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Crazy option spreads


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#1 bighouse1006

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Posted 06 February 2018 - 05:10 PM

The RUT had a 50 point move from low to high today, the IWM had a 6 dollar move from low to high yet the spreads were so wide on the weekly IWM options that if you bought calls at the ask on some strike prices at the open you would barely be even at the eod. My ff, for the IWM. I think we move higher tomorrow then move lower into Monday to test today's low.

#2 dTraderB

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Posted 06 February 2018 - 09:26 PM

Incredibly untradeable.

I took the day off. 



#3 q4wer

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Posted 06 February 2018 - 11:41 PM

I bought spy next week spread at 1.14 when spy was 264.x in the morning,  and sold it at 1.98 when spy was 267.x  and then I found the price drifted around 1.6x even when spy wen back blow 263.x , very hard to trade options today,  ES seems to be the fair vehicle to use



#4 tommyt

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Posted 07 February 2018 - 12:25 AM

"The RUT had a 50 point move from low to high today, the IWM had a 6 dollar move from low to high yet the spreads were so wide on the weekly IWM options that if you bought calls at the ask on some strike prices at the open you would barely be even at the eod."

 

Yesterdays "crash" event in the VIX related products caused players to go into crash mode pre open, knowing there was going to be liquidation. Everyone stepped away from the options market, no one wanted/could sell an option. It was very similar to '87. Dump truck wide spreads and fear. I was trading NDX options today and here is an example of most of the puts today: $1 bid at $20. Tremendous opportunity for some, as this is when the options need to be sold, when no one wants to. Saw wide spreads in most everything. The crash was in VIX related products, not the market. This spike in VIX vol to 50 is it for now and will be hard to surpass. At 50 the daily decay is so high, very tricky for those holding any options, almost always great sales. Do your own homework on any of these strategies.

 

http://stockcharts.c...id=p20798931825


Edited by tommyt, 07 February 2018 - 12:27 AM.


#5 dTraderB

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Posted 07 February 2018 - 07:51 AM

I agree VIX 50 plus is a rare event but this decline is not over, and we could see VIX shooting up above 50 but not in one day.



#6 dTraderB

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Posted 07 February 2018 - 07:51 AM

I prefer to trade QQQ options. 



#7 NAV

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Posted 07 February 2018 - 09:35 AM

The RUT had a 50 point move from low to high today, the IWM had a 6 dollar move from low to high yet the spreads were so wide on the weekly IWM options that if you bought calls at the ask on some strike prices at the open you would barely be even at the eod. My ff, for the IWM. I think we move higher tomorrow then move lower into Monday to test today's low.

 

Never buy calls at a market bottom. The Implied volatility at the bottoms will be huuge. Even if you precisely time the bottom, when the bounce does show up, the implied volatility implodes. You will end up making nothing. I learn't this lesson during one of the bottoms in 2002. I caught the exact bottom in 2002 and bought calls and ended up the day in loss. 

 

Smart thing to do with options is to buy options when the implied vol is low and get the hell out the implied vol gets out of control. I shorted on Friday and covered on Monday right near the close. Not bragging, i gotta pat myself on the back. Experience is the best teacher.


Edited by NAV, 07 February 2018 - 09:36 AM.

"It's not the knowing that is difficult, but the doing"

 

"No warning can save people determined to grow suddenly rich" - Lord Overstone  (The great crypto mania of 2017)

 

 


#8 boruseek

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Posted 07 February 2018 - 09:44 AM

I shorted on Friday and covered on Monday right near the close. Not bragging, i gotta pat myself on the back. Experience is the best teacher.

 

NAV, you deserve a pat on the back. That trade was a thing of beauty - tiny initial stop, superb discipline and money management. Congrats!



#9 bighouse1006

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Posted 07 February 2018 - 09:55 AM

Yes, great trade Nav!

#10 12SPX

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Posted 07 February 2018 - 09:56 AM

 

The RUT had a 50 point move from low to high today, the IWM had a 6 dollar move from low to high yet the spreads were so wide on the weekly IWM options that if you bought calls at the ask on some strike prices at the open you would barely be even at the eod. My ff, for the IWM. I think we move higher tomorrow then move lower into Monday to test today's low.

 

Never buy calls at a market bottom. The Implied volatility at the bottoms will be huuge. Even if you precisely time the bottom, when the bounce does show up, the implied volatility implodes. You will end up making nothing. I learn't this lesson during one of the bottoms in 2002. I caught the exact bottom in 2002 and bought calls and ended up the day in loss. 

 

Smart thing to do with options is to buy options when the implied vol is low and get the hell out the implied vol gets out of control. I shorted on Friday and covered on Monday right near the close. Not bragging, i gotta pat myself on the back. Experience is the best teacher.

 

That was a great trade and agreed, on spikes lower better off to sell way out of the money put options as over 90% of the time when the VIX spikes the market is higher the following week but not over previous highs, till later on so premium drys up and you run out of time.