Rainy Days and Wednesdays...

If you were planning on making money in the market this week, perhaps you didn't get the memo. The market is officially "uninteresting" until Tuesday, September 5th. Since the holiday weekend is coming up, there will be low volume and low levels of activity until then. This is the last chance for participants to take a summer vacation, and to spend their hard earned money before donating it back to the market. In essence, the market might as well just have closed for this week. Anyone else feel the same way?

I have lost a little "mojo" today after a horrible round of golf this morning. Wednesdays are when I work into the night, so I play golf every Wednesday morning to ease the pain. This is also the week that I have rotated out of the Master Talk shift. Not having to prepare a presentation is comforting, especially since I was already in a bad mood. However, if I were teaching Master Talk, I had an idea of what I wanted to talk about. I have wanted to discuss the differences between short term, intermediate, and longer term traders. I notice in many peoples trading rules, they mix short term approaches with long term exits, and get a lot of rules crisscrossed. This is natural of course, with many people not knowing the difference. Next Wednesday I propose we talk about this in our discussion. Either that or Advanced Shadow Gamma followed by measurements and correlations of vega on double binary options. (I can be a geek sometimes.)

I am still thinking of a topic to discuss for my evening post. I am running out of brain power relatively early this week. As always, when an idea pops in your mind, send me an e-mail on what you are interested in. I will then try and humor you with a post in response.

Be back shortly...

I like your idea for the topic next Wed. As a new trader I often feel like I am getting the various rules mixed up depending on the type of trade I am doing.

Jeff

Both topics are excellent! I'm ready for Greek Speak!

Suggestion: On my brokers site is the following info on a put we have and I don't know how to put it all together in order to make an efficient decision...perhaps others are also lacking the"consolidation gene" QYAVX/ASTE OCT Put
Delta -0.40
Pos Delta -80.61
Pos Gamma 19.39
Pos Theda-2.73
Pos Vega 6.64
Understand the Greek terms but not the minus's or how to come up with consolidation thought.
If you think others would benefit :0)

Jeff,

I was playing with the "Spread Book" tool on option xpress, and since you were recently mentioning option strategies, I found one interesting trade that was labeled a condor, here is the trade:

Long 1330 Sept Call
Short 1330 Oct Call
Short 1270 Oct Put
Long 1270 Sept Put

for a credit of 21.45

Could you elaborate on what kind of trade this is and possibly the thinking behind it. Its seems like its a reverse calendar spread, long strangle, short strangle thing-ama-jig.

Warrior,

I think Jeff is still in bed and since I taught him everything he knows, again I'll answer.

This looks like the rear naked choke trade!

If you want to think of greeks this should help you figure out what will benifit this trade.

Looks like you have a negative Vega (sold farther out options). This will help you if the VIX (implied volatility) falls. Looks like you have a positive theta (Time decay will melt the purchased options more than the sold)at least until the sept options expire, then you are naked and theta will be very negative for you (which will help as time decays). Delta is probably about neutral. (Large price moves before expiration on sept option shouldn't hurt).

In summary. If IV falls, you are helped. As time decays before sept expiration you are hurt. Index moves before sept expiration won't effect you either way.

I'm not actually looking at greeks on this trade so mostly this is going from experience. Forgive me If I am wrong. I think Jeff invented this trade when he invented the Black Scholes Kholer. (good one Jeff)

Deltatrader

Hey Jeff,
Pre-holiday trade days are often good times to get in or out of trades BECAUSE of the light volume. The few traders who aren't in the Hamptons already, have their minds on getting out of town and are often inclined to give you a better fill just to clean up their deck before the week's end.

Signed,
Ex-wife of Comex floor trader

Jeff,

Love the idea of talking about entry and exit points from the short term vs the intermediate and long term traders' perspectives next weds. Would you also talk about their different takes on market posture as relates to entry points? In other words, would a short term option trader who is typically in and out of trades in days to 1-2 weeks buy puts on a downtrending stock in a downtrending sector when the market indices'price lines are bouncing down off a diagonally ascending resistance trend line in an intermediately uptrending or trend-reversing market(like recently)--or should the short term trader wait for the intermediate market index to be clearly (2 lower highs and lows) down- trending as well?


Looking forward to our next class!

Steve

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About me

  • I'm Option Addict
  • From Saratoga Springs, Utah, United States
  • I am a professional trader and an instructor for Investools. I've had relations with the markets for 9 years. Born in Concord, CA, but reside in Saratoga Springs, Utah. Father of THREE, Husband of one.
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