We’re entering the following position for November expiration: Day limit order Buy to open 2 SPY Dec 137 calls Sell to open 2 SPY Nov 133 calls Buy to open 2 SPY Dec 119 puts Sell to open 2 SPY Nov 125 puts for a net debit of $0.15 or better. Note that 2 contracts is our base position for double-diagonals. Trading whole-number multiples of the base-position size ensures that adjustments will not result in…
Wednesday, October 12, 2011
We’re opening the following position to hedge our upside delta and vega risk: Day limit order Buy to open 2 SPY Oct 130 calls Sell to open 4 SPY Oct 124 calls Buy to open 2 SPY Oct 118 calls for a net debit of $2.81 or better. Note that the 2 contracts specified above for the wings represent the number of contracts allocated to each leg of our core, double-diagonal position. Analysis: The resulting risk…
Monday, October 10, 2011
We’re adjusting the SPY October 93/103/113 put butterfly hedge to create a theta-positive position with delta closer to neutral. We’re accomplishing this with the following iron-condor trade: Day limit order Buy to close 1 SPY Oct 103 put Sell to open 1 SPY Oct 113 put Buy to open 1 SPY Oct 127 call Sell to open 1 SPY Oct 125 call for a net credit of $0.97 or better. Note that the 1 contract…
Monday, October 10, 2011
A mostly bullish week triggered a signal to unwind our downside October butterfly hedge Friday in the final 45 minutes of trading, only to reverse that signal within the subsequent half-hour. With SPY now back well over $117 in pre-market trading this morning, it looks like we’ll be going through with that adjustment today. Note that we’re planning to roll the butterfly into an iron condor, which will require approximately $500 in additional margin per contract. As of Friday’s close,…
Monday, October 3, 2011
We’re hedging downside risk with the following butterfly position: Day limit order Buy to close 1 SPY Oct 113 put Sell to open 2 SPY Oct 103 puts Buy to open 1 SPY Oct 93 put for a net debit of $2.34 or better. Note that the 1 contract specified for the wings of the butterfly represents half the number of contracts in each leg of our core double-diagonal position. Analysis: As stocks continue to get…
Monday, October 3, 2011
A sharp sell-off in the last 15 minutes of Friday’s session left the S&P with a 2.5% loss on the day and tipped key technical indicators bearish again. A close below 1120 would have the bears crying “head-and-shoulders breakdown”, and a breach of 1100 would suggest that there’s more damage to come. But while it’s important to be aware of where the market could be headed, our main focus, as direction-neutral option-sellers, is hedging risk…
Friday, September 2, 2011
As those members who follow me on Twitter (@volatilitytrade) and/or Facebook (Volatility Trader) already know, I’ve been taking my summer vacation this week (or trying to, at least). Fortunately, SPY has made its way back to exactly where we want it to be for our September positions ahead of the weekend,…so this week’s update will be brief and to the point. At mid-day, our unrealized return was 0.5% of total capital at risk, or about break-even…
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 11, 2011
It’s been another wild week, as the market tries to find a bottom amid one string of bad news after another. Through disciplined adherence to our strategy rules, though, we’ve managed to keep risk under control without sacrificing a great deal in terms of profit potential. On the other hand, our unrealized return is quite another matter. As of this writing, our August portfolio is showing a loss on total capital at risk in the 20% range. Model Portfolio return,…
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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Friday, October 28, 2011
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