I always do spreads to neutralize the VIX. So I first have to look for what level I think it is going too end up at first, and that's the level I would sell. Then I buy a level somewhere around the money. The time left before opx is important, as the closer it is, the more likely I will buy the “at the money” or one strike “in the money”.
Since we are 3 weeks from opx, I felt comfortable buying the 118 May put yesterday, and selling the 112 (knowing that it's not going past that level before opx).
Yesterday, the spy was at 120.50 level when I bought the 118/112 spread, which is 2 points out of the money. But, I did that because we are 3 weeks away from opx. When it's only one week, I might have bought the 121, and sold the 115 or something.
The time factor is important, as you don't want to be caught without enough time left for the market to go below your strike price. Since 121 would have already been 50 cents in the money, as long as it didn't go higher, I'd still make some money.
Red, SC, why would you ever buy out of the money puts? Let's say SPX gets to 1184 and I have a strong suspicion we go down significantly from there. Would i always buy 119 puts at that level? Or would I buy 118 or 117 puts because the premium is so much lower? And, does it make sense to buy options when the VIX is so high (premiums get higher, no?)
We tagged the 50ema perfectly today, so that's why I sold my put spread. I'd like to see a small pop tomorrow, or late today. I'll re-enter short again with a downside target of 115.00 spy.
LOng SPY and GS
Just went long hold til opex. …. To new highs.
Might buy some GS too
http://stockcharts.com/h-sc/ui?s=gs
Monica,
I always do spreads to neutralize the VIX. So I first have to look for what level I think it is going too end up at first, and that's the level I would sell. Then I buy a level somewhere around the money. The time left before opx is important, as the closer it is, the more likely I will buy the “at the money” or one strike “in the money”.
Since we are 3 weeks from opx, I felt comfortable buying the 118 May put yesterday, and selling the 112 (knowing that it's not going past that level before opx).
Yesterday, the spy was at 120.50 level when I bought the 118/112 spread, which is 2 points out of the money. But, I did that because we are 3 weeks away from opx. When it's only one week, I might have bought the 121, and sold the 115 or something.
The time factor is important, as you don't want to be caught without enough time left for the market to go below your strike price. Since 121 would have already been 50 cents in the money, as long as it didn't go higher, I'd still make some money.
Hopefully that makes more sense to you now…
Red, SC, why would you ever buy out of the money puts? Let's say SPX gets to 1184 and I have a strong suspicion we go down significantly from there. Would i always buy 119 puts at that level? Or would I buy 118 or 117 puts because the premium is so much lower? And, does it make sense to buy options when the VIX is so high (premiums get higher, no?)
Either way you will make money.
You're right Monica, no backtest…
Well, I'm patient, and will wait until the EOD to see what plays out.
then again, look what happened last time we tagged the 50ema.
Probably smart especially since GS is barely down. I just figure expect the unexpected so I figure if I have to ride a wave up again, I will.
We tagged the 50ema perfectly today, so that's why I sold my put spread. I'd like to see a small pop tomorrow, or late today. I'll re-enter short again with a downside target of 115.00 spy.
http://stockcharts.com/def/servlet/Favorites.CS…
Yes. You got it. 🙂