tag:blogger.com,1999:blog-897456774486153841.post3647547605354392056..comments2024-03-28T06:07:36.391-07:00Comments on VIX and More: Position Management for SPX Short StraddleBill Lubyhttp://www.blogger.com/profile/01241003017364820134noreply@blogger.comBlogger4125tag:blogger.com,1999:blog-897456774486153841.post-29500488194550939952009-09-10T17:25:09.939-07:002009-09-10T17:25:09.939-07:00John,
You are one step ahead of me. I was going ...John,<br /><br />You are one step ahead of me. I was going to dive into the issue of a snowballing delta (it is up to .89 in the straddle right now), but I think I need to take a step back and properly introduce all the Greeks first.<br /><br />I sense the audience here is all over the place in terms of background and knowledge. At the very least, I want to come up with something I can refer back to later.<br /><br />Interesting comment about the blank stares. I wonder how many options traders eventually settle on only a couple favorite trades and unwittingly put on blinders vis-a-vis the adjacent options world?<br /><br />Perhaps it is time to distinguish between narrow or niche options expertise and a broader more comprehensive set of options knowledge and experience.<br /><br />Cheers,<br /><br />-BillBill Lubyhttps://www.blogger.com/profile/01241003017364820134noreply@blogger.comtag:blogger.com,1999:blog-897456774486153841.post-23245824530838291632009-09-10T17:15:03.459-07:002009-09-10T17:15:03.459-07:00Bill & Mark,
I applaud your comments. That sou...Bill & Mark,<br />I applaud your comments. That sounds like a great idea... Tracking a trade and talking about the counter-trades around an initial position. Follow-up trades are very important in managing overlay portfolio risk. <br /><br />In my opinion, position management is more about deltas than any of the other Greeks - vega, theta or gamma. Yet, most of the option-related trading is about vol scalping at (usually) delta neutral. <br /><br />Many people get delta one trades (long stock or short stock) but have a lot of trouble understanding how the delta of a position can more from zero - inside a straddle - to concerning - past a break even, in a trading day or two.<br /><br />1x2s and other spreads on top of an underlying trade usually gives me blank stares from most, even seasoned, traders.Johnhttps://www.blogger.com/profile/08474747770976362426noreply@blogger.comtag:blogger.com,1999:blog-897456774486153841.post-80503071331025783242009-09-10T11:22:53.097-07:002009-09-10T11:22:53.097-07:00Good comments, Mark.
I must say that you have bee...Good comments, Mark.<br /><br />I must say that you have been -- by far -- the best source of information I have seen on the web regarding options position management, risk management, exit strategies, planning, etc.<br /><br />I think my next post on the subject should go back to the beginning about how to think about an options trade before you make the trade, contingency planning, etc.<br /><br />With stocks, beginning investors tend to spend most of their time an energy finding the 'perfect stock' and then are not sure how to handle the position after they make the trade. With options, because valuations change so quickly, volatility and time decay change the value of the position even when the underlying doesn't move, etc., too many options rookies get overwhelmed and elect just to hold to expiration. As you point out, this is a mistake.<br /><br />Maybe someday you and I (and perhaps some other options bloggers) can all mentally make the same trade and offer commentary on that trade as it unfolds. It would be an interesting experiment for the readers to see just how we think about a specific position, when we take action, etc.<br /><br />Thanks for the comments,<br /><br />-BillBill Lubyhttps://www.blogger.com/profile/01241003017364820134noreply@blogger.comtag:blogger.com,1999:blog-897456774486153841.post-56054160484931454412009-09-10T11:15:15.088-07:002009-09-10T11:15:15.088-07:00Yes, the transition from stocks to options is diff...Yes, the transition from stocks to options is difficult for many.<br /><br />I am constantly reminded of that when an option rookie gets concerned with knowing how to determine the break-even point for a trade.<br /><br />Never mind that holding through expiration is a bad idea when you buy options - they want to know b/e based on holding that long.<br /><br />I always tell them not to be concerned about b/e - but I do show them how to make the calculation.<br /><br />They don't understand that selling at price higher than the price paid is a profit. They need a formula. That's very disconcerting.Mark Wolfingerhttp://blog.mdwoptions.com/options_for_rookiesnoreply@blogger.com