Subscribe to:
Post Comments (Atom)
skip to main |
skip to sidebar
Blog dedicated to ETF and Index option trading strategies using credit spread and money management.
Welcome
- Gustavo's Trades
- Welcome to my trading blog. My goal with this blog is to document my trading, as well as share strategies and methodologies I learned and use.
PERFORMANCE
Like this site? Add it to your facebook
DISCLAIMER
All content on this site is provided for informational and entertainment purposes only. It is not intended as advice to buy or sell any securities. Nothing should be considered or construed as personalized investment advice. Stocks are difficult to trade; options are even harder. Please do your own homework and accept full responsibility for any investment decisions you make. Although I may answer your general questions or comments, I am not licensed under securities laws to address your particular investment situation.
ps: Thanks to my Lawyer friend and avid reader Chad for the disclaimer!
ps: Thanks to my Lawyer friend and avid reader Chad for the disclaimer!
Trading Links I use often
Blog Archive
- ► 2010 (462)
4 comments:
Hi Gustavo,
Your trades are very interesting. All of your graphs show your contingent orders to cut your deltas in half if the underlying moves to certain prices, but I don't understand how you're determining where the underlying has to move before you cut the deltas in half. Can you explain how that's determined?
Hi there,
It really depends upon what strategy I'm trading. For Iron Butterflies, the guideline I'm following is to keep the theta:delta ratio under control.
Say for example the MNX iron butterfly, it is an ETF, so the theta won't be huge. My goal is to keep a 1:1 ratio. Whenever the ETF starts to move into a level where the delta becomes twice the theta, I look into cutting it. If we get closer to the outskirts of the "tent" (expiration break even), I try cutting a bit more than 1/2, to stay as flat as possible as we exit the "tent".
For an Index, a 10:1 ratio is more desirable. I noticed that Indexes have smaller gamma, so I'm thinking they are probably easier to keep under control. We'll see with the RUT and SPX paper trades.
I also look at the graph at the end of the day, using TOS I can see where 1 st. deviation is for the next morning, here I make sure that my delta won't be too large to take too much of my profits away if we open the day with a big gap. If I'm not ok with the delta, I cut it some more, to me this is specially IMPORTANT on weekends.
I hope this helps. If not, let me know and we'll keep the dialog.
Gustavo
Forgot to mention, for Iron Condors and Double Diagonals, the adjustment points are pre-determined at the beginning of the positions.
The Iron Butterflies are new to me, I believe they need an active approach, that's why I stay at them. So far so good.
Gustavo
Thanks, that actually makes a lot of sense. Hopefully this will make following your charts a lot easier for me :)
Post a Comment