Re: [SuperTraderKarenStudy] Defending By Diversifying


Nov 23, 2017

 


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#9278 Nov 23, 2017

Just wanted�� to review a strategy , I have learnt through this forum . I reached out around a month ago , that I had way too many Jan 18' 2600 Calls ... Subsequently Ralph and Craig gave me great advice .. Ralph basically said a position is a position - You are not married to it ; Craig said to just split the position up to a corresponding Put with the same premium [ I believe Ralph advised this as well ] .

I also have been Rolling these Calls all year and it is not fun . It feels good for a minute , then you are sitting at the screen with your hands behind your back for 60 - 90 days till you have to do it again . I needed an alternative .��

Let me run through this , cause I believe a variation of�� this could possibly�� be in every ones arsenal in defending a threatened position , if they see fit�� ... Let's say I had a 100 SPX Jan 2600 calls [ I know , Idiocy . Troubles started on 11/ 8 / 16�� ]�� . I bought back 50 and sold�� 50 June�� 2300 Puts for the same Premium a month ago after listening to Ralph and Craig�� ��... I know I went way out�� - I'm a scaredy cat , but I was over leveraged and needed to reduce my positions and may do the inverse later�� [ I'm sure you will variate this according to your risk tolerance - I believe I could have sold the Jan 2500 Puts instead ]��

After a couple of good nights sleep , and reading Barbara' s great post about diversifying , the market hit 2590 , I decided to diversify my risk [ I rolled 50 Calls�� to Feb 2625 a little before that ] , I thought why not buy back 30 calls and use the same notional value and diversify them with strangles for TLT , OIH , USO , GLD puts and calls with the same premium [ If I bought back the call for $20 , I sell a put and call in TLT�� that ADDS up to $20 with same notional�� ...�� ��I only did it with TLT and OIH so far .��

That immediately cuts my directional risk in half because I am now split between Puts and Calls in�� different underlyings that are less correlated to the�� SPX .

It also allows me to be more aggressive in case the new Strangles need adjusting , because I have less at stake in each one , and I am nervous about moving SPX Puts up close to ATM at this stage in the Bull market .��

Gold , Oil , and Bonds are also less correlated to each other so I won't necessarily get hit with all 3 .�� FXE [ Euro] was also something I was looking at .��

So now instead of 100 calls in SPX , I will have�� 50 SPX�� Puts, a bunch of strangles in different uncorrelated underlyings , notionally worth 30 Calls in SPX�� and 20 SPX Calls .... My buying power went way up also , as I am sure you can deduce . My risk has been substantially mitigated as well , and hopefully I won't have to Roll a major portion of my portfolio .��

Disclaimer - I am a novice trader . I did not backtest any of this . This whole strategy may be wrong . Mr Market is a very , very bad man ...�� I may be wrong in my execution , and the Brainiacs on this forum , may have smarter ways of doing this , but principally I believe it is a alternative way of defending positions , that I have never seen discussed on Tasty Trade or somewhere�� similar .... Who hasn't worried about�� getting�� double whammied defending a large position by moving up Puts or visa versa ? Split Vertically and Horizontally�� - This may be an alternative .��

Thanks ,��Victor��







��Hello Ralph,

I was able to harvest one of my STT put credit spreads today, and set up another STT trade.

I now have 4 on.�� Max loss is about 108K if SPX drops to 1500.�� No upside risk.�� I am currently at about 1700 profit and am tying up 3450 in margin.�� My T-0 breakeven is currently at 2220.�� Anything above that is profit.

I am currently experimenting with 3 different versions of the STT.�� I have one that is the standard STT with 25 point spreads.�� I have two with 50 point spreads and one that is 100 points.�� My preference so far is for the 50 point wide spreads.

Tom



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#9279 Nov 25, 2017

This has been a tough year and whatever you can do to survive is commendable.Be careful with ETFs though.- they may not carry the section 1256 tax benefits,.- you are likely to get exercised if you go under water..- you need to sell a lot more contracts to make the same amount of money,- so the commissions start biting you.

My diversification primarily is SPX, RUT and NDX as each of them have slightly different behavior so if one does not work, they other one does (except 2017, that is, with a vertical market :)) I prefer weekly contracts and there are so few options that give weeklies, have liquidity and also low fees (do not like the fees on futures). I also found orders on future options harder to manage (TDA did not allow me to create calendars etc.) so I am stuck with SPX, RUT and NDX.

While doing my trades, I have been struggling with 2 opposite thoughts:a) it is hard to predict markets, you do not know where market will go tomorrowb) technical analysis (charts and trend lines) works, it can help you guess market better than 50:50 for sure

While I have tried to manage my trades with theory a) ... it is hard to predict markets and have been using just the greeks,.I think there is a lot of value to adjusting trades based on the charts - hopefully I learn how to use the charts to my benefit in 2018.

Your comment => I also have been Rolling these Calls all year and it is not fun . It feels good for a minute , then you are sitting at the screen with your hands behind your back for 60 - 90 days till you have to do it again.



