GLD Diagonal

[PaulCao 51]

Hi, 

 

Just to update on what I've been doing with this trade, 

 

I have been trading GLD double calendar instead of Chris's put ratio trade. So I'm currently in the: 

August 2-August 15 125/128 GLD double calendar

 

My thinking is that unlike Chris, I don't want to have a upward or a downward bias on GLD, want to stay completely delta-neutral; just that its HV will stay about the same while IV can rise a bit. 

 

Whenever GLD touches one of my wings in the double calendar, I close that wing for a profit and then open another wing that's further away, so to keep GLD constantly inside the calendar's tent, I originally started with a 128/130 GLD double calendar but adjust my wings several times down to 125/128, 

 

I plan to roll up the whole calendar structure to: 

August 16-August 30 delta neutral double calendar on August 2 expiration date, 

 

Best,

PC

 

P.S.

For adjustment, https://www.tradeking.com/education/videos/adjusting-calendar-spreads I have found this video by Dan Sheridan to be helpful. Just skip the first 30 minutes as it's a lot of basic option stuff. 

[Mikael 31]

Paul would you mind sharing how has the returns been using that strategy? 

[PaulCao 51]

Hi, 

 

Sure no problem. I copied and pasted from my daily IB activity report, so apologize for poor formatting, also you can see my awesome sizing as a major GLD trader, 

 

7/25: Original Entry

Symbol Prior Quantity Quantity Prior Price Price Transaction Prior Open Commissions Dividends Total

Equity and Index Options

GLD 02AUG13 127.0 P 0 -10 -- 0.967081 12.92 0.00 -7.69 0.00 5.23

GLD 02AUG13 130.0 C 0 -10 -- 0.964109 -14.11 0.00 -7.69 0.00 -21.80

GLD 17AUG13 127.0 P 0 10 -- 1.800582 -29.42 0.00 -7.68 0.00 -37.10

GLD 17AUG13 130.0 C 0 10 -- 1.767335 7.34 0.00 -7.68 0.00 -0.34

 

Opened:

GLD 127 put calendar: 0.83 debit

GLD 130 call calendar: 0.8 debit

 

Cumulative realized P&L: 0

 

7/31: Roll down from 127 to 125 put leg to keep GLD in tent

Symbol Prior Quantity Quantity Prior Price Price Transaction Prior Open Commissions Dividends Tota

GLD 02AUG13 125.0 P 0 -10 -- 0.317863 566.14 0.00 -10.39 0.00 555.75

GLD 02AUG13 127.0 P -10 0 0.806207 0.770637 -939.36 35.57 -10.38 0.00 -914.17

GLD 02AUG13 130.0 C -10 -10 0.523761 0.35146 0.00 172.30 0.00 0.00 172.30

GLD 17AUG13 125.0 P 0 10 -- 1.377055 -600.94 0.00 -10.38 0.00 -611.32

GLD 17AUG13 127.0 P 10 0 1.878139 2.044154 781.85 166.01 -10.43 0.00 937.43

GLD 17AUG13 130.0 C 10 10 1.465742 1.398122 0.00 -67.62 0.00 0.00 -67.62

 

Closed:

GLD 127 put calendar: 1.274 credit

 

Opened:

GLD 125 call calendar: 1.06 debit

 

Remaining Open:

GLD 130 call calendar: 1.046 market value

 

Cumulative realized P&L: 0.444

 

 

8/1; Copied from IB WebTrader; rolled 130 call leg down to 128 to keep GLD in tent: 

Contract Position Mark Price Mark Value Average Cost Unrealized P&L Realized P&L Liquidate Last

GLD, 20130802, 125, PUT, Option, MIAX, USD -10 0.35 -350.00 87.36 523.61 0 No

GLD, 20130816, 125, PUT, Option, SMART, USD 10 1.66 1,665.00 198.84 -323.38 0 No

GLD, 20130802, 128, CALL, Option, PSE, USD -10 0.3 -305.00 32.82 23.17 0 No

GLD, 20130816, 128, CALL, Option, SMART, USD 10 1.58 1,575.00 159.67 -21.68 0 No

 

