Friday, September 11, 2009
Its Been A While!!!!
Wow!! I can't believe how long it has been since my last post. I really am sorry for that.
Anyway, I'm back now and will be post frequently again. So where are we?
Well last months play was neutral with us neither winning or losing. We now have a new play on and we are back in the game again (note there was a typo in the original play email - we do not have the 835/825 put spread but have the 935/925 spread).
The SPX finished yesterday strongly at 1044. We are in the green and ok.
Our trading strategy will change slightly now to reduce our risks further. Traditionally we always traded the current options cycle month (ie the options in that month which will expire first).
Now the options we will trade will be in the second options month, typically over 50 days out from their expiration. The advantage of this means that we will have a bigger range and more time to make adjustments if need be.
The next change is that we will adjust the trades a lot more so that we can nip losses in the bud early. This means that we will be adjusting trades by reference to the short options deltas. You will recall that the delta measures the rate of change of an option value with respect to the changes in the underlying asset's price.
Put in English if our position has a delta of positive 22 that means (all other things being equal) for each point the SPX moves up we gain $22 and point it goes down we lose $22.
We will seek to adjust our position when our short option delta's reach 25. When this happens we will close that relevant leg and then open up a new leg further out.
We will also seek to close legs when we can buy them back at around a third of the value we sold them for.
I will of course keep you updated as to what is happening re adjustments.
These tweaks to the system will mean more consistent profits in these more volatile times we are seeing.
Any questions drop me an email.
Until next time.
Anyway, I'm back now and will be post frequently again. So where are we?
Well last months play was neutral with us neither winning or losing. We now have a new play on and we are back in the game again (note there was a typo in the original play email - we do not have the 835/825 put spread but have the 935/925 spread).
The SPX finished yesterday strongly at 1044. We are in the green and ok.
Our trading strategy will change slightly now to reduce our risks further. Traditionally we always traded the current options cycle month (ie the options in that month which will expire first).
Now the options we will trade will be in the second options month, typically over 50 days out from their expiration. The advantage of this means that we will have a bigger range and more time to make adjustments if need be.
The next change is that we will adjust the trades a lot more so that we can nip losses in the bud early. This means that we will be adjusting trades by reference to the short options deltas. You will recall that the delta measures the rate of change of an option value with respect to the changes in the underlying asset's price.
Put in English if our position has a delta of positive 22 that means (all other things being equal) for each point the SPX moves up we gain $22 and point it goes down we lose $22.
We will seek to adjust our position when our short option delta's reach 25. When this happens we will close that relevant leg and then open up a new leg further out.
We will also seek to close legs when we can buy them back at around a third of the value we sold them for.
I will of course keep you updated as to what is happening re adjustments.
These tweaks to the system will mean more consistent profits in these more volatile times we are seeing.
Any questions drop me an email.
Until next time.
# posted by Paul @ 6:33 AM 
