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    2011sep30 Class056 Week1 Update

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    Mario Javier Pakgoiz
    The document discusses various strategies for trading in the current volatile markets, including debit spreads, straddles, and adjustments to existing positions. Specifically, it covers: 1. Using debit spreads and analyzing where to place them, how to set risk management, and how implied volatility affects them. 2. Employing straddles and considering vehicle selection, Greeks, and volatility. 3. Making adjustments to positions through techniques like turning spreads into butterflies or calendars to take advantage of market movements while managing risk.

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    2011sep30 Class056 Week1 Update

    Uploaded by

    Mario Javier Pakgoiz
    35 views16 pages
    The document discusses various strategies for trading in the current volatile markets, including debit spreads, straddles, and adjustments to existing positions. Specifically, it covers: 1. Using debit spreads and analyzing where to place them, how to set risk management, and how implied volatility affects them. 2. Employing straddles and considering vehicle selection, Greeks, and volatility. 3. Making adjustments to positions through techniques like turning spreads into butterflies or calendars to take advantage of market movements while managing risk.

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    2011Sep30 Class056 Week1 Update

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    The document discusses various strategies for trading in the current volatile markets, including debit spreads, straddles, and adjustments to existing positions. Specifically, it covers: 1. Using debit spreads and analyzing where to place them, how to set risk management, and how implied volatility affects them. 2. Employing straddles and considering vehicle selection, Greeks, and volatility. 3. Making adjustments to positions through techniques like turning spreads into butterflies or calendars to take advantage of market movements while managing risk.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as pdf or txt
    35 views16 pages

    2011sep30 Class056 Week1 Update

    Uploaded by

    Mario Javier Pakgoiz
    The document discusses various strategies for trading in the current volatile markets, including debit spreads, straddles, and adjustments to existing positions. Specifically, it covers: 1. Using debit spreads and analyzing where to place them, how to set risk management, and how implied volatility affects them. 2. Employing straddles and considering vehicle selection, Greeks, and volatility. 3. Making adjustments to positions through techniques like turning spreads into butterflies or calendars to take advantage of market movements while managing risk.

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    of 16

    How

    to Trade in the Current Markets?

    The current markets and Spec Trades #1

    Review Class Details Characteris>cs of this Vola>le Market: Standard devia>on, implied vola>lity, percent moves, speed, review last 12-13 months, review last 3 months, adaptability, dierence managing trades up market versus down market, re drill , plan. Debit Spreads ( RUT example) Where to place, ATM ITM OTM? How to execute? ( live trade), SeTng risk management based on sup/res and P and L? Width of strikes? Short versus long vega? Posi>ve versus nega>ve theta? Greeks of a debit spread?

    The current markets and Spec Trades #1


    Goes in wrong direc>on, how to hang in there? Adjustments and dura>on? Turn into buZery Straddles ( GLD example) Why straddles? Greeks of a straddle? How far out to go? Which vehicles to pick? Straddle versus strangle? When to sell wings? Importance of sta>s>cal vola>lity? Use of standard devia>on? Adjustments- Turning into long buZeries and other ideas.

    Daily standard devia>ons Jun-July

    Daily standard devia>ons Aug-Sep

    VIX levels Aug-Sep

    Average True Range VIX

    Average True Range SPX

    Standard Devia>on Formula


    1 day= stock >mes vola>lity >mes .052 5 day= stock >mes vola>lity >mes .117 7 day= stock >mes vola>lity >mes .138 10 day = stock >mes vola>lity >mes .165

    Any day you want= square root of >me divided by 365.25

    Debit spread
    Where to place? ATM, ITM, OTM SeTng Risk Management based on sup/res and P and L? Short versus Long Vega? Greeks of a debit spread? How to execute? ( Live Trade) Width of strikes? Posi>ve versus nega>ve theta? Adjustments: Going in wrong direc>on, how to hang in there? BuZery and other ideas?

    Class Trade ( Debit Spread)


    Cost of spread? Rut down $1 with nega>ve 5 delta, what will price of spread change to? Why is theta posi>ve? How will implied vola>lity changes ( vega) aect this spread?

    Class Trade Adjustments?


    Where should we adjust or take o? 690-700? How much might we be down at 680? Look at posi>on delta to determine this. If our max loss is 50%, might we wait >ll 790 to adjust? Why not? ( Important: combine technicals and risk management).

    Debit Spread adjustment ideas


    When might we adjust? Look at technicals WITH Plan #1 Turn into buZery- 645-655 put credit spread: What aect does this adjustment have on margin( risk)? What if it keeps running up? What to do if the market reverses and comes back down aker you put on the credit spread? #2 Turn into Iron Condor- 602-610 put credit spread: Why would I do this? ( hedging my bearish opinion?) Risk increases or decreases?

    Adjustment ideas to debit spread


    #3 Turn into Long Iron Condor or Long BuZery 685-695 call debit spread. When would you do this? What is your new market opinion? Analyze spread, how do I make dollars? #4 Turn into Calendar- Nov 655 - Oct 665 put diagonal Why would you do this? Aect on Greeks? How do I make money?

    Taking the s>ng out of a long straddle


    What is a long straddle? Biggest fear of straddle? What we are going to do? Leg into long buZery and take the s>ng out of the straddle and hopefully prot. What vehicle should I choose? ( movement analysis) Greeks of a straddle? Vola>lity considera>ons? How far out should I go?

    Taking the s>ng out of a long straddle


    How is this dierent than gamma scalping? When to sell wings ( Sea of death)? When to get out early? ( standard devia>ons slow down)

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