, December 21, 2009 10:03
> AM
> Subject: Re: [TheOptionClub. com] Re: Iron
> Condors ...3 fold question.... ?
>
> Â
>
>
>
>
>
> Thinking about this thread, the only thing that bothers
> me is the idea of an IC as market neutral. MArket neutral means to
> me that the position is unaffected by market direction..
>
> A short
> IC is anything BUT market neutral. It is directional and the direction
> is sideways
> if it is put on in the middle. Bullish if it is put on
> above the market, and bearish below.
>
> If yu want a market neutral,
> why not choose a ratio for zero credit? That way only one direction of
> the market out of three, will effect the position.
>
> --- On
> Sun, 12/20/09, Mary Norfleet
> <naboba1@yahoo. com> wrote:
>
>
> From:
> Mary Norfleet <naboba1@yahoo. com>
> Subject: Re:
> [TheOptionClub. com] Re: Iron Condors ...3 fold
> question.... ?
> To: OptionClub@yahoogro ups.com
> Date:
> Sunday, December 20, 2009, 3:22 PM
>
>
>
>
>
>
>
> Joules,
> In your recent e-mail to
> Chris, you stated: “Also it’s hard to understand how the vols play on
> Condors as the credit is achieved as long as the price stays within
> the breakevens. Based on the volatility now...it says to stay away
> from Condors? Is my thinking right?�
> In general, if volatility
> falls while you are in a condor this helps the trade.Â
> In contrast, if it falls while you are in a calendar this hurts
> the trade. If vols increase while you are in a
> condor, you will probably have to stay in the trade longer to achieve
> your profit -- If vols increase while you are in a calendar trade you
> will be able to achieve your profit faster. Of
> course vols usually increase when the market goes down and they
> usually decrease when the market goes up, so this is another part of
> the total.
> Currently VIX (a
> volatility measure) is around 21 or 22 which is relatively low â€"
> although that would have been high a few years ago when it was in the
> 12-15 range. However, it’s important to look at the
> implied volatilities (IV) of the at-the-money (ATM) calls and puts of
> any particular stock or index you plan to trade â€" and to look at where
> they are now relative to the past 6-12 months. If
> you have Thinkorswim (TOS) as your broker, it is easy to look at these
> data. I don’t know how other brokers present this
> information.
> To understand the
> impact of volatility changes, go to the analyze page in your TOS
> account and put up an iron condor (on your favorite index) â€" place the
> shorts at approximately 12- 15 delta. Set the
> analyze chart to show 68% (1 standard deviation -- SD) on the
> expiration day of your condor. Go to the
> “volatility adjustmentâ€� and increase the volatility â€" the graph will
> show that as the volatility increases, the standard deviations widen;
> the opposite will occur as you decrease the volatility.Â
>
> Do the same
> exercise with an ATM call or put calendar on the same
> index. You will see that as the vols rise, the area
> covered by the calendar increases â€" and as they fall, that area
> shrinks.Â
> To get back to your
> original question on condors -- the credit is achieved as long as the
> price stays within the breakevens (BEs) â€" that is correct; however if
> the vols increase while you are already in a condor, the SD is
> increasing so you then have a higher probability of having the market
> price run through your BEs and leaving you with a loss.Â
> If you have watched Dan Sheridan’s free webinars on CBOE.com
> over the past few years, he has given many examples of trading (and
> adjusting) condors in various market conditions.Mary
> Ann
>
>
>
>
>
> From: jouless360
> <jouless360@ yahoo. com>
> To:
> OptionClub@yahoogro ups.com
> Sent: Sat, December 19, 2009
> 6:20:48 PM
> Subject:
> [TheOptionClub. com] Re: Iron Condors ...3 fold
> question.... ?
>
> Â
>
> Chris:
>
> Thanks for the response. My feeling on legging in is
> based on the ebb and flo of the markets from my futures trading days.
> You get a 200 point up day ...then a 150 point down day. Why not take
> advantage of that to leg in on the up and down days. The credits are
> higher and the breakevens are wider. Of course, we need to look at the
> daily chart to see if we are in an uptrend, neutral or in a
> downtrend.
>
> Based on the VIX...I think I should be doing
> Calendars at this time and not Condors? am I on the right track?
>
>
> Also its hard to understand how the vols play on Condors as
> the credit is achieved as long as the price stays within the
> breakevens. Based on the volatility now...it says to stay away from
> Condors? Is my thinking right?
>
> by the way....I just got
> bombarded with another SJoptions email message:
>
> New Trading
> System by San Jose Options
>
> WE JUST GOT BETTER!
>
> We
> already had some of the safest option trading strategies ever taught
> anywhere, but one thing leads to another, and we just got even
> better!