Closed:

GLD 130 call calendar: 0.83 credit

 

Opened: 

GLD 128 call calendar: 1.28 debit

 

Remaing open:

GLD 125 put calendar: 1.31 market value

 

Cumulative realized P&L: 0.474

 

 

Hope this is helpful, 

 

Best,

PC

Edited August 1, 2013 by PaulCao

[Mikael 31]

looks like

 

-1.63 to open dbl calendar

+ 1.24 to close put side

- 1.06 to reopen

+ 0.83 to close

- 1.28 to open

remaining open +1.31

assume 1.28 still 1.28 market value

 

if liquidate everything today: +0.69 

 

that's a 0.69/1.63 or 42% ROI since 07/25. not bad at all! 

 

what are the main risks to this? i'm guessing since it's a dbl calendar and it's not pre-earnings any big move of GLD will be bad. but if you are constantly adjusting i guess this can be mitigated. I don't see GLD gaping too much on openings. 

 

any other risks you considered? 

[PaulCao 51]

Hi, 

 

Yea, I also got lucky with GLD kind of being range-bound during this period. Yes anytime when GLD moves out of the double calendar's tent, it's bad, so I'd adjust as soon as that happens. 

 

The risk is GLD does gap on open, gold futures is traded 24 hours; case in point, on July 10, Fed had announcement that they weren't stepping off as easily on QE, gold futures shot up in the 4pm-12am EST trading and GLD gapped up next day 9:30am EST. So in terms of catalyst, I guess any monetary policies. So I try not to get too greedy, select pretty wide strikes and roll and take less probability of profit when it gets outside of tent. 

 

Still, I think adjustment only helps to reduce loss and not turn a profit, if GLD's volatility indeed turns out more than expected, then this trade would lose money with or without adjustment. So I plan to do this only if I think GLD volatility is not rising. 

 

Best,

PC

Edited August 1, 2013 by PaulCao

[Mikael 31]

It seems reasonable to assume GLD IV is not going to rise anytime soon if monetary policy is the main driver. Feds just announced they are pretty much going to keep QE going for at least another couple of months. Looks like an interesting strat thanks for sharing!

[Marau 4]

Are`t we rolling this one today?

[Chuck451 310]

Supposed to.  I'm hoping that GLD bounces back on Monday.  I am sacrificing some extrinsic value, but I feel like waiting one trading day is okay.  Especially since I'm ahead of the game in the extrinsic I need each week.

[cwelsh 1,551]

Are`t we rolling this one today?

 

If we follow the rules, then yes, we roll today.  However, my technical readings suggest a rebound monday, so I am holding.

 

I would not recommend that people follow me here, as this is a larger risk and you might sacrifice some extrinsic value, but, as with the last FED meeting, I do feel fairly confident about that.  (Which means I'm probably wrong, we'll see).

 

Again though, the strategy says roll today.

[Chuck451 310]

Well, GLD did not bounce back today like I had hoped.

 

Just to recap, I'm currently holding the 125 Sep5 PUT long, and the 129 Aug2 PUT short.

 

If I follow the strategy, I would need to roll the short to the 126 Aug PUT for a 1.49 debit...  ouch!

 

 I'm contemplating a few options, like rolling to the 129 Aug PUT for a .40 credit to see if it will bounce back, or rolling down and out to the 128 Aug4 PUT for .10 credit.  The latter would remove a week and increase what I need extrinsically, but not as much as rolling to the 126 Aug2 PUT would.

 

Hopefully GLD will rocket up tomorrow? (... right...  ).

[cwelsh 1,551]

Well, obviously I was quite wrong on this holding.  Here's our options:

 

1.  Keep holding and wait for a rebound.  This is the highest risk/reward;

 

2.  Roll to the same current price a week or two out for a small credit.  If there is a rebound over the next two weeks, we can earn back this downturn in intrinsic value.

