The list of current and past trades. Find the link below for each specific trade.
If the date is in red, we are still following the trade
If the date is in blue, the trade has been closed, or we are no longer following it.
Assumptions. $100,000 portfolio; commissions $1, no exercise/assignment fee
...
The links in this sidebar make it easy to find all premium content.
NOTE: If you are not a Gold Member, the Premium Content will not be visible.
If you are not completely satisfied I'll return the Gold Membership fee. No questions asked.
NOTE: This guarantee is valid during the entire first month of your membership - that's a full 30 days.
One per customer, please
To request that refund, send e-mail to premium (at) mdwoptions (dot) com
More details on Guarantees and Refunds page
© 2013 Options for Rookies Premium. All Rights Reserved.
Your host is Mark Wolfinger
Mark I have been looking at using the new 5 point spread options on RUT as way to reduce risk when one of the sides is being challenged. I like the revenue when putting RUT ICs on with 10 point spreads. It gives me more money to manage risk. What I have been looking at is to roll out the short challenged side as my first adjustment. It is allows me to reduce my risk by half w/o doing anything more drastic. Your thoughts on the next discussion? Thanks Paul
Paul,
There is nothing wrong with rolling per se. As long as you like the new position. And you clearly like it. My objection to rolling is when it is done blindly – as if there were no alternatives.
When you say reduce risk by half – I don’t know what you mean.
Are you saying that you begin with a 5-point trade and roll into a 10-point trade? That doubles risk; it does not halve it. Or do you roll from a 10-point spread into a 5-pointer?
Roll from a 10 point spread to a 5 point
OK. That’s one trade I’ve never made.
If you can find the appropriate strikes, that’s a viable suggestion.
Thanks
Mark,
For covered call I’d like to suggest Arcellor Mittal (ticker MT). Nicely volatile, could suddenly give action.
Regards,
Chris-O
MT appears (corporate headquarters) to be located in Luxemburg and is one of the largest steelmakers in the world.
The 52-week price range is 26 to 47, and that is indeed volatile.
Zachs rates this a #1 best buy.
The problem for me is that my first piece of advice for writing covered calls is to never invest in a stock that I don’t want to own. And the second is to never write covered calls on a stock just because I like the option premium and find it to be potentially rewarding. However, I’d gladly forgo those two conditions and follow this stock as a covered call candidate – just because you requested it. However, I note that the options are trading at near their historical low implied volatility. IV has been higher than current levels 98% of the time.
I’ll take a look at the options when the market opens, however, this fails so many tests that I don’t see how I can justify it as a Follow That Trade candidate. Do you have a more specific reason for requesting this stock – other than it’s volatile?
Thanks
Mark,
Since there are no Collar trades that we are following, I would like to jump in with a Collar trade suggestion. Should I post the information here or in another location.
Thanks,
Jim
Jim,
The forum is best place. It makes it easiest to follow the thread.
if that’s not where you feel comfortable, let me know.
http://forum.mdwoptions.com
One suggestion Mark,
maybe you could mark the trades we no longer follow on this page – i guess in a not-so-distant future it`ll become hard to recall what we do still follow and what not.
Dmitry,
If you mean this page: http://www.mdwoptions.com/Premium/follow-that-trade-2/trades-we-are-following/
I’ve been doing that. Trades for which trade date is in RED are still being followed. Those in BLUE aye not.
Perhaps I should post that message.
Thanks
Hi Mark
Wondering what thoughts you had about adjusting this trade. The trade profitable now, with a delta of nearly 7 will run into problems fast if prices drop further. 670 would be about 200$ loss. I know you’ve expressed interest in rolling down in the past, especially when RVX rises. Would this be a candidate. Lets say buy 640/650 2.15 sell 610/620 1.40. I would feel safe in the new position but not see much profit, 300$ at expiration. What about buying some IWM positions to help ride out the storm. Here were some of my thoughts. Buy 1 dec66 put 1.60, b 3 dec67/69 put vertical .68, or buy 1 65 jan put 2.82. All have about a 28 delta My favorite would be the 67/69 vertical since it has the lowest theta and weaker vega would not be a huge trade off. Wow, sorry that turned into such a gigantic question. Please answer at your leisure.
Mark,
I do like rolling down – and yes, especially when IV is ‘high.’ However, when time is short (front month) it is much more difficult to find a roll down at a reasonable cost.
Is that strategy a candidate? Yes it is for many traders. I have a strong preference for exiting front-month trades.. Note that is a personal choice. Thus, the answer to your question is: YES. Rolling down is viable with this position.
