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Naked Strangles On Weekly SPX Options


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Naked Strangles On Weekly SPX Options

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  #1 (permalink)
WarrenGekko
Houston, TX
 
 
Posts: 4 since Sep 2011
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well I have been trading options for a year now for meager gains, I havent tried anything to complex yet, however I came across this strategy in a newsletter (Naked Strangles On Weekly SPX Options), I've back tested 3 years back and it seems to easy. Does anyone on here have any experience doing this? If so how does/did it work for you?

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  #3 (permalink)
 Delta_Panther 
Switzerland
 
 
Posts: 112 since Aug 2009



WarrenGekko View Post
well I have been trading options for a year now for meager gains, I havent tried anything to complex yet, however I came across this strategy in a newsletter (Naked Strangles On Weekly SPX Options), I've back tested 3 years back and it seems to easy. Does anyone on here have any experience doing this? If so how does/did it work for you?

Hi

This only happens when you do not know your break evens on each side and when you not understand what vega is. Other wise you not will be hit in a bad way. (Just to comment on the smilies)

You write about naked strangles. If now with SPX options or from other markets doe's not make to much different. But what makes the different is if you now mean short or long strangles.

If short: Sideway market with low vola, risk uncapped.

If long: Neutral markets with high vola, risk capped

Both ways are usually traded with otm options. There are different ways to implement such strategies, but as you are a beginner, stay with what is shown in the books and free learn videos.

I do not know, what software you used to back test it, but you should have recognized the break even points on each side. Be sure, that you know how to adjust on those levels in case the market moves to much to one side.

Delta_Panther

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  #4 (permalink)
WarrenGekko
Houston, TX
 
 
Posts: 4 since Sep 2011
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A Naked Strangle is selling/writing both an OTM put & OTM call. I want to write them 2-3 days before expiration on the SPX weekly hoping to have the index be confined to a tight range and the options sold expire worthless so I can pocket the premium. That is the strategy in more detail.

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  #5 (permalink)
 Delta_Panther 
Switzerland
 
 
Posts: 112 since Aug 2009


WarrenGekko View Post
A Naked Strangle is selling/writing both an OTM put & OTM call. I want to write them 2-3 days before expiration on the SPX weekly hoping to have the index be confined to a tight range and the options sold expire worthless so I can pocket the premium. That is the strategy in more detail.

An other way to trade short strangles with lesser risk as planed by you is to do it with otm options far out of the month. You can do that on any future. You keep them for two months and then you buy them back before they represent the current month. In that way you reduce the risk, that they may suddenly go in to the money in the last few days before expiring and then it will be expensive to buy them back.

Delta_Panther

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  #6 (permalink)
kkjalan
Kolkata , India
 
 
Posts: 23 since Feb 2012
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WarrenGekko View Post
A Naked Strangle is selling/writing both an OTM put & OTM call. I want to write them 2-3 days before expiration on the SPX weekly hoping to have the index be confined to a tight range and the options sold expire worthless so I can pocket the premium. That is the strategy in more detail.

I dont think this will be rewarding as one sharp correction or rally will wipe off ur seasons earnings, if you are expecting the markets to be range bound better do a short straddle as they are high Theta items and will decay pretty fast in the last week.

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  #7 (permalink)
 Delta_Panther 
Switzerland
 
 
Posts: 112 since Aug 2009


kkjalan View Post
I dont think this will be rewarding as one sharp correction or rally will wipe off ur seasons earnings, if you are expecting the markets to be range bound better do a short straddle as they are high Theta items and will decay pretty fast in the last week.

Hi

I see you are from India. May I ask you if you trade options in India or in the USA ?

I was told, that option theory in India not really works, as even atm Nifty options have a delta which Nifty not even makes in one day.

Delta_Panther

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  #8 (permalink)
kkjalan
Kolkata , India
 
 
Posts: 23 since Feb 2012
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Delta_Panther View Post
Hi

I see you are from India. May I ask you if you trade options in India or in the USA ?

I was told, that option theory in India not really works, as even atm Nifty options have a delta which Nifty not even makes in one day.

Delta_Panther

Not true, the system and formulas works same as in USA or any other market, but u have limited market depth apart from exchange options.


