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Bear in High IV

4 replies, 2 voices Last updated by John Locke 1 year, 2 months ago
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    • #15951

      David Oleksy
      Participant
      @dave@doleksy.com
      Points: 300
      Rank: Freshman

      Maybe an example will help.

      Let’s say I have entered my first 1/3 with my short strikes at 1000 (with the market at 1020).

      If the market goes to 1060 it has moved past my first addition point and is now at the 2nd addition point. Would I now enter a full position with butterflies at 1020 and 1040? From your reply I think the answer is yes but I want to make sure.

       

      • #15957

        John Locke
        Keymaster
        @john-locke
        Going to The Trading Triangle LIVE 2016Locke In Your Success CoachAPM2Trade JournalsUltimate Income Trader Workshop

        Yes that sounds correct

    • #15937

      David Oleksy
      Participant
      @dave@doleksy.com
      Points: 300
      Rank: Freshman

      I see you may have answered my questions in this week’s Options Trading for Income episode (for the BB). In the episode you perform a double-roll. Would you treat entry differently? A double-entry?

      • #15938

        John Locke
        Keymaster
        @john-locke
        Going to The Trading Triangle LIVE 2016Locke In Your Success CoachAPM2Trade JournalsUltimate Income Trader Workshop

        HI David, yes that is a common question and we would handle it the same as the Bearish Butterfly in OTFI. Basically if you surpass multiple adjustment points, you simply determine the ending position you “should be in” at the new price level and then go directly into that position without actually adding and/or rolling at each adjustment trigger.

        I don’t know what you mean by treating the entry different or using a double entry.

         

    • #15936

      David Oleksy
      Participant
      @dave@doleksy.com
      Points: 300
      Rank: Freshman

      Following on from my previous post, this time The Bear in our current High IV environment.

      In the current environment what would you do if we blow past the first addition point to the second addition point? I can see a couple of options:

      1. Add both additional thirds at once.
      2. Add 1 additional third at the entry position for the 2nd third (+60 from entry short strike instead of +40)
        1. I guess this would then push out the 2nd third also (and the following rolls)

      I haven’t started trading these yet but I guess I could back-trade year-to-date both ways and see what happens.

       

      ~dave

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