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#9283 Nov 25, 2017

Harry - What I liked about GLD , TLT , and OIH�� was that they weren't as correlated to the market as SPX RUT NDX especially on this melt up ... But true , commissions are rough . I wrote 100 put and 100 call�� OIH contracts [ Notional is $24.23 ] per 1 SPX call I replaced ....�� TLT 20 and 20 ...��

Regardless , I had to spread some chips around ... And I actually�� received a credit while writing further out of the money , because I split them to puts and calls�� ... Actually TLT will go up in a crash ..... When that happens ....��

Thanks��Victor��

On Saturday, November 25, 2017, 1:10:04 PM EST, Harry Singh harry.public@... [supertraderkarenstudy] supertraderkarenstudy@yahoogroups.com> wrote:







��This has been a tough year and whatever you can do to survive is commendable.Be careful with ETFs though��- they may not carry the section 1256 tax benefits,��- you are likely to get exercised if you go under water.��- you need to sell a lot more contracts to make the same amount of money,- so the commissions start biting you.

My diversification primarily is SPX, RUT and NDX as each of them have slightly different behavior so if one does not work, they other one does (except 2017, that is, with a vertical market :)) I prefer weekly contracts and there are so few options that give weeklies, have liquidity and also low fees (do not like the fees on futures). I also found orders on future options harder to manage (TDA did not allow me to create calendars etc.) so I am stuck with SPX, RUT and NDX.

While doing my trades, I have been struggling with 2 opposite thoughts:a) it is hard to predict markets, you do not know where market will go tomorrowb) technical analysis (charts and trend lines) works, it can help you guess market better than 50:50 for sure

While I have tried to manage my trades with theory a) ... it is hard to predict markets and have been using just the greeks,��I think there is a lot of value to adjusting trades based on the charts - hopefully I learn how to use the charts to my benefit in 2018.

Your comment => I also have been Rolling these Calls all year and it is not fun . It feels good for a minute , then you are sitting at the screen with your hands behind your back for 60 - 90 days till you have to do it again��







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#9284 Nov 25, 2017

Hollow, Victor,

Thank you for sharing your strategy. Very often in trading we think "normally" that limit our ability to solve problems.��

����Jeff��



On Thursday, November 23, 2017 11:00 PM, "Vic Ferrari vico213@... [supertraderkarenstudy]" supertraderkarenstudy@yahoogroups.com> wrote:



��

Just wanted�� to review a strategy , I have learnt through this forum . I reached out around a month ago , that I had way too many Jan 18' 2600 Calls ... Subsequently Ralph and Craig gave me great advice .. Ralph basically said a position is a position - You are not married to it ; Craig said to just split the position up to a corresponding Put with the same premium [ I believe Ralph advised this as well ] .

I also have been Rolling these Calls all year and it is not fun . It feels good for a minute , then you are sitting at the screen with your hands behind your back for 60 - 90 days till you have to do it again . I needed an alternative .��

Let me run through this , cause I believe a variation of�� this could possibly�� be in every ones arsenal in defending a threatened position , if they see fit�� ... Let's say I had a 100 SPX Jan 2600 calls [ I know , Idiocy . Troubles started on 11/ 8 / 16�� ]�� . I bought back 50 and sold�� 50 June�� 2300 Puts for the same Premium a month ago after listening to Ralph and Craig�� ��... I know I went way out�� - I'm a scaredy cat , but I was over leveraged and needed to reduce my positions and may do the inverse later�� [ I'm sure you will variate this according to your risk tolerance - I believe I could have sold the Jan 2500 Puts instead ]��

After a couple of good nights sleep , and reading Barbara' s great post about diversifying , the market hit 2590 , I decided to diversify my risk [ I rolled 50 Calls�� to Feb 2625 a little before that ] , I thought why not buy back 30 calls and use the same notional value and diversify them with strangles for TLT , OIH , USO , GLD puts and calls with the same premium [ If I bought back the call for $20 , I sell a put and call in TLT�� that ADDS up to $20 with same notional�� ...�� ��I only did it with TLT and OIH so far .��

That immediately cuts my directional risk in half because I am now split between Puts and Calls in�� different underlyings that are less correlated to the�� SPX .

It also allows me to be more aggressive in case the new Strangles need adjusting , because I have less at stake in each one , and I am nervous about moving SPX Puts up close to ATM at this stage in the Bull market .��

Gold , Oil , and Bonds are also less correlated to each other so I won't necessarily get hit with all 3 .�� FXE [ Euro] was also something I was looking at .��

So now instead of 100 calls in SPX , I will have�� 50 SPX�� Puts, a bunch of strangles in different uncorrelated underlyings , notionally worth 30 Calls in SPX�� and 20 SPX Calls .... My buying power went way up also , as I am sure you can deduce . My risk has been substantially mitigated as well , and hopefully I won't have to Roll a major portion of my portfolio .��

Disclaimer - I am a novice trader . I did not backtest any of this . This whole strategy may be wrong . Mr Market is a very , very bad man ...�� I may be wrong in my execution , and the Brainiacs on this forum , may have smarter ways of doing this , but principally I believe it is a alternative way of defending positions , that I have never seen discussed on Tasty Trade or somewhere�� similar .... Who hasn't worried about�� getting�� double whammied defending a large position by moving up Puts or visa versa ? Split Vertically and Horizontally�� - This may be an alternative .��

Thanks ,��Victor��







��Hello Ralph,

I was able to harvest one of my STT put credit spreads today, and set up another STT trade.

I now have 4 on.�� Max loss is about 108K if SPX drops to 1500.�� No upside risk.�� I am currently at about 1700 profit and am tying up 3450 in margin.�� My T-0 breakeven is currently at 2220.�� Anything above that is profit.

