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Gil
Toronto, Canada
Interests: Non directional Stock Options strategies like Iron Condors
Recent Activity
Hi Mark, There is something which I don't understand: presumably you own 530/540 bear calls (as an upper part of IC). When selling 1 530 C you'll cover a previously sold 530 C and will stay with an extra 540 C! I don't say that this is bad or so, however your analysis refers to owning a 530 C, rather than a 540 C. >>> the 530 call will be at least 40 points ITM Please explain Thanks Gil
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Mark the idea of a pre-insured IC sounds great. I usually refrain from 2-3 months ICs, and purchase only short term (about 1-1.5 months) ICs. I believe that such pre-insurance will not work for my short term ICs, since it will eat most of my collected premium. Gil
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General question (unrelated to this topic) IBM ==== Aparently IBM increased their dividend to 0.55 X May 6, Date June 9. Stock quote is 104.61. I try to see how we can take advantage of this one, if at all, using stock options: Looking at the chart my perspective is mild bullish. My thoughts would be: 1)sell near term Covered Calls above resistance. However there is no resistance at 110 or 115 . There is resistance is at 120 and May and June Calls do not worth much 2) Sell long term ITM Coevred Call, let's say, Jan 2010 C 100 at about 13.10 (actually will try for a little more) . Using this strategy, I'n getting: 1) My effective stock price is 104.60 - 13.10 = 91.50 2) Getting the dividend in about a month from now 3) Getting another quarterly dividends down the road. 4) 91.75 seems to be a support for the stock, so I do see a certain sefense on the downside. 5) If execriced I would keep not only the diviend, but also the premium of at least 13.10. How about this? Gil
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Search/Scan tools for the rookies ================================== Good week Mark, A general question: Other than the general indexes which you're used to trade (^RUT), do you use any free tools for retrieving which sector/index/holdr/etf/stocks etc. to look into? Thanks Gil
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Just to add another IC perspective, based upon my personal skill: If a trader has got ICs on multiple indexes simultaneously, for instance RUT and XEO - and the market becomes extremely volatile - most likely he risks both. That's why such IC trader might take into account that even with proper sizing he can still 'be on the spot' in all those ICs. Gil
Toggle Commented Apr 25, 2009 on Risk Management Revisited at Options for Rookies
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For slight bullish or slight bearish "rookies", simple spreads might be usefult too Gil
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Since you don't know for sure how the news will affect the stock, should not it be a good practice to go non directional, buying straddles or stangles (and yes, paying more...)? Gil
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IC RR Ratio =========== Mark, For a non IC investments a common practice is to calculate the, so called, RR ratio, and to enter a position only when the ratio is 3:1 in my favor (for instance based upon stop loss versus target value). Adpoting the above approach for IC tells never to use them :-)..? unless you analyze the RR based upon the asset(stock), rather than upon the IC spreads. I'm not sure how adjusuments or rolling fit into this model (other than recalculate evrything after adjsuting/rolling). I wonder is you can share with us your perspectives. Thanks, Gil
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Mark, Thanks for your detailed response. I've learned a lot from it. I believe that all the posts and comments assist all of us in getting good exposure to portions of the options world. This one is not an exception. As for investment versus gambling. My approach is that unlike gambling where no strategies are in place, using hedged strategies which match the market conditions wisely are far from being a plain gamble. Actually I'm a kind of frustrated that in light of this crazy market, I'm not sure which strategy makes sense. And... when I'm not confidence what to do I just don't play (using the time left to kearn from this form and to post these comments). Thanks again, Gil
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These examples indeed demonstrate diagonal backspreads. What bothers me about these examples in partucular and backspreads in general is that you put your money on a bullish direction accompanied by specific price range. In spite of the 450 resistance, isn't is just a gamble?! RUT might be above 460 at the May expiration but also below 500 (520, 530) at the June expiration. That's why "I'll not try it as home", per your advice. Gil
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ITM Covered Call ================= Recently opening IC became kind of scary. Backspread might also be too risky. I would like to bring up to the table another idea: ITM Covered Call. For example, let's take DIA, which closed at 77.81, with a modest body size candlestick, which implies uncertainty. The support lines are at: 72 and 69 My suggestion is to buy a DIA lot and sell APR C 68; that is a Covered Write, just below the second support line. The price of the APR C 68 is at about 10.50 . If I manage to pay for this covered call just 67, I'll purchase the DIA lot at 67, which is a nice discount from 77.81. What ifs ======= 1) If assigned I'll selling the stock at 68, keeping a premium of $1 per share. 2) If not assigned as long as the stock is above 68 I'm still in a good shape: I can sell the stock at more than 68, and also got the $1 premium. 3) My only concern is if the stock plunged below 68 without being assigned, and I start to loose money. My suggested protection measure for this case is to purchase P 68 when DIA is at 68 before the APR expiration. My estimate for the cost is $2.50 at most, which leaves my maximum risk if I use this PUT at 250 -100(since bought stock at 67) = $150. Your feedback is highly appreciated Thanks in advance, Gil
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Referring to my post above "From defense to attack" the resistance I refer is 410 not 390, So the post whould show up as follows: From defense to attack ====================== I've got the following ^XEO April IC: 300, 310, 415 425 ^XEO is at 385. I'm afraid that in case it crosses the 410 resistance it might rally. Instead of defending myself with expensive 410 calls, my idea is to buy a bull call 410, 425. I'll finance the buy of the 410 calls by selling the IC 425 calls (my original insurance). Apparently this is no more IC, but a bull put with a bull call, in light of my rally theory. And if later there is a reversal, I might still do the opposite. How about that? Gil
