Welcome to NexusFi: the best trading community on the planet, with over 150,000 members Sign Up Now for Free
Genuine reviews from real traders, not fake reviews from stealth vendors
Quality education from leading professional traders
We are a friendly, helpful, and positive community
We do not tolerate rude behavior, trolling, or vendors advertising in posts
We are here to help, just let us know what you need
You'll need to register in order to view the content of the threads and start contributing to our community. It's free for basic access, or support us by becoming an Elite Member -- see if you qualify for a discount below.
-- Big Mike, Site Administrator
(If you already have an account, login at the top of the page)
I might be off on this, so the more seasoned guys please correct me... but wouldn't most event-based trading strategies work better if one were to be long rather than short strangle? I mean, if the intent is to capture a move on increased volatility, wouldn't being long both a put and a call be a better strategy?
Of course, position management will become quite important and understanding fundamentals is important as well, but just curious whether event-based strategies are more of a long play rather than a short one?
I buy options very rarely, and this is the reason why I cannot answer the part of your question regarding buying options.
Selling options before an event is risky. I prefer to sell options just after an event or report, when volatility is still at an increased level, but the outcome of the event is already known. Eg., I added to my short ES puts after the open in New York, as the result of the French elections to me seems rather safe.
One problem remains: If there is an event or a report when I am short options longterm, I have to decide if I stay in the trade, reduce postions, or exit before the event. I make this decision case by case.
Buying options before an event might bring the problem of decreasing volatility after the event. The price of the underlying might move, which is favourable for a long strangle. But due to the decreasing volatility there remains a loss.
Currently I hold the following positions in the short options portfolio:
LHM P66
LHQ P64
Longterm trades.
KWN P4.1
Took profit on the last trade around 50 %, and re-entered. (Third entry, after taking 50 % profit twice.) Weather Looks short-term favourable, but a lot of old crop HRW around.
CCU P1600
Intend to take profit at 50 %.
CTZ C90
Intend to take profit at 50 %. Good marketings, but very large new corp not only from the US.
NGQ P2.6
NGQ C4.5
Large position, I have a lot of confidence that NG will move more or less sidewards for some weeks. Took profit on part of the NG positions (NGN puts, NGU calls)
I just closed the Ron99 ES Spread yesterday, and will enter next week again, in the probably misguided hope that volatility will pick a bit up for the French election.
I am also planning to sell puts on ZN next week.
Since volatility in the futures is mostly quite low, I also started to have small positions in stocks
JNJ May26 P117
QQQ Jun16 P129
All in all I have a harder time than usual to find good trades. Possibly I am too cautious.
I subscribed to MRCI now and will use their info for more ideas. And of course the indo provided here and on Ron's thread.
There will be times when you find more trades, and others where it is difficult to find good trades. For option sellers it is important to have a large percentage of winners. Thus, being coutious is important. You should also understand what is going on in the markets you trade. And there are times when it is simply not possible to understand before (!) entering a trade what is going on, eg. weather markets in the grains, or political events.
There will also be trades that you miss, because your entry level is not hit. Let them go - there are so many more trades.
for $400-420 each during the limit-up phase. Yesterday the LCQ C123 had settled at $400 - this is 5 points lower. I assume regular trade tomorrow (no limit move), and volatility to collapse.