I am currently experimenting with 3 different versions of the STT.�� I have one that is the standard STT with 25 point spreads.�� I have two with 50 point spreads and one that is 100 points.�� My preference so far is for the 50 point wide spreads.

Tom



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#9285 Nov 26, 2017

It has been a difficult year selling index options for me. Not only the lack of volatility limited put selling. I also got into trouble selling calls early in the year. long story short I am caught between rocks in an IRA account. I have couple of SPX and RUT bear call spreads deep (10%) ITM. I keep rolling out and expending the spreads to void taking big losses. I sold put spreads every time I rolled the calls. Now the puts and calls are totally inverted which present a dangerous situation if there is even a 2-3% pull back. That's not my big concern though.��

My bigger problem is that I have less than 5K available margin left in this account. I can add some cash to it and continue to roll out week by week while taking some losses. I thought about covert part of my calls to puts but it required a large margin and would limit my ability to roll on either side unless I add a large sum of cash to raise my available margin. I bought long calls a few times but they didn't help a lot for the longer term. Diversifying into other assets like Vic did may not be as effective in IRA account with limited margin.��

I made mistakes alone the way. I kept thinking a pull back of 3%, then 5%... would would help me to unwind the positions. of course Mr. Market doesn't have to do anything "normal". I copied Tylor's system principles but messed up his position size and margin requirements. I can't think anything "out side of the box" for this situation right now except holding on for as long as I can. I welcome any suggestions or comments via private email or public post here. Hope some people may learn from my mistakes as well.�� �� �� �� �� ����Thank you,��

Jeff��







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#9286 Nov 26, 2017

Hi Vic, if it works for you, it works. BTW this was not meant as a criticism, just that I tried some of these and I was not happy managing those trades so I gave up on them.

On Sat, Nov 25, 2017 at 5:03 PM, Vic Ferrari vico213@... [supertraderkarenstudy] supertraderkarenstudy@yahoogroups.com> wrote:

.

Harry - What I liked about GLD , TLT , and OIH. was that they weren't as correlated to the market as SPX RUT NDX especially on this melt up ... But true , commissions are rough . I wrote 100 put and 100 call. OIH contracts [ Notional is $24.23 ] per 1 SPX call I replaced ..... TLT 20 and 20 ....

Regardless , I had to spread some chips around ... And I actually. received a credit while writing further out of the money , because I split them to puts and calls. ... Actually TLT will go up in a crash ..... When that happens .....

Thanks.Victor.



On Saturday, November 25, 2017, 1:10:04 PM EST, Harry Singh harry.public@... [supertraderkarenstudy] supertraderkarenstudy@ yahoogroups.com> wrote:





.This has been a tough year and whatever you can do to survive is commendable.Be careful with ETFs though.- they may not carry the section 1256 tax benefits,.- you are likely to get exercised if you go under water..- you need to sell a lot more contracts to make the same amount of money,- so the commissions start biting you.

My diversification primarily is SPX, RUT and NDX as each of them have slightly different behavior so if one does not work, they other one does (except 2017, that is, with a vertical market :)) I prefer weekly contracts and there are so few options that give weeklies, have liquidity and also low fees (do not like the fees on futures). I also found orders on future options harder to manage (TDA did not allow me to create calendars etc.) so I am stuck with SPX, RUT and NDX.

While doing my trades, I have been struggling with 2 opposite thoughts:a) it is hard to predict markets, you do not know where market will go tomorrowb) technical analysis (charts and trend lines) works, it can help you guess market better than 50:50 for sure

While I have tried to manage my trades with theory a) ... it is hard to predict markets and have been using just the greeks,.I think there is a lot of value to adjusting trades based on the charts - hopefully I learn how to use the charts to my benefit in 2018.

Your comment => I also have been Rolling these Calls all year and it is not fun . It feels good for a minute , then you are sitting at the screen with your hands behind your back for 60 - 90 days till you have to do it again.



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#9287 Nov 26, 2017

Hi Jeff, yes it has been a tough year. I am not an expert and I do not even begin to understand the risks your account may have. However, let me just think aloud in case it helps.

# Continuing to roll does not help if market never reverses. You need to continue to move forward too, a bit at a time. Yes markets do reverse but what if it takes another year !!

# Taking small loss every week but still continuing to roll to avoid bigger loss is not a solution. You should either right size the portfolio (take a bigger, but not max, loss now) to free up some margin or add cash. You need to have cash to defend the positions. Always.

# I can understand the issues with calls being 10% deep ... it is 260 points, but I do not understand the issues with call spreads being 10% deep : your risk is limited by the max spread size is it not. If your spread is 10 points, the max you can lose is 10 points (minus the credit you have). Let us say your call spread is currently so hosed that it is worth 9.9 - so almost gone. However, you should be able to find an equivalent call spread for 9.9 that is either much farther in time and hence you avoid constant rolling or is much closer to the money so that you can defend it (claw back some money) from the other side.

What exactly is the situation? Are these naked calls or credit spreads?

# 2-3% of move killing your positions ... yes most other people say never get into such a setup, but market has brought me close to such scenarios so many times that I have started living it, it is quite a juggling act ... but what we need in such situations is a counter setup that gives you some money if the market moves against you. See how you can build such defenses with the 5K (or a higher K by right sizing your positions).



