Hit my profit target on this trade today. Closed out the position with 50% of the total credit. This was an easy trade that didn't require any adjustments.
Be careful just writing iron condors when volatility is high. It is more important that you catch volatility coming down instead of going up. These out of the money options react very violently to volatility, so if you catch it while it is going up you could be looking at a loss.
There are many ways you can flatten the deltas. If the stock price is moving towards the upside you can buy calls and sell some spreads to flatten the upside. This will create what they call a kite spread. On the downside you can usually just add some vertical put spreads.
It should definitely be an exciting time but I make no assumptions on Apples performance. Need more time to see how the market will react to Tim Cook at the wheel to get a better baseline.
It does matter because I use it to measure to see if the trade is worth entering. I use this formula:
Probability of Success + Return >= 100%
In my trade it will be:
80% + 30% = 110% which is greater than 100%
Now I know the trade is worth taking. The premium received is worth the risk of entering.
Trying to figure out what the day to day changes will be and where they correlate to the loss target will be very difficult. You would have to make a lot of assumptions on stock price, time, and volatility. It is best to look at when I want to exit and the probability in that time frame.
I agree with both. I think the stunt for the plant was just to get everyone off their labor problems. I will patiently wait and see if Mr. Cook and Apple can surprise the world again.
I am with your Eric. 90% of the time I am selling options, but there is the occasional time I prefer to buy options. Usually when I buy options it is because volatility is extremely low.
Volatility is the x-factor when it comes to option prices. If you can get volatility to move, in your favor, you can basically forget about the other inputs.
The long call when the underlying is 173, volatility increases 10%, and on 12/21/12 will yield a little over $3,000.
The long call when volatility increases 10%, on 12/21/12, even if the underlying drops to 167.88 you will still yield a 100% return.
So even though I get to limit my risk the vertical spread isn't really designed to take advantage of a increase in volatility, and that is what I am looking for in this trade.
The OTM options are only expensive to the ATM options because of skew.
However, all the options are inexpensive due to the lower volatility. This is why I am a buyer of premium here and not a seller. Now is not a good time to sell options in GLD. If volatility does start to tick higher than the short options will start to lose.
Apple: Time For A Condor [View article]
What Is The Right Strategy For Apple Now? [View article]
Apple: Time For A Condor [View article]
Apple: Time For A Condor [View article]
Apple: Time For A Condor [View article]
Apple: Time For A Condor [View article]
Apple: Time For A Condor [View article]
Apple: Time For A Condor [View article]
Probability of Success + Return >= 100%
In my trade it will be:
80% + 30% = 110% which is greater than 100%
Now I know the trade is worth taking. The premium received is worth the risk of entering.
Trying to figure out what the day to day changes will be and where they correlate to the loss target will be very difficult. You would have to make a lot of assumptions on stock price, time, and volatility. It is best to look at when I want to exit and the probability in that time frame.
Apple: Time For A Condor [View article]
Gold Is Starting To Wake Up [View article]
Gold Is Starting To Wake Up [View article]
Gold Is Starting To Wake Up [View article]
Gold Is Starting To Wake Up [View article]
The long call when the underlying is 173, volatility increases 10%, and on 12/21/12 will yield a little over $3,000.
The long call when volatility increases 10%, on 12/21/12, even if the underlying drops to 167.88 you will still yield a 100% return.
Gold Is Starting To Wake Up [View article]
Say for instance I put on a vertical spread the 171/173 call spread for .70 debit.
Here that is: http://bit.ly/Tob2dc
Now I am going to set the underlying price to 173 because that is my target.
I now have a profit of $33.32 (I am only using a 1 lot on these trades to show): http://bit.ly/QnytpG
Now say I keep the stock price at 173 and increase volatility by 5% (also what I predicted).
My profit has now dropped to $29.77: http://bit.ly/Tob2dg
Here is an increase in volatility to 10% - stock price still at 173.
Profit has now dropped again to $27.45: http://bit.ly/QnytpI
20% volatility - profit now $24.18: http://bit.ly/Tob2dk
So even though I get to limit my risk the vertical spread isn't really designed to take advantage of a increase in volatility, and that is what I am looking for in this trade.
Gold Is Starting To Wake Up [View article]
However, all the options are inexpensive due to the lower volatility. This is why I am a buyer of premium here and not a seller. Now is not a good time to sell options in GLD. If volatility does start to tick higher than the short options will start to lose.