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When should we get greedy?

Investment discussion for beginners. Why you should invest your money, get help getting started
johnhemming
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Re: When should we get greedy?

#304223

Postby johnhemming » April 29th, 2020, 6:24 pm

GoSeigen wrote:Options curve still busy righting itself. I continue to write options. Today wrote a few S&P Dec 2300 puts and 3225 calls.

I don't have the time to follow the options markets. What sort of price do these things write at?

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Re: When should we get greedy?

#304284

Postby GoSeigen » April 29th, 2020, 9:49 pm

johnhemming wrote:
GoSeigen wrote:Options curve still busy righting itself. I continue to write options. Today wrote a few S&P Dec 2300 puts and 3225 calls.

I don't have the time to follow the options markets. What sort of price do these things write at?


I took just under $100 per leg, so I lose on the trade if SPX falls more than 28% or rises more than 18%. Potential gain is about 3% of notional value, or 60% of margin posted.

GS

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Re: When should we get greedy?

#306741

Postby TheMotorcycleBoy » May 8th, 2020, 3:01 pm

GoSeigen wrote:
GoSeigen wrote:
GoSeigen wrote:
This position is still practically at break-even and VIX still elevated with inverted term structure. Earlier this week I increased exposure with some Dec S&P straddles. The plan is to write shorter-dated and/or OTM options against the position when the term structure normalises, or close my S&P short futures if and when there's another severe market drop.

GS


Sep and Dec straddles are comfortably in profit, the S&P term structure is now roughly flat so I have cautiously started writing Jun straddles against the long Sep and Dec positions.

GS


Options curve still busy righting itself. I continue to write options. Today wrote a few S&P Dec 2300 puts and 3225 calls.

GS

Purely out of curiousity, GS. But when "you" write options, who do you trade them with? I can't it figure out.....it's like....surely because you synthesised them yourself, how can the buyer price them?

Matt

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Re: When should we get greedy?

#306743

Postby Lootman » May 8th, 2020, 3:11 pm

TheMotorcycleBoy wrote:Purely out of curiousity, GS. But when "you" write options, who do you trade them with? I can't it figure out.....it's like....surely because you synthesised them yourself, how can the buyer price them?

He doesn't literally "write" or create those options. It's just a term for selling options contracts rather than buying them. They are exchange-traded and therefore are standardised, making them relatively easy to value.

He never sees who is on the other side of his trades, any more than you do when you buy or sell a share. Your counterparty is the exchange.

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Re: When should we get greedy?

#306747

Postby TUK020 » May 8th, 2020, 3:38 pm

GoSeigen wrote:
Sep and Dec straddles are comfortably in profit, the S&P term structure is now roughly flat so I have cautiously started writing Jun straddles against the long Sep and Dec positions.

GS


When I first read "Sep Straddles" I thought it sounded like a nasty bacterial infection one picked up horseriding

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Re: When should we get greedy?

#306856

Postby GoSeigen » May 9th, 2020, 7:34 am

Lootman wrote:
TheMotorcycleBoy wrote:Purely out of curiousity, GS. But when "you" write options, who do you trade them with? I can't it figure out.....it's like....surely because you synthesised them yourself, how can the buyer price them?

He doesn't literally "write" or create those options. It's just a term for selling options contracts rather than buying them.


This.

Personally, I just access options through a spreadbetting company, so there's actually the additional bucket-shop risk, but the pricing and principle is the same -- all the trades being cash settled of course. I think the market leader for directly accessing options is www.interactivebrokers.com but I haven't used them.

GS

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Re: When should we get greedy?

#306864

Postby johnhemming » May 9th, 2020, 8:50 am

https://www.bloomberg.com/news/articles ... uge-losses

To be fair to interactive brokers they did refund the below zero losses.

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Re: When should we get greedy?

#308404

Postby GoSeigen » May 13th, 2020, 8:07 pm

GoSeigen wrote:Options curve still busy righting itself. I continue to write options. Today wrote a few S&P Dec 2300 puts and 3225 calls.


Crazy, I know, but with just 1.5 days' trading left S&P May options are priced the same as they normally would be four weeks from expiration so I've taken a short May strangle today.

15% return on the posted margin in two days if the S&P opens between 2800 and 2825 on Friday. Loss if it's above 2870 or below 2660.


Get the pillory ready!

EDIT: A bit more context on this trade: I'm already short two ITM May puts, so if the index falls hard I won't mind too much. I'm also short a May ATM call, if I didn't put on the above trade I'd be tempted to close this call to avoid pin risk and forfeit all that lovely time value. OTH if the index rises much I'll be happy to open short futures against the ITM puts when they expire, leaving a hedge in place against my long share porfolio.

GS

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Re: When should we get greedy?

#308409

Postby Dod101 » May 13th, 2020, 8:22 pm

GoSeigen wrote:[
Crazy, I know, but with just 1.5 days' trading left S&P May options are priced the same as they normally would be four weeks from expiration so I've taken a short May strangle today


Sounds nasty. Seriously though does this have something to do with Theresa?

