Archive | Trades

Trading Call Diagonal Spreads on BofA’s 10 Stocks for 2014

Tuesday, December 10, 2013

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Bank of America Merrill Lynch's equity and quant strategy team publishes a list of stocks each year, choosing one from each GICS sector. The stocks are selected based on quantitative screens and...

Bonus Trade: SPY November Butterfly

Monday, November 8, 2010

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Our paid newsletter strategies are predicated on the expectation of mean-reversion (with risk-management rules for containing losses in trending markets)—in implied volatility as well as in price of the underlying. But when we find ourselves in a strong bullish trend, it's often desirable to both increase delta and decrease vega. One great way to do this is with butterflies...

February Monthly Review

Tuesday, March 3, 2009

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February 2009 was one of the most profitable months ever for our newsletter.  We were able to enter several positions at optimal moments in the cycle, and a cooperative market allowed us to let some trades expire worthless. Performance Comparison S&P 500: -9.42% Dow Jones Industrials: -11.06% Russell 2000: -11.90% S&P 500 Covered Call Fund: -11.89% Condor Options VAMI: 3.10% Note: the period measured is from expiration to expiration. Our updated Performance page compares the value-added…

Volatility As An Asset Class (Book Review)

Monday, November 3, 2008

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Volatility as an Asset Class: A guide to buying, selling, and trading third-generation volatility products, ed. Israel Nelken (London: Risk Books, 2007). Israel Nelken, one of the members of the CBOE New Products Committee, has collected 11 essays on the theory and practice of trading volatility as a distinct asset class. The first half of the book examines the measurement of volatility and ways to employ volatility models on several traditional underlying products. The second half is devoted to discussion…

June Monthly Review

Saturday, June 21, 2008

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We feel like we’re saying this every month, but it sure feels nice not to have any skin in the game come expiration day.  Options expiration surely had something to do with the intensity of today’s selloff, and this was a textbook case of why we never hold positions into expiration. The fancy-pants phrase for the influence options expiration had today is “negative gamma.”  The practical significance of that phrase is that when we gapped down at the open, lots…

VIX Wrapup, Variance Index, Very Uncertain Markets

Thursday, May 22, 2008

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Our VIX post from yesterday got picked up by two of the deans of options blogging, Adam Warner (shown) and Bill Luby: The Big Question for the VIX VIX Jumping the Shark? VIX and VIX (and thanks also to Abnormal Returns for the link) Not much to add in response to all this, except to agree that the increased coverage of this one instrument doesn’t change the fact that it still definitely serves a purpose. When…

May Monthly Review

Saturday, May 17, 2008

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We’re making some changes to our monthly review – hopefully the structure of this new format will make it easier to follow along and compare our strategy with the relevant benchmarks. Going forward, we’ll include the following items in each monthly review: 1) a quick-glance overview of our monthly performance, in the chart at right; 2) a performance comparison of our positions for the month vs. the SPX, DJIA, and RUT, plus BEP, which is an S&P 500 Covered Call…

8 Hedging Ideas for Iron Condors, Part 1

Saturday, April 26, 2008

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What should you do when the underlying moves against an iron condor position you have open? (For example, if you’re a member, you may have noticed that one of our DIA trades for May expiration is looking threatened by the recent price action in the index.) Any time this situation arises, people will always write in to ask about how they can “adjust” or “fix” the trade if the market continues to be uncooperative. It’s an understandable impulse to want…

Participate in the Rally with a Broken Call Condor

Wednesday, April 9, 2008

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Does this describe you? You’d like to participate in any nice rally that comes our way over the next month; You’d like to avoid any and all downside risk in case the rally never comes and indexes stay flat or plunge; You’d like to get paid just for hanging around and waiting to see what happens. Here’s a funky little way to do exactly those things. This trade has all the features that long-theta traders love, including long…

Friday Morning Data

Friday, April 4, 2008

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The unemployment and nonfarm payroll numbers have just been released, and they were worse than expected.  Reaction in the futures was negative: just seconds before the data was out, Dow futures spiked to +70, and are now sitting at about -20.  Rick Santelli (the only credible person on CNBC): “This is the worst headline jobs number since March 2003.” But as we mentioned last night, even though there’s a lot of chatter about how important these data points are,

Biding Time

Thursday, April 3, 2008

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As yesterday’s pause showed once again, rallies continue to run into profit-taking and uncertainty. One day the Dow is up 400 points; the next, sideways fizzle (if not down 300 points). We condor traders don’t care how long the market jerks back and forth – the weaker the trend, the better. But, as we noted in yesterday’s post, the iron condor isn’t the only strategy we can use in sideways markets. Members who have been following…

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Jared Woodard specializes in trading volatility as an asset class. With over a decade of experience trading options and other volatility products ... Read More

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