 

I don't like either of those options as the way we make money on this trade is via extrinsic value (hasn't been working well -- at least the SPY one has).  By waiting for an intrinsic rebound, we're losing out on extrinsic value.  However, we're also running out of time on the long position.  Right now, if I were to do the normal roll, I would be BTC the 129 puts at $4.80 and STO the Aug 27 127 Puts @ $3.80.   That moves my break even price to ..73/week and 5% profit to $1.47 -- which is almost unreachable.

 

So, what I'm looking to do is:

 

1.  BTC Aug 9 129 Put @ 4.80  (currently at a 4:5 ratio)

2.  STC Sep 126 Put @ 4.45

3.  BTO Nov 126 Put @ 6.25

4.  STO Aug 16 125 Put @ 2.25

 

This way I now have 14 weeks to make the trade work.  That has the net effect of lowering my need price per week to BE to 0.61, which is much more manageable. 

 

Disadvantages?  It cost you more capital and ties your money up longer.  But it's still the route I'm going to go.

[brownrc 3]

Well, obviously I was quite wrong on this holding.  Here's our options:

 

1.  Keep holding and wait for a rebound.  This is the highest risk/reward;

 

2.  Roll to the same current price a week or two out for a small credit.  If there is a rebound over the next two weeks, we can earn back this downturn in intrinsic value.

 

I don't like either of those options as the way we make money on this trade is via extrinsic value (hasn't been working well -- at least the SPY one has).  By waiting for an intrinsic rebound, we're losing out on extrinsic value.  However, we're also running out of time on the long position.  Right now, if I were to do the normal roll, I would be BTC the 129 puts at $4.80 and STO the Aug 27 127 Puts @ $3.80.   That moves my break even price to ..73/week and 5% profit to $1.47 -- which is almost unreachable.

 

So, what I'm looking to do is:

 

1.  BTC Aug 9 129 Put @ 4.80  (currently at a 4:5 ratio)

2.  STC Sep 126 Put @ 4.45

3.  BTO Nov 126 Put @ 6.25

4.  STO Aug 16 125 Put @ 2.25

 

This way I now have 14 weeks to make the trade work.  That has the net effect of lowering my need price per week to BE to 0.61, which is much more manageable. 

 

Disadvantages?  It cost you more capital and ties your money up longer.  But it's still the route I'm going to go.

Chris,    Ok, I'll take another bite.    But why the Nov 126 Put?    Thought we tried to go as close as possible to the current GLD price, currently just under 124.      Directional bias on GLD?   Thanks......

[cwelsh 1,551]

Yes, its a directional bias, and by being further in the money, I can be at a 1:1 ratio in case of a rebound -- the less risky and more neutral position is at 124 as you noted -- you need to pick what fits your risk profile and opinions on the market

[PaulCao 51]

Hi, 

 

Anyone know why gold gapped down today? I couldn't find any fundamental justification for it. 

 

The market is down today overall due to Fed comment on easing bond buying program. But usually this bodes well for non-equity asset class as this makes equity a less attractive investment. Not sure why GLD is down today, although it has been on this weird trend while typically inverse-correlated instruments are trending in the same direction, 

 

I took a loss on my 125/129 calendar spread and rolled to a more delta-neutral neutral August 9 122.5 put/August 23 123 put/August 9 127 call/ August 23 127 call calendar spread. 

 

Best,

PC

[Stephen 4]

Typically but not always interest rates perceived to going up gold down, less printing gold down. 

[PaulCao 51]

Hi, 

 

Typically but not always interest rates perceived to going up gold down, less printing gold down. 

 

Thank you for your explanation. So the Fed's plan to step off their purchase of mortgage-backed securities that is designed to keep home loans interest low and stabilize home price; as a result, overall interest rates are kept low. 

 

Gold was perceived as an attractive alternative to the CDs/treasuries that had low yield in a inflationary environment, also as a safer hedge/investment to the volatile equity market of 2009-2011. 

