IWO Trading Floor

Become a Great Options Trader

Full Time Profits, October 31st, 2018 – Adjustments in HD, CAT, UNP

By

After some serious market volatility, we’re seeing some more volatility… this time to the upside.

The most likely scenario here is that, while there is the potential for a retest, the market will start to establish a new trading range headed into the end of the year.

Right now, I’m not focusing on new trades because I’ve got plenty of risk on that I need to work down. Several of the open spreads are deep in the money.

Each of these trade adjustments will follow the same risk management standards.

The overall set of adjustments is like this:

  1. Close the losing spread.
  2. Open a new spread in December Options at lower strikes.
  3. The maximum debit for the roll is 1.50
  4. The closing price for these new spreads will be 0.20.
  5. New call spread sales will be planned to open on any further upside.

Essentially, we are going to roll these losing spreads out in time and down in strikes. This will come at a cost, and part of that cost will be paid for by selling new call spreads… this effectively converts the trades into iron condors, which help to reduce downside exposure and needed margin.

Adjustment #1: HD

Original Spreads: Nov 195/190 Bull Put Spreads

Average Price: 1.16

Current Price: 4.55

Closing Trade: Buy to Close HD Nov 195/190 Put Spread @4.55

Opening Trade: Sell to Open HD Dec 185/180 Put Spread @3.05

Debit: 1.50

Close the new spread at 0.20

New Call Spread:

Sell to Open HD Dec 200/205 Call Spread

Tier 1: Enter at 0.50, Exit at 0.05

Tier 2: Enter at 0.80, Exit at 0.30

Tier 3: Enter at 1.10, Exit at 0.60

Adjustment #2: CAT

Original Spreads: Nov 140/135 Put Spread

Average Price: 1.09

Current Price: 4.77

Closing Trade: Buy to Close CAT Nov 140/135 Put Spread @4.77

Opening Trade: Sell to Open CAT Dec 135/130 Put Spread @3.75

Debit: 1.00

Close the new spread at 0.20

New Call Spread:

Sell to Open CAT Dec 140/145 Call Spread

Tier 1: Enter at 0.80, Exit at 0.10

Tier 2: Enter at 1.10, Exit at 0.30

Tier 3: Enter at 1.40, Exit at 0.50

Adjustment #3: UNP

Original Spreads: Nov 150/145 Put Spread

Average Price: 0.90

Current Price: 2.20

Closing Trade: Buy to Close UNP Nov 150/145 Put Spread @2.20

Opening Trade: Sell to Open UNP Dec 140/135 Put Spread @1.00

Debit: 1.20

Close the new spread at 0.20

New Call Spread:

Sell to Open CAT Dec 160/165 Call Spread

Tier 1: Enter at 1.00, Exit at 0.20

Tier 2: Enter at 1.30, Exit at 0.50

Tier 3: Enter at 1.50, Exit at 0.80

Disclaimer

U.S. GOVERNMENT REQUIRED DISCLAIMER – COMMODITY FUTURES TRADING COMMISSION. FUTURES AND OPTIONS TRADING HAS LARGE POTENTIAL REWARDS, BUT ALSO LARGE POTENTIAL RISK. YOU MUST BE AWARE OF THE RISKS AND BE WILLING TO ACCEPT THEM IN ORDER TO INVEST IN THE FUTURES AND OPTIONS MARKETS. DON’T TRADE WITH MONEY YOU CAN’T AFFORD TO LOSE. THIS WEBSITE IS NEITHER A SOLICITATION NOR AN OFFER TO BUY/SELL FUTURES OR OPTIONS. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE DISCUSSED ON THIS WEBSITE. THE PAST PERFORMANCE OF ANY TRADING SYSTEM OR METHODOLOGY IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. CFTC RULE 4.41 – HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN EXECUTED, THE RESULTS MAY HAVE UNDER-OR-OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY, SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN