Long Dated VXX Income

[cwelsh 1,551]

With the VXX weekly launch today, I'm implementing my strategy we've been backtesting, starting today.

VXX is currently at 36.60

I bought the Jan 2013 41/30 VXX strangle for $16.30. (41 PUT and 30 CALL).

I sold the Nov1 Weekly 38.5 for $0.81 (price is already better).

If the VXX ever hits the short strike (38.5), I am out and just wait till the next week.

I will continue to sell short against my strangle as long as the VXX stays between 41-30. If it moves outside that range, so what, my strangle is now profitable, and I just close it and open another.

I will continue to sell short until 2-3 weeks are left to expiration, but will be watching theta decay as well as the value of the long strangle to perhaps exit before then.

In the "perfect" world, I get to sell short for ten weeks, and in those 10 weeks the strangle has approached one of the strikes (meaning there will be almost no decline in the long position). I then have returned about $8.00 on a $16.30 investment on the call side only in 2.5 months. The odds of that are basically zero. There will have to be adjustments.

This is the first time I've tried this with live money. It back tested extraordinarily well, but I have blown up my account on at least three separate occasions using strategies that back tested well and simply did not work as planned once implemented. Because of this, I would classify this trade as "high risk." The theory is sound, but that's not a guarantee.

If we went through an extended period (3-4 weeks) of the VXX spiking up (which could EASILY happen), this could result in 25-40% losses.

To clarify someones question, yes I'll sell the put too, but I'm legging in, I'll update when I do.

Edited October 25, 2012 by cwelsh

[trhanson 590]

Are you not selling a put against your 41 put?

I'm going to play along paper trading, but I'm going to always try to sell the strangle. Spreads are tight, using the mid as I think that is attainable for the most part.

I remember on your original thesis article about this you said you were trying for a 5% return per week, I'm going to be a tad more aggressive (than your thesis article) and try for 7.5%

VXX at 37.14

BTO JAN 19 31 C (D .77) 8.05

BTO JAN 19 41 P (D -.53) 7.85

Cost of long strangle: 15.90

STO NOV 2 39 C (D .34) .87

STO NOV 2 35 P (D -.24) .49

Credit this week: 1.36

Current D .14

Running Credit: 1.36

Edited October 25, 2012 by trhanson

[cwelsh 1,551]

Are you not selling a put against your 41 put?

Yes, but I'm legging in for prices, VXX was in a fairly solid uptrend when I first posted, waiting for that to balance out some.

[cwelsh 1,551]

Though it appears as if legging in is going to have the opposite of the intended effect today.....ah well

[cwelsh 1,551]

To update, waiting DID pay off, as I just got a .78 credit for the 35.5 put.

As I forgot to explain, I trade the short positions on the VXX around a 30 delta.

So to summarize the current trade:

LONG VXX Jan 30 Call

LONG VXX Jan 41 Put

Net debit: $16.30

SHORT VXX Nov1 Weekly 38.5 Call for $0.81 (delta of .32 when entered)

SHORT VXX Nov1 Weekly 35.5 Put for $0.78

Net Credit: $1.59 or 9.75%.

Rules:

a. if you hit the short strike (either one), buy and back and exit. If it happens on a Friday, you can CONSIDER re-entering (as long as the credit you get is above .50-.60), but other than that, just scratch that week off.

b. If you hit the long position, look to roll/exit/take profits

This is a nice trade to do if you can't monitor too closely, as you can have a standing conditional order (I prefer not to do that as you don't get good fills, but it is an option).

As one poster asked, yes I originally targeted a 5% weekly return, but in back testing the VXX model, I learned the "sweet spot" over an entire two year period was trading near 30 deltas, as opposed to targeting a specific weekly return.

[Kelly Park 10]

Well, I'm going to follow you on this one, with a small allocation, to get the idea. In at 14.79 total. I chased a bit because I didn't want to wait until tomorrow and maybe have different strikes be better. On this first one, I want to be in the same strikes as you, so I can follow along the adjustments more easily.

