Friday, August 24, 2012

Friday's Best Of The Web 8/24/12 @OptiontradinIQ @OptionPit @Mark_Lexus

Today's first article comes from my good friend Gavin at Options TradingIQ.  In his post, Gavin details some excellent ways to protect your iron condor positions from any sudden (and significant) market movements.  The most intriguing one is the use of further OTM puts to change the shape of the P/L graph for the condor.

"...The second thing to note is the difference in the pink and orange lines. You will notice that these are much higher with the hedge than without, and that the hedge is much more effective for the pink line (i.e. today). This means that if a Flash Crash were to occur today, right after you place your trade, this would actually work out really well for you and might actually mean a profit on the total position..."

Click on the image to read the full post.

The next article comes from the folks at OptionPit.  They answer the question, "Is the VIX Low?".  At the time of writing on 8/20, VIX was hovering around 13.50.  It has perked up a bit since then, but it's still a good read.

"The answer is, hisoricially, yes, but in relative terms, the answer is in the graph below.  Take a look at this chart of 30 day IV relative to the last 10 days of trading (the Red is 30 day IV).

For those of you saying that volatility HAS to go up, you are right, just not in the way you think you are.  HV is going to bounce off of sub-5% levels; however, the VIX does not NEED to bounce.  The VIX could potentially stay below 15 for the next few weeks, as we head into labor day, and it may not peak its head NEAR 16 until the employment report."

Click on the image to read the full post.

The last article comes from my buddy Mark Lexus.  Mark is a big proponent of diagonal spreads, and does very well with them.  For anyone unfamiliar, they are basically supercharged covered calls.  By replacing the stock with an ITM call option, you can greatly enhance your return.  Here, Mark talks about how he selects both the long and short strikes.

"Leap strikes - based mainly on how much cash you have available to put towards this position. having $20k might will give you a wider range of strikes vs having 15k. you also dont have to go all in , you can get 1-2 Leaps now, see how it works for you then add to them as market moves back and forth."

Click on the image to read the full post.

Have a great weekend everyone!

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