My observations on calendars
on 7/13 I bought 6x DIA Aug/Sep DIA cals, 6x XLE Aug/Sep 52 cals. On 7/20 I bought 2x OEX Aug/Sep 490 cals and 8x RTH Aug/Sep 90 cals. These are all big vehicles, so my commissions are mall in percentage terms.
I sold the RTH yesterday for a 24.4% profit. My observation is that I was quite surprised how much the prices moved during the day on a percentage basis. I ended up calculating an exit price at 20%, and putting a limit order in the market for that. So this net includes commissions.
DIA and XLE are doing nothing special. Theta is starting to help, even though vols are down.
OEX is the interesting one. The iV looked low when I bought it, but since then it is down almost 2 points. The price has moved to the top of the "tent" on the risk graph. I chose not to adjust yesterday, because this is a resistance level. Today there is a small pullback on the price. I have decided to sit tight for another day. I am down by 9%, but if the price moves lower then the vega and the price should move me into a decent profit in a few days. If it doesn't move down, I'll move half the position up.
So that is my thinking. What would any of you more experience traders do? I am following Dan S's adjustment ideas pretty much, but he doesn't tend to take support and resistance into consideration much.
BTW, these are in my paper traded ToS account.
Bill
From: wnfletcher@hotmail.com
To: optionclub@yahoogroups.com
Subject: RE: [TheOptionClub.com] Re: Selecting Calendars
Date: Tue, 20 Jul 2010 12:44:29 -0700
That is very useful. I just put on (paper trading) an RTH and an OEX ATM calendar. These are nice and big. I watched Dan's webinar again where he adjusted a RUT trade through a 10% price drop. Trading a small underlying would turn a profit into a loss under these conditions.
From: wnfletcher@hotmail.
To: optionclub@yahoogro
Subject: RE: [TheOptionClub.
Date: Tue, 20 Jul 2010 12:44:29 -0700
That is very useful. I just put on (paper trading) an RTH and an OEX ATM calendar. These are nice and big. I watched Dan's webinar again where he adjusted a RUT trade through a 10% price drop. Trading a small underlying would turn a profit into a loss under these conditions.
Bill
To: OptionClub@yahoogroups.com
From: robhansen5252@hotmail.com
Date: Tue, 20 Jul 2010 18:45:44 +0000
Subject: [TheOptionClub.com] Re: Selecting Calendars
Dan says that you should try to pay $1.00 a contract when trading these guerrilla calendars. Nevertheless, if you put 10 of these on, it will cost you $320 before commissions. If you are shooting for 20% profit, you should take the commissions into account, so add $60 to the projected 20% ($30 in and $30 out) and you should be looking to get out when the value of the spread is $444. So the spread started out at 0.32 and you want it to appreciate to 0.44. This is certainly attainable. Then you trade 100 of these next month! (Right).
RFH
--- In OptionClub@yahoogroups.com , "WilliamF" <wnfletcher@...> wrote:
>
> I have started to work on guerrilla calendars seriously. I have constructed a set of rules based on data from Sheridan and others.
> I was looking at an Aug Sep WAG ATM calendar. The 29s are 96 cents for the front, and $1.28 on the back (these are bid and ask). So doing it one time costs me $32 a contract. A ToS round trip for 4 contracts is $6 at $1.50 a contract.
>
> So if I set a target profit of 20% of my $32, that is $6.40. So after commissions I have a whole 40 cents left to spend on my celebration dinner!
>
> Yet this trade follows all the rules that I have looked at - volatility, skew, front vs back prices, minimum short premium etc.
>
> I suspect I need to trade a bigger underlying, but surely that should just be reflected in a "minimum cost per contract".
>
> Does anybody have enough practice on these to have a rule they feel comfortable with?
>
> Bill
>
The New Busy think 9 to 5 is a cute idea. Combine multiple calendars with Hotmail. Get busy.
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To: OptionClub@yahoogro
From: robhansen5252@
Date: Tue, 20 Jul 2010 18:45:44 +0000
Subject: [TheOptionClub.
Dan says that you should try to pay $1.00 a contract when trading these guerrilla calendars. Nevertheless, if you put 10 of these on, it will cost you $320 before commissions. If you are shooting for 20% profit, you should take the commissions into account, so add $60 to the projected 20% ($30 in and $30 out) and you should be looking to get out when the value of the spread is $444. So the spread started out at 0.32 and you want it to appreciate to 0.44. This is certainly attainable. Then you trade 100 of these next month! (Right).
RFH
--- In OptionClub@yahoogro
>
> I have started to work on guerrilla calendars seriously. I have constructed a set of rules based on data from Sheridan and others.
> I was looking at an Aug Sep WAG ATM calendar. The 29s are 96 cents for the front, and $1.28 on the back (these are bid and ask). So doing it one time costs me $32 a contract. A ToS round trip for 4 contracts is $6 at $1.50 a contract.
>
> So if I set a target profit of 20% of my $32, that is $6.40. So after commissions I have a whole 40 cents left to spend on my celebration dinner!
>
> Yet this trade follows all the rules that I have looked at - volatility, skew, front vs back prices, minimum short premium etc.
>
> I suspect I need to trade a bigger underlying, but surely that should just be reflected in a "minimum cost per contract".
>
> Does anybody have enough practice on these to have a rule they feel comfortable with?
>
> Bill
>
The New Busy think 9 to 5 is a cute idea. Combine multiple calendars with Hotmail. Get busy.
Hotmail is redefining busy with tools for the New Busy. Get more from your inbox. See how.
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