GLD Calendar

[cwelsh 1,551]

Well, time to grin, short term volatility is higher than long term on GLD -- add that together with overall low volatility, and I just entered the 158/158 Aug 18/Sep GLD Calendar for $2.04.

[ammarmalhas 5]

Well, time to grin, short term volatility is higher than long term on GLD -- add that together with overall low volatility, and I just entered the 158/158 Aug 18/Sep GLD Calendar for $2.04.

This is for Call options right?

[Rusty 0]

Interesting! Are you looking at the IV for each option? Right now TOS shows 12.76% for the Aug 158 call and 14.92% for the Sep. Am I looking in the correct place or has the IV changed since you placed the trade?

[ammarmalhas 5]

I also read Sep 2.5% more volatile than Aug!

[cwelsh 1,551]

It's changed -- when I entered the Aug was 15.28% and the Sep was 14.88% ( I wrote them down in my trade log).

It's hard to find non-earnings scenarios where you both have low overall volatility in the market and the shorter dated option is higher in volatility. I don't know of a good screener for that either, but those are the calendars that work the best.

[cwelsh 1,551]

This is for Call options right?

Yes

[ammarmalhas 5]

So do we follow u in? :-) at 2.04?

[ammarmalhas 5]

Well I'm in @ 2.03. Pls keep us posted of ur moves

[cwelsh 1,551]

Will do, this one has a flexible profit target, depending on how long I've held it. If I can get out monday or tuesday for anything above 12.5%, I'll take it and run.

Also, GLD, in the past, has been a good candidate to roll the shorts on the calendars and continually suck profit out. But that's a decision that has to wait until Thursday.

[ammarmalhas 5]

Thanks. I'm with u. Good luck.

[tjlocke99 18]

If this isn't done as a ratio trade, doesn't the position have a large risk if GLD drops in value?

[Rogers 263]

good luck to you all.. sitting this one out for now..

[Marco 223]

If this isn't done as a ratio trade, doesn't the position have a large risk if GLD drops in value?

I take it these guys are short the Aug vs. long Sep.

'large risk' is relative - they can lose their premium that they paid upfront (so 100%) if there is a fairly large move in GLD - up OR down. Their expectation is that this doesn't happen and GLD goes sidewards and with Aug IV over Sep IV that Volatility term structure normalises as well so that Aug IV drops below Sep IV again. But even if that happens GLD still cant move too much from the 158 strike for this to make money.

Its basically the same we do on the SPY calendar in this forum.

[cwelsh 1,551]

You are correct -- its the exact same premise as to the SPY trade

[Guest listolyman]

Chris, Do you still believe today is a good entry point? The underlying is at 156.8 and the option price is $2.03.

[cwelsh 1,551]

I think this is still a great trade, but if entering today, I'd probably enter the 157 (well not probably, that's where I would enter).

[smt1 2]

Looks like a large move down to 156 now.

[cwelsh 1,551]

It'll bounce back up -- GLD is actually a fun chart to watch and if you're a day trader based on technicals, can probably do quite well.

Yes GLD took a large dip down -- because someone sold 300,000 shares in two orders submitted simualtanously. That's half the days average volume in one trade. You'll always get a kick down (though volume is way up on this today, which in technical terms meaning you can probably confirm a 1-2 day OVERALL downward trend).

No adjustment is needed (yet).

[Rogers 263]

I added a small position yesterday and might add to it depending on how the chart looks EOD..

[Guest listolyman]

Scott, What strikes did you choose?

[Rogers 263]

Scott, What strikes did you choose?

It was still around 156-157 when i entered so I went with the 157

Edited August 14, 2012 by Scott Rogers

[csensen13 1]

Chris, GLD is down to 155 at this point - you mentioned in the SPY calendar discussion that you usually don't let the calendars expire and, if necessary, you typically roll up or down the strikes accordingly - what do you suggest at this point with the GLD 157 calendar - overall it's down about 20% from the entry point - wait for a bounce up, hopefully before Friday or change the strikes?

