A reminder of The Trade: A ratio Calendar
Sell the near month, buy the far month. A slight variation as we are so near expiry- sell 2 near month, buy one of the far month. We use July and August expiries for simplicity. The trade thus looks like this:
Sell 7300 July put @ 7.5 (x2)=15, Buy 7300 Aug put at 60. Debit =45 Resulting Greeks Delta 0.024. Gamma 46 against us! Theta 2.16 in our favour Vega 3.677
Outcome?
Well- a big disappointment. The trade barely made anything. You could at best have made about 5. However at close of play on Friday the Aug put was only 29.5. VFTSE collapsed to 10.13
Was this a poorly thought out trade?
To be honest, we look to try fresh ideas, and with current prices it’s hard to be: 1. Original 2. Consistently successful 3. Finding good trade entries.
Having NO positions is A position, and thus there are times the sidelines are the place to be.
Debit Trades Seem to Have Less Success
I think it seems to many of us that debit trades have a lower win rate. Trade 38 was a tiny ‘punt’ for 1.5, and we don’t mind those. We will have to look at our results, but somehow I suspect there is little to choose twixt debit and credit trades. Volatility is our guide and therefore dictates the nature of the trade.
The Takeaway
Look for good trade entries and be patient. Do the analysis, and be realistic,you may even wish to construct your own risk graph.http://optioncreator.com As options traders we do not have to think ‘on the fly’ like a futures or forex trader. We aim to use our ‘downtime’ productively to analyse.