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  #9 (permalink)
 Delta_Panther 
Switzerland
 
 
Posts: 112 since Aug 2009


kkjalan View Post
Not true, the system and formulas works same as in USA or any other market, but u have limited market depth apart from exchange options.


I prefer to sell straddles far out of the month like two ore three months. As the system is the same, I also could do that in India?

I heard, that short selling in India needs huge margins. Is that true and why, as a short straddle is made out of a put and a call and in that way I am protected to a certain level.

Delta_Panther


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  #10 (permalink)
kkjalan
Kolkata , India
 
 
Posts: 23 since Feb 2012
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Delta_Panther View Post
I prefer to sell straddles far out of the month like two ore three months. As the system is the same, I also could do that in India?

I heard, that short selling in India needs huge margins. Is that true and why, as a short straddle is made out of a put and a call and in that way I am protected to a certain level.

Delta_Panther

Symbol,Series/Expiry,Option Type,Strike Price,Best Buy Qty,Best Buy Rate,Best Sell Rate,Best Sell Qty,Last Traded Price,
NIFTY 28-Jun-12 CE 5900 5000 133 160.4 200 130
NIFTY 28-Jun-12 CE 5800 50 178 197.35 200 253.45
NIFTY 28-Jun-12 PE 5400 100 200 219.95 100 200
NIFTY 28-Jun-12 PE 5300 50 173 190 50 171

Nifty mar future is trading at 5537

its not true, that short selling have huge margins, for example if u sell both OTM CE and PE then ur margin will be INR 15000 (approx) per lot (lot size is 50).

So u are paying 30000 margin for 553700 exposure 5.4%

this is apart for your MTM,

I dont know about foreign markets but this seem reasonable.

what say

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 Delta_Panther 
Switzerland
 
 
Posts: 112 since Aug 2009


kkjalan View Post

Symbol/Expiry/Opt Type/Strike Pr/Qty/Best Buy/,Best Sell/,Sell Qty/,Last Traded Price,
NIFTY 28-Jun-12 CE 5900 5000 133 160.4 200 130
NIFTY 28-Jun-12 CE 5800 50 178 197.35 200 253.45
NIFTY 28-Jun-12 PE 5400 100 200 219.95 100 200
NIFTY 28-Jun-12 PE 5300 50 173 190 50 171

Nifty mar future is trading at 5537

its not true, that short selling have huge margins, for example if u sell both OTM CE and PE then ur margin will be INR 15000 (approx) per lot (lot size is 50).

So u are paying 30000 margin for 553700 exposure 5.4%

this is apart for your MTM,

I dont know about foreign markets but this seem reasonable.

what say

Hi

Will contact the person and ask him about this case. Let you know, what he thinks about it.

Delta_Panther

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  #12 (permalink)
kkjalan
Kolkata , India
 
 
Posts: 23 since Feb 2012
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Delta_Panther View Post
Hi

Will contact the person and ask him about this case. Let you know, what he thinks about it.

Delta_Panther

I didnt get you?

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  #13 (permalink)
 Delta_Panther 
Switzerland
 
 
Posts: 112 since Aug 2009


kkjalan View Post
I didnt get you?

Hi

The data you show me are good for different strategies but not for a short straddle. Any way, data are data and nothing else. The point now is, that in reality people in India are not used to trade far out of the month strategies as the slippage is bad and liquidity will be very low.

So, are you going to take such trades in your home market? If so, let us know how you did.

Good trading

Delta_Panther

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  #14 (permalink)
kkjalan
Kolkata , India
 
 
Posts: 23 since Feb 2012
Thanks: 18 given, 7 received


Delta_Panther View Post
Hi

The data you show me are good for different strategies but not for a short straddle. Any way, data are data and nothing else. The point now is, that in reality people in India are not used to trade far out of the month strategies as the slippage is bad and liquidity will be very low.

So, are you going to take such trades in your home market? If so, let us know how you did.

Good trading

Delta_Panther

Very truly said, people here trade on near month options only,

No I don't take and directional trades, I am more interested in low risk low return arbitrage opportunities ( Basically a day trader) ,

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  #15 (permalink)
bobbyd1
Albuquerque, NM / USA
 
 
Posts: 1 since Mar 2013
Thanks: 1 given, 0 received

Warren,

Is there any way I can get a copy of this article you mentioned in your post?

I want to test this strategy.

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