Joules .... there are plenty of good books that specfically deal with trading volatility spreads ..... including Cottle, Forchionne and Natenburg ..... maybe reading them until you have a good grasp of all the concepts rather than shortcutting with a cheat sheet will keep you out of trouble ...... and to quote from Charles Cottle's book "Volatility is not Money" ..... have a good xmas .... James
--- In OptionClub@yahoogro
>
> 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
> >
> > 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-neutralÂ
> > 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@
> >
> > From: Paul Seifert <paulseifert@
> > Subject: Re: [TheOptionClub.
> > To: OptionClub@yahoogro
> > Date: Monday, December 21, 2009, 12:15 PM
> >
> >
> >
> >
> >
> >
> >
> >
> >
> >
> > 
> >
> >
> >
> >
> >
> >
> >
> >
> >
> >
> > You are not interpreting the term MARKET NEUTRAL
> > correctly.Â
> >
> > ----- Original Message -----
> > From:
> > rvd
> > To: OptionClub@yahoogro
> > Sent: Monday, December 21, 2009 10:03
> > AM
> > Subject: Re: [TheOptionClub.
> > 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?â€
> > 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 adjustment†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@
> > 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!
> >
> > RECENT DISCOVERIES
> > 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
> > Risk-Free Insurance. What this means is that the insurance we use to
> > protect our trades virtually costs nothing if we do not use it. In a
> > 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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