We've hit this one a few times upthread.
IV is only low if you don't analyze IV before 2020.
If you believe the bananas action since the start of 2020 is the new norm, then yes, IV is low.
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Wiki Selling TSLA Options - Be the House
- Thread starter adiggs
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We've hit this one a few times upthread.
IV is only low if you don't analyze IV before 2020.
If you believe the bananas action since the start of 2020 is the new norm, then yes, IV is low.
Yeah, that's because they're not covered calls. They're calendar spreads, and since the CV of the long is higher than the short, its a debit spread.
I went even more conservative, and poor timing as well. STO-c635s at $2.30, enough premium for my long-term share buying goals. This week has the potential for a breakout (broke 200ma, after 5 consecutive down weeks), so even though I think 600 will hold, I’m not willing to bet on it. I did close out my -p575 for 50% profit and hope to resell a -p570 later in the week on a bear attack.
Edit: on another vein, I had a small amount of free cash and bought some June +c800s last week during a low, thinking they would definitely go up as the SP rose. However, they’re down 20% even though the SP is $20 higher than when I bought.
Ok, now after looking at the max pain Greeks, the IV for the 800s is higher than the lower strikes. Apparently, this is something that I had failed to realize/understand. So, as the SP rises and gets closer to the 800 strike, IV will go DOWN, reducing the premium. This must be one on those negative feedback mechanisms to keep options prices in line. It’s also probably one of those things @bxr140 has been trying to teach us, that we are really trading on volatility, not share price.
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jeewee3000
Active Member
Indeed. If you want to hold calls for a few weeks, you're better off choosing an expiration 6months out. Keeps theta decay in check. It costs more up front but decreases risk greatly.I went even more conservative, and poor timing as well. STO-c635s at $2.30, enough premium for my long-term share buying goals. This week has the potential for a breakout (broke 200ma, after 5 consecutive down weeks), so even though I think 600 will hold, I’m not willing to bet on it. I did close out my -p575 for 50% profit and hope to resell a -p570 later in the week on a bear attack.
Edit: on another vein, I had a small amount of free cash and bought some June +c800s last week during a low, thinking they would definitely go up as the SP rose. However, they’re down 20% even though the SP is $20 higher than when I bought.
I sold the same strikes last Thu/Fri and got $6 and $5.13, just to give you a comparison of the benefits of booking a few days earlier vs. the impact of share price rise in the meantime. Starting to get a little nervous about $617.50, depends if tomorrow SP is up or down.
I went even more conservative, and poor timing as well. STO-c635s at $2.30, enough premium for my long-term share buying goals. This week has the potential for a breakout (broke 200ma, after 5 consecutive down weeks), so even though I think 600 will hold, I’m not willing to bet on it. I did close out my -p575 for 50% profit and hope to resell a -p570 later in the week on a bear attack.
Edit: on another vein, I had a small amount of free cash and bought some June +c800s last week during a low, thinking they would definitely go up as the SP rose. However, they’re down 20% even though the SP is $20 higher than when I bought.
Even some ITM LEAPS that I got recently are down even after a +$25 day. IV is at 48.8 and from what I noticed if we were down $25 bucks today IV would in the 60s. At least that's the trend that I been noticing; up days IV tanks down days IV increases. Maybe a +5% up day is not enough to get the IV trending up
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Just rolled these to keep them ATM - now June 18th's $620 strike for a $5 credit each ($500)
STO 40x $650 CCs on Thursday for $1.99. BTC this morning for $.95 on the morning dip when I saw we went negative but Nasdaq was positive and trending higher. So I timed that right. STO 40x $652.50 for $2.21, although turns out I could have held out a little longer.
In one of my accounts I had a small stack of 640 puts that had gotten deeply enough ITM that I could no longer roll them effectively. I did a split-roll on some of them at the end of last week (to the 600 and 610 strike), hoping for a spike up this week. That'd get me a more friendly close than simply BTC.
I decided this morning that I've gotten that spike up and closed them. While I was at it, I kept going and also closed the 640s. They had turned modestly profitable, while closing these still generated a net realized loss over the period of time I had that open.
It was also a pretty decent exit compared to what I was looking at last week. This was me recognizing the losses and preparing for a new position - possibly tomorrow as a I expect a reversal back down towards the middle of the BB. If that happens tomorrow then I'll probably be using this freed up cash to opening something like 545s for this week expiration (we could view that as a $95 strike improvement).
I decided this morning that I've gotten that spike up and closed them. While I was at it, I kept going and also closed the 640s. They had turned modestly profitable, while closing these still generated a net realized loss over the period of time I had that open.
