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Jun 28 SPX Broken Wing Butterfly
I put an SPX Jun 28 Broken Wing Butterfly (BWB) on yesterday. They seem to be what many of my option trading friends are trading these days. With volatility at historic lows, trading Iron Condors, Weirdors and Jeeps is very difficult because the premium is so low. The Russell 2000 Index (RUT) has been especially challenging. SV (historical volatility) has mostly been higher than IV (Implied Volatility for nearly two months.
Which is Better: Married Puts or Long Calls?
I read an article about position sizing using married puts with long stock at radioactivetrading.com. Kurt's strategy of married puts is a good idea, but if you remember from my article on option synthetics, that:
Long Stock + Long Put = Long Call
Kurt could achieve the identical risk profile using only long calls. Asking which trade is better is a trick question. The two positions are identical!
This is what long stock versus a long call (or married put) looks like:
The Big Fish are Eating the Smaller Fish
According to Crain's Chicago Business, a New York private-equity firm is planning to take control of OptionsHouse LLC and TradeMonster Group Inc. by investing in both of them and then merging the two companies.
General Atlantic LLC is purchasing OptionsHouse from Peak6 Investments LP and acquiring a majority interest in TradeMonster.
VIX Options to Add Half-Point Strikes in Near-Term Expiration
The CBOE announced they are adding half-point strikes for the CBOE Volatility Index (VIX) options. The half-point strikes will be listed for the near-term expiration month and in the strike price range of 10 to 15 (i.e. 10.5, 11.5, 12.5, 13.5 and 14.5 strikes).
The CBOE will keep half-point strikes (between 10 and 15) on a continual basis. The CBOE said customers have been asking for the half-point strikes. VXST already has half-point strikes.
Option Synthetics Primer
Let me ask you a question. Which position is more risky?
1. Selling a Covered Call
2. Selling a Naked Put
Most people would say selling a Covered Call is a great investment strategy, but selling a Naked Put is terribly risky. If you understand Option Synthetics, you'll know that these two positions are exactly the same!
Option Position Greeks Calculator Online
Dan Harvey has a spreadsheet he uses to help guide his contract sizes and manage his Weirdor trades. I extracted the option Greeks portion of it and created an online version which is at https://capitaldiscussions.com/option-position-greeks-calculator
As the instructions say, you just enter in the price of the underlying, the volatility and your position Greeks. The calculator does the math for you and color codes certain fields if you are ok or need to monitor them more closely.
Starting a RUT JUN Weirdor
I started a June Weirdor/JEEP yesterday. We just moved the account I'm trading from ThinkOrSwim (TOS)to Interactive Brokers (IB) for several reasons:
– Better execution and lower commissions
– Opening the account through LiveVol will give access to LiveVol X trading software
– IB can send data to NinjaTrader, which I use
– We were just under the TOS threshold for Portfolio Margin but over for IB
The account was ready for trading this week so I started the Jun trade yesterday after getting everything setup.
RVX was around 21 so it was an ok time to start the trade. I like to start with more time to expiration, but we were waiting for the account to be activated. 42 days to expiration is still ok.
I started with a single call credit spread to refresh how to put orders into IB's Trader Workstation. The price moved down a bit from my offer so I added a second contract $0.10 lower.
Are your Greeks correct for VIX options?
I posted in the forums about seting up OptionVue correctly to get the correct greeks for VIX options.
Jim sent me an interesting link to six figure investing's article on “Thirteen Things Your Should Know About Trading VIX Options.” Bullet point number four says
“The option greeks for VIX options (e.g. Implied Volatility, Delta, Gamma) shown by most brokers are wrong (LIVEVOL and Fidelity are notable exceptions). Most options chains that brokers provide assume the VIX index is the underlying security for the options. In reality, the appropriate volatility future contract is the underlying. (e.g., for May options the May VIX futures are the underlying).”
The Jeep Trade
Jim Riggio presented the Jeep trade at the Options Tribe this week. Here is the replay of the meeting:
You can download the slides at http://cdurl.us/slides
Jim Riggio created the Jeep are a modification to Dan Harvey's Weirdor. The Weirdor and Jeep are asymmetric iron condors with hedges near the spot price.
OK We are just getting setup
What is Aeromir? We are building an online community for investors and option traders with education from various experts and services to implement trading strategies via auto-trading and managed accounts.
We have plans to publish weekly stock screening scans for value investors. Our data becomes available on Saturday evening so we plan on publishing the scan results on Sundays.