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#9288 Nov 26, 2017

Hi, Harry,

Thanks for your reply. These positions are credit spreads. My original trading plan to defend a threatened credit spread position was to expend the width of the spread in order to collect more premiums and let the protective longs (calls in this case) stay out of money. During the market surge early this year the width of these spreads expanded from 5k, 10K 20K ... and collected some premiums on each roll out. That was my early mistakes. Up until late part of the year I stopped to expand the spreads. When I roll them in the same width the longer dated strike always have higher premium so I have to pay to roll without expanding the spreads.��

Your counter setup is a good idea. Are you referring to buy long calls or long call spreads? I bought long calls and spreads a few times in short time frame. They helped for that period of time. Now you mentioned it I will look at longer dated ones. ����

��Thank you,��

Jeff��



On Sunday, November 26, 2017 2:40 PM, "Harry Singh harry.public@... [supertraderkarenstudy]" supertraderkarenstudy@yahoogroups.com> wrote:



��Hi Jeff, yes it has been a tough year. I am not an expert and I do not even begin to understand the risks your account may have. However, let me just think aloud in case it helps.

# Continuing to roll does not help if market never reverses. You need to continue to move forward too, a bit at a time. Yes markets do reverse but what if it takes another year !!

# Taking small loss every week but still continuing to roll to avoid bigger loss is not a solution. You should either right size the portfolio (take a bigger, but not max, loss now) to free up some margin or add cash. You need to have cash to defend the positions. Always.

# I can understand the issues with calls being 10% deep ... it is 260 points, but I do not understand the issues with call spreads being 10% deep : your risk is limited by the max spread size is it not. If your spread is 10 points, the max you can lose is 10 points (minus the credit you have). Let us say your call spread is currently so hosed that it is worth 9.9 - so almost gone. However, you should be able to find an equivalent call spread for 9.9 that is either much farther in time and hence you avoid constant rolling or is much closer to the money so that you can defend it (claw back some money) from the other side.

What exactly is the situation? Are these naked calls or credit spreads?

# 2-3% of move killing your positions ... yes most other people say never get into such a setup, but market has brought me close to such scenarios so many times that I have started living it, it is quite a juggling act ... but what we need in such situations is a counter setup that gives you some money if the market moves against you. See how you can build such defenses with the 5K (or a higher K by right sizing your positions).







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#9289 Nov 26, 2017

Ok, quite a bit of unorganized thoughts below ... hopefully it makes sense.

Here's what I have been trying, without quantification of success because success will come when markets stops for a while (and in the right manner).

I am going to assume you have a 20 point spread, deep in the money. SPX is now 2600, let us assume we have Dec 15 expiry (monthly) and 2480-2500 strikes (call spread of course)..The spread is now priced at 19.40 - pretty much worthless but hey the market has gone up so much, we expect it to eventually go back and maybe recover it all.

Now what if I had a put spread for 2500-2480? If the market goes up, I make some money, but because of the put call parity, I probably make only 60 cents, just enough to allow me to continue to roll. But what if market crashes down to 2400? Whatever I recovered in the call side is lost on the put side.

However, call spreads and put spreads have finite risks, more so at their extreme ends. Now if you are at 2480-2500, or 2500-2520, or 2520-2540, is the spread price going to change by much? Well 2480-2500 will be different than 2520-2540 for sure, but it can not be different by 20 points and very likely if you are still talking about 80-90 delta strikes, you can move your strikes by 100 points easily by paying only a buck (5%) ... I may sound like an exaggeration but try it ... where you will lose is slippage, the pricing may go from 60 cents to 90 cents or 120 cents, but it can't be 5 bucks as long as you are still deep ITM.

At the same time, how much will it cost you to roll this out in time, let us say 1 month, or 3 months? Once again a spread that is 19.40 can not become 25 bucks just because you are rolling it out a month. The only issues you will have is slippage and also liquidity. The options may not be very liquid. Sometimes it may make sense to close the current spread and re-open the new spread as they might fill faster but if you are trading multiple (10s or 100s of contracts) you may want to go few at a time as there is no guarantee of pricing whereas a roll will be priced exactly what you limit it to.

Now that we know we can roll the spread in time and price for small cost, can we do both? I bet we can. My fictitious 2480-2500 Dec/15 call spread can be rolled to 2520-2540 Jan/19 call spread for just 2.15 mid price. Is it going to fill for 2.15. Maybe not. But can you get it for 2.50? Maybe. Do you need to go out 5 weeks and 40 points ... thats your decision but it brings you much closer to market ... and if market stabilizes here, further rolls in time are going to be cheaper.

Now where do I find this 2.50? Finance it by selling put spreads.Should I sell Jan/19 put spreads? No.a) Move your losing side out in time so that theta burn is small ... your theta was anyways negative 60 cents but by adding 2.50 you have increased it to 3.10 and you want this to burn very slowly so this should be out in timeb) Set up your counter position with high theta so that you can churn it over and over. An example of this would be a Dec/8 2520-2500 put spread that gives me 40 cents. Is 40 cents adequate? Barely but if I can repeat it 6 times, I have taken care of the adjustment cost..