[Rogers 263]

in @ 14.75 (16.5 with a credit of 1.75)

[srf335 14]

Chris, your long strangle is fairly delta positive. Is this because of the nature of VXX to decline over time all other things being equal?

[cwelsh 1,551]

Yes -- in backtesting, it greatly improved performance, and even when the VXX was spiking, it did not adversely affect things too badly.

[tjlocke99 18]

With the VXX weekly launch today, I'm implementing my strategy we've been backtesting, starting today.

VXX is currently at 36.60

I bought the Jan 2013 41/30 VXX strangle for $16.30. (41 PUT and 30 CALL).

I sold the Nov1 Weekly 38.5 for $0.81 (price is already better).

If the VXX ever hits the short strike (38.5), I am out and just wait till the next week.

I will continue to sell short against my strangle as long as the VXX stays between 41-30. If it moves outside that range, so what, my strangle is now profitable, and I just close it and open another.

I will continue to sell short until 2-3 weeks are left to expiration, but will be watching theta decay as well as the value of the long strangle to perhaps exit before then.

In the "perfect" world, I get to sell short for ten weeks, and in those 10 weeks the strangle has approached one of the strikes (meaning there will be almost no decline in the long position). I then have returned about $8.00 on a $16.30 investment on the call side only in 2.5 months. The odds of that are basically zero. There will have to be adjustments.

This is the first time I've tried this with live money. It back tested extraordinarily well, but I have blown up my account on at least three separate occasions using strategies that back tested well and simply did not work as planned once implemented. Because of this, I would classify this trade as "high risk." The theory is sound, but that's not a guarantee.

If we went through an extended period (3-4 weeks) of the VXX spiking up (which could EASILY happen), this could result in 25-40% losses.

To clarify someones question, yes I'll sell the put too, but I'm legging in, I'll update when I do.

Chris, why is this true, "If we went through an extended period (3-4 weeks) of the VXX spiking up (which could EASILY happen), this could result in 25-40% losses."? Won't your short put cover most of this loss and the gains in your long call over your long put make up for most of this as well?

Also, regarding your rule about the underlying hitting one of the short strikes before Friday, do you close the whole trade including your long ITM strangle? Thanks!

[cwelsh 1,551]

Ok, this morning VXX opened lower, getting VERY near 35.5. Following the rules, II exited the short 35.5 put for a cost of 0.67 right before it hit 35.5. Because of time decay, I could actually close it, even at the strike, for a gain (thats not always the case, actually its rarely the case).

If you did NOT follow the rules, well things went your way as the VXX rebounded and is now at 36.5

Also, following the rules, I will NOT be re-entering another shortly week put this week, though its VERY tempting to try to recapture another .35 by re-entering the same position. However, I will not do so because if the VXX drops back to 35.5 tomorrow, and I receive .35, to exit would cost near .65 -- making a current winner a loser. Just stick to the rules.

[cwelsh 1,551]

Chris, why is this true, "If we went through an extended period (3-4 weeks) of the VXX spiking up (which could EASILY happen), this could result in 25-40% losses."? Won't your short put cover most of this loss and the gains in your long call over your long put make up for most of this as well?

Also, regarding your rule about the underlying hitting one of the short strikes before Friday, do you close the whole trade including your long ITM strangle? Thanks!

In answer to your second question: no you don't close the long positions until you're completely done with the trade -- normally 2-3 weeks before expiration of the longs, depending on the instrument, theta, and where the strike is. When one of the short strikes is hit, you just close that short position and wait until the next round of weeklies to open another short strangle.

On your first question, yes the longs cover some of it, but not all of it. Let's say, on stock XYZ, which is currently trading at $100, you buy the $120 put for $25 and buy the $80 call for another $25, both expiring in four months. That's a $50.00 cost.

