tech_trader
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Has anyone tried the strategies from Capturing Theta?
Options Strategy
- Thread starter tech_trader
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Tech,
Short theta is no good if implied volatility increases.
A short theta position is best set up at high implied volatility, not low volatility.
The amount gained by short theta, ie the time value, could be erased by an adverse movement exceeding the time value on the underlying.
However, there may be strategies which can address all these shortcomings (I can't think of any off the top my head. Vertical spreads, possibly?).
I did a Google search for “short theta”. Look at this excellent explanation re the Greeks and theta (time) and its relation to delta, gamma, vega, p85-100:
Fundamentals of the Options Market - Google Book Search
Grant.
Short theta is no good if implied volatility increases.
A short theta position is best set up at high implied volatility, not low volatility.
The amount gained by short theta, ie the time value, could be erased by an adverse movement exceeding the time value on the underlying.
However, there may be strategies which can address all these shortcomings (I can't think of any off the top my head. Vertical spreads, possibly?).
I did a Google search for “short theta”. Look at this excellent explanation re the Greeks and theta (time) and its relation to delta, gamma, vega, p85-100:
Fundamentals of the Options Market - Google Book Search
Grant.
It would seem that many of the "systems" that are sold would take advantage of theta but added to the other benefits they claim.
I have used OPTIONSMART.COM : 3D Option Trading Strategies based QQQQ trading for over 3 months and the results have been quite good. They charge a reasonable amount for the service which offers "auto-trading". You do nothing and they advise the trades which are carried out by a recognised broker. You can change your settings with immediate effect.
So far so good. My USD10,000 has got to $15,200 in 3.5 months but at a time when QQQQ has risen by 10%. I am yet to experience how they do when there is a change of sentiment.
I probably could have done better with CFDs on NDX but at least my emotions cannot quickly interfere with the decisions made on my behalf.
I have used OPTIONSMART.COM : 3D Option Trading Strategies based QQQQ trading for over 3 months and the results have been quite good. They charge a reasonable amount for the service which offers "auto-trading". You do nothing and they advise the trades which are carried out by a recognised broker. You can change your settings with immediate effect.
So far so good. My USD10,000 has got to $15,200 in 3.5 months but at a time when QQQQ has risen by 10%. I am yet to experience how they do when there is a change of sentiment.
I probably could have done better with CFDs on NDX but at least my emotions cannot quickly interfere with the decisions made on my behalf.
evergreen3
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Any updates from anyone on OptionSmart? I'd like to give it a try.
option911
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Theta positive strategies can be pretty effective. Premiums are SUPER high right now, but the market has alot of speed. Just make sure you have a good plan in place
Mark
Option 911 Blog
Mark
Option 911 Blog
Hello traders,
It seems this thread has gone quiet... I have recently subscribed to optionsmart QQQQ product and first couple of trades were ok but then they closed (rolled) position at a loss of $1500 (20 contracts per leg).
The interesting thing it is not reflected on their records as it is rolled. Some of their positions are rolled several times and although they mention it in their records it does not show that if position is rolled 3 times they lost $1500 x 3. What puzzles me is how this loss of $1500 gets recuperated by rolling if average win is c. $200? Can anyone shed some light on this for me?
Nik
It seems this thread has gone quiet... I have recently subscribed to optionsmart QQQQ product and first couple of trades were ok but then they closed (rolled) position at a loss of $1500 (20 contracts per leg).
The interesting thing it is not reflected on their records as it is rolled. Some of their positions are rolled several times and although they mention it in their records it does not show that if position is rolled 3 times they lost $1500 x 3. What puzzles me is how this loss of $1500 gets recuperated by rolling if average win is c. $200? Can anyone shed some light on this for me?
Nik
evergreen3
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I've noticed the same thing the last 2 months. I don't expect a healthy profit every month, but my balance is now where it was 60 days ago. Losing over $1000 on a rolled option really hurts the profit margin. I'm going to see how things go in July and if I'm still not moving forward (as I was the first two months), I will terminate my agreement. Which is too bad as I really thought this was going to be a long-term subscription.
hello again,
I have been reading through some interesting threads here. I liked cash C.O.W discussion where I got a feeling that recklessness will be punished. There was some advises there that stired an option trader in me and made me open some books on options. So here are some questions for experts:
Q1 Where one can get numbers for volatility (implied and real) for various timeframes. Is ib any good for this?
Q2 There are implied and real volatility. (implied is calculated through option pricing model - please correct if I am on a right track). They sometimes diverge/converge and I wonder how to use that divergence to enrich oneself when selling a put for instance?
I have been reading through some interesting threads here. I liked cash C.O.W discussion where I got a feeling that recklessness will be punished. There was some advises there that stired an option trader in me and made me open some books on options. So here are some questions for experts:
Q1 Where one can get numbers for volatility (implied and real) for various timeframes. Is ib any good for this?
Q2 There are implied and real volatility. (implied is calculated through option pricing model - please correct if I am on a right track). They sometimes diverge/converge and I wonder how to use that divergence to enrich oneself when selling a put for instance?
tripleogstar
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Q1) IMplied vol data may be difficult to get hold of (reliable and accurate data anyway), unless you can creat an option pricing model on excel and run the market prices through that to get implied vol.
For realised vol you can calculate that yourself, not difficult.
Q2) well if you think implied vol is way off the mean of realised vol in a particular time frame you can trade that volatility. So if you think implied vol will fall you want to be short vega and so short options.
tripleogstar,
thanks for your answer.
I am currently reading Lenny Jordans book on options and read Volatility part a few times already coz I am trying to quantify probabilities in my head.
I understood that if volatility is 20% for a product then it is for year. So if one wants to calculate volatility for 20 days then you have divided 20 by 12 to get to c 1.7% vol? And then how would you arrive at, say, 2 standard deviations from its current price within next 20 days?
If price now is 100 then 2% vol in next 20 days is 98 and 102 for 1 st dev?
Is this correct calculation?
thanks for your answer.
I am currently reading Lenny Jordans book on options and read Volatility part a few times already coz I am trying to quantify probabilities in my head.
I understood that if volatility is 20% for a product then it is for year. So if one wants to calculate volatility for 20 days then you have divided 20 by 12 to get to c 1.7% vol? And then how would you arrive at, say, 2 standard deviations from its current price within next 20 days?
If price now is 100 then 2% vol in next 20 days is 98 and 102 for 1 st dev?
Is this correct calculation?
tripleogstar
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volatility is a 1 sd measure. the actual calculation is volatility/square root of time mulitplied by current price of underlying.
A Dashing Blade
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where time = number of trading days NOT calander days
