Option Trading Articles: Re: [ConservativeOptionStrategies] Re: VVUS again

Friday, July 2, 2010

Re: [ConservativeOptionStrategies] Re: VVUS again

Lou,

What went wrong is that the vix at the time was around 50 and when the market went directional the RUT price blew through my short strikes and as I adjusted to the next month the price kept going down so I kept losing more money and bailed.

I now enjoy 30-40% annual returns with minimal risk but it took a long time to figure it out...many times the attraction of high monthly yields overcome the pysche of traders and they don't fully realise the risk dangers in trading these spreads.

Never again for me...

Fred

From: Louis <loupi3@yahoo.com>
To: ConservativeOptionStrategies@yahoogroups.com
Sent: Thu, July 1, 2010 10:55:56 PM
Subject: [ConservativeOptionStrategies] Re: VVUS again

If you care to talk about it, I think we could learn from your experience and your analysis of what went wrong.
Lou

--- In ConservativeOptionStrategies@yahoogroups.com, fred barbour <barbour2p@...> wrote:
>
> I did a condor trade once using 6 contracts,did the appropriate management moves when the markets turned directional..lost $6350,could have lost alot more..sure was fun..."not".
>
> Fred
>
>
>
>
> ________________________________
> From: Louis <loupi3@...>
> To: ConservativeOptionStrategies@yahoogroups.com
> Sent: Tue, June 29, 2010 11:18:10 PM
> Subject: [ConservativeOptionStrategies] VVUS again
>
> Â
> I finally took a little bite and entered an order for a couple of contracts on a condor. This is my first condor so I just want to get my feet wet without getting nervous.
> The details (all July): long put @ 5, short put @ 6, short call @ 15, long call @ 16. Net credit if filled .60 (between bid/ask).
> Max profit 60 between 6 and 15; max loss 40 below 5 or above 16; breakevens at 5.40 and 15.60. It appears to be a fairly conservative position.
> Two questions I have:
> First, how do I figure profit? I'm guessing something like the difference between the short strike exposures (900) divided by the profit or loss, so that if I made the max profit of 60, the profit would be 60/900 or 7%? Somehow that doesn't seem correct. It would intuitively seem to me to be 100%, but if that were the case, how would I figure a $30 profit, or a $20 loss?
> Second, what surprises should I be watching for (other than the obvious possible major price swing)?
> Lou
>