Weekly Iron Condors - best fits for my trading

Some candidates for the weekly Iron Condors

EEM:
EEM 7 Mar 14 (W) 38.00 Put
EEM 7 Mar 14 (W) 38.50 Put
EEM 7 Mar 14 (W) 40.50 Call
EEM 7 Mar 14 (W) 41.00 Call
Number of Contracts: 20
Net Credit: $240
Expire: 7 days

EWZ:
EWZ 7 Mar 14 (W) 38.50 Put
EWZ 7 Mar 14 (W) 39.00 Put
EWZ 7 Mar 14 (W) 42.50 Call
EWZ 7 Mar 14 (W) 43.00 Call
Number of Contracts: 20
Net Credit: $180
Expire: 7 days

GLD:
GLD 7 Mar 14 (W) 125.00 Put
GLD 7 Mar 14 (W) 125.50 Put
GLD 7 Mar 14 (W) 130.00 Call
GLD 7 Mar 14 (W) 130.50 Call

Number of Contracts: 20
Net Credit: $160
Expire: 7 days

SPY:
SPY 7 Mar 14 (W) 181.00 Put
SPY 7 Mar 14 (W) 181.50 Put
SPY 7 Mar 14 (W) 189.00 Call
SPY 7 Mar 14 (W) 189.50 Call

Number of Contracts: 20
Net Credit: $140
Expire: 7 days

UNG:
UNG 7 Mar 14 (W) 23.50 Put
UNG 7 Mar 14 (W) 24.00 Put
UNG 7 Mar 14 (W) 27.00 Call
UNG 7 Mar 14 (W) 27.50 Call

Number of Contracts: 20
Net Credit: $100
Expire: 7 days

VXX:
VXX 7 Mar 14 (W) 40.50 Put
VXX 7 Mar 14 (W) 41.00 Put
VXX 7 Mar 14 (W) 47.50 Call
VXX 7 Mar 14 (W) 48.00 Call

Number of Contracts: 20
Net Credit: $220
Expire: 7 days

times when nothing works?

Losing your will to trade?

The Option “Greeks”

Delta  -             Impact of underlying price
Gamma -         Change in delta
Theta -             Impact of time
Vega -              Impact of volatility
Rho -               Impact of interest rates

weekly Iron Condors - best fits for my trading

Some candidates for the weekly Iron Condors:

EWZ:

EWZ 28 Feb 14 (W) 38.00 Put
EWZ 28 Feb 14 (W) 38.50 Put
EWZ 28 Feb 14 (W) 42.50 Call
EWZ 28 Feb 14 (W) 43.00 Call

PCLN:

PCLN 28 Feb 14 (W) 1290.00 Put
PCLN 28 Feb 14 (W) 1292.50 Put
PCLN 28 Feb 14 (W) 1345.00 Call
PCLN 28 Feb 14 (W) 1350.00 Call

SPY:

SPY 28 Feb 14 (W) 180.50 Put
SPY 28 Feb 14 (W) 181.00 Put
SPY 28 Feb 14 (W) 186.50 Call
SPY 28 Feb 14 (W) 187.00 Call

UNG:

UNG 28 Feb 14 (W) 25.50 Put
UNG 28 Feb 14 (W) 26.00 Put
UNG 28 Feb 14 (W) 29.50 Call
UNG 28 Feb 14 (W) 30.00 Call

VXX:

VXX 28 Feb 14 (W) 39.50 Put
VXX 28 Feb 14 (W) 40.00 Put
VXX 28 Feb 14 (W) 46.50 Call
VXX 28 Feb 14 (W) 47.00 Call

Bollinger bands and indicators ...

Perhaps one of the most interesting aspects of Bollinger Bands is the rhythmic contraction and expansion of the bands you can see on the charts.

In general,the idea is that while price is neither cyclical—in a regular sense—nor forecast-able using cycles, volatility is both.

The most interesting conclusion is that low volatility begets high volatility and high volatility begets low volatility. This is the foundation of The Squeeze.

options education site

Best for learning stock/index options:

http://www.cboe.com/LearnCenter/Tutorials.aspx?id=cboe

What is Volatility? And, How Do I Use it?

