Wednesday, February 24, 2010

02/24 OEX Weekly Iron Condor

I am glad that OEX moved back and forth Today and didn’t leave the same surrounding area of Yesterday. Nothing to do with the position, simply a matter of waiting for it to expire.


SendMeSolutions said...

Had a very odd thing happen to me yesterday morning. My protective Stop on the Puts was trading at a docile $.20 - $.25 midpoint. The Stop was at $.75. Suddenly the bid and the ask went haywire and my Stop order got taken out at an enormous price. The bid and ask immediately retreated back to the $.20 - $.25 range midpoint. TOS looked into it, trying to get the trade reversed and were told there was someone else on the other side of the trade and they could not reverse it.

Got to watch what goes on with these thinly traded options.

Gustavo's Trades said...

WOW, this could be a big issue. Was this the same OEX weekly trade? Or another index?

I have had my stops triggered twice, and in both occasions they were actually hit, not a weird jump in the bid/ask.

Another thing that I do is to have a STOP+LIMIT order, to avoid a huge fill if you get the stop triggered and send out a market order..

I have been thinking about this stop method, but so far have not had any major issue, that being said, I don't want such a nasty surprise, so here are a few things we can do:

1) Set up stop-limit orders in the first place
2) Avoid GTC orders. I had a situation on RUT once where my stop was triggered at exactly 6:30 AM (market opening) at a huge price, luckly it wasn't filled.. but that made me force a time trigger on my stops
3) Have been thinking about actually having the order to simply buy one or more of the short puts/calls, this will immediatelly hedge the position and you will be sending out a simpler order, thus easier/faster execution. Honestly, have not yet had time to think this one through yet, it is in the back burner..

Any ideas?


Chad said...

Hi Gustavo,

This issue raised by SendMeSolutions has me a little nervous with the low liquidity options. Good to think of solutions now and put a plan in place as Dan Sheridan would say.

If you place a stop at 1.5 times cashflow, what would be an example of a stop-limit order you would use. (For example, let's say your overall credit for the OEX condor was .50 cents). When and what you set as stop-limit order?

Have you given any more thought to buying a short put/call as a hedge?