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JCVictory
Elkhorn, Nebraska
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Mark, I think this is a great topic and one of the main strengths of "Rookies" and your blog! I have not seen anything in the way of advice on the internet about about establishing positions that have longer terms to expiration. Most of what I've seen deals with selling premium 4-6 weeks until expiration. I've tried this before and, for my main income positions, it just doesn't fall within my comfort zone. I have been establishing RUT Iron Condors in the 70-80 day range that are anywhere from 140-200 points wide. And while major market moves like the one we have seen in July are not fun, I am spoiled by having the ability to stay in the game longer with my positions while other trades are bailing out or having to adjust positions. I also don't have any more expiration week stress because I'm out of positions 3-4 weeks before expiration. I can spend more time evaluating and establishing better future positions, rather than worrying if I can collect that last $0.30 - $.15 in the coming three weeks before expiration Thanks again for your willingness to get your ideas out there. I think it provides food for thought for people who want to further develop their personal style of options trading, but in more conservative ways. James
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Mark, Great article! In the article "The Double Diagonal", Tom Preston of Thinkorswim writes: "But you could start to look to roll when the current value of the short option is less than 10% of the difference between the long and short strikes of the double diagonal. In the case of the June 111/119 July 109/121 (SPY) double diagonal, the difference between the long and short strikes is 2.00. 10% of 2.00 is .20. So, when the short June 111 puts or 119 calls trade around .20, you could start to plan on rolling them." What would be your professional opinion on this method of using the price of the front month short options as a guide to close (rather than roll) a diagonal spread? Regards, James
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Mark, As a proud option rookie, I've been fascinated to see how much option prices have changed over the past month. You talk a lot about one's personal "comfort zone" and it's neat to now see how those decisions play out in my real time trading. + For me, is a 10 point wider RUT iron condor worth the $.40 less in premium? + Should I positions be established at 13 weeks or 11 (or sooner)? + Should I add other positions to reduce volatility and/or price risk? + How will I work an order to get the most advantageous fill? No "right" answers - just personal ones -- and that's all part of developing one's comfort zone. A great journey of discovery . . . James
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Mark, I have learned (the easy way!) how volatility impacts an iron condor. As you well know, volatility has been declining steadily since the end of April. This has been extremely beneficial to my July RUT iron condor. However, with the knowledge of the power of volatility has on a position comes a certain anxiety about opening new positions and wanting to do so in a favorable volatility environment. However, if I choose not to predict price right now, I think I'm going to do the same with volatility. Getting more vega neutral feels good to me as well. The advice in your book (especially point 3 on p. 211-212) has been very helpful as I evaluate an AUG/SEP double diagonal position that will work in harmony with my AUG iron condor. James
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Mark, This is an excellent post. I like having the foundational information that comes from your book and the analysis of the various ways of trading you have in it. But it's also nice to be able to (in a certain sense) peer over your shoulder and see how a veteran trader makes decisions on opening and closing positions, and the guidelines that inform those decisions. Thanks again for the great post! James
Toggle Commented May 26, 2009 on Q and A. Iron Condor Set-up at Options for Rookies
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Interesting . . . I've also heard that Market Makers do something (I'm not sure what) to prevent people from selling options on Friday and then collecting two free days of theta. Is this true? If so, do they simply lower the bid / ask prices on Friday? James
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I have always been a bit confused about theta. This might be a strange question, but I'll ask it . . . Let's say I have an Iron Condor with a theta of 10, so I'm collecting $10 in premium on this position each day. Is this $10.00 gain reflected in changes in bid / ask spreads on the various options on the morning open? Of course, I imagine theta gain is "everthing being equal", and volatility and price changes would reduce or augment any theta gains.
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Mark, With this volatility environment, when do you start to consider adding Double Diagonals? James
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Jim, I think if you click on the name of the person being replied to on Mark's Twitter, (i.e. @jcvictory) that will take you to that person's account and their original question (asked with an @MarkWolfinger) . . . if that helps at all. Regards, James
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Whew -- that gives me a day to catch up on older posts! I'm reading the Iron Condor thread starting from last year. There is a lot of "meat" in these threads. It's almost like a history lesson along with a trading lesson. Good trading and have a nice weekend. James
Toggle Commented Apr 17, 2009 on Day Off at Options for Rookies
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