Home › Forums › Income Trades › Income Trade in SPX
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February 22, 2016 at 12:36 pm #4728Steven PlaceKeymaster
About 60 days to April expiration, time to put on another iron condor.
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You must be logged in to view attached files.March 4, 2016 at 12:37 pm #4815SureshParticipantSteven, Are you making any adjustments to the upside risk?
March 8, 2016 at 10:53 am #4868Steven PlaceKeymasterWhere we sit on this trade… it’s sitting at a slight profit, but short directional exposure is starting to get accumulated.
Sure the market is overbought but it can stay overbought and continue to frustrate us even further.
Here’s the catch-22 that we’ve got right now.
As I type this there are only 37 days left to expiration. Because February was a short month, the time is actually going by a little faster than I had expected.
Our plan currently is to roll the call side higher and add to risk. Here’s the problem that I currently see.
The cost of this roll is a little higher than I’d like. What I mean by that is the premium savailable on further OTM calls are lower because everyone and their mother is selling SPX call premium.
This drives the amount of premium lower as well as the strikes we can select.
Right now the suggested roll is to take the 2050/2060 call spread and move it higher to the 2080/2090 call spread. At current mid prices you’ll be able to do this with no increase in margin.
Yet, the roll of 30 points higher just *feels* too tight. That’s the concern I have right now.
It will also double the short exposure we have in the market. That means we haev to be willing to take some upside heat. I’m comfortable doing that at these price levels but it’s still a concern. I remember the rally in Oct 2015 that ran me over and that’s one of the biggest concerns I have right now. We may have to deploy a hedge by purchasing some May SPX calls to reduce delta if we do start to squeeze above 2030.
Those are my thoughts. I’ll structure the roll in a second.
March 8, 2016 at 10:56 am #4870Steven PlaceKeymasterOk here’s the adjustment:
Buy to close SPX Apr 2050/2060 call spread @2.80
Sell 2x Apr 2080/2090 call spread @1.40
You can do this as a custom order but your best bet is to split them up.
March 8, 2016 at 12:04 pm #4885fazParticipantmine is slightly different to yours. i have 2040/2050 and no BPS. currently can close @ 220.. but i really dont like the gamma curve and can see the possibility for the call hedge.
i am considering adding another BPS @ 1800 which halves my net delta and flattens gamma curve while 1800 is close to 10% away..
March 8, 2016 at 12:16 pm #4887MarcoParticipantI got instafilled at your prices steven. So maybe there is a bit more in that to be squeezed.
March 8, 2016 at 12:39 pm #4893Steven PlaceKeymaster@faz, this is a little complicated to understand but bear with me.
This is the delta of an iron condor over time.
Notice that as time goes on, the directional exposure of this position decreases on an absolute basis.
That means over the next few weeks the charm (delta decay) will take care of a lot of the risk inherent in the position.
March 8, 2016 at 1:37 pm #4896fazParticipantthanks Steve,
It shows that deltas get more directional if they are ITM and less directional if they are OTM as time goes by. By rolling we keep on the OTM side of things..
Compare that to my options, By hedging with a BPS it will put me closer to the right hand side of the graph then i want to be while also bringing the left hand side of the graph closer ?
so rolling is better… but in my situation without any BPS should i still not add one to make it delta neutralish?
March 8, 2016 at 2:38 pm #4899Steven PlaceKeymasteradding bull put spreads to an iron condor as a risk management technique… well I’m not the biggest fan.
Think about what happens if the market rips. The delta of your bull put spread “hedge” goes away because it is more OTM, and your short call spread starts to get smoking hot in terms of risk.
There are other alternative spreads if you don’t feel comfortable buying calls straight up. You can look at buying time bomb butterflies to help neutralize your delta and give you a little kick… you can also look at buying call spreads as well.
March 8, 2016 at 2:59 pm #4900fazParticipantThanks for the explanation is useful but not why i want to but the BPS.. 🙂
You still have your put spread but I closed mine
I am happy to roll and use a call.. but my position would be a rolled call spread whereas you still have an iron condor..
so i am asking as part of my roll should i for example also sell the 1800 bull put spread?
March 8, 2016 at 3:10 pm #4901Steven PlaceKeymasterAh got it…. if you’re going to leg out then leg back in… wait for some kind of pullback, maybe to 1975 and then resell.
March 8, 2016 at 3:17 pm #4902fazParticipantok great thanks 🙂 my 280 not getting filled.. ill be patient and may have to take a 340 fill
March 17, 2016 at 12:32 pm #5040ColinParticipantAs the market continues to move up here, should we be looking to hedge with a call buy or some other strategy to limit upside risk? If not now, at what point would you want to do so?
March 17, 2016 at 1:07 pm #5041MarcoParticipantI think the strategy is gonna be roll up the put side (that right now is at .05 to .65) and use the credit you get to roll up the call side.
I got out right now on a portion of the put side at .10. But i’m not good in following instructions.
EDIT just got filled on the other part. Out of the put side at .10. Probably by march opex is gonna be worth .05
- This reply was modified 7 years, 2 months ago by Marco.
March 18, 2016 at 4:39 pm #5062Donna zhao ZhaoParticipantSteve,
Somehow I can’t find the post on the trade below on this thread…May I know where I can find the rest of the email? Thanks…
Adjust SPX Trade
I’m taking off the hedge and rolling the call side higher.
SELL TO CLOSE SPX APR5 2100 CALL @10.50
BUY SPX APR 2080/2090 2110/2120 CALL CONDOR @2.05
SEE THE FULL TRADE HERE -
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