Hi Michael,
For the underlying, we watch out for 1SD price move as possible point of adjustment - got it.
With regards to current position of Short Vega with IV around 35%,
what kind of changes in volatility would warrant an adjustment?
What would you do if IV creeps up/down? IV makes a sharp move to the upside/downside?
Thanks,
Sam
--- In OptionClub@yahoogro
>
> Okay I'll ignore the "it continues to be weak" perspective and just focus on
> the trade. Basically the position is delta neutral with a slight negative
> (delta) bias. It's also short vega with IV around 35%
>
> On a trade like this I'll just assume the intent is to hold onto the short
> volatility unless the market proves otherwise (i.e. one of the points of
> this exercise) and to keep the position relatively delta neutral.
>
> Given these prices and position info basically id be looking at what kind of
> changes would require action to protect or alter the position. the one week
> single SD is about +/-$7 so the first focus is to check the position
> somewhere around the long strikes on the bwb (150 or 165 since 157 +/- 7
> points gets us to these strikes). If GS trades at 150 or 165 next week the
> idea would be to shift the risk in the trade so that deltas are still
> somewhat neutral or slightly negative. Unless volatility starts rising
> sharply then the adjustment at the trigger point would be some kind of short
> vega play such as adding an atm fly or another bwb around the atm strike.
> This is how I would be monitoring the trade and I'll follow up with
> commentary should GS move to 150 or 165 zone or if I find something worth
> commenting on.
>
> Current position:
> +1 150c/-2 155c/+1 165c
>
> Net credit: $1.20
>
>
>
> -----Original Message-----
> From: OptionClub@yahoogro
> Behalf Of speedsam21
> Sent: Thursday, April 22, 2010 10:32 AM
> To: OptionClub@yahoogro
> Subject: Re: [TheOptionClub.
>
> Hi Michael,
> Let me digest what you said about Vega.
>
> In the mean time, let us look at a trade on GS.
> After GS gapped down due to SEC suit, it now hovers around 157.
> It continues to be weak.
>
> May I suggest -
> GS May BWB /1 150c/-2 155c/1 165c/ for $1.20credit.
> Delta= -12.44; Gamma=-0.38; Theta= 1.78; Vega= -2.97
>
> Of course, I open to suggestion.
>
> Thank you again for sharing.
>
> Best regards,
> Sam
>
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