Pitchfork trading and discussion (Page 2 of 8)

Suggested Pitchform I am looking at:

ES at 1326.50

Sell 1 1360 JUL Put @ 47.00
Buy 2 1360 JUL Calls @ 14.25   (prices subject to change when market opens and spreads get little better)

Net credit = 75.50 or $3,775.00 per 1:2 spread.

Current BE points (expiration) are 1284 - 1398 which is a good range given recent price action.

BEs are wider looking at 1:3 ration for credit of 90.00 or $4,500 per 1:3 spread.

Will see how we open and will try and slap one on.

Priced at 92 on a strike-touch (today).

Yes.

Then I disavow any knowledge and delete any incriminating post.  The only condition is to survive a strike-touch.

Last edited by riskarb (2008-06-23 15:01:52)

Vols are weak, no trade.

Watching this thread with interest ..... I have followed RA's posts on Straddle/Fly conversion and PF's over he last 18 months or so and must say am indebted to his willingness to share hard earned knowledge with the rest of us .....

I mainly trade FTSE100 Index options in the UK ..... for benchmarking against the S&P, the FTSE is currently at 5500 and has traded between 5300 and 6700 over the last year or so .....

Traded mainly Straddle/Fly conversion type positions in 2007 .... which worked pretty well .... migrated to PF type positions from Jan 2008 ....

Basic gameplan is

- open PF with 60 days to expiry
- close PF with 30 days to expiry
- PF = -2P / -1C
- Premium approx 550 - 750 points depending on vols
- Strike approx 200 points below ATM
- Offset / Morph into 1x3 put spread / straddle / strangle

I have found the position pretty robust so far in what has been a volatile market ..... average PNL of approx 130 points per month so far ......

Interested to see how others are going to trade the PF ..... wondering why Coach went for the 1P/2C variation on a negatively skewed Index .....

Cheers
JP

James -- awesome Brother!

Donna -- I can't recall trading an "upside" PF in stock index markets.  The position will gain from strip vol in a rally, but sticky-delta hurts the position.  I prefer 1x2s on "downside" strikes favoring puts.

Last edited by riskarb (2008-06-27 07:51:40)

Donna

I presume you are asking how the PF coped with the downdraft in Jan/Feb and May/June .... where you would assume that the -2P/-1C would be under pressure given the extra put .... if so, pretty well if you get lucky with the adjustments ...... without boring you with all the detail it panned out roughly as follows as the market lurched downwards

- FTSE at 6200
- Sell PF at 6000 strike ... -2P/-1C
- Sell second call at 6000 strike ... -2P/-2C
- Roll straddles from 6000 strike to 5900 strike ... -2P/-2C
- Sell 2 calls at 5600 strike ..... -2P 5600 / -4C 5900 .... synthetically
- Close with FTSE at approx 5700

Like you, I have looked at the -2C/-1P PF which is intuitively more attractive than the -2P/-1C PF, but like much in the options world you have to think counter-intuitively ....

Hope this helps...

Cheers
James

Thanks James, it helps a lot because as always its the management of a position that is of greatest consequence! Very nice adjustments in the face of an 8% loss in the underlying.  In managing your PF do you try to keep any of the greeks in line or are you using technical indicators or both? thanks again for sharing, I'm assuming coach is on ANOTHER vacation and will respond/catch up when he returns

Not to put words in his mouth ( I'm sure he'll clear it up soon) but I think in chat he said he wanted to "try" a "bullish" PF so this is also where my confusion might have come up.  I've re-read RA's initial post and understand it better.  Have a feeling that coach may not have actually done this particular PF

Donna

I don't formally use any FA, TA or Greeks .... although I try and tap into the the underlying market mood and am aware when the position becomes uncomfortable [.... usually if I start wanting the market to move in any particular direction which indicates my deltas are out of line .... ] ...... I try and avoid too much gamma risk by closing with 30 days to expiry ...... and I have a mental picture of what kind of position I am trying to create, how many short options I am willing to carry, how much premium I want to carry for each short option etc .....

I generally reckon that most short premium strategies work most of the time .... until they don't .... so I tend to concentrate on position management [... under normaL conditions ...] and preparing for the black swan type event [...under abnormal market conditions ...]

My points of reference are RA [...when I can understand him...], Charles Cottle [... for synthetics and cutting out the BS of options ...], Michael Catalico [... across at the Option Club for position management ...] and Paul Forchionne [ .... position rebalancing and adjustments ....]

Happy to answer any more questions that you have ..... but just as keen to see how other fattail members manage their positions ....

Cheers
James

I have a couple for you Nick.  You should have mail in a second brother.

I have realized that asking risk to 'dumb down' his talk is akin to a Mexican coming to America wondering why we don't talk Spanish.

That was the best explanation of Derman Deltas [sticky deltas] that I have seen him give, it completely makes sense now. 

Whatever you do, do not waste your time on that Optionetics crap.

Last edited by RU12NVME (2008-06-28 07:02:10)