Then you sell weekly the 95/105 and receive $2.50 in a credit (so right at a 5% gain). That week, XYZ goes up to $107, when it hits $105, you exit for a cost of $3.00 (very typical). You're now down -$.50 on the week.

The next week you sell the 110/105 for another $2.50. XYZ goes up to $112, you lose another $.50.

This next week you sell the $115/$110, except you forgot it was earnings week (or any other event which triggers a gap move up --- there are infinite possibilities of why a stock could gap up). Wednesday the stock gaps from $112 to $120. You now have to sell the call for $7.00, and have a $4.50 loss.

The fourth week you repeat the first two weeks, losing .50. So, after four weeks, you are down $6.00, XYZ is at 125. Let's also assume this happened in the last month before you were going to close the position. Your 120 Put is now not worth much (probably about $2.00 or so). Your call is now worth $47 or so. That's a total of $49 -- or a $1.00 loss on the long. So, on an investment of $50, you lost $7.00, or 14%.

In backtesting, this did not happen on the VXX, but does on some instruments. This trade just does not perform ideally in a prolonged bull or bear run because you get cut to death. It does not do well if there are repeated huge gaps that you are not adequately compensated for.

But, there are plenty of stocks that either compensate you for big swings (e.g. AAPL), or which just dont have big swings.

[trhanson 590]

Still following along on my paper trade, but I was caught in traffic this morning and wouldn't have been able to get out, so I'm still in (on my paper trade)

[Kelly Park 10]

Ok, this morning VXX opened lower, getting VERY near 35.5. Following the rules, II exited the short 35.5 put for a cost of 0.67 right before it hit 35.5. Because of time decay, I could actually close it, even at the strike, for a gain (thats not always the case, actually its rarely the case).

If you did NOT follow the rules, well things went your way as the VXX rebounded and is now at 36.5

Also, following the rules, I will NOT be re-entering another shortly week put this week, though its VERY tempting to try to recapture another .35 by re-entering the same position. However, I will not do so because if the VXX drops back to 35.5 tomorrow, and I receive .35, to exit would cost near .65 -- making a current winner a loser. Just stick to the rules.

I am in this trade and was busy trying to manage the three trades that went through earnings due to the storm. So I never saw it get close to 35.5. So I still have both shorts. Chris, my understanding was that we exited when the short got hit, but you jumped a bit earlier than that. Should I think of it as getting out BEFORE the short goes ITM? If so, how close is close? I would like to be able to set an alert to let me know when I need to exit.

[cwelsh 1,551]

I am in this trade and was busy trying to manage the three trades that went through earnings due to the storm. So I never saw it get close to 35.5. So I still have both shorts. Chris, my understanding was that we exited when the short got hit, but you jumped a bit earlier than that. Should I think of it as getting out BEFORE the short goes ITM? If so, how close is close? I would like to be able to set an alert to let me know when I need to exit.

This is where a little bit of discretion comes in. The rules I've created (which SHOULD be in flux as these are the first "real money" trades conducted, so they're subject to modification) say you HAVE to exit when the strike hits, if you don't your losses quickly escalate, but when you do, you sometimes have a tiny loss, BE, or might even turn a small profit.

This morning, I watched the VXX open lower, and start lower. When it hit around 35.65-35.70, I noticed I could close out the 35.5, and still lock in a profit for this week. I made the decision to do so.

It turns out that it was the WRONG decision in this case, and I probably cost myself .500.60 of premium. However if the VXX had continued lower, instead of a gain, I'd have a loss.

If you are putting hard stops in (never my preference, but you actually can with this trade), I would set them on the strike itself.

I think the BETTER approach is to set an alert slightly above the strike, so you can then go and evaluate and make a decision based on the information you have. When I know I can't watch all day, and have this trade on, I do use alerts -- sent to my phone, email, and desktop, so where ever I am, I can pull up the chart, the option prices, and make a decision.

