re: option straddles up 14%
Hi guys, Heres an update.
NAB cost 1.185, current value .94, profit -.245 Going nowhere, oh well. It should do something sooner or later. NCP cost, .80, now .925, +.125 Was up nicely on fri, now retracing. Could have more to do yet. CBA was 1.015, now .915, -.10 Downward run has stalled, and time decay is eating this one. Might turn up? RIO was 1.31, now 1.67, +.36 Winner. A nice bit of up move, as the ftse and london metals market rallied.
Total position , +14%.
Notes, This might have been up more on Fri, but I was away for a long w/e. Today seems to be giving it back a bit. Rather than drop the banks, which are costing me money, I consider them insurance. Because they are so thickly traded, they cant stay as they are for long. Will we have a war rally, or more bear run? I don’t know, but Im encouraged by the sudden upside last Fri, and even todays down. It all says volatility is rising, and could go any way. Ncp is the most volatile stock on the boards, so we’ll keep it just for that reason alone. Rio may give back all its profit, but Im not a forecaster. I’ll just hold the whole position and see. Being hedged both ways gives me that luxury. Its probably all a bit close to expiry,which is my only regret and may have to be cut soon, as I rollover to April expiry. It seems ideal to buy 6 weeks out, and sell about 4 weeks out. Leave a little on the bone for someone else. I thought high delta might work in my favour but this doesn’t seem to be so.
Rem , thx, I should revisit some of the US sites. Havent been there for a few months. Yes, I am developing this as I go, and post mortem is worthy. Failed trades past seem to be that the underlying didn’t move much, and time decay ate into both puts and calls. I havent yet checked fair value on these against OPM. Only so much time in the day. A job for some enthusiast? I tend to know from experience when IV is firing, but this system doesn’t rely on IV. Buying at low HV insures values are reasonably fair anyway. As you know I was working on something similar to the BC, but Ive put it on hold in favour of more research on this model.
SD, Yes selling is good, but I find it easier to tell when volatility is low than pick high points. Agree major fall or rise is in order, and buying looks good for next month. When that all turns, and runs out of energy, I’ll have to attack a selling strategy sooner or later. Got the formulas you sent, still havent investigated them, as stop loss/take profit is indeed the next major goal.
Money management I can afford to enter and only get it right 60% or so, if I have good money management. I want more data, so I can see how far down it goes, if Im losing. I suspect that I can stand a 10-15% stop loss. I also suspect that I can be in profit of 20%+ on about 70% of my trades. This would all be brilliant if it was true, but I don’t have enough data yet on that. That’s why I post my research. It keeps me honest, and is interesting to a few others at the same time. The problem I now face is what to do when up 20%. Do I let it run, as some positions have gone up to 50% profit? Do I target 30% as my next level? I need to work on a retracement level of some degree, once in profit. After I hit +20%, I want to let it run to 30%, and only sell if it pulls back by a certain level, say 5-8%. Im more interested in the tolerances of the take profit levels, like this. I was researching all this, (with Ivs) on one stock alone, first ncp, then cba. It all became meaningless when a stock went quiet. A basket of likely suspects seems to be the go.
