[quote author=“capablanca”][quote author=“mtdoc”][quote author=“mtdoc”]Bought a few June 175 straddles. 

Rolled these to October (essentially buying a double calendar)  to get me more long Vega and lessen the effects of time decay over the next 2 weeks since it looks like we might be range bound until WWDC.

Will likely sell some June calls and puts against my long options before WWDC.

Could you please amplify this, doc.  I follow how rolling to October lessens the effect of time decay, but I am unsure regarding the the double calendar reference.  Straddles and are long gamma and Caledars short gamma.  Are you referring to the similar shape of the P/L for both types?

And does double refer to longer than 3 months?

I originally put on a June straddle - thinking that we might get a quick move up or down and a volatility spike. Once it looked to me like this was not going to happen I rolled it to October.  This meant selling the Junes and buying the Octobers - even though It was a roll because it was selling front month options and buying back month options this means the trade was a calendar spread.

I was worried the the acceleration of theta decay for front month options over the 2 weeks before WWDC would not be overcome by the expected IV increase (because rate of decay accelerates during the last few weeks before expiry). October options will not be so vulnerable to decay and back month options are always relatively more affected by IV increases than front month (which is why a long calendar is a good trade when IV is increasing)

Whenever I adjust a position or roll a position I look at the trade that I do as a new trade in itself and ask does it make sense.  Rolling a straddle forward by doing a “double calendar” made sense to me since it would be a theta positive and vega positive trade.

Hope that makes sense ....

ADD: Capa - double refers to a put calendars and call calendarswit the same strikes. So rolling a long straddle forward is equivalent to doing a double calendar spread.

Chartguy -

Thanks for the good advice. We’ve come a long way from the dark days of Jan/Feb, and I suppose it’s time to adjust, or at least reevaluate my strategy a bit. Back then I sold common shares and bought LEAPS $120 and $130 to limit my risk. I still occasionally run some simulations using options trading tools to see what these positions and others (such as 2010 $170s) might be worth under a host of different scenarios. I have generally been considering ATM calls as the price climbed as a hedge against another price drop like we saw earlier this year. I feel pretty comfortable with the $120s and $130s now. $170s could still fall OTM, in fact I expect another decline below $170 and perhaps significantly deeper in the not too distant future.

Your idea of using the good returns I have made on my earlier purchases to fund some new spreads is very interesting to me. I’ve been wondering if/when there would come a time when I’ve wrung out the max profit from these now far ITM calls and would be better served by rolling them forward to something different. I’ll have to run some more simulations and see what makes the most sense. Of course, they all depend on me being able to predict some sort of scenarios that might actually come true. So far I haven’t been the best at that.

Thanks again for the help,

[quote author=“Chessie”] ... I expect another decline below $170 and perhaps significantly deeper in the not too distant future ...

Gut feel or based on some evidences or TA?

IMHO, long vertical (LEAPS) is like buying insurance twice.  Reason for buying calls (LEAPS) is because we believe AAPL would rally to certain price point but not sure when, should be within the time frame of LEAPS expiry.  Adding a short call (LEAPS) is inconsistent with this thinking.

[quote author=“Mace”][quote author=“Chessie”] ... I expect another decline below $170 and perhaps significantly deeper in the not too distant future ... Gut feel or based on some evidences or TA?.

Perhaps she was reading the EW thread

[quote author=“capablanca”] ... decided to go with the backspread due to its slightly bullish tilt ...

You open this position: 5,000 APVAT (call(Jan 09) $200) and 10,000 APVAU (call(Jan 09) $240)?

litespeed - That would be female intuition.

June options

mtdoc,

IV usually increases leading to an event.  However, IV of AAPL keeps decreasing over the last two weeks.  Now is 38.71%.  Lowest for this year is 34.70%.  Do you have a good explanation?

Re: June options

[quote author=“Mace”]mtdoc,

IV usually increases leading to an event.  However, IV of AAPL keeps decreasing over the last two weeks.  Now is 38.71%.  Lowest for this year is 34.70%.  Do you have a good explanation?

Good observation Mace.  I suppose it is due to the slow grind higher we’ve had the past few days. This is why I rolled my June straddle to October - I was afraid this might happen - without the increase in IV, June option premium is eroding quickly.

I’m still expecting iV to push up to the upper 50s by the eve of WWDC. That’s my bet based on historical patterns - of course I could be wrong.

Re: June options

[quote author=“Mace”]However, IV of AAPL keeps decreasing over the last two weeks.  Now is 38.71%.  Lowest for this year is 34.70%.  Do you have a good explanation?

Where do you find these figures? Where can I find them in ToS?

Re: June options

[quote author=“awcabot”][quote author=“Mace”]However, IV of AAPL keeps decreasing over the last two weeks.  Now is 38.71%.  Lowest for this year is 34.70%.  Do you have a good explanation?