 

Now that the Feds is planning to step off QE, coupled with what is perceived as a calmer bull market with low VIX, gold is faced with the double pressure of rising interest rate and equities becoming more attractive. Let me know if I'm missing anything else, 

 

Best,

PC

[cwelsh 1,551]

I think you left out that if it is the feds plan to step off of QE will lead (and has led some) to an increase in the value of the US $, which will result in a decrease of the value of gold.  (and also make inflation less likely in the longer term, also bad for gold).

 

As for an intraday move look this?  Happens all of the time with gold, I wouldn't read too much into it, other than the fact that this trade has performed horribly so far. 

[Chuck451 310]

Well, I rolled my short to the 129 Aug PUT for a small credit.  I'm deeper in the hole now, hoping to make it up with intrinsic if GLD bounces back up.

[cwelsh 1,551]

I don't think a lot of people really understand how these trades are supposed to work, particularly with paper losses.  No, this one has not performed so far, but it's not as far off as people think it is.

 

We originally bought the Sep 125 Put @5.25, when there were 13 weeks to expiration.  Let's say we bought 10 contracts, so that cost us $5,250.00.  If we're planning on selling 8 against that a week over the next 13 weeks, we would need .51 in extrinsic value each week to BE or .72 to hit our profit goal -- and it doesn't matter if we bleed cash each week.  Here's a very simplistic way to look at it, assuming we hold the shorts to right before expiration:

 

Week 1 we sold the 127 put @1.90, which had .72 extrinsic value.  So GLD would have been at 125.82.  What happens if the price of GLD drops down to 125?  Well that short 127 put is now worth -$2.00.  Which means we lost $0.10 in cash the first week.

 

Week 2 we would then sell the 125 put, let's say for $0.72, and after that week the price goes down to 123.  Well we just lost another $1.28 in cash.

 

Week 3 we sell the 123 put for $0.72 (and we'll be able to do that easily because as GLD goes down, IV would be going up).  Again, the price drops to 121, and we lose another $1.28 in cash.

 

Week 4 we sell the 121 put for $0.72 and the price drops to $119.  Oh crap, we just lost another $1.28 in cash.

 

Let's say this continues for the next 9 weeks, so after week 13, we lost $1.28 in cash 12 times and $0.10 once, or $15.46.  Over the 8 contracts we own, that's -$12,368.00.  In other words, on our $5,200 investment, we lost $12,368 in cash and the initial investment, so are down around $17,500.00.

 

EXCEPT THE TRADE WORKED.  GLD is now at 101 and we own 10 125 puts -- so they are each worth $24, or $24,000.00 -- meaning we made $6,500.00 on a $5,200 investment in 13 weeks -- even though we got absolutely creamed on the short positions each week.

 

Now this is a very simple example, and assumes linear movement of the price.  It also hopefully demonstrates how you can lose if you're getting whipsawed around the long puts. 

 

But hopefully it also shows that it doesn't matter if you lose on the shorts each week, as long as you average earning the extrinsic value you need too. 

[Maxtodorov 19]

Well, obviously I was quite wrong on this holding.  Here's our options:

 

1.  Keep holding and wait for a rebound.  This is the highest risk/reward;

 

2.  Roll to the same current price a week or two out for a small credit.  If there is a rebound over the next two weeks, we can earn back this downturn in intrinsic value.

 

I don't like either of those options as the way we make money on this trade is via extrinsic value (hasn't been working well -- at least the SPY one has).  By waiting for an intrinsic rebound, we're losing out on extrinsic value.  However, we're also running out of time on the long position.  Right now, if I were to do the normal roll, I would be BTC the 129 puts at $4.80 and STO the Aug 27 127 Puts @ $3.80.   That moves my break even price to ..73/week and 5% profit to $1.47 -- which is almost unreachable.