[cwelsh 1,551]

Well I'm not doing anything today. With GLD I'm much more likely to just roll the short position into the next week on Thursday. GLD's trading range the last month has been between 154-158. As long as we don't stress the bottom of that, I'm not that concerned and would just roll to the next week. (buy back the 158, sell next weeks).

If GLD stays at 155, that should net a credit of about .55/share at the 158 price.

However, if GLD starts testing the bottom of the range (3 month bottom around 152), we'll have to consider rolling down a strike, or maybe opening a double calendar.

Again though, until either (a) get below 154 or ( Thursday, I'll just let this one sit.

In an ideal world, the price will bounce up to 157.50 or so by late Thursday/early Friday, and I'll collect another .80 rolling forward.

[csensen13 1]

That's more or less what I was thinking - just wanted to confirm with your expertise - thanks!

[cwelsh 1,551]

That's more or less what I was thinking - just wanted to confirm with your expertise - thanks!

Relative term

[ammarmalhas 5]

With GLD at 155 our Aug 18th Calls are now at around 0.11. If GLD remains around 155 by Thursday, the Calls will be worth less than $0.05 (if I read the Theta correctly). The next week's weekly will come in play Thursday.

I am sure u would wait to see the figures on Thursday and then decide to roll or wait till Friday. I know that selling the Aug weekly (next week's) on Thursday should get us more than doing so on Friday, but buying the Aug 18th calls on Thursday will cost more than doing so on Friday (or letting them expire). So one would compare the cost of closing (buying back) the Aug 18th Calls and selling the next week's weeklies on Thursday vs doing so on Friday, using the Thetas to estimate what the Friday net credit would be! All this assuming GLD remains at 155.

Is it this simple?

Now, how does the underlying price movement affect these prices on Thursday and Friday? (delta, gamma, VI ...etc.)

How do u really decide what to do? The calculations and assumptions seem to be very complicated and we will have to guess the underlying price movement and then we are no longer non-directional.

I do not know if I am confusing several other friends here, but I surely got myself confused

[Guest DShaver]

Chris,

With GLD just above 155 I was looking at a Sept RIC with 149/150/160/161 puts/calls. I've noticed that GLD has been between 160 and 150 since roughly may 2nd and with the wing strikes being so close it reduces the risk, right now it looks like about a .44 credit to open the trade risking only 66 for every 44 gain. What do you think about something like that?

[cwelsh 1,551]

Chris,

With GLD just above 155 I was looking at a Sept RIC with 149/150/160/161 puts/calls. I've noticed that GLD has been between 160 and 150 since roughly may 2nd and with the wing strikes being so close it reduces the risk, right now it looks like about a .44 credit to open the trade risking only 66 for every 44 gain. What do you think about something like that?

I frequently trade the GLD RIC -- however I can rarely get enough credit to make it worth the risk. I just looked up the price on that and you'd be looking at a whopping credit of either .02 or .01. You lose that on commissions.

This is where my 1 and 2SD analysis comes in (several threads on this), that I use in selling RICs. But that far out, you just won't be getting the credit you need to even have a chance at the trade being profitable.

Unless you're thinking of going long -- but then you'd need a HUGE unexpected move. Which of course could happen, but if you were looking at that, I would go out to December and buy it at .05. That's just a pure gamble though.

[cwelsh 1,551]

With GLD at 155 our Aug 18th Calls are now at around 0.11. If GLD remains around 155 by Thursday, the Calls will be worth less than $0.05 (if I read the Theta correctly). The next week's weekly will come in play Thursday.

I am sure u would wait to see the figures on Thursday and then decide to roll or wait till Friday. I know that selling the Aug weekly (next week's) on Thursday should get us more than doing so on Friday, but buying the Aug 18th calls on Thursday will cost more than doing so on Friday (or letting them expire). So one would compare the cost of closing (buying back) the Aug 18th Calls and selling the next week's weeklies on Thursday vs doing so on Friday, using the Thetas to estimate what the Friday net credit would be! All this assuming GLD remains at 155.

Is it this simple?

