GLD Calendar

[Rogers 263]

In the 157 and obviously took a hit today.. My adjustments were to open a SLV 28.5 straddle yesterday to hedge and bought one of my short 157 calls back today to lower the delta a little.. It buys me a little breathing room to decide on the next move.. Yes, it's a little messy now.

[Guest listolyman]

Scott, pls keep us posted on your adjustments. Chris, thanks for the guidance. I 'm at a 20%+ loss now but waiting for a pullback.

[ammarmalhas 5]

The next week options r out. We can roll the 158 for around 0.3-0.4 , should we?

[cwelsh 1,551]

I'm looking at it right now, and mapping out the different strategies, I'll let people know what I find.

[cwelsh 1,551]

Ok, here are the options that I've looked at:

1. Just close the position out (right now around 1.32, which would be around an 18% loss);

2. Roll until next week for a current price of .35. If GLD stays at the current price or lower, the trade will hit the BE/Profit range. Much of an increase at all though and you hit the loss line again.

3. Roll and sell a OTM vertical put on the weekly -- I'm looking at the 161/159 for a credit of .65. This gives you MINOR protection to the upside, and if it goes down, your max loss on the vertical is $2.00, which is more than offset by the gain in the value on the short 158 position (yes you're long goes down as well, just at a slightly slower rate). If GLD stays right around 161, or goes SLIGHTLY up, this is the best strategy. If GLD goes down belwo 159 (or worst case below 158), you've compounded your losses.

4. Wait until tomorrow and see if there's a pullback and re-evaluate.

GLD is a fickle instrument. I HATE betting against the trend in GLD, particularly after it breaks resistance on volume.

I, in all liklihood, will either roll or wait until tomorrow -- the safe play is to just eat your losses and go on your merry way.

[cwelsh 1,551]

As a follow up, at the current levels, waiting until tomorrow is begining to look better and better -- the continued rise in GLD won't change the price very much (e.g. your losses won't get much worse, unlikly to be more than .15 more), as your long september is now above .75 delta postive, and a jump $1.00 more in GLD, will rise that to around .85.

[Rogers 263]

I don't want to hijack this thread but my positions are doing good and will probably wait until tomorrow to adjust...

[cwelsh 1,551]

It's not hijacking if you comment on it . And, while I'm down today, I have not gone down MORE as the day progressed (as the price went from 161-162.50, it did not change the value of my position -- got to love the high delta long position). So, like you, I'm leaning toward waiting -- even a $1.00 retracement will give me either more of a credit for next week in rolling or might give me a profitable exit.

[ammarmalhas 5]

I don't think this 158 is working. Should we just close and take the loss or roll for a mere 0.2-0.3?

[Guest listolyman]

Scott/Chris, any recommendations on how to play this today. The short expires today and to roll to next week is about .10-.20 credit(for the 157 strike).

Edited August 24, 2012 by listolyman

[fieldydwb 31]

Cwelsh, What did you end up doing? I got a 157 still active. Going through options.

[cwelsh 1,551]

All right, just finished the roll analysis on this one:

If I roll the 158 today, and the price stays at 160.39 or below, I am no worse off of that i am today -- the credit I would receive from rolling makes up for the entire theta loss of the long position (plus a little).

However, if the price goes up next week at all, then the loss is compounded. Any drop at all on a roll improves the trades situation.

Options:

1. Close today for an 18% loss;

2. Roll to next week and hope that the price goes down (if it does, that loss gets better and/or could turn to a gain);

3. Roll to next week and open a double calendar at the 162 level -- while doubling you initial investment (almost), it means you'll now have profits next week if GLD finishes between 162.6 and 157.50 --- this is what I'm doing, with an eye of bailing on Monday or Tuesday if the prices adversely move and taking profits as soon as they arise

[cwelsh 1,551]

I rolled the 158 and opened the 162 calendar

[Guest listolyman]

Is this still a viable option for us at the 157 where my losses are about 40%?

[cwelsh 1,551]

Yes, if you have TOS go to the trade analysis and look at the chart after adding in the trade, even with the 157, it pulls the profit up.

HOWEVER, looking at the P/L chart, it looks like if you have a reversion to the 159-160.25 level, you'll still have a loss -- just a little bitty one. So still just repairing, but much better than you are now. However, if it does keep moving up, you just compound your losses -- I'd look at the PL chart and risk reward profile and do what you're comfortable with.

[ammarmalhas 5]

Chris,

What is "double calendar"? Did you open Sep 22nd calendar at 162? You rolled to Aug 31st (Aug4) right?

Edited August 24, 2012 by ammarmalhas

[ammarmalhas 5]

Your prices for the roll and the calendar?

[ammarmalhas 5]

I closed at 1.2 with 0.3 loss.

[Guest listolyman]

Thanks Chris. I after looking at the P/L graph in TOS i opted for the 163 calendar. It gives me some room for the price to go up and provides a broader tent. I could have a small loss if it moves to 160 but this is about damage control and capital preservation. Also the 163 reduced my investment for this fix by 40%.

