There is one thing I forgot to mention in the last post...
Yes it is possible that TLT ends up exactly at 89 at Jan expiration (and you make $1350 profit), but please keep in mind that each underlying keeps moving in a zig zag fashion every day, and flys don't make any huge profits unless you get very close to expiration.
Cheers Vikas
On Sat, Jan 2, 2010 at 9:12 PM, Vik <vikas.basantani@gmail.com > wrote:
Hi Joey, please see some comments below:
At the risk of making your net position more complicated, what you have a combination of the following:
(a) Ten 89 Long Put Flys (+10 87/-20 89/+10 91)
(b) Ten 87/89 Short Put Spreads (+10 87/-10 89)
(c) Ten 90/91 Short Put Spreads (+10 90/-10 91)
(a) requires TLT to stay neutral around 89. But both (b) and (c) require TLT to go higher (above 91) as much as possible.
Overall, you have net 293 deltas (please see attached risk graph) and you are risking $2650 to potentially make $350.
With the next earnings season kicking off in the next couple of weeks (statistically speaking, this period does not usually see any significant sell-off in stocks which may help in pushing TLT higher), there is probably a lot more to lose than what can be made with this position.
The risk/reward can also be easily identified in the attached graph. What you need is at-least a 2 point upward move which will give you a paper profit of $284, But just in case that does not happen and TLT goes down a couple of points, you will be facing a paper loss of $912. Is this risk/reward worth it - you have to decide for yourself...
What you probably need to do is to look at ways to loose deltas. You can add negative deltas in numerous ways some of which include buying some put spreads, selling call spreads, adding things like bearish ladders (-90p/+88p/+85p), backspreads (-90/+2 87) etc. Each of these, however, will have some impact on your theta, vega and potential profit so you need to be careful about what you do now (and subsequently) .
While you have said that you are not looking at making any adjustments at this point, I do not think that is a very idea though...
Sorry if I sound negative here but I have just described my real feelings.
All the best with your trade!!!
Cheers VikasOn Sat, Jan 2, 2010 at 5:02 PM, naguse <trading.ocyg@naguse.com > wrote:
Hey gang,
Just wanted to pull some thoughts on a trade I have in play, right now I am not planning on doing anything but wanted to know if I am missing something... like being able to adjust the trade to make it better.
TLT
+10 TLT Jan 2010 90 PUT
-30 TLT Jan 2010 89 PUT
+20 TLT Jan 2010 87 PUT
trade initiated at a 0.35 credit.
thanks for any input.
Joey
__._,_.___
The goal of TheOptionClub is to provide a forum for members to work together for the purpose of furthering our individual understanding option trading. All messages and postings, and any materials circulated are provided for discussion and educational purposes only. No statement contained in any materials from TheOptionClub should be considered a recommendation to buy or sell a security or to provide investment, legal or tax advice. All investors are encouraged to consult a qualified professional before trading in any security. Stock and option trading involves risk and is not suitable for most people. There is no guarantee that any information provided is accurate and, may in fact, be wrong. It is understood that the participants in TheOptionClub have varying backgrounds and degrees of experience in option trading, and that regardless of experience each member is considered a student. As such, any information distributed through TheOptionClub should be considered with a critical mind and not relied upon as an authoritative source.
To unsubscribe from TheOptionClub, send an email to:
OptionClub-unsubscribe@yahoogroups.com
To unsubscribe from TheOptionClub, send an email to:
OptionClub-unsubscribe@yahoogroups.com
.
__,_._,___
No comments:
Post a Comment