Yes, I am a Blogger

I recognize that writing about trading and investing is a serious business.  But that doesn't mean we cannot take an occasional time out for a little fun.

I had my fun by creating this video and I hope you can get a kick out of it.


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The Rookies Guide to Options

7 Responses to Yes, I am a Blogger

  1. 5teve 04/08/2010 at 10:17 AM #

    Haha, Mark
    That is very creative side of you. I thought you are going to play the piano along with the song. That would be perfect. ^^
    Finally get to own the book, The Rookies Guide to Options. On the chapter of iron condor, you did mention a little bit about CTM iron condor. A trading idea came to my mind, Double Diagonal Spreads with CTM strikes. Sell expiring-month and buy next-month (for a debit). I would like to know your opinions on this kind of trading. (I tried to do virtual trading online to see profit and loss graph. However I was told I have to do two separate spread trade, therefore it requires more margin than regular iron condor. Also I was required approve for trading iron options.)

  2. Mark Wolfinger 04/08/2010 at 11:05 AM #

    5teve,
    (smile)
    1) Double diagonals (DD) do require full margin on each side (calls and puts). There is no sound reason why this should be different from iron condors (IC), but margin rules don’t make much sense anyway.
    2) In a practice account, you don’t have to be concerned with margin. But you must be aware of it at all times.
    3) If you make two separate trades (in practice account) you should be able to see the risk graph for the combination of trades.
    4) Paying a debit for double diagonals is fine. It’s a matter of your comfort zone. Remember that CTM positions can get into trouble more often that ‘regular’ IC or DD.
    There is NOTHING wrong with that. Choosing which options to trade is truly up to you. I offer ideas on different strike prices and expiration months so that you can see the benefits (and risk) of each. I hope that allows you to decide which is better for you.
    Practice trading helps you reach those decisions.
    Thus, CTM DD is fine with me. No objections.
    5) Will your broker give you permission to trade IC and DD?
    Thanks

  3. John 04/08/2010 at 2:24 PM #

    Hi Mark,
    Recently I have some mixed feelings about iron condor, which I think may benefit if I share it out here (and hopefully you have some input that may enlighten me and others who trade IC). While veterans like you have mentioned that IC is not a free lunch, I think I have a way to put this in context. Although IC adjustments are a must for long term success, I believe these adjustments only make deferred losses (aka preventing an immediate loss). If all the positions are closed right after adjustments, then it will result in an immediate loss overall. The deferred losses are piled up as more adjustments are made. Once adjustments are made, then the IC trader hopes that the market will treat him kind so that theta decay is accumulated enough to cover the deferred loss and hopefully have some more left for profit. But hope is not a strategy, as you have said.
    So my conclusions are:
    1) IC does not have a clear advantage compared to other strategies.
    2) The only feature that makes IC looks promising on the hindsight is the upfront collection of premium.
    Mark, I wonder you agree with my point of view.

  4. Mark Wolfinger 04/08/2010 at 2:49 PM #

    John,
    1) I do agree with your point of view
    2) I don’t believe any strategy has a ‘clear advantage’ over most other strategies.
    I have more to say on this topic. Look for it Monday morning.
    Thanks for the question

  5. Jason Preti 04/08/2010 at 11:23 PM #

    Mark,
    How are you dealing with the low volatility in your ICs? I’m finding it hard to open the call side for an acceptable credit. For the last couple of months I’ve only opened Put spreads. All of the call spreads that I considered would have ended errrr poorly… At this point all I can think of is “don’t fight the tape” but I’m not so bullish as to open put spreads CTM.
    Any thoughts?
    -J-

  6. Mark Wolfinger 04/09/2010 at 9:04 AM #

    Hi Jason,
    This is a most difficult problem
    Possible solutions are:
    a) accept less premium for call spreads
    b) find an alternative strategy
    c) compromise: open 1 call spread for every 2 or 3 put spreads. That’s a bullish lean – and can be very uncomfortable.
    d)I have rejected this idea, but it may work for you: Take the other side. Buy the OTM call and put spreads instead of selling them. That does not fit my comfort zone.
    e) I see nothing wrong with selling only put spreads – as long as it continues to work. It’s a short-term plan. I recognize that comfort is important and selling call spreads at low prices has been unrewarding – to say the least.
    Your current plan of selling only put spreads seems ok for now. Just don’t sell too many.
    One thing we must do to survive, is to be flexible. That’s easy to say. But which specific trades should we make when being flexible? That’s the difficult part and the very question you are asking.
    I don’t have a good answer.

  7. Jason Preti 04/09/2010 at 9:43 AM #

    Mark,
    Thanks, I think that was a good answer. You’ve reinforced my decision, essentially e, is ok for the short term.
    Sincerely,
    -J-