Dod

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Re: When should we get greedy?

#308892

Postby GoSeigen » May 15th, 2020, 2:41 pm

GoSeigen wrote:
GoSeigen wrote:Options curve still busy righting itself. I continue to write options. Today wrote a few S&P Dec 2300 puts and 3225 calls.


Crazy, I know, but with just 1.5 days' trading left S&P May options are priced the same as they normally would be four weeks from expiration so I've taken a short May strangle today.

15% return on the posted margin in two days if the S&P opens between 2800 and 2825 on Friday. Loss if it's above 2870 or below 2660.


Turned out okay in the end. Haven't seen the contract note yet but I think the S&P opened around 2825 so close to maximum profit on that two-day trade.

At the open I rolled the short ITM call positions into a short June ATM contract taking 100 of premium.

GS

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Re: When should we get greedy?

#309052

Postby ADrunkenMarcus » May 16th, 2020, 10:27 am

JDot wrote:With the recent market falls, funds and shares are offering high dividend yields and low price to earnings ratios. When do we know when the best time to pull the trigger is, and buy buy buy?


Ask me in ten years!

But, for now, I am happy that I fed money into my portfolio in late March and into April - increasing my portfolio size by almost 11%. I also added substantial funds into the market in 2009 and 2011 - those turned out well. I expect 2020 will turn out well in the future, too.

Best wishes

Mark.

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Re: When should we get greedy?

#310262

Postby GoSeigen » May 20th, 2020, 2:18 pm

GoSeigen wrote:
GoSeigen wrote:
GoSeigen wrote:Options curve still busy righting itself. I continue to write options. Today wrote a few S&P Dec 2300 puts and 3225 calls.


Crazy, I know, but with just 1.5 days' trading left S&P May options are priced the same as they normally would be four weeks from expiration so I've taken a short May strangle today.

15% return on the posted margin in two days if the S&P opens between 2800 and 2825 on Friday. Loss if it's above 2870 or below 2660.


Turned out okay in the end. Haven't seen the contract note yet but I think the S&P opened around 2825 so close to maximum profit on that two-day trade.

At the open I rolled the short ITM call positions into a short June ATM contract taking 100 of premium.

GS


Still selling volatility, a few more added this week. VIX remains above 30 and S&P has been trading in a range for more than a month now. Personally am leveraged long UK stocks and still buying but don't know whether this market is going up or down so happy to keep trading the options.

GS

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Re: When should we get greedy?

#315431

Postby GoSeigen » June 5th, 2020, 9:48 am

GoSeigen wrote:
GoSeigen wrote:
GoSeigen wrote:
Crazy, I know, but with just 1.5 days' trading left S&P May options are priced the same as they normally would be four weeks from expiration so I've taken a short May strangle today.

15% return on the posted margin in two days if the S&P opens between 2800 and 2825 on Friday. Loss if it's above 2870 or below 2660.


Turned out okay in the end. Haven't seen the contract note yet but I think the S&P opened around 2825 so close to maximum profit on that two-day trade.

At the open I rolled the short ITM call positions into a short June ATM contract taking 100 of premium.

GS


Still selling volatility, a few more added this week. VIX remains above 30 and S&P has been trading in a range for more than a month now. Personally am leveraged long UK stocks and still buying but don't know whether this market is going up or down so happy to keep trading the options.

GS


Well, the S&P has strongly broken out of its range. FTSE is following the US skyward. The VIX has finally decided to drift back to normal (but still elevated) levels and the Put-Call ratio is strongly in favour of calls. My short straddles are under water for now, but the call leg of a long SEP straddle I bought right back in March is finally in profit (the put leg was closed out long ago).

This all has prompted me to take a first tentative short call writing just a few ATM (3150) Aug S&P calls. Will add if the market continues making new highs, but also will be looking to close the put legs of the short straddles to free up margin. No point doing it too soon though because their value is dropping rapidly.

GS

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Re: When should we get greedy?

#317708

Postby GoSeigen » June 11th, 2020, 7:50 pm

GoSeigen wrote:
GoSeigen wrote:
GoSeigen wrote:
Turned out okay in the end. Haven't seen the contract note yet but I think the S&P opened around 2825 so close to maximum profit on that two-day trade.

At the open I rolled the short ITM call positions into a short June ATM contract taking 100 of premium.

GS


Still selling volatility, a few more added this week. VIX remains above 30 and S&P has been trading in a range for more than a month now. Personally am leveraged long UK stocks and still buying but don't know whether this market is going up or down so happy to keep trading the options.

GS


Well, the S&P has strongly broken out of its range. FTSE is following the US skyward. The VIX has finally decided to drift back to normal (but still elevated) levels and the Put-Call ratio is strongly in favour of calls. My short straddles are under water for now, but the call leg of a long SEP straddle I bought right back in March is finally in profit (the put leg was closed out long ago).