Now, how does the underlying price movement affect these prices on Thursday and Friday? (delta, gamma, VI ...etc.)

How do u really decide what to do? The calculations and assumptions seem to be very complicated and we will have to guess the underlying price movement and then we are no longer non-directional.

I do not know if I am confusing several other friends here, but I surely got myself confused

First, selling on Thursday won't necessarily get you more than on Friday -- it completely depends on what the price of GLD does. For instance, if GLD was right at 155 on Thursday we might get .55 or so (ball park) but if GLD were to jump to 157 or Friday, then you would probably get double that. Whereas if GLD stayed the same or went down you would get less. Gamma plays a HUGE role in the weekly roll.

Your analysis is correct, assuming GLD stays the same on Thursday and Friday. And it's one I go through. So if our current weekly was worth .10 on Thursday and the next weeks 158 was worth .55 on Thursday, we'd be looking at a credit of .45.

Then we just look at the theta, let's say its .05 on this weekly and .02 on the next weekly. Theoretically, with no price movements, we'd be looking at .05 and .53, or a credit of .48. Therefore waiting until Friday would be better. Unfortunately, it's not quite that simple because the odds of the price staying the exact same day to day is about nil.

This is where I roll technical analysis in (which is a fancy way of saying I like to pretend it improves my chances of guessing the direction GLD will move in one day). If I see a strong trend up or down, over a two day period, then I'll let that weigh in my decision. For instance, if my indicators seem to say price is going up, I'll wait until Friday to roll, if they are saying down, I'd roll right on Thursday. If I can't get a read at all, and I have no clue, then I typically roll on Thursday to get the most TV.

Hope thats clear, if not, just shoot me a message.

[ammarmalhas 5]

Thank u Chris

I have bought back the short 158 call contracts for 0.1. I am now waiting for tomorrow for the new weeklies so I can sell next week's 158. (I have am essentially rolling in two days).

I do not really know why I did it, except that I am playing around with trades trying to understand what happens, and perhaps I should have waited till tomorrow and did a roll then, I may have saved myself a few pennies, but on a few contracts it is not worth it.

[cwelsh 1,551]

Thank u Chris

I have bought back the short 158 call contracts for 0.1. I am now waiting for tomorrow for the new weeklies so I can sell next week's 158. (I have am essentially rolling in two days).

I do not really know why I did it, except that I am playing around with trades trying to understand what happens, and perhaps I should have waited till tomorrow and did a roll then, I may have saved myself a few pennies, but on a few contracts it is not worth it.

The only problem with doing that is you're now naked on the long. With the price only being .11, there's not much left to give up, but there is some.

The other thing you did is bought yourself two commissions. When you roll you can buy back this weeks and sell next weeks as one trade. The way you did it you'll be paying two commissions, essentially doubling your cost.

[Rogers 263]

Good day for the 157 calendar.. I would love to roll in the 156-158 area

[cwelsh 1,551]

Well I did not get quite the bounce in GLD today that I wanted, but it is up slightly, so I am rolling today. Right now you can roll the front end weekly into next week's 158 for about .35. I'm going to wait a little and see if I can't get .45, but I do plan to roll today.

[Rogers 263]

rolled 157 for .56

[cwelsh 1,551]

Well, just got filled at .45 while getting a glass of tea on a big spike. If you haven't rolled yet, you can now for close to .50 -- which I certainly would take at that price

[ammarmalhas 5]

Chris,

I am selling 158 Aug 25th weekly @ 0.67, since I had bought back yesterday @0.1, if I can then I will have effectively rolled @0.57

I am not bragging :-) but it looks like it was a logical move.

[ammarmalhas 5]

I sold the Aug 24th strike 158 at 0.65

[cwelsh 1,551]

You guys both got much better prices than I did -- GLD went up yesterday, and I rolled fairly early in the day. Good job, and hopefully GLD will be around 157.25 or so next Thursday

[Guest listolyman]

I closed this for a 16% gain yesterday. Is it still a good time to reenter this trade?

