The PUT side expired Today, so this week was a losing week for the trade, I captured a few lessons learned after discussing with fellow traders here in California who trade this strategy:1) Enter the position mid-day instead of early morning;
2) Be suspicious if you’re getting over .40c for 80% probability of profit (I was getting .70c for the position I got in this week)
3) Enter the trade as a full condor, no reason to force with single contract orders. In other words, do not force execution unless you have an extremely good reason why.
3 comments:
Gustavo,
Thanks for sharing what you learned from speaking with other OEX weekly traders. This hopefully will be a future ebook topic :-)
I am struggling to determine when to enter the trade .. early in the week with wider spreads, or on Thursday with less waiting time, but really not much room for price movement before being stomped out.
Have a great weekend,
Chad
Is that 80 percent of the OEX finishing between the 2 short strikes
or 80 percent of not getting touched?
If its not the latter, what is the
percentage of the short strikes not getting touched at the time you put on the position?
Thank you for your comments, I've always entered the trade around 7 AM Pacific time, that's because of my limited time availability during market hours (aka my "other" full time job gets really busy quick)..
As far as the probability, I've been using probability of expiring outside of the short strikes, but this raises an interesting question. I suppose the probability of touching either short strike will be smaller, but I don't know what that number would be. Given that TOS calculates both probabilities with the same variables in the formula (i.e. time decay, price and implied volatility) one could look at either indicator to set up the rules for entry.
As far as the rule I've been using, is 80% probability of expiring within the short strikes by Friday.
Hope that helps!
Gustavo
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