BTW, this is easier said than done. However, this is the core of what I would do if in a similar situation. Ideally, I would like my counter position to yield more money than I am losing in the adjustments and ideally I would like my counter position to be farther in price from the market than my losing position. This drives quite a few factors such as whether you can make a 5 week adjustment, or whether you can make a 40 point adjustment ... in real life maybe you make smaller adjustments. In my experiments, I have found a knights move (as in chess) as the most frequently used adjustment. What is a knights move : move 2 right 3 down, or move 3 right 2 down, with one direction being time and other direction being price ... you can see it as moving rolling 2-3 weeks AND rolling 20-30 points at a time ... as long as you are still deep ITM, it costs reasonably low to be financed via counter-positions ... and usually of a smaller size than the losing position so that if the market reverses, you now need to defend this smaller position. (You can also try the tetris blocks to set rules around your moves :)). When you are closer to the money, you can just roll out in time, or just move in time and bring it 10 points closer to money - whatever you can finance.

Why the knight moves? Even though 2 spreads are priced similarly 19.4 and 19.1 ... there is no way you are going to get filled for 30 cents, plus the commissions. So make multiple adjustments in one go achieving both your purposes ... time and price.



What if you cant get enough credit for the move? Unless time is breathing down your neck, do you need to move all your positions at once? Do half at a time ... based on how much credit you get, and how big of a counter you want to setup ... or a third, or a quarter ... as far as I will go as tracking these becomes difficult. If you move only half or quarter this also reduces your regret if the market reverses quickly.

Why would I do it rather than just close the trade and start a new one? Like you, I also have the belief that once the market has run up, it should reverse and how can A) buy some more time on my side, and B) assuming the market does not turn very fast, how can I move my spread close where I have a higher chance of success.

This probably requires a higher amount of margin because the expiries are in different cycle, this probably does not work very well on a long term basis, this probably does not work as well on the downsize, this probably could be implemented better, this probably .... lots of probables, but I have tried these tactics and will be willing to try them again in such situations. YMMV. Try at your own risk.

But while doing that, never never never, increase risk by doubling or quadrupling your positions ... there is only so far your money can go but the market ... it will stop, but will it stop in 2018, or will it stop and crack next week ... god knows.

[ In terms of defense, you can also do calendars and STT and butterflies and futures and what not. What I discussed above is just a) one approach using credit spreads incorporating the element of time and b) assumes you are already in trouble, so is post-defense ]

In the above example, I have assumed a 2480-2500 spread which is quite far to setup an effective counter-position, but if you were doing these adjustments from the get go (right when you got in trouble), you would probably not be as deep ITM but a bit closer thus allowing setting up a counter position with higher premium (or of a smaller size).







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#9291 Nov 26, 2017

Just to throw my two cents!

Rolling, in my experience, is deceptive.. You "feel" like you're salvaging something but, in reality, you are most definitely taking a loss and then continuing with a losing position.. Rolling occasionally makes sense as an effort to give yourself time to be right.. At this point, given the voracious bull market we're experiencing...is "right" every going to happen?. Someone else said this but I will reiterate:. you are not married to these positions.. You do not have to make your money back in the same underlying or position...

In addition Harry's advice is often what I follow:. if I'm in a losing position I will peel off part of it taking the loss incrementally while, hopefully, taking profits in other things.. This eases the pain somewhat since you are spreading the knife in your heart over time.

Hope that helps?



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#9292 Nov 26, 2017

==> if I'm in a losing position I will peel off part of it taking the loss incrementally while, hopefully, taking profits in other things.

I think this is pretty much what it is, except the profits come from an opposite (and smaller) position.



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#9293 Nov 26, 2017

==> Rolling, in my experience, is deceptive.. You "feel" like you're salvaging something but, in reality, you are most definitely taking a loss and then continuing with a losing position.. Rolling occasionally makes sense as an effort to give yourself time to be right.. At this point, given the voracious bull market we're experiencing...is "right" every going to happen?. Someone else said this but I will reiterate:. you are not married to these positions.. You do not have to make your money back in the same underlying or position.

I do rolling for a different reason. If you go back and check my queries here a few months back, I was asking advice on how to salvage under-water positions so it is not something I landed into by happenstance but by choice. So I do rolling for different reasonsa) Whatever may be our backtest of the markets, whether 3 months, 3 years or 30 years, we will encounter situations that we will not have understood. (Except for markets shutting down for weeks) I would like to plan for all contingenciesb) I do not like the concept of 7 successes and 3 failures ... if all we have are probabilistic odds under backtests, I will not succeed because I will have fill problems, I will have network problems, I will have broker problems, I do not want to spend more than 30 minutes per day looking at the screen, I am just bored to focus on trading, and what not. Also, markets can crash without warning. So do I just keep on losing money? No. I need to make my odds 100% even if it takes me a while to recover from any losses. If I can learn strategies that help me dig out of problems, then aa) I can make sure I do not lose and bb) I can go way more aggressive so even if I have 3 out of 10 successes but they were big wins and if I can ensure I roll and secure the 7 losing trades, I come out "mentally" ahead.

Just my thoughts, of course YMMV.



