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Vega - the change of implied volatility of the underlying that effects the option price. Longer dated options are exposed to possible more volatility and their Vega is greater. That's why I usually try to sell around 2 months out to take advantage of Theta decay and be less exposed to Vega risk.
Example: 10 1950 Oct Put Delta -.20 is ~ the same as 48 1650 Nov Put Delta -.03, in option value
With a 5% drop in /ES, the 48 1650 Nov puts vega is more than twice as much as the 10 1950 Oct puts (plus 4.8x more commissions)
Volatility is good for the market and trading.
Preservation of capital is the most important concept for those who want to stay in the trading game for the long haul. - Van Tharp
When your IM decreases, probably you are showing a gain in your position and a period of time has passed.
The DTE has decreased to the point that you will not want to enter these same type positions. If you have extra margin,
you might want to look for a new/different position if conditions warrant it.
Yes possibly! and this could be the correction needed to make ATH. Doom and gloom because oil is at @41, I'm take my chances on the long side for now and see how this plays out. The one thing I have learned - in a bull economy is days like these are the best time to sell options. Even with a range day tomorrow, IV will more than likely go down.
I try to tune out the news headlines - yuan devaluations, slowing growth in china, fed uncertainty, oil @$41. And focus on the fundamentals, yes there were some lower than expected earnings but overall earnings are still strong, so is employment, housing, and overall growth.
Volatility is good for the market and trading.
Preservation of capital is the most important concept for those who want to stay in the trading game for the long haul. - Van Tharp
I going to hold off on the /ES puts, because I just bought some equities. IMO this is good buying opportunity to improve cost basis (AAPL down almost 6%).
My 1920 put has now doubled in price and the 1915 is more than double, going hold onto these for right now.
This is Nov 1650 put that was $2.90 a few days ago:
Volatility is good for the market and trading.
Preservation of capital is the most important concept for those who want to stay in the trading game for the long haul. - Van Tharp
Is anyone selling more options with the high VIX? I wanted to on Friday but was at work at my day job. I managed to do it a few weeks ago when CL was going crazy after the first big drop and made up enough to cover loses, but I am only trading very small so it is easy to have confidence and make moves like that.
I am regretting not buying VIX calls when they were super cheap. I had read an article somewhere that said to buy them when they hit lows which they were a week ago.
