Kelly Park

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.

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?

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.

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.

Chris: 1) I wasn't advocating one way or the other. To me, it all comes down to probability. If the backtesting shows whipsawing as being rare enough that buying back the second short position reduces the gain with little risk reduction, then it isn't necessary or desirable. 2) Sorry my question wasn't clear. I wasn't talking about rolling at the same time as closing the short. I meant when the next weeklies become available and we would be rolling one or two shorts to the next week. I don't trade on TOS, so I don't know, but on IB you can pretty much do whatever trade you want as a Combo, by just picking what you're selling and what you're buying individually. Sometimes those odd multileg trades get really wide spreads and are hard to get a good fill, though. On IB there is no per trade fee, so it doesn't really affect commissions, but it is like legging into a trade, it might make it better, or might make it worse, depending on movement in the underlying between trades.

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.

Chris: Two questions: 1) If one of the short legs gets hit and you exit it, would it make sense (in the long run) to also exit the other short position. After all, it will be at a very low value, and if the stock reverses, you could end up buying back both short legs at a loss. Or is the likelihood of hitting both shorts too low to matter? 2) If you bought back one short leg, would you roll into two new shorts in one, three-legged trade, or would the spread be too wide that way? (Sorry if that sounds off-color. Trading has such strange lingo.)

Chris: Following you verbatim on VXX. Trying to actually think on this one! Right now, SNDK is at 42.77, so if I'm looking for .80 delta on the longs and .30 on the shorts, I see 48/38 for the longs and 44/41.5 for the shorts. For the short Put, there is a .27 and a .34 delta available. In that kind of case, which way to err? To the outside to be a bit more conservative?

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.

There are times when I find myself wondering if the message I am writing is really worthwhile. Does anyone really care if I am the fourth person to get into the same trade at the same price? Probably not. So I try not to "me too". But when prices, and sometimes strikes and strategies (RIC vs Straddle VS Strangle), are variable over time, I really use the posts that show real members fills, in an out. It also keys me into when I may want to adjust a trade (average down, roll to another strike, etc.)

Thanks for the head's up, Scott. Mine's back for now, too.

Obviously, IB is still trying to figure out the charting issue. There is a workaround, although I find it cumbersome. If you change your order to some direct routing (I used ISE), and chart it before transmitting the order, then it will chart. Just remember to change it back to SMART before submitting the order.

Opened a ticket at IB about the charting problem. Here is their response, it doesn't make any sense to me. This is a known issue with the charts when you are using a Smart Routed Quote. Our programmers are aware of this and they have suggested that for the time being you should direct route the option quote. Please note, if you direct route the quote on the Chart and place the order from the chart, the order will be direct routed to the exchange and the commission is USD 1.00 per contract for directed orders.

Just tried again, still no luck with restarting TWS. Guess I'll open a ticket.

I tried that with no luck. It really makes it hard to judge entry and exit points when you can't chart the position!

Is anyone else having trouble with IB charting today? My charts are Ok for stocks and ETFs but nothing comes up when I try to chart any options (indivdual or combos).

For just entertainment sake, try The Quants, by Scott Patterson and Liar's Poker, by Michael Lewis. Both are very well written (Lewis also wrote The Blind Side, since turned into a hit movie, which I also recommend, especially for football buffs) quick reads and have enough technical trading discussion in them that SO members will "get" a lot of what most readers won't. Both are also useful cautionary tales about over-confidence, trading in things you don't understand, and risk/reward decisions (or the lack thereof).

Just happened to make a good guess on my GTC sell order. If I had done that with all my contracts, my gain would have been a good bit more, but I had already sold some to guarantee at least BE. Nice to be in that position every now and again.

My remaining Oct 12.5 calls sold at 1.60, so I'm out of that position. 30% gain. Thanks for the head's up on this one, Eric. Still holding my Dec 11 calls.

Personally, I wouldn't do that anytime soon. We are still well below the highs of August (16.75) and April (17.75). I actually think this will continue upward, which is why I maintained a partial position. But my risk/reward said to take some profits now, especially in a market that (I think) has a significant risk of a sharp correction.

Sold 4 out of 5 SKUL OCT 12.5 Calls, for just over my basis in the trade. keeping the remainder for a bit to safely squeeze as much out of it as possible. Still holding more conservative DEC 11 calls.

I still have my Oct 12.5 and Dec 11 calls. Both back to BE today. You kinda split the difference between the two with your position. Good call. (pun intended.) I'm still holding. I still think there is more potential upside.

On IB, when you chart multi-leg option positions, I'm not sure what exactly is bieng represented by the middle section of the candlestick diagram. IB states it is the "Time Averaged BID (or ASK)". Does anyone know how they determine that?

Wouldn't a 2SD trade be closer to a 5 delta, instead of 15. ( approx. 95% probability)

Thanks, Scott. I got it charted, although I don't think I did it quite the same way you were describing.