[Date Prev][Date Next][Thread Prev][Thread Next][Date Index][Thread Index]

[RT] spread on ibm



PureBytes Links

Trading Reference Links




Hi 
Dom,
<SPAN 
class=071164512-15032002> 
my 
heart and mind was all set to write 60%, rounded from 59.8 which was the 
number that OptionVue gave for your short straddle, but my fingers 
wrote 30, for what reason I know not. Sorry about that. See attached for the 
probabilities pertaining to your position.
<SPAN 
class=071164512-15032002> 
I 
would indeed consider a probability of profit of 60% to be OK for this type 
of trade. Though that number is not cast in concrete, either. For one 
thing, the probability refers to the current statistical volatility of 32%, and 
would vary inversely with it. If volatilities were to increase, it would 
hurt the probability of profit; if they were to collapse, it would benefit it. 
Furthermore, a probability figure cannot take into account possible adjustments 
or roll-overs of the straddle. So that number is to be taken with a grain 
of salt.
<SPAN 
class=071164512-15032002><FONT face="Trebuchet MS" 
color=#000080> 
Best 
regards,
<SPAN 
class=071164512-15032002> 
<SPAN 
class=071164512-15032002>Michael Suesserott
<SPAN 
class=071164512-15032002> 
<SPAN 
class=071164512-15032002> 
<SPAN 
class=071164512-15032002> -----Ursprüngliche 
Nachricht-----Von: Dom 
[mailto:domenick@xxxxxxxxxxxx]Gesendet: Friday, March 15, 2002 
05:28An: realtraders@xxxxxxxxxxxxxxxBetreff: Re: [RT] 
spread on ibm
<BLOCKQUOTE 
style="PADDING-LEFT: 5px; MARGIN-LEFT: 5px; BORDER-LEFT: #000080 2px solid">
  Hi Mike,
    
    This trade selling 25 april ibm 105 
  calls and selling 25 april ibm 105 puts for a gross credit of 45,000.00 
  backed by cash which is collecting approximately 5% in Ginmae , is not 
  set in stone. When I deem appropriate I will sell more puts or calls 
  depending on where ibm is at. 
     The next cycle is for 25 days. In 
  the last 25 days  ibm highest close was 
  109.28 and the lowest close was 96.38.The beginning profit range (not counting 
  future selling) is 96.00 to 114.00. With possible more selling at around 
  the 110.00 and/or 100.00 areas.will bring the 96.00 lower and the 114 
  higher. 
     With the highest close in last 25 
  days being 109.28 and the lowest close being 96.38 on ibm , I don't 
  understand how you can get only a 30% profit probability, which you consider 
  good. I think a 30 % profit possibility is low. The trade is done and I 
  know it will be profitable.Option Vue does not agree. Check out option vue by 
  telling it the spread was bought rather than sold. It should come up with 70 
  %profit probability. The reciprical of 30%. 
   
  Best regards,
  Dom    
  <BLOCKQUOTE 
  style="PADDING-RIGHT: 0px; PADDING-LEFT: 5px; MARGIN-LEFT: 5px; BORDER-LEFT: #000000 2px solid; MARGIN-RIGHT: 0px">
    ----- Original Message ----- 
    <DIV 
    style="BACKGROUND: #e4e4e4; FONT: 10pt arial; font-color: black">From: 
    <A title=MikeSuesserott@xxxxxxxxxxx 
    href="mailto:MikeSuesserott@xxxxxxxxxxx";>MikeSuesserott@xxxxxxxxxxx 
    
    To: <A 
    title=realtraders@xxxxxxxxxxxxxxx 
    href="mailto:realtraders@xxxxxxxxxxxxxxx";>realtraders@xxxxxxxxxxxxxxx 
    
    Sent: Thursday, March 14, 2002 4:32 
    PM
    Subject: [RT] spread on ibm
    
    <SPAN 
    class=048215020-14032002>Hello Dom,
    <SPAN 
    class=048215020-14032002> 
    <SPAN 
    class=048215020-14032002>I agree that the theoretical range would be 101 - 
    109. Including moderate slippage and commissions, OptionVue gives 101.23 - 
    108.77. See attached. In the lower left corner you'll find the other 
    numbers, 13% probability of profit  and a mathematical expectation of 
    -0.91 points at current prices. This shows that this "conservative approach" 
    is conservative only in that losses are limited; unfortunately, they are 
    also almost certain (87% probability).
    <SPAN 
    class=048215020-14032002> 
    <SPAN 
    class=048215020-14032002>Dom, the strategy you suggest - the sale of a 
    straddle - is fundamentally sound, and by placing your stops at 96 and 
    114 you attain a 30% probability of profit at current volatilities, which is 
    OK for that type of trade. The problem was simply that in trying to be extra 
    conservative you suggested "insurance" (the long options); that insurance 
    was so expensive that the position had hardly any chance left to become a 
    winner.
    <SPAN 
    class=048215020-14032002> 
    <SPAN 
    class=048215020-14032002>Best regards,
    <SPAN 
    class=048215020-14032002> 
    <SPAN 
    class=048215020-14032002>Michael Suesserott
    <SPAN 
    class=048215020-14032002> 
    <BLOCKQUOTE 
    style="PADDING-LEFT: 5px; MARGIN-LEFT: 5px; BORDER-LEFT: #000080 2px solid">
      <FONT face=Tahoma 
      size=2>-----Ursprüngliche Nachricht-----Von: Dom 
      [mailto:domenick@xxxxxxxxxxxx]Gesendet: Thursday, March 14, 
      2002 21:32An: realtraders@xxxxxxxxxxxxxxxBetreff: 
      Re: [RT] spread on ibm
      Hello Mike,
           
           I do this as a 
      collar spread. I sell the put and the call. Net credit of 9.00. The profit 
      range for ibm would be between 96.00 to 114.00. I place stops at 96.00 and 
      114.00. 
          I presented a most 
      conservative approach. With this conservative approach the profit range 
      would be 101 and 109. These figures would be 105.00 strike 
       plus/minus the 4.00 credit=101.00 and 109.00. How did you get 102 
      and 108?  
       
