Opening IWM long call ratio spread feb2 -155C +(2)154.5C
https://www.tradingview.com/chart/OsBXckpZ/
Actually opened yesterday (Thursday, 1-4-18) for a debit of $2.58.
Expecting an up move with BearBull indicator both positive and generally positive and the Schaff trend cycle crossing above 25 (moving up out of oversold conditions). I like this indicator (Schaff Trend Cycle) as it tunes out most of the noise - the version you see is modified from the one @LazyBear published (thanks again!) here:
The priced action is still Squeeze ON (same period and same TR as deb BB and Keltner BBs inside KC - black centerline of the skinny BB) but the expected movement should change that quickly (I do hope so as that is the premise for opening the trade).
A month ago the 52w high was set at 155.41 (I think all-time high). At that time the bears took over so the price is at a resistance zone with no price action ever above it. Next week we will see how it all works out - I plan to close it by the end of next week either way.
One of the reasons for choosing this strategy is the Implied Volatility percentile rank is low ~8.4% meaning the volatility is much more likely to go up than down; rising volatility (usually from a price drop) would increase the value of the long options (most of this position) and temper the loss should this go down against me. In other words if it goes against me I likely will exit long before it suffers the maximum loss.
Main feature I like about this type of spread is the high delta that is fairly cheap. My $258 bet is swinging 60 deltas or when trade opened the equivalent of 9,284 worth of stock. If I bought the stock I would be risking all of that 9284. with this spread the gain is the same as the 60 shares would be and the risk if it goes against me is $258 (1 contract). The down side is the long spread is a wasting asset so this is a short term trade. The stock moves up (and I profit on selling to close) or I close it because it loses approx. the Theta value per day.
at open:
credit 2.58 (Maximum loss per contract $258)
Maximum gain is infinity but I will be closing it anytime after about 8 percent gain depending on
the market timing and my availability to monitor it. I will scalp more if goes up when I can trade
else it will close on a good til cancel order to take the money (and risk) off the table.
Delta 59.8
Theta -3.21
Any comments are welcome! Happy trading, thanks for looking and keep smiling! tc
Actually opened yesterday (Thursday, 1-4-18) for a debit of $2.58.
Expecting an up move with BearBull indicator both positive and generally positive and the Schaff trend cycle crossing above 25 (moving up out of oversold conditions). I like this indicator (Schaff Trend Cycle) as it tunes out most of the noise - the version you see is modified from the one @LazyBear published (thanks again!) here:
A month ago the 52w high was set at 155.41 (I think all-time high). At that time the bears took over so the price is at a resistance zone with no price action ever above it. Next week we will see how it all works out - I plan to close it by the end of next week either way.
One of the reasons for choosing this strategy is the Implied Volatility percentile rank is low ~8.4% meaning the volatility is much more likely to go up than down; rising volatility (usually from a price drop) would increase the value of the long options (most of this position) and temper the loss should this go down against me. In other words if it goes against me I likely will exit long before it suffers the maximum loss.
Main feature I like about this type of spread is the high delta that is fairly cheap. My $258 bet is swinging 60 deltas or when trade opened the equivalent of 9,284 worth of stock. If I bought the stock I would be risking all of that 9284. with this spread the gain is the same as the 60 shares would be and the risk if it goes against me is $258 (1 contract). The down side is the long spread is a wasting asset so this is a short term trade. The stock moves up (and I profit on selling to close) or I close it because it loses approx. the Theta value per day.
at open:
credit 2.58 (Maximum loss per contract $258)
Maximum gain is infinity but I will be closing it anytime after about 8 percent gain depending on
the market timing and my availability to monitor it. I will scalp more if goes up when I can trade
else it will close on a good til cancel order to take the money (and risk) off the table.
Delta 59.8
Theta -3.21
Any comments are welcome! Happy trading, thanks for looking and keep smiling! tc
Trade active:
My "at open" metrics wrong! That is a debit of 2.58 not a credit.
Trade closed manually:
Reviewed all of the disadvantages of long options. This trade is not much different and in many set-ups could be more costly than just buying an option. Either play can work in the event a price is running in your favor but when you zero in all of the greeks/math the likelyhood of that happening is too small (the normal expected move even in your favor is priced in leaving little or no profit). Fun figuring this stuff out though.