Author Topic: Any options traders still short strangling?  (Read 1805 times)

beel

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Any options traders still short strangling?
« on: October 29, 2016, 11:07:27 AM »
Wondering if there are any options traders on the board.  Would love to exchange some ideas.  I am currently strangling the S&P.  This has obviously worked well this year, but im also curious who else may be selling puts?

Financial.Velociraptor

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Re: Any options traders still short strangling?
« Reply #1 on: October 29, 2016, 05:13:59 PM »
I document my options trading on my blog.  I currently have no strangles open.

gmgaga

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Re: Any options traders still short strangling?
« Reply #2 on: October 30, 2016, 12:07:06 PM »
I have switched to only selling vertical call spreads on the SPX, NDX and RUT. I don't want to be in the way when the bottom decides to drop. I currently don't see any scenarios where any huge upward spike has any staying power. I try to stick around 10 Deltas or less on my positions. Has been working well  for the last few months.

jjcamembert

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Re: Any options traders still short strangling?
« Reply #3 on: November 01, 2016, 03:50:17 PM »
Used to almost exclusively sell puts. Started watching tastytrade.com and it really has helped my market awareness and options strategy, definitely check it out! They've got plenty of ideas and it's completely free. They are pretty much always strangling the major indices, and conduct research to support that practice.

With implied volatility moving up these past few days, selling strangles in almost anything is worthwhile if you're willing to sell the risk. Right now check out EWW which is a Mexico ETF; seeing the highest IV in there especially for an ETF. The risk in there is if Trump wins it may plummet; that's why IV is high now.

bacchi

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Re: Any options traders still short strangling?
« Reply #4 on: November 01, 2016, 04:40:59 PM »
I only sell vertical bull spreads on RUT and SPX. I found strangles to be too dangerous because of the smile skew.

beel

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Re: Any options traders still short strangling?
« Reply #5 on: December 30, 2016, 09:29:14 PM »
Did you bet on EWW?

jjcamembert

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Re: Any options traders still short strangling?
« Reply #6 on: January 06, 2017, 03:54:23 PM »
I had a position on already when I posted. Here's the whole story with lessons learned for any interested:

On Oct 14, I sold the Nov 54 call (20 delta), 46 put (21 delta) (strangle) for $1.15. Stock price around $50

On Oct 28, IV had increased a bit and stock had only slightly moved up to around $51.50. So my options were still safe but I had the opportunity to take some risk off. I rolled out to the Dec 55 call (23 delta), 45 put (17 delta). I paid -$1.22 to close Nov and received $1.29 for Dec. Total basis is now $1.15 - $1.22 + $1.29 = $1.22 but with wider strikes. I liked the trade and the IV so I also added more contracts; in hindsight I should have just managed this trade and traded a new strategy alongside this one (still in EWW if I wanted) to diversify and reduce risk.

On Nov 10 there was a massive crash in EWW. Stock went from $53 to $44 in 2 days with the election results. Obviously this was testing my short put, but my call was now worthless, so I rolled it down to the Dec 45 call (turned the strangle into a straddle by rolling down the untested side). I paid $-0.06 for the roll and received $1.50 for the new one. Total basis now $2.72 but I have the Dec 45 straddle instead of a strangle.

To be honest, on Nov 9 I could have closed my straddle for around $-0.76 for a total profit of $0.46. However, I was hoping for a larger profit but in hindsight I should have just taken off the risk when I had the chance.

At this point I'm just looking for a scratch. Another mistake was my account was in the middle of being transferred as well, so I couldn't close even when the stock rallied back briefly. However, enough time passed and there was a slight rally (up to $44), so I ended up closing the trade on 11/28 for -$2.04. So overall I still made $0.68 on the whole trade, without having to make any directional assumptions (i.e. predict the election). When I opened the trade I was only shooting for 50% profit ($0.58) so I'm pretty happy with this result even though I made several mistakes.

I learned how to manage this trade and got the ideas all from watching TastyTrade since July 2016.

There's no IV out there these days, so not doing too many strangles right now. Have a calendar on in SPX and been doing debit spreads in other low IV products. I think the only strangle I have on is NVDA which is bouncing around lately.