Options - the next generation - managing butterflies - when good times roll / when bad times come...
๐Ÿงต๐Ÿ‘‡
Say you bought a simple balanced butterfly spread on 1/5 that looks like this

Its balanced, and theta neutral
Then 1/6 happened (Partaeeee)
You got a near 30% change in every leg.

What should you do - sell it?
Manage it?
Or do nothing?
I would manage it - you can close out that middle leg buying 2calls back, and open 2 new legs that are MORE than what you paid for the top and bottom leg, cover exchange fees and the position now becomes free.

You would do this only if you got a lot of time left on spread
In this case, you are out to march23, 2 more months to manage it.

If you thought the market move was total bunk, well, there is another way to manage it

(and there is a reason i think market move is bunk - second picture). Spy popped and flopped, but price stayed hi. #WEIRD
Ok -thats all great if sky is blue, sunshine, glitter...but thats not what happens every day - what if market went the other way?
We have the same setup, but now options dropped by 30%+

Well, it it happened in the overnite, nothing we can do.
But this is a major part of WHY YOU ONLY DO SPREADS IN A MARKET LIKE THIS

You are out of pocket 100$

After that 30% drop overnite? Meh.
Look at what happened to butterfly now?

You spent 128.
After 30% drop - now you down $20.
Big woop.

But some defense moves if you want
Remember - we got 2 months to work this thing, looking at whats going on w/ spy, my bet is its going to continue to chop around...
But, defense move
a) just sell the whole spread and be done with it
b) change it to a CREDIT spread from a debit spread.
c) just wait and do nothing
b) change it to a credit spread - ez
Now you have a condor credit spread
these options will bleed, but they CAN go the other way.

You buyback 1 of the 385 and sell 1@379.

With the choppyness of these markets, im really not sure id make any move until i saw a clear direction.
If it were me, id prolly take my gains and run (SELL!) - close the position and wait for another extreme position (like EOD FRI or EOD Thurs) to plot a new entry opposite of market.
Notice the MASSIVE chop in the overnight session.
Its just nuts.
If i were down, id set a stop loss and live with it.
But prolly not change my position.
you got 2 months to work it.

Longer dated options would have been better.

Say june or july - the OP manipulation dont work so good out there...

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More from @frankoz95967943

Jan 9
The $SVIX is a CB tool.

Im now convinced.

That right there was a swap.
To keep markets calm, they pumped svix to bleed all vol out of market to just swallow swap w/no disruption.
Instantly.

My vix formula still works, but when vol gets hi due to currencies, svix steps in. Image
From Jan 6 - here is my vix formula vs svix.
its accurate.

But they are overriding vix when things get too choppy for the CB's tastes....

I think they just detect crazy and immediately crush vol. Image
The markets would be a LOT more choppy without $SVIX Image
Read 4 tweets
Jan 8
Kinda funny when you listen to what he says and just replace communism with corporatism...

#China
#Corporatism
#CorporateState
#Oligarchy

Image
The thought control part......

FAKE NEWS...
Same in social media....elong fired thousands of "moderators" only to find out they were conduits from gov to "control the messaging"?
livemint.com/news/world/us-โ€ฆ

I really reject that tinfoil hat...but more i see the more i believe...
Read 5 tweets
Jan 8
More options - Butterflies defense / offense
Playing both teams

๐Ÿงต๐Ÿ‘‡
Listen to the what the market says.
Here is $SPY
Call vs put

Here Calls are MUCH MORE expensive than puts.
Short term - ie Jan 2023 - the market agrees stonks go down (2nd chart) but long term(first chart)?

Saying markets go UP ImageImage
There is NOTHNG wrong with buying butterfly on the same instrument on BOTH sides.

Who knows what market will do day to day - you can work either side as market moves.

Remember - theta neutral and who cares. Your goal is to convert butterflies to condors
Read 12 tweets
Jan 7
Options - when a good idea gets manipulated.

I have covered the vix for a long time.

If you have not seen these posts, I highly recommend reviewing
๐Ÿงต๐Ÿ‘‡
Second, know why its important to EVERYTHING
Read 23 tweets
Jan 7
Part 2 of options

Mechanical Bits
๐Ÿงต๐Ÿ‘‡
Max pain:

Buying 100 shares of stonk.

You got about a 50/50 chance that stonk goes up or down.

Its EXPENSIVE - in this example, WWE is trading at 84.27. so, 100 shares x 84.27 is $8427 out of pocket.

The stonk can go to zero.
The stonk can double.
Who knows.
But if you DO buy that position, you can do things with insurance to make (or save) you money.

First - lets buy some insurance - protect your massive gains from friday 1/6

Notice how the curve changed?

Your max loss is now 230, but if stonk rockets higher, you get the gainz...
Read 17 tweets
Jan 7
Basic options 101

I will be building on this - if you already know options basics, you can skip all this.

๐Ÿงต๐Ÿ‘‡
1 option refers to 100 of the underlying instrument.

If you buy 1 call, thats the right - but not the obligation - to buy 100 shares of the underlying instrument.

Options pricing is x100 - if the option is trading at $0.50, and you want to by 1 contract, thats 50$ per contract.
Buy Calls - you have the right to go long the instrument
Buy Puts - you have the right to go short the instrument

Every option has the concept of theta decay.

Over time, the option typically loses value, especially far out of the money (OOM) options.

Theta decay charted:
Read 34 tweets

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