It was also a pretty decent exit compared to what I was looking at last week. This was me recognizing the losses and preparing for a new position - possibly tomorrow as a I expect a reversal back down towards the middle of the BB. If that happens tomorrow then I'll probably be using this freed up cash to opening something like 545s for this week expiration (we could view that as a $95 strike improvement).
Time flies when one is staring at the options chain. Today is full head-on assault on fixing my 6/4 ITM BPS problem. All hands on deck. All cards on the table. All ducks lined up. Use every muscle. Double down on it. Go for broke. Go all in. Go all out. Step on the gas. Pull out all the stops. Push all the buttons. Push the envelope. Jump through the hoops. Throw everything but the kitchen sink!
STO Iron Condor + Bull Put Spread + Bear Call Spread + Covered Call + day trade. Various ranges. Everything in my playbook except -P and Short Strangle and roll-split/flip-split because those use too much margin. All positions and credits are small by themselves (to reduce risk), but together they are enough to stop the drama. Net $15,593 credit. It's Merry Xmas on May if Friday close <640 !
STO Iron Condor + Bull Put Spread + Bear Call Spread + Covered Call + day trade. Various ranges. Everything in my playbook except -P and Short Strangle and roll-split/flip-split because those use too much margin. All positions and credits are small by themselves (to reduce risk), but together they are enough to stop the drama. Net $15,593 credit. It's Merry Xmas on May if Friday close <640 !
I'm sure you missed at least one colloquialism in there
Anybody using a trade tracking / journal program? I've been manually entering positions in a spreadsheet and finding that an increasingly untenable approach.
I duckduckgo'd to see if there was anything like this already out there:
I found several options. Just reading the description I think I like the looks of this one the most:
Wingman - Trade Tracker for Options, Stock, and Futures
Trade tracking and analysis platform built for options/stock/futures traders. Import trades directly from your brokerage firm - no manual entry. Have your trades grouped and analyzed, so you can make faster, more informed trading decisions.www.wingmantracker.com
That is because they spend the most time talking about the stuff that matters most to me - easy trade imports (export the CSV from broker; import the CSV into tool), and easy interface for assigning positions to trades (where they don't automatically get assigned). Keep tracking of an evolving position to see how it is performing over time. E.g. a PMCC with a long dated call paired up with a large series of short term short call sales.
Analyze trade types to see what is working best for me, etc..
I haven't tried anything like this, but I consider a trading journal essential. And one that has all trades - not just a subset I think important at the time. And the entry for this is becoming a problem for me
The downside - this is going to be $50/month or $500/year.
One thing that last week and this week has made clear to me is that attempting to track trade level detail in this spreadsheet I have just isn't going to work. It's taking too much time / effort, and I'm not getting much of the information that I want. It is at least making it possible to see my monthly net earnings and cash flow month to month and that is good.
But its just inadequate. I expect I'll be trying out the Wingman app 30 day free trial shortly. What I particularly like about what I read - easy to import trades (export CSV from Fidelity when I want an update, import into tool). Ability to assign individual trades to a position. Keeps closed transactions with the position they were associated with. Such as a series of covered calls sold against the same shares or leaps. Easy to get the overall position p/l.
I'm assuming that there is a monthly earnings report by account - I'll find out.
There is additional analysis that all of these tools I looked at have. I'm sure I'll find it valuable as I use more and more of the tool. But for now - record the transactions, group a collection of trades into a single strategy, and track the strategies as they evolve over time. These are the mechanical things that my manual tracking is suddenly overwhelmed by.
So that's the tough thing when you get into mutli-leg positions and especially if you start rolling them and ESPECIALLY if you start splitting/flipping them. I don't think there's any paid solution that's really going to cover this with any efficiency; I think its probably easiest to bulldog through a spreadsheet and don't worry about the in-the-weeds data like what you might get by exporting from your trade history.
I think the key for bookkeeping is to not get hung up on tracking rolls. A "roll" in the books is simply closing one line item and opening the next line item. Doesn't matter if its a straight roll or one of the more complicated split/flip deals that we've been talking about recently. That also will highlight winning vs losing trades--rolling an underwater position is most certainly a losing trade and that's the main thing you want to be able to reflect upon during a review of your history.
Circling back to this one for folks looking for a rule-of-thumb, there isn't one. The above is very much a single point along a very wide curve. The win-to-loss ratio of an IC (or any sold position) is very much dependent on the risk of the position. Farther OTM positions, for instance, will have much higher risk/reward ratios. I usually end up with IC's somewhere around the 10:1 land.
