ES Wednesday 12-3-2014

Good morning to all. Today's SD bands. Good luck to all.

came out heavy at 67.75...that is other key line,...see chart

use IV MEAN....I think I pointed to it on Video ...let me know if u can't find it

Originally posted by brettr

How do you know which volatility percentage to plug into the standard deviation calculator?

I have a double 5 minute high at highs of the day...I would think that as long as they stay above the 67.50 they will make new highs......

as per the video the 2095 calls would have brought in $50 and the 2035 puts would have brought in $140.........this trade would have unlimited risk to have an 85% probability of working but in order to be safe you would want to put in a sell order to buy the futures or something below the 2035 strike just in case something horrible happens on the downside......perhaps maybe 5 - 10 points below the 2035.....and on the upside you would want to do the same in case we get some kind of surprise on the upside....and if the market stays in the range you won't get filled on your futures buy or sell......since this is a weekly option we have some quick time decay that happens....

this is an example on the spx but you could do this on the es too

here is a video for anyone who is interested in the option trade idea....I used the ES to set up this fake trade so we can relate to it a bit better

lots of numbers up near 72...anyone trying sells up here during the one time frame up ??? seems logical to me.....kind of ...LOL !! r1 today and weekly number up here....and I have last weeks VA high as per my data here

this is second try outside of Ib high so all us sellers will want the 11 am close to be under the IB high and get back under 70.25....LVN area from last week...not sure they are gonna give us that....last trade for me today...it's always fascinating to watch one time framing and cool to see WHEN they actually stop pushing.....what isn't cool is when you are short and they keep pushing...so in other words it's often more fun to watch and not be in a trade against one time framing...!!!

i think we are going back into ghost town forum mode

should test 70.25 soon..

triple at 70.50 and volume drying up...that should be broken..I have shorts from 71.75 and now 71.50...

thanks for your comments APK...In general it would be safer to use some kind of iron condor idea and buy the further out puts and calls.like you said.....so we'd have bull put and bear call spreads working....but as you know there is a trade off then because we give up much of the premium collected by having to buy the protection. I also realize that anything could go wrong at anytime but the hope here would be that it doesn't happen in the next three days. Some other ideas would be to just exit at a loss when we get near the strike prices sold and have a stop loss in on the option. The problem with that is what happens if the move happens overnight ? I would also not wait and try to get the full premium. that would be a losing bet I think. Perhaps 33% - 50% might be doable.

I agree with you though and it would be much better to be selling spreads when volatility was very high ( we can use the vix as a gauge)....the better idea for this particular example would be to give up some time and premium by waiting an additional day if I wasn't willing to buy the protection.......so this idea would work better if we put the trade on in the last 45 minutes of tomorrows session or sometime tomorrow . This way we can manage the trade during the day session on Thursday and limit our exposure to only one overnight session...... if over time we found that doing these types of weekly option trades was worth doing in front of reports and fed meetings etc then we could set alerts at night and make sure we monitor overnight activity if we get within a certain percent of our strike price during the overnight session. No way to avoid the whipsaws but actually trading the overnight would be ok if it was to just manage our position...for example if I had got an alert that tonight we are printing ES 2050 in the overnight session from the 2072 level well then I can step in and watch the market if I needed too.....and if I needed to get short at 2030 well then I'd be a trader like I always am. Bottom line is I am not sure these trades will be worth the effort and I am certainly not arguing your point. The safest idea though is to buy the protection as u said.

my idea would be that if we can find 4- 5 ideas a month then it might be a profitable trading practice. While I am drawn to the weeklies due to my short term focus, I really want to eventually establish a portfolio each month that can achieve some balance between low volatility trading ideas and high volatility trading ideas ( like condors) and use some form of beta weighting to manage the entire portfolio. This way I MIGHT be able to achieve some consistent long term option results regardless of the volatility environment.

Thanks for the insights and I'd love to hear more as I am fascinated by the options and it's quite refreshing for me. Your points are well taken and spot on !!

I always assume that most here are doing their own research and wouldn't invest in any idea until they fully understand the risks.

as a quick aside the options we sold this morning were sold at $190 and we could currently buy them back for $165......so there will always be that greed factor as to how long do we wait on something so risky. It would also help to study what happens on the days preceeding the event you are trading and have some historical reference point.