03/23/2012 Intraday Watering

[Cobra]

remember the key to my plan is the rebound cannot go decisively higher high.

[SWalsh]

I know there are some options traders here, so I thought I'd ask...

I've been doing a very simple options strategy for a few months and have had success, and it seems too "low risk" that I must be overlooking something.

I sell a call above the stock price, and sell a put below stock price betting that the stock will stay in the range, and both will expire worthless.

I manage it by if the stock reaches my call price I buy the stock, and sell it if it goes back into my "range" . Inversely if it falls to my put price I short the stock, and cover my short when it rises back above my put price.

So, even if it goes out of my range, my risk is covered. I do this when I have the cash in the account to cover buying or shorting the stock to manage position. What am I missing besides overnight gaps?

A Black Swan that causes a bank holiday? You have, unless I read that incorrectly, a naked credit option position that you wrote. If it were a debit your risk is limited to 100% of your investment, but that is definable.

What happens if the market closes and the stock opens 50% lower? Nassim Taleb, PhD mathematician and money manager who wrote about Black Swan events, always had some type of coverage in the event the unforeseeable happened. There's no need to answer this exactly, but what happens to you, financially, if the market is closed for a week? BTW, he does not define the collapse of the WTC as a Black Swan. After 1993 I predicted they would fly planes in the next time. A friend of mine was retired Secret Service and had escaped the fall by evacuating. On a boat over to NJ he called me to apologize that he had laughed at me often for thinking such a thing could happen. What could happen now? I have no idea. But I chose to not write naked options.

[knurbs]

Nice try with the Head fake. No volume in this market since late morning.

[Cobra]

made the 1st core I guess.

[trader0303]

I know there are some options traders here, so I thought I'd ask...

I've been doing a very simple options strategy for a few months and have had success, and it seems too "low risk" that I must be overlooking something.

I sell a call above the stock price, and sell a put below stock price betting that the stock will stay in the range, and both will expire worthless.

I manage it by if the stock reaches my call price I buy the stock, and sell it if it goes back into my "range" . Inversely if it falls to my put price I short the stock, and cover my short when it rises back above my put price.

So, even if it goes out of my range, my risk is covered. I do this when I have the cash in the account to cover buying or shorting the stock to manage position. What am I missing besides overnight gaps?

A Black Swan that causes a bank holiday? You have, unless I read that incorrectly, a naked credit option position that you wrote. If it were a debit your risk is limited to 100% of your investment, but that is definable.

What happens if the market closes and the stock opens 50% lower? Nassim Taleb, PhD mathematician and money manager who wrote about Black Swan events, always had some type of coverage in the event the unforeseeable happened. There's no need to answer this exactly, but what happens to you, financially, if the market is closed for a week? BTW, he does not define the collapse of the WTC as a Black Swan. After 1993 I predicted they would fly planes in the next time. A friend of mine was retired Secret Service and had escaped the fall by evacuating. On a boat over to NJ he called me to apologize that he had laughed at me often for thinking such a thing could happen. What could happen now? I have no idea. But I chose to not write naked options.

SWalsh, okay you bring up a very good point that makes me second guess my "brilliant" plan. Thanks for the reply But the way I see it.....holding an equity overnight exposes you to the same "black swan" event. Do you never hold an equity overnight without a protective corresponding option?

[Petsamo]

I've always known Fridays to be non-bearish. Da bears made their attack and left early for the weekend

[stucap]

Target -- the channel -- no doubt.

Can't break support must test resistance ASAP even if it's 1% away (from support). I think the market has one of those crazy OCD things about touching things....

[Cobra]

key time, a decisive higher high then i'll need a new plan. small higher high is ok.

[Harapa]

IWM is looking good. Break out of what looks like a bullish flag could be significant.

[shumushu]

trendy day, looks like market wants to fill the gap at and close the weekly at 1400 or 1404.

[uempel]

Update:

[Petsamo]

Maybe SPY is trying to fill a gap made between Wed & Thurs

http://www.marketwatch.com/investing/fu ... style=1013

[TraderGirl]

SPX...

[BullBear52x]

IWM is looking good. Break out of what looks like a bullish flag could be significant.

This is what I got on IWM, one more push, a little strong one. I don't see it will be done today unless they try to gap Monday

[Harapa]

IWM is looking good. Break out of what looks like a bullish flag could be significant.

This is what I got on IWM, one more push, a little strong one. I don't see it will be done today unless they try to gap Monday

What do you think of the bullish flag idea?

[jarbo456]

ok...who wants to buy TVIX with me now?

[TraderGirl]

NDX looks like it needs another leg down too...

[Richarab]

ok...who wants to buy TVIX with me now?

lets do this! all in baby!

[xiakeman]

Tvix intrinsic value is still lower
http://finance.yahoo.com/q?s=^tvix-iv&ql=1

[jarbo456]

ok...who wants to buy TVIX with me now?

lets do this! all in baby!

what an f'n nutty asset...is it now trading below implied value?