Michael / Martin
Using the concepts of dissection, analysis of fly prices, peeling the risk off AND leveraging exposure as a position approaches expiry, I have used Viky's LOW position and posted a file "1.02 LOW adjustments - peeling the risk off" to provide some visual representation of these concepts.
Hope these help ..
Cheers
James
-- In OptionClub@yahoogro
>
>
>
> -----Original Message-----
> Martin wrote:
>
>
> This discussion on position dissection comes at a very good time. I've
> been practicing some of your techniques, and things can get complicated
> rapidly. Here's a short example...
>
> <...>
>
> The result is a "risk-free" position: 101p/-102c/-
> with a minimum profit of $160 (minus heaps of commissions)
> like this approach! But it's getting hard to draw the risk graph in my
> head...
>
> MC- congratulations. If you can first master bringing ANY trade to
> profitability exclusive of transactions, it's a very small step to get to be
> able to manage that cost. You should be paying no more than a buck or so per
> contract so even with the number of trades you've made to get you to this
> point, most of that $160 should be retained. As far as the risk graph "in
> your head" obviously the dissection below can help but if you have a decent
> software (like tos) that should easily show your risk at expiration.
>
>
> However, after going back over the first couple of chapters of OT:THR, I
> can see that by adding a long 102/105 box (102c/-102p/
> mess turns out to be a simple put condor (101p/-102p/
> exactly as the ToS risk graph shows. Or, by adding another short
> 103/104 box (-103c/103p/
> (101p/-102p/
> yet, but still, this is very cool!
>
> Now it's time to figure out what's next. I know that I can just
> continue to follow SPY, by adding butterflies in order to widen the
> condor if necessary. But there's no long gamma left to work with any
> more. Does this maybe call for adding another zero-cost ladder
> somewhere? In other words, is there a good way to improve on a "free"
> condor, without messing it up too badly?
>
> MC -you have to be a bit careful during expiration week. the ladders may
> seem very cheap and they can work if you get quick powerful moves right
> after you enter them. But in general, expiration for me is a time to get
> defensive with the core position and peel off risk as the market allows.
> Your core position happens to be pretty simple: a straight 101/2/3/4 condor.
> You can ignore what kind of condor this is (put, iron or whatever) as long
> as you understand your max risk (obviously it's non-risk with a guaranteed
> $160 profit as you state). So what I normally would do is look for
> inexpensive ways to maybe leverage the profits locked in so far without
> burning up the entire profit potential. Something as simple as buying a
> plain 102 put or the +102p/-101p vertical should be a cheap gamble that
> could be scalped on a quick selloff or turn into a big winner on a major
> selloff. Alternatively, since the current trade already will benefit from a
> modest selloff, the 105 call or long 105/6 call vertical might be a cheap
> bullish bet. There's not a whole bunch to over think here: you've got a
> profit so hang on to it; any further action should be very small limited
> risk bets that play off of the core trade.
>
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