[cwelsh 1,551]

I closed this for a 16% gain yesterday. Is it still a good time to reenter this trade?

Well sorry for the late reply, but yes, the GLD ATM is still a good trade. So if I was entering today, I'd have done the 157

[Rogers 263]

GLD jumpy today... thinking about buying back one of my 157 shorts so I am not so delta negative.. Or I might just wait and see where we land in the next couple of days to make an adjustment.. Calenders are hard in an UP UP UP UP market...

[ammarmalhas 5]

What are our plans for this play, I hv the 158 Sep/Aug calendar?

I bought the calendar at 2.05 net, rolled the Aug 17th for Aug 24th for 0.55 credit. I think my cost is reduced to 1.50 and since the calendar is now around 1.79 then i am 0.29 up. Should I sell?

[cwelsh 1,551]

We're still right in the range -- I'm not that far off my original 158 starting point. GLD would have to continue up for me to really consider readjusting.

Right now the trade is about 11% up for me, but with accelerating theta on the weekly, I'm very tempted to just keep holding (and will do looks like for today at least).

[ammarmalhas 5]

We're still right in the range -- I'm not that far off my original 158 starting point. GLD would have to continue up for me to really consider readjusting.

Right now the trade is about 11% up for me, but with accelerating theta on the weekly, I'm very tempted to just keep holding (and will do looks like for today at least).

Yes but the expiry of the short side is day after tomorrow (Friday), do we let it get filled (which I do not like

at all) or do we roll to next week's weekly call options or close the whole trade by Thursday?

Do you have a price target for the Calendar by Friday? Do you see it close to $2?

[cwelsh 1,551]

Nono, we DO NOT let it get filled, we either close or roll to the next week.

With GLD right in the trading range its supposed to be in (remember the reverse problem last week, lower ), we'll probably roll. Always set your own profit targets though, and if you're not comfortable, by all means, take profits and run.

Weeklies will be issued tomorrow, and with GLD only slightly up today, I'll continue to hold until tomorrow and make a decision on rolling or closing (most likely rolling).

I am a LITTLE concerned that GLD broke resistance at 159 and has not retraced yet, but its not shooting up, and looks to be staying around 159 for now. It does need to be closely watched, but again, right now, I'm holding until tomorrow (if it jumps up today significantly, I might exit).

[Hannes Kury 7]

I just closed with a small profit. Gold seems to be pretty nervous and could break out to the upside. Thanks Chris for leading this!

Profit was actually 9% after comm, which is not bad at all.

Edited August 22, 2012 by Hannes Kury

[smt1 2]

Not in this trade, but watching it carefully. Chris: you worried about post-FOMC shenanigans?

[Guest listolyman]

Hi Chris, I am in the 157 calendar. I entered at 1.69 and the mid is about 1.30. Should i be concerned or make any adjustments?

[jr1221 12]

I would only be doing this trade between FOMC meetings, but not during one. GLD always moves a lot based on whether the word "QE" comes up in the FOMC minutes.

[cwelsh 1,551]

The FOMC meeting is a worry, but just listened to Richard Fisher today, and he "highly doubts any QE announcement" is forthcoming. But yes, it is an increased risk.

And even though it jumped above 160 today, I did not exit -- for the reason that the long IV also increased. I could have exited, even at the 160.50 level for a nine percent profit, which is still well within my measure of safety, particularly given the theta on the trade.

HOWEVER, it does make the probability of rolling tomorrow instead of exiting lower.

To those in the 157 or 156, if this breakout is confirmed on volume tomorrow, I would not hang around. If you are facing a loss, there are several things you can do to try to save it:

a. Open a double calendar (probably at the 161 or even 162 level, depending on the price tomorrow);

b. Change to a longer dated calendar (so instead of the august weekly/sept, roll the august weekly tomorrow and switch to the december long -- this will give you more time to sell premium against it)

I personally would either take option ( and just sell premium against it until the price reverts to near 157, then close (should net a decent profit) or just close. The risk of option ( is that the breakout is permanent between now and December and the price stays well above 157 -- looking at a loss then.