This all has prompted me to take a first tentative short call writing just a few ATM (3150) Aug S&P calls. Will add if the market continues making new highs, but also will be looking to close the put legs of the short straddles to free up margin. No point doing it too soon though because their value is dropping rapidly.

GS


Having closed most of the put legs on my short straddles I started the week very heavily short (mostly Jun) calls with strikes all the way down to 2800. Today's falls are welcome as the Jun contracts will rapidly lose value and I can close them out or let them expire next Friday. 2825 or lower next Friday would be ideal...

Opened a long Dec straddle today as the vol curve inverted.

GS

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Re: When should we get greedy?

#317940

Postby Pipsmum » June 12th, 2020, 3:38 pm

GoSeigen wrote:Having closed most of the put legs on my short straddles I started the week very heavily short (mostly Jun) calls with strikes all the way down to 2800. Today's falls are welcome as the Jun contracts will rapidly lose value and I can close them out or let them expire next Friday. 2825 or lower next Friday would be ideal...

Opened a long Dec straddle today as the vol curve inverted.

GS


I so wish I truly understood what you are meaning. It's like hearing another language. I'll have to go and try to learn.

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Re: When should we get greedy?

#317944

Postby johnhemming » June 12th, 2020, 3:44 pm

He does quite a bit of option trading. I don't personally want to do that much on options. I prefer to make assessments as to when I think the market is undervaluing something and then to buy it. This allows me not to have to concentrate on what is going on too much so I can get on with other things.

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Re: When should we get greedy?

#317953

Postby GoSeigen » June 12th, 2020, 4:02 pm

johnhemming wrote:He does quite a bit of option trading. I don't personally want to do that much on options. I prefer to make assessments as to when I think the market is undervaluing something and then to buy it. This allows me not to have to concentrate on what is going on too much so I can get on with other things.


Yes, I do it on the side, though I do have a long-term more conventional portfolio.


My contributions about options on this thread started as a comment that when markets are highly volatile, it's difficult to pick the bottom or a direction of travel -- it's often better to do nothing.

I noted though, that those are often good times to trade options, because non-directional (i.e. market neutral) positions can be taken. One can then react to subsequent moves. [e.g. if one is long a put and a call and the market shoots up, one can sell the call. OTOH if one is short a put and a call and the market rises the short put might be covered. ]

My posts are an effort to document in real time the kind of trade I am making. Sorry if some of the language is jargon; that is the nature of the beast. I requested my posts be moved to a new board due to their non-newbie nature but the mods declined and other posters said they were interested. Thus I'll keep posting here but feel free to ignore my scribbles!

GS
P.S. Yesterday's straddle in profit. May add more today.

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Re: When should we get greedy?

#317960

Postby johnhemming » June 12th, 2020, 4:14 pm

I am quite pleased that you post your comments here. (even if I disagree with some of them)

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Re: When should we get greedy?

#317967

Postby TheMotorcycleBoy » June 12th, 2020, 4:24 pm

GoSeigen wrote:
johnhemming wrote:He does quite a bit of option trading. I don't personally want to do that much on options. I prefer to make assessments as to when I think the market is undervaluing something and then to buy it. This allows me not to have to concentrate on what is going on too much so I can get on with other things.


Yes, I do it on the side, though I do have a long-term more conventional portfolio.


My contributions about options on this thread started as a comment that when markets are highly volatile, it's difficult to pick the bottom or a direction of travel -- it's often better to do nothing.

I noted though, that those are often good times to trade options, because non-directional (i.e. market neutral) positions can be taken. One can then react to subsequent moves. [e.g. if one is long a put and a call and the market shoots up, one can sell the call. OTOH if one is short a put and a call and the market rises the short put might be covered. ]

My posts are an effort to document in real time the kind of trade I am making. Sorry if some of the language is jargon; that is the nature of the beast. I requested my posts be moved to a new board due to their non-newbie nature but the mods declined and other posters said they were interested. Thus I'll keep posting here but feel free to ignore my scribbles!

GS
P.S. Yesterday's straddle in profit. May add more today.

Keep posting GS!

I understand bits and pieces about options. But what I don't know is why the one to which you currently refer is called a "straddle".

Matt

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Re: When should we get greedy?

#317979

Postby GoSeigen » June 12th, 2020, 4:39 pm

TheMotorcycleBoy wrote:
GoSeigen wrote:P.S. Yesterday's straddle in profit. May add more today.

Keep posting GS!

I understand bits and pieces about options. But what I don't know is why the one to which you currently refer is called a "straddle".

Matt


Straddle: you buy a call and a put at the same strike price (sell for the short version). If you draw a graph of the possible pay-off/cost it looks like a sharp mountain with the strike price straddling a peak located at the current market price. Hence the name straddle (I think!).

Image


With a strangle the puts and calls are out of the money, i.e. the strike is either side of the current price, like a pair of hands strangling the neck!

Option strategies have colourful names which takes some of the tedium out of learning about them.

GS


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