Tuesday, March 9, 2010

Re: [TheOptionClub.com] Reverse IC Trades 3-9

 

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From: Ricky Jimenez <rickyjim@bestweb.net>
Date: Tue, 09 Mar 2010 21:41:56 -0500
To: OptionClub<OptionClub@yahoogroups.com>
Subject: [TheOptionClub.com] Reverse IC Trades 3-9 [3 Attachments]

 

Today I modified AAPL and IWM. No changes to GOOG, IBM and RIMM.

The original AAPL position was 4 copies of -190p +200p +210c -220c at
$5.19 debit (2.11, 5.40, 2.39,.71), red graph. As AAPL started to
surge on Friday, I decided to sell the put spread so +190p - 200p for
.27 credit (.12, .39) blue graph. Probably, when you can get so
little by closing a spread, you might as well keep it for black swan
protection.

Today I rolled the 210, 220 spread up to 220,230 as AAPL continued
past 220. -210c + 2*220c - 230c for a $3.54 credit. The current
position is shown in black. I could have also gone for the 210,
220,230 free fly. A comparison of the two positions is shown in
another jpg. I suppose the fact that Cramer and some legit analysts
have been predicting great things for the Ipad makes me think that
APPL will keep going up, at least until March expiration. We will see
if I blundered.

As far as IWM, which traded over 67 today,I know I messed badly up in
what I did. Starting from 26 copies of -2*62p +64c -65c -66c +67c
(red graph), I sold the ITM fly of the condor for a measly 4 cents:
-64c +2*65c -66c (3.53, 2.62, 1.75). Next I decided I wanted to
extend the remaining fly to a condor so I went +66c -2*67c +68c for a
.21 debit (1.73, 1.01, .50). The result is the current position
(black). The problem isn't just that I could have done both as a
single 4 legged trade and saved commissions. I simply should have
done only the second trade and the result would have extended the
original condor (blue graph). Now I am less protected against a
drawdown with no upside advantage.

I have mentioned in the past that a tool to quickly compare expiration
P/L graphs of different modifications of a position (maybe up to 10
different colored graphs) would be a boon to traders. I don't think
it would be very difficult for a programmer to do but I still don't
know of any such tool readily available. Currently I am often too
lazy to use what tools I have to make the comparisons since it is
cumbersome to do.

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