 

So, what I'm looking to do is:

 

1.  BTC Aug 9 129 Put @ 4.80  (currently at a 4:5 ratio)

2.  STC Sep 126 Put @ 4.45

3.  BTO Nov 126 Put @ 6.25

4.  STO Aug 16 125 Put @ 2.25

 

 

 

Chris, did you do the above? 

[cwelsh 1,551]

Yes, Ill go pull my actual fill prices after I get back from a lunch meeting and give them to you.

[cwelsh 1,551]

Here were my actual fill prices:

 

1.  BTC Aug 9 129 Put @ 4.85  (4 contracts)

2.  STC Sep 126 Put @ 4.53 (5 contracts)

3.  BTO Nov 126 Put @ 6.32 (5 contracts)

4.  STO Aug 16 126 Put @ 2.80 (5 contracts)

[Maxtodorov 19]

Thank you, Chris!

 

I closed the trade for 12.14% gain. (my strikes were slightly different due to timing).

I will be entering NOV/AUG tomorrow. 

[Guest giorgio]

Chris;

 

I have the Sep  put 124, I must open  also the Nov put 124  or it's better Nov put 126 ? Thanks

[cwelsh 1,551]

Chris;

 

I have the Sep  put 124, I must open  also the Nov put 124  or it's better Nov put 126 ? Thanks

 

When picking a long, I personally always go the nearest strike that's ITM.  So if GLD is at 126.01, I would use the 127.

 

The more ITM you go the "safer" the trade is, but the more it cost and the lower the returns -- and if to goes against you in a BIG swing, your losses can actually be larger --- but you're less likely to get the tiny whipsaw bleeding that we've had so far on this one.

[cwelsh 1,551]

I went ahead and rolled today:

 

BTC Aug 16 126 Put @ 1.06

STO Aug 23 127 Put @ 2.04

 

Net CREDIT of $0.98.

 

So far so good on the correction.

[cwelsh 1,551]

With the continuing rise in GLD, I did a vertical roll

 

BTC Aug 23 127 Put @ 1.73

STO Aug 23 128 Put @ 2.23

 

Net credit $0.50

[Guest Hal]

I got out of this trade last week at a small profit. I really like learning about these kinds of diagonal spreads, but I'm wondering if GLD remains a good stock to do this with. In your opinion, do you think it's worth opening a new spread with new money? I'm thinking November for the long puts.

 

Despite the fact that I didn't reach my profit target on the last trade, I really have learned a lot, and feel it's a pretty safe structure, overall. Surprised that SPY is doing well; I thought the long bias was for the downside, but it looks like you can still use this structure for upward-trending stocks. The enemy, it seems, is volatility, more than direction. Do I understand this correctly?

[Mikael 31]

If IV goes up alot, its likely the price gld will have gone down a bit. So ur short position will be down. Hal I believe if you are on the ratio the effects of increasing IV and paper loss on the short will be somewhat offset by your long position. But I would check your overall position vega

The overall position should still be downside bias ESP if your on the ratio. Look at the overall delta on the position. This trade won't do well if GLD is on a huge rally since its impractical to constantly roll up your long position. At some point you would be over allocating the trade

Edited August 9, 2013 by Mikael

[cwelsh 1,551]

I got out of this trade last week at a small profit. I really like learning about these kinds of diagonal spreads, but I'm wondering if GLD remains a good stock to do this with. In your opinion, do you think it's worth opening a new spread with new money? I'm thinking November for the long puts.

 

Despite the fact that I didn't reach my profit target on the last trade, I really have learned a lot, and feel it's a pretty safe structure, overall. Surprised that SPY is doing well; I thought the long bias was for the downside, but it looks like you can still use this structure for upward-trending stocks. The enemy, it seems, is volatility, more than direction. Do I understand this correctly?

 

Well the true enemy is declining volatility in a whipsawing market around your long position  (e.g. why GLD might end up not being a good candidate). 