[cwelsh 1,551]

That's why the PL graphs are great

[srf335 14]

Any reason not to use puts for the 162 calendar if my 158 calendar is in calls?

I don't think it matters and it charts basically the same as if the double calendar is all calls. It's currently a bit cheaper to do the 162 calendar with puts (if I pull the trigger and can get a fill), and would think it might have a bit more value near if GLD moves back down near 158 since they would be in the money (the 158 call calendar is currently about .03-.04 more than the 158 put calendar). Still deciding whether to close with loss or attempt to gain some back next week and just want to make sure I'm not missing anything on the double calendar.

[cwelsh 1,551]

The risk profile for both is identical -- so it shouldn't matter.

However, in actuality that is not true. You need to decide on several factors (the first being the most important) in making the decision to use puts/calls when opening a calendar (this one or anyone);

1. Are you planning, or is there a possibility of rolling? If so, I would always go with the side that is more EXPENSIVE, because when you sell the next week's option, you will collect more premium. (You should actually calculate the ratio, because the cheaper one might offer a higher rate of return, even though the option premium is less -- though that's unusual). If you know this is a one week calendar only, always go for the cheaper one -- higher rate of return on lower investment.

2. Do you have a strong market bias one way or the other? If so, while the risk/reward profile is the same, the change in IV might not be on a 1-2 day move if you have to exit. This never makes a huge difference, but it can make a few cents.

3. Look at the liquidity -- sometimes there is a SIGNIFICANT difference in put/call liquidity, particularly on indexes or GLD, or something similar. If everything else is about equal, I'll trade the more liquid side.

[srf335 14]

Chris,

Thanks for the insight and sharing your past learnings.

Not as much with RUT/SPY/GLD, but more with individual securities, liquidity has been the main factor on many of these trades as I have allocated more of my portfolio to non-directional trades, especially when trying to minimize slippage on these 2 and 4-legged trades. A lot different than my directional "mindset" where a few pennies here and there weren't material to the results. The pennies are significant on these $1.00 to $5.00 non-dir trades, but meaningless if you can't execute. Still getting a feel for those trade-offs.

FWIW, i decided to close the GLD calendar Friday and take the loss.

[cwelsh 1,551]

Chris,

Thanks for the insight and sharing your past learnings.

Not as much with RUT/SPY/GLD, but more with individual securities, liquidity has been the main factor on many of these trades as I have allocated more of my portfolio to non-directional trades, especially when trying to minimize slippage on these 2 and 4-legged trades. A lot different than my directional "mindset" where a few pennies here and there weren't material to the results. The pennies are significant on these $1.00 to $5.00 non-dir trades, but meaningless if you can't execute. Still getting a feel for those trade-offs.

FWIW, i decided to close the GLD calendar Friday and take the loss.

I don't blame you, I was REAL close to doing that, but as I was almost completely in cash, the increased risk profile on GLD was well within the overall risk of the portfolio. Everyone should always make their own decisions based on their own risk tollerances and portfolios.

And yes, .05 or .10 makes a huge difference on the calendars and RICs -- as do commissions. I would never use a platform that would not let me execute these as one trade -- to do a 4 leg trade, as four seperate trades is just asking for problems.

[srf335 14]

Looks like GLD started to head back in the right direction this afternoon for you. Hope you get back to BE or better.

I'm with tos, so placing an IC, RIC, straddle, etc... as a single order is not an issue. Commissions are predictable. How much the bid/ask spread changes (or doesn't) while I'm in a trade is not predictable (at least not that I can see on the trades I've executed so far). Haven't found the UNPREDICT() function in Excel yet...

[fieldydwb 31]

Cwelsh,

I have the 157/163 double call calendar in place. Could I get your insight on how to deal with it this week?

Thanks!

[cwelsh 1,551]

My goal on this right now is to get back to BE -- with the 157/163 you should be fairly near the middle of the profit chart (go open it up on TOS or your trading platform).

If I can get even close to BE, I'll judge this a succesful adjustment and exit. Ideallly that point will be tomorrow, but maybe Friday morning.

BB is making an announcement Friday morning -- and it COULD be for more stimulus -- I personally think that won't happen, it may in the September meeting -- but that announcement most likely will have an impact on GLD prices. I hope to be out before it.

[fieldydwb 31]

Advisable to close the 157 calendar altogether and roll the 163 into next week? Or close both?

Appreciate the insight.

[Guest listolyman]

I am also in the 157/163 double calendar. Since the "tent" is wide and the underlying is in the middle then i am planning to roll both the 157 and the 163 weekly's then wait to see if the underlying moves. If it approaches either edge of the tent then i will sell. But if it stays in the safe range then i plan on keeping this open and rolling again next week. Next week is a shortened week with only 2 business days before the next weekly is available.