Rolling down 30 point is not a huge help. It is the fact that these are front-month options that limits your ability to move more strikes OTM. However the fact that you would feel safer (I hope you mean ‘safer’ and not ‘safe’) is important. I would be wiling to pay the 75 cent cost to regain that comfortable feeling. As I said to Wayne, I know we trade for profits, but sometimes safety comes first. If you want to get out now, that’s okay. If you want to roll down, that’s okay also. But I recommend that you not be all that concerned with whether the position will be able to earn a profit. Why? Because you own this position today at today’s prices. The original trade is history. Do you want to own this trade, as is? Do you prefer to exit? Do you prefer to roll down? Those are the questions and they should be based on which you believe gives you the best opportunity in the future: Exit if you fear the big loss. Roll down if you believe that gives you a good position to own for the next couple of weeks. Risk comes first. If you can arrange to give yourself a chance to earn a profit from the start of this trade, that’s nice. But not mandatory. Risk is the name of the game you are playing today. Make the trade that gives you the best chance to increase (or not decrease) your net liquidating value from TODAY.
Yes, you can buy insurance in the form of IWM options. Ten of those = one RUT option. This play will also eat up a portion of the potential profits.
As to your insurance plays, you did not mention how many iron condors you own. That makes a difference.
a) Yes a naked put option is viable and the Dec 66 is a good choice. However, it is not cheap. That’s a difficult decision.
I do not like the idea of owning Jan puts for two reasons. If market rallies you will lose too much, or have to decide when to unload that put. Next, Jan options have more vega, and I don’t want to pay for vega when IV is high. I prefer to pay theta – but I mention this so that you can consider my preferences and the decide if you agree/disagree with them.
b) The debit spread is good. If market tanks, you earn $132 x 3. I don’t know how much good that does – compared with your current risk.
c) I have no leisure, but that’s for the suggestion!
Thanks for your quick response. Leisure is over rated anyhow. I was choosing my IWM adjustment based upon 2 RUT position. I appreciate your viewpoints on rolling down, both the lessened value of that strategy when in the front months and also 30 points not being terribly significant. Yes I guess it is all about risk. Do you define your risk when you enter a trade and religiously exit when that amount is hit or are you more flexible?
Mark,
I am more flexible for one simple reason. It is impossible for me to follow my ‘original trades’
For example, for February SPXPM, I have a BUNCH of iron condors. I don’t know which call spread goes with which put spread and I although I currently know how much I collected for each, that will become increasingly less important and I will no longer care.
If had only one position, I would adhere to my trade plan. In fact, I would update that plan every day to be sure it is in compliance with current market conditions.
I am short these put spreads:
990/1000
1010/1020
1030/1040
1050/1060
1070/1080
1090/1100
That’s what happens when I trade 2-lots at a time.
I am short these call spreads:
1340/1350
1360/1370
1380/1390
1400/1410
Plus I have another account with more positions.
Hmm so it sounds like you are always adding positions and subtracting positions. Do you always try to add your positions at the same time prior expiration ie. 3 months. It sounds like you always have a position on. Do you think trading only iron condors can be a viable trading strategy?
Mark,
I am not always adding or subtracting, although it may seem that way.
1) I open positions two or three lots at a time. I make no more than three such trades in one day. I continue to add trades until one of two things happens:
a) The prices become unattractive and I do not want to trade at that price
b) I own as many iron condors as I want to own.
If I exit any positions, I’ll have more margin room and may decide to open more trades. Or, if I believe I own enough Feb, I’ll wait until March options become available for trading.
2) I close positions whenever possible. I exit call spreads or put spreads – seldom whole iron condors. I enter bids all the time. Every day. There is always something for which I can make a bid.
Today I bought two SPXPM Jan 1400/1410 call spreads at $0.25.
Today, the SPXPM Jan 1380/1390 call spread was $0.05 to $0.80. I entered a bid at $0.25. I knew there was only a tiny chance to get filled (probably a customer making an error), but who cares?I entered the bid – just in case.
When the shorts become the front-month options (today, these are Dec options), I become more aggressive with my closing bids. Not very aggressive. Not yet. But I will pay more than seems reasonable – especially if I had already exited the other side of the condor. I don’t have any rules that govern here, but this is my approach:
Philosophy tidbit
I prefer to collect ~$300 for a new iron condor position that has almost three months to run than hold onto a front-month iron condor that I can cover for $0.80. Yes, the front month has higher time decay. However, it is probably nearer to being at the money and I want to get out of that trade. I already have a good profit, so there is no incentive to take the risk of a sudden market move. [Note: Front-month options tend to lose more dollars than longer-term options when the stock price changes significantly]
3) Yes, I always have a position.
4) Viable? Yes, it viable. However, it may not be advisable.
Using a single strategy may be a good idea when market conditions are just right, but most traders should have at least two or three strategies ion their arsenal – just in case they may be needed.
If you trade iron condors,
My point is that this strategy as appeal. But I would recommend that any trader who does not have a lot of experience to continue to look for a strategy that he/she understand well and has some success trading. It’s fine to hone in on iron condors – but there is no guarantee of success. And you do want to see if you prefer to trade other strategies.
Thanks Very insightful answer
Thanks Mark.