Option strategies

This is a discussion on Option strategies within the Futures & Options forums, part of the Markets category; FWIW: Sold 5175Jul Calls at 18 (currently 15-16). I am rubbish at calling market tops but I might scale in ...

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Old Jun 17, 2005, 3:37pm   #1
 
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FWIW:
Sold 5175Jul Calls at 18 (currently 15-16). I am rubbish at calling market tops but I might scale in if we continue to rise,on the basis that 5150 is a huge Fib level . On the other hand,if we see another 100 point drop on Monday I'll be selling puts. I really would NOT want to be long this market,as option prices are saying we are headed south. As usual the market confuses,frustrates,delights,but ultimately puts food on the table.
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Old Jun 17, 2005, 5:12pm   #2
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Windlesham...

I've also been writing FTSE Calls for July. I wrote some 5125's last week which paid 22 and then I wrote some 4925 Puts (during weakness earlier this week) which paid 18. Today I wrote some 5175 Calls but did so a tad early and only got 12.

Very strange today on FTSE if you ask me.

Steve.
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Old Jun 17, 2005, 10:30pm   #3
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Wind, Steve,
You 2 guys are brave in writing naked so close to mrkt levels.
I'm xpecting a pull back, for this reason i bought some julys 4925 puts at 9 pts. [they are now showing 13 to buy] I say this cause I believe the mrkt is ripe for profit taking.

Fc,
I like your catastrofic stops Hows the margin doing on those shorts? May i suggest a small tip? dont add to ur shorts just BUY some july puts insted, there is no margin to pay at all.

Fantastic week end to all!

Bull

Last edited by bulldozer; Jun 17, 2005 at 10:49pm.
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Old Jun 18, 2005, 7:20am   #4
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Bulldozer....

Yes, we are quite close to market levels with those Calls but I've personally got a 40 point premium when you consider the Puts which I've also written. I also play the futures intra-day in a roughly corresponding size. Today was good as I managed to scalp a further 23 points on the upside move. This means that 'psychologically' I now see my breakeven level up at 5188. If we didn't happen to get that high then I would 100% hedge the Calls and then write some further Calls for a higher level again.

I would suggest that your Puts are rising in value because the implied volatility is rising. FTSE has been a bit of a sleeping dog of late so a 50 point intra-day move was always going to push the price of all options higher.

Have a good weekend,
Steve.
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Old Jun 18, 2005, 10:58am   #5
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Originally Posted by stevespray
Bulldozer....

Yes, we are quite close to market levels with those Calls but I've personally got a 40 point premium when you consider the Puts which I've also written. I also play the futures intra-day in a roughly corresponding size. Today was good as I managed to scalp a further 23 points on the upside move. This means that 'psychologically' I now see my breakeven level up at 5188. If we didn't happen to get that high then I would 100% hedge the Calls and then write some further Calls for a higher level again.

I would suggest that your Puts are rising in value because the implied volatility is rising. FTSE has been a bit of a sleeping dog of late so a 50 point intra-day move was always going to push the price of all options higher.

Have a good weekend,
Steve.
Steve,
Thanx 4 ur reply.
What u have is in fact a Short strangle [naked] very close for comfort. This is not so bad if ur doing just a few, i hope u dont have too many.?
If mrkt drops by more than 80 pts u'll be on margin call, if it continues to drop the marg will get more heavier [larger] if this happens i supose u can always convert into a Put bull sprd by using the prem's uve taken and close out the calls for peanuts.
Why not do a short naked strangle far out [say 3-4 mths away] with the strikes far OTM for more prem's and less stress and hassle with less adjustments and a saving on commissions and with less marg and more contracts = more profits and more free time to enjoy life away from the mrkts.
Just my opinion 4 what its worth

Bull
Let the theta work for you while you enjoy life. Milk the THETA and STRANGLE the MM
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Old Jun 18, 2005, 10:59am   #6
 
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Windlesham1 started this thread At last -some sensible option players. vol has been as low as 7% on P&Cs I have a long put spread,as I see support at 4900 and massive support at 4800. hoping for a good week for selling puts,but happy to sell more calls. I just trade what I see,but if I were asked to comment on this market,I'd say this is panic buying,and those champions of the losing trade, the fund managers, have been told to 'Get on with it' . Volatility is much better on SPX,but of course margin is so much higher,to discourage the small players.
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Old Jun 18, 2005, 11:12am   #7
 
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Windlesham1 started this thread dozer: Never write far dated stuff-it'll bite yer bum. You can adjust near month,and generally roll up/down/and take in premium-eg sell 5 near month and they go against you,sell 10 or more in next month and so on -it's all a question of who has enough margin. Sadly for us there are now too many option writers-I've been doing this for some years,and watched many players get blown up,and survived a few horrible times myself. Happy trading.
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Old Jun 18, 2005, 11:20am   #8
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================================================== ======
Your quote Steve,
I also play the futures intra-day in a roughly corresponding size. Today was good as I managed to scalp a further 23 points on the upside move.
================================================== ======
It seems to me that ur using ftrs as a form of hedge on ur options positions, if u make a loss on the ftrs this will wipe away all the profits generated from the Options strangles and your back to square one again with the broker as the real winner having pocketed all those commissions.

Just my opinion 4 what its worth

Bull
Let the theta work for you while you enjoy life. Milk the THETA and STRANGLE the MM [/QUOTE]
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Old Jun 18, 2005, 11:31am   #9
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Quote:
Originally Posted by Windlesham1
dozer: Never write far dated stuff-it'll bite yer bum. You can adjust near month,and generally roll up/down/and take in premium-eg sell 5 near month and they go against you,sell 10 or more in next month and so on -it's all a question of who has enough margin. Sadly for us there are now too many option writers-I've been doing this for some years,and watched many players get blown up,and survived a few horrible times myself. Happy trading.

