Buyers have found their footing and are holding SPY above key intraday moving-average support. We’re taking this opportunity to place the following order: Day limit order Buy to open 2 SPY Nov 130 calls Sell to open 2 SPY Oct 124 calls Buy to open 2 SPY Nov 107 puts Sell to open 2 SPY Oct 113 puts for a net credit of $0.18 or better. Note that 2 contracts is our base position for…
Tuesday, August 30, 2011
We’re hedging our upside delta risk with the following trade: Day limit order Buy to open 1 SPY Sep 135 call Sell to open 2 SPY Sep 128 calls Buy to open 1 SPY Sep 121 call for a net debit of $2.54 or better. Note that the 1 contract specified for the wing strikes represents half the number of contracts allocated to our current September double-diagonal position. Analysis: We’re taking a conservative approach with this…
Tuesday, August 23, 2011
Even with the VIX down more than 10% this afternoon, implied volatility for SPY options is still well over 35%. When IV (and thus volatility risk) is at an elevated level, our strategy calls for a vega-neutral, double-diagonal trade. We’re placing the following order for September expiration: Day limit order Buy to open 2 SPY Oct 128 calls Sell to open 2 SPY Sep 122 calls Sell to open 2 SPY Sep 111 puts Buy to…
Thursday, August 4, 2011
SPY recovered a bit after the last trade notice went out, but it’s resumed its fall now and confirmed our risk-management signal. With SPY August implied volatility now over 30%, we’re selling (vol) into that spike by opening the following butterfly hedge: Day limit order Buy to open 2 SPY Aug 125 calls Sell to open 4 SPY Aug 119 calls Buy to open 2 SPY Aug 113 calls for a net debit of $1.55† or…
Tuesday, August 2, 2011
Closing the strangle left us with an excess of downside exposure, so we’re adjusting our portfolio delta with the following butterfly hedge: Day limit order Buy to open 3 SPY Aug 132 puts Sell to open 6 SPY Aug 126 puts Buy to open 3 SPY Aug 120 puts for a net debit of $2.10† or better. Note that here, 3 contracts represent 1½ times the number of contracts allocated to our initial, Aug/Sep double-calendar (DC#1; 131/136 put/call).…
Thursday, July 28, 2011
We’re opening the following position to hedge tail risk through the debt-ceiling crisis: Day limit order Buy to open 2 SPY Aug 140 calls Buy to open 2 SPY Aug 120 puts for a net debit of $0.53 or better. Note that the 2 contracts specified above represent the same number of contracts currently allocated to SPY Aug/Sep Double-Calendar #1. Analysis: This is the first time we’ve made a strangle part of our official portfolio, as opposed…
Wednesday, July 27, 2011
With SPY implied volatility spiking to its highest level in six weeks, we’re entering a (short-vega) butterfly to hedge our delta bias, as follows: Day limit order Buy to open 2 SPY Aug 135 puts Sell to open 4 SPY Aug 129 puts Buy to open 2 SPY Aug 123 puts for a net debit of $1.73 or better. We’re allocating a dollar amount to this trade equal to the allotment for each regular calendar-spread position.…
Thursday, July 21, 2011
With SPY up $2.00 this afternoon, we’re opening a second August/September double-calendar, as follows: Day limit order Buy to open 2 SPY Sep 138 calls Sell to open 2 SPY Aug 138 calls Buy to open 2 SPY Sep 135 calls Sell to open 2 SPY Aug 135 calls for a net debit of $1.78† or better. Note that we’re using the calls for both strikes in this double-calendar. And, as usual, 2 contracts is our…
Tuesday, July 19, 2011
Both the S&P 500 Index and the VIX are in limbo—but the sooner we get a trade on the books, the more chance we have to profit from time-decay at relatively low gamma. We have no clear indication of where implied volatility is headed, but the following trade has a risk profile well-suited for current conditions: Day limit order Buy to open 2 SPY Sep 136 calls Sell to open 2 SPY Aug 136 calls Buy to…
Friday, July 8, 2011
We’re hedging our downside risk into the weekend with the following position: Day limit order Buy to open 4 SPY Aug 132 puts Sell to open 4 SPY Jul 132 puts for a net debit of $1.52† or better. Note that 4 contracts is our base position for single-calendars. Trading whole-number multiples of the base-position size ensures that adjustments will not result in unbalanced positions. In addition, in order to come as close as possible to matching our…
Jared Woodard is a registered commodity trading advisor who specializes in trading volatility as an asset class. With over a decade of experience trading options, futures ... Read More
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Wednesday, September 28, 2011
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