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Stock Picks and Trading · TRADING IRON CONDORS - FUN WITH OPTIONS
Kevin_in_GA
msg #120728
6/13/2014 12:10:27 AM

Today we saw a reversion back to within the IC "wings" for IWM. The call spread delta is now at 0.30 with only one day remaining before expiration. That means there is a 70% chance of this closing profitably where a few days ago it was only 38%. The ICs for both SPY and GLD are all at 0.01 or 0.00 guaranteeing a profit upon option expiration.

I will try to post another set of actual trades tomorrow, as I have been traveling for work and not been looking at the market so much. The new ICs might be worth a little less because there are fewer days until expiration, but that helps to reduce risk.




Stock Picks and Trading · TRADING IRON CONDORS - FUN WITH OPTIONS
Kevin_in_GA
msg #120696
6/11/2014 7:11:28 PM

Of course. Lots of traders do this to limit risk.

Based on today's action, the deltas on everything except the IWM call spread are less than 0.1, and several are flat at 0.00. At the present price for IWM, the option would actually expire for a small profit because of the compensating profit from the put spread. At the moment it is down about $775 but time decay of the option will really accelerate into Friday at the close.

The IWM call spread is at a delta of 0.52, so it is a 50/50 chance of staying aligned with the original stats. Let's see how it plays out ...

General Discussion · Stocks that TREND and do not CONSOLIDATE at 0
Kevin_in_GA
msg #120570
6/9/2014 8:57:15 PM

SF data and filters won't show you intraday consolidation.

Stock Picks and Trading · TRADING IRON CONDORS - FUN WITH OPTIONS
Kevin_in_GA
msg #120569
6/9/2014 8:55:13 PM

Well, pretty much. This past week has been a statistical anomaly, and when you bet on statistical probabilities you don't like anomalies!

Stock Picks and Trading · TRADING IRON CONDORS - FUN WITH OPTIONS
Kevin_in_GA
msg #120563
6/9/2014 7:16:13 PM

Well, the deltas aren't pretty, but to pull the plug now on the IWM trade would be to accept about a $15000 loss. I'd rather ride it out and risk losing the full $2000 versus no chance at all of it expiring profitably. Again, a great example of IC pluses and minuses in my first posted trade here. Always happens ...

The SPY IC is getting a little closer than I like as well, while the GLD put spread will easily close profitably.

Stock Picks and Trading · TRADING IRON CONDORS - FUN WITH OPTIONS
Kevin_in_GA
msg #120524
6/7/2014 7:01:37 PM

Friday after the close update:

The market moved up again, placing the IWM call spread under serious pressure. The current deltas are as follows:

SPY Put Spread Delta = -0.02 (great)
SPY Call Spread Delta = 0.23 (increased risk)

IWM Put Spread Delta = -0.02 (great)
IWM Call Spread Delta = 0.52 (red zone - current price is above the inner call option)

GLD Put Spread Delta = 0.03 (great)

I'll keep this tracking going - odds are now basically 50/50 that the IWM IC will close at a loss. Too close to call but to exit this spread now would be to take a large loss (almost $1200). In statistical analyses, this happens periodically and about 2/3rds of the time it comes back inside the inner option strike price. Still not the 90+% odds that were in play when the trade was placed ...

I actually like that my first post on this is in trouble - I think it is far more informative to show a system's weaknesses than its strengths (still, I want it to close profitably and will wait and see how it plays out).

General Discussion · CCI Divergence Filter Help
Kevin_in_GA
msg #120523
modified
6/7/2014 6:44:46 PM

http://forums.stockfetcher.com/forums/General-Discussion/A-challenge-to-TomB-and-the-Stockfetcher-Crew/95123/10


Fetcher[
sfNegDiv(CCI(14), MA(3), 10,3) is above 0
close is above 5
and CCI(14) below -100
]



Stock Picks and Trading · TRADING IRON CONDORS - FUN WITH OPTIONS
Kevin_in_GA
msg #120502
6/5/2014 10:09:33 PM

If you are thinking this can be done with a small account, then no - you don't know when the big loss will come. If it comes first it will wipe your $2000 account out.

I would not put into these type of trades any more than 1/4th of my trading account. Note that I am using an initial equity of $25,000 in this thread, which would be at the ratio I feel comfortable.

You are also confusing "money at risk" with equity. You see a typical return of 6% on "money at risk" but to be safe you need to divide that by 4 to get what your total account sees as a return. Given these are weekly option plays, that still is about 1-2% per week after commissions.

Stock Picks and Trading · TRADING IRON CONDORS - FUN WITH OPTIONS
Kevin_in_GA
msg #120500
6/5/2014 9:08:07 PM

Update from today's trading:

Today's action is exactly what you DON'T want when trading iron condors - a sudden and significant move in either direction that places the trades under pressure. This is really only happening in the IWM call spread, which has moved from a delta of 0.11 to 0.32. The current price is now only about 0.4 SD from our condor, which definitely increases the risk. However, we have a week to see where things go, and I'm not one to cut and run when the heat is turned up a little.

All other spread deltas are even lower than before, and are not showing any risk signals.

Stock Picks and Trading · TRADING IRON CONDORS - FUN WITH OPTIONS
Kevin_in_GA
msg #120499
modified
6/5/2014 8:57:25 PM

Sort of - I wrote this which I thought explained it:

So if IWM stays within the range of 108 - 116 by the close of trading next Friday, this IC will net $440 against a total at risk of only $1780 (since only one side could be a loss, the total at risk is only one side or $2000 minus the $220 profit made from the other side).

The sum of the three trades risk is as I quoted (no profit offset on GLD since there is only one side to the condor).

The max loss is always larger than the max gain in this trade, but you need to think longer term - in any 10 trades we will have 9 wins at $340 and one loss at $1860. That means you make $1200 over 10 trades, or $120 per trade. That is your expectancy and it is equal to 6% of the amount at risk. Not too bad.

And more often than not the actual loss is less than the max loss (which is only hit if the price goes beyond the outer option in the spread). If you are trading multiple ICs you can mitigate any large loss with several smaller wins (although you are also increasing your probability of taking a loss since you are trading more ICs).

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