hackertrading

Like others said, need a bit more details. But the positive gamma is probably coming from the fact that you have more Long puts than short. How much more Long is something we don't know. Also its not clear why you say "if the underlying moves up, the positive theta should cover me". I feel there is something wrong with this statement. Since you have more long puts, my sense is that your risk is to the upside, and the graph turns down into negative territory if it moves up. So there must be risk on the upside. If you can include a risk graph, things will be clearer.

Suby, there's one thing you can do with Bollinger Bands and/or Keltner channels. By design, these indicators represent extreme points. Bollinger Bands are usually calibrated with a 2-standard deviation move on the upside as well as downside. So knowing if a stock is trading outside of these bands tells you that the stock has experienced very high volatility and is likely to undergo "mean reversion". Using this, you can take a calculated bet on the trend in the immediate future.

Hi, If you have a spread, you'll generally not have to do anything. Most brokers (and thinkorswim) will automatically match your short position with your long position and do an automatic assign/exercise for both those Options. Your Bull Put is a defined risk spread, so you'll not lose more than the maximum loss for that spread. You also have to bear in mind that assignment can happen anytime before expiry also. This is called the American style and applies to all stocks and ETFs. Index products (like SPX and RUT) are European style Options, are cash settled on the day of expiry and not before. As others have said, it may be best to close your Options before expiry. Also if you feel that your credit spreads are getting into trouble, you should adjust them. Taking the max loss on a credit spread will blow up your account very quickly. In credit spreads, its very important to know how to adjust spreads, and more info about adjustments can be found here. As a newcomer to Options, I'd urge you to get educated and learn the mechanics of Options and credit spreads thoroughly before you put trades of size. I think you should continue to paper trade for some more time. Hope this helps Hari Swaminathan

The author started the post by saying that (ironically he/she does not want to consider Volatility in the Options world) - but I find it hard to understand how getting the current volatility of a stock would help you in any instrument except Options. Its the only instrument where the computation of Volatility goes into pricing of the instrument. Stocks are Futures trade in one dimension only - Price movement. That's it. One definition of Volatility (and there are many) is that it represents the Standard deviation of movement from the mean. Even if you know that a stock is volatile and is at its higher end, you can probably expect a mean reversion but this still does not tell you the trend, whether its going to move up or down. The Average True Range indicator (ATR) gives you one of the best indications of how much a stock is volatile currently but this will not give you trend either. In the Options world, increasing volatility generally means lower prices, and vice versa. This is helpful if you want to take a bearish position with Puts or you can play the Bear call spread, or even a Bull Put which would take advantage of a volatility crush when a reversion to mean happens.

Options on Futures is treated the same way as Futures. All Futures are margined by the SPAN Margining method. This is a risk-based method, so in general it will be a lot more favorable than the Reg-T margin. But as a trader, you have to understand how it works and different brokers may have slightly different implementation guidelines. Hari

Does not look credible.. Hari

Hi Jazz, Selling premium on the last or next to last day can be risky at times. While time decay is eroding quickly, the strike prices you have to choose comes too close to the stock price. At this point, you're just gambling, you could be right or you could be wrong. And if you're wrong, you generally tend to lose a lot more than what you gain. What I suggest is for you to try an alternate - When weekly Options start trading on Thursday, take an Options selling position that afternoon or mid-morning. Premiums will be much higher and you can provide yourself a good buffer zone by going OTM. You'll notice that by Monday, a significant portion of this premium has already eroded (probably more than what you'd have achieved with a last-day trade). If by Monday, your position is still in safe zone, you can try to extend to Wednesday and close the trade. The following day you have a new trade opportunity. This strategy strikes a good balance between risk, time decay and a decent buffer zone. And it gives you sufficient opportunity to adjust, should things work against you. Hari Swaminathan

Hi, I agree - Prefer selling naked or spreads. Going OTM avoids the need to be correct directionally.