I also have a sticky note attached to my phone that says what my short strikes are, and what I received for them.

[Kelly Park 10]

Thanks, Chris. That makes good sense. I don't like hard stops either, except for putting in a profit target for the entire trade, so some spike might catch it. But for this one, I really want to use an alert, so a sharp move doesn't leave me ITM and SOL.

[trhanson 590]

VXX at 35.75

JAN 19 31 C

JAN 19 41 P

Cost of long strangle: 15.90

Long current value: 8.10 + 7 = 15.10

NOV 2 39 C (D .34) .87 (.11)

NOV 2 35 P (D -.24) .49 (.05)

Credit prior week: 1.36

Buyback Debit: .16

Running Credit: 1.20

For this week, it seems as though there is no 34.5 option, which is ind of weird. Since I'm paper trading this, if one shows up later, I may just switch my position to that and would know that I would need to wait or something, but still, kinda weird.

STO NOV 09 34 P (-.27 D) .54

STO NOV 09 38 C (.29 D) .65

Total Credit: 1.19 (7.5% of original capital)

Running Credit: 2.39

Edited November 1, 2012 by trhanson

[cwelsh 1,551]

I finished closing out the expiring weekly (the 38.5) call.

INCLUSIVE of commissions, this past week netted 4.78%.

I then opened the 34/38 for next week for a credit of $1.15.

Depending on when you entered, as much as VXX is tanking today, you might have picked different strikes.

[Kelly Park 10]

I rolled last week's 38.5/35.5 to next week's 34/37 for net credit of .70. Could have done better maybe but have to go out and can't watch it anymore.

[trhanson 590]

Looks like we may need to watch our 34 short leg. VXX sure took a turd today.

I'm wondering if it may be worth (in the future) waiting until the end of the day when dust settles to get back into the trade.

[trhanson 590]

roll 34 to 33 for .46 debit?

That's the right play for the strat right? Or should one just get out for 1.33 and take the .14 loss?

[cwelsh 1,551]

roll 34 to 33 for .46 debit?

That's the right play for the strat right? Or should one just get out for 1.33 and take the .14 loss?

The ONLY time to roll, as opposed to just closing, is Thursday or Friday. If it happens on the Thursday, I probably would certainly roll. I was at the doctor, so didn't make a move at all. I'll re-evaluate tomorrow, but I most likely will roll down, but have to get high enough prices so, if it moves down again, Monday, you're still BE or close to it.

The reason we normally close instead of rolling is we don't get enough credit to justify the risk. For example, we got a credit of $1.15 for our position today. If the VXX moves against us, as it did, except its Tuesday or Wednesday, we might only end up with .10 or so for rolling down -- if it keeps trending down, then we have a big loss. Whereas if we close instead, we just lock in a BE or tiny loss -- and move onto the next time. I'd much rather have 3 BE's and one plus 5%, than one plus 5%, one plus 1% and two -5%.

[Hannes Kury 7]

One could think of the presidential election being the earnings week for the VIX, especially if you consider the possibility of a very close result with no winner, as we have seen it before. I will therefore wait to enter this trade until next Thursday/Friday.

[Kelly Park 10]

I finished closing out the expiring weekly (the 38.5) call.

INCLUSIVE of commissions, this past week netted 4.78%.

I then opened the 34/38 for next week for a credit of $1.15.

Depending on when you entered, as much as VXX is tanking today, you might have picked different strikes.

Chris:

I'm not following your math, and it doesn't seem like my trade is going the way yours is. I did the same roll yesterday, from the 35.5/38.5 to 34/37 and got .70 credit. I didn't see it get near 1.15 or are you only counting the sale? Then what did it cost to close the previous week's shorts? I am now looking at needing to close the 34 for about 1.40, major loss, or roll it to a 32 for about 1.00. In the hole either way, while you seem to be ahead. What's different?

