Saturday, May 1, 2010

Re: [TheOptionClub.com] GS TRADE [was:How do you manage your Vega?]

 

Michael

Unfortunately, I cannot provide a graph for a couple of days as we have a long weekend here in the UK; but it may be easier to follow if you bought the 145/165 box for $20.00 to simplify the position.

This would leave;

-1c 165 / +1c 170
+1p 130 / +1p 135 / +1p 140 / -2p 145

Net Credit $4.89

Cheers
James

--- In OptionClub@yahoogroups.com, "mcatolico" <mcatolico@...> wrote:
>
> Update 4/30/10
>
>
>
> Okay huge selloff (GS down 15 to 145) proving Sam's prescience. Volatility
> explodes as well. The trick here is to use the existing position and shift
> the risk profile. That measly little extra long 140 put unit proved more
> than enough to make this a decent move for the trade.
>
>
>
> Adjustments -
>
> Going to clean house on this first by converting everything to a
> 140/145/165/170 condor using some crazy strikes.
>
>
>
> Opening position was:
>
> +1 150c/-2 155c/+1 170c
>
> +1 160p/-2 155p/-1 150p/+2 145p/+1 140p
>
>
>
> Net credit: 2.26
>
>
>
> To get to the condor add
>
> -1 145c/-1 150c/+2 155c for 5.65 net credit
>
> -2 145p/+1 150p/+2 155p/-1 160p/-1 165p for 16.15 net credit
>
>
>
> As complicated as this may look, all I'm basically doing is unloading
> inventory and doing something of a guts condor all by taking advantage of
> the big IV spike.
>
>
>
> This yields a condor
>
> +1 140p/-1 145c/-1 165p/+1 170c
>
>
>
> I also want to keep in the spirit of the trade by hanging on to the short
> delta forecast (which is working out so no reason to change course) and add
> some vega on the spike.
>
>
>
> So add a put side ladder -1 145p/+1 135p/+1 130p for a net credit of $0.83
>
>
>
> If I got all the plusses and minuses correct, the net end of day position is
> thus:
>
> -1 145c/+1 170c
>
> -1 165p/-1 145p/+1 140p/+1 135p/+1 130p
>
>
>
> Net overall credit is $24.89
>
>
>
> If someone wants to graph this it might become clearer how simple this
> position actually is. We've got the big condor with almost no upside risk
> and an extra put unit that is protection (or opportunity) for further
> selling and/or IV increase. There are multiple ways for this to become
> profitable: drift/bounce higher or further jarring selloff are the biggest
> bonuses to the position. a mild drift lower can be scrambled after but may
> pose the most threat. The trade as it stands makes 4.89 anywhere between
> 145-165 and loses no more than 0.11 above 170. On the downside would be
> 10.11 between 135-130 but has nothing but upside potential in the unlikely
> event that sachs collapses well below 115.
>
>
>
>
>
>
>
>
>
>
>
> From: OptionClub@yahoogroups.com [mailto:OptionClub@yahoogroups.com] On
> Behalf Of mcatolico
> Sent: Thursday, April 29, 2010 11:39 PM
> To: OptionClub@yahoogroups.com
> Subject: RE: [TheOptionClub.com] GS TRADE [was:How do you manage your Vega?]
>
>
>
>
>
>
>
>
> Update 4/29/10
>
>
>
> GS continued higher through 160 today (despite all the doom and gloom about
> the firm). And IV drifted another couple points lower (take a look at the
> atm straddle to see how vega really got sapped today).
>
>
>
> So the position needs some tweaking here to center it around the 160 strike.
>
>
>
> Adjustment:
>
> +1 155c/-2 160c/+1 170c $0.40 credit net on this unbalanced fly.
>
>
>
> This nudges the body of the trade closer to and surrounding the atm (160)
> strike while retaining the extra downside units in case the Sam scenario
> returns. For the most part the trade is vega negative (i.e. has positive
> decay) into a declining or flat implied volatility environment with an extra
> put unit should big gap type event occur.
>
>
>
> Brings the position to.
>
>
>
> Net position:
>
> +1 150c/-2 155c/+1 170c
>
> +1 160p/-2 155p/-1 150p/+2 145p/+1 140p
>
>
>
> Net credit: 2.26
>
>
>
>
>
>
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