>
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> Recently, we've developed a
> Self-Adjusting trading system which in a few words is "Simply
> Amazing!" What we've done is discovered a way to trade with nearly
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> normal situation, insurance strategies lose money each month and eat
> up your profits, but we've designed a way around this
> problem!
>
> FOR EXAMPLE
> Let's say you want to trade an Iron
> Condor, but you want to do this with insurance to the upside and to
> the downside. Well, 99.9% of all option traders only know how to
> design a trade where the insurance will eat up most of the profits if
> the Iron Condor is profitable.
>
> With our newly designed
> Insurance Risk-Free method, we can trade the Iron Condor with
> surrounding insurance plays which do not take away from the Condor
> profits. In fact, many of our insurance plays will also make money
> while simultaneously adding insurance to the position.
>
> STUDENT
> FEEDBACK
> Student feedback on this new strategy has been awesome. I
> am loving it myself. In all my years in the option educational field,
> I have never seen or heard of this technique. Students are saying that
> I invented this. They could be right, but all I know is that our new
> Risk-Free Insurance strategy is the best thing I have ever seen when
> it comes to trading options.
>
> If it was $199 deal, I think more
> of us would buy to satisfy our curiousity. However, at $2995....I just
> can't do it.
>
> Joules
>
>
> --- In OptionClub@yahoogro
> ups.com, "TheOptionClub" <chris@> wrote:
> >
> >
> Joules,
> >
> > 1. The wider expiration break evens you find
> with a 3 month iron condor
> > reflect the fact that those options
> were sold three months prior to
> > expiration instead of, say, 30
> days away. While the spread is wider,
> > you must also stay in it
> longer to achieve the potential of the
> > expiration risk graph.
> There is always a trade-off between risk and
> > reward, so don't
> fool yourself about the notion you can sell 3 month
> > condors
> and have better probabilities than selling 1 month condors.
> >
> Having said that, also understand that selling 30 days condors is
> not
> > "better" than selling 3 month condors. Whether you make
> money over the
> > long term has much more to do with your risk
> management and your
> > discipline than it does with the width of
> a spread.
> >
> > 2. Legging into an iron condor can be
> beneficial IF you're able to sell
> > the spreads at opportune
> times. Unless you are comfortable timing the
> > market
> fluctuations, I would not suggest legging into an iron condor.
>
> > In my experience, this tactic works best if you think of
> yourself as a
> > vertical credit spread trader who sometimes
> finds that they are trading
> > both sides of the market. In other
> words, the goal would not be to
> > trade an iron condor but it
> would simply be a happy coincidence when you
> > find yourself in
> one.
> >
> > 3. You really should be aware of what is going
> on with implied
> > volatility because it will effect your spread.
> Not paying attention to
> > implied volatility as an option trade
> is sort of like a pilot who does
> > not pay attention to
> altitude. Probabilities, standard deviation,
> > etc., are all
> dependent upon implied volatility and if vols rise after
> > you
> put your trade on it will diminish your probability of success
> and
> > effect your profitability. Calendar spreads are very
> sensitive to
> > changes in implied volatility.
> >
> >
> Christopher Smith
> > TheOptionClub. com
> >
> >
> >
> --- In OptionClub@yahoogro
> ups.com, "jouless360" <jouless360@ > wrote:
> >
> >
> > > Option Club Members:
> > >
> > > I
> have a 3 part question on Iron Condors. I am relatively new at
> this
> > and the Condor does have an appeal of safety, even though
> you have to
> > put up more risk capital to get decent returns.
> Here are a few
> > questions:
> > >
> > > 1. I
> noticed I can get wider breakevens if I go out 3 months..ie to
> >
> March 10 on the RUT or SPX. I was wondering if I go out that far...can
> I
> > close them in 30 days with the idea that the theta decay
> will be enough
> > to make a decent return. I know the theta kicks
> in better the last 30
> > days but I cant seem to get a decent
> return with wider breakevens for
> > the risk in a 30 day
> condor.
> > >
> > > 2. I have seen benefit in legging in
> to Iron Condors ..by selling the
> > Vertical Call portion on a
> nice upday...and selling the Vertical PUT
> > portion on a nice
> down day. This could bring in a better credits and
> > allowing
> for wider breakevens. Is this a reasonable strategy..or do you
> >
> prefer to sell the entire Iron Condor at the same time?
> >
> >
> > > 3. Can I sell Iron Condors without worrying about
> the volatility
> > charts..or is this strategy affected more
> adversely with the vols as
> > opposed to a Calendar
> trade?
> > >
> > > I thank all of you in advance for
> your expertise and thoughts on this
> > subject.
> >
> >
> > > Happy Holidays!
> > > Joules
> >
> >
> >
>
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