[trhanson 590]

I think he was meaning that he closed out the other call so last week, the position turned 4.78%. He then opened the 34/38 for $1.15 (which is also the position I opened paper trading, but I did mine earlier and got a slightly higher credit). He was unable to roll his option, so I would be willing to bet that he is in the same position as you (a hole) on this week.

[trhanson 590]

The VXX put that I "bought" (paper trading) seems to not have kept up with the call that is losing value (due to the deltas). I'm thinking we are going to need to increase initial capital and make sure that we buy the higher delta call in the future. The 31/41 long strangle (which is what i used) is now worth 14.85, however the deltas are now both .67, which is good. I think that means that 14.85 is about as low as it goes since the long portion of the trade is delta neutral (not counting Theta).

Going forward, would it be a better idea to attempt to be delta neutral that the beginning? That probably means a slightly skewed strangle due to the nature of VXX, but It may be a better play.

[Kelly Park 10]

Well, I went back through the numbers and I understand where Chris is on the trade now. He just didn't report his cost to buy back the 38.5, but I back calculated it from his % gain for the week. I was recording a single "roll price" rather than deducting the cost of buyback from the initial credit. Same net, but different way of thinking, since this is a "weekly income" trade.

So, actually it isn't as bad as I thought. 16.37 for the long. 1.58 credit the first week, minus .81 buy back is 4.7% weekly credit. 1.51 credit the second week.

Now when VXX hit 34 today, the rules say I should have closed (for about 1.20 debit). What I DID was roll the 34 to 32 for .88 debit, so I still have .63 credit for the week (3.8% if it stands), but still have a short position that could get hit and need to be closed. This was probably a mistake, since I hadn't quite wrapped my head around the concept of the trade when I did it. But I'll let you know how it turns out. If we don't test 32, it will be OK.

[trhanson 590]

Chris, did you exit or roll today before the reversal?

[cwelsh 1,551]

Sorry to everyone for not being around Thurs afternoon and Friday -- I had a nephew jab me in the eye and was getting a cut cornea worked on. What I did, which only worked because it was Friday and I could get the credit I needed, was roll my 34 down to a 33.

I bought back the 34 at 1.06 and sold the 33 for .58. That leaves me a credit of .67 on the week. Why did I decide to do this instead of just closing? Option calculator -- if the price continued to drop, and hit 33 on Monday, I could close it for .60. That means its still not a losing position. This is a-typical. Normally if you roll down, and your next strike is hit, you lose money (e.g. make a bad situation worse).

And, in answer to the previous question, you have it correct -- I did not include the roll price. (I do actually roll for commission purposes), but for my weekly accounting, I break out the prices. So each Thursday or Friday when I roll, I will report the cost to buy back last weeks position against the previous week, and then the full credit for that week going forward. I'll try to be clearer going forward.

[Hannes Kury 7]

Chris/others,

I would like to start this trade Thursday but I am thinking of buying the long side today, just in case the election will be undecided. Now if I look at your entry on the long side and adjust for the lower VIX I could choose the 39C/28P. How do you chose the strikes in general for the VXX long side? Thanks

[trhanson 590]

You look for strikes with deltas close to .80. That's the official rules anyway.

The rest of this is opinion and not necessarily backed by Chris.

Because VXX is constantly going down, it's skewed. the JAN 28 options are close to delta 80. Mid 7.20 right now. On the upper side, it's tougher. To get a delta of 80, you would have to go to 50 which would cost 17.20, way too much. For VXX I think it is better to find a call with a delta close to 80 and then pick the put based off percentages. If you want to try for 6.5% weekly, you probably don't want to spend More than about $18.50 on the entry (assuming you can get $1.20 per week). If you want to push it more (say 7.5%) you don't want to spend more than about $16 So I would say somewhere between $8.80 and $10. The JAN 40 put is selling for 8.65 with a delta of .618, the 41 is selling for 9.5 with a delta of .642 and the JAN 42 is going for 10.25 with a delta of .664. All are decent options I think. Just know that the VXX long is probably going to lose more value than other equities running this, but I think that it could be more consistent, so you may get better returns.

