To Add Puts Or Not To Add Puts....That Is The Question
BookingAlpha's Blog
9 Followers
Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.
Seeking Alpha Analyst Since 2009
My name is Trevor Vernon and I created BookingAlpha in response to the events precipitated from the financial collapse of 2007-2008. After years of generating additional wealth for already wealthy individuals through my hedge fund and various other holding companies and financial activities, I had a wake up call. Witnessing family, friends, and complete strangers being adversely affected ,and many totally devastated, by the ripple effects of the collapse affected me in a way I didn't know that it could. The greed, complacency, and morally corrupt financial system that it is Wall Street cause this devastation to occur. What's worse was I realized I was a part of this. I toiled sucessfully for years to perpetuate an industry of thieves, liars and cheats; and it was all coming home to roost. I was mortified and ashamed to be associated with such a farce.
I founded BookingAlpha to provide never available before access for REGULAR investors to the world of Hedge Fund investing and its out-sized returns. The strategies I and other hedge fund managers use to generate consistent returns for wealthy clients are very much an art and science reserved for the Fat-Cat Boys Club of Wall Street. Buy and hold is dead for stocks proving long term investing is a joke, and mutual funds are probably the greatest wealth generating industry for everyone EXCEPT the actual investors in the financial universe.
We have received a few inquiries today and yesterday like this:
“I was wondering if you might share your thinking with regard to adding a put spread to balance the call spread on our SPY position expiring April 16 [creating an Iron Condor]. Currently we're looking at a profit on the call spread, and I'm happy with that. Would it be greedy or reckless to add a put spread, say 129/127 for a credit of .06 or .07?”
Normally, we always try to complete an Iron Condor by selling an opposing credit spread (a put spread since we already have a credit spread open) in a case like this. However, in this particular circumstance, we are somewhat hesitant to add the put spread. Here’s why:
1.) The market is looking a little toppy. SPY is banging its head against resistance at 134.& nbsp; Maybe just a pause before blasting through but too early to tell
2.) The Russell/IWM has started rolling over; even if just taking a breather from the vertical flight path of late. Throughout the last few rallies the Russell/IWM has been the first to rise and first to fall of the indexes, this time feels the same so far.
3.) The budget issue and potential govt shutdown. We are not saying the world is going to stop spinning if no budget is approved today. However, we feel like it might be a good reason for the market to retest 130 or at least fill the gap at 132.
4.) “Markets take the stairs up and the elevator down”. This is one of my favorite lines and it continues to hold true. Market always rise slower than they fall. This was what burned us on some weekly spreads earlier this year. We are much more comfortable having an underlying approach the call side of an iron condor as they can always be adjusted up and out. Conversely, puts spreads can be sliced through instantly in the event of geopolitical issues, etc., setting up a potentially nasty situation.
So, to specifically answer the question posed above: As we approa ch the final week of our April spreads on both SPY and IWM, we just don’t feel like a $0.06 or $0.07 credit for SPY puts only 3-4 points out of the money is a prudent risk/reward transaction, considering the items detailed above.
With today’s (Friday’s) pullback, we have increased confidence in holding our SPY credit call spread & IWM Iron Condor through OpEx this coming Friday. We are looking at some nice May positions that may be opened this coming week depending on market action. Stay tuned……
Happy trading and have a great weekend everyone.
“I was wondering if you might share your thinking with regard to adding a put spread to balance the call spread on our SPY position expiring April 16 [creating an Iron Condor]. Currently we're looking at a profit on the call spread, and I'm happy with that. Would it be greedy or reckless to add a put spread, say 129/127 for a credit of .06 or .07?”
Normally, we always try to complete an Iron Condor by selling an opposing credit spread (a put spread since we already have a credit spread open) in a case like this. However, in this particular circumstance, we are somewhat hesitant to add the put spread. Here’s why:
1.) The market is looking a little toppy. SPY is banging its head against resistance at 134.& nbsp; Maybe just a pause before blasting through but too early to tell
2.) The Russell/IWM has started rolling over; even if just taking a breather from the vertical flight path of late. Throughout the last few rallies the Russell/IWM has been the first to rise and first to fall of the indexes, this time feels the same so far.
3.) The budget issue and potential govt shutdown. We are not saying the world is going to stop spinning if no budget is approved today. However, we feel like it might be a good reason for the market to retest 130 or at least fill the gap at 132.
4.) “Markets take the stairs up and the elevator down”. This is one of my favorite lines and it continues to hold true. Market always rise slower than they fall. This was what burned us on some weekly spreads earlier this year. We are much more comfortable having an underlying approach the call side of an iron condor as they can always be adjusted up and out. Conversely, puts spreads can be sliced through instantly in the event of geopolitical issues, etc., setting up a potentially nasty situation.
So, to specifically answer the question posed above: As we approa ch the final week of our April spreads on both SPY and IWM, we just don’t feel like a $0.06 or $0.07 credit for SPY puts only 3-4 points out of the money is a prudent risk/reward transaction, considering the items detailed above.
With today’s (Friday’s) pullback, we have increased confidence in holding our SPY credit call spread & IWM Iron Condor through OpEx this coming Friday. We are looking at some nice May positions that may be opened this coming week depending on market action. Stay tuned……
Happy trading and have a great weekend everyone.
Trading has been active lately and the feedback has been great! Add your review today at Investimonials.
Subscribe today and don't miss out on your next profit opportunity!
Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.