EL TRADES OPTIONS

This blog will show my longer term Swing trades using OPTIONS. I use specific income producing option strategies with a DIRECTIONAL BIAS. Having a directional bias is critical in earning more, even from what are generally called income trades such as butterflies and condors. The aim of my strategies is to give me more than a 66% edge and to provide a greater than 80% win rate within that edge. The blog shows you the trades I make and how I manage them. For my directional bias, I use the same EL methodology as I employ in my day trading that you have seen for years in the original ElectronicLocal blog. Read the disclaimer.

Tuesday, June 19, 2012

Widening the Tent 2

I didn't finish the previous post as I had not finished my additions to the RUT trade yet.


The pic below shows two additions to the trade as I progress getting the full position on. I'm about half way to my maximum margin allocation, although there is a large reserve in addition to this if anything unexpected happens.


I have used almost $50,000 Reg-T margin which is the basis for my percentage profit calculation. I need a pullback in the RUT to make my profit or alternatively, that the market expires within the risk tent which is the heavy line in the pic.



The numbers along the bottom of the pic show my current Greeks. Still negative delta, which is as planned. Adding to the position as I have, has mitigated negative effects to a certain extent. If the pullback happens now rather than after a further up move, I'll be able to make the profit I want more quickly.


I've been in this trade just 8 days and we are about 30 days to expiry. The fastest theta decay has now kicked in and there is still enough time premium to make any needed adjustments. I'd really like to be out of the trade within 14 more days.
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3 comments:

  1. Marshall JungJune 20, 2012 at 12:41 PM

    Hi Tom,

    Is there a particular rule set you follow for adding to or adjusting a position? Is it a percentage move in the underlying or a change in the greeks that dictate an adjustment?

    Thanks for the new blog, I am very excited to learn more.

    ReplyDelete
  2. AnonymousJune 20, 2012 at 2:39 PM

    How about buying some IWM's to improve your delta to defend against the upside risk?

    ReplyDelete
  3. Electronic LocalJuly 9, 2012 at 9:46 PM

    Marshall, I add butterflies as the price moves enough to warrant widening the tent. Depends on what directional move I am expecting.
    Anon, This is not a delta neutral play. I expect a move against the position to add size adn gain a wider tent.

    ReplyDelete

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