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  • Take Flight With An Iron Condor For Significant Profits [View article]
    rarundas,

    I have been trading RUT condors for years with great success. You are absolutely correct that it can be very volatile, but you are also compensated for this volatility by larger credits and ability to go further out of the money. In fact, I found out that out of the main indexes, RUT has the best ratio between Implied Volatility and realized volatility.

    As I mentioned, I'm not going to hold till expiration. Usually I open those trades 6-7 weeks before expiration and close them 2-3 weeks before expiration.

    Adjustment strategy depends on the initial position and time to expiration. For this specific trade, the short strikes are relatively close to the current price (the deltas are 25) so the adjustment point is when RUT touches one of the short strikes. There is high probability that this will happen during the life of the condor. Based on the time when it happens, I will decide what to do.
    Jan 6, 2012. 10:56 PM | Likes Like |Link to Comment
  • Trading Google Before Earnings [View article]
    Buying butterfly and selling before earnings or holding?
    Jan 6, 2012. 07:38 PM | Likes Like |Link to Comment
  • Trading Google Before Earnings [View article]
    I lose 100% if I hold through earnings, but I don't. I sell before earnings. IV will keep the floor under the condor price. It might lose money, maybe 20-30% worst case, but definitely not 100%, not even close.
    Jan 6, 2012. 07:36 PM | Likes Like |Link to Comment
  • An Ingenious Way To Profit From JPMorgan's Earnings Prior To Their Release [View article]
    The answer is yes.

    Another consideration is commissions. Doing the reverse iron condor for low priced stocks is too commissions consuming. It sounds great in theory, but when commissions are accounted, it is not so great.

    For example, the 34/35/35/36 condor has a mid of 0.81. Considering slippage, you would probably pay around 0.83-0.84. Maximum gain is 1.00, but since I'm selling before earnings, it is more likely around 0.93-0.95. So $10 per spread. Most people pay around $1 per contract, so you pay $8 to open and close.

    If you go OTM (33/34/36/37 for example) the cost would be around 0.43-0.45. So you spend ~20% of the trade on commissions.
    Jan 6, 2012. 04:17 PM | Likes Like |Link to Comment
  • Take Flight With An Iron Condor For Significant Profits [View article]
    Thank you guys.

    If you enjoy the article, you can recommend them by clicking the button on the top left hand-side of the article, left of the "in" button, so it will get on the readers recommend list. You can also share it on Facebook and Twitter.
    Jan 6, 2012. 01:47 PM | Likes Like |Link to Comment
  • An Ingenious Way To Profit From JPMorgan's Earnings Prior To Their Release [View article]
    Frank, this is exactly the concept. The problem is that there is another significant factor here - the negative theta. Since the time to expiration is so short, the fight between vega and theta is very close. If the stock doesn't move, it's a close call - much depends on the timing of the entry. If the stock moves, even just 2-3%, the trade is very likely to be a winner.
    Jan 5, 2012. 10:53 PM | Likes Like |Link to Comment
  • Trading The Pre-Earnings Volatility Spike On Monsanto, Mosaic And Apollo [View article]
    Zornra, two things:

    To be breakeven for MOS, you had to sell at the pick of the stock price which was a 5% move - exactly was the 52.5 straddle was pricing yesterday (2.40).

    Regarding the MON trade - with the stock at 72.7 before earnings, the 67.5/72.5 strangle was directionally biased. If the stock moved the same 5% but down the trade would be a big loser. Are you willing to take that risk? More accurate measure would be a 72.5 straddle - it would be up around 20-25% today. Still not bad, but far from 80%.
    Jan 5, 2012. 07:00 PM | Likes Like |Link to Comment
  • An Ingenious Way To Profit From JPMorgan's Earnings Prior To Their Release [View article]
    Thank you for your comment nldomain,

    No, they won't since at some point the winning side will start winning more than the losing side to lose.

