Is consistent option income possible?

[HowardCohodas]

How did you guys make out coming out of QE2 it was really interesting to watch how the IV's moved. Ended up more like and earnings play than a market trade

No effect whatsoever. I trade index options credit spreads and form Iron Condors when market conditions permit. None of my spreads required any adjustment because of Fed action. Time marches on, and that's where my profit comes from.

 

[option911]

No effect whatsoever. I trade index options credit spreads and form Iron Condors when market conditions permit. None of my spreads required any adjustment because of Fed action. Time marches on, and that's where my profit comes from.

so you are saying that despite implied volatility falling 2% on the indexes you didnt notice any change in your positions. you are either not trading or in some crazy kind of iron condor ive never seen in 10 years of trading.

 

[HowardCohodas]

so you are saying that despite implied volatility falling 2% on the indexes you didnt notice any change in your positions. you are either not trading or in some crazy kind of iron condor ive never seen in 10 years of trading.

My third sentence clarified my first. That is, no effect that required position adjustment. The current value of a credit spread or an iron condor varies throughout it's life. The question is, is it within the limits that permit time decay to overwhelm them. The Fed action did not cause any of my limits to be exceeded, so I let time do its work.

 

[option911]

My third sentence clarified my first. That is, no effect that required position adjustment. The current value of a credit spread or an iron condor varies throughout it's life. The question is, is it within the limits that permit time decay to overwhelm them. The Fed action did not cause any of my limits to be exceeded, so I let time do its work.

did you notice a P&L swing from Wed to Thurs at least, or some quick change in decay?

 

[HowardCohodas]

did you notice a P&L swing from Wed to Thurs at least, or some quick change in decay?

No warning or action alerts were signaled in my Credit Spread Trading Dashboard. My Dashboard signals position opportunities and position warnings based on limits set by my strategy. I only infrequently look at the value of positions without warnings or alarms set.

Were I not a news junky and a forum junky, the Fed action would have gone unnoticed by me.

 

[RPEX]

From how far out (time til expiry) do you cats put on your ICs?

Also, carrying on from another thread, i'm just trialling livevol which i think is pretty impressive although it lacks product coverage (US equities only, no FOPs or European mkts), if any of you guys have looked at this have you found it enlightening for putting on your ICs. Or is it just info you already know?

 

[HowardCohodas]

From how far out (time til expiry) do you cats put on your ICs?

Also, carrying on from another thread, i'm just trialling livevol which i think is pretty impressive although it lacks product coverage (US equities only, no FOPs or European mkts), if any of you guys have looked at this have you found it enlightening for putting on your ICs. Or is it just info you already know?

I begin a new month's credit spread as soon as the current month expires and I get my margin back. That is usually 59 days from expiration for the new credit spread. My intention is to form an Iron Condor, but I treat each spread separately, each having to stand on its own with respect to amount of credit received and the risk involved. It may take days or weeks before the second half of the Iron Condor can be formed.

I'm unfamiliar with your livevol reference. Perhaps that is because I'm a Yank

 

[daveyc]

its starting to feel like we might actually have a two way market possibly.

do you guys like trading OEX? i've got some positions for dec expiry that are acting really well so far. i did say so far. but it seems very managable.

good luck guys,
dave

 

[HowardCohodas]

its starting to feel like we might actually have a two way market possibly.

do you guys like trading OEX? i've got some positions for dec expiry that are acting really well so far. i did say so far. but it seems very managable.

good luck guys,
dave

What kind of positions? Longs, shorts, calls, puts, spreads, other?

