- This topic has 4 replies, 1 voice, and was last updated 9 years, 8 months ago by .
Viewing 5 posts - 1 through 5 (of 5 total)
Viewing 5 posts - 1 through 5 (of 5 total)
- You must be logged in to reply to this topic.
Become a Great Options Trader
Home › Forums › Income Trades › September Income Trade in GS
This is a slightly bullish double calendar in GS.
It’s a little advanced, but here is the premise:
1. GS is in an uptrend, and 170 will most likely get hit between now and August opex.
2. After earnings, the implied volatility in GS got hit pretty hard, which means that you can buy volatility here and profit from any pop.
3. If GS pulls back, implied volatility will rise, and that will help calendar spreads.
Here is the trade:
Here is the risk profile:
The main contingency is to the downside.
Adjustment strategy:
– if GS hits 160, we will close the 170 calendar for a loss and open the 160 calendar
Our target is 15-20% return on our risk, which means we are looking for profits of around 250.
Our income trade in GS is doing well but it needs an adjustment to hedge against downside risk:
If GS manages to break down and run to 160, we will close close out the high calendar and roll it to 160.
With the big selloff in the market, GS has broken support and we are now in short theta territory.
Here is the current position:
To fix the trade, we will simply do two things:
Here is what the position risk looks like afterwards:
Quick update to GS
With some reversion and time decay on the September options, the trade has moved back to breakeven. The september options now have about two weeks left to expiration.
We are now at a trkcy point where we have a lot of theta gains possible, but also with short gamma risks. If GS chops around for a week or so that’s great, but if we get trending action anytime soon then we can be in trouble. This one will be on a short leash, and any strong moves will require a close.
GS had a pretty big rally and broke out above 165. That’s where the short gamma risk comes in.
You should be exiting at breakeven or a tiny profit.