[Rogers 263]

I am in the 157/162 tent myself.. I will probably decide by EOD what to do.. Keep Tent/Roll Tent/Close Tent.. Hedge with straddle yes/no

[cwelsh 1,551]

Right now, I am almost certainly going to close the trade for only a small loss (looks like about 2%), which, as bad as this was, means this was a great repair job, and I'm happy with it.

With GLD right at 160.50, I'm toying with the idea of the 159/160/161/162 for .53 on this weekly for a one day play -- break evens only require a $1.00 move in either direction, which has happened in 8/10 last bernak announcements. I need to do some option calculator testing to see how big the risk is, I'll let everyone know.

[Rogers 263]

I was looking at the same trade earlier.. Commissions would be huge for me @ 1.25 per contract

I was hoping GLD would settle on the 160 or 161 strike for a straddle

[cwelsh 1,551]

Right now you can get out of the repaired trade for about a 2% loss, I have a limit order in that would let me get out at BE INCLUSIVE of commissions.

I however WILL be getiting out of this today, even if I have to take a 3-5% loss due to slippage. Yes I could try to wait until tomorrow morning am and get out ahead of the announcement, but I have met my goal on the repair strategy, and will not get greedy.

[fieldydwb 31]

Listoly, What'd you end up doing with your double calendar?

I've got the 157/163 call double calendar. Overall still at sig. loss.

[Rogers 263]

closed my 157/162 tent for a loss (a much smaller loss than was on the books yesterday)

Edited August 30, 2012 by Scott Rogers

[cwelsh 1,551]

Well I chased it down for an entire 20 minutes trying to close, and finally did for a 9% loss after commissions. I lost .20 as the MM teased me repeatedly, it sucked.

BUT, last week I was looking at a 21% loss, I ended up with a 9%, and have no risk tomorrow. Maybe GLD doesn't move at all (I did not open my 1 day condor), maybe it does, but I can sleep with a 9% loss on a trade.

[Guest listolyman]

Listoly, What'd you end up doing with your double calendar?

I rolled both weekly's for a.75 credit. I'm watching if gold moves tomorrow. It can move abt 3 points either way. I setup an alert if the underlying gets close to either end.

I've got the 157/163 call double calendar. Overall still at sig. loss.

[Guest listolyman]

Fieldy,

I rolled both weekly's for a.75 credit. I'm watching if gold moves tomorrow. It can move abt 3 points either way. I setup an alert if the underlying gets close to either end.

[cwelsh 1,551]

Well if I had been patient, and held to this morning, the extra TV decay would have let me get out at a 4% profit.

[Guest listolyman]

Good news is that you slept well last night.

[cwelsh 1,551]

And looks like I should have taken the one day ATM condor, oooooo well

[Guest listolyman]

The underlying was in the middle of my 157/163 calendar yesterday but the move to 163.4 became too directional so i exited this trade with a 30% loss(ouch). I learned a lot from this trade. I should have followed Chris's lead and taken the 162 calendar but i took the 163 because i thought it was the safer decision. The markets have been close and moving at the last minute. My spy calendar was right at my strike of 142 at closing on wed but then AH it moved to < 142 so it cut my potential profit in half. It returned close to 142 today. There is no replacement for experience when determining entry and exit positions.

[cwelsh 1,551]

I just went back over the last 2 years of bernak speeches/announcements -- just over 97% of the time, GLD moved over one percent. Holding a calendar through that type of odds just doesn't make sense. I SHOULD have waited until first thing this morning, ahead of the speech, but I've noted for the future to just not hold through them.

That said, I do think I'll probably start doing the ATM condors ahead of them if the announcement is on Thursday or Friday.

[fieldydwb 31]

Chris,

Any chance you can pass on the dats of the speeches/announcements so I can do some backtesting? If you have a solid resource of historical announcements that would be great as well. I'm having a heck of a time finding a summary of historical speeches.

[cwelsh 1,551]

See: http://www.federalreserve.gov/monetarypolicy/fomccalendars.htm for starters

[Guest listolyman]

I just went back over the last 2 years of bernak speeches/announcements -- just over 97% of the time, GLD moved over one percent. Holding a calendar through that type of odds just doesn't make sense. I SHOULD have waited until first thing this morning, ahead of the speech, but I've noted for the future to just not hold through them.

That said, I do think I'll probably start doing the ATM condors ahead of them if the announcement is on Thursday or Friday.

Thanks Chris. You have a wealth of knowledge and experience which i severely lack. I was no worse off selling after BB spoke since my calendar tent was so broad. My loss was due to a) my calendar was at 157 and the underlying moved to 161.5 i opened the second calendar at 163 instead of 162 and c) the movement on friday forced me to sell once it reached over 163. This trade plus the spy straddle negated all of my gains for the month. I remember Kim mentioned that breaking even during the first year is a realistic goal.

Edited September 2, 2012 by listolyman