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ES Wednesday 12-3-2014

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

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that's me done at 69.50..I was determined to get that bracket low test and can't talk to self forever......and also past 11 am now....that double top is not a great way to put in a top but it would be more trouble if it was side by side on a 5 minute time frame....still best to get out here no matter what happens...70.25 - 71 holds the key and I don't know how to unlock the lock for any more profits or trades in here....I'd watch 68 - 68.50 on downside if they even push that far....good luck...

profile is " P" shaped.......this is probably just short covering so far today and not really new longs...I assume most new longs would want to come in after Fridays report
Thanks for sharing all of this, Bruce. It is always very helpful!
Bruce, sorry I went silent today. I had to take care of a few things at home so bowed out early. You are never alone :)
Bruce, first of all thanks for all the recent ES comments and videos...very educational as usual

as per the options, i would be very very careful about the strategy u r abt to embark on...selling optionality is the easiest way to go bankrupt as u can be right 99 times but u only need one to give back all the pennies u collect when u r right and then some...this current environment is very deceiving, as this grind up makes one think that those otm puts and calls are basically unachievable...but i would urge u to look at the month of october as the true measure of what to expect on these type of strategies if u happen to be wrong...also, the only perfect way to limit your unlimited downside is to buy further otm calls and puts so u r basically short call sprds and put sprds...that way u r selling some optionality but at least the downside is capped....having orders to buy futures above the call u r selling ( or to seel below the put u r selling) is a recipe for getting whipsawed...what if the market went to 2100 (in which case ur short call would be in the money) and your order to buy futures get executed? then u would think u r fine because now u r hedged, but what if the market sells off 20 pts from there...ur short call would expire worthless but now u r down 20 pts on your spot position....same with the put if we sell off thru your put strike and then u get short futures and we start is very difficult to manage exposure of options once they are in the money or very close to and the gamma (change in delta) is very high

peope have been doing this for yrs bruce and u do not need yrs like 2008 to go bankrupt...a few months like october and these strategies are suddenly all but useless

just my 2 cents


Originally posted by BruceM

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
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 you 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 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 $ 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.