The Entrepreneur Forum | Financial Freedom | Starting a Business | Motivation | Money | Success

Welcome to the only entrepreneur forum dedicated to building life-changing wealth.

Build a Fastlane business. Earn real financial freedom. Join free.

Join over 80,000 entrepreneurs who have rejected the paradigm of mediocrity and said "NO!" to underpaid jobs, ascetic frugality, and suffocating savings rituals— learn how to build a Fastlane business that pays both freedom and lifestyle affluence.

Free registration at the forum removes this block.

Options - Iron Condors, Vertical Spreads, Flys

Anything related to investing, including crypto

Edge

Contributor
FASTLANE INSIDER
Summit Attendee
Speedway Pass
User Power
Value/Post Ratio
19%
Sep 20, 2007
345
66
47
Kansas
Curious, why do you expect the markets to stabilize over the next few weeks?

My idea of relative stability is not selling off another (and staying down) another 10% within the next 6 weeks.

My position was going to be on the RUT (Russell 2000 index). Since we were knocked down off the 50dma on 2/27, we are down almost 10%. I was looking for a short put strike around 580 which would represent a 19% drop from the 2/27 close. Options are priced based on where the market thinks the price can go based on volatility and time to expiration, not by where it was last week.

Basically the position has a profit zone of greater than 1 standard deviation to the downside. I think there is an edge since we have already sold off so much and “Probability & Statistics 101†tells us that any move greater that 1 std deviation has a high probability of bouncing back within range.

Anyway, I put in an order but it didn’t get filled because I was asking too much for it. I figured yesterdays selling would pump up the premium to the price I was asking, but it was a pretty controlled selling on just average volume. So, I’m watching the rally from the sidelines today (actually have JOB stuff to do) and I’ll look at the market again on Wednesday. Not sure if I’ll still be looking for an iron condor, depends on what volatility looks like.
 
Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

imirza

Contributor
User Power
Value/Post Ratio
39%
Jul 29, 2007
224
88
103
Crazy move today huh ?

I am short the SRS and SKF March 125 and 130 calls ( covered) while I am long the 100 and 105 puts. So as long as we don't move up too fast by next Friday or move down too quick I should be good with all my Puts and Calls.

I would think we have a few hundred points upside in the Dow. 12457 is the 50 day moving average and we are likely to encounter strong resistance there. Next week looks to be ideal for buying puts( or in my case selling puts on the inverse ETFs SKF SRS ) especially on Tuesday around the FOMC announcement. Bear market rallies can be brutal and todays was ample evidence.
 

Edge

Contributor
FASTLANE INSIDER
Summit Attendee
Speedway Pass
User Power
Value/Post Ratio
19%
Sep 20, 2007
345
66
47
Kansas
Crazy move today huh ?

I am short the SRS and SKF March 125 and 130 calls ( covered) while I am long the 100 and 105 puts. So as long as we don't move up too fast by next Friday or move down too quick I should be good with all my Puts and Calls.

I would think we have a few hundred points upside in the Dow. 12457 is the 50 day moving average and we are likely to encounter strong resistance there. Next week looks to be ideal for buying puts( or in my case selling puts on the inverse ETFs SKF SRS ) especially on Tuesday around the FOMC announcement. Bear market rallies can be brutal and todays was ample evidence.

You and I think a lot alike. I'm also waiting for a day next week to find some resistance on weaker volume. I'll sell call spreads into it.

IMHO - this is nothing more than a short term rally in the context of a longer term downtrend.
 

imirza

Contributor
User Power
Value/Post Ratio
39%
Jul 29, 2007
224
88
103
That was some volatility today. Crazy intraday swings. Up 50 on the Dow to down 300 to down 80 to down 300 to down 100 to down nearly 200.
I have found that one of the best ways to play this volatility ( apart from using options) is to use leveraged ETFs . I use SKF and SRS to short the market and QLD to go long. The swings in these ETFs are so wild that you can keep positions in all three of them and sell the bearish ones SKF and SRS when the market has made a big drop ( like today during the Bear Sterns announcement) and sell the bullish QLD when the market spikes up like at the open today . When the market is overly bearish I sell SKF and SRS while adding to QLD and when the market gets overextended I sell QLD while adding SKF and SRS. Buy the dips and sell the spikes.
 
Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

Edge

Contributor
FASTLANE INSIDER
Summit Attendee
Speedway Pass
User Power
Value/Post Ratio
19%
Sep 20, 2007
345
66
47
Kansas
That was some volatility today. Crazy intraday swings. Up 50 on the Dow to down 300 to down 80 to down 300 to down 100 to down nearly 200.
I have found that one of the best ways to play this volatility ( apart from using options) is to use leveraged ETFs . I use SKF and SRS to short the market and QLD to go long. The swings in these ETFs are so wild that you can keep positions in all three of them and sell the bearish ones SKF and SRS when the market has made a big drop ( like today during the Bear Sterns announcement) and sell the bullish QLD when the market spikes up like at the open today . When the market is overly bearish I sell SKF and SRS while adding to QLD and when the market gets overextended I sell QLD while adding SKF and SRS. Buy the dips and sell the spikes.

I've just been catching the summary view of the volatility these past few days, been pretty busy with JOB stuff. The volume and wide bid/ask as kept me away from all these ultra leveraged and inverse ETFs (options at least, I do buy the TWM underlying for hedging), but I can see the liquidity is getting better. When volatility is high and you expect it to die down, iron condors are great plays for decreasing volatility. You sell premium on both sides while the volatiliaty has the premium pumped up and as the volatility dries up, the premium you sold gets profitable really quick.
 

Edge

Contributor
FASTLANE INSIDER
Summit Attendee
Speedway Pass
User Power
Value/Post Ratio
19%
Sep 20, 2007
345
66
47
Kansas
Haven’t updated for awhile, so here are my thoughts and what I’ve been up to…

Looks like today is the day that the VIX (S&P volatility index) finally gets back above 25. That means that if you are a premium seller, your 3 month vacation is over. I do think that you have to change the way you look at the VIX these days as people are using other instruments (ultra short ETFs) rather than put buying in times of increased fear in the market.

I haven’t really been on vacation during the past 3 months, I’ve been fighting the counter trend rally with skip-strike call butterflys, and increasing my put calendar positions. Last week I opened up my fist iron condor in a few months, it was a negative delta, 30% probability, July expiration position. The put calendars hedged it perfectly during this sharp move down and I still plan on holding both through expiration.

Like I said, I’m looking for more iron condors today and tomorrow. Specifically, August expiration, negative delta, about 30-35% probability. I’ll keep or roll my existing put calendars as a volatility hedge, but not looking to add more put calendars because the far month premium for US equities is too expensive now. I’m possibly going to do something a little different to hedge the upside of my iron condor this time. The only thing I see that could make this market rally strong enough to threaten my call strikes, would be a drop in oil or sector rotation from oil to equities. So, I’ll be looking for a 2 or 3 month put calendar in USO (oil ETF), probably next week.

You can probably see that the story that has really been working for me is buying put calendar spreads during low volatility, and selling iron condors during high volatility. I’ll keep with this strategy as long as the primary trend of the market is down.
 

Post New Topic

Please SEARCH before posting.
Please select the BEST category.

Post new topic

Guest post submissions offered HERE.

Latest Posts

New Topics

Fastlane Insiders

View the forum AD FREE.
Private, unindexed content
Detailed process/execution threads
Ideas needing execution, more!

Join Fastlane Insiders.

Top