In the end, what's most important is that the positions are entered with some logic that's more dynamic than "always a ∆ of X" or "always a strike that's Y% OTM". The casino odds of selling options means those are guaranteed losers in the long run.
Rolling underwater position for a credit shouldn't necessarily mean losing trade until it causes a realized loss no?
While I agree it isn't remotely ideal.... if we begin defining "losing" in terms of opportunity costs (poor use of capital), then "winning" similarly becomes equally difficult to define.
Rolling underwater position isn't something to be proud of... so it is better off thinking of rolling as a "losing trade" in the colloquial sense, correct?
Maybe warfare is a better analogy here. In a battle, buying time until weather changes is not ideal. BUT if you live in Russia... maybe retreating a bit and waiting for the winter to murder a bunch of Nazis isn't bad either?
"Winning" and "losing" are very simple to define--no need to complicate a simple concept with things like opportunity cost. Return on Capital and risk/reward are for sure important metrics, but they are most certainly separate.
Rolling an underwater position is explicitly realizing the loss of that position. It just happens to be also simultaneously opening up a new position. While some of us prefer that new position offset the loss of the previous one (so, roll for net even or credit) not treating them as separate positions from a tracking perspective is, at best, inefficient for the trader. In the context of tracking one's trades, abstracting the losing trade into some multi-cycle position is really more akin to cooking the books, which of course doesn't make sense if you're the one that wants 'the books' in the first place.
Trade trackers are not simply an accounting exercise, because everyone can get that just by looking at their broker's basic performance tools. A tracker's primary function is to capture a trader's logic/criteria used to enter/exit the position, explicitly for the purpose of generating a statistical, quantifiable data set from which the trader can evolve their overall strategy. The accounting rack up is simply the metric by which the trader's strategy is assessed.
Trade trackers are the only reliable method by which a trader can objectively assess whether or not a losing trade was a bad trade or simply a statistical eventuality.
There is something here that is akin to the difference in a cash flow statement and the income statement in accounting. It is quite possible in business to have positive cash flow while showing an accounting loss. Eventually the cash flow turns into accounting losses and gains, but eventually can occur after the business has run out of money and gone bankrupt. It's also possible to show positive net income with negative cash flow and go bankrupt as a result (ask Solar City how that happens; good thing they found a white knight).
Both are important and need to be understood.
Sidenote - everybody here should know about the 3 basic accounting reports, what is in them, how they are different from each other, and how they expose different elements of the companies they are invested in.
Back to your comment - rolling a losing position, as long as its for a net credit, means you're collecting a positive cash flow, even as your earnings can go quite heavily negative. The mechanism is to realize a current loss while simultaneously opening a new position at a slightly higher option premium. The unrealized position is steadily larger than the realized position. Actually the unrealized position ends up being larger and smaller, while still being in the red overall.
The party ends though if you are ever forced to end the position. Whatever the state at that point becomes a realized result.
Opportunity costs can be upleveled from the individual trade level fairly easy. The 760 puts I have now as an example - the first roll or two would be in the buying time category awaiting winter to handle the German aggression. But winter hasn't arrived, and now I find myself with a thesis that the shares are going to be flat to down (and I have a new reason to think sharply down) for the balance of the year. That doesn't mean that I'm right, but if I really do believe that then I really don't want to be in a position that needs a big move up to recover.
I didn't have much opportunity cost that first roll or two. But I'm now considering a circumstance where that is dead money for a year. That's a pretty hefty dose of opportunity cost and a big reason I'm cleaning those up, one way or the other.
That's also specific to my context. For those still in pure growth mode, the opportunity cost on that position may be much much higher than it is for me.
I'm already tracking the rolls as you describe. Close the current position (with its gain or loss) and open the new. And I agree that's the right / best way to track and think of them.
The 30 day trial will hopefully be enough to discover whether this will help or not. I know that bulldogging my way through entering in the spreadsheet is losing. I'm going back 1 or 2x/month at this point to catch things up. That's ok for my monthly results tracking but not really where I'd like to be. And the delays getting caught up are because I feel like I'm doing a chore and catching up on it.
If one of these tools shortens the time to get that done and gets it done faster / more accurately (a problem I'm also starting to worry about), then for me at least they can have my $500/year. Heck - I think I can take that as an investing expense as well, which might save me $250 on the tax bill! The tax savings will totally make this worthwhile (/s).
Its hard to argue with a free trial; it is unclear what you're actually looking to get out of a tracking tool so hopefully you have that internally defined.
To wit, if you're paying someone for a tracking service make sure you're getting useful, actionable output and not just a ton of data and shiney graphs that don't really move your ball anywhere.
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