 

But as Mikael noted, if IV is going up, that's not necessarily a bad thing as the price of GLD will be going down, increasing the value of your long puts -- as long as it keeps going down.  You DONT want to go down, take a loss on the shorts, then have a REAL quick move to the upside (so you can only recapture part of the upswing).

[cwelsh 1,551]

With the continuing rise in GLD, I did a vertical roll

 

GLD @ 129.46

 

BTC Aug 23 127 Put @ 1.19

STO Aug 23 129.5 Put @ 1.79

 

Net credit $0.60

 

However, since I'm now back above my long strike, I did so in a 5:4 ratio.  So I still own 20% of the 127 puts.

[PaulCao 51]

Hi, 

 

What a spike on GLD; was doing an expiring 125/129 GLD calendar spread that was going swimmingly, was going to adjust as GLD spiked up to 129.5 but stepped out for lunch; and had to take a loss when came back to a screen of GLD at 132.20, closed the whole original GLD structure. 

 

Now in 130 put/132 call/134 call August 16-August 23 triple calendar. Will see how it goes and report with the performance of doing expiring calendar spreads after this week's expiration, 

 

Best,

PC

[cwelsh 1,551]

Well the spike was sort of good news as we just got a ton of credit on our short position, thus decreasing the amount we need per week.  I just rolled:

 

BTC Aug 23 129.5 Put @  0.66

STO Aug 30 133 Put @  2.70

 

Net credit of 2.04

 

Lowered the BE on this trade by 40% in one week -- that's good news (even though the short position is now significantly out of the money, increasing the margin necessary to continue to do the trade).

[Micahjw 3]

I've been trying to learn from a distance on these types of trades (SPY and GLD etc) and I think I'm getting the gist of them, but what types of stocks or setups should one look for with this type of strategy? Are there other possibilities that work well besides SPY and GLD? Can one take the concept to the long side in the same way for a long bias (like one might prefer to do with GLD right now?)? If one has been tracking this or the SPY trade, is there a particular entry point that is better/worse or is it possible to just open a similar Dec/Jan long SPY put and start writing the short weekly puts?

[cwelsh 1,551]

The best time to enter is after a run up, then volatility is low, so your long dated option is cheaper.  They tend to work best with things that trend or stay flat -- whipsawing will kill you. 

 

The longer out you date your long put, the less you have to make per week to break even/make a profit, but the longer your capital is tied up and the more susceptible  you are to longer moves. 

 

As far as have I backtested this across 50 different instruments to find which works the best?  No, I haven't.  You do need something with highly liquid weeklies.  

[cwelsh 1,551]

I just did a vertical roll for a .55 credit:

 

BTC Aug 30 133 Put

STO Aug 30 134 Put

 

Net credit .55

[cwelsh 1,551]

I am rolling the position today:

 

GLD @

 

BTC Aug 30 134 Put @ 1.26

STO Sep 6 136 Put @ 2.88

 

Net CREDIT of 1.62

 

This was a great week for the GLD trade (finally).

[cwelsh 1,551]

If GLD hits the 138 level, I'll be rolling up my long puts as well.  With the volatility down, right now, that will only cost us one week (to roll from 126 to 136 right now is about $2.00.

[cwelsh 1,551]

Well this ratio diagonal is working great right now, but I am making two adjustments today:

 

GLD is currently at 137.01

 

1.  I am doing a vertical roll on the weekly:

 

BTC Sep 6 136 Put

STO Sep 6 137 Put

 

Net CREDIT of 0.49

 

2,  I am rolling the LONG puts as well

 

STC Nov 15 125 Put

BTO Jan 17 137 Put

 

Net DEBIT of 5.35

 

This increases the cost of the long by 5.35, but actually REDUCES the cost of the break even point because of the added nine weeks of trading.  It also eliminates some of the large margin costs we were incurring on the spread (difference between where our short and long positions were). 

[cwelsh 1,551]

I'm rolling the position today:

 

 

BTC Sep 6 137 Put

STO Sep 13 137 Put

 

Net Credit .57

[cwelsh 1,551]

I hope everyone has stuck with these SPY and GLD trades as they are now in the positive payoff territory....