Wind,
Writing far dated OTM Strangles is more safer than the near dated ones. If ur near dated go ATM or ITM ur marg will go thro the roof and in most cases u will NOT be allowed to adjust until the marg has been settled first.
Are u aware that writen puts on NEAR month carries more marg than a far dated at same strike? You will be surprised that MANY Option players DONT know this fact! even my broker cant xplain why this is. You will only get that answer from the MM.

Bull
Let ur hedge be ur edge
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Old Jun 18, 2005, 11:51am   #10
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I'd make two points here....

1) If you get into writing options then it is very important that you are well margined. I generally do just a few contracts at a time. Doing it this way you get a good balanced feel for the market. If things dont quite go your way then there is plenty of scope for adjustments / hedging etc. The key is to remain relaxed and not under pressure.

2) I find that my trading personality is hugely bias towards psychology. On that basis I like to look at things as simply as possible. This is why I am drawn to writing strangles. Firstly you have the protection of the range and then you have the further protection of any scalping / hedging you can pull off. When I manage to scalp a few points I psychologically add these to my premium and thus my profitable expiry range generally gets bigger and bigger.

Bulldozer - You are correct, I am using the futures to hedge the exposure on the At The Money Calls. What you have stated isn't entirely correct. A loss on the Futures positions does not wipe away ALL profits, it erodes profits as far as the future moves against me (if we are inside the expiry range) and it 'locks' my position if we are outside the expiry range. This is another benefit of trading the way that I do - as my profitable expiry range grows, the point at which I will need to be hedged will move further and further away from the strike price of the Call / Put. This means that there is far less chance of getting a nasty whip.
In reality, and based on experience, I am always prepared to lose as much as I stand to gain. So, given the example of a strangle on FTSE which has paid me 40, I am prepared to drop 40 before I get any kind of desire to hedge the whole position out - again this prevents whip. At the end of the day it's all down to personal psychology and how you decide to look at your trading / positions. Obviously, at present, the strangle writers will technically be showing a loss simply because the volatility is rising and therefore there is a blanket increase on the value of all the short (written positions).

Steve.
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Old Jun 18, 2005, 6:09pm   #11
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Steve,
If both prems = 40 pts and ur ftrs hedge loses 40 pts ur back to square one! Plus the ftrs Delta is greater than the Options Delta. Also if one leg goes deep ITM ur marg will be increased. Does ur broker allow U to adjust/convert position without first settling the marg issue?

Bull
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Old Jun 18, 2005, 6:28pm   #12
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Quote:
Originally Posted by Windlesham1
dozer: Never write far dated stuff-it'll bite yer bum. You can adjust near month,and generally roll up/down/and take in premium-eg sell 5 near month and they go against you,sell 10 or more in next month and so on -it's all a question of who has enough margin. Sadly for us there are now too many option writers-I've been doing this for some years,and watched many players get blown up,and survived a few horrible times myself. Happy trading.
Wind,
How do you come to the conclusion that far dated OTM short strgls will bite ur bum? If this position bites my bum? i would hate to think what an ATM short near dated strgl will do I think it will swallow ur whole account and bite ur neck Especialy if it goes ITM

Surely you must agree that the Far dated OTM short strgl is much safer than the one ur suggesting? and it carries LESS marg.
The Delta will be working against you on the near dated position cause ur already ITM and my position has not become ITM. [my strgl position is far dated and far OTM]

Far dated strgls can also be adjusted in the same way as u've suggested! there is no difference whats so ever between the two. Infact my ones dont need as much adjusting as they were far OTM with plenty of time left than yours and I'm saving on commisions too.
Would ur broker allow u to adjust before you settle the marg?


Just my honest opinion guys Just take a mo and think pls.

Bull

Last edited by bulldozer; Jun 18, 2005 at 6:50pm.
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Old Jun 18, 2005, 6:52pm   #13
 
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Quote:
Originally Posted by bulldozer
Wind,
How do you come to the conclusion that far dated OTM short strgls will bite ur bum? If this position bites my bum? i would hate to think what an ATM short near dated strgl will do I think it will swallow ur whole account and bite ur neck Especialy if it goes ITM

Surely you must agree that the Far dated OTM short strgl is much safer than the one ur suggesting? and it carries LESS marg.
The Delta will be working against you on the near dated position cause ur already ITM and my position has not become ITM. [my strgl position is far dated and far OTM]

Just my honest opinion guys Just take a mo and think pls.

Bull
Hi Bull (John)
Presume you wouldn't let far dated strgls run to expiry if they start to look suspect?
Or would you hedge using something else ?
I've tried to convince a pal to write OTM further out in time, but he seems perturbed by the prospect of having to buy them back (Comms + Spread).
He is used to having near dated OTM writes run to expiry and keeping all the premium.
However, he took a hit on Friday on 5075 calls. (Some serious manipulation going on imo.)

Glenn
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Old Jun 18, 2005, 7:05pm   #14
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Glen,
Are u the one also known as GMT/novice that came to the football club hse some months ago? and ate all my food and drinks?
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Old Jun 18, 2005, 8:22pm   #15
 
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Originally Posted by bulldozer
Glen,
Are u the one also known as GMT/novice that came to the football club hse some months ago? and ate all my food and drinks?
Not quite. I couldn't finish the Roasted Loin of Veal with Braised Leek and Crisp Pancetta & Café au Lait Sauce, Anna Potatoes and Baby Vegetables.
Must have been because of the gallon of Newcastle Brown I had

So what do you think about the far dated strgls ?
Glenn
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