120924. Weeklys Trade

8:31 am
RUT = 850.10
Went for a bit farther OTM options this time.

Collected 60 cents (.32 for P; .28 for calls)
Trade size: 11 lots
Delta ~12 for each side
RVX = 18.54

RUT Sep 27 825/830P; 870/875C

8:41 am
Initial (flexible) target: pay 20 cents to exit. Any time prior to Wed close.
If we still own this trade on Thursday, a new plan will be needed.

Sep 25

2:26 pm
RUT = 842.10
Short deltas: Puts 22; Calls 3

The big question is whether to hold overnight without an adjustment or hedge. The position is 65 delta long and gamma is -7.

The Greeks.

2:23pm
FYI. The 5-point put roll down spread has a midpoint of 35 cents (no bid, 70 cent offer).

2:55pm
RUT = 839.39; Position long 75 delta, with negative 9 gamma.
Mid-point for the put spread is 85 cents, suggesting that I could cover some of the short position at 90 cents.
Dilemma

Bidding 5 cents for 865 calls
Bidding 20 cents to roll puts down by 5 points

2:59pm
Raised bid for put roll-down to 25 cents.

September 26

Important discussion:

Discipline: This character trait makes or breaks traders. I know for a fact that this is true, yet after all these years, I still have difficulty with maintaining good discipline.

Look at this current trade. To me, there are two extreme mindsets, and most of us fall between these extremes. One mindset is healthy; one is not.

Trader A: “I want to get out of this trade. The market is falling Tuesday afternoon and I do not know the reason. Perhaps it is more rioting in Spain or perhaps it is just fear of more rioting. But I do know this: there is a decent chance that things will get worse and very soon.

However, I want a profit. If this trade gets to where I can but it back for a small gain, I’ll take it. I’ll be happy to gt out. Or perhaps I can make an inexpensive adjustment (such as buying the 5-point roll-down for a 25-cent debit). Sure, that roll-down may bring nothing but trouble with a big downside opening, but…

I’ve been bidding 5-cents for the put and call spreads all day. I’m trying to get out. But I want that profit and because the market often reverses direction overnight, I think I’ll just sit with this trade. The overnight time decay will be very beneficial.”

Trader B: “I want to get out of this trade. The market is falling Tuesday afternoon and I do not know the reason. Perhaps it is more rioting in Spain or perhaps it is just fear of more rioting. But I do know this: there is a decent chance that things will get worse and very soon.

I can buy back the iron condor by paying 85to 90 cents. Sure that’s a loss, but does it really matter whether it is a gain or loss? No, it does not. Here’s what I do know. If I pay that 90 cents I am out. If I do not pay it, then I own the position overnight – and I have no idea what will happen tomorrow.

My choice has nothing to do with whether this trade is profitable. It has everything to do with this: If I hold, I can no more than earn 90 cents (from where I am right now) per spread. If I hold, I can lose another $2 or $3 per spread – and if the worst happens, I could lose another $4.10. This is madness. The market is threatening. I’m outta here and I’ll live to play another day.

Bid 85 cents and if not filled in 5 seconds, bid 90 cents. And even 95 cents if necessary.”

8:44am

Exit.
RUT = 839
Paid 75 cents for put spread.
Paid 5 cents for call spread.
Loss 20 cents, plus commissions.

4 Responses to “120924. Weeklys Trade”


  1. Fatal error: Uncaught Error: Call to undefined function ereg() in /home/mdwoptio/www/www/Premium/wp-content/themes/Canvas/includes/theme-comments.php:64 Stack trace: #0 /home/mdwoptio/www/www/Premium/wp-content/themes/Canvas/includes/theme-comments.php(19): the_commenter_link() #1 /home/mdwoptio/www/www/Premium/wp-includes/class-walker-comment.php(174): custom_comment(Object(WP_Comment), Array, 1) #2 /home/mdwoptio/www/www/Premium/wp-includes/class-wp-walker.php(145): Walker_Comment->start_el('', Object(WP_Comment), 1, Array) #3 /home/mdwoptio/www/www/Premium/wp-includes/class-walker-comment.php(135): Walker->display_element(Object(WP_Comment), Array, '5', 0, Array, '') #4 /home/mdwoptio/www/www/Premium/wp-includes/class-wp-walker.php(370): Walker_Comment->display_element(Object(WP_Comment), Array, '5', 0, Array, '') #5 /home/mdwoptio/www/www/Premium/wp-includes/comment-template.php(2097): Walker->paged_walk(Array, '5', 0, 0, Array) #6 /home/mdwoptio/www/www/Premium/wp-content/themes/Canvas/comments.php(27): wp_list_comme in /home/mdwoptio/www/www/Premium/wp-content/themes/Canvas/includes/theme-comments.php on line 64