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#9294 Nov 26, 2017

Hi Jeff,��

What is your exit strategy and plan? Tastytrade had done some backtested trades on short strangles at 1 SD expiring in 45 days, found that exit trades at 50% max profit could yield highest daily profit.��

I am trying to test it myself and see if can benefit from it.��

Best Regards

CH

Sent from my iPhone

On 27 Nov 2017, at 2:48 AM, Jeff Zhu netowl2003@... [supertraderkarenstudy] supertraderkarenstudy@yahoogroups.com> wrote:



��

It has been a difficult year selling index options for me. Not only the lack of volatility limited put selling. I also got into trouble selling calls early in the year. long story short I am caught between rocks in an IRA account. I have couple of SPX and RUT bear call spreads deep (10%) ITM. I keep rolling out and expending the spreads to void taking big losses. I sold put spreads every time I rolled the calls. Now the puts and calls are totally inverted which present a dangerous situation if there is even a 2-3% pull back. That's not my big concern though.��

My bigger problem is that I have less than 5K available margin left in this account. I can add some cash to it and continue to roll out week by week while taking some losses. I thought about covert part of my calls to puts but it required a large margin and would limit my ability to roll on either side unless I add a large sum of cash to raise my available margin. I bought long calls a few times but they didn't help a lot for the longer term. Diversifying into other assets like Vic did may not be as effective in IRA account with limited margin.��

I made mistakes alone the way. I kept thinking a pull back of 3%, then 5%... would would help me to unwind the positions. of course Mr. Market doesn't have to do anything "normal". I copied Tylor's system principles but messed up his position size and margin requirements. I can't think anything "out side of the box" for this situation right now except holding on for as long as I can. I welcome any suggestions or comments via private email or public post here. Hope some people may learn from my mistakes as well.�� �� �� �� �� ����Thank you,��

Jeff��



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#9295 Nov 26, 2017

Harry,��

Thanks for such a detailed explanation of your approach. It's very enlightening. I wish I had learned it a lot earlier. We only do what we could think of.��For deep ITM options every dollar has a dollar intrinsic value. So if one wants to move up $10 in strike price then there should be a $10 price difference. I tested your example of roll up 20 points in a $20 deep ITM spread. You are correct. It only cost about 0.60. I never thought about that could be the case. Unfortunately my protective calls are barely at the money since I made my spreads so wide after rollings. The math works totally different. It will cost me a lot more to roll up the strikes. I may have to wait for market push higher and make my protective calls ITM.��

I will try different combinations base on your approach tomorrow with live data.��

��Thank you again,��

Jeff��



On Sunday, November 26, 2017 4:54 PM, "Harry Singh harry.public@... [supertraderkarenstudy]" supertraderkarenstudy@yahoogroups.com> wrote:



��While re-reading, I realized a fallacy (not material to the discussion):

==> At the same time, how much will it cost you to roll this out in time, let us say 1 month, or 3 months? Once again a spread that is 19.40 can not become 25 bucks just because you are rolling it out a month.��



Well if you add 5 bucks to 19.40, it will not go to 24.40, it will go to 14.40 as you have added on risk and the spread now has more value (it had a value of 19.40 earlier but based on the probabilities we know we would almost never recover that 19.40 value). So 2 different things - price vs value. I personally would never roll anything by 5 bucks ... that is too much money to be offered to fix a bad spread. Maybe 2 bucks but that also sounds high and that's why I think the chess moves keep it in the right range where you are not spending too much money at one go but slowly and incrementally shifting the position in your favor ... given the presumption of market reversal.







----------------------------

#9296 Nov 26, 2017

Barbara,��

I will keep in mind the two points from you. A. Not marry to any position, B. keep it small as you stressed in your post.��

��Thank you,��

��Jeff��



On Sunday, November 26, 2017 4:58 PM, "Barbara Newton barbara.newton@... [supertraderkarenstudy]" supertraderkarenstudy@yahoogroups.com> wrote:



��Just to throw my two cents!

Rolling, in my experience, is deceptive.�� You "feel" like you're salvaging something but, in reality, you are most definitely taking a loss and then continuing with a losing position.�� Rolling occasionally makes sense as an effort to give yourself time to be right.�� At this point, given the voracious bull market we're experiencing...is "right" every going to happen?�� Someone else said this but I will reiterate:�� you are not married to these positions.�� You do not have to make your money back in the same underlying or position.����

In addition Harry's advice is often what I follow:�� if I'm in a losing position I will peel off part of it taking the loss incrementally while, hopefully, taking profits in other things.�� This eases the pain somewhat since you are spreading the knife in your heart over time.

Hope that helps?



----------------------------

#9297 Nov 26, 2017

Hi, CH,

I think Tasty Trade has some very good research for trading. The key is to know what to do when things go wrong, or extremely wrong like I am now. ����

��Thank you,��

��Jeff��



On Sunday, November 26, 2017 8:08 PM, "DENG CAI HONG dengch75@... [supertraderkarenstudy]" supertraderkarenstudy@yahoogroups.com> wrote:



��Hi Jeff,��

What is your exit strategy and plan? Tastytrade had done some backtested trades on short strangles at 1 SD expiring in 45 days, found that exit trades at 50% max profit could yield highest daily profit.��

I am trying to test it myself and see if can benefit from it.��

Best Regards

CH

Sent from my iPhone

On 27 Nov 2017, at 2:48 AM, Jeff Zhu netowl2003@... [supertraderkarenstudy] supertraderkarenstudy@yahoogroups.com> wrote:

��

It has been a difficult year selling index options for me. Not only the lack of volatility limited put selling. I also got into trouble selling calls early in the year. long story short I am caught between rocks in an IRA account. I have couple of SPX and RUT bear call spreads deep (10%) ITM. I keep rolling out and expending the spreads to void taking big losses. I sold put spreads every time I rolled the calls. Now the puts and calls are totally inverted which present a dangerous situation if there is even a 2-3% pull back. That's not my big concern though.��

