Thank you Michael for giving us a day by day account of this GS trade.
Since I have tried to do similar things myself, I know its time
consuming nature so I appreciate you ambitions as an options educator.
First question is: are you actually trading this, with a real time
simulator or with real money, or are you reporting an EOD analysis of
something you might have done during the trading day? So are the
given debits and credits based on something your broker reported as
part of the execution or are they based on the market bids and asks of
EOD prices?
With the last trade, what exactly was the calculation you made to
conclude IV was falling? I didn't see that happening. Do you always
avoid buying premium in falling IV and avoid selling premium when IV
is rising?
I still am miles away from understanding how you choose your trades.
Comments you make like, "I'm adding some negative deltas here" or
"gammas there" don't give enough detail to see what your method is.
None of the traders Chris has brought in to lecture us, or books on
options trading, explain trades as difficult for the ordinary trader
to fathom as what you are offering. For example, do expiration graphs
play a role in what you are doing? From what you have said in the
past, I got the impression you have a goal of a risk free expiration
profit graph by sometime in expiration week. However, in the first
couple of trades that goal isn't evident.
The expiration P/L of the starting BWB had a 6.20 profit at 155 and a
3.80 loss at 165 and above.
The 4/26 modification had a 5.85 loss between 140 and 145, .85 loss at
160 and above and a profit of 4.15 at 155 with profits exceeding that
below 130.
The 4/28 change had a 8.14 loss between 140 and 145, 3.14 loss above
160 and 11.86 profit at 155 with higher profits below 120.
So right now, you seem to concentrate on making the expiration graph
very profitable at the current market price but are not worried about
eliminating risk a short distance away. One thing I notice is that
you haven't taken on unlimited risk, at far off GS expiration values,
by selling naked. Is that a general policy? Is there a general
principle that gives you confidence that the local risk is going to
eventually go away? Is there some rule you use to "grow the position"
without taking on too much risk?
Now maybe I am the only one following your trades who needs more
explanation. OK readers, please speak up if I am being too demanding
of Michael.
On Wed, 28 Apr 2010 21:55:22 -0500, "mcatolico"
<mcatolico@mindsprin
>4/28/10 update
>
>
>
>Previous position:
>+1 150c/-2 155c/+1 160c
>-1 150p/+1 145p/+1 140p
>Net debit $0.85
>
>
>
>
>
> GS bounces right back to around entry point at 157. Vol stays steady to
>slightly drifting down. The position probably needs an adjustment off the
>put ladder. The deltas are still relatively flat but given the move, may as
>well try to take some advantage and grow the position a bit.
>
>
>
>Adjustment:
>
>+1 160p/-2 155p/+1 145p 0.21 cr net
>
>-1 155c/+1 160c 2.50cr net
>
>
>
>The idea here is basically to add an atm fly (selling premium into falling
>IV) while still retaining the downside bias a bit for Sam. J
>
>
>
>Net position:
>
>+1 150c/-3 155c/+2 160c
>
>+1 160p/-2 155p/-1 150p/+2 145p/+1 140p
>
>
>
>Net credit: 1.86
>
>
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