 

[daveyc]

What kind of positions? Longs, shorts, calls, puts, spreads, other?

hi howard,

i started with an iron condor, then i added a put butterfly, then vertical. 550/530/510 for the butterfly and 505/515/585/595 for the iron condor, then added 570/580. so its a hodge podge so far but delta is exactly neutral at this point in time. hope it falls in the butterfly, it would be a nice christmas gift

 

[HowardCohodas]

hi howard,

i started with an iron condor, then i added a put butterfly, then vertical. 550/530/510 for the butterfly and 505/515/585/595 for the iron condor, then added 570/580. so its a hodge podge so far but delta is exactly neutral at this point in time. hope it falls in the butterfly, it would be a nice christmas gift

I've not yet attempted to master the butterfly. I also look at delta as a secondary consideration.

I've got a lot to learn.

If you don't mind telling me, I'm curious on what date you placed the Iron Condor. It would let me explore my considerations relative to yours. Thanks.

 

[daveyc]

I've not yet attempted to master the butterfly. I also look at delta as a secondary consideration.

I've got a lot to learn.

If you don't mind telling me, I'm curious on what date you placed the Iron Condor. It would let me explore my considerations relative to yours. Thanks.

hi howard,
i am just a novice myself. send me a pm with your email addess and i can take a picture of this trade on my tos screen (just figured this out recently) and send it to you for you to look at.

dave

 

[oiltrader81]

you can obviously have constant cash flows but you will have to adjust your position.
Trading options is not like trading futures you dont trade guessing about the direction you trade volatility but since the last augmented in all markets you have to delta hedge your portfolio all the time

 

[option911]

I am selling some premium into this vol uptick, but I think we might see the VIX get above 25 and ATM IV over 23 at some point this week. Interestingly though, realized vol is the lowest level I have calculated in several months. How are you guys holding up.

 

[daveyc]

I am selling some premium into this vol uptick, but I think we might see the VIX get above 25 and ATM IV over 23 at some point this week. Interestingly though, realized vol is the lowest level I have calculated in several months. How are you guys holding up.

hi mark!

this is turning out to be a very good few weeks for my trades, actually my very best options cycle yet. this is definitely hard work but i couldn't be more pleased. i think i'm going to stick with OEX and SPX from here on out, so no more etf's, they kill me with commissions. $4650 is commissions so far this year, ouch!!

 

[daveyc]

i should modify my post above, just a pretty good options cycle, this recent move up is not so good since i had to adjust short calls. this is a tough business!!

 

[oiltrader81]

well trading options is pretty much hedging the position in order to eliminate directional risk.
have you seen the VIX futures prices for January and February ? they decreased a bit but overally they are still pretty high....we might see some big moves early next year.
my models give me the same forecast and i am thinking to buy some puts

@ daveyc $ 4650 in commissions is a lot ...what broker are trading with?
BTW i agree with you this is a tough business !!!

 

[HowardCohodas]

well trading options is pretty much hedging the position in order to eliminate directional risk.

Some, but not all, options trading strategies are a hedge against directional risk.

It is a good thing that there are so many uses for options as it makes some niches very profitable.

 

[daveyc]

well trading options is pretty much hedging the position in order to eliminate directional risk.
have you seen the VIX futures prices for January and February ? they decreased a bit but overally they are still pretty high....we might see some big moves early next year.
my models give me the same forecast and i am thinking to buy some puts

@ daveyc $ 4650 in commissions is a lot ...what broker are trading with?
BTW i agree with you this is a tough business !!!

hi oiltrader,

i'm trading with thinkorswim and my commissions are set to tradekings rates. i'm going to avoid trading etf's for 2011 and stick to the SPX and OEX mostly and maybe stocks like PG.

since we're so bullish, i'm thinking of buying an out of money butterfly and financing it with a bull put spread.

enjoy the weekend guys!

dave

 

[oiltrader81]

Hi Dave, sorry for replying you so late. The uptrend is now over but who cares? WE WERE RIGHT!!! lol
To be honest I am not too optimist for the beginning of the 2011.
The first 2-3 months seem to be quite volatile and I am thinking to implement a bearish strategy or start selling covered calls.
I might be wrong but my quant models are really bearish until March and then start moving upward from April. The S&P500 average volatility should be around 25%.