That being said, I'm going to real trade SNDK I think before doing VXX, but I'm not going to start for a few weeks. I want to just paper trade it all for now.

[Hannes Kury 7]

Tyler, thank you very much for the explanation. Hannes

[cwelsh 1,551]

The VXX is the only one were I don't open around .80 strikes because it is skewed negative, significantly so, over time. So what I did in this case was find the .80 call, and match the price on the put side. So this trade:

Good

Posted Thu 25 October 2012 - 10:00 AM

Are you not selling a put against your 41 put?

I'm going to play along paper trading, but I'm going to always try to sell the strangle. Spreads are tight, using the mid as I think that is attainable for the most part.

I remember on your original thesis article about this you said you were trying for a 5% return per week, I'm going to be a tad more aggressive (than your thesis article) and try for 7.5%

VXX at 37.14

BTO JAN 19 31 C (D .77) 8.05

BTO JAN 19 41 P (D -.53) 7.85

The 31 C was the closest to .80, and the 41P was the closest to the 8.05 price. Typically your .80 delta calls are just slightly cheaper than your .80 puts, but in the VXX case, the .80 calls are A TON cheaper than your .80 puts.

What was the logic to this? It's what backtested well over the last year. Will it work going forward? Who knows, the theory is sound, but I've had a lot of theories leave me with $0.00 at the end of the day.

And again, one thing I want to note, and what I am opening Thursday, is AAPL is by FAR the best performer on this strategy. Yes it has much wilder volatility, and you have to close the trades almost half the time, but even closing them half the time, it still was quite profitable, over any period tested.

[trhanson 590]

And again, one thing I want to note, and what I am opening Thursday, is AAPL is by FAR the best performer on this strategy. Yes it has much wilder volatility, and you have to close the trades almost half the time, but even closing them half the time, it still was quite profitable, over any period tested.

I'm thinking i'll paper trade that, but the capital requirements to buy the ITM strangle is going to cost too much capital for me to be able to real trade it at this time.

520 c - $61

655 p - $88

Assuming you are going 80 deltas, that's roughly $15k in the long.

[cwelsh 1,551]

I'll have a separate post up on AAPL tomorrow, so let's not clog up this thread too much, but yes, you are quite right, even 1 contract on AAPL will be capital intensive. I trade quite a large portfolio, so it works well for me. I would not do the AAPL trade unless you had at least $150K, because I try to never allocate more than 10% to any one trade, ever (and EVERY *#$& single time I have, it's bit me in the butt).

[Kelly Park 10]

Was out this morning and missed the VXX spike above 37, so didn't close. Good example of whipsaw that CAN happen, even if not typically.

[Kelly Park 10]

If VXX opens about were it is now, choosing strikes for a roll could be interesting. 33 and 27 delta available on both sides, big difference in credit, especially with still significant time value left in this week's 37 call. I guess the plan would be to wait for some of that to come off, or roll if it gets hit?

[trhanson 590]

I think it also depends on how much credit is left on the short options tomorrow. Right now, I have the 33 put and the 38 call short which together still have .58 of time left on them. Depending on where the markets go and the premiums left, it may be a good idea to wait until Friday to roll your short strangle.

[cwelsh 1,551]

I went ahead and rolled with where the prices where. Note that I am using my actual trading dollars, so the following are NET of commissions (e.g. they include commissions)

I closed the 33/38 for 0.34, giving me a 3.82% return on the week

I opened the 35/40 for $1.14 for a maximum possible 6.99% return (won't happen due to rolling, but theoretically)

To reduce commissions I executed the above as one trade on the TOS platform using the double calendar feature.

