Option trading with DanPickUp

[gmt900]

Hi TP

I may have to explain it a bit deeper to not spread confusion. It is a bit unclear the way I posted it.

First you implement your short strangle. Best to do that is when market is in a range and makes swings up and down.

Now instead of using the idea to close the legs, we plan our trade in a different way with a more advanced idea. What would that be?

As market swings, you would buy your long call when market is at Support, means then the call is cheap. This then is your call credit spread on the Resistance side, which is at the same time like a stop loss.

The same you will do with the long put when market is on the Resistance side and then you have also here your stop loss with your long put credit spread.

All four legs together are called: Long iron condor.

If it comes to the situation that only one side is filled, then you have only a three leg spread and for that situation I do no specific strategy name.

Hope that clears the confusion.

Good trading / DanPickUp

Thanks Dan !
Frankly, last time I avoided taking long iron condor simply because it was a new strategy for me and felt that if I could manage the trade without getting into a new srategy, I might avoid it.
I realise that it is not the best way to learn managing a short strangle. So this gives me an opportunity to make amends.
As for taking broker's help, I will study different types of orders and take his help when I will be away.
Thanks again, will come back with questions when required in future.
regards,
gmt900

I still am not able to use Option Oracle . So I have to depend on my math in the absence of pictorial view of the strategy.

 

[DanPickUp]

Is Long Iron Condor usually executed in phases ? Does one have to monitor the setup continuously ?

Hi

That is after you. You can implement a long iron condor at once or you leg in. Depends on your way of trading or the idea you want to trade.

What I have explained is just one way to trade the Iron condor strategy. There are various ways to do so by leg in in different ways. There is a post in this thread where I have shown in how many ways you can leg in any kind of strategy.

Depending on how you want to leg in, you can place limit orders by your broker. That is a way by which you not have to monitor the whole time.

If you implement it at once, then know your break evens and keep an eye on them. As the Standard deviation tool is used to have an idea where to place the short legs, you can decide how small or large your range will be. As larger your range is, as less you have to monitor. Why? The probability will be smaller that the market will touch your BE and Standard deviation is nothing else than a probability calculation of how far the market could move.

Good trading / DanPickUp

 

[poortrader]

Anyone finding this error in options oracle. Any solution??

Any other free tool for strategy builder?

image ru

 

[gmt900]

Anyone finding this error in options oracle. Any solution??

Any other free tool for strategy builder?

image ru

I have been getting this message for the last 3/4 months.
I don't know of any other free software for strategy builder

 

[gmt900]

Hi DanPickUp,
I have been going through your comments in the thread "Advanced Nifty

Option Strategies".
1. You have mentioned that you always prefer to hedge short strangle over
week ends or even for overnight positions.
I am a little confused about this .
Suppose, you buy put and call options of one strike lower and higher resply,
for hedging ( 5900P and 6300C in my case), it will cost substantial sum.( Around 47 points in my case).
Do you square off this hedging positions after the week end?
Luckily for me , against premium of 117.75 received by me, the value of 6000P and 6200C options is 93.75.
2. Although you recommend short strangle when volatility is high, some "Experts" recommend it when it is low, their argument being low volatility means market will be range bound.
3. When vola is high and is likely to reduce, short straddle may be a better strategy, experts say.
4. I am going through your earlier posts in this thread and I find them very useful. You do have flair for writing. Please keep it up.
5. I like your suggestion of writing options for far months than for expiry month, sinc eit will reduce oscillations in option prices.
6. Finally, a personal question. Do you live in US and trade in Indian markets?
Thanks and regards,
gmt900

 

[DanPickUp]

Hi Gmt900

1. Over weekends or even longer holidays I recommend to hedge for safety reasons. A weekend is long and much can happen. If you want to hedge over night, you can hedge the side which is most at danger. But that is all personal choice and no must.

What you have to know is that there are option markets which offer on very small strike levels an option. This specially in commodities and in currencies. Options on each 5 point strike level or even on each 0.5 strike level. This gives you the possibility to trade price differences very precisely.

I know that your market not offers such kind of options on commodities futures. You are offered options on every 100 point strike level. That makes it more difficult. But again: Personal choice.

On Monday you square of your long legs with profit or loss which will be accumulated or vice verse in the other leg.

2.Yes I know these comments. May I ask: When are option prices high and when are they low? Why do we study first how we can adjust a trade and what kind of possibility we have to do so? If I know and do it that way, I can take the trade also under more risky conditions even I am a risk adverse person. Here we can play our knowledge against the market and that should be prove enough to say: Knowledge is the key to success in trading.

3. What ever they say, I do not care.

4. Quit a hell of work to do so some times as it is not my mother tongue.

5. An other weak point in your market.

6. No, I do not live in the US, but trades are done at the CME, which is the most advanced exchange when it comes to option trading http://www.cmegroup.com/ At the moment I am in Switzerland and when I first found this forum I was living in Asia. Thats why I am connected to this place as this place is as good as any other place.

Good trading / DanPickUp

 

[timepass]

Dan,

Why a strangle over the weekend? Why not a straddle ? Specially a week or so before the expiry.

 

[DanPickUp]

Dan,

Why a strangle over the weekend? Why not a straddle ? Specially a week or so before the expiry.

Hi TP

No rule about that or any specific reason to do so. Gmt900 did a strangle and the thread he mentioned is about a strangle. So the post was about that strategy.

If you want to implement a short straddle just over the weekend, that would be your choice and an other subject. Even than: What ever you want to trade over the weekend, be sure you know what you do and how you do it.

Good trading / DanPickUp

 

[gmt900]

Dear DanPickUp,

I had entered into nifty (Feb) 6200C / 6000P short strangle on 28 Jan.

Nifty spot started slipping below 6000 on 1 Feb . So I baught 5900P .

Current position is:

6200C 61.95(S) - 23 = +38.95

6000P 55.85(S) - 66 = - 11.85

5900P -34.45 (B) + 34.60 = +0.15

Total Profit = 27.25.

I suppose I am on track in keeping the trade delta neutral .

I have experienced difficulty in the past in managing the trade when nifty

keeps oscillating around either call or put strike price especially if you cannot

track nifty movement constantly.

I intend to fine tune the skill required to manage short strangle trades before

increasing the position size. As you mentioned in your thread earlier, it is a bit

tricky. I tried to download the article mentioned by you in the link

https://rapidshare.com/#!download|5p7|734897675|Delta.pdf|10747|0|0.

However I could not succeed.

There seem to be several ways to keep the short strangle trade delta neutral

but I suppose only experience can teach one how to tackle individual

situations.

I am reading through your write ups on various subjects for option trading.

I must confess it will take more than one reading to undersatnd the

concepts.

There are a lot of books on the subject of dervatives trading, but here

in your thread one can interact with the author on specific difficulties.

Thanks and regards,

gmt900

 

[DanPickUp]

Dear Gmt900

It is an explanation from P. Forchone called: The road less traveled.

https://rapidshare.com/files/1106390487/Delta(1).pdf Should work now, otherwise PM and then we have to coordinate.