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At very volatile times like this I increase the excess for CL to 3X or even 4X.
The 78 + 156 equals 234. Margin on a 70 put is 195 at OX. The premium is $40 higher. So your 234 just barely covers a $5 drop in futures. And maybe even not that if volatility increases and that jacks margin and premium up more than expected.
It sure looks like the buyer of the 300 coffee calls is putting on a hedge. He wouldn't be bidding it so much higher if he was trying to make profit.
Also that is what happened last year. OI went up but OI didn't drop when the buyer could have taken a profit. OI stayed high to expiration.
Also calculating ROI using today's premium but yesterday's margin will get you an incorrect ROI. If the premium is higher you can be assured that margin will be higher tomorrow.
It's best to use yesterday's settlement price for the option when calculating ROI and figure that margin and premium will move at about the same rates up or down.
cannot see how they can wind down QE for at least another 2 years - they are stuck in the biggest rut ever, who buys the bonds then? interests rates will have to rise which means they will default on their debt. inflation is now their friend - the race by the CBs to devalue their fiat currencies has been going on for last cpl of years. and heres most normal ppl thinking inflation is bad, bernanke says its good.
the massive overnight sell off in asia/japan was mainly driven by the JGB futures market being halted twice due to massive sell offs. japanese banks hold most the debt, and now they are undercapitalised due to price crash. japan is completely screwed.
theres some good vids online of kyle bass seminars explaining the japanese situation & why it cannot be rescued.
Hi homerjay,
sorry for v delayed response, just going through saved posts in this thread - so many good posts to wade through!
some questions if you have time to answer:
1. is your position sizing based on the Van Tharp method? His book is not in print, and cannot seem to find anywhere online. can you provide some basic detail re how you position size?
2. re the big GC sell off in april - did you have an open position? if so how did you manage the exit? and how did it impact your margin requirements?
3. do you put both ends of the reverse diagonal trade on @ the same time or do you wait for a possible rebound after a high vol move to get favourable price on the 2nd leg?
4. the bid/offer spread is often quite wide do you put your spread orders in @ midpoint? or do you try & work out fair value price? eg + OCT13 122 Call - NOV13 120 Call is -0.17 bid @ -0.01, wld you be happy to put a bid in close to the midpoint say @ -0.10?
5. re volatility measurement - are you using std deviation over the DTE for entry? also to manage trades do you use the greeks? & is that at portfolio level or on security / trade level?