From: janet_earnest <janetearnest@
To: OptionClub@yahoogro
Sent: Mon, January 18, 2010 1:22:57 PM
Subject: [TheOptionClub.
Mike,
So sorry, I meant increase or decrease volatility not delta. Delta changes with price fluctuation or by adding/removing positions. I guess my fingers thought that delta was easier to type than that word starting with "v"
--- In OptionClub@yahoogro ups.com, Mike Cleveland <mikeandjody1996@ ...> wrote:
>
> Janet, could you explain how to "increase or decrease delta" using the little wrench on the right in TOS? I see the wrench but not sure how to increase or decrease delta with it.
>
> Thank you.
>
> Mike
>
>
>
> ____________ _________ _________ __
> From: janet_earnest <janetearnest@ ...>
> To: OptionClub@yahoogro ups.com
> Sent: Sat, January 16, 2010 11:48:53 AM
> Subject: [TheOptionClub. com] Re: Calendar Chat
>
>
> In a word - volatility
>
> The back month volatility dropped 4.5% - this caused the value of the long option to drop in value.
>
> Profiting with a calendar is normally intended to be from the front month decaying while the back month has very little decay. But if volatility is dropping, the back month option also drops in value (by more than time decay) making it more difficult to make a profit. Movement of the underlying adds other factors to potential profits. You are seeing why calendars are best during stable or increasing volatility.
>
> I'd recommend using your TOS platform to better visualize volatility impact. First put on a simulated trade (feb-mar calendar) and then you can use the little wrench over to the right under where it says "delta" to increase or decrease delta and see the impact to the trade. The "more" button that is now available towards the middle of the screen allows you to vary the volatility seperately for each month. Also look at increasing volatility while you are there. This should give you a great visual on volatility impact.
>
> Good Luck with your class and eventual calendar trading.
> --- In OptionClub@yahoogro ups.com, Joey Huckabee <trading.ocyg@ ...> wrote:
> >
> > Ok guys I am confused.... I am in the Dan Sheridan class for Advanced Calendars
> > and so I was taking some time tonight to simulate some trades with TOS
> > thinkBack. During the mini-presentation here at option club and the first day
> > of Class they mentioned that IBM has been used for years as a steady source of
> > income using Calendars. Well I thought that would be a good place to start so I
> > fired up the trusty old TOS platform and began to run some positions in IBM. I
> > wanted to focus in on one particular trade, on 11/23/2009 I placed an IBM 130
> > PUT Calendar on for 1.50 debt.
> >
> > Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â BIDÂ Â ASK Â IV
> > 130 PUT DEC09 Â Â Â Â $3.30 $3.40 17.09%
> > 130 PUT JAN10Â Â Â Â Â $4.80 $4.90 19.76%
> >
> > I marched the date forward to expiration to see what happens and these are the
> > resulting prices:
> >
> >
> > Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â BIDÂ Â ASK Â IV
> > 130 PUT DEC09 Â Â Â Â $1.93 $2.04 0.00%
> > 130 PUT JAN10Â Â Â Â Â $3.35 $3.45 15.29%
> >
> > If I sell this position on 12/18/2009 for 1.415 (mid price) that gives a profit
> > of 6%. Ok so that is nothing to get upset about but it is no where near the
> > 100% projected by the risk chart (since we closed on 12/18/2009 $127.91). Now
> > if I click forward one more day then the prices look like this:
> >
> > Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â BIDÂ Â ASK Â IV
> > 130 PUT DEC09 Â Â Â Â EXPIREDÂ Â Â Â 0.00%
> > 130 PUT JAN10Â Â Â Â Â $2.74 $2.80 14.81%
> >
> > Now if I sell the JAN10 PUT at $2.77 I bank a hefty 84.6%, but my dilemma is the
> > DEC09 PUT option was ITM so I had to sell on 12/18/2009.. .. Can someone help me
> > out here? What am I missing?
> >
> > thanks,
> >
> > Joey
> >
>
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