My bigger problem is that I have less than 5K available margin left in this account. I can add some cash to it and continue to roll out week by week while taking some losses. I thought about covert part of my calls to puts but it required a large margin and would limit my ability to roll on either side unless I add a large sum of cash to raise my available margin. I bought long calls a few times but they didn't help a lot for the longer term. Diversifying into other assets like Vic did may not be as effective in IRA account with limited margin.��

I made mistakes alone the way. I kept thinking a pull back of 3%, then 5%... would would help me to unwind the positions. of course Mr. Market doesn't have to do anything "normal". I copied Tylor's system principles but messed up his position size and margin requirements. I can't think anything "out side of the box" for this situation right now except holding on for as long as I can. I welcome any suggestions or comments via private email or public post here. Hope some people may learn from my mistakes as well.�� �� �� �� �� ����Thank you,��

Jeff��



----------------------------

#9298 Nov 26, 2017

Hi Jeff,��I am really short on time as I am moving, so I only skimmed throughall the conversation . so take what I.m going to say with a grain of salt as Imay have missed something pertinent that may nullify what I.m about to say. Besure to verify it.��First, I was the one Barbara mentioned who said don.t get marriedto your position. It.s just a position. Trade what the market is giving. Don.tfight it. If it is only going up, move some of your call positions to putpositions. When you do that, you may also be able to move closer in time,giving you more flexibility in the future.��Having said that, what I gleaned from your initial post is that youare pretty much at your margin limit. What isn.t clear to me is if you have PMor just using regular margin. What I do know is if you move some of your SPX/RUTpositions over to /ES positions, you may gain a significant amount of marginrelief. This relief may be enough to allow you to dig yourself out. ��I don.t think you said how far out in time your positions are atthis point. Be sure you understand /ES contract expirations along with the associatedoptions. Know that if you go very far out, liquidity won.t be as good and youmay not be trading options on the currently active contract. ��Also, don.t forget you can use /ES itself as a hedge when you.re introuble. There has been a lot of discussion here about doing that. I suggestyou go back and read those discussions.��Finally, I.m a big fan of the KISS principle. The more complicatedyou make things, the more difficult it becomes to recover when the marketchallenges you. But, you.ve probably already seen that. Tom seems to thrive oncomplexity, but for the rest of us mere mortals, simple may make more sense. Lookat what you have and see if you can.t simplify.��Good luck.I hope you.re able to recover.Ralph



----------------------------

#9299 Nov 26, 2017

Couple of quick points and then the work week starts so probably end of long updates:

I am assuming the same spread as before 2480-2500 which let us say you doubled to 2480-2520 and then doubled to 2480-2560. I am not saying this is what you did but let.s assume this is what you did and 2560 is somewhat ATM as compared to 2480 so although not exact it is somewhat similar to your situation where one strike is closer to money.

Going by my original theory, I would want to move 2480-2560 to 2510-2590 (30 pts right) but moving anything to 2590 will cost big bucks because it is ATM.

What I would do is to cut down the width by moving 2480 higher - it costs 9.75 - not cheap but what are the options!! What this does is frees up wasted capital - yes you are paying 975 for that but if the market was going to reverse, it will reverse to 2590 first then 2580 then 2570 and 2480 is so remote that I would not even worry about saving it. Now does paying 975 to save 1000 make sense? I don.t know. but this is a fake trade, look at your real numbers.

Your counter setup is a good idea. Are you referring to buy long calls or long call spreads? I bought long calls and spreads a few times in short time frame. They helped for that period of time. Now you mentioned it I will look at longer dated ones. ����







----------------------------

#9300 Nov 27, 2017

Hi Jeff,

I really think Ralph is on to right path here. I.ve also read some of Craig.s posts where he recommends the same thing.

I don.t know your positions, but assuming this is an IRA account. I would do the math on these steps and take action if it makes sense to you.

1. Look at converting all of your put/call (spreads) to ES. That is permitted in the IRA. This will free up a certain amount of margin. (buying power)

2. Use some of that margin and sell ATM ES puts 1 to 2 weeks out. You will start raising some cash. Use that to de-leverage, taking off some of the losers. ��Right now, you need to have the flexibility of the extra margin.

Tyler wrote about how he trades the IRA and I am pretty sure he said buy 5 cent wings just make it legal. But he said many times that rolling spreads is a losing deal.

Best of luck, �� Doug

On Nov 26, 2017, at 10:43 PM, ralphko@... [supertraderkarenstudy] supertraderkarenstudy@yahoogroups.com> wrote:

��

Hi Jeff,��

I am really short on time as I am moving, so I only skimmed throughall the conversation . so take what I.m going to say with a grain of salt as Imay have missed something pertinent that may nullify what I.m about to say. Besure to verify it.��

First, I was the one Barbara mentioned who said don.t get marriedto your position. It.s just a position. Trade what the market is giving. Don.tfight it. If it is only going up, move some of your call positions to putpositions. When you do that, you may also be able to move closer in time,giving you more flexibility in the future.��

Having said that, what I gleaned from your initial post is that youare pretty much at your margin limit. What isn.t clear to me is if you have PMor just using regular margin. What I do know is if you move some of your SPX/RUTpositions over to /ES positions, you may gain a significant amount of marginrelief. This relief may be enough to allow you to dig yourself out. ��

I don.t think you said how far out in time your positions are atthis point. Be sure you understand /ES contract expirations along with the associatedoptions. Know that if you go very far out, liquidity won.t be as good and youmay not be trading options on the currently active contract. ��

Also, don.t forget you can use /ES itself as a hedge when you.re introuble. There has been a lot of discussion here about doing that. I suggestyou go back and read those discussions.��

Finally, I.m a big fan of the KISS principle. The more complicatedyou make things, the more difficult it becomes to recover when the marketchallenges you. But, you.ve probably already seen that. Tom seems to thrive oncomplexity, but for the rest of us mere mortals, simple may make more sense. Lookat what you have and see if you can.t simplify.��

Good luck.I hope you.re able to recover.Ralph



----------------------------

#9302 Nov 27, 2017

Don't futures accounts require you to sign a personal guarantee?