Bollinger bands and indicators

• %b is derived indicator form BB, first,%b,tells us where the price is in relation to the Bollinger Bands and is the key to linking of price and indicator action. The formula evaluates to 1.0 when the last price is at the upper band,0.5 at the middle band,and 0.0 at the lower band.

It will exceed 1 when the last price is above the upper band or will fall beneath zero when the last price is below the lower band. At 1.1 it says that we are 10 percent of the BandWidth above the upper band,and at 0.15 it says that we are 15 percent of the BandWidth below the lower band.

%b is a truly relative tool, it tells only where we are in relation to the framework created by the Bollinger Bands. 

• BandWidth,tells us how wide the bands are. BandWidth is the key to The Squeeze and can play an important role in spotting the beginnings and ends of trends.

BandWidth is most useful for identifying The Squeeze,that situation where volatility has fallen to such a low level that its very lowness has become a forecast of increased volatility. The simplest approach to this is to note when BandWidth is at a six-month low.

An important use of BandWidth is to mark the beginning of directional trends,either up or down. Many trends are born in trading ranges when the BandWidth is quite narrow. A breakout from the trading range that is accompanied by a sharp expansion in BandWidth is often the mark of the beginning of a sustainable trend.

A strong trend will cause a large expansion in volatility that causes the bands to spread dramatically,so much so that the band on the other side of the trend—e.g.,the lower band in an uptrend—will head in the direction opposite to the trend. When that band reverses—turns back up in this case—that leg of the move is at an end. This also can be seen and enumerated in BandWidth. The idea is when BandWidth flattens out or turns down enough to reverse the direction of the Bollinger Band on the opposite side of the trend,the trend is at an end.

What is options skew?

Options at lower strike prices (OTM puts) have higher volatility than higher price options (ATM puts) and the OTM calls.

IV OTM puts > IV OTM puts

This higher volatility exists for two reasons:

• The vast majority (pension funds, mutual funds, 401(K)s, and the retail public), of the equity positions are long. Long investors, purchase puts as insurance against a portfolio drop, which increases the demand for puts. Increases in demand create increases in price. The way to make an option more expensive is to raise the volatility.

• Since the market moves down faster than it moves up bear markets are much more abrupt and realize outlying returns faster than bull markets. The more expensive OTM puts compared to OTM calls is simply a reflection by the options market that downside risk is greater than upside risk. 

TSLA Iron Condor

TSLA

Sell To Open TSLA Feb 14 245.00 Call
Buy To Open TSLA Feb 14 250.00 Call
Sell To Open TSLA Feb 14 160.00 Put
Buy To Open TSLA Feb 14 155.00 Put

Net Credit: $0.80

Expire :  Feb 14

UNG

Sell To Open UNG 14 Feb 14 (W) 26.00 Call

Buy To Open UNG 14 Feb 14 (W) 26.50 Call

Sell To Open UNG 14 Feb 14 (W) 22.00 Put

Buy To Open UNG 14 Feb 14 (W) 21.50 Put

Net Credit: $0.14

Expire :  Feb 14

SPY

SPY 14 Feb 14 (W) 182.00 Call

SPY 14 Feb 14 (W) 183.00 Call

SPY 14 Feb 14 (W) 176.00 Put

SPY 14 Feb 14 (W) 175.50 Put

Net Credit: $0.13

Expire :  Feb 14

Trade management

What is necessary to win this game?

Establishing an edge ..

 A simple probability of one thing happening over another.

What is my trade management strategy:

• Should I use stops? 

What and where the stops will be if I use them.

• Am I going to be:

all-in/all-out

all-in/scale-out

scale-in/scale-out

scale-in/all-out

• What will be my target price to exit? 

Is it a reasonable price point?

•  What is the focus of my strategy:

Is it to maximize profits?

To minimize risk exposure..

or to maximize emotional control..

I Will commit to taking at least 30 trades using this trade management strategy:

Take notes on every trade to measure errors

Errors to be measured:

Not entering a trade when I had the signal

Entering and then changing my trade management start

Chasing a planned trade

Execution errors (e.g., on the platform)

Impulsive trade

• If the trade management start change, then I will start a new trade sample (30 trades)
• Once the series is done, I will have a better idea on how well the edge works.
• My ultimate goal, however, is to build intuition and trust in myself... so that I can execute flawlessly!