Where do you find these figures? Where can I find them in ToS?

I’m using Power E*Trade Pro platform.

Re: June options

[quote author=“awcabot”][quote author=“Mace”]However, IV of AAPL keeps decreasing over the last two weeks.  Now is 38.71%.  Lowest for this year is 34.70%.  Do you have a good explanation?

Where do you find these figures? Where can I find them in ToS?

The average IV for each month expiry is shown at the right side of the month under the trade or analyze tab.

You can choos implied volatility as from the drop down menus to show IV for each strike in real time.

You can also chart IV and historical volatility in TOS charts or prophet charts.

[quote author=“mtdoc”][...]
I originally put on a June straddle - thinking that we might get a quick move up or down and a volatility spike. Once it looked to me like this was not going to happen I rolled it to October.  This meant selling the Junes and buying the Octobers - even though It was a roll because it was selling front month options and buying back month options this means the trade was a calendar spread.

[...]

Whenever I adjust a position or roll a position I look at the trade that I do as a new trade in itself and ask does it make sense.  Rolling a straddle forward by doing a “double calendar” made sense to me since it would be a theta positive and vega positive trade.

Hope that makes sense ....

[...]

Makes perfect sense.  Thanks for a most cogent explanation.

Help, that is about all I can say. I have some questions about options. I have printed out the option chains and just when I think I am ready i come up with more questions.

I am looking at trying Jan09/Jan10. I find it odd that some prices will have two lines and the percentage that they move do not seem to have any consistency, and why is it that the last and bid/ask do not match up.

There seems to be a lot of interest in Jan09 200 and % wise it dropped less yesterday than most others. I hope this does not annoy you seasoned option traders. I want to risk some money, not burn it.

thanks Mark

[quote author=“mbeauch”]I want to risk some money, not burn it.

I think that the difference of the bid/ask goes to the market maker. I would HIGHLY suggest that you get as educated as you can with options before getting too deep in them. Check out ThinkorSwim.com and download their software and sign up for an account. You do not have to fund it to use the paper trading account. They also have a great deal of educational info there…. look here and here

I would also check out the info at the CBOE where you will find a bunch of videos with a lot of them by Dan Sheridan who explains things in a very clear entertaining way. Note: for the Dan Sheridan link you will have to create an account for it to work.

Good luck to ya.

d

Speaking of education in my last post I thought I would recommend an Option book that I just came across. 101 Option Trading Secrets by Kenneth R. Trester, ISBN 0-9604914-4-9. It has 101 short chapters with items that Trester learned during his 30+ years dealing in options. Very easy read and LOTS of great PRACTICAL tips that I haven’t even heard of yet much less read about. Enjoy.

d

[quote author=“mbeauch”]Help, that is about all I can say. I have some questions about options. I have printed out the option chains and just when I think I am ready i come up with more questions.

I am looking at trying Jan09/Jan10. I find it odd that some prices will have two lines and the percentage that they move do not seem to have any consistency, and why is it that the last and bid/ask do not match up.

There seems to be a lot of interest in Jan09 200 and % wise it dropped less yesterday than most others. I hope this does not annoy you seasoned option traders. I want to risk some money, not burn it.

thanks Mark

Mark - LEAPs and OTM options are sometimes thinly traded so the Last price it traded at may be very different from the Bid/Ask due to the movement of the stock price but no trades taking place of that particular option contract.

In general OTM calls will generally drop less than ITM calls when the stock price drops.  Generally the more ITM the option, the more it’s movements will match the movement of the underlying stock.  This is due to a variety of factors - some of which have been discussed here before like the “volatility smile” .

If you want to buy Leap calls as a proxy for holding long stock but with some downside protection ( a call is equivalent to holding stock plus puts) then that is not all that complicated and buying Leap calls near the money is probably the best way to do it (IMO).

If you want to trade near month options or spreads then I completely agree with Roontoon that the time spent educating yourself on the site he links is well worth the investment in time.

Good Luck. 

[quote author=“Mace”][quote author=“capablanca”] ... decided to go with the backspread due to its slightly bullish tilt ...

You open this position: 5,000 APVAT (call(Jan 09) $200) and 10,000 APVAU (call(Jan 09) $240)?

litespeed - That would be female intuition.

Mace, sorry to be slow in responding.

My spread is long JUL185 calls and short JUL175 calls in a ratio of 5 to 4 which was delta neutral, but positive vega.  I lose the most if the stock goes nowhere, but I gain from increase in IV.

Unfortunately, IV has not moved up much at all and the stock is not moving.  So, once again I am failing to profit from an Apple event.  I intend to keep trying.

FWIW, I am still surprised by the failure of IV to rise this week.  I will likely close this spread out tomorrow, as IV should fall next week.  But given its failure to spike up, that may be wrong also.  Another possibility is that I will decide to close only the short end.