On Mon, Nov 27, 2017 at 11:27 AM, James Holsted dougholsted@... [supertraderkarenstudy] supertraderkarenstudy@yahoogroups.com> wrote:

.Hi Jeff,

I really think Ralph is on to right path here. I.ve also read some of Craig.s posts where he recommends the same thing.

I don.t know your positions, but assuming this is an IRA account. I would do the math on these steps and take action if it makes sense to you.

1. Look at converting all of your put/call (spreads) to ES. That is permitted in the IRA. This will free up a certain amount of margin. (buying power)

2. Use some of that margin and sell ATM ES puts 1 to 2 weeks out. You will start raising some cash. Use that to de-leverage, taking off some of the losers.. Right now, you need to have the flexibility of the extra margin.

Tyler wrote about how he trades the IRA and I am pretty sure he said buy 5 cent wings just make it legal. But he said many times that rolling spreads is a losing deal.

Best of luck, . Doug



----------------------------

#9303 Nov 27, 2017

Hi, Ralph,

Thank you for taking time from your busy schedule to write back. I have read many of your posts before. You have contributed to this group a lot.��My account for these deep ITM calls is an IRA. The big broker doesn't offer futures either.��

I will remember not to get married to any position from now on. I assumed market would pull back sometime within the year which never happened. I will have to set hard rules to take out losing position and try to recover from opposites side or other assets.��



��Jeff��



On Monday, November 27, 2017 1:43 AM, "ralphko@... [supertraderkarenstudy]" supertraderkarenstudy@yahoogroups.com> wrote:



��Hi Jeff,��I am really short on time as I am moving, so I only skimmed throughall the conversation . so take what I.m going to say with a grain of salt as Imay have missed something pertinent that may nullify what I.m about to say. Besure to verify it.��First, I was the one Barbara mentioned who said don.t get marriedto your position. It.s just a position. Trade what the market is giving. Don.tfight it. If it is only going up, move some of your call positions to putpositions. When you do that, you may also be able to move closer in time,giving you more flexibility in the future.��Having said that, what I gleaned from your initial post is that youare pretty much at your margin limit. What isn.t clear to me is if you have PMor just using regular margin. What I do know is if you move some of your SPX/RUTpositions over to /ES positions, you may gain a significant amount of marginrelief. This relief may be enough to allow you to dig yourself out. ��I don.t think you said how far out in time your positions are atthis point. Be sure you understand /ES contract expirations along with the associatedoptions. Know that if you go very far out, liquidity won.t be as good and youmay not be trading options on the currently active contract. ��Also, don.t forget you can use /ES itself as a hedge when you.re introuble. There has been a lot of discussion here about doing that. I suggestyou go back and read those discussions.��Finally, I.m a big fan of the KISS principle. The more complicatedyou make things, the more difficult it becomes to recover when the marketchallenges you. But, you.ve probably already seen that. Tom seems to thrive oncomplexity, but for the rest of us mere mortals, simple may make more sense. Lookat what you have and see if you can.t simplify.��Good luck.I hope you.re able to recover.Ralph







----------------------------

#9304 Nov 27, 2017

Hi, Doug,��

Thanks for your reply. My broker doesn't offer futures trading. It's much less flexible trading IRA with spreads. I do sell bull put spreads whenever I roll my calls but they are all inverted now. I have to sell them on the same expiring date with the calls otherwise it will require additional margin. You are right that the key is to figure out a way to free some margins.��

��Jeff��



----------------------------

#9305 Nov 30, 2017

Hi Jeff,

I hope you have positioned your account where your short puts are paying off and/or offsetting your short calls. I know you said you were almost out of margin. This non-stop rally could hurt.��

I moved my IRA from Schwab to TDA so I would have the flexibility needed.��

Best of luck, Doug

On Nov 27, 2017, at 7:01 PM, Jeff Zhu netowl2003@... [supertraderkarenstudy] supertraderkarenstudy@yahoogroups.com> wrote:



Hi, Doug,��

Thanks for your reply. My broker doesn't offer futures trading. It's much less flexible trading IRA with spreads. I do sell bull put spreads whenever I roll my calls but they are all inverted now. I have to sell them on the same expiring date with the calls otherwise it will require additional margin. You are right that the key is to figure out a way to free some margins.��

��Jeff��



----------------------------

#9306 Nov 30, 2017

The Vix Indicator on OptionsBistro.com fired an Upside Warning signal on Friday. ��I started getting long, got longer every day this week, and closed all remaining short positions yesterday. ��Now just riding it up until we see a pause or pullback, then I can sell new call spreads. ��It.s a relief because this signal almost always works, but this is the first time I.ve trusted it enough to GTFO of shorts and sell ATM put spreads from the start.

Jeff Paynejpayne.rdb@...OptionsBistro.com



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