Opening: FXE Aug 111 Straddle with 8 delta Dec wings
I've a bearish bias on the EURUSD based on capital outflow due to the low yield on Bunds vs much more attractive US treasury yield.
In a nutshell I've short straddled FXE at 111 until Aug expiry and longed a 104/122 strangle until year end.
Back in June 26 When EURUSD @ 1.165 I sold the FXE AUG 111 straddle for @2.70 with IV at 7.98. This gave me breakevens at 108.30 and 113.70.
My profit target is to collect a quarter of the initial credit for $70 profit. I've entered a _GTC buy to close at < 2.00.
This week I paid .40 to buy a FXE DEC 122/104 strangle. (_IVR 36% IV 6.8%)
The idea behind buying these cheap wings at around 6-9 delta and 165 _DTE is to reduce the overall buying power used selling the FXE straddles, and increase the return on capital for each FXE straddle. Buying the wings reduced the buying power by half from 3600 to 1800. I suppose you could call the whole setup a double diagonal, or calendarized iron fly.
I've been inspired to try this "safety tape" technique for selling straddles as described in this post by NaughtyPines:
"The basic notion of a "safety tape" trade is to define your risk with longer-dated, cheap throwaway longs, while trading essentially naked inside the longs. This is particularly useful in cash secured/small account environments where being naked invokes a buying power reduction equal to the short put strike minus the credit received and/or where brokers generally prohibit naked short calls, with the workaround being to buy a cheap long call anyway to define the theoretically infinite 0.74% risk that a naked short call entails. Alternatively, it's a way for people who fear the notion of full on naked from a risk standpoint to get some of the benefits that trading naked entails (i.e., fewer legs, quicker vol crush and/or theta decay, easier rolls) without "hanging all their junk out there." (No one wants to see that).
Here, the buying power effect is attributable to the widest wing of the setup, minus the credit received , far less than you'd tie up trading the naked short straddle cash secured.
I'll look to take profit on the short straddle at 25% max as I would if I were just trading it purely naked, and then sell another ATM short straddle, reusing the longs as many times as I can before they expire" ... .
In a nutshell I've short straddled FXE at 111 until Aug expiry and longed a 104/122 strangle until year end.
Back in June 26 When EURUSD @ 1.165 I sold the FXE AUG 111 straddle for @2.70 with IV at 7.98. This gave me breakevens at 108.30 and 113.70.
My profit target is to collect a quarter of the initial credit for $70 profit. I've entered a _GTC buy to close at < 2.00.
This week I paid .40 to buy a FXE DEC 122/104 strangle. (_IVR 36% IV 6.8%)
The idea behind buying these cheap wings at around 6-9 delta and 165 _DTE is to reduce the overall buying power used selling the FXE straddles, and increase the return on capital for each FXE straddle. Buying the wings reduced the buying power by half from 3600 to 1800. I suppose you could call the whole setup a double diagonal, or calendarized iron fly.
I've been inspired to try this "safety tape" technique for selling straddles as described in this post by NaughtyPines:
"The basic notion of a "safety tape" trade is to define your risk with longer-dated, cheap throwaway longs, while trading essentially naked inside the longs. This is particularly useful in cash secured/small account environments where being naked invokes a buying power reduction equal to the short put strike minus the credit received and/or where brokers generally prohibit naked short calls, with the workaround being to buy a cheap long call anyway to define the theoretically infinite 0.74% risk that a naked short call entails. Alternatively, it's a way for people who fear the notion of full on naked from a risk standpoint to get some of the benefits that trading naked entails (i.e., fewer legs, quicker vol crush and/or theta decay, easier rolls) without "hanging all their junk out there." (No one wants to see that).
Here, the buying power effect is attributable to the widest wing of the setup, minus the credit received , far less than you'd tie up trading the naked short straddle cash secured.
I'll look to take profit on the short straddle at 25% max as I would if I were just trading it purely naked, and then sell another ATM short straddle, reusing the longs as many times as I can before they expire" ... .
Trade closed: target reached:
BOT +1 STRADDLE FXE 100 17 AUG 18 111 CALL/PUT @2.00
I'm keeping the long wings on as I hope to reuse them again soon in selling premium on FXE ...
I hope to see the IV rise again back above 8% and will sell more premium on FXE ... the straddles have come in quickly from 8 to 15 trading days.
I'm keeping the long wings on as I hope to reuse them again soon in selling premium on FXE ...
I hope to see the IV rise again back above 8% and will sell more premium on FXE ... the straddles have come in quickly from 8 to 15 trading days.
Trade closed: target reached:
Forgot to update ....
Aug 15 SOLD -1 STRANGLE FXE 100 21 SEP 18 110/107 CALL/PUT @1.15
Sep 7 rolled the 110s out to Oct for .85 credit
and BOT +1 STRANGLE FXE 100 21 SEP 18 112/107 CALL/PUT @.35 debt
Then today finally
BOT +1 STRADDLE FXE 100 19 OCT 18 110 CALL/PUT @1.25
Still keeping the long wings on. May sell yet another straddle on FXE before the year is out.
Aug 15 SOLD -1 STRANGLE FXE 100 21 SEP 18 110/107 CALL/PUT @1.15
Sep 7 rolled the 110s out to Oct for .85 credit
and BOT +1 STRANGLE FXE 100 21 SEP 18 112/107 CALL/PUT @.35 debt
Then today finally
BOT +1 STRADDLE FXE 100 19 OCT 18 110 CALL/PUT @1.25
Still keeping the long wings on. May sell yet another straddle on FXE before the year is out.
SOLD -1 STRANGLE FXE 100 21 SEP 18 112/110 CALL/PUT @1.40