#6100 Jan 16, 2016
I love the challenge of trading, especially with options.
I think someone mentioned that they had the short strike ITM and the long strike OTM on expiration and couldn't get a fill to exit the position. I was hoping #2 would be a working idea for a way to get the risk off.
My plan is to start with SPY and increment slowly. I want to go through a few storms with small size to get my mechanics down. I don't like figuring things out on the fly in critical times, especially with size. Been there, done that, puked the position, no Tee shirt, but a tattoo. ;-)
Is it possible to get smaller than a one lot? Just kidding.
I try everything new as small as possible. I've also learned to not add risk to a losing position. Almost always regret it in the end.
Thanks to all of you. This is an amazing group.
On January 16, 2016 6:17:23 PM PST, "poast@... [supertraderkarenstudy
Having done it both ways I find that for me it is better to take the spread as a whole when adjusting.�� When trading spreads I tend to trade closer to the money than I should in order to collect more premium.�� As a result I end up tested more than occassionally but not as often to make it frequently.
I generally let the trade go until the last week before expiration.�� Then I analyze any adjustments and weigh their impact on my bottom line.�� When adjusting I am in defense mode and am a little more generous with my offer to buy my position back.�� This results in rapid fills.�� I then get agressive in selling the new position.�� As you can see I do it in two moves rather than as a Condor, but this depends upon the liquidity of the underlying.
In answer to your question 2 I would suggest you learn how to use the Analyze tab and use that to assess your risks.�� It is a big jump to go from SPY to SPX but if you master trading in SPY you can set the same risk metrics in SPX and adjust your position size accordingly.�� When first starting out I suggest determining your position size and then trading a little smaller just to make sure you figured things out correctly.
I've been watching but not commenting as I'm learning from all of you.
Felt I didn't want to speak up unless I had something to offer.
A couple of thoughts on how to comfortably learn and sleep with trading this strategy.
In a fast market, would adjusting your shorts only allow you to defend more efficiently? Then you could figure out what you wanted to do with your "insurance" part of the trade.
Karen broke apart the IC and created a strategy that is making money for her funds and created this following. Seems logical to break apart the risk vs the insurance part of the trade. Allows for more granularity just like taking the IC sides apart so one can put each side on based on market assumptions. Doing the same would allow one to just take off the short quicker if caught in a situation where you want/need to adjust.
I realize it's more transactions and not as clean. However, when wanting to adjust, thinking this way would be similar as having a strangle with catastrophic insurance. I think of the wings as insurance in case of a huge market gap. I know it slows the profits down but it seems the equity curve could be much smoother while protecting from disaster.
Karen stated that if she wasn't managing such size, she would still be doing her individual sides of IC's in SPY. There is a lot packed in that statement.
For me, once I have the method down in SPY, I plan to lever up slowly in the SPY by incrementally increasing the contract size. It will allow me to synthetically build up to a SPX contact in 1/10 increments while increasing my experience during many market contortions. It would also allow more flexibility in changing size when it seems appropriate. One could ratchet up or down in 1/10 increments of a full SPX contract.
It would also allow for fractional SPX sizing when the desire to increase beyond one SPX contract. i.e. one SPX and two SPY would be equivalent to 1.2 of SPX. Feels safer to me in lieu of going from 1 to 2 contracts as the only choice.
I know this is a bit wordy. My hope is to communicate clearly.
What are the flaws in my logic?