Edited November 9, 2012 by cwelsh

[Hannes Kury 7]

I am in the Jan 28C/39P long for 15.15 (bought 11/5)

I just sold the Nov 16 35P/40C for 1.70

This is my first week. Thanks Chris

[Kelly Park 10]

Chris:

How is 1.14 over 10%, on a 16.30 long? Or are you adjusting your basis somehow?

[trhanson 590]

With VXX still 1.17 away from my 38 short call (Which has a delta of .37) I'm thinking it might be worth waiting on the roll. There's still .41 of premium left, most of which will be collected in 1 day vs the .17 theta on the new roll. If I was real trading this, I probably would roll (but I'd wait for a few more hours and do it like an hour or so before close), but since I'm paper trading it and I don't feel that pressure, i'm going to go ahead and hold off.

If I was going to roll, I'd roll to the 34.5p/40c with deltas of -26 and 29 for .67 and .83 for a $1.50 credit, or a little better than 10% max. I still may roll my paper trade later in the day, but I like where the vxx is at for now.

[trhanson 590]

Prior week (buyback in at end)

STO NOV 09 34 P (-.27 D) .54

ROLL 34 to 33 P -.46 (.02)

STO NOV 09 38 C (.29 D) .65 (.02)

Net Weekly credit: .42 (2.64%)

Running Net Credit: 1.62

This week:

STO NOV 17 39.5 C (.30) .83

STO NOV 17 34.5 P (.265) .68

Credit this week: 1.51 (9.5% against initial outlay)

Edited to add: In a week where we had to adjust, still making 2.64% is awesome :-)

Edited November 8, 2012 by trhanson

[cwelsh 1,551]

Chris:

How is 1.14 over 10%, on a 16.30 long? Or are you adjusting your basis somehow?

Very good question, it appears as if my fat fingers were typing who knows what, I've fixed the typo.

[cwelsh 1,551]

Prior week (buyback in at end)

STO NOV 09 34 P (-.27 D) .54

ROLL 34 to 33 P -.46 (.02)

STO NOV 09 38 C (.29 D) .65 (.02)

Net Weekly credit: .42 (2.64%)

Running Net Credit: 1.62

This week:

STO NOV 17 39.5 C (.30) .83

STO NOV 17 34.5 P (.265) .68

Credit this week: 1.51 (9.5% against initial outlay)

Edited to add: In a week where we had to adjust, still making 2.64% is awesome :-)

I agree. I would like to add "making 2.64% a week is awesome --- no matter what"

[Hannes Kury 7]

Chris,

lets assume that, independently from the short side, the long side develops a 15-20 gain. What would you do? Are there options to lock such a gain or do you focus on the gains on the short side?

[cwelsh 1,551]

If the long side -- including BOTH the calls and puts, develops that much gain, I would absolutely take it and just roll to a future month and start over. That has happened, particularly using things like the VXX or AAPL.

However, I would never take the profits on just the long call or long put -- that's a recipe for disaster. The short side is meant to be income producing, if we get a gain from the long side, that's a bonus, we take it, and just start the whole position all over.

[Kelly Park 10]

Things bouncing around alot today. Ended up rolling the 32/37 shorts to 35.5/39.5 for net credit 1.07. So far, that is 4.7% first week, only 1.0% second week, and with 1.53 credit to start week three. Rolled at the right time, this week could have been about 2.5%, at other times, it could easily have been a loss. If 1.0% is a bad week, I'm gonna like this.

[Hannes Kury 7]

Long Jan 28C/39P $15.15 debit

Short Nov 16 35P/40C $1.70 credit

If we have a rally tomorrow the short will be overrun quickly. I do not thing a 1 point roll would be holding, 2 points is too expensive.

I could close today for maybe a gain of 0.50-0.60 for the week.

Any thoughts welcome

[trhanson 590]

I think you want to close the 35p. The rules are you roll on Thursday or Friday. The mid week buy in/roll has not worked well for Chris.