Update: XLE closed at 53.85 and the fly is still in the middle of the web. TOS says I am up 10% on this trade in 3 days, displaying a profit calculation of $146 on my $1,360 cost. We all know that this number is off. My excel calculations, which take into account commissions in and out as well as nat prices (not midprices as used in TOS), show a current loss of -$61.00 if I take the trade off now. So it's somewhere in between, and I'm going into another week with no adjustments or additions. Position delta at 23.17, theta 17.45 and vega 54.15.
RFH
--- In OptionClub@yahoogroups.com, "RobertH" <robhansen5252@...> wrote:
>
> On Tuesday, July 27, I opened an Aug – Sep calendar spread on XLE. I bought 20 Sep10_54c at 2.35 and sold 20 Aug10_54c at 1.67. The 0.68 debit translated to a cost of $1,360. Add $50.50 for commissions and my maximum loss is the amount I paid, or $1,440.50. This is a positive theta and positive vega position, so I benefit from the passage of time as well as increased volatility. Lately, I've been having success with butterflies which generally benefit from a decrease in volatility, but checking the implied volatility on a TOS chart, I noted that XLE was down in the lower third of the range for the last year. So since I'm not too experienced in calendar spreads, I thought I would give this one a try.
>
> Break evens for this trade are 51.91 and 56.17. My plan is to scale into this trade (add another calendar converting it into a double calendar) if the underlying moves a lot in either direction, with an ultimate goal of $1,000 profit. So, I will invest up to $5,000 into this trade to make the $1,000. With this first position, a 20% profit after commissions translates to around $332. I'm not greedy, so if XLE stays where it is and my 20% goal is reached, I'll take it. In fact, I've put in a GTC order to sell calendar at that point. If XLE moves close to break even on either side, I'll add another 20 contract calendar and adjust my profit goal up to the new cost of the trade. If that happens and XLE continues in the same direction, I'll scale back half of the original 54 calendar and add a 10 contract calendar closer to the new price. If XLE whipsaws and goes back the other way, I'll add to the 54 calendar. I will continually keep track of the cost of the trade and adjust my profit goal accordingly.
>
> I'm in my second day of the trade and nothing spectacular has happened yet. TOS says I am up around $90 at this moment, so I'll watch and wait.
>
> Comments appreciated.
>
> RFH
>
>
> --- In OptionClub@yahoogroups.com, "RobertH" <robhansen5252@> wrote:
> >
> > Hi. I opened up a "gorrilla calendar" time spread in XLE on Tuesday. I know that on occasion, this forum has tracked various options strategies, trades and adjustments both theoretically as paper trades and in real time. If there is any interest, I'd be happy to report the particulars of the trade, profit goals, adjustments, etc. as they occur. Of course if there are any differing opinions as to how to handle the inevitable scenarios between now and August expiration, they can be debated. Could this possibly be a learning experience?
> >
> > RFH
> >
>
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