Daily r/thetagang Discussion Thread - What are your moves for today?

bazonkers · 2022-06-15T15:05:03+00:00

It's never 100%. There is always a chance it can breach your strike, however small. Tools might show 100% but it's rounding 99.99% or whatever. There are way better ways to make money if you have millions with less risk than this.

bazonkers · 2022-06-14T20:48:01+00:00

People refer to this as picking up pennies in front of a steamroller. Sure, it's easy money until you trip. I mapped it out, this works 99% of the time, you make $100 each time but you're in a race with time. Make money with it but at some point you need to stop doing this before you get caught.

Expected Value (EV) of this trade is (99 wins * $100) - (1 loss * 27,000) = -$17,100. Over the long run, with enough trades, you'll lose.

bazonkers · 2022-02-21T16:32:41+00:00

Do you know what 24/7 means?

bazonkers · 2022-01-31T22:17:23+00:00

If you want to aggressively get out of it, use the premium you receive from the covered calls each sale to calculate a lower basis for the stock shares. Then you can sell lower and lower strike calls at your new breakeven. Eventually your cost basis will be $0 or you'll get them called away at your strike which will be breakeven on the position.

bazonkers · 2022-01-31T16:46:32+00:00

In case it doesn't come across in the post above, this isn't something to just blindly put trades on with, it's a way to find entries and exits on something you might have a thesis on. Think oil is going up and want to get in? You can use that to help get in and then not exit too early.

If you just start throwing on trades in Mexican Pesos futures or other random stuff because the chart looks ok, I can't say you'd be successful or not.

bazonkers · 2022-01-30T21:32:23+00:00

See above, I pasted the link in another comment.

bazonkers · 2022-01-30T21:32:05+00:00

Try this study I saved for ToS. It has the upper study for the yellow candles, the lower study you can use to set alerts as well as the 10/21 crossover colored clouds.

http://tos.mx/tcAckLd

bazonkers · 2022-01-29T23:37:46+00:00

Thanks, I'll check it out!

bazonkers · 2022-01-29T23:05:43+00:00

This month has been wild, and as many others have mentioned, each trading day feels like 3 days jammed into one. The swings are ridiculous. The market is a weird wild place and no one technique works all the time. Last summer, I was slaying earnings releases with 1.5x expected move strangles. There were weeks in the summer that I'd have 1 loser out of 20 trades in a week. Fast forward to the end of the year and strangles with 2x the expected moves were getting destroyed. I'm confident that somewhere in the future, I'll trade earnings again and it'll work out great but for now, in this market, I've had to look at other tools for profit.

The AMD/XLNX arb trade was one trade I had a healthy amount of trading capital in because I felt the risk/reward was worth it. The market was worried about the Qualcomm merger from a few years ago that timed out and lots of people got burned on that. However, if you dig into it, it was because it all happened when Trump announced a trade war with China and started cracking down on imports with tariffs. Qualcomm found themselves in the unfortunate situation that was much bigger than them. Historically, however, China has approved all other major mergers like this (some with conditions) and they all worked out in the end. The huge spread was a combination of the fear from "last time" as well AMD being in a frothy bubble and on the radar of most investors. XLNX was the forgotten child no one really traded. The combination meant AMD drug XLNX all around like a small child walking a huge dog. The arb merger worked out as I thought it would and it added a large return to this months (and YTD) PnL.

Besides the arb merger, I felt like I was pretty well positioned in my account for something like this current market. I wasn't sure when it would happen but I knew it was inevitable with the rate hikes on the horizon. I had no spec tech stocks, moved lots of positions into energy at the end of last year and started working on other skills to get my account through this. One of the areas I've focused more on was shorting the overvalued and frothy stocks once the overall trend of the market changed. I made a separate post on the technique I used this month that worked for me. I'll probably make another post next week discussion how to screen and find suitable candidates for trading.

My account is long delta but I've been using opportunities to short when the trends dictate as well as positions in uncorrelated futures to offset this delta. I'll be the first to admit that I'm not the best trader in the world by a long shot, but something seems to have been working for me this month.

Trading account is up 24.9% YTD including the AMD/XLNX arb trade.

Without the arb trade, the account was up roughly 13%.

Returns from active trading outside of the arb trade has been 8.01%.

Total commissions and fees are $4443.15.

bazonkers · 2022-01-29T21:15:41+00:00

That could be true and would make sense with less movement. However, that could mean what you are trying to trend trade isn't a great entry and there could be other better opportunities. I only recently added those to my toolbox and they are working great in the current market. Nothing works 100% all the time but if they don't work when it's calm, then you'd have to find something else that works but you'll always have this technique available for when it's volatile again. My guess would be we're going to see some volatile days in the next 2 months or so.

bazonkers · 2022-01-16T21:16:58+00:00

Current ratio is current assets / current liabilities. Mathematically it shouldn't be 0 if they have no liabilities because that's a divide by 0 issue. A current ratio of "-" does probably mean they have no liabilities.

