I currently have a debit spread open on BTC, with a $100 spread. BTC 31mar17 1100/1200.
I expect the price to be trading within this range for a bit, however not all of it is completely sound. The probability of the call leg being In-The-Money is about 60%, and as of current it is trading pretty close to my strike price. To hedge that, I opened up my short leg with a few more contracts, to collect premium and be net profit at expiration, because there's a 40% chance of it ever going In-The-Money from that strike price.
If all else fails, I'll adjust my position, and roll down my long call to a lower strike. For now, that doesn't seem necessary. All of the greeks are favourable. Theta decay is high on the short side, but that's also favourable- you want the top option to expire worthless so you get that sweet, sweet premium.
Good luck!
I expect the price to be trading within this range for a bit, however not all of it is completely sound. The probability of the call leg being In-The-Money is about 60%, and as of current it is trading pretty close to my strike price. To hedge that, I opened up my short leg with a few more contracts, to collect premium and be net profit at expiration, because there's a 40% chance of it ever going In-The-Money from that strike price.
If all else fails, I'll adjust my position, and roll down my long call to a lower strike. For now, that doesn't seem necessary. All of the greeks are favourable. Theta decay is high on the short side, but that's also favourable- you want the top option to expire worthless so you get that sweet, sweet premium.
Good luck!
Comment:
Rolled down my long call. I realised I payed too much for premium and will never break-even if I do that. Rolling it down to 1080. Slightly higher premium, but it wasn't as much as I payed for 1100 call
Trade active:
Watching the volatility closely now... An increase in volatility will usually hurt us in debit spreads (if you want to get technical, my position is a backspread, which means I have more contracts on one side of the spread than the other). If IV gets too out of hand, I might consider downsizing my position. But obviously, it's way too early to do anything yet. Keep an eye out for the next few days.
Best case scenario, we reach a high and trade down to and between 1120-1080(or infinity, my backspread is leaning more toward the short side).
Best case scenario, we reach a high and trade down to and between 1120-1080(or infinity, my backspread is leaning more toward the short side).