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< For me, it's iron condors with some extra long Apr options < as insurance. And that was an easy decision because < I already own a bunch of RUT May and Jun iron condors Presumably you survive April with the long protections. As insurance, these longs might expire worthless, and on May - as well as on June - you'll need to protect once again, meaningly more payments. These triple protection premiums might eat most your profits, if there are any, and this happens in the "good" scenario, in which your IC are profitabe. Can you please be more specific on how you make money with this extra protections? Thanks, Gil
Toggle Commented Mar 25, 2009 on Getting Back in The Saddle at Options for Rookies
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Mark, A company named "Spread Trades System" is trying to seduce me, claiming that they are the only one who teaches and practices many strategies with adjustments. As usual, their price is few grands. I tend to let them down, unles they agree to charge according to some "success" criteria: Meaningly not money back guarantee, but the other direction: making money according to their directions and pay only then... 1) Do you know this company? 2) What do you think about my idea? 3) They also claim that IC is not a right strategy for these days. How about that? Thanks, Gil
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Mark, On the boat too.... but still is: After an extreme days like yesterday, and the previous Geithner speech, some reversal is predicted and indeed happaned in both cases. 1) Would not it be cheaper to wait at least extra day for this reveral before adjusting (since you (means we) in a trouble anyway, this delay will not burn you significantly more)? 2) You've mentioned rolling roll down. Would not it be a rollup, since you go for a higher price call? Gil
Toggle Commented Mar 24, 2009 on Geithner Is Volatile at Options for Rookies
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Mark, I understand your approach and I do appreciate your link to "settlement of European style options". Looks like I could not find this useful link on my own. Is there any kind of TOC or index, which points to all currently existing topics? Also, are we, the members, not allowed to initiate new topics? Thanks, Gil
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Mark, the above "new approach" is defintely useful from some of your positions, which have got few months lifetime and risk period. My IC duration is usually just one month, and my experience tells me that most of the times it is still worthwile expire worthless, than contributing extra money back to the market, presumably this one month IC is wide enough (enough has to do with the trader comfort zone, of course). Gil
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I agree with what has been written. As an active options trader I would like to ring up a related issue: Even after you've got a solid self education (books, internet sites and webinars, paper trading and even live trding) - the nature of the options world is that there is always a lot to catch up, in this risk reward sophisicated area. The issue is: after "graduating" yourself... does it make sense to practice with eal money on your own (starting with modest amounts, of ciourse), or to get a mentor to walk you through complicated stages like: making the right entry to the right trategy, set up exit points, adjustments, repairs and more. There are companies out there which charge couple of grands, usually accompanied by risk free guarantee (if you don't make money, you get refund). As for myself, I do try to get around on my own, unless I find some mentoring program in which I pay gradually reasonable amounts, and see results as I move forward. What do you think? Gil
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Mark, 1) Looking at the ^RUT chart, it looks like on January it was at 519. I would feel uncomfortable selling Jun 490/500 these days (the downside might be OK)! 2) Looking at Iron Condors for indexes: in addition to ^RUT(Russel 2000) I do also trade ^XEO (S&100 100 European Style). a) These two examples are correlated, i.e. extreme in one of them will most likely occurs in the other one too. Isn't this a receipt for a high risk portfolio? b) Which other indexes (HLDRS? ETFs?) would you also consider as good candidates for Iron Condors trades? Thanks, Gil
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(Actually I wanted to define it as a new post but could not; the best I could do is to append this as a response): Iron Condor adjustment - question by example ======================================------= Mark, I would like to share with the members a specific example, so we can all learn what to do, or more important what not to do ... :-) . Here we go: Couple of days ago (16/3) I purchased the following April ^RUT (Russel 2000 index) Iron Codnor: P330 P340 C450 C460 for $2. Since this purchase ^RUT climbed from 396 to 417.63. I identify resistance at 430; the next one is 450. That's why, as soon as the 430 is breached - I'm in trouble. My intention is to roll the bear call to: C480 C490, which is above another resistance level. While it might be too early to do so, The problem is that such rolling today already costs about $1.75, eating most of my credit. Moreover, If I defer it, it will cost more, meaningly I'll start loosing money, even before making any additional adsjustments, which might be necessary down the road (or should I say up to ^RUT... :-) ). Looking back - purchasing the iron condor at that time might have been a mistake. However, as this is a done deal, I've to face it. My questions are: Does the above costly rolling make sense? Are there any better approaches? Thanks, Gil
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The author (S.) said: "My IC tend to be opened approximately 3 months out - I like to give myself some time to let them work". I thought that time is the enemy - rather than the ally - of the IC owner. That's why I never go for 3 Months IC. I'll go for 6 weeks at most. Mark, what do you think about this? Gil
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When improving the RR ration you said: "because you pick up an extra put, losses are limited ($3,000) if the expiration settlement price is 340, and those losses are reduced by $100 per point as RUT moves lower" I understand this and fully agree... however, this refers only to the new positions. I believe that you should also take into account your original spreads (you have not told how many you've got), which have poor RR! Gil
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After reading your post about "positions that have become ugly", I found out that today (March 3)^RUT is indeed under 350 within the range of your original Iron Condor Bull Spread. On one hand you have already improved your RR ratio by means of back ratio spreads. On the other hand you claimed you are not going to stick with this position until expiration (and without the RR improvement I can see why). My question is: how you address this now, meaningly after the RR improvement is already in place. Thank you Gil
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