[cwelsh 1,551]

I rolled this one today as well, doing a calendar:

 

BTC Sep 13 137 Put

STO Sep 20 137 Put

 

Net Credit of 0.59.

[PaulCao 51]

Hi, 

 

I want to ask everyone if they know if there's an equivalent GLD option series on the European markets that we can trade on during the Asian/European hours, 

 

Given the recent events involving Syria, it's been quite frustrating to see how gold prices swing wildly in after hours of US market and not being able to do anything to adjust the positions, 

 

I think having an alternative option-series to trade on during the European trading session would help a lot in preventing unexpected gaps in GLD open, 

 

Best,

PC

[Kim 7,943]

You can always hedge with futures. 

[CJFerreira 1]

Well, I forgot to roll my puts last week and was assigned on 1/3 of them this morning (GLD currently at $127.29).

I bought back the rest and sold the full allocation - STO Sep 21 128 put @ $2.12

I also sold  a slightly ITM call against my assigned shares - STO Sep 21 126 call @ $2.58. This will cover me to $124.71 or recoup some loss otherwise.

 

I need to watch those rolls!

[PaulCao 51]

Hi, 

 

Given that next week is FOMC meeting. Are you guys still in this trade or sitting in the sidelines until Wednesday next week after the FOMC Meeting Announcement? 

 

http://bloomberg.econoday.com/byweek.asp?day=17&month=9&year=2013&cust=bloomberg-us&lid=0

 

Best,

PC

[cwelsh 1,551]

I'm still in it, but largely because my long put is pretty deep ITM and nearing a 1 delta, so I don't want to miss a fast rise, if that happens.

 

I also am rolling today, and, with where my longs are, I'm considering going a little further in the money in case there's a big rebound.  Looking at that now and will post when I've decided.

[cwelsh 1,551]

Ok, both the trades:

 

On the 1:5 ratio:

 

BTC Sep 13 128 Put @ 1.00

STO Sep 20 128 Put @ 2.28

 

net credit of $1.28

 

On the 4:5 ratio

 

BTC Sep 20 137 Put @  10.00

STO Sep 27 131 Put @  4.80

 

Net deibt of: 5.20 (yes cost 5.20)

[Marau 4]

Bought back my Sep20/137 short an not rolling for now. Kept my long put and might go a little further in the money.

[fieldydwb 31]

GLD skyrocketed in last hour, it was quite interesting to watch. Hopefully you rolled.

 

I've been trying to time the rolls as well but I find now, 3 months in, that I just am not getting anywhere with timing either SPY or GLD. I did a combination of buying back the shorts intra-day with the aim of selling them for higher price as well as using combinations of OTM, ATM and DITM to represent my stance.  I started off well during the summer when volume and volatility was low.  Everything seemed quite easy with the right tools (I used HFTalerts service (market breadth and liquidity) and Cobrasmarketreport) but since late Aug I've found intra-day timing to be incredibly difficult. I think its naturally tempting to try and time the sale and buy backs of your short puts intraday. Has anyone else been tempted to buy back the shorts in hopes of re-selling for more when the market is see-sawing intraday? it's tempted me but it hasn't worked well lately and it's required too much time. I was ahead of the game until late Aug, but with the recent volatility and exogenous events (Syria, Taper, Debt Ceiling) I took a more bearish stance and have given back any timing gains. There is a lot of danger in missing a run-up as there is being delta positive on a down swing. I agree with Chris that the best bet is a ratio and always target DITM with the bulk of your short puts. So much of the movements since Jul have been afterhours and lately also in the last 5 minutes (look at today and yesterday with 1s to go). Thus, having tried it with a lot of effort, I would agree with Chris and suggest against it. Stick to the plan.

 

Just some observations from my experience as of late. It's now equally tempting to try and keep a bearish stance in order to gain back some of the timing losses but I've convinced myself and continue to convince myself that this is no way to do it.