With your NDX trade idea (unfortunately I did not take it) , the concept is bringing to light some great things to consider PLUS with legitimate reference and reasoning behind it. You keep spawning some great research (internet) bunny trails (and now you are going to make me actually crack open that Dynamic Hedging book I bought forever ago), and it is exactly what I need. Bravo!
No worries on not taking the NDX trade. So long as you know what to look for and how to enter the trade (w.r.t time, width, size), you will find opportunities every week!
My general rules of thumb are as follows:
1) 10-15 days to expiry at a maximum in most cases.
2) Does the spread price for a credit to close if at-the-money?
3) In the size that you enter the trade, do you have enough capital to maintain the position (i.e., do you exceed the margin requirement if the market moves to that spread)?
Those are a few quick tests you can make before entering. Just price the spread at-the-money. If it's a credit to close, test passed! If margin not exceeded, test passed!
This is my go-to strategy, particularly when I am unsure of what the next market move will be. If up, that's great! I may make money. If lower, no problem! I did not lose that much.
On my desk at all times I have:
- Dynamic Hedging (Taleb)
- The Rise of Carry (Lee et al)
- Positional Option Trading (Sinclair)
- The Second Leg Down (Krishnan)
- Exotic Options and Hybrids (Bouzoubaa et al)
Look forward to staying in touch. Thanks for comment!
Excellent as always.
With your NDX trade idea (unfortunately I did not take it) , the concept is bringing to light some great things to consider PLUS with legitimate reference and reasoning behind it. You keep spawning some great research (internet) bunny trails (and now you are going to make me actually crack open that Dynamic Hedging book I bought forever ago), and it is exactly what I need. Bravo!
So glad to hear!
No worries on not taking the NDX trade. So long as you know what to look for and how to enter the trade (w.r.t time, width, size), you will find opportunities every week!
My general rules of thumb are as follows:
1) 10-15 days to expiry at a maximum in most cases.
2) Does the spread price for a credit to close if at-the-money?
3) In the size that you enter the trade, do you have enough capital to maintain the position (i.e., do you exceed the margin requirement if the market moves to that spread)?
Those are a few quick tests you can make before entering. Just price the spread at-the-money. If it's a credit to close, test passed! If margin not exceeded, test passed!
This is my go-to strategy, particularly when I am unsure of what the next market move will be. If up, that's great! I may make money. If lower, no problem! I did not lose that much.
On my desk at all times I have:
- Dynamic Hedging (Taleb)
- The Rise of Carry (Lee et al)
- Positional Option Trading (Sinclair)
- The Second Leg Down (Krishnan)
- Exotic Options and Hybrids (Bouzoubaa et al)
Look forward to staying in touch. Thanks for comment!