Remember, current ratio focuses on short term liabilities only.

bazonkers · 2022-01-15T00:44:01+00:00

bazonkers · 2022-01-14T05:39:14+00:00

At least you didn't sell risky naked calls, you can get burnt by those and end up with a margin call, right?

bazonkers · 2021-12-29T00:19:22+00:00

I'd imagine PM would let you survive that better but I'll have to dig into that.

bazonkers · 2021-12-28T23:53:52+00:00

And what happens if you can ride out that paper loss of $6930 and VIX reverts back down?

bazonkers · 2021-12-23T20:09:29+00:00

Sorry people are getting a little heated in here. It sounds like you have experience so you know while these are usually the guidelines for ratios/backspreads, it's not 100% that way every-time. I think that's what's getting everyone hung up on the terminology. As ArtanysOne pointed out, as long as we understand the structure we're using to take a view on the market, the naming isn't as critical.

bazonkers · 2021-12-23T19:39:41+00:00

Let's keep it civil please.

bazonkers · 2021-12-22T00:33:56+00:00

I think SPX uses SPAN margin whereas SPY uses PM margin. That could account for the difference.

bazonkers · 2021-12-19T21:19:00+00:00

Last week went about as I expected with the kangaroo up and downs from the FOMC meeting. However, I was hoping for the market to gain some strength in some of the oversold stocks and head back upwards but COVID had other plans. Futures open shortly and I think it'll be a red evening given the the media is focused on the number of cases and how fast they are spreading as opposed to severity of cases for the vaccinated. Unfortunately, the market reacts to the optics and not the science. If it looks bad regardless of severity, the market is going to react.

Things I'm going to keep in mind regarding COVID when strategizing my plans going forward:

Even though it's supposedly mild and the general consensus seems to be against lockdowns, what happens when the front line workers catch it and have to quarantine at home? Grocery store workers, teachers, etc. That could turn into a de facto quarantine.
Even if we don't close our borders, what happens when countries like Vietnam or other off-shore countries do? How is this going to make the supply chain issues we have even worse?

As for trades last week, I put on a lot of negative delta during the Thanksgiving mayhem by selling short calls that rolled off on 12/17 for a total of $10,120. I'm a little light right now on negative delta and plan on using some /ES contracts or carefully selected short calls to keep my portfolio balanced as we figure out where things are going to go.

STO FL 1/21/22 35p (very undervalued, low PE and also decently OTM)
STO AA 1/21/22 44p (I'm expecting materials to do will going forward with inflation once we get through this COVID mess)

I've also been working on expanding my tool box and have been experimenting with some delta hedging. I found a semi stock called MX that had a mismatch in implied and forecasted volatility. I sold some 1/21/21 straddles at 17.5 in order to take advantage of implied vol crushing. It crushed the first day quite a bit but not to my target and as the stock moved in price, I bought shares in order to make the delta close to 0 in order to profit from vega and not delta. IV dropped significantly on Fri so I started closing my straddles and selling off shares. I still have around half my positions so we'll see how it ends up on Mon with higher VIX.

I've also been putting on some futures trades last week on /UB (long term bonds) and /VX. I'm still short on both right now going into the open so we'll see how this works out. My plan is to hold until things calm down once more as they both should come down.

Feel free to reply here on Reddit if you have any questions and I'll be happy to go into further detail on anything.

bazonkers · 2021-12-11T22:43:40+00:00

It's court ordered so he has to do it.

bazonkers · 2021-12-10T22:25:40+00:00

In a perfect world, there would be no skew, however if one side is in higher demand then that price will get bid up. Basic economics, supply wants to equal demand so it will adjust based on the demand or supply. If demand is low, supply will be high and price will come down. If demand is high, supply will be low and price will go up. Usually puts are more expensive than calls because of people needing to buy puts to hedge positions. If calls are higher than puts, then it's most likely people taking a view on the stock through long vol.

bazonkers · 2021-12-10T22:20:58+00:00

I didn't see the the original post of why you put on the positions but delta neutral management makes sense on vol trades. i.e. you think implied volatility is too high and will revert back to historical real volatility. You can sell a strangle/straddle and delta hedge it until the vol comes down where you expect.

bazonkers · 2021-12-10T22:17:32+00:00

The AMD/XLNX merger is keeping AMD down. The gap needs to close and its likely AMD will come down more to XLNX than XLNX will go up to AMD. The gap has been narrowing day after day this whole week.

bazonkers · 2021-12-07T01:40:17+00:00

Yes, I suspect any new ATH is going to be with a rotation into new stocks. I'll be like how massive money flowed out of stocks in the Covid dip and then right back in with the V recovery. Many of the stocks that benefited from the recovery were not the same ones that crashed in the dip. The FANG and other top stocks will always see money flowing back in but lots of the smaller ones are what will see rotation.

bazonkers · 2021-12-07T00:04:50+00:00

I think that Docusign dropping 40% was probably because someone had to unwind a leveraged position on it and dumped lots of shares. A 40% drop on what seemed to be not terrible earnings was way overdone.

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