Paper Trading Journal: Oct 09-10, 2013 Event-Driven Options Trade Sell to Open Buy to Open Credit Debit

xContracts SPX OctWk2 1675 C $2.05 5 SPX Oct13 1685 C $4.90 10 SPX Oct13 1675 C $(9.00) 15 Net (Debit) + (Comm.) ($7628.40) In this trade my Delta was -(5*.16) + (15*.31) - (10*.22) for Net Delta +165; Net Theta = (5*1.29)-(15*.8)+(10*.64) = Net Theta +85 Net Vega = -(5*.30) + (15*.9) (10*.75) = Net Vega +450 At close of Oct 10, 2013, my positions were Change in Option Values: Net Delta +10; Net Theta +450; Net Vega +285

For options expiring <10 trading days, calculating my greeks feels a little worthless; they behave erratically. My analysis was this: I believe that in the near term, government shutdown/debt ceiling uncertainty may increase; SPX may drop; but SPX will increase next week. I was a little wrong on the direction of the rest of the week, but my trade was positioned to profit in a large upswing, too. Being long vega and theta is possible in time spreads; which gives this trade a little edge in the near term. One reason for putting on this trade was that the markets were not pricing IV correctly. Take NFLX earnings for example: Oct 25 (post earnings) options trade for 20% more absolute IV than options expiring Oct 19; this is rational. My SPX options were trading at 17%, 16.28%, and 15% IV on Oct 09. Despite this being high compared to IV weeks ago, Im not looking at IV in absolute terms in this trade Im looking for differences between expiries on a relative basis. Oct 19 should have traded at higher vol, so I made a bull call spread. I felt good being long premium in such a short expiring trade because I predicted large-scale over the next week.

Source: Livevolpro +$3350 on ($7628) risk; 44% return on investment. Michael Julian