|
PureBytes Links
Trading Reference Links
|
Gary Funck wrote:
>
> On Sep 14, 1:50am, James Charles wrote:
> >
> > Friday's close gave me a signal to buy oex calls.
>
> September or October? At, in, or out, of the money?
>
> > Although I cannot
> > reveal the full methodology of my signal, it is confirmed by common
> > indicators such as a stochastics turn up from oversold, an engulfing
> > candle, a nice position relative to the support line at 873, and the
> > fundamentals as above. If the market rests or retraces on Monday, calls
> > can be bought into weakness for a rally later in the week.
> >
> > Would anyone else like to share their thoughts for early next week?
>
> If the OEX follows its usual expiration pattern, it'll run up Mon/Tues,
> and then stay releatively flat going into expiration. Of course, one
> too many cocktail parties attended by the Fed. chairman, or an Intel
> earnings pre-announcment could change all that.
>
> With $VIX at 27, I'm looking for strategies that let me sell volatility
> rather than buy it. If I did the math correctly, OEX options currently
> have priced in a +/- 35 point 1 std. dev. move (OEX closed approx. 895
> on Friday) over the course of next week. That's about 1.5 times the
> volatility we've seen over the course of the past 3 rather volatile
> weeks (the weekly range has been about 40 points).
>
> Based on the chart, there's been overhead resistance at about 910-915
> and support at 875-880; OEX is roughly mid-way in that range. I'm
> looking at selling an 920/910 Sept. call credit spread, and selling
> the 870/880 Sept. put credit spread, netting about 4 points for both
> spreads. If both sides go to expiration out of the money, that's
> about a 4 points of return on 6 points of risk, on a one week hold.
> If OEX makes a big run in one direction however, there's risk of
> early exercise on the short strikes - this spread has to be monitored
> closely.
>
> Any better ways to take advantage of the current high options premiums?
>
> --
> --
> | Gary Funck, Intrepid Technology, gary@xxxxxxxxxxxx, (650) 964-8135
Hi Gary,
I like your post and I agree with you. In fact, I was just talking to a
market maker at the Phil Exch and he has already sold iron butterflies
just like you propose to do. Whenever I have tried that though I had
problems relating to the following.
1. Early excercise happens. It scares me and I don't know how to
manage it. And as a retail customer I don't get prompt notice of fills.
I know enough to monitor the market but rolling up the spread involves a
lot of slippage. WHEN do you do it?
2. I must buy the more out of the money options before I sell the less
out of the money options. If I put the order in as a spread for a net
credit, I get screwed because I pay the ask and I get the bid or I don't
get executed. How do you handle order placement?
My signal is based strictly on the cash index and is not filtered by the
prices of the options. Thus entry is discretionary. The way I do it is
that since I am taking a position with regard to the direction I think
the market is headed in, I try to buy into weakness. Then I pay a fair
price. For arb reasons I will monitor the prices on several out of the
money options. At this point I personally prefer the Septembers.
Best wishes,
James
(609)489-0183
|