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Options education
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Options education

  #21 (permalink)
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val2004 View Post
what is the edge for the STUDD strategy ?

The edge the way I see it: If you initiate the original diagonals at intrinsic value for the long options. You keep the premiums from the weekly short options. At IB I can call then put 100 shares of stock for $1.00 and get my intrinsic value back. But one may have to adjust the short options during the week to stay profitable.


energetic View Post
anymore beacktest result ?

I do not have any results yet to back up my hypothesis.

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  #22 (permalink)
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Tiberius View Post
Found this new strat. Actually, someone gave it to me. If anyone wants to review it, test it or comment on it, please do. I did a tracking spreadsheet on it as I did the first trade for the option strategy.

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That's from Terry Allen's site (Trading Rules for New 5%-a-Week Strategy | Terry's Tips Stock Options Trading Blog) if anyone wants to learn more about it. Terry is one of the good guys.

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  #23 (permalink)
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Some visualization


Hi

Stuud visualized.

I did a rough analyzes from the idea. I do that to see and understand clearly with what I deal. In this case it is a combination of a diagonal put and a diagonal call . If I would implement that strategy, I would have to treat each side ( Diagonal call and diagonal put ) separately.

As the strategy deals with sold options, volatility is a very important point to watch. If the option volatility falls and we are not aware of that, we will get in troubles. Better would be if the option vola would rise. Following a few screen shots, which give a rough picture about the above comments and the Stuud strategy.

That is the main idea behind it: http://i43.tinypic.com/16h6tle.png

That is the main analyze picture with that positions: http://i42.tinypic.com/35hfpli.png

That is the same position after option volatility rised: http://i40.tinypic.com/23w07sp.png ( We are far more above the zero line compare to the last picture. By the way: Being and coming over the zero line is the main target in any option strategy which is implemented )

Diagonal call, which is one part from the strategy: http://i40.tinypic.com/n1weu9.png

Analyze picture from the diagonal call : http://i41.tinypic.com/6r7hj9.png ( You see, that the right foot has moved up and is more near the zero line compare to picture two and three. This happens because of the different risk profile from a pure diagonal call compare to the whole Studd idea ).

Have a nice weekend

Delta_Panther


Last edited by Delta_Panther; January 15th, 2012 at 04:46 AM. Reason: In jargon they are called : Diagonals and not calendars. It is a bit like blue and bluish.
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  #24 (permalink)
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gibbs View Post
Terry is one of the good guys.


Forums - Terry's Tips - A Cautionary Tale
http://www.sec.gov/litigation/complaints/comp19291.pdf
SEC v. Terry's Tips and Terry F. Allen: Lit. Rel. No. 19725 / June 13, 2006

Math. A gateway drug to reality.
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  #25 (permalink)
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Delta_Panther View Post
Hi

Stuud visualized.

I did a rough analyzes from the idea. I do that to see and understand clearly with what I deal. In this case it is a combination of a long put calendar and a long call calendar. If I would implement that strategy, I would have to treat each side ( Put calendar and call calendar ) separately.

As the strategy deals with sold options, volatility is a very important point to watch. If the option volatility falls and we are not aware of that, we will get in troubles. Better would be if the option vola would rise. Following a few screen shots, which give a rough picture about the above comments and the Stuud strategy.

That is the main idea behind it: http://i43.tinypic.com/16h6tle.png

That is the main analyze picture with that positions: http://i42.tinypic.com/35hfpli.png

That is the same position after option volatility rised: http://i40.tinypic.com/23w07sp.png ( We are far more above the zero line compare to the last picture. By the way: Being and coming over the zero line is the main target in any option strategy which is implemented )

Call Calendar or also called : Calendar Spread, which is one part from the strategy: http://i40.tinypic.com/n1weu9.png

Analyze picture from the call calendar : http://i41.tinypic.com/6r7hj9.png ( You see, that the right foot has moved up and is more near the zero line compare to picture two and three. This happens because of the different risk profile from a pure calendar spread compare to the whole Studd idea ).

Have a nice weekend

Delta_Panther

I don't see the calendars in the spreadsheet, I only saw two diagonals in the spreadsheet and your images. What calendars are you talking about ?

Math. A gateway drug to reality.
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  #26 (permalink)
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Hi @traderwerks

Yes, you are very right and thanks to mention it. In jargon, there is a diagonal call and there is a calendar call and we should not confuse them. I changed the names now in the mentioned post from you to diagonals, as we must be correct with names. There are so many names for option strategies and often the name changes when nearly nothing is changed in the strategy by it self..Here we only change the name because the long term options is itm and not atm like the short term options.

In jargon, for a diagonal call we use long term deep in the money calls ( which substitutes the share ) and sell short term higher strike calls. And this exactly is what is shown here: http://i40.tinypic.com/n1weu9.png

( As I did a rough analyzes, I only recognized the short term and long term option and valued it as calendar spread with out thinking about the itm options and atm options. Sorry, my mistake )

Even than, it doe's not change any thing the way I look at the strategy. The different names of the spreads mean nothing to this view. It is like moving from blue to bluish and nothing more or less.

The risk profile in any strategy is one primary point and the way the strategy is implemented in the market is an other primary point.

Delta_Panther


Last edited by Delta_Panther; January 15th, 2012 at 04:58 AM.
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  #27 (permalink)
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I guess we all have different terminology.

Math. A gateway drug to reality.
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  #28 (permalink)
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Risk

I am new at using the IB Risk Analysis. But here it goes. My simple SPY Stuud Strategy. My potential is the red/pink dashed line.

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  #29 (permalink)
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Hi Zsike

Your potential is also your risk. Why? Do you have any possibility to change the volatility parameters in your software?

If so, do it to see what happens if vola goes up and if vola falls.

After that make once a test and implement the strategy at the begin only with one diagonal and after market moved, implement the second diagonal.

I am not sure if you can test such scenarios with your software. If so, also see what happens then and check the margins.

Take care and good luck

Delta_Panther

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  #30 (permalink)
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Risk or Reward?


Thanks @Delta_Panther. I am going to work with this aspect of IB TWS with your suggestions and drill down in the user guide. I am going to leave this window open during by trading day to adjust if I must. I am currently in Florida, USA. Thank you warm weather.

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My other Stuud strategy.

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