    Take a look at the current option prices. With JPM at $35.68, the 35 straddle is already worth 1.84 compared to 1.70 when JPM was at $35 - 8% gain. The 34 straddle is worth 2.31. So if we bought the $34 straddle for 1.70 when the stock was at $34, the trade would be already up 35%, without taking any directional risk.

    Check the concept in my original article - http://seekingalpha.co....
    Jan 5, 2012. 06:48 PM | Likes Like |Link to Comment
  • Trading The Pre-Earnings Volatility Spike On Monsanto, Mosaic And Apollo [View article]
    Gary, I agree with all your conclusions. I closed my APOL trade for 5% gain. Could be a bit higher but stock pulled back in the last half hour. IV actually remained the same. Overall IV increased about 4% during the two days of holding. Entering on Friday would produce much larger gain, I will check with TOS later.

    Weeklies IV is not always rising, but combined with earnings on the last day, it should. I will be entering the trade next week together with the RUT iron condor and this is exactly my gain - to have some trades open all the time. JPM might be not the best candidate, but it's the only one next week. My JPM article is out btw.
    Jan 5, 2012. 04:49 PM | Likes Like |Link to Comment
  • How To Profit From Sideways Markets - An Options Strategy (Part 1) [View article]
    Thank you convoluted.

    I like your style. I usually don't use the stock to adjust (in this case it wouldn't even be possible since this is an index). Another way to adjust the delta is using straight calls/puts, maybe with further expiration. There are a lot of options with options.

    This trade is now officially closed for 70.4% gain. Don't think for a second that those gains are typical. Far from it. In fact, this was my largest condor gain EVER.

    I will have another article shortly for the Feb. condor.
    Jan 5, 2012. 01:26 PM | Likes Like |Link to Comment
  • Trading The Pre-Earnings Volatility Spike On Monsanto, Mosaic And Apollo [View article]
    Are yo referring to the APOL trade? Did you use the Jan. 50/55 strikes? I have a cost of 3.10, up 9% currently - how would +25% be possible?

    The gamma of those trades is always positive. The delta will never be zero, but if the stock is between the strikes more or less, it's good enough.
    Jan 5, 2012. 12:55 PM | Likes Like |Link to Comment
  • Trading The Pre-Earnings Volatility Spike On Monsanto, Mosaic And Apollo [View article]
    I will be doing the weekly. I agree that IV increase was very mild, but general IV is very low right now and I think it might rise taking JPM IV with it. In addition, IV of the weeklies is always rising. But I will be in the trade only for couple of days so the risk is minimal.
    Jan 5, 2012. 12:53 PM | Likes Like |Link to Comment
  • Trading The Pre-Earnings Volatility Spike On Monsanto, Mosaic And Apollo [View article]
    I'm doing JPM for the next week. Not hoping for a big IV spike but currently IV is very low. Will do it probably 1-2 days before earnings with weeklies.

    MOS trade is essentially unchanged compared to yesterday. The stock is up around 5%, this is exactly what the straddle was pricing (2.40) so it is expected that the trade would be around breakeven.

    MON trade would be up significantly, but this is not a good indication since the 67.5/72.5 strangle was delta positive going into earnings.
    Jan 5, 2012. 10:24 AM | Likes Like |Link to Comment
  • A Review Of 2012 'Expert' Predictions [View article]
    This is exactly my point. The markets became very unpredictable, the correlation is very high, even good companies will go down if the markets tank.
    Jan 5, 2012. 09:19 AM | Likes Like |Link to Comment
  • Trading Google Before Earnings [View article]
    Hi mal,

    This is a million dollar question. The problem is that even for the same stock, IV might behave differently from cycle to cycle.

    For a strangle, I wouldn't hold more than 2-4 days. The negative theta is too large. For a condor, I also tend to do the trade 6-8 days before earnings. In this case, the IV just seemed too low. At the moment, it seems that waiting couple more days would be better. But you can never know in advance. Also, entering early gives the stock a chance to move. If it does, you can take 15-20% gain and roll to the next strikes to remain delta neutral.
    Jan 4, 2012. 10:19 PM | Likes Like |Link to Comment
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