      Best regards, 
      Dom
       
          
          
      <BLOCKQUOTE 
      style="PADDING-RIGHT: 0px; PADDING-LEFT: 5px; MARGIN-LEFT: 5px; BORDER-LEFT: #000000 2px solid; MARGIN-RIGHT: 0px">
        ----- Original Message ----- 
        <DIV 
        style="BACKGROUND: #e4e4e4; FONT: 10pt arial; font-color: black">From: 
        <A title=MikeSuesserott@xxxxxxxxxxx 
        href="mailto:MikeSuesserott@xxxxxxxxxxx";>MikeSuesserott@xxxxxxxxxxx 
        
        To: <A 
        title=realtraders@xxxxxxxxxxxxxxx 
        href="mailto:realtraders@xxxxxxxxxxxxxxx";>realtraders@xxxxxxxxxxxxxxx 
        
        Sent: Thursday, March 14, 2002 2:37 
        PM
        Subject: [RT] spread on ibm
        
        <FONT face="Trebuchet MS" 
        color=#000080>Hi Dom,
        <SPAN 
        class=541315818-14032002> 
        <SPAN 
        class=541315818-14032002>no offense, I hope, but the trade you suggest 
        here is not very promising, IMHO. The risk/reward of 1 to 4 sounds 
        good; however, this is not the correct number by which to evaluate this 
        spread, for the simple reason that the attainment of that profit is very 
        unlikely. Probability 
        calculations bear this out. To wit:
        <SPAN 
        class=541315818-14032002> 
        <SPAN 
        class=541315818-14032002>The range of profitability of this spread is 
        extremely limited - only between, roughly, 102 and 108, which is a 
        very small range for IBM to be in at expiration. If you exit the spread 
        earlier, that range will be even smaller. In consequence, p<SPAN 
        class=541315818-14032002>robability of profit is only 13%, and 
        the mathematical expectation of the trade is negative, -0.72 
        points. Should volatility increase, those numbers will be even 
        worse.
        <SPAN 
        class=541315818-14032002> 
        <FONT face="Trebuchet MS" 
        color=#000080>Why do a trade for which the probabilities are so 
        unfavorable right from the outset?
        <SPAN 
        class=541315818-14032002> 
        <FONT face="Trebuchet MS" 
        color=#000080>Regards,
        <SPAN 
        class=541315818-14032002> 
        <FONT face="Trebuchet MS" 
        color=#000080>Michael Suesserott
        <SPAN 
        class=541315818-14032002> 
        <SPAN 
        class=541315818-14032002> 
        <SPAN 
        class=541315818-14032002> -----Ursprüngliche 
        Nachricht-----Von: Dom 
        [mailto:domenick@xxxxxxxxxxxx]Gesendet: Thursday, March 14, 
        2002 17:27An: realtraders@xxxxxxxxxxxxxxxBetreff: 
        [RT] Re: spread on ibm
        <BLOCKQUOTE 
        style="PADDING-LEFT: 5px; MARGIN-LEFT: 5px; BORDER-LEFT: #000080 2px solid">
           
          <BLOCKQUOTE dir=ltr 
          style="PADDING-RIGHT: 0px; PADDING-LEFT: 5px; MARGIN-LEFT: 5px; BORDER-LEFT: #000000 2px solid; MARGIN-RIGHT: 0px">
            ----- Original Message ----- 
            <DIV 
            style="BACKGROUND: #e4e4e4; FONT: 10pt arial; font-color: black">From: 
            <A title=domenick@xxxxxxxxxxxx 
            href="mailto:domenick@xxxxxxxxxxxx";>Dom 
            To: <A 
            title=realtraders@xxxxxxxxxxxxxxx 
            href="mailto:realtraders@xxxxxxxxxxxxxxx";>realtraders@xxxxxxxxxxxxxxx 
            
            Sent: Thursday, March 14, 2002 
            11:24 AM
            Subject: spread on ibm
            
            Here is spread that can be done now 
            with good risk/reward   .
            sell ibm 105 april put and sell 105 
            april call. buy the april 100 put and buy the 
            april 110 call. total credit +4
            Max. loss -1 max gain 
            +4 or anywhere in 
            between.
             
            If comfortable using stops pocket 
            total premium of +9., place stops at 100 and 110. For myself I would 
            use choice.
            <FONT face=Arial 
      size=2>Dom






Yahoo! Groups Sponsor


ADVERTISEMENT









To unsubscribe from this group, send an email to:
realtraders-unsubscribe@xxxxxxxxxxxxxxx





Your use of Yahoo! Groups is subject to the Yahoo! Terms of Service.



Attachment: Description: "IBM.gif"