My prediction about the VIX jump was spot on (unfortunately). It's been an absolute blood bath at the markets today (and the previous few days). The fact that the SPY is down nearly 9% in 4 trading days is a huge move.
The key risk for options traders in situations like this is the rapid volatility expansion (the VIX jumped up). You might have sold a really wide strangle against a solid underlying but, due to the volatility expansion, the price of options also jump up leaving your account in negative territory.
If the right reserves were not maintained then traders can easily find themselves in desperate situations and either forced to close deals at a loss or roll out to another month much sooner than planned.
On the flip side, when the volatility is high then option traders collect a lot more premium.
So what's my trade for today?
#XLE (#EnergyETF). The price and flow of energy is a massive challenge nowadays globally so naturally the volatility is quite high. I decided to go with a really wide strangle to keep my account safe but still receive decent credit.
The stats
Trade Type: Short Strangle
Strike: $70 / 95
Expiry: 15 Jul
Delta: -7
IV Rank: 81.4
Premium: $1.42
Cap Req: $852
Annualised Prof at Expiry: 190%
IMPORTANT: Studying previous trades provide the opportunity to everyone to learn a great deal so I encourage you to click on the links below and digest the info.
https://www.tycoonitos.com/community/market-comments/market-comments-20220419
https://www.tycoonitos.com/community/market-comments/market-comments-20220602
https://www.tycoonitos.com/community/market-comments/market-comments-20220330
https://www.tycoonitos.com/community/market-comments/market-comments-20220524
https://www.tycoonitos.com/community/market-comments/market-comments-20220420
https://www.tycoonitos.com/community/market-comments/market-comments-20220609
https://www.tycoonitos.com/community/market-comments/market-comments-20220421
https://www.tycoonitos.com/community/market-comments/market-comments-20220520
Let me know your thoughts.
What a winner!
After 8 months of battle I was able to close this trade at $1.12 for an annualised profit of 32%.
This is a catch up post from 10/Feb.
Rolled up the put side to $88 for $0.34 credit.
Current position: Feb $88 straddle.
Total credit: $5.01
Rolled up the put side to $86 for $0.49 credit.
Current position: Feb $86p/88c
Total credit: $4.67.
Rolled to Feb $83p/88c for $0.04 credit.
Total credit: $4.18.
Rolled to Jan $88/88 straddle for $0.51 credit.
Total credit: $4.14.
I was hoping that this would retreat a bit but it just keeps marching upwards.
Rolled to December $90/85 for $2.19 debit.
Total credit: $3.63.
I am chasing my tail with this one. It just keeps going up.
Rolled up my put side to $90 for $0.67 credit so I am now inverted the Nov $90p/80c.
Total credit: $5.82.
Rolled up the put side to $86 for $0.47 credit.
Total credit: $5.15.
Rolled up the put side to $83 for $0.73 credit.
Total credit: $4.68.
Rolled up the the put side to $79 for $0.38 credit.
Total credit: $3.95.
Rolled up the put side to $76 for $0.52 credit.
Total credit: $3.57.
Rolled up the put side to $73 for $0.49 credit.
Total credit: $3.05
Rolled to November $70 / 80 strangle for $4.18 debit.
Total credit: $2.56.
Rolled down the call side to $78 for $0.31 credit.
Total credit: $6.74.
Rolled to Oct $80/80 for $1.57 credit.
Total credit: $6.43
Rolled up the put side to $77 for $0.67 credit.
Total credit: $4.86.
I am expecting an upwards movement so I rolled both the put and the call side up.
Rolled to Sep $75 / 77 for $0.49 credit.
Total credit: $4.19
Rolled down the call side to $70 for $0.47 credit.
Total credit: $3.70
Rolled down the call side to $75 for $0.76 credit.
Total credit: $3.23
Rolled to Aug $70/78 strangle for $0.39 credit.
Total credit: $2.47